PSI Licensing Exam — Questions and Answers

Question 1: What is the primary purpose of private mortgage insurance (PMI) on a conventional loan?

It covers the property for fire and natural disaster damage
It protects the lender against borrower default when LTV exceeds 80% (Correct answer)
It guarantees the loan is repaid if the borrower dies
It protects the borrower in case of job loss

Correct answer: It protects the lender against borrower default when LTV exceeds 80%

PMI protects the lender—not the borrower—against financial loss if the borrower defaults when the loan-to-value ratio is above 80%.

Question 2: A non-resident licensee in a state must agree to:

Appoint the state real estate commission as their agent for service of process (Correct answer)
Pass the full licensing exam again each renewal period
Maintain a physical office within the state
Hire a resident broker to co-sign all contracts

Correct answer: Appoint the state real estate commission as their agent for service of process

Non-resident licensees typically must designate the state licensing commission as their agent for service of legal process as a condition of licensure.

Question 3: Which type of life insurance policy builds cash value and keeps the premium level for the life of the insured?

Universal life
Variable term
Term life
Whole life (Correct answer)

Correct answer: Whole life

Whole life insurance provides permanent coverage with a fixed premium and a guaranteed cash value accumulation component.

Question 4: Which lien is voluntary and specific?

IRS tax lien
Special assessment
Mechanic’s lien
Mortgage lien (Correct answer)

Correct answer: Mortgage lien

A mortgage lien is considered voluntary because the property owner willingly pledges their property as collateral for a loan. It is also a specific lien because it attaches only to the particular piece of real estate identified in the mortgage agreement, not to all of the owner's assets. This makes it distinct from involuntary or general liens.

Question 5: Which nonforfeiture option uses a lapsed whole life policy's cash value to buy a reduced paid-up policy of the same type?

Automatic premium loan
Reduced paid-up (Correct answer)
Cash surrender
Extended term

Correct answer: Reduced paid-up

The reduced paid-up nonforfeiture option uses accumulated cash value to purchase a fully paid-up policy with a lower face amount than the original.

Question 6: What is the primary purpose of a Safety Data Sheet (SDS)?

To provide detailed hazard and safe handling information for chemicals (Correct answer)
To list the price of hazardous chemicals
To record workplace injuries related to chemical exposure
To document employee training on chemical use

Correct answer: To provide detailed hazard and safe handling information for chemicals

An SDS provides comprehensive information about a chemical substance including hazards, safe handling, storage, disposal, and emergency response procedures.

Question 7: An insured's home is destroyed by fire. The insurer pays the cost to rebuild it with new materials of like kind and quality. This is called:

Market value
Replacement cost (Correct answer)
Agreed value
Actual cash value

Correct answer: Replacement cost

Replacement cost coverage pays to repair or replace damaged property without deducting for depreciation.

Question 8: What is the Schedule Performance Index (SPI) formula?

SPI = Earned Value / Planned Value (Correct answer)
SPI = Budget at Completion / Earned Value
SPI = Planned Value / Actual Cost
SPI = Actual Cost / Earned Value

Correct answer: SPI = Earned Value / Planned Value

SPI = EV / PV; a value greater than 1.0 means the project is ahead of schedule, while less than 1.0 means behind schedule.

Question 9: Which must a policy pass to avoid being a MEC?

accelerated benefits test
five-pay test
policy loan test
seven-pay test (Correct answer)

Correct answer: seven-pay test

To avoid being classified as a Modified Endowment Contract (MEC), a life insurance policy must pass the seven-pay test. This test ensures that the cumulative premiums paid into the policy within the first seven years do not exceed the net level premium required to pay up the policy in seven years. Failing this test results in the policy losing some favorable tax treatments, such as tax-free withdrawals and loans.

Question 10: What is the primary purpose of reinsurance?

To allow insureds to purchase coverage from multiple insurers simultaneously
To allow insurers to transfer portions of risk to other insurers (Correct answer)
To regulate premium rates charged to policyholders
To provide coverage after the primary policy limit is exhausted

Correct answer: To allow insurers to transfer portions of risk to other insurers

Reinsurance allows a primary insurer (ceding company) to transfer a portion of its risk to another insurer (reinsurer) to manage large exposures.

Question 11: Which insurance concept requires that an insured have a financial interest in the insured property at the time of loss?

Contribution
Subrogation
Insurable interest (Correct answer)
Indemnity

Correct answer: Insurable interest

Insurable interest requires the insured to face actual financial loss if the insured property is damaged or destroyed.

Question 12: Which type of insurance policy pays a death benefit only if the insured dies within a specified period?

Variable life
Whole life
Universal life
Term life (Correct answer)

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 13: The Uniform Standards of Professional Appraisal Practice (USPAP) are developed and interpreted by:

The Federal Reserve Board
The U.S. Department of Housing and Urban Development
The National Association of Realtors
The Appraisal Standards Board of The Appraisal Foundation (Correct answer)

Correct answer: The Appraisal Standards Board of The Appraisal Foundation

USPAP is promulgated by the Appraisal Standards Board (ASB) of The Appraisal Foundation, a congressionally authorized organization that sets appraisal standards and qualifications.

