GEORGIA LIFE AND HEALTH INSURANCE EXAM– QUESTIONS
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1. A 42-year-on small business owner purchases a universal life insurance policy to ensure
business continuation funding in the event of premature death. The policy features an
adjustable death benefit and unbundled pricing elements. Which component of this policy
represents the net amount at risk for the insurance carrier?
A. The total cash surrender value accumulated within the separate account
B. The difference between the total face amount and the current cash value
C. The total aggregate premiums paid plus credited current interest
D. The level term rider face value minus administrative surcharges
In a universal life policy, the insurance company's actual net amount at risk decreases as the
cash value grows, because the net pure insurance protection provided by the carrier is equal to
the total face amount minus the accumulated cash value.
2. An agent is reviewing a prospective client's portfolio and notices an existing annuity
contract is about to be replaced. Under Georgia insurance regulations, what specific
document must be signed and provided to the applicant during a replacement transaction?
A. A binding temporary binder agreement
B. A notice regarding replacement of life insurance or annuities
C. A mandatory credit bureau authorization waiver
D. A stock exchange disclosure statement
Georgia insurance regulations require producers to deliver a signed Notice Regarding
Replacement to ensure consumers are fully informed of the consequences, costs, and benefits
associated with replacing an existing contract.
3. A client owns a participating whole life insurance policy and decides to use the annual
dividend to purchase small blocks of single-premium permanent insurance. Which
dividend option has the client selected?
A. Accumulation at interest option
B. Paid-up additions option
C. Reduction of premium option
D. One-year term option
, The paid-up additions option utilizes annual dividends to buy incremental blocks of paid-up
whole life insurance, which increases both the total death benefit and the overall cash value
base over time.
4. An applicant submits an application for a disability income policy but fails to disclose a
chronic back condition that required ongoing chiropractic treatment. Two years later, the
insured becomes disabled due to a completely unrelated automobile accident. How will the
insurer most likely handle the claim?
A. Deny the claim entirely and rescind the policy for fraudulent concealment
B. Pay the claim because the condition is unrelated and the time limit on certain defenses
has passed, or contest it if within the two-year contestable period based on materiality
C. Automatically double the elimination period retroactively
D. Force the insured to reimburse all prior premium payments
Under the time limit on certain defenses provision, after a policy has been in force for two
years, non-fraudulent misstatements on the application can no longer be used to void the
contract or deny claims.
5. A 50-year-old corporate executive is evaluating retirement vehicles and wants a product
that provides a guaranteed lifetime income starting immediately with a single premium
layout. Which contract fits this profile?
A. Single premium deferred annuity
B. Single premium immediate annuity
C. Variable universal life insurance
D. Adjustable whole life contract
A single premium immediate annuity (SPIA) is purchased with a single lump sum and begins
making regular income distributions to the annuitant within one month of purchase.
6. Under Georgia insurance law, what is the mandatory minimum grace period required
for individual life insurance policies other than those payable weekly or monthly?
A. 7 days
B. 15 days
C. 31 days
D. 60 days
Georgia statutes mandate a grace period of at least 30 or 31 days for individual life policies
(excluding industrial weekly/monthly modes), ensuring protection remains active during late
payments.
7. A policyowner decides to surrender a whole life insurance policy for its cash surrender
value. The total cash value equals 12,000 dollars, and the total gross premiums paid up to
,that date equal 9,000 dollars. What is the federal income tax consequence of this
transaction?
A. The entire 12,000 dollars is subject to ordinary income tax rates.
B. Only the gain of 3,000 dollars is subject to federal income tax as ordinary income.
C. The transaction is completely tax-free under section 1031.
D. The owner faces a mandatory 50 percent IRS penalty tax.
Cost recovery rules dictate that withdrawals or surrenders up to the aggregate amount of
premiums paid (cost basis) are tax-free. Only amounts exceeding the cost basis are taxed as
ordinary income.
8. An insurance producer in Georgia tells a prospective client that a competing insurance
company is financially unstable and about to go bankrupt, even though this statement is
false and malicious. What illegal trade practice has the producer committed?
A. Rebating
B. Twisting
C. Defamation
D. Sliding
Defamation occurs when a producer makes false, maliciously critical, or derogatory
statements regarding the financial condition of any insurer with the intent to injure or deceive.
9. Which health insurance policy provision allows an insurer to adjust benefits if the
insured changes to a more hazardous occupation without notifying the company?
A. Change of Occupation Provision
B. Illegal Occupation Provision
C. Probationary Period Provision
D. Time Limit on Certain Defenses
The change of occupation provision protects the insurer by allowing a downward adjustment
of policy benefits to match what the premium would have purchased under the more
hazardous job classification.
