Health Only Practice Exam.
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1. An insured misses a premium payment on her whole life policy. Under the grace period provision, what happens to her coverage immediately after the due date?
- A. Coverage lapses at midnight on the due date
- B. Coverage remains in force, typically for 30 or 31 days, while the premium can still be paid
- C. Coverage converts automatically to extended term insurance
- D. Coverage continues only if the insurer waives the premium
Show answer & explanation
Answer: B
The grace period provision keeps coverage in force for a period, typically 30 or 31 days after a missed premium, giving the owner time to pay. It does not cause immediate lapse, trigger a nonforfeiture option, or require insurer waiver.2. A producer holding only a life insurance license wants to begin selling variable life policies. What additional credential is required, and why?
- A. None — a life license alone is sufficient for all life products
- B. A FINRA registration, because variable life is a security
- C. A property and casualty license, because the cash value is invested
- D. A health insurance license, because variable life includes living benefits
Show answer & explanation
Answer: B
Because variable life is a security, its sale requires a FINRA registration in addition to a life license. This reflects that the cash value is invested in separate account subaccounts and the policyowner bears the investment risk.3. A life insurance policy has been in force for three years when the insurer discovers the applicant concealed a health condition on the application. Which statement best describes the insurer's position?
- A. The insurer may rescind the policy because concealment voids coverage at any time
- B. The insurer may reduce the death benefit proportionally
- C. The insurer cannot contest the policy for the concealment because the two-year contestability period has passed
- D. The insurer may contest the policy only with the beneficiary's consent
Show answer & explanation
Answer: C
The incontestability clause bars the insurer from contesting the policy for misstatements or concealment once it has been in force for two years, except for nonpayment of premium. After three years, the concealment can no longer be used to contest the policy.4. An insured dies by suicide 14 months after his life policy was issued. Under a standard suicide clause, what will the insurer most likely pay?
- A. The full death benefit
- B. A refund of the premiums paid
- C. The policy's cash value plus interest
- D. Nothing at all
Show answer & explanation
Answer: B
The suicide clause excludes death by suicide during the first two years of the policy, limiting the insurer's liability to a refund of premiums paid. Because death occurred at 14 months, within the exclusion period, the beneficiary receives the premiums back rather than the death benefit.5. A policyowner can no longer afford her whole life premiums and decides to stop paying, but she does not want to lose the value she has built up. Which of the following is NOT one of her nonforfeiture options?
- A. Cash surrender
- B. Reduced paid-up insurance
- C. Extended term insurance
- D. Guaranteed insurability
Show answer & explanation
Answer: D
Nonforfeiture options guarantee the owner the accumulated cash value through cash surrender, reduced paid-up insurance, or extended term. Guaranteed insurability is a rider that lets the insured buy additional coverage without evidence of insurability — it is not a nonforfeiture option.6. An insured is diagnosed as terminally ill and wants access to policy funds while still alive, without surrendering the policy. Which rider is designed for this situation?
- A. Accelerated death benefit rider
- B. Waiver of premium rider
- C. Guaranteed insurability rider
- D. Decreasing term 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 access to policy proceeds. The other riders address disability, future insurability, and additional term coverage rather than terminal illness.7. A new parent wants the contractual right to purchase additional life insurance at several future dates regardless of any decline in health. Which rider should the producer recommend?
- A. Waiver of premium rider
- B. Accelerated death benefit rider
- C. Guaranteed insurability rider
- D. Extended term rider
Show answer & explanation
Answer: C
The guaranteed insurability rider lets the insured buy additional coverage at set intervals without evidence of insurability, so later health changes cannot block the purchases. Waiver of premium responds to disability and the accelerated death benefit responds to terminal illness.8. An insured's primary beneficiary dies before the insured, and no contingent beneficiary was ever named. When the insured later dies, where do the policy proceeds go?
- A. To the primary beneficiary's heirs
- B. To the state's unclaimed property fund
- C. To the insured's estate
- D. They are retained by the insurer
Show answer & explanation
Answer: C
A contingent beneficiary receives proceeds only if the primary predeceases the insured; with no surviving beneficiary of any class, proceeds are paid to the insured's estate.9. A policyowner decides to stop paying premiums on a whole life policy that has accumulated cash value. Which set of options is she guaranteed by the policy's nonforfeiture provisions?
