Question 1

An applicant wants coverage that will pay off the remaining balance of a 30-year mortgage if she dies, with a premium that stays level throughout. Which type of term insurance is specifically designed for this need?

Accepted Answer

Decreasing term features a death benefit that declines over the policy period while the premium remains level, matching an amortizing debt such as a mortgage.

Question 2

A policyowner has an annually renewable term (ART) policy. How do the death benefit and premium behave over time?

Accepted Answer

Annually renewable term guarantees the right to renew each year without evidence of insurability, keeping the face amount level while the premium rises annually with the insured's attained age.

Question 3

Which provision in a term policy allows the insured to exchange the coverage for a permanent policy without providing proof of insurability?

Accepted Answer

The convertibility provision lets the owner convert term coverage to permanent insurance without a new medical exam; the renewability provision only extends term coverage.

Question 4

Which statement best describes ordinary (straight) whole life insurance?

Accepted Answer

Straight (ordinary) whole life spreads level premiums across the insured's lifetime to the endowment age and accumulates guaranteed cash value, endowing at the maturity age.

Question 5

A client wants permanent life insurance that will be completely paid up by the time he retires at age 65, with no premiums due afterward. Which policy best fits this goal?

Accepted Answer

Limited-pay whole life compresses premium payments into a set period (such as paid-up at 65), after which the policy remains in force for life with no further premiums.

Question 6

Compared to an otherwise identical straight whole life policy, a single-premium whole life policy will generally have which characteristic?

Accepted Answer

Because the entire cost is funded with one lump-sum payment at issue, single-premium whole life immediately generates substantial cash value that exceeds the early values of a level-premium policy.

Question 7

Under a universal life policy, the policyowner selects Option B (Option 2) rather than Option A. What is the primary effect of this choice?

Accepted Answer

Under Option B, the death benefit is the level face amount PLUS the cash value, so total death proceeds increase as cash value grows; Option A keeps a level total death benefit.

Question 8

In a universal life policy, what is the purpose of the IRS corridor (the minimum gap required between cash value and death benefit)?

Accepted Answer

The corridor requires the death benefit to remain a specified percentage above the cash value so the contract continues to qualify as life insurance under the tax code rather than as an investment.

Question 9

Which feature is characteristic of universal life insurance but NOT of traditional whole life?

Accepted Answer

Universal life is a flexible-premium, adjustable-benefit product; the owner may vary premium payments within limits and adjust the face amount, unlike the fixed structure of whole life.

Question 10

An agent selling variable universal life insurance must hold which credential in addition to a life insurance license?

Accepted Answer

Because variable products invest in separate accounts and are considered securities, the producer must also be registered with FINRA and hold a securities license, and the product must be sold with a prospectus.

Question 11

In a variable life insurance policy, who bears the investment risk associated with the separate account?

Accepted Answer

Variable life places cash value in separate accounts chosen by the owner, so the policyowner assumes the investment risk; poor performance can reduce cash value, though most policies guarantee a minimum death benefit.

Question 12

How does an indexed universal life (IUL) policy typically credit interest to its cash value?

Accepted Answer

IUL credits interest linked to an external index (such as the S&P 500) but is not directly invested in the market; a floor protects against loss while a cap limits the maximum credited gain.

Types of Life Insurance Practice Questions

Answer a few Types of Life Insurance questions now

More Life & Health Insurance Exam Topics