Life Insurance Practice Exam.
57 verified questions, instant feedback.
Know the exam before you sit it
the facts most prep sites buryEvery free resource for this exam
family overview →Get a free Life Insurance study plan
A week-by-week plan plus new practice questions, straight to your inbox.
Browse all questions & answers
1. Two candidates compare notes: one scored 72 percent and the other scored 69 percent on the same life insurance licensing exam. Assuming the typical passing threshold, which candidate(s) most likely passed?
- A. Both candidates passed
- B. Neither candidate passed
- C. Only the candidate who scored 72 percent passed
- D. Only the candidate who scored 69 percent passed
Show answer & explanation
Answer: C
The typical passing score is 70%. A score of 72% is at or above the threshold and would pass, while 69% is below it and would not. Comparing each score to 70% yields this result.2. When advising a new applicant on the general path to licensure, which pairing of requirements is best supported as commonly applicable?
- A. Completing pre-licensing coursework hours and achieving a typical passing exam score
- B. Posting a surety bond and passing a physical exam
- C. Holding a securities license and completing an internship
- D. Paying an annual membership fee and attending a convention
Show answer & explanation
Answer: A
Many states mandate completion of pre-licensing coursework hours, and a passing score of 70% is typically required on the exam. Combining these two commonly applicable requirements identifies the supported pairing.3. A licensing prep instructor emphasizes that candidates should not underestimate the coursework step. Which statement best reflects why this step matters in many jurisdictions?
- A. Pre-licensing coursework hours are mandated by many states as part of becoming licensed
- B. Coursework is purely optional everywhere and has no bearing on licensure
- C. Coursework replaces the need to achieve any passing exam score
- D. Coursework is only required after a license is already issued
Show answer & explanation
Answer: A
Many states mandate completion of pre-licensing coursework hours, which is why the step is important where required. The other statements contradict this mandate or misstate its role.4. Before sitting for the licensing examination, what do many states require a candidate to complete?
- A. A minimum of two years of industry work experience
- B. Pre-licensing coursework hours
- C. A college degree in finance
- D. A background investigation by a federal agency
Show answer & explanation
Answer: B
Many states mandate completion of pre-licensing coursework hours as a prerequisite. The other options are not identified as requirements in the material.5. A study guide claims that a candidate needs to answer at least 70 percent of questions correctly to pass. How should this claim be characterized?
- A. It is inaccurate; the typical requirement is higher
- B. It is consistent with the typical passing score described
- C. It is inaccurate; there is no minimum passing score
- D. It applies only to candidates who skipped pre-licensing coursework
Show answer & explanation
Answer: B
A passing score of 70% is typically required, so a guide stating that 70% is needed to pass is consistent with the standard described.6. Which of the following pairs correctly identifies a typical exam standard and a common pre-exam requirement?
- A. A 70 percent passing score, and completion of pre-licensing coursework hours mandated by many states
- B. A 90 percent passing score, and a mandatory apprenticeship in every state
- C. A 70 percent passing score, and no educational prerequisites anywhere
- D. A 55 percent passing score, and pre-licensing coursework required only in one state
Show answer & explanation
Answer: A
A passing score of 70% is typically required, and many states mandate completion of pre-licensing coursework hours. Only option A reflects both facts accurately.7. A candidate scores exactly 70 percent on the licensing exam. Based solely on the typical passing threshold, what is the most defensible conclusion?
- A. The candidate has met the typical passing score of 70 percent
- B. The candidate has failed because 70 percent is below the requirement
- C. The candidate must retake pre-licensing coursework regardless
- D. The candidate's result depends on the number of other test-takers
Show answer & explanation
Answer: A
Since a passing score of 70% is typically required, a score of exactly 70% meets that threshold. This applies the stated standard directly.8. Which score is generally described as the minimum needed to pass a life insurance licensing examination?
