Life Insurance Exam Questions And Answers PDF: Free Life Insurance Exam Study Guide

Life Insurance Exam Questions And Answers PDF: Free Life Insurance Exam Study Guide. You will need to take and pass your state’s Life & Health Insurance exam if you are pursuing a license as a life and health insurance agent. The contents of the exam are different depending on the state you take the test in. This includes the number of questions, the time limit, the topics covered, and the overall exam format. 

The guide in this article will provides you with the following:

• Insurance exam tips.
• A variety of updated life and health insurance past questions.
• Possible answers.
• Rules and regulations for the practice exam.

How to Study for the Life Insurance Exam

Your success on Life and Health Insurance test depends not only on how many hours you put into preparing but also on whether you prepared the right way. It’s good to check along the way to see whether your studying is paying off. One of the most effective ways to do this is by taking Life and Health Insurance practice tests to evaluate your progress.

Section explaining the answer choices

Many Life and Health Insurance practice tests have a section explaining the answer choices. It can be tempting to read the explanation and think that you now have a good understanding of the concept. However, an explanation likely only covers part of the question’s broader context.

Even if the explanation makes sense, go back and investigate every concept related to the question until you’re positive you have a thorough understanding.

Understand each topic fully

Memorizing these questions and answers will not be very helpful on the actual test because it is unlikely to have any of the same exact questions. If you only know the right answers to the sample questions, you won’t be prepared for the real thing. Study the concepts until you understand them fully.

Sample Life Insurance Exam Questions And Answers

Question 1.

Ghislaine wishes to buy a $150,000 whole life insurance policy. She meets with her representative and completes an application form in which it is mentioned that she suffered minor health problems a few years ago. She also fills out a separate application form to obtain temporary coverage for 90 days pending the underwriter’s final decision. She pays the first premium of $422. The insurer limits temporary coverage to $250,000 for all TIAs.

How much temporary coverage Ghislaine does obtain?
a) Zero. b) $150,000. c) $150,422. d) $250,000.

Correct answer: b). The maximum amount under the temporary insurance agreement is limited to the LESSER of the amount granted by the company and the amount of coverage requested in the application.

Question 2

Your client is looking to buy a T-20 life insurance. You submitted the completed application to the insurance company. A few weeks later, the application is approved and the contract delivered to you.

At this stage, what should you do to complete the delivery process?

• a) Complete the medical questionnaire, obtain a signed illustration, premium for the insurance, declaration of insurability and confirmation of delivery receipt from the client.
• b)Complete the agent’s comments section, obtain a premium for the insurance, declaration of insurability and confirmation of delivery receipt from the client.
• c) Deliver the policy personally or by mail and obtain a premium for the insurance.
• d) Meet the client, obtain the premium for the insurance, declaration of insurability and confirmation of delivery receipt from the client.

Correct answer: d). 

Answer 2 Explanations.

Answer a): False. The medical questionnaire had already filled in the application to the insurance company. The signed policy illustration is not necessary of a T-20 life insurance. The policyholder has to sign an illustration acknowledging that he understands the limitations of the illustration in case of policies that are very sensitive to the investment returns like the participating whole life and universal life policy outcomes.

Answer b): False. The agent’s comments section had already completed in the application to the insurance company.

Answer c): False. The agent does not deliver the policy by mail or give it to somebody else than the applicant. He has to meet the applicant to ensure that nothing important has changed that would affect the insurability of life insured.

Answer d): Correct answer. To close the underwriting process, the agent has to meet the client, obtain the premium for the insurance after a carefully analyze the contract with him, and finally, obtain the declaration of insurability and confirmation of delivery receipt from the client.

Question 3. Life Insurance Exam Questions And Answers.

Zhang, one of your clients, approaches you for help with his current life insurance policy, which includes a dangerous policy exclusion. Zhang will take part in his hometown’s famous Spring Flower motorcycling event. Zhang’s lovely wife Fei is quite anxious, and he wants to make sure that his existing coverage would give benefits. Zhang has never ridden a motorcycle before. What do you think you should say to Zhang?

1. Coverage could be available by other means.
2. The exclusion to his policy is unenforceable.
3. An exclusion in the policy will prevent coverage for the race.
4. Zhang’s policy will provide coverage since the race is a one-time event.
5. None of the above.

ANSWER: Coverage could be available by other means

If a death is caused by an inherently dangerous activity, such as participating in a motorcycle race, an insurance company is allowed to limit or exclude the payment of a life insurance death benefit. 

A short-term Accidental Death and Dismemberment policy is an alternative for temporary participation in a dangerous activity.

Auto racing, mountain climbing, hang gliding, and cliff diving are all perilous activities. Other policy exclusions include:

1. A drug or alcohol abuse exclusion, as well as an exclusion for engaging in illegal activities.
2. Suicide, though this may be limited to the first one or two years (depending on the state); 
3. An act of war exclusion, such as if the death occurs while serving in the military or during the war.

Question 4 – Life Insurance Exam Questions And Answers.

Tom just submitted a death claim for both his father’s individual universal life and group life policies. He would like to know if the death benefits are taxable.

How would you answer his question?

