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CHEAT SHEET · LIFE-ONLY INSURANCE

Life-Only Insurance Cheat Sheet.

The Life-Only Insurance numbers, rules and traps that decide questions, on one page. Review them here, then download the free PDF for offline study.

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Written by Every Exam Prep Editorial TeamSource and review policyPublished July 9, 2026Updated July 17, 2026
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01

Quick facts

the numbers to know before exam day
Questions
80
Time limit
2h
Passing score
70% (60% in CA)
Exam fee
$39
Governing body
State DOI
02

Full write-up

the complete guide, in prose

Exam Snapshot

  • 80 scoreable questions
  • 120-minute time limit
  • Exam fee: $39

Life Insurance Policy Types

  • Term: covers a specified period, death benefit only if death occurs within term, no cash value — cheapest per dollar of coverage
  • Decreasing term: death benefit shrinks over time; common for mortgage protection
  • Whole life: level premium, guaranteed death benefit, guaranteed cash value on a fixed schedule; cash value = face amount at maturity (age 100 or 121)
  • Universal life: flexible premiums/death benefit; splits mortality, expense, interest; cash value earns current rate with a guaranteed minimum
  • Variable life: cash value in separate-account subaccounts; owner bears investment risk; it's a security — needs FINRA registration + life license

Policy Provisions

  • Grace period: 30 or 31 days after missed premium — coverage stays in force
  • Incontestability: after 2 years in force, insurer can't contest for misstatement/concealment (except nonpayment)
  • Suicide clause: excludes suicide in first 2 years; insurer liable only for refund of premiums
  • Misstatement of age/sex: death benefit adjusted to what premium would've bought at correct age
  • Nonforfeiture options: cash surrender, reduced paid-up insurance, or extended term

Riders

  • Waiver of premium: waives premiums if insured becomes totally disabled
  • Guaranteed insurability: buy more coverage at set intervals, no evidence of insurability
  • Accelerated death benefit: advances part of death benefit if terminally ill

Underwriting & Beneficiaries

  • Insurable interest needed only at policy inception, not at time of loss
  • Everyone has unlimited insurable interest in their own life
  • Risk classes: preferred, standard, substandard, or decline
  • MIB: nonprofit database of coded medical impressions shared among insurers
  • FCRA: insurer using a consumer/investigative report must notify applicant of info collected
  • Primary beneficiary is first in line; contingent collects only if primary predeceases insured
  • Revocable beneficiary: owner can change anytime. Irrevocable: needs beneficiary consent to change
  • No surviving beneficiary → proceeds go to insured's estate

Annuities

  • Annuity = opposite of life insurance: turns a lump sum into income, protects against outliving assets
  • Fixed: guaranteed minimum rate, insurer bears risk. Variable: separate accounts, owner bears risk, is a security (registration required)
  • Life-only payout: largest payment, stops at death

Health, Disability & LTC

  • Major medical: deductible + coinsurance + out-of-pocket max
  • HMO: prepaid network care, PCP gatekeeper for referrals
  • PPO: lower in-network cost-sharing, allows (pricier) out-of-network care
  • Disability income: replaces lost earnings after elimination period; own-occ vs any-occ definitions
  • LTC: covers custodial/skilled care; benefits trigger on inability to perform stated # of ADLs

Taxation — Memorize These

  • Lump-sum death benefit to named beneficiary: generally income-tax-free
  • Settlement option: principal tax-free, interest taxable
  • Personal life premiums: never deductible
  • MEC (fails 7-pay test): loans/withdrawals taxed LIFO + possible 10% penalty before age 59½
  • Annuity payments: taxed via exclusion ratio (part return of principal, part taxable ordinary income)
  • Annuity withdrawal before 59½: 10% penalty
  • 1035 exchange: swap life/annuity contracts of like kind, no current tax
  • Group life: first $50,000 employer-paid coverage tax-free; excess = imputed income

Frequently asked questions

What are the must-know numbers for the Life-Only exam?

Memorize the recurring numbers: the grace period is typically 30 or 31 days after a missed premium, the incontestability and suicide clauses both run two years, annuity withdrawals before age 59½ generally incur a 10% penalty, and employer-paid group life coverage is tax-free up to $50,000. Whole life matures when cash value equals the face amount, typically at age 100 or 121. These figures show up constantly in exam questions.

What policy-type distinctions should I have memorized cold?

Know that term insurance builds no cash value and pays only if death occurs within the term, while whole life carries a level premium with guaranteed death benefit and cash value. Universal life adds flexible premiums with a guaranteed minimum interest rate on cash value, and variable life shifts investment risk to the policyowner and requires a FINRA registration on top of the life license because it is a security. Decreasing term is the classic mortgage-protection answer.

What are the most common traps on the Life-Only exam?

Timing and taxation traps catch the most candidates. Remember that insurable interest must exist at policy inception, not at the time of loss; that a death benefit paid to a named beneficiary in a lump sum is generally income-tax-free while interest under a settlement option is taxable; and that personal life insurance premiums are never deductible. Also watch the MEC trap: an overfunded policy that fails the seven-pay test gets LIFO taxation on loans and withdrawals plus a possible 10% penalty before age 59½.

Which beneficiary and rider rules belong on my cheat sheet?

For beneficiaries: a revocable beneficiary can be changed anytime, an irrevocable one must consent to a change, and if no beneficiary survives, proceeds go to the insured's estate. For riders: waiver of premium waives premiums on total disability, guaranteed insurability lets you buy more coverage at set intervals with no evidence of insurability, and the accelerated death benefit advances part of the death benefit for terminal illness. These one-line rules are pure memorization points the exam loves.

How should I use the cheat sheet the night before the exam?

Use it as a final-pass review, not a first-time learning tool — skim every line and flag anything that doesn't feel automatic yet. Spend your last hour only on the flagged items, like nonforfeiture options (cash surrender, reduced paid-up, extended term) or the misstatement-of-age adjustment, then stop and sleep. The cheat sheet complements full study; it works because it triggers recall of material you've already practiced.

Sources

  1. 1.State Insurance Department Directory — NAIC
  2. 2.Insurance Licensing Exams (Pearson VUE) — Pearson VUE

Official sources

Primary documents used to verify the exam details shown on this page.

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