- A. 60 percent
- B. 65 percent
- C. 70 percent
- D. 75 percent
Show answer & explanation
Answer: C
A passing score of 70% is typically required to pass the examination. The other percentages do not reflect the commonly stated passing threshold.9. According to commonly cited licensing standards, completing coursework before sitting for the exam is best described as:
- A. A step many states require of applicants
- B. Prohibited in all states
- C. Available only to applicants who already hold a license
- D. Optional in every state without exception
Show answer & explanation
Answer: A
Many states mandate completion of pre-licensing coursework hours before an applicant may sit for the exam, so it is a step many states require.10. Two candidates sit for the same licensing exam. One scores 70 percent and the other scores 72 percent, on an exam using the typical threshold. Which best describes their outcomes?
- A. Both fail
- B. Both meet or exceed the typical passing score
- C. Only the 72 percent candidate reaches the threshold
- D. Neither result can be determined
Show answer & explanation
Answer: B
With a typical passing score of 70%, a result of 70% meets the threshold and 72% exceeds it, so both candidates meet or exceed the passing score.11. A candidate for a life insurance license reports that their jurisdiction expects them to earn a specific score on the licensing examination in order to qualify. Based on the standard threshold commonly applied, what is the minimum percentage a candidate is typically required to achieve to pass?
- A. 60 percent
- B. 65 percent
- C. 70 percent
- D. 75 percent
Show answer & explanation
Answer: C
A passing score of 70% is typically required on the licensing examination. The other percentages do not reflect the standard threshold.12. A study guide states that reaching the typical passing score means answering at least 70 percent of questions correctly. On a fill-in basis, the minimum passing percentage it refers to is:
- A. 50 percent
- B. 70 percent
- C. 80 percent
- D. 100 percent
Show answer & explanation
Answer: B
The typical passing score is 70%, so the minimum passing percentage referenced is 70%.13. On an exam using the typical passing threshold, which of the following results would NOT achieve a passing outcome?
- A. 70 percent
- B. 71 percent
- C. 69 percent
- D. 85 percent
Show answer & explanation
Answer: C
The typical passing score is 70%. A result of 69% is below that threshold and would not pass, while 70%, 71%, and 85% meet or exceed it.14. An applicant answers 68 percent of the questions correctly on a life insurance licensing exam. Assuming the typical passing threshold applies, what is the most likely result?
- A. The applicant passes, because 68 percent exceeds the required minimum
- B. The applicant fails, because the score falls below the typical passing threshold
- C. The applicant is granted a conditional pass pending review
- D. The applicant automatically qualifies for a waiver of the score requirement
Show answer & explanation
Answer: B
Since a passing score of 70% is typically required, a score of 68% falls below that threshold, so the applicant would typically fail. Reasoning that 68 is less than 70 leads to this conclusion.15. Before sitting for a life insurance licensing examination, a prospective producer in many states must satisfy an educational prerequisite. Which of the following best describes this requirement?
- A. Completion of pre-licensing coursework hours
- B. A four-year college degree in finance
- C. Two years of prior sales employment
- D. Membership in a national producer association
Show answer & explanation
Answer: A
Many states mandate completion of pre-licensing coursework hours before a candidate may become licensed. The other options are not identified as the standard prerequisite.16. A study guide states that a candidate must reach the standard minimum passing percentage on the licensing exam. If a candidate scores exactly at that standard threshold, what percentage did they achieve?
- A. 50 percent
- B. 70 percent
- C. 80 percent
- D. 90 percent
Show answer & explanation
Answer: B
The standard minimum passing score is typically 70%, so a candidate scoring exactly at that threshold achieved 70%.17. A prospective producer asks whether simply signing up for the licensing exam is enough to qualify in many jurisdictions. Which statement most accurately reflects the typical expectation?
- A. Registration alone is sufficient; no coursework is expected
- B. In many states, completing pre-licensing coursework hours is also expected
- C. Only prior work experience is expected, not coursework
- D. A passing score is optional if coursework is completed
Show answer & explanation
Answer: B
Many states mandate completion of pre-licensing coursework hours, so registration alone is generally not sufficient. This makes coursework an expected step in many jurisdictions.18. An applicant who has completed the mandated pre-licensing coursework in their state now takes the exam and scores 70 percent. Assuming the typical standard, what is the most likely outcome regarding the exam score?
