Life Insurance Practice Exam.
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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. Only the candidate who scored 72 percent passed
• C. Neither candidate passed
• D. Only the candidate who scored 69 percent passed

2. When advising a new applicant on the general path to licensure, which pairing of requirements is best supported as commonly applicable?

• A. Holding a securities license and completing an internship
• B. Paying an annual membership fee and attending a convention
• C. Posting a surety bond and passing a physical exam
• D. Completing pre-licensing coursework hours and achieving a typical passing exam score

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. Coursework is only required after a license is already issued
• B. Coursework replaces the need to achieve any passing exam score
• C. Coursework is purely optional everywhere and has no bearing on licensure
• D. Pre-licensing coursework hours are mandated by many states as part of becoming licensed

4. Before sitting for the licensing examination, what do many states require a candidate to complete?

• A. A college degree in finance
• B. A background investigation by a federal agency
• C. Pre-licensing coursework hours
• D. A minimum of two years of industry work experience

5. Which of the following pairs correctly identifies a typical exam standard and a common pre-exam requirement?

• A. A 90 percent passing score, and a mandatory apprenticeship in every state
• B. A 55 percent passing score, and pre-licensing coursework required only in one state
• C. A 70 percent passing score, and no educational prerequisites anywhere
• D. A 70 percent passing score, and completion of pre-licensing coursework hours mandated by many states

6. 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. Optional in every state without exception
• D. Available only to applicants who already hold a license

7. 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. 65 percent
• B. 60 percent
• C. 75 percent
• D. 70 percent

8. 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. A four-year college degree in finance
• B. Completion of pre-licensing coursework hours
• C. Two years of prior sales employment
• D. Membership in a national producer association

9. 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. 70 percent
• B. 80 percent
• C. 50 percent
• D. 90 percent

10. 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. A passing score is optional if coursework is completed
• B. Registration alone is sufficient; no coursework is expected
• C. Only prior work experience is expected, not coursework
• D. In many states, completing pre-licensing coursework hours is also expected

11. 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

12. 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. Nothing is required before the exam in any state
• B. She must first pass a separate federal ethics test
• C. She must accumulate five years of experience first
• D. In many states, she must complete pre-licensing coursework hours

13. 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 required, and a specific number of coursework hours is fixed nationwide
• B. A passing score of 70 percent is typically required, and many states mandate pre-licensing coursework hours
• C. A passing score of exactly 72 percent is required in all states, and coursework is optional
• D. There is no passing score, and pre-licensing coursework is universally required

14. An applicant claims that no state ever requires education before an insurance licensing exam. How should this statement be evaluated?

• A. Incorrect, because every single state requires it without exception
• B. Correct, because education is never a requirement
• C. Correct, because only the exam matters
• D. Incorrect, because many states mandate pre-licensing coursework hours

15. Which pairing correctly matches a common licensing requirement with its general description?

• A. Pre-licensing coursework — banned in most states
• B. Pre-licensing coursework — required only after passing the exam
• C. Passing score — typically 90 percent
• D. Passing score — typically 70 percent

16. 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. Coursework is only for renewing an existing license
• C. Many states mandate pre-licensing coursework hours before the exam
• D. The exam cannot be scheduled by applicants at all

17. Which statement about typical insurance licensing requirements is best supported?

• A. A passing score of 40 percent is typically required, and coursework is never involved
• B. There is no passing score, and coursework is universally banned
• C. A passing score of 70 percent is typically required, and many states mandate pre-licensing coursework hours
• D. A passing score of 95 percent is required in every state, with no coursework

18. An underwriter finds a coded entry in the industry medical information exchange indicating that another member insurer once recorded an impairment for this applicant. What may the underwriter properly do with that entry?

• A. Rate the policy at the level assigned by the reporting insurer, since the coding is standardized across members
• B. Decline the application immediately, since a member insurer already identified the impairment
• C. Use it as a signal to investigate further, but not as the sole basis for declining or rating the application
• D. Disregard it entirely, since exchanged information may not be considered in any underwriting decision

19. Which nonforfeiture option lets a policyowner take the accumulated cash value in a single lump-sum payment and terminate the coverage?

• A. Waiver of premium
• B. Cash surrender
• C. Extended term insurance
• D. Reduced paid-up insurance

20. 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. Return of premium rider
• B. Waiver of premium rider
• C. Accelerated death benefit rider
• D. Guaranteed insurability rider

21. 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 stays in force during a grace period of typically 30 or 31 days, and any accumulated cash value remains protected through a nonforfeiture option
• B. The incontestability clause forces the insurer to continue the policy free of charge
• C. Coverage ends the instant a premium is missed, with no window and no residual value
• D. The misstatement of age provision automatically converts the policy to term

22. An insurer participates in an industry information-sharing arrangement to help detect material misrepresentations during underwriting. Which entity is being described?

• A. A federal agency that approves each individual policy
• B. A state-run public registry of policy premiums
• C. A consumer credit bureau operated by the applicant's bank
• D. The MIB, a nonprofit database of coded medical impressions shared among member insurers

23. 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 incontestability clause, after the policy has been in force for two years
• B. The suicide clause, after five years
• C. The reinstatement clause, after ten years
• D. The grace period provision, after 30 days

24. 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. Approval from the state insurance regulator
• B. The consent of the irrevocable beneficiary
• C. A court order in every case
• D. Nothing; the owner may change it at any time without limitation

25. 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. Variable life
• B. Decreasing term
• C. Term insurance
• D. Universal life

26. 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. Universal life
• B. Decreasing term
• C. Whole life
• D. Variable life

27. How is a life insurance product best described as the 'mathematical opposite' of an annuity?

• A. An annuity pays a death benefit income-tax-free, while life insurance does not
• B. Life insurance protects against dying too soon, while an annuity liquidates a principal sum into income and protects against outliving one's assets
• C. Both protect only against premature death, but at different premium levels
• D. Life insurance uses separate accounts, while an annuity never does

28. An annuitant selects the payout option that yields the largest periodic payment. What is the principal trade-off of that choice?

