Life, Accident, and Health Insurance
Practice Exam
1. Which is the proper term for a company 5. The money paid by the insured to the insurance
owned by its policyowners? company for insurance protection is called the
A. A stock insurance company A. consideration
B. A mutual insurance company B. dividend
C. A legal insurance company C. benefit
D. A fraternal insurance company D. assignment
2. A certificate of insurance 6. The difference between a customer and a
A. is issued to the employer to list which consumer under the Gramm-Leach-Bliley Act
employees are covered by the group plan is that
B. is issued to each individual covered by A. a customer is a policyholder, whereas
the group life insurance a consumer is an applicant
C. contains all policy information except the B. a consumer is a policyholder, whereas
amount of protection and the beneficiary a customer is an applicant
D. is not considered valid proof of coverage C. a customer has an ongoing relationship with
the insurer, whereas a consumer does not
3. Al purchases an estate builder (jumping D. a consumer has an ongoing relationship
juvenile) policy for his 5-year-old son, Donald. with the insurer, whereas a customer
When Donald reaches age 21, his father does not
presents him with the policy as a gift. Which
of the following statements is NOT correct? 7. An insured allows a permanent policy to
A. Donald does not have to continue to make lapse. Unless otherwise instructed, the
the premium payments to keep the policy in insurance company
force. A. is entitled to keep any accumulated
B. The premium will continue to be based on cash values
Donald’s original age of 5. B. may use the cash value to purchase a
C. Donald has enjoyed protection against the reduced amount of permanent insurance
problems of premature death. C. will automatically send the cash values
D. The face value of Donald’s policy of the policy to the policyowner
has increased by 5 times. D. will automatically institute the extended
term option
4. Mortality figures are normally developed
by studying and interpreting statistics 8. Which of the following statements about the
A. from small groups of people over 10- average number of people who die each year
year periods is TRUE?
B. developed from the deaths of millions A. It is called the mortality rate.
of persons over long periods B. It cannot be predicted with any accuracy.
C. gathered by interviewing many persons C. It cannot be used to determine insurance
in selected cities across the nation rates.
D. obtained by surveys of insured persons D. It is the principal factor in risk selection.
1
,2 Life, Accident, and Health Insurance Practice Exam senior executives. This benefit is not available to
other retirees of the company. This is an
9. Money taken out of a modified example of a
endowment contract (MEC) A. profit-sharing plan
A. will result in the policy being voided B. qualified retirement plan
B. is always received income-tax free C. nonqualified plan
C. is considered to be a return of premium D. defined contribution plan
D. may be subject to unfavorable tax rules
15. In a universal life policy, the two adjustments
10. Ed has a $50,000 policy with cash values of usually made to the cash value account are
$10,000. A $2,000 loan is outstanding, as is a A. guaranteed interest and current interest are
past-due premium of $1,000. Ed finds he can no credited
longer make premium payments on this policy. B. premium and excess interest are charged
If Ed chooses the cash surrender value option, C. guaranteed interest is charged and
he will receive premium is credited
A. $7,000 D. cost of insurance protection is charged
B. $8,000 and current interest is credited
C. $9,000
D. $10,000 16. Loan values and retirement income are
A. called the living benefits of life insurance
11. George, who has a group policy, may, B. available from all life insurance policies
upon leaving his place of employment C. available only from term policies
A. convert it to permanent insurance, provided D. available only as part of the business uses
he’s insurable, within a specified period of life insurance
B. convert it to permanent insurance without
proof of insurability, within a specified period 17. Which of the following policies could be
C. convert it to permanent insurance at his expected to have the lowest premium?
original age, without proof of A. 15-pay endowment at age 65
insurability, within a specified period B. 20-pay life
D. not convert it to permanent insurance C. 30-pay life
but may convert it to term insurance on an D. Whole life
individual basis
18. To be valid, a contract must be between
12. A life insurance policy is a unilateral contract individuals considered legally able to enter
because into an agreement. This principle is known as
A. only the insured is bound to live up to his A. legal purpose
side of the agreement B. offer and acceptance
B. only the insurance company is bound to live C. competent parties
up to its side of the agreement D. a contract of utmost good faith
C. either party may default on the agreement
D. neither party may default on the agreement 19. When a group plan is contributory, what
percentage of employees must want and
13. To what does the statement “spreading the be willing to pay for coverage?
result of financial loss created by an A. 50%
individual’s death among many persons so the B. 75%
cost for each individual is small” refer? C. 100%
A. The principle of mortality D. The percentage depends on the size of
B. The principle of life insurance the group.
C. The principle of indemnity
D. The principle of risk
14. The Lucrative Lozenge Company provides a
$5,000 monthly income to retirees who served as
, 26. Warren and Wilma have a joint life policy.