- A. Cash surrender, reduced paid-up insurance, or extended term insurance
- B. Policy loan, dividend accumulation, or paid-up additions
- C. Waiver of premium, accelerated benefit, or guaranteed insurability
- D. Automatic conversion to universal life at current rates
Show answer & explanation
Answer: A
Nonforfeiture options guarantee the owner the accumulated cash value through three routes: taking the cash surrender value, purchasing reduced paid-up insurance, or purchasing extended term insurance. The other choices list dividend options or riders, not nonforfeiture options.10. A candidate answered 40 of the 75 questions correctly on the California health-only producer exam. Given the state's passing standard, what is the result?
- A. Pass — 40 correct exceeds the required minimum
- B. Pass — 40 correct exactly meets the required minimum
- C. Fail — 40 correct is below the required minimum of 45
- D. Fail — a perfect score is required to pass
Show answer & explanation
Answer: C
The passing standard is 60 percent of 75 questions, which is 45 correct. Because 40 is below 45, the candidate fails. This reasons over the two stated facts.11. A candidate wants to know the minimum result required to pass the licensing exam in California. Which of the following is the passing standard?
- A. 50 percent
- B. 60 percent
- C. 70 percent
- D. 75 percent
Show answer & explanation
Answer: B
California requires a score of 60 percent to pass the producer examination.12. Given the 60 percent passing standard, what is the minimum number of the 75 questions a candidate must answer correctly to pass?
- A. 38 questions
- B. 42 questions
- C. 45 questions
- D. 53 questions
Show answer & explanation
Answer: C
Sixty percent of 75 questions equals 45 (0.60 × 75 = 45), so a candidate must answer at least 45 correctly. This is an inference combining the passing standard with the question count.13. A candidate has already answered 45 of the 75 questions correctly. Based on the stated passing standard, what can be concluded about their result?
- A. They have fallen short of the passing threshold
- B. They have met the minimum passing threshold
- C. They must retake the exam regardless of the count
- D. The passing threshold cannot be determined from the exam parameters
Show answer & explanation
Answer: B
Because 60 percent of 75 is 45, answering exactly 45 correctly meets the minimum passing threshold. This conclusion is inferred from the passing standard and question count.14. A candidate wants to summarize the key parameters of the licensing exam for a study sheet. Which combination correctly pairs the question count with the passing standard?
- A. 75 questions; pass at 50 percent
- B. 75 questions; pass at 60 percent
- C. 100 questions; pass at 60 percent
- D. 100 questions; pass at 70 percent
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Answer: B
The exam consists of 75 questions and requires a score of 60 percent to pass in California; only that pairing is correct.15. To pass the California Health-Only producer exam, a candidate must reach the required passing percentage. Based on the total number of questions and the passing threshold, what is the minimum number of questions a candidate must answer correctly?
- A. 38 questions
- B. 45 questions
- C. 53 questions
- D. 60 questions
Show answer & explanation
Answer: B
Sixty percent of 75 questions equals 45 questions. This is an inference combining the passing-score fact and the question-count fact; no standalone raw count is asserted beyond what the facts support.16. At claim time, an insurer learns the insured's application understated his age. What does the misstatement of age provision require the insurer to do?
- A. Void the policy and refund all premiums
- B. Pay the full face amount as written
- C. Adjust the death benefit to what the premium paid would have purchased at the correct age
- D. Deny the claim for material misrepresentation
Show answer & explanation
Answer: C
The misstatement of age provision does not void the policy; it adjusts the death benefit to the amount the premium actually paid would have purchased at the insured's correct age.17. Which of the following best describes the MIB used by life insurers during underwriting?
- A. A government registry of all insurance applications
- B. A nonprofit database of coded medical impressions shared among member insurers
- C. A credit bureau that scores applicants' payment history
- D. A state fund that pays claims of insolvent insurers
Show answer & explanation
Answer: B
The MIB (Medical Information Bureau) is a nonprofit database of coded medical impressions that member insurers share, helping underwriters detect misstatements. It is not a government registry, credit bureau, or guaranty fund.18. Which feature most distinguishes universal life from traditional whole life insurance?
- A. It pays a death benefit only if the insured dies within a stated term
- B. Its premiums are fixed and can never be changed by the policyowner
- C. It separates the mortality, expense, and interest components and lets the owner adjust premiums and death benefits within limits
- D. Its cash value has no minimum interest guarantee of any kind
Show answer & explanation
Answer: C
Universal life is flexible-premium permanent insurance that unbundles the mortality, expense, and interest components, allowing the policyowner to adjust premiums and death benefits within limits. Its cash value earns a current interest rate that is still subject to a contractual guaranteed minimum, so choice D is false, and unlike whole life the premium is flexible rather than fixed.19. All of the following are guaranteed features of a traditional whole life policy EXCEPT:
- A. A level premium
- B. A guaranteed death benefit
- C. A cash value that grows on a fixed schedule
- D. A cash value that fluctuates with the performance of separate account subaccounts
Show answer & explanation
Answer: D
Whole life features a level premium, a guaranteed death benefit, and a guaranteed cash value that grows on a fixed schedule. A cash value invested in separate account subaccounts that fluctuates with investment performance describes variable life, where the policyowner bears the investment risk.20. Priya missed her premium payment that was due last week, but she has not received any lapse notice and intends to pay soon. Under a standard life policy's grace period provision, what is her situation?