• A. Payments are entirely tax-free
• B. Payments continue to a joint survivor for life
• C. Payments are guaranteed for a fixed period of years regardless of death
• D. Payments cease at the annuitant's death, leaving nothing to survivors

29. 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. Taxed on a last-in, first-out basis
• B. Fully taxable as ordinary income
• C. Generally received income-tax-free
• D. Taxable only on the portion above $50,000

30. A policy is overfunded and fails the seven-pay test. What is the tax consequence of this classification?

• A. Premiums become fully tax-deductible
• B. The death benefit becomes fully taxable to the beneficiary
• C. Loans and withdrawals are taxed LIFO and may incur a 10% penalty before age 59½
• D. The policy loses all death benefit protection

31. When must insurable interest exist in a life insurance contract, and who is presumed to hold unlimited insurable interest?

• A. Only at the time of loss; the insurer holds unlimited interest
• B. At both inception and loss; only a spouse holds unlimited interest
• C. At policy inception only; a person is presumed to have unlimited insurable interest in their own life
• D. At the time of loss; the beneficiary is presumed to hold unlimited interest

32. Before sitting for the licensing exam, an applicant in many states must first satisfy which requirement?

• A. Membership in a national insurance trade union
• B. A federal securities license
• C. Ten years of prior industry employment
• D. Completion of mandated pre-licensing coursework hours

33. 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 suicide clause, which suspends coverage during nonpayment
• B. The reinstatement provision, which extends coverage indefinitely
• C. The incontestability clause, which restarts after each missed premium
• D. The grace period, which is typically 30 or 31 days after a missed premium

34. 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. A FINRA registration, because variable life is a security
• B. No additional qualification, because variable life is treated like whole life
• C. A real estate license, because separate accounts hold real property
• D. A property and casualty license, because it covers property risk

35. 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 contest only if the misstatement concerned the insured's age
• C. It may rescind the policy immediately and retain all premiums
• D. It may not contest for misstatement, because the policy has been in force more than two years

36. 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 cash value only, reduced by outstanding loans
• B. The full face amount, because suicide is always covered
• C. Nothing at all, because the death is excluded permanently
• D. A refund of the premiums paid, because the death occurred within the first two years

37. 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

38. 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 grace period, typically 30 or 31 days, keeps coverage in force after a missed premium
• B. The suicide clause requires the insurer to pay any claim in the first two years
• C. Nonforfeiture options automatically convert the policy to paid-up status
• D. The incontestability clause forces payment regardless of premium status

39. 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, but only within the first five years
• B. Yes, concealment voids a policy at any time
• C. No, because insurable interest is presumed for one's own life
• D. No, the incontestability clause bars contest for misstatements or concealment after two years in force

40. 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. Level term
• D. Variable life

41. 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. Reduced paid-up insurance
• B. Extended term insurance
• C. Cash surrender
• D. Automatic premium loan

42. 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. Accelerated death benefit rider
• B. Cost-of-living rider
• C. Guaranteed insurability rider
• D. Waiver of premium rider

43. 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. Waiver of premium rider
• B. Payor benefit rider
• C. Guaranteed insurability rider
• D. Accelerated death benefit rider

44. 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. Both fixed and variable annuities require securities registration equally
• C. A fixed annuity requires securities registration, but a variable annuity does not
• D. Neither fixed nor variable annuities require any registration

45. 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. Deny the applicant automatically if any report is obtained
• B. Destroy the report within 24 hours of receiving it
• C. Notify the applicant, who has the right to know the nature of the information collected
• D. Share the full report with all competing insurers

46. 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. Public or private class based on income
• D. Approved or pending, with no ability to decline

47. 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 grace period, typically 30 or 31 days
• C. The free-look period, typically 5 days
• D. The incontestability clause, typically two years

48. A 78-year-old policyowner no longer needs her $500,000 universal life policy and is offered $140,000 for it by a licensed settlement provider. Her cash surrender value is $62,000. What best describes what she is being offered and what happens after the sale?

• A. An accelerated death benefit, which advances part of the face amount and reduces what her beneficiary later receives
• B. A collateral assignment, under which the provider is repaid the $140,000 it advanced and the balance goes to her named beneficiary
• C. A life settlement, in which the provider becomes owner and beneficiary, pays the ongoing premiums, and collects the death benefit
• D. A viatical settlement, which is available only because she is over 65, with the insurer taking over premium payments

49. A client compares two 30-year level term policies with identical face amounts. The return-of-premium version costs substantially more each year. What does that additional premium actually purchase?

• A. Cash value that the owner may borrow against at any point during the term
• B. A refund of the premiums paid if the insured is still living when the term expires
• C. A death benefit that grows each year by the amount of premium paid in that policy year
• D. A guaranteed right to convert to permanent coverage at the original issue age

50. A 45-year-old surgeon wants permanent coverage that stays in force for her entire life, but she wants every premium paid before she retires at 65. Compared with an ordinary whole life policy for the same face amount, what should she expect from a life paid-up at 65 contract?

• A. A higher annual premium, with cash value accumulating more rapidly and coverage continuing for life
• B. A lower annual premium, because the contract matures at 65 rather than at the normal whole life maturity age
• C. The same annual premium, with coverage ending on her 65th birthday
• D. A higher annual premium, with no cash value accruing until the policy becomes paid up

51. A client purchases annually renewable term coverage and is surprised when the second-year premium notice is larger than the first. Which statement correctly explains the renewal feature of this contract?