- A. The score is below passing and the applicant fails the exam portion
- B. The score meets the typical passing threshold for the exam portion
- C. The completed coursework overrides the need for any exam score
- D. The applicant must retake the coursework before the score counts
Show answer & explanation
Answer: B
A passing score of 70% is typically required, so a score of exactly 70% meets that threshold for the exam portion. Since 70% is not below the required minimum, it is a passing exam result.19. A candidate answers 68 percent of the exam questions correctly. Based on the typical passing standard described, what is the result?
- A. The candidate passes, because 68 percent rounds up to the threshold
- B. The candidate fails, because the score is below the typical 70 percent requirement
- C. The candidate passes, because any score above 60 percent is sufficient
- D. The result cannot be determined from the passing standard alone
Show answer & explanation
Answer: B
Since a passing score of 70% is typically required, a score of 68% falls below that threshold and would not pass. This applies the stated standard to a specific score.20. Which statement most accurately reflects how pre-licensing education requirements apply across jurisdictions?
- A. Every state imposes an identical number of required hours
- B. Pre-licensing coursework is mandated by many states, though not necessarily all
- C. No state requires any pre-licensing coursework
- D. Pre-licensing coursework is only required after the exam is passed
Show answer & explanation
Answer: B
The material states that many states mandate completion of pre-licensing coursework hours, indicating the requirement is widespread but described as applying to 'many' rather than all states.21. Two prospective licensees are comparing notes. One insists the exam has no formal passing benchmark. Based on the material, is that correct?
- A. Yes, the exam is scored purely on a curve
- B. No, a passing score of 70 percent is typically required
- C. Yes, only attendance is recorded
- D. No, but the benchmark is 50 percent
Show answer & explanation
Answer: B
The claim that there is no passing benchmark is incorrect because a passing score of 70% is typically required.22. A new candidate asks what she must do before she is even permitted to take the exam. Which response is supported by the material?
- A. She must first pass a separate federal ethics test
- B. In many states, she must complete pre-licensing coursework hours
- C. She must accumulate five years of experience first
- D. Nothing is required before the exam in any state
Show answer & explanation
Answer: B
Many states mandate completion of pre-licensing coursework hours, so completing those hours is a supported prerequisite in many states. The other options introduce requirements not stated in the material.23. Which combination of statements about the licensing process is fully supported by the source material, without adding unstated details?
- A. A passing score of 70 percent is typically required, and many states mandate pre-licensing coursework hours
- B. A passing score of exactly 72 percent is required in all states, and coursework is optional
- C. There is no passing score, and pre-licensing coursework is universally required
- D. A passing score of 70 percent is required, and a specific number of coursework hours is fixed nationwide
Show answer & explanation
Answer: A
Only option A stays within the material: a 70% passing score is typically required and many states mandate pre-licensing coursework hours. Options B, C, and D introduce specific numbers or universality that the material does not support.24. A candidate answers 68 percent of the items correctly on an examination that follows the typical passing threshold. What is the most likely result?
- A. The candidate passes, because 68 percent exceeds the threshold
- B. The candidate fails, because 68 percent is below the typical passing score
- C. The candidate must retake only the missed sections
- D. The candidate automatically receives a provisional license
Show answer & explanation
Answer: B
Because the passing score is typically 70%, a score of 68% falls below that threshold and would not pass. This conclusion follows by comparing the candidate's result to the stated passing score.25. An applicant claims that no state ever requires education before an insurance licensing exam. How should this statement be evaluated?
- A. Correct, because education is never a requirement
- B. Incorrect, because many states mandate pre-licensing coursework hours
- C. Correct, because only the exam matters
- D. Incorrect, because every single state requires it without exception
Show answer & explanation
Answer: B
The claim is incorrect. Because many states mandate completion of pre-licensing coursework hours, it is not true that no state requires education before the exam. Note that 'many' does not mean 'every,' so option D overstates the requirement.26. Which pairing correctly matches a common licensing requirement with its general description?
