PSI Knowledge Exam 5 — Questions and Answers
Question 1: What is 'insurable interest' in the context of life insurance?
- The premium amount the insured can afford to pay
- A financial or emotional stake in the continued life of the insured at the time of application (Correct answer)
- The interest rate applied to a policy's cash value
- The insurer's interest in limiting claim payouts
Correct answer: A financial or emotional stake in the continued life of the insured at the time of application
Insurable interest means the policyholder must have a legitimate financial or personal stake in the insured's continued life, which is required at the time the policy is issued.
Question 2: A 'mechanic's lien' can be filed against a property by:
- Only licensed general contractors
- Contractors, subcontractors, or suppliers who have not been paid for work or materials (Correct answer)
- The municipality for unpaid building permit fees
- The property owner's mortgage lender
Correct answer: Contractors, subcontractors, or suppliers who have not been paid for work or materials
Mechanic's liens allow contractors, subcontractors, and material suppliers who have not been paid to place a legal claim against the improved property as security for payment.
Question 3: Under the Fair Housing Act, which of the following is a protected class?
- Occupation
- Credit score
- National origin (Correct answer)
- Marital status (federally)
Correct answer: National origin
The federal Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, disability, and familial status; national origin is explicitly protected.
Question 4: When an insured intentionally causes a loss, an insurer can deny the claim based on which policy provision?
- The coinsurance clause
- The concealment and fraud exclusion (Correct answer)
- The pro-rata cancellation clause
- The mortgagee clause
Correct answer: The concealment and fraud exclusion
Insurance policies exclude coverage for intentional acts or fraud, so a claim arising from a deliberate loss by the insured can be denied under the concealment and fraud exclusion.
Question 5: In a real estate transaction, 'earnest money' is best described as:
- The commission paid to the buyer's agent at closing
- A good-faith deposit made by the buyer to demonstrate intent to purchase (Correct answer)
- The lender's origination fee added to the loan balance
- A penalty fee charged if the seller backs out
Correct answer: A good-faith deposit made by the buyer to demonstrate intent to purchase
Earnest money is a deposit provided by the buyer when submitting an offer to show serious intent to purchase; it is typically applied toward the purchase price at closing.
Question 6: Which licensing exam scheduling action should a candidate take if they need to reschedule a PSI exam?
- Show up on the original date and reschedule in person at the center
- Contact PSI at least 24-48 hours before the scheduled exam to avoid a forfeiture fee (Correct answer)
- Request a reschedule only on the day of the exam via the PSI website
- Submit a written letter to the state licensing board 30 days in advance
Correct answer: Contact PSI at least 24-48 hours before the scheduled exam to avoid a forfeiture fee
PSI generally requires candidates to reschedule at least 24-48 hours before the appointment to avoid losing the examination fee; exact windows vary by program.
Question 7: A real estate licensee who deposits a client's funds into their own personal bank account is guilty of:
- Conversion
- Commingling (Correct answer)
- Steering
- Puffing
Correct answer: Commingling
Commingling is the illegal act of mixing a client's funds with the licensee's personal or business funds; it violates state real estate license laws and can result in license revocation.
PSI Knowledge Exam 5
What is 'insurable interest' in the context of life insurance?