Warren dies, and the policy pays nothing. Later
20. A rollover refers to which of the following? on, Wilma dies and the policy death benefit is
A. A transfer of funds from one IRA to another paid to the beneficiary. This is called a
B. Change from a standard to a substandard risk A. limited pay life policy
C. Contributions made by employees to a B. convertible term policy
group life policy C. variable life policy
D. Taxation of withdrawals from a D. survivorship, or second-to-die, policy
modified endowment contract
27. The number of years excluded from the conversion
21. Which of the following possibilities would privilege on a convertible term policy
be considered a speculative risk? A. is 3 years
A. The painting you bought might be a long- B. is 5 years
lost masterpiece. C. varies among insurance companies
B. Your house will burn down. D. there is no exclusion
C. You will die young.
D. You will contract cancer. 28. Which of the following situations most likely
calls for the purchase of term insurance?
22. Nonfinancial regulatory activities are known as A. Tanya plans to retire at age 59 with
A. insurance conduct enough income to travel abroad.
B. insurance competition B. George has 2 years of medical school to
C. market conduct complete. He and his wife have 1 child.
D. market competition C. Leonard is 42 years old and owns a
thriving business. He is married, with 2
23. A Taft-Hartley Trust is established by one teenaged children.
or more D. Marge, widowed, has 1 married son, age 30.
A. employers in the same or related field
B. employers in unrelated fields 29. When a producer is made aware of an
C. employees working for the same employer insured’s death, the first task is to
D. labor unions or associations A. comfort the family
B. provide financial counseling
24. The cash value accumulation in a life insurance C. contact the beneficiary
policy D. notify the insurance company
A. cannot be used until the policy matures
B. can be used for loans or later as 30. The primary purpose of a Section
retirement income 303 redemption is
C. is always so small that the policyowner A. liquidation of an estate’s assets to
can do very little with it provide income for survivors
D. is taxed as income to the policyowner as B. to provide income for a businessowner
it accumulates at retirement
C. to provide liquidity to pay estate taxes
25. The type of policy that can be changed from one and administration and funeral costs
that does not accumulate cash values to one that D. to enable a businessowner to redeem
does is a shares in payment of debts on a tax-
A. renewable term policy advantaged basis
B. convertible term policy
C. whole life policy
D. level term policy
Life, Accident, and Health Insurance Practice Exam 3
Practice Exam
1. Which is the proper term for a company 5. The money paid by the insured to the insurance
owned by its policyowners? company for insurance protection is called the
A. A stock insurance company A. consideration
B. A mutual insurance company B. dividend
C. A legal insurance company C. benefit
D. A fraternal insurance company D. assignment
2. A certificate of insurance 6. The difference between a customer and a
A. is issued to the employer to list which consumer under the Gramm-Leach-Bliley Act
employees are covered by the group plan is that
B. is issued to each individual covered by A. a customer is a policyholder, whereas
the group life insurance a consumer is an applicant
C. contains all policy information except the B. a consumer is a policyholder, whereas
amount of protection and the beneficiary a customer is an applicant
D. is not considered valid proof of coverage C. a customer has an ongoing relationship with
the insurer, whereas a consumer does not
3. Al purchases an estate builder (jumping D. a consumer has an ongoing relationship
juvenile) policy for his 5-year-old son, Donald. with the insurer, whereas a customer
When Donald reaches age 21, his father does not
presents him with the policy as a gift. Which
of the following statements is NOT correct? 7. An insured allows a permanent policy to
A. Donald does not have to continue to make lapse. Unless otherwise instructed, the
the premium payments to keep the policy in insurance company
force. A. is entitled to keep any accumulated
B. The premium will continue to be based on cash values
Donald’s original age of 5. B. may use the cash value to purchase a
C. Donald has enjoyed protection against the reduced amount of permanent insurance
problems of premature death. C. will automatically send the cash values
D. The face value of Donald’s policy of the policy to the policyowner
has increased by 5 times. D. will automatically institute the extended
term option
4. Mortality figures are normally developed
by studying and interpreting statistics 8. Which of the following statements about the
A. from small groups of people over 10- average number of people who die each year
year periods is TRUE?
B. developed from the deaths of millions A. It is called the mortality rate.
of persons over long periods B. It cannot be predicted with any accuracy.
C. gathered by interviewing many persons C. It cannot be used to determine insurance
in selected cities across the nation rates.