10. A business enters into a cross-purchase buy-sell agreement funded by life insurance.
There are four equal partners. How many total life insurance policies must be purchased to
fully fund this arrangement?
A. 4 policies
B. 8 policies
C. 12 policies
D. 16 policies
, In a cross-purchase buy-sell agreement, every partner must own a policy on the life of every
other partner. With $n$ partners, the formula is $n \times (n - 1)$. Therefore, $4 \times 3 =
12$ total policies.
11. An insured suffers a severe stroke that leaves her completely unable to perform two or
more activities of daily living (ADLs) for an expected duration exceeding 90 days. Which
type of insurance policy will respond to this long-term care need?
A. Short-term medical expense plan
B. Long-term care insurance policy
C. Basic hospital indemnity contract
D. Specified disease critical illness policy
Long-term care policies provide coverage for diagnostic, preventative, therapeutic, and
custodial services when an insured is certified as chronically ill by lacking capability in
multiple ADLs.
12. What is the primary purpose of the "entire contract clause" in a life insurance policy?
A. To bind the agent to personal liability for unpaid claims
B. To ensure that the policy document, application, and any attached riders constitute the
entire binding agreement between the parties
C. To permit the insurer to alter premium rates at any time without notice
D. To prevent beneficiaries from filing lawsuits
The entire contract provision protects the policyowner by stipulating that no oral statements
or external documents outside the policy and attached application can be used to void the
contract.
13. A prospective insurance applicant gives an agent a check for the initial premium and
receives a conditional receipt. When does coverage typically become effective under a
standard insurability conditional receipt?
A. Exactly at midnight on the date the check is written
B. On the date of application or the date of passing a required medical exam, whichever is
later, provided the applicant is found insurable
C. Only when the policy is physically handed to the client at their kitchen table
D. When the home office underwriting team deposits the check into corporate accounts
An insurability conditional receipt provides temporary coverage retroactive to the application
or medical exam date, contingent upon the applicant meeting the insurer's underwriting
standards.
14. Under Georgia insurance law, what is the maximum number of pre-licensing education
hours required for a combined Life, Accident, and Sickness insurance license?
AND ANSWERS | VERIFIED AND WELL DETAILED ANSWERS
PLUS RATIONALES | GUARANTEED PASS | LATEST EXAM
UPDATE | EXAM PREP | STUDY GUIDE | PRACTICE TEST|
DOWNLOAD INSTANT PDF
1. A 42-year-on small business owner purchases a universal life insurance policy to ensure
business continuation funding in the event of premature death. The policy features an
adjustable death benefit and unbundled pricing elements. Which component of this policy
represents the net amount at risk for the insurance carrier?
A. The total cash surrender value accumulated within the separate account
B. The difference between the total face amount and the current cash value
C. The total aggregate premiums paid plus credited current interest
D. The level term rider face value minus administrative surcharges
In a universal life policy, the insurance company's actual net amount at risk decreases as the
cash value grows, because the net pure insurance protection provided by the carrier is equal to
the total face amount minus the accumulated cash value.
2. An agent is reviewing a prospective client's portfolio and notices an existing annuity
contract is about to be replaced. Under Georgia insurance regulations, what specific
document must be signed and provided to the applicant during a replacement transaction?
A. A binding temporary binder agreement
B. A notice regarding replacement of life insurance or annuities
C. A mandatory credit bureau authorization waiver
D. A stock exchange disclosure statement
Georgia insurance regulations require producers to deliver a signed Notice Regarding
Replacement to ensure consumers are fully informed of the consequences, costs, and benefits
associated with replacing an existing contract.
3. A client owns a participating whole life insurance policy and decides to use the annual
dividend to purchase small blocks of single-premium permanent insurance. Which
dividend option has the client selected?
A. Accumulation at interest option
B. Paid-up additions option
C. Reduction of premium option
D. One-year term option
, The paid-up additions option utilizes annual dividends to buy incremental blocks of paid-up
whole life insurance, which increases both the total death benefit and the overall cash value
base over time.
4. An applicant submits an application for a disability income policy but fails to disclose a
chronic back condition that required ongoing chiropractic treatment. Two years later, the
insured becomes disabled due to a completely unrelated automobile accident. How will the
insurer most likely handle the claim?
A. Deny the claim entirely and rescind the policy for fraudulent concealment
B. Pay the claim because the condition is unrelated and the time limit on certain defenses
has passed, or contest it if within the two-year contestable period based on materiality
C. Automatically double the elimination period retroactively
D. Force the insured to reimburse all prior premium payments
Under the time limit on certain defenses provision, after a policy has been in force for two
years, non-fraudulent misstatements on the application can no longer be used to void the
contract or deny claims.
