PSI Knowledge Exam 2 — Questions and Answers
Question 1: Which type of insurance policy pays a death benefit only if the insured dies within a specified period?
- Whole life
- Term life (Correct answer)
- Universal life
- Variable life
Correct answer: Term life
Term life insurance provides coverage for a set period and pays a death benefit only if the insured dies during that term.
Question 2: In real estate, what does 'escrow' refer to?
- A type of mortgage loan
- A neutral third-party account holding funds during a transaction (Correct answer)
- The legal transfer of property title
- A disclosure form signed at closing
Correct answer: A neutral third-party account holding funds during a transaction
Escrow is a neutral account managed by a third party that holds funds and documents until all conditions of a real estate transaction are met.
Question 3: A contractor who performs work without a required state license may face which consequence?
- Mandatory apprenticeship program
- Civil penalties and inability to enforce contracts (Correct answer)
- Automatic license suspension in other states
- Federal criminal charges only
Correct answer: Civil penalties and inability to enforce contracts
Unlicensed contractors can face civil fines and may be barred from pursuing legal remedies to collect payment for their work.
Question 4: What is the purpose of a 'deductible' in an insurance policy?
- The maximum amount the insurer will pay per claim
- The portion of a loss the policyholder must pay before insurance kicks in (Correct answer)
- A premium discount for bundling policies
- The insurer's profit margin on each policy
Correct answer: The portion of a loss the policyholder must pay before insurance kicks in
A deductible is the out-of-pocket amount the insured must pay before the insurance company begins covering the remaining loss.
Question 5: Under most state real estate laws, dual agency occurs when a licensee represents:
- Two buyers competing for the same property
- Both the buyer and seller in the same transaction (Correct answer)
- A buyer in two different property purchases
- Two separate sellers simultaneously
Correct answer: Both the buyer and seller in the same transaction
Dual agency means a single agent or brokerage represents both the buyer and the seller in the same real estate transaction, requiring disclosure and consent.
Question 6: Which document legally transfers ownership of real property from seller to buyer?
- Purchase agreement
- Title commitment
- Deed (Correct answer)
- Bill of sale
Correct answer: Deed
A deed is the legal instrument that conveys ownership of real property from the grantor (seller) to the grantee (buyer) upon delivery and acceptance.
Question 7: In insurance, 'subrogation' allows an insurer to:
- Cancel a policy without notice
- Recover claim costs from a responsible third party after paying the insured (Correct answer)
- Increase premiums after a claim
- Deny coverage for pre-existing conditions
Correct answer: Recover claim costs from a responsible third party after paying the insured
Subrogation gives the insurer the legal right to pursue a third party responsible for an insurance loss after compensating the insured policyholder.
PSI Knowledge Exam 2
Which type of insurance policy pays a death benefit only if the insured dies within a specified period?