Question 14: Which life insurance rider allows the policyowner to purchase additional coverage at specified future dates without proving insurability?

Accidental death benefit rider
Guaranteed insurability rider (Correct answer)
Waiver of premium rider
Return of premium rider

Correct answer: Guaranteed insurability rider

The guaranteed insurability (or guaranteed purchase option) rider lets the insured buy more coverage at specific ages or life events without a new medical exam.

Question 15: When an insured intentionally causes a loss, an insurer can deny the claim based on which policy provision?

The mortgagee clause
The pro-rata cancellation clause
The coinsurance clause
The concealment and fraud exclusion (Correct answer)

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 16: What is the function of the 'other insurance' clause in a property or liability policy?

It requires the insured to notify all other insurers of a claim
It prevents an insured from buying coverage from multiple insurers
It eliminates coverage for losses caused by government-owned property
It determines how the insurer will share payment when multiple policies cover the same loss (Correct answer)

Correct answer: It determines how the insurer will share payment when multiple policies cover the same loss

The other insurance clause (pro rata, contribution by equal shares, or excess) governs how payment is apportioned when two or more policies cover the same loss.

Question 17: An insurer that uses reinsurance is attempting to accomplish which primary goal?

Reduce premiums for individual policyholders
Comply with state requirements to cover uninsurable risks
Avoid paying agent commissions on large policies
Transfer a portion of its risk to another insurer to limit potential losses (Correct answer)

Correct answer: Transfer a portion of its risk to another insurer to limit potential losses

Reinsurance is a risk management tool that allows a primary (ceding) insurer to transfer part of its exposure to a reinsurer, protecting the primary insurer's financial stability against large or catastrophic losses.

Question 18: Which settlement option in a life insurance policy pays the death benefit in equal installments over a fixed period regardless of how long the beneficiary lives?

Interest only option
Fixed period option (Correct answer)
Life income option
Fixed amount option

Correct answer: Fixed period option

The fixed period (installments for a fixed period) option pays out the proceeds plus interest in equal payments over a specified number of years, stopping when the period ends.

Question 19: A worker suffers a serious job-related injury resulting in an in-patient hospitalization. According to federal OSHA requirements, how soon must the employer report this event to OSHA?

Within 24 hours. (Correct answer)
By the next business day.
Within 8 hours.
Within 72 hours.

Correct answer: Within 24 hours.

Federal OSHA regulations explicitly state that employers must report any work-related in-patient hospitalization, amputation, or loss of an eye within 24 hours of the incident. A work-related fatality has a shorter reporting window of 8 hours.

Question 20: Under the UCC, what is the 'perfect tender rule' for the sale of goods?

Minor defects in goods can never be grounds for rejection
The buyer must accept goods that substantially conform to the contract
The buyer must notify the seller of defects within 30 days
The seller must tender goods that exactly conform to the contract or the buyer may reject (Correct answer)

Correct answer: The seller must tender goods that exactly conform to the contract or the buyer may reject

The UCC's perfect tender rule gives the buyer the right to reject goods if they fail to conform to the contract in any respect, though the seller may have a right to cure.

Question 21: In a balloon mortgage, what happens at the end of the loan term if the borrower has not refinanced?

The lender extends the term automatically for another period
The interest rate converts to a fixed rate for the remaining balance
The entire remaining principal balance becomes due immediately (Correct answer)
The monthly payments increase to fully amortize the remaining balance

Correct answer: The entire remaining principal balance becomes due immediately

A balloon mortgage requires a large lump-sum payment of the remaining principal at the end of the term, regardless of how little has been paid down.

Question 22: The Workers' Compensation law requires employers to provide benefits for employees injured:

After a 30-day waiting period
In the course and scope of employment (Correct answer)
Only in serious accidents requiring hospitalization
Only when the employer is at fault

Correct answer: In the course and scope of employment

Workers' compensation is a no-fault system covering injuries arising out of and in the course of employment, regardless of employer negligence.

Question 23: In risk management, 'risk avoidance' means:

Purchasing insurance to fund potential losses
Reducing the frequency of losses through safety measures
Retaining financial responsibility for small losses
Eliminating an activity or exposure that creates risk (Correct answer)

Correct answer: Eliminating an activity or exposure that creates risk

Risk avoidance involves completely eliminating the source of risk — for example, choosing not to engage in a particular activity.

Question 24: An applicant for a contractor's license is denied because they failed to disclose a prior felony conviction on their application. The denial is based on the applicant's failure to meet the licensing board's requirement for:

Technical competence.
Financial stability.
Sufficient work experience.
Good moral character. (Correct answer)

Correct answer: Good moral character.

Most licensing laws require applicants to possess good moral character. Failing to disclose a criminal conviction is often viewed as a reflection of an applicant's character and truthfulness, which can be grounds for denial of a license, separate from the nature of the conviction itself.

Question 25: A borrower takes out a home equity line of credit (HELOC). Which statement BEST describes a HELOC?

