L&H Licensing Life and Health Insurance Agent Licensing Practice Exam TEST BANK PREP 2024(, Exams of Nursing

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L&H Licensing Life and Health Insurance

Agent Licensing Practice Exam TEST BANK

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Life and Health Insurance

L&H Licensing Life and Health Insurance Agent

Licensing Practice Exam TEST BANK PREP 2024

TABLE OF CONTENTS

Introduction / Review

Practice Exam Questions

Life Insurance Section 1 – General Life Insurance Basics, Insurable Interest, Parties and Regulations Section 2 – Types of Life Insurance Policies and Individual versus Group Life Insurance Section 3 – Life Insurance Application and Underwriting Section 4 – Selling Life Insurance, Determining Coverage Needs and Issuance and Delivery Section 5 – Life Insurance for Business Owners and in Estate Planning Section 6 – Policy Components, Riders and Non-forfeiture Options Section 7 – Claims, Settlement Options and Tax Concepts Section 8 – Living Benefits and Viatical and Life Settlements

Health Insurance Section 9 – General Health Insurance Basics, Regulation and Social Health Insurance Section 10 – Types of Health Insurance Policies and HMO and PPO Section 11 – Health Insurance Policy Components and Exclusions Section 12 – Selling Health Insurance, Issuance and Delivery and Tax Considerations Section 13 – Deductibles and Copayments Section 14 – Health Insurance Claims and Indemnity vs. Reimbursement Section 15 – Disability and Related Insurance and Seniors and Special Needs Individuals

Miscellaneous Section 16 – Risk Management and Legal Concepts Section 17 – Types of Insurance Entities and HIPPA Section 18 – Fraud and Unauthorized Entities Section 19 – Affordable Care Act

Practice Exam Answers

Practice Exam Questions with Answers

Test Preparation and Test Taking Tips

Bubble Sheet

50 State Life and Health Insurance Agent Exam Guide

Life and Health Insurance Agent Exam Review

While most people do not like to dwell on unexpected perils that can occur, the probability of such incidents happening must be properly prepared for. Insurance can provide both individuals and businesses protection against the financial loss that may result from accidents, illnesses, death, and other types of covered situations. Because insurance is a complex product, agents who are involved in selling such policies are required to have an in-depth understanding of how insurance works as well as understand which types of coverage will best fit the particular needs of their clients. As an insurance agent, one is allowed to offer many different lines of coverage – provided that the required training and testing qualifications have been met. Those who wish to sell life and health insurance are required to posses the proper licensing for each state in which they conduct business. In order to obtain a life and health insurance license, individuals must take and successfully pass an exam that is offered by the state licensing boards. Insurance agents and companies have been regulated by the states in which they sell insurance products and by the U.S. government for many years for the purpose of consumer protection. In addition, all insurers must possess an appropriate amount of surplus funds in order to pay the potential future claims of their policy holders. Each of the 50 states has its own specific insurance licensing and testing functions, and all require some amount of pre-licensing education. Different lines of insurance are tested separately, therefore the passing of the Life & Health Insurance exam will only allow an agent to offer and sell life and health insurance related products. A life and health insurance license will typically allow an agent to offer and sell the following products to their clients:

• Term life insurance
• Whole life insurance (except variable life policies)
• Universal life insurance
• Individual and group health insurance
• Sickness and accident policies
• Disability insurance
• Long-term care insurance (certain states may require additional education and testing)
• Medicare Supplement insurance
• Fixed annuities

Life & Health Insurance Exam Testing Methods The Life & Health Insurance licensing exams will differ from state to state. Typically, an exam will consist of 150 multiple choice questions. It is common these days that the exam will be given by computer at qualified testing centers throughout a proposed licensee’s state. Some common question formats a test candidate will face will be questions formatted as direct questions, as well as incomplete sentences that require the test taker to fill in the blank, options for choosing “all of the following EXCEPT,” and scenarios whereby the test taker must choose the best answer to fit into a particular situation.

