Montana State Life Insurance Practice Exam 2025 - Free Life Insurance Practice Questions and Study Guide

An agent employed by the principal is best described as an actual agent. This term signifies a relationship where the agent is authorized to act on behalf of the principal, performing tasks and making decisions within the scope of that authority. An actual agent is one who has a clear and defined relationship, typically established through a contract, where the agent is given specific duties.

In this context, the authority of an actual agent stems directly from the principal, creating a fiduciary relationship. This means that the agent is expected to act in the best interests of the principal and is accountable for their actions.

The other options present different types of relationships that do not accurately capture the nature of an agent employed by a principal. For instance, an independent contractor operates under a different arrangement than an employed agent, as they typically work on a contractual basis without the same level of authority or responsibility to the principal. Ostensible agents may create the impression of authority; however, they do not possess actual authority given by the principal. Unauthorized subagents act without the explicit permission of the principal, which deviates from the defined relationship characteristic of an actual agent.