An unsecured personal line of credit tied to home value
A government-backed second mortgage program
A fixed lump-sum loan secured by home equity
A revolving credit line secured by the borrower's home equity (Correct answer)

Correct answer: A revolving credit line secured by the borrower's home equity

A HELOC is a revolving line of credit secured by the equity in a home, allowing borrowers to draw and repay funds as needed.

Question 26: In a deed of trust, who holds legal title to the property until the loan is repaid?

The escrow company
The borrower (trustor)
The trustee (Correct answer)
The lender (beneficiary)

Correct answer: The trustee

In a deed of trust, the trustee holds legal title on behalf of the lender until the borrower satisfies the debt.

Question 27: A business owner's policy (BOP) is designed primarily for which type of insured?

Personal auto policyholders
Small to mid-sized commercial businesses (Correct answer)
High-net-worth homeowners
Large industrial manufacturers

Correct answer: Small to mid-sized commercial businesses

A BOP bundles property and liability coverages at a discounted rate specifically for small to mid-sized businesses.

Question 28: Under the Uniform Commercial Code (UCC), what is the 'battle of the forms' rule regarding additional terms in acceptances between merchants?

Additional terms require a written amendment
The offeror's terms always control
Additional terms become part of the contract unless they materially alter it or the offer expressly limits acceptance (Correct answer)
Additional terms automatically void the acceptance

Correct answer: Additional terms become part of the contract unless they materially alter it or the offer expressly limits acceptance

UCC §2-207 provides that between merchants, additional terms in an acceptance become part of the contract unless they materially alter the deal, the offer limits acceptance to its terms, or the offeror objects within a reasonable time.

Question 29: A borrower has a gross monthly income of $5,000 and total monthly debt obligations of $1,900 including a proposed PITI of $1,200. What is the back-end debt-to-income ratio?

40%
24%
42%
38% (Correct answer)

Correct answer: 38%

The back-end DTI divides total monthly debts ($1,900) by gross monthly income ($5,000) = 38%.

Question 30: What happens to a candidate's personal belongings (keys, wallet, phone) during a PSI exam?

They are held by the proctor at the front desk
They are placed in a sealed bag visible in the exam room
They are secured in a provided locker at the testing center (Correct answer)
They must be left in the candidate's vehicle

Correct answer: They are secured in a provided locker at the testing center

PSI testing centers provide secure lockers where candidates must store all personal belongings before entering the exam room.

Question 31: RESPA requires that buyers receive a Loan Estimate within how many business days of submitting a loan application?

5 business days
7 business days
3 business days (Correct answer)
1 business day

Correct answer: 3 business days

Under RESPA and TILA (TRID rules), lenders must provide the Loan Estimate within 3 business days of receiving a completed loan application.

Question 32: Which study resource type is generally most aligned with actual PSI exam content?

Unofficial YouTube channels and forums
General test prep books not specific to the exam
Official state board-approved prep materials and PSI candidate bulletins (Correct answer)
Social media flashcard groups

Correct answer: Official state board-approved prep materials and PSI candidate bulletins

State board-approved materials and the official PSI candidate bulletin are written to match the actual exam blueprint, making them the most relevant resources.

Question 33: A candidate passed their PSI exam. What is typically required before they can legally practice their licensed profession?

Waiting 90 days for automatic licensing
Submitting a license application and receiving state board approval (Correct answer)
Paying PSI an additional licensing fee
Printing the score report and beginning work immediately

Correct answer: Submitting a license application and receiving state board approval

Passing the PSI exam is one step; candidates must still apply to the state licensing board and receive official approval before practicing legally.

Question 34: A licensed contractor is disciplined by the state licensing board for abandoning a project without legal excuse. This action is reported and becomes part of the contractor's record. This is an example of the board's authority to:

Enforce regulations and discipline licensees. (Correct answer)
Set examination standards.
Issue new licenses.
Approve pre-licensing education.

Correct answer: Enforce regulations and discipline licensees.

Licensing boards are responsible not only for issuing licenses but also for enforcing the laws and regulations that govern the profession. This includes investigating complaints against licensees and taking disciplinary action, such as fines, suspension, or revocation of the license, when violations are found.

Question 35: An employer-sponsored retirement plan that defines the benefit the employee will receive at retirement is a:

SIMPLE IRA
Defined contribution plan
401(k) plan
Defined benefit plan (Correct answer)

Correct answer: Defined benefit plan

A defined benefit plan promises a specific monthly benefit at retirement, usually based on salary history and years of service.

Question 36: A 'retroactive date' on a claims-made policy means that:

Coverage applies to claims reported after the policy expires
Claims from prior policy years are automatically covered
The policy automatically renews without a gap in coverage
No coverage applies to incidents that occurred before that date (Correct answer)

Correct answer: No coverage applies to incidents that occurred before that date

A retroactive date sets the earliest point in time from which a covered incident may have occurred; losses before this date are excluded.

Question 37: What is the term for an easement that benefits one parcel of land and burdens another?

Easement in gross
Profit
Easement appurtenant (Correct answer)
License

Correct answer: Easement appurtenant

An easement appurtenant attaches to and benefits a dominant estate, while burdening a servient estate, and transfers with the land.