Examples of questions that may be seen on a Life & Health Insurance agent licensing exam include:

1. Some of the ways in which the death benefit proceeds from a life insurance policy may be used by one’s beneficiary include the following: a. Paying off a mortgage b. Funding a child’s future education costs c. Paying ongoing bills such as utilities and food d. All of the above
2. All of the following are activities that are included in the definition of transacting insurance EXCEPT: I. Soliciting the purchase of insurance II. Doing preliminary negotiations for an insurance purchase III. Issuing an insurance contract IV. Providing service to a policy holder a. IV only b. I and IV c. All of the above d. None of the above In order to pass a Life & Health Insurance examination, candidates typically must receive a score of at least 70%. Test scores are usually provided immediately after the student completes the exam, along with a summary of how many questions the students correctly answered and the percentage of correct answers that were attained by the test taker in each of the exam topics. If a student does not initially pass a Life & Health Insurance exam, they will be allowed to re- take the test at a later time. In order to do so, the individual must schedule to take the test again with an appropriate testing center. There may be an additional fee required in order to do so. The following areas are typically covered in a Life & Health Insurance examination. The topics include:

• General insurance
• Insurance regulation
• Life insurance basics
• Life insurance policies
• Life insurance policy provisions, options, and riders
• Annuities
• Federal tax considerations for life insurance and annuities
• Qualified plans
• Health Insurance basics
• Individual health insurance policy general provisions
• Disability income and related insurance
• Medical plans
• Health maintenance organizations
• Group health insurance
• Dental insurance

• Insurance for special needs individuals and senior citizens
• Federal tax considerations for health insurance The Tests.com practice exam covers these subject areas and more. The test has been designed to prepare the test candidate on the laws and regulations that generally apply throughout the country. Your state exam may base some questions on laws or regulations that are unique to that state. It is important to obtain the candidate handbook for your state exam and understand what areas will be tested and to keep in mind any variation on the law in respect to generally applicable principles.

Preparing for a Life & Health Insurance Exam All individuals learn differently. Therefore, there are a variety of resources available to students in preparing for a Life & Health Insurance exam. These include flash cards, study guides, practice tests, and even live test preparation classes. Many of these test preparation items can be found in book stores as well as through online sources. In addition, those seeking to become agents may also wish to utilize live discussion groups. There are many areas of the country where those in the life and health insurance field meet to discuss various topics and information that is relevant to the industry, so it is possible that members of such groups can be of help in preparing for the insurance licensing exam. While students are not usually required to take a specific course prior to sitting for a Life & Health Insurance exam, obtaining more in-depth knowledge on the subject matter will likely increase a test taker’s probability of passing the test. It is best to take the Tests.com practice test before you start studying in order to access your strengths and weaknesses, as well as to evaluate how well you know the material. Taking a practice test should be one part of your total study plan, including the review of reference books and test books, class notes, study guides, flash cards, and test prep courses. You can use the bubble sheet at the end of the test to track your answers. Print numerous copies of the bubble sheet so that you can take the test more than once. You will want to mix some test taking into your study habits to vary your activities in order to keep the process interesting and to more effectively commit the subject matter to memory. You may also want to practice your test taking skills. Limit yourself to a certain time period for a certain number of questions that are randomly selected. You can do this more than once throughout your preparation period. Finally, a few days prior to the actual test, retake this practice test to evaluate your grasp of the material. How students prepare for a Life & Health Insurance licensing exam can make the difference between a low score and a high score, so it is important to ensure enough preparation time to thoroughly learn and understand the necessary materials. Some tips that can help in passing a Life & Health Insurance examination the first time can include studying well in advance and following a set study schedule during the time leading up to the exam. The information that is included on the exam is relevant to an agent’s day-to-day operation, so cramming for the purpose of just passing the exam will not be helpful to an agent in the long run. It is also important to visualize success on the exam. As many students experience nervousness during testing situations, having a clear focus on passing and moving forward in the insurance industry will help to reduce anxiety and successfully move forward with confidence.

When preparing for a Life & Health Insurance examination, it is also essential to make use of quality and up-to-date materials. Using outdated books and guides will not likely include the correct information that the student will be tested on. Therefore, be sure to use books and guides that contain the most current and relevant information and tools. Don’t be afraid to highlight pertinent information and make notes in test preparation books and other materials. This will help in making certain facts and data stand out, thus keeping it fresh and memorable when being tested. In order to find test preparation materials, prospective life and health insurance agents can click here to go to our Life & Health Insurance Sales Test Directory.