D. obtained by surveys of insured persons D. It is the principal factor in risk selection.
1
,2 Life, Accident, and Health Insurance Practice Exam senior executives. This benefit is not available to
other retirees of the company. This is an
9. Money taken out of a modified example of a
endowment contract (MEC) A. profit-sharing plan
A. will result in the policy being voided B. qualified retirement plan
B. is always received income-tax free C. nonqualified plan
C. is considered to be a return of premium D. defined contribution plan
D. may be subject to unfavorable tax rules
15. In a universal life policy, the two adjustments
10. Ed has a $50,000 policy with cash values of usually made to the cash value account are
$10,000. A $2,000 loan is outstanding, as is a A. guaranteed interest and current interest are
past-due premium of $1,000. Ed finds he can no credited
longer make premium payments on this policy. B. premium and excess interest are charged
If Ed chooses the cash surrender value option, C. guaranteed interest is charged and
he will receive premium is credited
A. $7,000 D. cost of insurance protection is charged
B. $8,000 and current interest is credited
C. $9,000
D. $10,000 16. Loan values and retirement income are
A. called the living benefits of life insurance
11. George, who has a group policy, may, B. available from all life insurance policies
upon leaving his place of employment C. available only from term policies
A. convert it to permanent insurance, provided D. available only as part of the business uses
he’s insurable, within a specified period of life insurance
B. convert it to permanent insurance without
proof of insurability, within a specified period 17. Which of the following policies could be
C. convert it to permanent insurance at his expected to have the lowest premium?
original age, without proof of A. 15-pay endowment at age 65
insurability, within a specified period B. 20-pay life
D. not convert it to permanent insurance C. 30-pay life
but may convert it to term insurance on an D. Whole life
individual basis
18. To be valid, a contract must be between
12. A life insurance policy is a unilateral contract individuals considered legally able to enter
because into an agreement. This principle is known as
A. only the insured is bound to live up to his A. legal purpose
side of the agreement B. offer and acceptance
B. only the insurance company is bound to live C. competent parties
up to its side of the agreement D. a contract of utmost good faith
C. either party may default on the agreement
D. neither party may default on the agreement 19. When a group plan is contributory, what
percentage of employees must want and
13. To what does the statement “spreading the be willing to pay for coverage?
result of financial loss created by an A. 50%
individual’s death among many persons so the B. 75%
cost for each individual is small” refer? C. 100%
A. The principle of mortality D. The percentage depends on the size of
B. The principle of life insurance the group.
C. The principle of indemnity
D. The principle of risk
14. The Lucrative Lozenge Company provides a
$5,000 monthly income to retirees who served as
, 26. Warren and Wilma have a joint life policy.
Warren dies, and the policy pays nothing. Later
20. A rollover refers to which of the following? on, Wilma dies and the policy death benefit is
A. A transfer of funds from one IRA to another paid to the beneficiary. This is called a
B. Change from a standard to a substandard risk A. limited pay life policy
C. Contributions made by employees to a B. convertible term policy
group life policy C. variable life policy
D. Taxation of withdrawals from a D. survivorship, or second-to-die, policy
modified endowment contract
27. The number of years excluded from the conversion
21. Which of the following possibilities would privilege on a convertible term policy
be considered a speculative risk? A. is 3 years
A. The painting you bought might be a long- B. is 5 years
lost masterpiece. C. varies among insurance companies
B. Your house will burn down. D. there is no exclusion
C. You will die young.
D. You will contract cancer. 28. Which of the following situations most likely
calls for the purchase of term insurance?
22. Nonfinancial regulatory activities are known as A. Tanya plans to retire at age 59 with
A. insurance conduct enough income to travel abroad.
B. insurance competition B. George has 2 years of medical school to
C. market conduct complete. He and his wife have 1 child.
D. market competition C. Leonard is 42 years old and owns a
thriving business. He is married, with 2
23. A Taft-Hartley Trust is established by one teenaged children.
or more D. Marge, widowed, has 1 married son, age 30.
A. employers in the same or related field
B. employers in unrelated fields 29. When a producer is made aware of an
C. employees working for the same employer insured’s death, the first task is to
D. labor unions or associations A. comfort the family
B. provide financial counseling
24. The cash value accumulation in a life insurance C. contact the beneficiary
policy D. notify the insurance company
A. cannot be used until the policy matures
B. can be used for loans or later as 30. The primary purpose of a Section
retirement income 303 redemption is
C. is always so small that the policyowner A. liquidation of an estate’s assets to
can do very little with it provide income for survivors
D. is taxed as income to the policyowner as B. to provide income for a businessowner
it accumulates at retirement
C. to provide liquidity to pay estate taxes
25. The type of policy that can be changed from one and administration and funeral costs
that does not accumulate cash values to one that D. to enable a businessowner to redeem
does is a shares in payment of debts on a tax-
A. renewable term policy advantaged basis
B. convertible term policy
C. whole life policy
D. level term policy
Life, Accident, and Health Insurance Practice Exam 3