- A. Passing score — typically 70 percent
- B. Passing score — typically 90 percent
- C. Pre-licensing coursework — banned in most states
- D. Pre-licensing coursework — required only after passing the exam
Show answer & explanation
Answer: A
A passing score is typically 70%, making that pairing correct. Pre-licensing coursework is something many states mandate, so the options describing it as banned or post-exam are inaccurate.27. An applicant plans to schedule the licensing exam without completing any preparatory coursework. Based on common state practice, what is a likely obstacle?
- A. There is never any coursework involved in licensing
- B. Many states mandate pre-licensing coursework hours before the exam
- C. Coursework is only for renewing an existing license
- D. The exam cannot be scheduled by applicants at all
Show answer & explanation
Answer: B
Since many states mandate completion of pre-licensing coursework hours, an applicant who skips coursework may be blocked from sitting for the exam in those states.28. Which statement about typical insurance licensing requirements is best supported?
- A. A passing score of 70 percent is typically required, and many states mandate pre-licensing coursework hours
- B. A passing score of 40 percent is typically required, and coursework is never involved
- C. There is no passing score, and coursework is universally banned
- D. A passing score of 95 percent is required in every state, with no coursework
Show answer & explanation
Answer: A
Both elements of option A are supported: a passing score is typically 70%, and many states mandate completion of pre-licensing coursework hours. The other options misstate one or both of these points.29. Which nonforfeiture option lets a policyowner take the accumulated cash value in a single lump-sum payment and terminate the coverage?
- A. Cash surrender
- B. Reduced paid-up insurance
- C. Extended term insurance
- D. Waiver of premium
Show answer & explanation
Answer: A
Cash surrender is one of the three nonforfeiture options — cash surrender, reduced paid-up insurance, and extended term — and it is the one that pays out the accumulated cash value and ends the policy. Waiver of premium is a rider, not a nonforfeiture option.30. A young policyowner wants the ability to increase coverage at future set intervals as their family grows, without having to prove good health each time. Which rider provides this?
- A. Waiver of premium rider
- B. Guaranteed insurability rider
- C. Accelerated death benefit rider
- D. Return of premium rider
Show answer & explanation
Answer: B
The guaranteed insurability rider lets the insured buy additional coverage at set intervals without evidence of insurability — exactly the ability to add coverage later without re-proving health.31. An insured stops paying premiums and lets the grace period expire without electing any option. Considering both the grace period and the nonforfeiture provision, which statement is most accurate?
- A. Coverage ends the instant a premium is missed, with no window and no residual value
- B. Coverage stays in force during a grace period of typically 30 or 31 days, and any accumulated cash value remains protected through a nonforfeiture option
- C. The incontestability clause forces the insurer to continue the policy free of charge
- D. The misstatement of age provision automatically converts the policy to term
Show answer & explanation
Answer: B
Two provisions work together here: the grace period keeps coverage in force for typically 30 or 31 days after a missed premium, and nonforfeiture options guarantee the accumulated cash value through cash surrender, reduced paid-up, or extended term. Incontestability and misstatement of age address unrelated matters.32. An insurer participates in an industry information-sharing arrangement to help detect material misrepresentations during underwriting. Which entity is being described?
- A. The MIB, a nonprofit database of coded medical impressions shared among member insurers
- B. A state-run public registry of policy premiums
- C. A federal agency that approves each individual policy
- D. A consumer credit bureau operated by the applicant's bank
Show answer & explanation
Answer: A
The MIB (Medical Information Bureau) is a nonprofit database of coded medical impressions shared among member insurers, used in the underwriting process.33. A statutory policy provision bars an insurer from challenging a policy for misstatements or concealment after a set period. Which provision is this, and what is the period?
- A. The grace period provision, after 30 days
- B. The incontestability clause, after the policy has been in force for two years
- C. The suicide clause, after five years
- D. The reinstatement clause, after ten years
Show answer & explanation
Answer: B
The incontestability clause bars the insurer from contesting the policy for misstatements or concealment after it has been in force for two years, except for nonpayment of premium.34. A regulator is verifying that a life policy honors an applicant's naming of beneficiaries. If the named owner designated an irrevocable beneficiary, what does the law require before that designation can be changed?