Question 38: A life insurance policy provision that allows the policyowner to reinstate a lapsed policy within a specified period by paying back premiums with interest requires evidence of:

Insurability (Correct answer)
Financial hardship
No additional evidence is needed
Prior claims history

Correct answer: Insurability

Reinstatement provisions require the policyowner to provide evidence of insurability in addition to paying all overdue premiums plus interest.

Question 39: What is remote proctoring offered by PSI?

An in-person exam with a tutor
The ability to take exams from home or office with a live proctor monitoring via webcam (Correct answer)
A self-study program
An automated grading system

Correct answer: The ability to take exams from home or office with a live proctor monitoring via webcam

Remote proctoring allows candidates to take exams from any location with a computer and webcam, while a live proctor monitors the session to maintain exam integrity.

Question 40: Which of the following is the most reliable source of official PSI exam content outlines?

Wikipedia
Social media study groups
Third-party study apps
PSI candidate handbook or bulletin (Correct answer)

Correct answer: PSI candidate handbook or bulletin

The official PSI candidate handbook contains the exact content outline, weight of each domain, and exam policies you need to study.

Question 41: A project has a budget at completion (BAC) of $150,000. At the current time, the earned value (EV) is $75,000, the planned value (PV) is $80,000, and the actual cost (AC) is $90,000. What is the Cost Performance Index (CPI) for this project?

1.07
0.83 (Correct answer)
0.94
1.20

Correct answer: 0.83

The Cost Performance Index (CPI) is calculated using the formula: CPI = Earned Value (EV) / Actual Cost (AC). In this scenario, EV = $75,000 and AC = $90,000. Therefore, CPI = $75,000 / $90,000 = 0.83. A CPI less than 1 indicates that the project is over budget.

Question 42: A real estate license applicant omits a prior misdemeanor conviction on their application. If discovered later, this could result in:

Denial, suspension, or revocation for making a false statement on the application (Correct answer)
Automatic approval because misdemeanors are not disqualifying
A small administrative fine with no other consequences
A mandatory three-year waiting period before reapplication

Correct answer: Denial, suspension, or revocation for making a false statement on the application

Providing false or incomplete information on a license application is a serious violation that can result in denial or revocation.

Question 43: Which scheduling technique uses probabilistic time estimates including optimistic, pessimistic, and most likely durations?

Critical Path Method (CPM)
Gantt Chart
Resource Leveling
Program Evaluation and Review Technique (PERT) (Correct answer)

Correct answer: Program Evaluation and Review Technique (PERT)

PERT uses three-point estimates (optimistic, pessimistic, most likely) to account for uncertainty in activity durations.

Question 44: A mechanic's lien may be filed by a:

taxing authority
contractor (Correct answer)
buyer’s real estate agent
seller’s real estate agent.

Correct answer: contractor

A mechanic's lien is a specific, involuntary lien placed on real property by individuals or companies who have provided labor or materials for improvements to that property but have not been paid. Contractors, subcontractors, and material suppliers are common parties who can file such a lien to secure payment for their work.

Question 45: How are PSI exam results typically delivered for licensure exams?

Only by postal mail weeks later
Via email after 30 days
Immediately on-screen with a printed pass/fail report (Correct answer)
Announced verbally by the proctor

Correct answer: Immediately on-screen with a printed pass/fail report

Most PSI licensure exams provide an immediate on-screen score report at the end of the exam, often including a pass or fail determination.

Question 46: The 'twisting' of insurance refers to which prohibited practice?

Inducing a policyholder to lapse or surrender a policy by misrepresenting facts to buy a new one (Correct answer)
Sharing commissions with unlicensed persons
Charging different premiums to insureds in the same risk class
Issuing a policy without the required state filing

Correct answer: Inducing a policyholder to lapse or surrender a policy by misrepresenting facts to buy a new one

Twisting is an unfair trade practice where an agent uses misrepresentation or incomplete comparisons to persuade a policyholder to replace an existing policy with a new one that may not be in their best interest.

Question 47: Which of the following BEST describes a 'bridge loan' in real estate?

A long-term loan used to finance commercial construction projects
A short-term loan used to bridge the gap between buying a new home and selling the existing one (Correct answer)
A loan that bridges the difference between appraised value and purchase price
A government-subsidized loan for first-time homebuyers

Correct answer: A short-term loan used to bridge the gap between buying a new home and selling the existing one

A bridge loan is short-term financing that allows a borrower to purchase a new property before their current property is sold.

Question 48: Which provision in a disability income policy requires the insured to be under a physician's care to receive benefits?

Elimination period
Physician care clause (Correct answer)
Residual benefit
Own-occupation definition

Correct answer: Physician care clause

The physician care clause stipulates that the insured must be under regular care of a licensed physician to qualify for disability benefits.

Question 49: What is float (or slack) in project scheduling?

The overlap between two concurrent tasks
Extra budget reserved for unexpected costs
The amount of time an activity can be delayed without delaying the project end date (Correct answer)
The buffer added to each task estimate

Correct answer: The amount of time an activity can be delayed without delaying the project end date

Float is the amount of time a task can be delayed without affecting the project's overall completion date.