- A. Her coverage lapsed at midnight on the due date
- B. Her coverage stays in force for typically 30 or 31 days after the missed premium
- C. Her coverage continues only if she provides new evidence of insurability
- D. Her coverage converts automatically to extended term insurance
Show answer & explanation
Answer: B
The grace period provision gives the policyowner typically 30 or 31 days after a missed premium during which coverage stays in force, so Priya remains covered while she brings the premium current within that window.21. Three years after issuing a policy, an insurer discovers that the insured concealed a serious health condition on the original application. The insured has just died and premiums were always paid on time. Can the insurer contest the claim?
- A. Yes — concealment voids a policy at any time
- B. Yes — but only if the concealment was intentional
- C. No — after the policy has been in force for two years, the insurer cannot contest it for misstatements or concealment, except for nonpayment of premium
- D. No — but the insurer may reduce the death benefit by the premiums it would have charged
Show answer & explanation
Answer: C
The incontestability clause bars the insurer from contesting the policy for misstatements or concealment once it has been in force for two years, with nonpayment of premium as the only exception. Since three years have passed and premiums were paid, the claim cannot be contested.22. A retiree annuitizing her contract says her only goal is to receive the largest possible monthly check for as long as she lives; she has no dependents and does not care whether anything is left after her death. Which payout option should she choose?
- A. Life only
- B. Life with period certain
- C. Joint and survivor
- D. Lump-sum refund
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Answer: A
The life-only payout provides the largest payment but ceases at death, which matches her goals exactly. This fits the core purpose of an annuity: liquidating a principal sum into an income stream that protects against outliving one's assets. Options with period-certain or survivor guarantees reduce the payment in exchange for benefits she does not want.23. When must insurable interest exist for a life insurance contract to be valid?
- A. At both the inception of the policy and the time of loss
- B. Only at the time of the loss
- C. Only at the inception of the policy
- D. Continuously throughout the life of the policy
Show answer & explanation
Answer: C
In life insurance, insurable interest must exist only at the inception of the policy, not at the time of the loss. A person is also presumed to have unlimited insurable interest in their own life.24. At the insured's death, the insurer discovers the insured's age was understated on the application. How does the misstatement of age provision resolve the claim?
- A. The policy is voided and premiums are refunded
- B. The full face amount is paid as long as the policy is past the contestable period
- C. The beneficiary must repay the premium shortfall before proceeds are released
- D. The death benefit is adjusted to the amount the premiums paid would have purchased at the correct age
Show answer & explanation
Answer: D
The misstatement of age provision does not void the policy; it adjusts the death benefit to what the premium actually paid would have purchased at the insured's correct age.25. Which rider keeps a life insurance policy in force without further premium payments if the insured becomes totally disabled?
- A. Accelerated death benefit rider
- B. Waiver of premium rider
- C. Guaranteed insurability rider
- D. Return of premium rider
Show answer & explanation
Answer: B
The waiver of premium rider waives premiums if the insured becomes totally disabled, keeping the policy in force. The accelerated death benefit rider advances part of the death benefit for terminal illness, and the guaranteed insurability rider allows purchase of additional coverage — neither waives premiums.26. A policyowner names his sister as an irrevocable beneficiary. A year later, he wants to replace her with his new spouse. What must occur for the change to be valid?
- A. Nothing — the owner may change any beneficiary at will
- B. The sister must consent to the change
- C. The insurer must approve the new beneficiary's insurable interest
- D. The policy must first pass its contestability period
Show answer & explanation
Answer: B
A revocable beneficiary can be changed at any time by the owner, but an irrevocable beneficiary must consent to a change. Since the sister was named irrevocably, her consent is required.27. An insured misses a premium payment on her individual life policy. Under the standard provision required in most policies, how long does coverage remain in force while she still has the opportunity to pay?
- A. Coverage lapses immediately on the due date
- B. Typically 30 or 31 days after the missed premium
- C. Until the end of the policy year
- D. Only until the insurer mails a lapse notice
Show answer & explanation
Answer: B
The grace period provision keeps coverage in force for typically 30 or 31 days after a missed premium, giving the owner time to pay before the policy lapses.28. A life insurer discovers, three years after issue, that the insured concealed a medical condition on the application. The insured has kept premiums current. May the insurer contest the policy?