Taking the Next Step in Becoming a Licensed Life & Health Insurance Agent Passing a Life & Health Insurance exam grants individuals the necessary certification for becoming a licensed life and health insurance agent. The exam is typically offered year-round, so students can prepare and test at times that are convenient for them. Most states’ exams are administered by private testing centers such as Pearson Vue, Thompson Prometric, PSI Exams, and TSI Testing. These test companies will typically handle all of the registration, test administration, and reporting of the scores to the appropriate states in order to move forward with an agent’s licensing procedure. To register for a Life & Health Insurance license examination, applicants should either call the state insurance division or its authorized test center directly, or they can visit the website of the appropriate testing center and select a date, time, and location for taking the exam. It is recommended that test takers arrive at the test center at least 30 minutes prior to their exam start time in order to complete any paperwork and other pre-test requirements. Students are not allowed to bring any personal items into the testing area. Lockers are typically available within the test center site for safely placing items such as wallets, keys, cell phones, and other belongings. Once a test taker has been checked in by test center staff, the next step is moving to the computer terminal in which the actual exam will be given. A staff member will verify that the correct exam is showing on the screen and will then proceed in giving instructions on how to answer the test questions properly. When going through the examination, be sure to read and understand each of the questions and form an appropriate answer. Then, in going through the group of possible answers that are given, eliminate the ones that are obviously incorrect and isolate the possibilities for the right choice. If stuck on a more difficult question, it is possible in most cases to “mark for review” and come back to such questions prior to completing the exam. This will help to eliminate frustration – especially if a particularly confusing or hard question pops up near the beginning of the test. As the examination is timed, it will also be necessary to maintain a comfortable pace in moving through the test. Students will oftentimes find that they complete the exam in plenty of time, thereby allowing them to go back through and review their answers prior to completion of the test should they choose to do so. It is also important to be well rested on the day of the exam, so try to ensure a good

amount of rest the night before. While it might seem pertinent to cram one last time prior to testing, it is also essential to have a well rested brain. This will help to keep a clear and sharp mind during the actual exam. In all cases, it is necessary to maintain a positive attitude and to stay composed during the test. Having a good attitude will allow test takers to more easily get through the challenging parts of the exam and to avoid getting bogged down.

After the Life & Health Insurance Exam is Complete Once an individual is licensed to sell life and health insurance, there are other industry related certifications and advanced designations that may also be of interest for agents to obtain. Many of these involve training in specialty areas and can give insurance agents more in-depth knowledge of various topics. In order to become certified, and to retain such certification, agents may be required to pass additional exams and / or complete ongoing continuing education courses. Some insurance industry related designations that agents may wish to consider include:

• CLU – Chartered Life Underwriter
• ChFC – Chartered Financial Consultant
• RHU – Registered Health Underwriter
• REBC – Registered Employee Benefits Consultant
• CLTC – Certified in Long-Term Care Insurance The choosing of additional education and certification will often depend upon whether an agent decides to focus on a particular area of insurance and / or financial planning with a targeted group of clients in their business. In most cases, the courses of study for these additional certifications will also count towards the required hours of continuing education that life and health insurance agents are required to complete in order to keep their insurance licenses active.

Best of luck on your exam.

Life and Health Insurance Agent Practice Exam – Section 1

General Life Insurance Basics, Insurable Interest, Parties and Regulations

1. All of the following are parties to a life insurance contract EXCEPT: I. Insurer II. Underwriter III. Beneficiary IV. Owner V. Insured a. II only b. III only c. II, III, and V d. All are parties to a life insurance contract 2. Which of the following will have to meet an insurable interest requirement in order for a policy to issue? a. Beneficiary b. Insured c. Insured’s dependents d. All of the above e. Both a and b only 3. In many instances, the and the on a life insurance policy may be the same person or entity. a. Owner, insured b. Insured, beneficiary c. Insurer, insured d. Beneficiary, insured 4. The beneficiary in a life insurance policy does not have to be a person. Which of the following can be named a beneficiary, assuming the presence of an insurable interest? a. A trust b. An estate c. A business entity d. All of the above e. Both a and b only 5. Which of the following has the rights that are stipulated in the insurance contract? a. Insured b. Beneficiary c. Owner d. Annuitant 6. Life insurance is regulated only at the federal level.

policy?