Question 50: What is a biweekly mortgage's main benefit?

they accept those with poor credit
easier for budgeting
quicker loan repayment (Correct answer)
they provide more affordable rates of interest

Correct answer: quicker loan repayment

The main benefit of a biweekly mortgage is quicker loan repayment. By making half of the monthly payment every two weeks, borrowers effectively make 26 half-payments, which equates to 13 full monthly payments per year. This extra annual payment significantly reduces the principal balance faster, shortening the loan term and saving a substantial amount in interest over the life of the loan.

Question 51: What is the purpose of a 'deductible' in an insurance policy?

The portion of a loss the policyholder must pay before insurance kicks in (Correct answer)
A premium discount for bundling policies
The maximum amount the insurer will pay per claim
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 52: Under OSHA's scaffolding standard, what is the minimum width of a scaffold platform?

12 inches
24 inches
20 inches (Correct answer)
18 inches

Correct answer: 20 inches

OSHA 29 CFR 1926.451 requires scaffold platforms to be at least 18 inches wide, though 20 inches is the minimum for most supported scaffolds used by employees.

Question 53: Which loan type is typically used by investors to fund a quick property purchase before obtaining permanent financing?

Blanket mortgage
Bridge loan (Correct answer)
Graduated payment mortgage
Reverse mortgage

Correct answer: Bridge loan

A bridge loan is a short-term loan that 'bridges' the gap between a property purchase and securing long-term financing.

Question 54: In an appraisal report, reconciliation refers to the process of:

Verifying that all comparable sales used are within the same ZIP code
Confirming the property's legal description matches the deed
Recalculating adjustments to ensure mathematical accuracy
Weighing the reliability of each approach to value and arriving at a final value opinion (Correct answer)

Correct answer: Weighing the reliability of each approach to value and arriving at a final value opinion

Reconciliation is the appraiser's judgment process of analyzing the results from all applicable approaches and weighting them based on their reliability to arrive at a single final value opinion.

Question 55: In a real estate transaction, 'earnest money' is best described as:

The commission paid to the buyer's agent at closing
A penalty fee charged if the seller backs out
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

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 56: What is a 'novation' in contract law?

Converting an oral contract to a written one
Extending the performance deadline
Adding a new term to an existing contract
Substituting a new party or obligation, releasing the original party from liability (Correct answer)

Correct answer: Substituting a new party or obligation, releasing the original party from liability

A novation substitutes a new party or obligation for an existing one, with the consent of all parties, and extinguishes the original party's liability.

Question 57: The principle of highest and best use requires that use to be:

Legally permissible, physically possible, financially feasible, and maximally productive (Correct answer)
Currently used, zoned for residential, income-producing, and owner-occupied
Permitted under current zoning, profitable, and environmentally sustainable
Approved by the municipality, historically consistent, and commercially viable

Correct answer: Legally permissible, physically possible, financially feasible, and maximally productive

Highest and best use is the use that is legally permissible, physically possible, financially feasible, and maximally productive — all four criteria must be met.

Question 58: Which type of property ownership gives two or more people equal, undivided interest with the right of survivorship?

Tenancy by the entirety
Community property
Tenancy in common
Joint tenancy (Correct answer)

Correct answer: Joint tenancy

Joint tenancy includes the right of survivorship, meaning a deceased owner's share automatically passes to the surviving co-owners.

Question 59: An insurance 'binder' serves as:

A summary of all exclusions in the policy
Proof of final policy issuance
Temporary evidence of coverage until a formal policy is issued (Correct answer)
A mandatory disclosure form for high-risk applicants

Correct answer: Temporary evidence of coverage until a formal policy is issued

An insurance binder is a temporary written agreement that provides proof of coverage until the full insurance policy can be formally issued and delivered.

Question 60: A borrower's existing loan is replaced with a new loan at a lower interest rate. This process is called:

Assumption
Subordination
Novation
Refinancing (Correct answer)

Correct answer: Refinancing

Refinancing replaces an existing mortgage with a new loan, often to secure a lower interest rate or different loan terms.

Question 61: What form of payment does PSI typically accept for exam registration?

Personal check mailed to PSI
Cash only at the testing center
Credit or debit card online (Correct answer)
Cryptocurrency transfers

Correct answer: Credit or debit card online

PSI primarily accepts credit and debit card payments through their online registration portal.

Question 62: Among these, which is a general lien?

Bail bond lien
Real estate taxes
Judgment (Correct answer)
Mechanic’s lien

Correct answer: Judgment

A general lien attaches to all of a debtor's property, both real and personal, within the jurisdiction. A judgment lien, which arises from a court order, is a classic example of a general lien because it can be enforced against any non-exempt property owned by the debtor to satisfy the judgment. Other options listed are typically specific liens.

Question 63: Which statement about the PSI candidate handbook is correct?

It outlines policies, ID requirements, and testing procedures (Correct answer)
It contains exam content and answer keys
It is updated only every five years
It is only available by mailing PSI directly

Correct answer: It outlines policies, ID requirements, and testing procedures

The PSI candidate handbook describes testing rules, acceptable identification, scheduling procedures, and what to expect on exam day.