- A. Yes, concealment can be contested at any time
- B. Yes, but only if the concealment was intentional
- C. No, because the incontestability clause bars contest for misstatements or concealment after the policy has been in force for two years
- D. No, unless the beneficiary agrees to a reduced benefit
Show answer & explanation
Answer: C
After a policy has been in force for two years, the incontestability clause prevents the insurer from contesting it for misstatements or concealment; the only remaining exception is nonpayment of premium, which did not occur here.29. Which statement correctly describes the insurer's obligation if an insured dies by suicide 18 months after the policy is issued?
- A. The full death benefit is payable to the beneficiary
- B. The insurer's liability is limited to a refund of the premiums paid
- C. The insurer pays half of the face amount
- D. The insurer owes nothing at all, not even premiums
Show answer & explanation
Answer: B
The suicide clause excludes death by suicide during the first two years of the policy. Because 18 months is within that period, the insurer's liability is limited to refunding the premiums paid.30. Before ordering an investigative consumer report on an applicant, what must an insurer do to comply with the Fair Credit Reporting Act?
- A. Obtain a court order authorizing the investigation
- B. Notify the applicant, who has the right to know the nature of the information collected
- C. File the report with the state insurance department
- D. Nothing, because underwriting reports are exempt from the Act
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Answer: B
Under the Fair Credit Reporting Act, an insurer that obtains a consumer or investigative report must notify the applicant, and the applicant has the right to know the nature of the information being collected.31. A licensed life producer wants to begin selling variable life insurance. In addition to the life license, what does regulation require?
- A. A FINRA registration, because variable life is a security
- B. A separate property and casualty license
- C. No additional credential beyond the life license
- D. A federal banking charter
Show answer & explanation
Answer: A
Because variable life invests cash value in separate account subaccounts and the policyowner bears the investment risk, it is classified as a security, and its sale requires a FINRA registration in addition to a life license.32. When must insurable interest exist for a life insurance policy to be valid?
- A. At the inception of the policy and again at the time of loss
- B. Only at the time of the insured's death
- C. Only at the inception of the policy, not at the time of loss
- D. Continuously throughout the life of the policy
Show answer & explanation
Answer: C
In life insurance, insurable interest must exist only when the policy is issued; it does not need to exist at the time of the loss. This distinguishes life insurance from property coverage.33. A policyowner named his sister as an irrevocable beneficiary and now wishes to name his new spouse instead. What is required to make the change?
- A. Nothing beyond the owner's written request
- B. The sister's consent to the change
- C. Approval from the state insurance department
- D. Surrender and reissue of the policy
Show answer & explanation
Answer: B
A revocable beneficiary can be changed by the owner at any time, but an irrevocable beneficiary must consent before the designation can be changed. The owner therefore needs his sister's consent.34. Devon, age 30, wants the maximum amount of pure death protection for the next 20 years at the lowest cost per dollar of coverage, and he has no interest in building savings inside the policy. Which type of life insurance best fits his need?
- A. Whole life insurance
- B. Term life insurance
- C. Universal life insurance
- D. Variable life insurance
Show answer & explanation
Answer: B
Term insurance provides protection for a specified period, pays a death benefit only if the insured dies within that term, and builds no cash value, making it the least expensive form of coverage per dollar — exactly matching a need for low-cost, protection-only coverage over a set period.35. Marisol recently signed a 30-year home loan and wants a life insurance policy whose death benefit shrinks over time roughly in step with her outstanding loan balance. Which policy is specifically designed for this purpose?
- A. Level term insurance
- B. Whole life insurance
- C. Decreasing term insurance
- D. Universal life insurance
Show answer & explanation
Answer: C
Decreasing term insurance reduces the death benefit over time and is often used to cover a mortgage, so the coverage declines alongside the loan balance.36. A beneficiary chooses to leave life insurance proceeds with the insurer under a settlement option rather than taking a lump sum. Which statement correctly describes the income tax treatment of the payments she receives?
- A. Both the principal and the interest are fully taxable
- B. The principal remains tax-free, but any interest earned is taxable
- C. Both the principal and the interest are received income-tax-free
- D. The interest is tax-free, but the principal is taxable
Show answer & explanation
Answer: B
A death benefit paid to a named beneficiary in a lump sum is generally received income-tax-free. When proceeds are instead held under a settlement option, the principal remains tax-free but any interest earned on it is taxable.