a. True b. False

7. Whose death will cause the insurance company to pay the benefit proceeds of the

a. Owner b. Beneficiary c. Insured d. Annuitant

8. Business owners often have a need for life insurance. a. True b. False 9. If a whole life insurance policy holder needed funds for long-term care expenses, which part of the policy could they access in order to do so? a. Investment benefits b. Death benefits c. Annuity benefits d. Living benefits 10. Which of the following factors does NOT have an effect on a life insurance policy’s premium calculation? a. Occupation b. Health c. Lifestyle d. None of the above 11. The requirement that a life insurance company must keep enough cash in place to pay claims as they arise is known as the requirement. a. Reinsurance b. Policy riders c. Capital reserves d. A++ ratings 12. John makes a good living and got a life insurance policy for the benefit of his wife. He recently experienced a life-changing event with the birth of his son. John should: a. Cancel his life insurance policy to afford to support his new son. b. Decrease his life insurance policy death benefit to get a cheaper policy. c. Increase his life insurance policy death benefit. d. Stop paying premiums on his life insurance policy. 13. is the number one reason why people buy life insurance. a. Income replacement b. Mortgage payoff c. College funding d. Retirement planning 14. Which of the following is typically the lowest cost type of life insurance? a. Term b. Permanent c. Universal

d. Variable

15. Unmarried people without children do not need life insurance. a. True b. False 16. What purpose do mortality tables serve? a. Estimating the appropriate amount of death benefit b. Estimating the projected cash value of a policy at a particular age of a policy holder c. Estimating how long an individual may live d. Estimating the best type of life insurance coverage based on one’s life expectancy 17. Joseph had suffered from signs of early-onset diabetes several years ago, although through better diet and exercise, he has been able to keep his condition under control. Joseph will be considered by the life insurance company as being a(n). a. Undeterminable risk b. Uninsurable risk c. Impaired risk d. Preferred risk 18. A standard suicide clause will prevent the payment of a death benefit if the insured’s death is determined to be by suicide within which period of time after the issuance of the policy? a. 3-6 months b. 6-12 months c. 1 – 2 years d. 2 – 3 years 19. Bert is 45-years old. He is a married father of two teen-aged sons and is the partner in a successful consulting business. He owns a nice house in a tight-knit suburban community and his neighbors appreciate the improvements he’s made to his lot, as it helps maintain property values. For life insurance purposes, who would be deemed as having an insurable interest in Bert if he were to pass away? I. Bert’s business partner II. Bert’s wife III. Bert’s children IV. Bert’s neighbors a. II and III only b. I only c. I, II, and III d. I, II, III, and IV 20. How many days are typically given to a life insurance buyer as a free-look? a. 1-3 days b. 7-10 days c. 7-14 days d. 10-30 days 21. Some of the companies that rate insurance companies regarding their financial strength and claims paying ability include: I. A.M. Best

II. Fitch III. Moody’s IV. FICO a. I and II b. II and III c. I, II and III d. All of the above are insurance ratings agencies

22. What is, in part, the primary purpose of insurance regulation? a. To ensure the financial success of the insurance companies b. To ensure fair competition in the marketplace c. To ensure that beneficiaries get the highest benefit they can d. To maintain the solvency of insurance companies 23. Joel’s primary purpose for purchasing life insurance was to pay estate taxes. Therefore, he should consider life insurance. a. Term b. Permanent c. Both a and b d. Neither a nor b 24. Which of the following ensures that a minimum benefit amount is available for every policy holder in the event that an insurance company cannot pay claims and the reinsurance system fails? a. Capital reserves b. Guarantee corporation c. Reinsurance reserves d. Pooled funds 25. A 35-year old client wants to put a retirement plan in place. It is not necessary to consider life insurance needs when creating a retirement plan. a. True b. False 26. Some of the ways in which the death benefit proceeds from a life insurance policy may be used by one’s heirs include: a. Paying off a mortgage b. Funding a child’s future education costs c. Paying ongoing bills such as utilities and food d. All of the above

Life and Health Insurance Agent Practice Exam – Section 2

Types of Life Insurance Policies and Individual versus Group Life Insurance

27. Jack and his wife Lyn just purchased a home with a 15-year mortgage. Wanting to

make sure that Lyn would be able to pay off the mortgage balance in the event of Jack’s death, Jack had a “temporary” need for life insurance. What type of policy should Jack purchase? a. Whole Life Insurance b. Term Life Insurance c. Variable Life Insurance d. A Viatical Settlement