- A. Nothing; the owner may change it at any time without limitation
- B. The consent of the irrevocable beneficiary
- C. Approval from the state insurance regulator
- D. A court order in every case
Show answer & explanation
Answer: B
A revocable beneficiary can be changed at any time by the owner, whereas an irrevocable beneficiary must consent to a change. Therefore the irrevocable beneficiary's consent is required.35. A policyowner wants a permanent policy that lets them raise or lower premiums and adjust the death benefit within limits, with cash value earning a current interest rate that can never fall below a contractual floor. Which product fits?
- A. Term insurance
- B. Universal life
- C. Variable life
- D. Decreasing term
Show answer & explanation
Answer: B
Universal life is flexible-premium permanent insurance that separates mortality, expense, and interest components and lets the owner adjust premiums and death benefits within limits; its cash value earns a current rate subject to a contractual guaranteed minimum.36. A homeowner wants inexpensive coverage whose death benefit shrinks over time to roughly track a declining mortgage balance. Which product is most commonly used for this purpose?
- A. Whole life
- B. Universal life
- C. Decreasing term
- D. Variable life
Show answer & explanation
Answer: C
Decreasing term reduces the death benefit over time and is often used to cover a mortgage. Term insurance also builds no cash value, keeping cost low.37. How is a life insurance product best described as the 'mathematical opposite' of an annuity?
- A. Life insurance protects against dying too soon, while an annuity liquidates a principal sum into income and protects against outliving one's assets
- B. Both protect only against premature death, but at different premium levels
- C. An annuity pays a death benefit income-tax-free, while life insurance does not
- D. Life insurance uses separate accounts, while an annuity never does
Show answer & explanation
Answer: A
An annuity liquidates a principal sum into a stream of income and protects against outliving one's assets — the mathematical opposite of life insurance, which protects against dying too soon.38. An annuitant selects the payout option that yields the largest periodic payment. What is the principal trade-off of that choice?
- A. Payments continue to a joint survivor for life
- B. Payments are guaranteed for a fixed period of years regardless of death
- C. Payments cease at the annuitant's death, leaving nothing to survivors
- D. Payments are entirely tax-free
Show answer & explanation
Answer: C
The life-only payout provides the largest payment but ceases at death, so no further payments go to survivors.39. An employee receives a $250,000 death benefit as the named beneficiary of a life policy, taken in a lump sum. How is that lump-sum benefit generally treated for income tax?
- A. Fully taxable as ordinary income
- B. Generally received income-tax-free
- C. Taxable only on the portion above $50,000
- D. Taxed on a last-in, first-out basis
Show answer & explanation
Answer: B
A life insurance death benefit paid to a named beneficiary in a lump sum is generally received income-tax-free.40. A policy is overfunded and fails the seven-pay test. What is the tax consequence of this classification?
- A. The policy loses all death benefit protection
- B. Loans and withdrawals are taxed LIFO and may incur a 10% penalty before age 59½
- C. Premiums become fully tax-deductible
- D. The death benefit becomes fully taxable to the beneficiary
Show answer & explanation
Answer: B
A modified endowment contract fails the seven-pay test by being overfunded, so loans and withdrawals are taxed on a last-in, first-out basis and may incur a 10% penalty before age 59½.41. When must insurable interest exist in a life insurance contract, and who is presumed to hold unlimited insurable interest?
- A. At the time of loss; the beneficiary is presumed to hold unlimited interest
- B. At policy inception only; a person is presumed to have unlimited insurable interest in their own life
- C. At both inception and loss; only a spouse holds unlimited interest
- D. Only at the time of loss; the insurer holds unlimited interest
Show answer & explanation
Answer: B
In life insurance, insurable interest must exist only at the inception of the policy, not at the time of loss, and a person is presumed to have unlimited insurable interest in their own life.42. Before sitting for the licensing exam, an applicant in many states must first satisfy which requirement?