Question 64: Under real estate license law, 'commingling' refers to:

Advertising one price publicly while negotiating a different price privately
Mixing client funds with the broker's personal or business operating funds (Correct answer)
Representing both buyer and seller in the same transaction
Failing to disclose a dual agency relationship

Correct answer: Mixing client funds with the broker's personal or business operating funds

Commingling is the illegal mixing of clients' funds (such as earnest money) with the broker's own funds.

Question 65: A homeowner borrows $50,000 using their home's equity as collateral to fund a renovation. This is best described as a:

Purchase money mortgage
Bridge loan
Construction loan
Home equity loan (Correct answer)

Correct answer: Home equity loan

A home equity loan allows homeowners to borrow against the equity built up in their property.

Question 66: Assemblage in real estate refers to the process of:

Combining two or more adjacent parcels under single ownership to create greater utility (Correct answer)
Dividing a large parcel into smaller lots for individual sale
Estimating the contributory value of individual improvements to a property
Calculating site value by the land residual technique

Correct answer: Combining two or more adjacent parcels under single ownership to create greater utility

Assemblage is the combining of two or more adjacent parcels into one larger holding, often resulting in plottage value — the incremental increase in value created by the combination.

Question 67: A coffee shop posts a sign offering a free coffee to the 100th customer of the day. This is an example of what type of contract?

A unilateral contract (Correct answer)
An executed contract
A bilateral contract
An implied contract

Correct answer: A unilateral contract

A unilateral contract is formed when one party makes a promise in exchange for a specific act by another party. The contract is accepted by the performance of the act. In this scenario, the coffee shop (the offeror) promises a reward, and the contract is only accepted when a customer performs the act of being the 100th person to make a purchase.

Question 68: What is the primary remedy for breach of contract?

Punitive damages to punish the breaching party
Compensatory damages to put the non-breaching party in the position they would have been in had the contract been performed (Correct answer)
Specific performance in all cases
Rescission in all cases

Correct answer: Compensatory damages to put the non-breaching party in the position they would have been in had the contract been performed

The primary remedy for breach of contract is compensatory damages, designed to give the non-breaching party the benefit of the bargain they expected.

Question 69: Which organization of the government was established to promote low-income housing?

$1,000
$2,750 (Correct answer)
$275
$1,375

Correct answer: $2,750

The provided question text 'Which organization of the government was established to promote low-income housing?' does not align with the numerical answer options, making it impossible to explain why '$2,750' is correct in this context. Typically, a question leading to a specific dollar amount like this would involve a calculation related to fees, taxes, or maximum limits within a real estate transaction, which is missing here.

Question 70: An encumbrance that makes property security for the repayment of a debt is called a:

Lien (Correct answer)
Restriction
Encroachment
Easement

Correct answer: Lien

A lien is a financial encumbrance that gives a creditor the right to have a debt satisfied from the property if the debt is not paid.

Question 71: Under COBRA, how long may a qualified beneficiary typically continue group health coverage after losing coverage due to a voluntary termination of employment?

29 months
12 months
36 months
18 months (Correct answer)

Correct answer: 18 months

COBRA allows qualified beneficiaries who lose group health coverage due to voluntary or involuntary termination of employment (other than gross misconduct) to continue coverage for up to 18 months.

Question 72: Which defense time restriction makes the policy incontestable?

5 years
2 years (Correct answer)
12 months
18 months

Correct answer: 2 years

The incontestability clause in life insurance policies states that after a policy has been in force for a specific period, usually two years, the insurer cannot dispute the validity of the policy due to misstatements or concealment in the application. This provision protects the beneficiary from claims being denied years later based on minor inaccuracies. After this two-year period, the policy becomes incontestable.

Question 73: Which type of mortgage uses one loan to finance multiple properties simultaneously?

Open-end mortgage
Wraparound mortgage
Blanket mortgage (Correct answer)
Package mortgage

Correct answer: Blanket mortgage

A blanket mortgage covers two or more parcels of real estate under a single loan, often used by developers.

Question 74: A lender quotes an interest rate of 6.5% but the annual percentage rate (APR) is 6.9%. What accounts for this difference?

The APR represents the lender's profit margin on the loan
The APR is always lower than the stated interest rate
The APR reflects only the principal balance owed
The APR includes the interest rate plus fees and costs associated with the loan (Correct answer)

Correct answer: The APR includes the interest rate plus fees and costs associated with the loan

APR expresses the true annual cost of borrowing by incorporating the interest rate plus loan fees (origination fees, discount points, etc.) into a single percentage.

Question 75: Inverse condemnation lawsuits can be filed by _____.

the zoning board
the city
the police
a homeowner (Correct answer)

Correct answer: a homeowner

Inverse condemnation occurs when a government entity takes private property for public use without formally initiating eminent domain proceedings, but its actions effectively deprive the owner of the property's use and value. In such cases, the homeowner (the property owner) has the right to file a lawsuit against the government to seek just compensation for the taking.

Question 76: Under what circumstances may a professional license typically be placed on 'inactive' status?