28. Which type of life insurance is considered to be more risky based on its investment component? a. Level Term Life Insurance b. Whole Life Insurance c. Decreasing Term Life Insurance d. Variable Life Insurance 29. If someone has an employer-sponsored group life insurance policy, they do not need individual coverage. a. True b. False 30. With group life insurance, the risk is spread across a wider number of people. This results in higher premiums for unhealthy people and lower premiums for the healthier participants. a. True b. False 31. Group life insurance can be purchased via: a. Employer b. Professional organization c. Alumni association d. All of the above e. Both a and b only 32. Which type of life insurance policy allows the policy holder to move funds between the death benefit component and the savings component? a. Universal Life Insurance b. Term Life Insurance c. Variable Life Insurance d. Group Life Insurance 33. Jason, a healthy 25-year old, knew that he needed life insurance coverage to protect his wife and newborn son should he pass away suddenly. However, at the present time, he simply did not have a large budget in which to purchase such coverage. Which type of life insurance would be best for Jason’s current needs? a. Term Life Insurance b. Variable Life Insurance c. Universal Life Insurance d. Level Term Life Insurance 34. Insurance agents must obtain their securities license in order to offer which type of life insurance product?

a. Universal Life Insurance b. Term Life Insurance c. Variable Life Insurance d. None of the Above

35. What are the two primary classes of life insurance? a. Variable and Universal b. Term and Permanent c. Whole and Universal d. Term and Universal 36. Which type of live insurance offers only a pure amount of death benefit with no component for cash value or investment funds? a. Universal Life Insurance b. Whole Life Insurance c. Variable Life Insurance d. Term Life Insurance 37. Which of the following distinguishes an individual policy from a typical group policy? a. Flexibility b. Portability c. Value d. Limitations 38. Bob wanted to purchase life insurance coverage. He recently suffered an adverse health condition. Which type of life insurance will Bob have the easiest time qualifying for? a. Individual term b. Group term c. Individual whole life d. Individual Variable 39. life insurance policies are usually less expensive than policies. a. Group, individual b. Individual, group c. Variable, term d. Whole life, term 40. Which type of life insurance coverage offers the least expensive cost per $1,000 of death benefit purchased? a. Universal Life Insurance b. Whole Life Insurance c. Term Life Insurance d. Variable Life Insurance 41. Andrew wanted to obtain a life insurance policy where the coverage and the premium would remain level throughout his entire life. Which type of policy should Andrew purchase? a. Whole Life Insurance b. Universal Life Insurance

c. Variable Life Insurance d. Term Life Insurance

42. After 10 years, Michael’s life insurance policy expired, requiring him to re-qualify for coverage, likely at a higher premium rate due to his increased age. What type of policy did Michael likely own? a. Term Life Insurance b. Whole Life Insurance c. Universal Life Insurance d. Variable Life Insurance 43. A whole life insurance policy will share in the insurance company’s excess profits in the form of dividends. a. Non-Participating b. Participating c. Level d. None of the Above 44. With a whole life insurance policy, the policy holder will have a paid-up policy after they make one large premium payment. a. Limited Pay b. Interest Sensitive c. Single Premium d. Indeterminate Premium 45. life insurance policies are considered to be interest rate sensitive because the policy’s cash value is used to purchase short-term interest bearing instruments. a. Universal b. Term c. Variable d. Whole 46. Which of the following types of life insurance policies have a very specific period of coverage? a. Whole b. Variable c. Term d. Universal e. Both a and c 47. Joe wanted to establish a future college education fund for his 2-year old daughter. He wanted to ensure that the funds in the account were safe and could grow at a guaranteed rate of interest, while also allowing for the payment of a guaranteed amount of death benefit should he pass away. What is the best type of life insurance for Joe to purchase? a. Universal Life b. Term Life c. Variable Life d. Whole Life

Life and Health Insurance Agent Practice Exam – Section 3

Life Insurance Application and Underwriting

48. Life insurance underwriters look at a variety of factors when determining the acceptance of an applicant. These factors can include: a. Health history b. Occupation c. Hobbies d. All of the above e. Both a and b only 49. Which of the following needs to have an insurable interest for an underwriter to issue an insurance policy? a. Owner b. Insurer c. Beneficiary d. Insured 50. A person in excellent health may be placed into the category on his or her life insurance policy. a. No risk b. Standard risk c. Sub-standard risk d. Preferred risk 51. An applicant’s marital status has no bearing on policy underwriting. a. True b. False 52. Which of the following is true concerning smoking and insurance applicants? a. Smokers necessarily pay higher premiums. b. Smokers are considered a higher risk than non-smokers to an insurance company. c. Smokers are not insurable. d. Smokers are permanently put into the smoking category for insurance. e. Both b and d 53. For the purpose of life insurance, everyone is considered to have an insurable interest in: a. Their own life b. Their spouse’s life c. Their dependents’ lives d. All of the above e. Both a and c only 54. Insurable interest in life insurance must be present at the time of. a. Death b. Birth