• A. Coverage renews each year only after the insured submits a satisfactory medical examination
• B. The premium is level for the full term, so the increase must be a billing error
• C. Coverage renews each year without evidence of insurability, and the premium rises with the insured's attained age
• D. The death benefit is automatically increased each year, and it is that added coverage that drives the higher premium notice

52. A 40-year-old exercises the conversion privilege on a term policy issued when he was 30 and elects the original-age conversion rather than the attained-age conversion. What is the immediate consequence of that election?

• A. The permanent premium is based on age 30, and he must pay the difference in premiums, generally with interest
• B. The permanent premium is based on age 40, and no back payment is required
• C. The insurer requires a new medical examination, because changing the premium basis changes his underwriting risk class
• D. The face amount must be reduced proportionally to offset the lower premium rate

53. A universal life policyowner elects the level death benefit option rather than the increasing death benefit option. As the policy's cash value grows over the years, what happens to the insurer's net amount at risk?

• A. It remains constant, because the monthly mortality charge is locked in at issue and cannot be redetermined
• B. It increases, because the total death benefit rises along with the cash value
• C. It decreases, because the stated death benefit stays level while the cash value inside it grows
• D. It decreases, but only after the contract's surrender charge period has expired

54. A universal life policyowner has skipped premium payments for two years, relying on the contract's flexible premium feature. The insurer now notifies her that the policy is in danger of lapsing. What is the most likely explanation?

• A. The policy forfeited its guaranteed minimum interest rate when the owner stopped paying premiums
• B. Skipping the scheduled premiums voids the policy's incontestability provision, which in turn terminates the coverage
• C. The accumulated cash value is no longer large enough to cover the monthly mortality and expense deductions
• D. Flexible premium contracts terminate automatically after 24 consecutive months without a payment

55. An indexed universal life contract credits interest based on the performance of an external stock index, subject to a stated cap and a stated floor. In a year when the index declines sharply, what is credited to the cash value under a typical contract?

• A. No index-linked interest for the period, because the floor limits downside crediting
• B. A negative credit, reduced in proportion to the contract's stated participation rate
• C. A negative credit mirroring the index decline, because the cap limits gains but not losses
• D. The full cap rate, because the cap is applied whenever the index moves in either direction

56. The cash value of a variable universal life contract is held in the insurer's separate account, while the cash value of a traditional whole life contract is backed by the general account. What is the practical consequence of that difference for the owner of the variable contract?

• A. The insurer guarantees a minimum cash value but does not guarantee any death benefit
• B. The owner bears the investment risk, and the cash value carries no guaranteed minimum
• C. The owner bears the investment risk, but the cash value is still guaranteed never to decline
• D. General account creditors of the insurer have first claim on the separate account assets

57. Two clients each own a contract whose cash value is invested in subaccounts. One owns variable whole life; the other owns variable universal life. Which statement correctly distinguishes the two products?

• A. Only variable universal life uses a separate account, because variable whole life invests its cash value in the insurer's general account rather than in subaccounts
• B. Variable whole life has a fixed premium and a guaranteed minimum death benefit; variable universal life has flexible premiums and no such guarantee
• C. Variable whole life may be sold on a life license alone, while variable universal life additionally requires a securities registration
• D. Variable whole life carries flexible premiums and an adjustable death benefit, while variable universal life carries a fixed, level premium

58. A client funds a new whole life contract with one lump-sum payment and assumes no further premium obligation of any kind. Under federal tax rules, how is that contract classified from the moment it is issued?

• A. As an ordinary whole life contract, because a single premium is simply a permitted payment mode
• B. As a modified endowment contract, because a single-premium policy cannot satisfy the seven-pay test
• C. As a modified endowment contract, but only once the owner takes a loan or withdrawal
• D. As a term contract, because no continuing premium obligation sustains the coverage beyond the first year

59. A married couple who together own a small manufacturing company purchase a single contract that pays one death benefit when the first of them dies. Which product have they bought, and what is its characteristic use?

• A. Joint life, used to fund a buy-sell obligation or replace income at the first death
• B. A joint and survivor annuity, used to guarantee lifetime income to both spouses
• C. A family income policy, used to provide a monthly income to surviving children
• D. Survivorship life, used to create liquidity for estate taxes owed after the second death

60. An estate planner recommends a second-to-die policy for a wealthy married couple instead of two separate individual policies. What is the principal reason that design fits their objective?

• A. Proceeds arrive at the second death, when settlement costs fall due, and the premium is lower than for two individual policies
• B. It insures only the healthier of the two spouses, which materially lowers the underwriting cost of the coverage
• C. It pays two separate death benefits, one at each spouse's death, so it doubles the liquidity available to settle the couple's estate
• D. It keeps the proceeds out of both spouses' gross estates regardless of who owns the contract at the second death

61. A 68-year-old retiree hands an insurer a lump sum from a maturing certificate of deposit and wants income payments to begin within the next month. Which annuity structure fits, and which funding method is incompatible with it?

• A. A deferred annuity funded by a single premium; flexible premium funding would be incompatible
• B. An immediate annuity funded by a single premium; flexible premium funding is incompatible with it
• C. An immediate annuity funded by flexible premiums; single premium funding is incompatible
• D. A deferred annuity funded by flexible premiums; single premium funding would be incompatible with deferral

62. A retired couple want annuity income that continues for as long as either of them is alive, with no possibility of outliving the payments. Which payout structure meets that objective, and what does it cost them?

• A. Installment refund; payments continue to the survivor only until the original principal has been recovered
• B. Joint life income; the periodic payment is larger because two lives share the mortality risk
• C. Joint and survivor life income; the periodic payment is smaller than a single-life payout on either annuitant
• D. Life with a 20-year period certain; the payments would stop twenty years after the first annuitant dies, leaving the survivor unpaid

63. During the pay-in phase of a variable annuity, the owner's contributions buy accumulation units in the chosen subaccounts. What happens to those units when the contract is annuitized?