Voluntarily by a licensee who is not currently practicing but wishes to maintain the license. (Correct answer)
Automatically after 5 years of continuous practice.
When the licensee fails the renewal examination.
When the licensee is under investigation for misconduct.

Correct answer: Voluntarily by a licensee who is not currently practicing but wishes to maintain the license.

Inactive status is an option for licensees who are not actively working in their profession but want to keep their license without having to meet all the active requirements, such as continuing education. It allows for easier reactivation in the future compared to letting a license lapse or expire completely.

Question 77: Depreciation, defined as a decrease in value from any cause, is usually classified into three categories. The loss of a property's value due to normal wear and tear is called ______.

economic obsolesce
external obsolescence
physical deterioration (Correct answer)
functional obsolesce

Correct answer: physical deterioration

Physical deterioration is the loss of value that comes from the wear and tear that buildings go through as they age. Floods, earthquakes, fire, UV rays, wind, etc. can cause physical damage.

Question 78: Which practice best helps candidates simulate actual PSI exam conditions during preparation?

Studying in short 5-minute bursts throughout the day
Watching video lectures at 2x speed repeatedly
Reading the textbook aloud
Completing timed practice tests without interruptions (Correct answer)

Correct answer: Completing timed practice tests without interruptions

Timed, uninterrupted practice tests replicate the pressure and pacing of the real exam, improving performance under test conditions.

Question 79: An insured deliberately misrepresents a material fact on an insurance application. This is known as:

Estoppel
Fraud (Correct answer)
Concealment
Warranty

Correct answer: Fraud

Fraud is an intentional misrepresentation of a material fact made with the intent to deceive the insurer.

Question 80: Under the doctrine of 'reasonable expectations,' courts will interpret policy language in favor of:

Industry standard policy interpretations
The insured's reasonable understanding of coverage (Correct answer)
The state insurance department's guidelines
The insurer's stated intent

Correct answer: The insured's reasonable understanding of coverage

The reasonable expectations doctrine holds that coverage should align with what an average insured would reasonably expect the policy to provide.

Question 81: A potential insured wants to buy a policy that would offer the HIGHEST level of protection for a brief period of time during which the insured will have few financial resources. Which of the following types of insurance should the agent suggest the potential insured to purchase?

Limited-Pay Life
Whole Life
Variable Life
Term Life (Correct answer)

Correct answer: Term Life

Term life insurance offers the highest level of protection for the lowest premium over a specific period. It is ideal for individuals with limited financial resources who need maximum coverage for a temporary need, such as covering a mortgage or providing for dependents during their working years.

Question 82: A corporation's shareholders are generally not personally liable for corporate debts. Under what circumstances might a court 'pierce the corporate veil' and hold shareholders liable?

When shareholders comingle personal and corporate funds and use the corporation as an alter ego (Correct answer)
Whenever the corporation fails to earn a profit
When the corporation has fewer than five employees
When a shareholder owns more than 50% of the stock

Correct answer: When shareholders comingle personal and corporate funds and use the corporation as an alter ego

Courts pierce the corporate veil when shareholders ignore corporate formalities, commingle funds, or use the corporation as a personal alter ego to perpetrate fraud or injustice.

Question 83: How many employees can share a single lock on a group lockout procedure?

The crew supervisor applies one lock for the entire crew
Up to 5 employees can share one lock
Each authorized employee must apply their own personal lock (Correct answer)
One lock per department is sufficient

Correct answer: Each authorized employee must apply their own personal lock

In group lockout procedures, each authorized employee working on the equipment must apply their own personal lock to the group lockout hasp to ensure individual protection.

Question 84: An insurance agent who represents multiple insurers and legally represents the policyholder rather than any single insurer is a:

Captive agent
Independent agent
Managing general agent
Insurance broker (Correct answer)

Correct answer: Insurance broker

A broker represents the buyer/policyholder and can place coverage with multiple insurers, unlike an agent who represents the insurer.

Question 85: What term describes the process by which the government acquires private property for public use with just compensation?

Eminent domain (Correct answer)
Escheat
Adverse possession
Police power

Correct answer: Eminent domain

Eminent domain is the government's constitutional power to take private property for public use, provided just compensation is paid to the owner.

Question 86: Under license law, a broker must keep transaction records for a minimum period, typically:

Three to five years (Correct answer)
One year
Six months
Ten years

Correct answer: Three to five years

Most states require brokers to retain transaction records, including contracts and trust account records, for three to five years.

Question 87: A limited payment life insurance policy has all of the same characteristics as a straight life insurance policy, with the exception of:

Premium-paying period is longer. (Correct answer)
Cash value accrues more quickly.
Premiums are higher.
Policy is paid up before the age of 100.

Correct answer: Premium-paying period is longer.

A limited payment life insurance policy has a *shorter* premium-paying period compared to a straight (or continuous premium) whole life policy, where premiums are paid until age 100 or death. Due to this condensed payment schedule, individual premium payments are higher, and the cash value typically accrues more quickly.

Question 88: An insurer's legal right to recover from a negligent third party the amount paid to an insured claimant is called:

Indemnity
Subrogation (Correct answer)
Contribution
Assignment

Correct answer: Subrogation

Subrogation allows the insurer to 'step into the shoes' of the insured and sue the responsible party to recover claim payments made.