5. A 50-year-old corporate executive is evaluating retirement vehicles and wants a product
that provides a guaranteed lifetime income starting immediately with a single premium
layout. Which contract fits this profile?
A. Single premium deferred annuity
B. Single premium immediate annuity
C. Variable universal life insurance
D. Adjustable whole life contract
A single premium immediate annuity (SPIA) is purchased with a single lump sum and begins
making regular income distributions to the annuitant within one month of purchase.
6. Under Georgia insurance law, what is the mandatory minimum grace period required
for individual life insurance policies other than those payable weekly or monthly?
A. 7 days
B. 15 days
C. 31 days
D. 60 days
Georgia statutes mandate a grace period of at least 30 or 31 days for individual life policies
(excluding industrial weekly/monthly modes), ensuring protection remains active during late
payments.
7. A policyowner decides to surrender a whole life insurance policy for its cash surrender
value. The total cash value equals 12,000 dollars, and the total gross premiums paid up to
,that date equal 9,000 dollars. What is the federal income tax consequence of this
transaction?
A. The entire 12,000 dollars is subject to ordinary income tax rates.
B. Only the gain of 3,000 dollars is subject to federal income tax as ordinary income.
C. The transaction is completely tax-free under section 1031.
D. The owner faces a mandatory 50 percent IRS penalty tax.
Cost recovery rules dictate that withdrawals or surrenders up to the aggregate amount of
premiums paid (cost basis) are tax-free. Only amounts exceeding the cost basis are taxed as
ordinary income.
8. An insurance producer in Georgia tells a prospective client that a competing insurance
company is financially unstable and about to go bankrupt, even though this statement is
false and malicious. What illegal trade practice has the producer committed?
A. Rebating
B. Twisting
C. Defamation
D. Sliding
Defamation occurs when a producer makes false, maliciously critical, or derogatory
statements regarding the financial condition of any insurer with the intent to injure or deceive.
9. Which health insurance policy provision allows an insurer to adjust benefits if the
insured changes to a more hazardous occupation without notifying the company?
A. Change of Occupation Provision
B. Illegal Occupation Provision
C. Probationary Period Provision
D. Time Limit on Certain Defenses
The change of occupation provision protects the insurer by allowing a downward adjustment
of policy benefits to match what the premium would have purchased under the more
hazardous job classification.
10. A business enters into a cross-purchase buy-sell agreement funded by life insurance.
There are four equal partners. How many total life insurance policies must be purchased to
fully fund this arrangement?
A. 4 policies
B. 8 policies
C. 12 policies
D. 16 policies
, In a cross-purchase buy-sell agreement, every partner must own a policy on the life of every
other partner. With $n$ partners, the formula is $n \times (n - 1)$. Therefore, $4 \times 3 =
12$ total policies.
11. An insured suffers a severe stroke that leaves her completely unable to perform two or
more activities of daily living (ADLs) for an expected duration exceeding 90 days. Which
type of insurance policy will respond to this long-term care need?
A. Short-term medical expense plan
B. Long-term care insurance policy
C. Basic hospital indemnity contract
D. Specified disease critical illness policy
Long-term care policies provide coverage for diagnostic, preventative, therapeutic, and
custodial services when an insured is certified as chronically ill by lacking capability in
multiple ADLs.
12. What is the primary purpose of the "entire contract clause" in a life insurance policy?
A. To bind the agent to personal liability for unpaid claims
B. To ensure that the policy document, application, and any attached riders constitute the
entire binding agreement between the parties
C. To permit the insurer to alter premium rates at any time without notice
D. To prevent beneficiaries from filing lawsuits
The entire contract provision protects the policyowner by stipulating that no oral statements
or external documents outside the policy and attached application can be used to void the
contract.
13. A prospective insurance applicant gives an agent a check for the initial premium and
receives a conditional receipt. When does coverage typically become effective under a
standard insurability conditional receipt?
A. Exactly at midnight on the date the check is written
B. On the date of application or the date of passing a required medical exam, whichever is
later, provided the applicant is found insurable
C. Only when the policy is physically handed to the client at their kitchen table
D. When the home office underwriting team deposits the check into corporate accounts
An insurability conditional receipt provides temporary coverage retroactive to the application
or medical exam date, contingent upon the applicant meeting the insurer's underwriting
standards.
14. Under Georgia insurance law, what is the maximum number of pre-licensing education
hours required for a combined Life, Accident, and Sickness insurance license?
