PSI Life Exam Practice Test 2025 – Complete Preparation Resource

The primary purpose of the application form in life insurance is to provide essential information that helps insurers assess the risk associated with the applicant. This information is critical in determining eligibility for coverage, which includes evaluating aspects such as the applicant's health history, lifestyle habits, and personal information. By analyzing this data, the insurance company can decide whether to offer coverage, under what terms, and at what premium rates.

Collecting premium payments is an important aspect of maintaining a life insurance policy but occurs after the application process has established coverage. Facilitating claims processing refers to the procedures followed after a covered event, which is not the main function of the application form. Issuing dividends pertains to certain types of life insurance policies, usually whole life, and is based on the performance of the insurance company but is unrelated to the initial application process.