• A. They are converted into a fixed dollar payment that is then guaranteed for the annuitant's lifetime
• B. They are surrendered for cash, and the insurer issues a separate fixed annuity contract with the proceeds
• C. They continue to be purchased each month, and each payment equals the value of the accumulation units redeemed that month
• D. They are converted into a fixed number of annuity units, and each payment varies with the value of those units

64. A conservative client selects a fixed annuity specifically because the insurer guarantees the dollar amount of each payment for life. Which risk does that guarantee leave entirely unaddressed?

• A. The risk that one of the separate account subaccounts declines sharply during a prolonged market downturn
• B. The risk that the insurer credits less than the contractually guaranteed minimum interest rate
• C. The risk that inflation erodes the purchasing power of a level payment across a long retirement
• D. The risk that the annuitant lives long enough to exhaust the accumulated principal

65. An insurer markets a permanent contract that carries a fixed death benefit and a scheduled premium, credits the cash value at a current rate, and reserves the right to redetermine the premium based on its own mortality and expense experience. Which product is being described?

• A. Interest-sensitive whole life
• B. Indexed universal life
• C. Variable whole life
• D. Universal life

66. In the twelfth year of a 20-year level term contract, the policyowner telephones the insurer to ask what his accumulated cash surrender value is. How should the producer respond?

• A. Cash value is available only on a policy carrying a return-of-premium rider, which pays it out annually
• B. Cash value becomes available after the tenth policy year under the nonforfeiture provision
• C. The contract has no cash value; term insurance provides pure death protection for the stated period
• D. Cash value equals the policy reserve less the applicable surrender charge

67. A whole life policyowner who is nearing the contract's stated maturity date asks his producer what will happen if he is still living on that date. What does a standard whole life contract provide?

• A. The contract converts automatically to extended term insurance for the remaining face amount
• B. The insurer endows the contract and pays the owner the cash value, which by then equals the face amount
• C. Coverage terminates and the premiums paid over the years are refunded to the owner without any credited interest
• D. The death benefit is reduced to the accumulated cash value and coverage continues indefinitely

68. A 65-year-old annuitant wants income for life but worries that if she dies shortly after payments begin the insurer will keep the unpaid balance of her deposit. She elects a life income option with a twenty-year period certain. How does that election differ from a straight life income option?

• A. The payments stop at the end of the twenty-year certain period, whether or not she is still living on the date it expires
• B. The periodic payment is unchanged, and her beneficiary receives a lump sum refunding the unrecovered principal
• C. The periodic payment is larger, because the guarantee period shortens the insurer's expected payout obligation
• D. The periodic payment is smaller, and any payments remaining in the guarantee period at her death go to her beneficiary

69. An applicant asks a producer to add a handwritten sentence to the margin of a delivered policy promising that the insurer will never raise the premium. The producer signs beside it. What effect does that notation have?

• A. It has no effect, because only an authorized officer of the insurer may alter the contract
• B. It binds the insurer only if the applicant also initials the notation and returns a copy to the home office
• C. It voids the policy, because an alteration made after issue renders the entire contract unenforceable
• D. It binds the insurer, because a producer's signature commits the company to any terms the producer writes on its forms

70. A policyowner receives her new life policy on the 3rd of the month, reads it that evening, and decides on the 6th that she does not want it. She had paid the initial premium with the application three weeks earlier. What does the free look provision entitle her to?

• A. Nothing, because the free look period runs from the date the application was signed and has already expired
• B. A refund of the premium reduced by the cost of the coverage the insurer provided since the application date
• C. A refund of the premium reduced by the insurer's underwriting, medical examination, and policy issue expenses to date
• D. A full refund of the premium, because the free look period runs from delivery and she returned the policy within it

71. A whole life policyowner travels abroad for several months and misses a premium due date entirely. When she returns she finds the policy still in force but the cash value reduced and an interest charge posted. Which provision produced that outcome?

• A. The extended term nonforfeiture option, which continued the coverage using the accumulated cash value
• B. The automatic premium loan provision, which borrowed the overdue premium from cash value
• C. The waiver of premium rider, which paid the overdue premium on her behalf while she was travelling
• D. The reinstatement provision, which automatically restored the lapsed policy when she returned and paid

72. Eighteen months after a policy lapsed for nonpayment, the former policyowner asks to put the same contract back in force rather than apply for a new one. Which combination of consequences follows a successful reinstatement?

• A. Premiums resume at the original issue age, and a fresh contestable and suicide period begins
• B. Premiums resume at the insured's current attained age, and no new contestable period applies to the restored coverage
• C. Premiums resume at the original issue age, and the original contestable period simply continues to run uninterrupted
• D. Premiums resume at the current attained age, and a fresh contestable period begins at reinstatement

73. A policyowner requests a substantial cash loan against her whole life policy during a period of severe financial market stress. The insurer notifies her that payment will be delayed. Which statement about the insurer's authority is correct?

• A. The insurer may not delay payment of a policy loan under any circumstances once cash value has accumulated in the contract and is unencumbered
• B. The insurer may defer a cash loan for a limited period stated in the contract, but not a loan requested to pay a premium on that policy
• C. The insurer may delay indefinitely, since a policy loan is a discretionary accommodation rather than a contractual right
• D. The insurer may delay only where the owner already has an outstanding prior loan against the same contract

74. The owner of a participating whole life policy wants each annual dividend to buy as much additional permanent coverage as it will purchase, without ever submitting to another medical examination. Which dividend option should she elect?

• A. Accumulate at interest, leaving each dividend on deposit with the insurer to earn a declared rate
• B. Cash, which she may then use to purchase a supplemental policy through a separate application and new medical exam
• C. Paid-up additions, which buy small single-premium amounts of permanent coverage with no evidence of insurability
• D. Reduction of premium, which lowers the amount she owes the insurer on each annual premium notice

75. A participating policyowner in his fifties wants each year's dividend used to add temporary death benefit for that year only, rather than to build permanent coverage or accumulate interest. Which dividend option achieves this?