Question 89: Why should candidates prioritize high-weighted domains when creating a PSI study plan?

High-weighted domains are guaranteed to have easier questions
Lower-weighted domains are always easier and need no study
PSI only tests candidates on the highest-weighted domain
Higher-weighted domains contribute more points to the total score, maximizing study efficiency (Correct answer)

Correct answer: Higher-weighted domains contribute more points to the total score, maximizing study efficiency

Focusing first on domains with greater weight ensures that study time yields the highest possible score impact per hour invested.

Question 90: Which listing agreement gives the broker the exclusive right to a commission regardless of who sells the property?

Open listing
Exclusive right-to-sell listing (Correct answer)
Exclusive agency listing
Net listing

Correct answer: Exclusive right-to-sell listing

An exclusive right-to-sell listing entitles the broker to a commission if the property sells during the listing period, no matter who procures the buyer.

Question 91: Which FHA mortgage insurance premium is collected at loan closing?

Monthly MIP
Upfront MIP (UFMIP) (Correct answer)
Hazard insurance premium
Annual MIP

Correct answer: Upfront MIP (UFMIP)

FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), currently 1.75% of the base loan amount, paid at closing.

Question 92: A long-term care policy that allows unused benefits to be carried forward to extend the benefit period is using which feature?

Inflation protection
Pooled benefits (Correct answer)
Restoration of benefits
Shared care rider

Correct answer: Pooled benefits

Pooled benefits allow the total benefit pool to be drawn upon flexibly, so unused daily benefits effectively extend the total coverage period.

Question 93: What happens if you arrive more than 15 minutes late to a PSI exam?

You receive extra time at the end
You reschedule at no charge
You may be denied entry and forfeit your fee (Correct answer)
You are allowed to start but flagged

Correct answer: You may be denied entry and forfeit your fee

PSI policy states that candidates arriving more than 15 minutes late may be turned away and forfeit their examination fee.

Question 94: What is the most important reason to read all answer choices before selecting one on a PSI exam?

Reading all choices wastes valuable time
A later choice may be more complete or accurate than the first plausible option (Correct answer)
PSI always places the correct answer last
Only the first two choices are usually relevant

Correct answer: A later choice may be more complete or accurate than the first plausible option

Exam writers often include partially correct 'distractors'; reading all options ensures you identify the best answer rather than the first acceptable one.

Question 95: If an older structure cannot be equipped with air conditioning, it is an example of:

economic obsolescence
physical deterioration
functional obsolescence (Correct answer)
external deterioration

Correct answer: functional obsolescence

Functional obsolescence refers to a loss in value due to outdated design, features, or inadequate utility within the property itself, making it less desirable or efficient compared to newer properties. An older structure unable to accommodate modern amenities like air conditioning is a classic example, as it negatively impacts the property's functionality and market appeal.

Question 96: What fiduciary duty requires an agent to place the client's interests above all others, including the agent's own?

Disclosure
Loyalty (Correct answer)
Reasonable care
Confidentiality

Correct answer: Loyalty

The duty of loyalty requires the agent to act solely in the best interest of the principal and to avoid any conflicts of interest.

Question 97: Which of the following is considered a primary form of ID accepted by PSI at check-in?

Student ID from a university
Employer-issued badge
Library card
Government-issued photo ID such as a driver's license (Correct answer)

Correct answer: Government-issued photo ID such as a driver's license

PSI requires at least one government-issued photo ID such as a driver's license, passport, or military ID for candidate verification.

Question 98: A mortgage's discount points are calculated as a percentage of:

the closing cost
the selling price
the down payment
the amount borrowed (Correct answer)

Correct answer: the amount borrowed

Mortgage discount points are calculated as a percentage of the amount borrowed. To reduce the interest rate by one eighth of a percent or one quarter of a percent, you can pay one point, or one percent of the loan amount. Depending on how many points a borrower pays, the lender will offer different rates and payment plans.

Question 99: An employee performing cord-and-plug equipment servicing is exempt from LOTO requirements if which condition is met?

A supervisor is present during the service
The work is completed in under 10 minutes
The plug is under the exclusive control of the employee performing the work (Correct answer)
The equipment is less than 120 volts

Correct answer: The plug is under the exclusive control of the employee performing the work

OSHA exempts cord-and-plug equipment from LOTO if the plug is unplugged and kept under the exclusive personal control of the employee doing the service work.

Question 100: What is the difference between a project constraint and a project assumption?

They are functionally identical in project planning
Assumptions require approval; constraints do not
Constraints are known limiting factors; assumptions are considered true without proof (Correct answer)
Constraints are external; assumptions are internal to the team

Correct answer: Constraints are known limiting factors; assumptions are considered true without proof

Constraints are known restrictions (budget, time, resources), while assumptions are factors believed to be true but not yet confirmed.

PSI Licensing Exam

The PSI Licensing Exam exam validates essential knowledge and skills required for certification or licensure in this field.

100

Questions

120 min

Time Limit

70%

To Pass

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