c. Application d. Policy renewal

55. State laws have established some guidelines as to who may or may not have an insurable interest in an individual. These persons or entities fall into different categories, including those who are related by blood or marriage and those with business relationships. Which of the following is also recognized to have an insurable interest in an individual? a. Creditors b. Neighbors c. Friends d. Association members 56. The sole and final say in terms of whether an applicant will be an acceptable risk for an insurance company is the responsibility of the insurer’s actuaries. a. True b. False 57. While filling out an application for life insurance coverage an applicant for insurance appears to the agent to not qualify for coverage. The agent is certain that she will not qualify. What is the agent’s responsibility at that point? a. Stop the interview and inform the applicant that she will not qualify to avoid wasting her time. b. Continue completing the application and submit to underwriting. c. Include information about the applicant that may sway the underwriters. d. None of the above 58. Which of the following is used to predict with accuracy the likelihood of future losses to the insurance company resulting from an insured’s death? a. Morbidity tables b. Past applicant experiences c. Mortality tables d. None of the above 59. Which of the following is considered to determine how a life insurance applicant will be rated by the insurance company as well as the premium that will be charged? a. Estate value b. Debts and liabilities c. Income d. Insurability 60. What can permanently lock a life insurance applicant into a particular premium amount? a. Pre-existing conditions b. Lifestyle c. Hobbies d. None of the above 61. Most life insurance applicants fall into which of the following underwriting risk categories? a. Preferred b. Standard

c. Sub-standard d. Actuarial

62. Blake was a New York City police officer. Because of his more dangerous occupation, Blake was placed into the sub-standard risk category on his life insurance policy. And, although he was accepted for coverage, the premium that he was charged was: a. More than a standard risk category b. Less than a standard risk category c. Less than a preferred risk category d. The same as a standard risk category

Life and Health Insurance Agent Practice Exam – Section 4

Selling Life Insurance, Determining Coverage Needs and Issuance and Delivery

63. Which of the following deals with a set of relationships where one person is authorized to act on behalf of another in order to create a legal relationship with a third party. a. Law of principals b. Law of agency c. Law of third parties d. None of the above 64. All of the following can be considered life-changing events that could result in a change in the amount of life insurance coverage needed EXCEPT: I. Birth of a child II. Divorce III. Marriage IV. Change in job title a. I, II, and III b. II and III only c. I only d. IV only 65. After 25 years, Bob and Karen are finally empty-nesters. With all of their children grown and earning a living of their own, Bob and Karen decide to purchase a second home in Florida. Given their situation, will Bob and Karen still have a need for life insurance coverage? a. No, as all of their dependents are grown and on their own b. No, as Karen could sell the vacation home if Bob passes away c. Yes, for mortgage payoff and estate taxes d. Yes, to continue funding future college expenses of their children 66. Life insurance companies rely on the as a way of better predicting how many losses will actually take place within a given group of individuals. a. Age of an applicant

b. Life expectancy of an applicant c. Law of large numbers d. Average age of policy holders

67. Under the laws of agency, any person who is involved in soliciting, transmitting, examining, or collecting, or in any way associated with the sale of, insurance is an agent. a. True b. False 68. Those who have a “temporary” need for life insurance coverage should consider what type of policy? a. Whole life b. Universal life c. Variable life d. Term life 69. Regarding term life insurance policies, “rated” life insurance policies are rated according to a table and the extra premium that is charged is called a. a. Penalty premium b. Table rating c. Addendum d. Excess rate 70. When a person is in a position of financial trust, they are considered to be a: a. Principal b. Agent c. Broker d. Fiduciary 71. Insurance agents have a responsibility to all of the following EXCEPT: I. The insurance company II. The applicant III. The policy holder IV. The beneficiary a. I and II b. II and III c. I, II, and III d. IV only 72. When Derek met with a life insurance applicant to fill out an application, the applicant mentioned that he had certain adverse health conditions, however, the applicant did not list such conditions on the application for coverage. Is Derek responsible for informing the insurance company of the applicant’s conditions? a. No. Only the information on the actual application will be considered in making an underwriting determination. b. No. An agent owes the applicant a duty of confidentiality. c. No. An agent is not responsible for immaterial information. d. Yes, as it could affect the correct underwriting decision. 73. Those who do not have any dependents have no need for life insurance coverage? a. True