• A. The one-year term option, which buys term insurance covering the following twelve months
• B. The accumulate-at-interest option, with the accrued interest added to the death benefit each year
• C. The reduction of premium option, with the annual savings applied to a supplemental term rider
• D. The paid-up additions option, which adds coverage that lapses if the next dividend is smaller

76. A prospect complains that the illustration for a participating whole life policy shows growing dividends but the producer will not promise them. What is the correct explanation of what a policy dividend is?

• A. A required rebate of a portion of the premium, which state law compels every insurer to pay to participating policyowners
• B. A non-guaranteed return of premium the insurer overcharged, payable when favorable mortality, expense, and investment results permit
• C. A guaranteed distribution of the insurer's investment earnings, which the contract obligates the insurer to pay annually
• D. A taxable distribution of the insurer's corporate profits, comparable in character to the dividend a corporation pays on its common stock

77. A business owner pledges his life insurance policy to a bank as security for a commercial loan, intending that the bank recover only the outstanding debt if he dies before repaying it. Which form of transfer fits, and what does the bank receive?

• A. An irrevocable beneficiary designation, giving the bank a permanent claim to the entire proceeds
• B. An absolute assignment, giving the bank all ownership rights in the policy until the loan is repaid
• C. A collateral assignment, giving the bank a claim limited to the unpaid balance, with any excess going to the beneficiary
• D. A viatical settlement, which transfers ownership of the contract to the bank in exchange for the proceeds advanced on the note

78. An insured and his primary beneficiary, his wife, are killed in the same automobile accident and the order of their deaths cannot be established. The policy names his adult daughter as contingent beneficiary. Under the common disaster clause, who receives the proceeds?

• A. The insured's estate, because the beneficiary designation fails when both parties die together
• B. The wife's estate, because a primary beneficiary's interest vests at the moment of the insured's death
• C. The daughter, because the primary beneficiary is presumed to have died first when survival cannot be established
• D. The wife's estate and the daughter in equal shares, since neither party's survivorship can be established on these facts

79. A policyowner names her three children as beneficiaries per stirpes. One child dies before the insured, leaving two children of his own. At the insured's death, how are the proceeds distributed?

• A. One fifth each to the two surviving children and the two grandchildren, with the balance to the estate
• B. One third each to the surviving children, with the deceased child's third divided between his two children
• C. One quarter each to the two surviving children and the two grandchildren of the predeceased child
• D. Entirely to the two surviving children, in equal halves, with the grandchildren of the predeceased child taking nothing

80. A widowed father names his eight-year-old son as the sole primary beneficiary of a large life policy and makes no other arrangement. What problem has he created at claim time?

• A. The designation is void, so the proceeds must be paid instead to the insured's estate for probate
• B. The proceeds become taxable to the minor as ordinary income because no adult beneficiary was named
• C. The insurer generally cannot pay a minor directly, so payment waits until a guardian or trustee is appointed
• D. The insurer must pay the proceeds over to the minor's school district, to be held in trust for his future education

81. A beneficiary tells the insurer she needs exactly $2,000 a month to cover her mortgage and will continue that amount for as long as the proceeds and interest last. Which settlement option is she selecting, and what is left open?

• A. The fixed amount option; the number of payments, and so the duration, is left open
• B. The interest only option; the timing of the eventual principal payout is left open
• C. The fixed period option; the amount of each payment is left for the insurer to compute
• D. The life income option; the total amount ultimately paid out is left open

82. An insured with a $250,000 policy and a $250,000 accidental death benefit rider suffers a heart attack while driving, loses control, and is killed in the resulting crash. The medical examiner attributes death to the cardiac event. What is the insurer likely to pay?

• A. $500,000, because a death involving a motor vehicle collision is presumed to be accidental
• B. $250,000, because death resulted from a natural cause rather than accidental bodily injury
• C. $500,000, because the immediate cause of death was the collision rather than the heart attack
• D. Nothing, because the underlying cardiac condition was a pre-existing illness at issue

83. A grandmother purchases and pays for a life policy on her ten-year-old granddaughter and adds a rider protecting the child's coverage if the grandmother herself dies or becomes disabled. Which rider has she added, and whose life does it monitor?

• A. The guaranteed insurability rider, which monitors the child's insurability at set option dates
• B. The other insured rider, which extends term coverage to the grandmother as the premium payor
• C. The payor benefit rider, which waives premiums if the premium payor dies or becomes totally disabled
• D. The waiver of premium rider, which is triggered only by the total disability of the insured child herself

84. A policyowner is worried that the fixed face amount she bought today will be inadequate in twenty years because of rising prices. Which rider directly addresses that concern?

• A. The accelerated death benefit rider, which advances proceeds to offset rising living costs
• B. The waiver of premium rider, which protects the coverage if inflation makes the premiums unaffordable
• C. The cost of living rider, which periodically raises the death benefit with an inflation index
• D. The return of premium rider, which refunds the premiums paid so she can buy more coverage later

85. Two life policies contain military service exclusions. One is a status clause and the other is a results clause. An insured serving overseas dies of a cause entirely unrelated to combat. How do the two clauses respond?

• A. The results clause pays, because death did not result from war; the status clause denies, because he held military status
• B. Both pay the full death benefit, because the death was not caused by military action or by war
• C. Both deny the claim, because the insured was serving in the military overseas at the time that he died, whatever the cause of death
• D. The status clause pays and the results clause denies, because the results clause is the broader exclusion

86. At the time of the insured's death, a whole life policy with a $300,000 face amount carries an outstanding policy loan plus accrued loan interest. How does the insurer settle the claim?