• a)  The death benefit for an individual is always tax-free. If the employer paid the group life premium portion, the premium would not be added to Tom’s income and the death benefit is tax-free too.
• b)  The death benefit for individual and group life insurance is always tax-free.
• c)  If the universal life is classified as non-exempt policy, the death benefit is fully taxable. The group life death benefit is always tax-free.
• d)  An individual life insurance death benefit is always paid out tax-free. If the employer paid and deducted the group life insurance portion, the benefit becomes taxable.

Correct answer: b)

Answer 4 Explanations

• Answer a: False. The group life insurance premium paid by the employer would be added to Tom’s income.
• Answer b: Correct answer. Death benefits from individual or group life insurance are always paid out tax-free.
• Answer c: False. The death benefit from a universal life policy is paid out tax-free.
• Answer d: False. The death benefit from group insurance, regardless of who paid the premium, is always tax-free.

Question 5 – Life Insurance Exam Questions And Answers

Jacky is single and will turn 24 this year. He doesn’t have any dependents. He does not have any group coverage. He drives a motorcycle to work every day. Which of the following riders or supplementary benefits should he add to his current individual insurance plan?

• a)  Accidental death and dismemberment.
• b)  Accidental death and waiver of premium.
• c)  Paid-up additions and guaranteed insurability benefit (GIB).
• d)  T erm insurance and waiver of premium.

Correct answer: a)

Answer 5 Explanations

• Answer a: Correct answer. Jacky’s main risk is suffering a serious injury or even dying in a motorcycle accident.
• Answers b, c and d: False. One or the riders mentioned are not as high a priority as the two mentioned in a.

Question 6 – Life Insurance Exam Questions And Answers

Tom is turning 63 this year and has already retired. He has sizable non-registered assets with large unrealized capital gains and is concerned about the tax consequences upon the sale of the assets. He comes to you for risk management advice.

Which of the following statements is correct regarding Tom’s next action?

• a)  Under the risk avoidance technique, he can immediately apply capital losses.
• b)  Under the risk retention technique, he can choose to do nothing.
• c)  Under the risk transfer technique, he can transfer ownership to his son upon his death.
• d)  Under the risk reduction technique, he can invest aggressively to achieve a higher rate of return.

Correct answer: c)

Answer 6 Explanations

• Answers a, b and d: False. They do not decrease or eliminate Tom’s tax risk.
• Answer c: Correct answer. According to section 1.3.4 of the reference manual, the best way to reduce or avoid a financial or tax risk is to transfer the risk to a third party.

Question 7 – Life And Health Insurance Exam Questions And Answers 

Mario and Danielle have been married for 10 years, are childless and have no desire to have children. Mario’s annual net income is $120,000, and he has group life insurance for the same amount. Danielle’s net income is $45,000 and she has no group insurance. Their home is valued at $320,000, and they currently have 20 years left on their $250,000 mortgage.

Mario would like to bequeath an amount of $100,000 to the hospice that cared for his parents. Danielle inherited $250,000 recently upon the death of her father, which they are using to maximize their registered retirement savings plan (RRSP) contributions and use all unused contribution room. In the event of his own death, Mario would like to leave the house to Danielle mortgage-free.

To meet Mario’s needs, what is the minimum amount of life insurance coverage he should buy?

a) $420,000. b) $300,000. c) $230,000. d) $100,000.

Correct answer: c)

Answer 7 Explanations – Life And Health Insurance Exam

Answers a and b: False. They use the value of the residence ($320,000$) and not the mortgage amount ($250,000).

Calculations:

a: $320,000 + $100,000 = $420,000

b: $320,000 + $100,000 – $120,000 = $300,000

Answer c: Correct answer. Mario’s need is $250,000 for the mortgage, then $100,000 for the donation to the seniors’ residence less the amount of the group insurance, $120,000.

Calculation: $250,000 + $100,000 – $120,000 = $230,000

Answer d: False. It does not take either the mortgage ($250,000) or the current group insurance ($120,000) into account.

Question 8: What is the major function of a STOLI? 

• An investment vehicle. 
• To adhere to federal law.
• To help the elderly.
• Insurance for the protection of loved ones.
• To make an insurance product cocktail.

ANSWER: An investment vehicle

Stranger-originated life insurance (STOLI) is a policy in which the recipient has never met the insured and has no insurable interest in him or her before the policy is purchased.

STOLI policies are not prohibited under federal law, they may be restricted by state insurance laws. 

Rather than providing protection to the insured and those close to the insured, STOLI is largely purchased as an investment for the benefit of the beneficiary. Unscrupulous individuals who want to take advantage of the elderly may exploit STOLIs.

Strategy for Life and Health Insurance Practice

1. Time Yourself.

Take the second practice test “open book” as well, but set a timer and practice pacing yourself to finish in time.

2. Remove Limitations.

Take the first test with no time constraints and with your notes and Life and Health Insurance study guide handy. Take your time and focus on applying the strategies you’ve learned.

3. Keep Practicing.

Keep taking practice tests on a regular basis until you run out of practice tests or it’s time for the actual test. Your mind will be ready for the schedule and stress of test day, and you’ll be able to focus on recalling the material you’ve learned.

4. Simulate Test Day.

Take any other practice tests as if it were test day. Set a timer and put away your study materials. Sit at a table or desk in a quiet room, imagine yourself at the testing center, and answer questions as quickly and accurately as possible.

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