b. False

74. An insurance agent has concerns that he may be sued and incur personal liability if he gives the wrong advice to a client. In order to protect himself, the insurance agent should obtain which of the following? a. Errors and omissions insurance b. Principal protection c. Agency liability coverage d. Loss underwriting 75. The premium that is charged to an applicant for life insurance takes into consideration which of the following factors: I. Age II. Height III. Weight IV. Lifestyle V. Income a. I, II, III, and IV b. I, II and III only c. I and IV only d. I, II, III, IV, and V 76. If an applicant is approved for coverage with a life insurance company at a sub- standard rating, the insured will not thereafter be able to move up to a more favorable premium category. a. True b. False 77. An insurance company will take into account all of the following factors when determining premium rates EXCEPT: I. Applicant’s height and weight II. Insurance company’s overhead costs III. Life expectancy a. I only b. II and III c. All of the above d. None of the above – all will be considered 78. It is required that a copy of the insured’s policy application be included with the actual life insurance policy upon delivery. a. True b. False 79. Acceptable methods for delivering a life insurance policy to the newly insured include: I. In person II. Mail III. Email a. I only b. I and II

c. I, II, and III d. None of the above

80. Upon delivery of a life insurance policy, the policy owner may be required to: I. Pay any additional premium that is due II. Sign a delivery receipt III. Change the named beneficiary a. I only b. II only c. I and II d. II and III

Life and Health Insurance Agent Practice Exam – Section 5

Life Insurance for Business Owners and in Estate Planning

81. Term life insurance should always be used in buy / sell agreements. a. True b. False 82. Corporate owned life insurance proceeds may be used for the following purposes: I. To find, replace, and train a new employee or executive II. To fund other corporate debt obligations III. To redeem the deceased employee’s stock. a. III only b. I and III only c. All of the above d. None of the above 83. For estate planning purposes, life insurance proceeds are always received income tax free and estate tax free. a. True b. False 84. On January 1, 2010, the federal estate tax was officially repealed. However, it was reinstated on January 1, 2011, with an exemption amount of $. a. $5 million b. $4 million c. $3 million d. $2 million 85. Roger decided to take out a life insurance policy on himself but was not sure who he wanted to be the beneficiary. He put his own name in as the beneficiary and wanted to make a change to the beneficiary designation later when he had resolved some issues with his children. Unfortunately, Roger passed away before changing his beneficiary. Which of the following is true regarding life insurance and probate in this situation?

a. The insurance proceeds will not pass through probate but will go to Roger’s heirs. b. The insurance proceeds will not pass through probate but will be distributed in accordance with Roger’s will. c. The insurance proceeds will not go through probate since insurance contracts are “will substitutes” and the proceeds will be distributed however the executor decides. d. The insurance proceeds will pass through probate.

86. In most cases, the company is the and the of the business life insurance policy. a. Owner, insured b. Insured, owner c. Owner, beneficiary d. None of the above 87. Which of the following will partners in a business use to purchase a life insurance policy on the other partners? a. Cross purchase agreement b. Individual life insurance policies c. Corporate trust d. Group life insurance plan 88. Keith, Kevin, and Tom are all partners in a business. If they construct a cross purchase agreement, how many total life insurance policies will be needed? a. 3 b. 6 c. 9 d. 12 89. In order to remove life insurance proceeds from one’s estate, the insured could: I. Name him or herself as the policy owner II. Place the policy in a revocable trust III. Place the policy in an irrevocable trust a. I only b. I and II c. I, II, and III d. III 90. Which circumstance(s) could cause life insurance proceeds to be included in the decedent’s estate? a. The decedent at death possessed an incident of ownership in the policy. b. The proceeds of the policy are paid to the executor of the decedent’s estate. c. There is a transfer of ownership within three years of death (within certain guidelines). d. All of the above. e. Both a and b only 91. Life insurance can be used as a deferred compensation benefit for corporate employees. a. True b. False 92. Who names the beneficiary in a split dollar plan?