• A. It pays the face amount reduced by the outstanding loan balance and accrued interest
• B. It pays the full face amount, and the estate remains liable to repay the loan separately
• C. It denies the claim, because an unpaid loan constitutes a default under the contract
• D. It pays the full face amount and cancels the loan, because policy loans are forgiven at death

87. An applicant completes an application, pays the initial premium, and receives a conditional receipt. She takes the required paramedical examination nine days later and dies in a fall the following week, before the insurer has acted on the file. Underwriting later establishes she was a standard risk. What is the insurer's obligation?

• A. To pay half the death benefit, because coverage under a conditional receipt is limited until delivery
• B. Nothing, because a conditional receipt binds coverage only after the insurer approves the application
• C. Nothing beyond a refund of the premium she paid, because the insurer never issued or delivered a policy to her before she died
• D. To pay the death benefit, because coverage attached on the date of the examination once she proved insurable as applied for

88. A producer submits an application without collecting the initial premium. Six weeks later the insurer approves the policy and the producer arranges to deliver it. What must the producer obtain at delivery in addition to the first premium?

• A. A signed statement of continued good health covering the period since the application was taken
• B. A second paramedical examination, because underwriting information expires when a policy is held for delivery
• C. A signed waiver of the free look period, since coverage does not begin until delivery
• D. A newly completed application, because the original went stale once the policy was issued

89. While reviewing an application in the applicant's kitchen, a producer notices that the applicant wrote the wrong year of birth. What is the correct way to handle the error before the application is submitted?

• A. The producer strikes through the entry and signs beside the change on the applicant's behalf
• B. The correction is made and the applicant initials it, or a clean application is completed and signed
• C. The producer submits the form as written and notes the correction in the cover memo to underwriting
• D. The producer erases the entry and writes the correct year, since the producer is responsible for the accuracy of the form

90. An insured stated on his application that he had not consulted a physician in the past five years, believing that a routine visit he had forgotten did not count. The insurer discovers the visit during a contestable-period claim investigation. How is his statement classified, and what must the insurer prove to rescind?

• A. As a representation; the insurer must show the misstatement was material to its underwriting decision
• B. As a warranty; the insurer must show the statement was both untrue and intentional
• C. As a warranty; the insurer need only prove the statement was untrue, whether or not it mattered
• D. As a concealment; the insurer must show that the insured intended to defraud it when he answered the question

91. An applicant is scheduled for a cardiac catheterization the week after he signs his application, and he deliberately says nothing about it because the application does not ask about scheduled procedures. Which term describes his conduct?

• A. Waiver, because the insurer gave up its right to the information by omitting the question
• B. Concealment, the intentional withholding of a material fact the insurer would want in assessing the risk
• C. Estoppel, because the insurer is barred from denying a claim on facts it did not ask about
• D. Innocent misrepresentation, since he answered truthfully every question that the application actually asked him

92. A producer submits an application on which two health questions were left completely blank because the applicant was in a hurry. What is the likely consequence for the case?

• A. Underwriting returns the application for completion, because issuing on an incomplete form waives the missing information
• B. The insurer must treat the unanswered questions as answered in the negative and issue the policy
• C. The insurer may issue the policy and later rescind it during the contestable period for the omitted subjects
• D. The application is void, and the applicant must wait out a stated waiting period before he is permitted to reapply to this insurer

93. A commercial lender wants to insure the life of a borrower who owes the bank a substantial sum on an unsecured note. To what extent does the lender have an insurable interest in the borrower's life?

• A. None, unless the borrower first assigns an existing policy to the lender as collateral
• B. To the extent of the debt, so the coverage may reasonably reflect the outstanding obligation
• C. Unlimited, because a creditor may insure a debtor for any amount it chooses
• D. None, because insurable interest in another person's life requires a family or marital relationship

94. An investor group approaches healthy retirees in a community, offers each of them a cash payment to apply for large policies on their own lives, funds the premiums, and takes an assignment of the contracts shortly after issue. How is this arrangement treated?

• A. A prohibited stranger-originated life insurance scheme, because the investors lacked insurable interest at inception
• B. A permissible third-party ownership arrangement, because policy ownership may always be transferred by assignment
• C. A permissible life settlement, because each of the insureds applied for the policy on his or her own life and then sold it
• D. A viatical settlement, because the arrangement transfers the death benefit on each life to a purchaser for cash

95. An applicant is declined for life coverage after the insurer reviews a report supplied by a consumer reporting agency. Which right does federal law give her at that point?

• A. The right to notice that the decision was based on the report and the name of the agency that furnished it
• B. The right to compel the consumer reporting agency to delete any item in the file that she disputes as inaccurate
• C. The right to a copy of the insurer's internal underwriting guidelines used to evaluate the report
• D. The right to have the insurer reconsider the application without any reference to the report

96. An applicant applies for a standard-rate policy. Underwriting develops an impairment, and the insurer issues the contract with a table rating and a premium 40 percent higher than quoted. In contract law terms, what has the insurer done and what must happen next?

• A. It has accepted the applicant's offer, so coverage is already in force at the higher premium
• B. It has exercised a reserved right to reprice, so the applicant must pay the higher premium or forfeit the contract
• C. It has made a counteroffer, which the applicant accepts by paying the modified premium and accepting delivery
• D. It has issued a binding policy subject to rescission if the applicant objects within the free look

97. A dispute arises over an ambiguous phrase in a life policy. The policyowner had no opportunity to negotiate any of its wording. How will a court most likely resolve the ambiguity, and on what principle?

• A. In favor of the insurer, because insurance contracts are aleatory and the insurer bears the greater risk
• B. In favor of the insurer, because the policyowner accepted the contract as written when he paid the premium
• C. In favor of the policyowner, because an insurance policy is a contract of adhesion drafted entirely by the insurer
• D. In favor of neither party, because an ambiguous term is simply struck from the contract as unenforceable surplusage

98. An insured paid $3,400 in premiums over two years and his beneficiary collected $500,000 at his death, while another insured paid premiums for forty years and his beneficiary collected the same amount. Which two characteristics of an insurance contract does this comparison illustrate?