- A. Completion of mandated pre-licensing coursework hours
- B. Ten years of prior industry employment
- C. A federal securities license
- D. Membership in a national insurance trade union
Show answer & explanation
Answer: A
Many states mandate completion of pre-licensing coursework hours before the applicant may be licensed. The remaining options are not the general prerequisite described.43. A policyowner forgets to pay a premium on the due date but wants to know how long coverage remains in force before the policy lapses. Which provision addresses this window?
- A. The grace period, which is typically 30 or 31 days after a missed premium
- B. The incontestability clause, which restarts after each missed premium
- C. The reinstatement provision, which extends coverage indefinitely
- D. The suicide clause, which suspends coverage during nonpayment
Show answer & explanation
Answer: A
The grace period gives the owner typically 30 or 31 days after a missed premium, during which coverage stays in force. The other provisions govern contestability, suicide exclusion, and reinstatement — not the post-due-date payment window.44. A producer wishes to sell variable life insurance to a client. Beyond holding a state life insurance license, what additional qualification does the regulatory framework require, and why?
- A. No additional qualification, because variable life is treated like whole life
- B. A property and casualty license, because it covers property risk
- C. A FINRA registration, because variable life is a security
- D. A real estate license, because separate accounts hold real property
Show answer & explanation
Answer: C
Because variable life is a security, its sale requires a FINRA registration in addition to a life license. This is why a state life license alone is insufficient.45. An insurer discovers a material misstatement on an application three years after the policy took effect. The insured is still living and premiums have been paid on time. What is the insurer's ability to contest the policy?
- A. It may contest the policy at any time, since misstatements are never protected
- B. It may not contest for misstatement, because the policy has been in force more than two years
- C. It may contest only if the misstatement concerned the insured's age
- D. It may rescind the policy immediately and retain all premiums
Show answer & explanation
Answer: B
After a policy has been in force for two years, the incontestability clause bars the insurer from contesting for misstatements or concealment, except for nonpayment of premium. Three years exceeds that period, so the insurer cannot contest on the basis of the misstatement.46. An insured dies by suicide 14 months after the policy was issued. Under the standard suicide clause, what is the insurer obligated to pay?
- A. The full face amount, because suicide is always covered
- B. Nothing at all, because the death is excluded permanently
- C. A refund of the premiums paid, because the death occurred within the first two years
- D. The cash value only, reduced by outstanding loans
Show answer & explanation
Answer: C
The suicide clause excludes death by suicide during the first two years, limiting the insurer's liability to a refund of premiums paid. A death at 14 months falls within that first two-year window.47. At the insured's death, the insurer learns the applicant understated the insured's age at issue. How is the claim handled under the misstatement of age provision?
- A. The claim is denied entirely because of the misrepresentation
- B. The death benefit is adjusted to what the premium paid would have purchased at the correct age
- C. The full face amount is paid and the insurer bills the estate for back premiums
- D. Only a refund of premiums is paid
Show answer & explanation
Answer: B
When age (or sex) is misstated, the provision adjusts the death benefit to what the premium actually paid would have purchased at the correct age — it neither voids the policy nor pays the unadjusted face amount.48. An applicant fails to pay a premium by the due date but dies eight days later. Under a standard life policy, why is the death benefit still payable?
- A. The incontestability clause forces payment regardless of premium status
- B. The grace period, typically 30 or 31 days, keeps coverage in force after a missed premium
- C. The suicide clause requires the insurer to pay any claim in the first two years
- D. Nonforfeiture options automatically convert the policy to paid-up status
Show answer & explanation
Answer: B
The grace period gives the owner typically 30 or 31 days after a missed premium during which coverage remains in force, so a death within that window is still covered.49. A life policy has been in force for 30 months when the insurer discovers the insured concealed a material fact on the application. Absent nonpayment of premium, may the insurer contest the policy?
