Ace the 2026 Life & Health Insurance Exam – Insure Your Success Today!

The correct answer is the principal. In the context of agency rules, the agent acts on behalf of the principal, who is the party that grants authority to the agent to perform certain activities or make decisions on their behalf. This relationship is foundational in agency law, where the principal entrusts the agent with specific responsibilities, such as negotiating contracts or facilitating transactions related to insurance.

In an insurance context, the principal is typically the insurer or the policyholder, depending on the relationship established. The agent, while representing the interests of the principal, is obligated to act in the best interest of the principal and must adhere to the authority granted by them. This agency relationship emphasizes the fiduciary duty of the agent toward the principal, ensuring that the agent manages and represents the principal's interests with care and loyalty. Other roles, such as the broker, client, or insurer, play different parts in the overall insurance transaction and do not fulfill the specific role defined by agency rules.