• A. That it is aleatory and unilateral, because the values exchanged depend on chance and only the insurer is bound
• B. That it is a warranty contract and an executed contract, because performance was completed when it was issued
• C. That it is a personal contract and a contract of indemnity, restoring the insured's exact prior financial position
• D. That it is bilateral and conditional, because both parties exchange enforceable promises subject to conditions

99. A walk-in prospect wants to buy a large single-premium life contract funded entirely with cash, is indifferent to the product's features, resists providing identifying documents, and asks how soon he can surrender it. What should the producer recognize and do?

• A. A suitability problem only; document the file and complete the sale once the client signs a written suitability acknowledgment
• B. A money laundering red flag; the producer must follow the insurer's anti-money laundering program and report internally
• C. A privacy matter; the producer should deliver the insurer's privacy notice and then proceed with the application
• D. A replacement transaction; the producer must deliver the required replacement notices before accepting the premium

100. An employee covered under her employer's group life plan resigns to start her own business. She has developed a serious health condition and cannot qualify for individual coverage. What does the group conversion privilege allow her to do?

• A. Convert to an individual term policy at the group rate, subject to a simplified health questionnaire
• B. Continue as a member of her former employer's group plan indefinitely by paying the premium directly to the group insurer each month
• C. Convert to an individual permanent policy at attained-age rates with no evidence of insurability, within the conversion window
• D. Require the employer to keep her group certificate in force at her own expense until she obtains other coverage

101. A group of forty friends who share a strong interest in skydiving forms an association and immediately applies for group life coverage on its members. The insurer declines to write the case. What is the most likely regulatory reason?

• A. Group life insurance requires that every proposed member submit individual evidence of insurability first
• B. A group must exist for a purpose other than buying insurance, and this one was assembled to buy coverage
• C. Group life insurance may be written only through an employer-employee relationship
• D. Group life insurance may not be issued to a group with fewer than one hundred members

102. A corporation applies for, owns, pays the premiums on, and is the named beneficiary of a policy insuring its chief engineer, whose departure would badly disrupt operations. How are the premiums and the eventual death proceeds treated for federal income tax?

• A. Premiums are not deductible, and the proceeds are generally received income-tax-free
• B. Premiums are deductible as a business expense, and the proceeds are taxable to the corporation as ordinary income
• C. Premiums are deductible as a business expense, and the proceeds are received income-tax-free
• D. Premiums are not deductible, and the proceeds are taxable to the corporation as ordinary income

103. Four equal partners want to fund a buy-sell agreement with life insurance and are comparing a cross-purchase arrangement with an entity purchase arrangement. How many policies does each design require?

• A. Sixteen for the cross-purchase design and one for the entity design
• B. Four for each design, since one policy insures each partner either way
• C. Twelve for the cross-purchase design and four for the entity design
• D. Four for the cross-purchase design and twelve for the entity design

104. An employer wants to reward a key executive by paying the premium on a permanent policy that the executive personally owns and on which she names her own beneficiary. How is that arrangement treated for tax purposes?

• A. The employer may deduct the premium, and the executive is not taxed on it because it funds life insurance
• B. The employer deducts the premium as compensation, and the executive reports the same amount as income
• C. Neither party has any tax consequence until the death benefit is eventually paid to her beneficiary
• D. The employer may not deduct the premium, and the executive is not taxed on the amount paid

105. A policyowner surrenders a whole life contract for its cash value. Over the years she paid substantially more into the policy than the amount she now receives back. What is her federal income tax result?

• A. No taxable income, because the surrender proceeds do not exceed her cost basis in the contract
• B. The entire surrender value is taxable as long-term capital gain, because the policy was held for many years
• C. She may deduct the shortfall between premiums paid and surrender value as a capital loss
• D. The entire surrender value is taxable as ordinary income, because cash value grew tax-deferred

106. A client owns a deferred annuity with a substantial gain and now wants permanent life insurance instead. Her producer proposes exchanging the annuity directly for a life policy so the gain is not currently taxed. Is that permitted?

• A. Yes, provided the same insurance company issues both the annuity and the new life contract
• B. Yes, provided the annuity has been in force long enough to be past its surrender charge period
• C. No, the exchange rules permit life to annuity but not annuity to life, so the gain is taxable
• D. Yes, because both contracts are issued by life insurers and are therefore treated as like kind

107. Two equal shareholders fund a cross-purchase buy-sell agreement, and one later sells his policy on the other shareholder's life to a third shareholder who has joined the company, for cash. What is the tax consequence when the insured dies?

• A. The transfer for value rule applies, so proceeds above the price paid plus the buyer's later premiums are taxable
• B. The proceeds are taxed as capital gain, because the buying shareholder acquired the policy as a long-term investment asset
• C. The full death benefit remains income-tax-free, because a transfer between shareholders is always exempt
• D. The full death benefit becomes taxable as ordinary income, because any sale of a policy destroys the exclusion

108. A wealthy insured owned his own $4,000,000 policy outright and named his adult son as beneficiary. The son collects the proceeds free of income tax, but the family's advisor warns of another tax. What is the concern?

• A. The proceeds are includable in the insured's gross estate, because he held incidents of ownership
• B. The proceeds are includable in the son's gross estate immediately, because he became the owner at the insured's death
• C. The son will owe a penalty because the proceeds were not taken as a settlement option
• D. The son will owe income tax on the cash value growth that occurred before the insured's death

109. A 34-year-old widow with one child receives Social Security survivor benefits after her husband's death. Her producer explains that those benefits will stop for a long stretch before resuming later in her life. What is that gap called, and when does it run?