a. Employee b. Company c. Both A and B d. Neither A or B

93. Ed and his employer were involved in purchasing a $500,000 life insurance policy using a split dollar arrangement. Ed paid 40% of the policy premiums and his employer paid the other 60%. When Ed passes away, how much will his personal beneficiary receive from the policy? a. $500,000 b. $0 c. $300,000 d. $200,000 94. A new start-up internet company, Ecompany, applied for a business loan. The bank was concerned with the company’s lack of assets and asked that its executives take out life insurance policies with the bank as a beneficiary. The bank’s request violated the Federal Insurance Office Act of 2010 under Dodd-Frank. a. True b. False 95. Sally is a sole proprietor of a hair salon. She is concerned that if something happens to her, her business will close and her employees will lose their jobs and face financial distress. Sally asks her insurance agent about any life insurance options that may help. What should the agent discuss with her? a. Use of a cross purchase agreements b. Use of a business continuation agreement c. Becoming a sole member LLC d. Becoming an S corporation

Life and Health Insurance Agent Practice Exam – Section 6

Policy Components, Riders and Non-forfeiture Options

96. What is the most common component in all life insurance policies? a. Living benefits b. Waiver of premium c. Death benefit d. Cost of living rider 97. Permanent life insurance policies always have two components. What are they? I. Death benefit II. Cash value III. Living Benefits IV. Conversion Benefit

a. I, II, III and IV b. I, II and III c. II and IV d. I and II

98. Ralph wanted his beneficiary to receive an additional amount of death benefit if he should die in an accident. Therefore, what should Ralph add to his policy? a. Rider b. Addendum c. Savings component d. Investment component 99. John is concerned that if he becomes ill or disabled and loses his job that he will not be able to afford to keep his life insurance in place. Which of the following riders should an agent advise John about? a. Cost of living rider b. Waiver of premium rider c. Advance purchase privilege rider d. Guaranteed insurability rider 100. Which of the following will prevent a life insurance policy from lapsing for failure to pay the premium? a. Level term rider b. Accelerated term rider c. Non-forfeiture option d. Guaranteed insurability rider 101. Which of the following riders will allow the insured to purchase additional amounts of life insurance coverage at regular intervals without the need to show evidence of insurability? a. Guaranteed insurability b. Waiver of premium c. Advance purchase privilege d. Cost of living 102. With the cash value component of a permanent life insurance policy, the policy holder can borrow, as well as withdraw, funds. a. True b. False 103. If a policy holder decides to cancel a whole life insurance policy, what amount will he receive? a. Death benefit b. Cash surrender value c. Premiums paid in d. Nothing 104. John wanted a life insurance policy that also offered him an investment component that had the potential to rise with the market conditions of the underlying equity investments. Which type of life insurance should John consider? a. Variable life insurance

b. Term life insurance c. Whole life insurance d. Increasing term life insurance

105. Dan was afraid that the original face amount on his life insurance policy would not be enough if he were to pass away years later, yet be unable to purchase additional coverage if he were to become uninsurable. Which rider should Dan purchase to solve this issue? a. Guaranteed insurability b. Waiver of premium c. Advance purchase privilege d. Cost of living 106. The non-forfeiture option allows the insured’s permanent life insurance policy to be converted into a term life insurance policy with the same face amount of coverage. a. Cash surrender b. Extended term c. Single premium immediate annuity d. Reduced paid-up insurance 107. John wants to convert his life insurance policy into a paid-up life insurance policy using the reduced paid-up option that is in his current policy. What will determine the amount of coverage he can buy with his old policy? a. Face amount of the original policy b. Cash value of the original policy c. The price will be set in the option d. Cannot be determined 108. Which of the following non-forfeiture options will allow the policy holder to be paid an amount that is commensurate with the original policy’s cash value as well as the policy holder’s age for the remainder of his or her life? a. Single premium immediate annuity b. Extended term c. Reduced paid-up d. Cash surrender 109. In all cases, a life insurance policy will lapse after the end of a grace period for non- payment of policy premiums. a. True b. False 110. What type of policy rider will allow an insured to purchase an additional amount of death benefit on their life insurance policy within 90 days of a life changing event such as marriage or the birth of a child? a. Cost of living rider b. Advance purchase privilege rider c. Accelerated death benefit rider d. Family income benefit rider 111. Pete wanted a life insurance policy where he would have the flexibility to move