PSI Life Exam Practice Test

What does an insured need to provide truthful information about during the application process?

1. Financial liabilities

2. Personal preferences

3. Known health risks

4. Insurance history

The correct answer is: Known health risks

During the application process for life insurance, providing truthful information about known health risks is crucial because it directly impacts the underwriting process and the insurer's ability to assess risk. Insurers rely on accurate health information to evaluate the potential for future claims, determine premium rates, and decide on the coverage amount. If an individual omits or misrepresents health-related information, it can lead to repercussions such as denial of claims, cancellation of the policy, or even charges of insurance fraud. While financial liabilities, personal preferences, and insurance history are also important considerations, they do not carry the same weight in terms of the agency's assessment of risk and underwriting decisions. Health risks are particularly significant as they relate to the primary reason for life insurance—protection against the financial impact of premature death, which is closely tied to the insured's health status.