• A. The waiting period, running for the number of quarters the deceased worker was short of being fully insured
• B. The blackout period, running from when the youngest child reaches the cutoff age until she qualifies for a widow's benefit
• C. The elimination period, running from the date of the worker's death until the first survivor payment is actually made to the family
• D. The probationary period, running from the date of death until the surviving spouse reaches full retirement age

110. An employer asks its producer to explain the essential trade-off between a qualified retirement plan and a nonqualified deferred compensation arrangement for its executives. Which comparison is correct?

• A. A qualified plan may be limited to a handful of executives, while a nonqualified plan must cover all employees on equal terms
• B. Both plans allow an immediate employer deduction, but only the qualified plan defers the employee's tax
• C. Neither plan allows an employer deduction, but both defer the employee's tax until distribution begins
• D. A qualified plan gives a current deduction but must be nondiscriminatory; a nonqualified plan may be selective but forgoes it

111. To close a sale, a producer offers to pay the applicant's first quarterly premium out of her own commission and to give the applicant a gift card at delivery. Neither inducement appears anywhere in the policy. How is this conduct characterized?

• A. A permissible sales promotion, because the producer is spending her own commission rather than the insurer's money
• B. Coercion, because the producer applied improper pressure on the applicant to obtain the application
• C. Rebating, an unfair trade practice, and in most states the applicant who knowingly accepts may also be penalized
• D. Permissible, provided the producer discloses the arrangement to the insurer in writing beforehand

112. A producer persuades a client to surrender a ten-year-old whole life policy and use its cash value to buy a new policy from the same insurer, telling the client the old contract has stopped earning anything, which is untrue. What is this conduct called?

• A. Twisting, which by definition can only occur between two entirely different insurance companies
• B. Churning, a misrepresentation-driven replacement using existing values at the same insurer
• C. Commingling, because the producer applied the client's own funds to a different contract
• D. Rebating, because accumulated policy values were used as an inducement to buy

113. An insurer quotes two applicants of identical age, health history, occupation, and tobacco status materially different premiums for the same policy, based on where each applicant lives within the state. Which unfair trade practice does this describe?

• A. Boycott, because the insurer is effectively refusing to deal with one of the two applicants on the same terms as the other
• B. Defamation, because the pricing difference implies something derogatory about one of the applicants
• C. Misrepresentation, because the rate quoted to one applicant does not reflect the insurer's filed rate
• D. Unfair discrimination, because individuals of the same class and equal expectation of life pay different rates

114. A producer collects initial premiums from four applicants on a Friday, deposits them into his personal checking account over the weekend, and remits the full amount to the insurer on Monday. No client suffers any loss. Has he violated his obligations?

• A. No, because premiums become the producer's property once collected and are owed to the insurer as a debt
• B. No, because he remitted the full amount promptly and no client suffered any loss from the deposit
• C. Yes, because premiums are held in a fiduciary capacity and must not be commingled with personal funds
• D. Yes, but only if the personal account was overdrawn at some point during the weekend

115. A prospect worries aloud that the insurer being recommended could fail. The producer reassures him that the state guaranty association stands behind every policy, so there is nothing to lose. Which statement about that reassurance is correct?

• A. It is permitted only if the insurer being recommended has been placed under regulatory supervision
• B. It is accurate and encouraged, because consumers are entitled to know that the guaranty association exists to protect them
• C. It is permitted only if the producer also names the association's statutory benefit limits to the prospect
• D. It is prohibited, because using the association's existence as an inducement to buy is an unfair trade practice

116. A producer takes an application for a new policy that the applicant intends to fund by surrendering an existing contract with a different insurer. Which set of duties does the replacement regulation impose on the producer and the replacing insurer?

• A. The producer must document the replacement in the file, but no notice to the existing insurer is required unless the applicant asks
• B. None, because the replacement transaction is complete once the applicant signs the surrender request for the existing policy
• C. The producer must obtain the existing insurer's written consent to the replacement before he may submit the new application for underwriting
• D. The producer must present and submit a replacement notice, and the replacing insurer must notify the existing insurer so it may conserve the business

117. Under life insurance solicitation rules, when must a producer give a prospective purchaser the buyer's guide and the policy summary for the contract being recommended?

• A. Only where the applicant requests them in writing before the application is signed and submitted to the insurer
• B. Within thirty days after the policy is delivered, enclosed with the insured's first renewal premium notice
• C. At the insurer's discretion, since both are marketing materials rather than required disclosures
• D. No later than the time of policy delivery, and in many jurisdictions before the initial premium is accepted

118. A producer recommends that a 79-year-old with modest savings and a limited income move most of her liquid assets into a deferred annuity carrying a twelve-year surrender charge schedule. Under the annuity suitability and best interest standard, what is the producer's obligation?

• A. To gather her financial situation and objectives and document a reasonable basis that the recommendation is in her best interest
• B. To recommend the product only if the commission it pays is comparable to that of the other alternatives he considered for this client
• C. None, because suitability obligations attach only to variable annuities, which are regulated as securities
• D. To obtain a signed acknowledgment that the client understands the surrender charges, which satisfies the standard

119. An insurer was incorporated in a neighboring state, holds a certificate of authority to transact business in this state, and writes policies here through appointed producers. How is that insurer classified with respect to this state?

• A. A domestic, admitted insurer
• B. An alien, admitted insurer
• C. A foreign, admitted insurer
• D. A foreign, nonadmitted insurer

120. A beneficiary submits a complete proof of death. The insurer neither acknowledges the claim nor investigates it for several weeks, then offers substantially less than the face amount while suggesting the beneficiary hire a lawyer if she disagrees. Which statutory violation does this pattern establish?

• A. Misrepresentation of policy benefits, because the amount offered understated the policy's stated face amount
• B. Breach of the entire contract provision, because in settling for less the insurer effectively rewrote the terms of the policy it issued
• C. Unfair claims settlement practices: failing to acknowledge and investigate promptly and compelling litigation by a lowball offer
• D. Twisting, because the conduct pressured the beneficiary into abandoning her rights under the contract