- A. Yes, concealment voids a policy at any time
- B. Yes, but only within the first five years
- C. No, the incontestability clause bars contest for misstatements or concealment after two years in force
- D. No, because insurable interest is presumed for one's own life
Show answer & explanation
Answer: C
After two years in force, the incontestability clause bars the insurer from contesting for misstatements or concealment, except for nonpayment of premium. At 30 months the policy is past that period.50. Which type of life insurance requires the producer to hold a FINRA registration in addition to a life license before it can be sold?
- A. Whole life
- B. Decreasing term
- C. Variable life
- D. Level term
Show answer & explanation
Answer: C
Because variable life is classified as a security, its sale requires a FINRA registration in addition to a life license. The other listed products are not securities.51. A whole life policyowner decides to stop paying premiums but wants to keep the same face amount of coverage for as long as the accumulated cash value will sustain it. Which nonforfeiture option fits this goal?
- A. Cash surrender
- B. Reduced paid-up insurance
- C. Extended term insurance
- D. Automatic premium loan
Show answer & explanation
Answer: C
Nonforfeiture options guarantee the accumulated cash value through cash surrender, reduced paid-up insurance, or extended term. Extended term uses the cash value to keep the original face amount in force for a limited period, matching the owner's goal of preserving the full death benefit rather than a reduced one.52. An insured becomes totally disabled and can no longer work. Which rider would keep the life policy in force by relieving the insured of the obligation to pay premiums?
- A. Guaranteed insurability rider
- B. Accelerated death benefit rider
- C. Waiver of premium rider
- D. Cost-of-living rider
Show answer & explanation
Answer: C
The waiver of premium rider waives premiums if the insured becomes totally disabled, keeping coverage in force. The guaranteed insurability and accelerated death benefit riders serve different functions.53. An insured is diagnosed as terminally ill and needs funds while still living. Which rider allows a portion of the death benefit to be advanced before death?
- A. Accelerated death benefit rider
- B. Guaranteed insurability rider
- C. Waiver of premium rider
- D. Payor benefit rider
Show answer & explanation
Answer: A
The accelerated death benefit rider advances part of the death benefit if the insured is diagnosed as terminally ill, providing living funds. The other riders address premium waiver and future purchase rights, not early access to the death benefit.54. A producer is arranging the sale of a variable annuity. Which statement about the required registration is correct?
- A. A variable annuity is a security and requires registration, unlike a fixed annuity where the insurer bears the investment risk
- B. A fixed annuity requires securities registration, but a variable annuity does not
- C. Neither fixed nor variable annuities require any registration
- D. Both fixed and variable annuities require securities registration equally
Show answer & explanation
Answer: A
A variable annuity invests in separate accounts, shifts investment risk to the owner, and is a security requiring registration; a fixed annuity guarantees a minimum rate with the insurer bearing the investment risk and is not described as requiring registration.55. During underwriting, an insurer obtains an investigative consumer report on an applicant. Under federal law incorporated into state regulatory practice, what must the insurer do?
- A. Destroy the report within 24 hours of receiving it
- B. Notify the applicant, who has the right to know the nature of the information collected
- C. Share the full report with all competing insurers
- D. Deny the applicant automatically if any report is obtained
Show answer & explanation
Answer: B
Under the Fair Credit Reporting Act, an insurer that obtains a consumer or investigative report must notify the applicant, who has the right to know the nature of the information collected.56. A regulator reviews an insurer's underwriting outcomes. Which set of classifications reflects a permissible risk-classification result for an applicant?
- A. Preferred, standard, or substandard, or declined
- B. Gold, silver, or bronze tier only
- C. Approved or pending, with no ability to decline
- D. Public or private class based on income
Show answer & explanation
Answer: A
In underwriting, the insurer classifies applicants as preferred, standard, or substandard, or declines them. The other schemes are not the recognized classifications.57. A required policy provision keeps coverage in force for a limited time after a premium is missed. Which provision is this, and what is its typical duration?
- A. The reinstatement provision, typically 90 days
- B. The incontestability clause, typically two years
- C. The grace period, typically 30 or 31 days
- D. The free-look period, typically 5 days
Show answer & explanation
Answer: C
The grace period gives the owner typically 30 or 31 days after a missed premium during which coverage stays in force.