LIFE INSURANCE EXAM 7 ACTUAL TEST PAPER
2026 QUESTIONS WITH SOLUTIONS GRADED
A+
◉ Law of Large Numbers. Answer: The larger the number of risks
insured in the same risk pool; the more predictable losses become.
◉ Peril. Answer: An immediate, specific event that causes a loss.
◉ Loss. Answer: An unintended, unforeseen reduction, or
destruction of financial or economic value.
◉ Hazard. Answer: Creates an increased possibility that a peril (a
cause of a loss) will actually occur.
◉ Occurrence. Answer: Is any event that causes a loss.
◉ Risk. Answer: Risk is defined as thepotential or uncertainty for
loss.
◉ Speculative risk. Answer: A situation in which either profit or loss
is possible, not insured.
,◉ Industrial life insurance. Answer: Issues very small face amounts,
such as $1,000 or $2,000. Premiums are paid weekly and collected
by debit agents. They were designed for burial coverage.
◉ Ordinary life insurance. Answer: Life insurance of commercial
companies not issued on the weekly premium basis. It is made up of
several types of individual life insurance, such as temporary (term),
permanent (whole).
◉ Group life insurance. Answer: Insurance written for members of a
group, such as a place of employment, association, or a union.
Coverage is provided to the members of that group under one
master contract. The group is underwritten as a whole, not on each
individual member. One of the benefits of group life coverage is
usually there is no evidence of insurability required.
◉ Term life insurance. Answer: Life insurance that pays a death
benefit if the policyholder dies within a specific time period but has
no remaining value at the end of this time.
◉ Whole life insurance. Answer: Sometimes called straight life
insurance or ordinary life insurance; can provide lifetime insurance
coverage; in this case, fixed premiums are paid for life; pays interest
on the cash value portion with a guaranteed minimum interest rate
during life of the contract.
,◉ Joint survivor or last survivor life policies. Answer: Cover the lives
of two individuals and saves on premium costs by averaging the ages
of the two insureds. Joint Life Survivor or Last Survivor policies only
pay the death benefit upon the death of the last insured person. For
example, say B and M purchase a joint life survivor policy. If B were
to die first and then M died 10 years later, no benefits would be paid
out from the policy until M died. A Joint Life and Survivor policy
covers two lives but only pays benefits after the death of the last
insured.
◉ Family maintenance policy. Answer: Pays a monthly income from
the date of death of the insured to the end of the preselected period.
◉ Family income policy. Answer: Combines Whole Life insurance
with a Decreasing Term
Rider also written on the same person.
◉ Adjustable life policy. Answer: Whole life insurance policy, but you
can change your policy as your needs change. You can change your
premium payments to increase or decrease coverage.
◉ Universal life insurance policy. Answer: Incorporates flexible
premiums and an adjustable death benefit. The investment gains
from a Universal Life Policy usually go toward the cash value. The
policy owner can use the cash value to manipulate the flexible
, aspects of a universal life insurance policy. A customer who wants a
policy that gives them the most options and the most control would
be looking for a Universal Life Policy. Universal policies use gains to
fund the cash value and give the policy owner options for flexible
premiums and adjustable death benefits.
◉ Variable Life Insurance. Answer: Life insurance in which the
benefits are a function of the returns being generated on the
investments selected by the policyholder.
◉ Equity index universal life insurance. Answer: Combines most of
the features, benefits, and security of traditional life insurance with
the potential of earned interest based on the upward movement of
an equity index.
◉ Cash value. Answer: The equity amount or "savings" accumulation
in a whole life policy.
◉ Endowment policy. Answer: Is a contract providing for payment of
the face amount at the end of a fixed period, at a specified age of the
insured, or at the insured's death before the end of the stated period.
◉ Face amount plus cash value policy. Answer: Contract that
promises to pay at the insured's death the face amount of the policy
plus a sum equal to the policy's cash value.
2026 QUESTIONS WITH SOLUTIONS GRADED
A+
◉ Law of Large Numbers. Answer: The larger the number of risks
insured in the same risk pool; the more predictable losses become.
◉ Peril. Answer: An immediate, specific event that causes a loss.
◉ Loss. Answer: An unintended, unforeseen reduction, or
destruction of financial or economic value.
◉ Hazard. Answer: Creates an increased possibility that a peril (a
cause of a loss) will actually occur.
◉ Occurrence. Answer: Is any event that causes a loss.
◉ Risk. Answer: Risk is defined as thepotential or uncertainty for
loss.
◉ Speculative risk. Answer: A situation in which either profit or loss
is possible, not insured.
,◉ Industrial life insurance. Answer: Issues very small face amounts,
such as $1,000 or $2,000. Premiums are paid weekly and collected
by debit agents. They were designed for burial coverage.
◉ Ordinary life insurance. Answer: Life insurance of commercial
companies not issued on the weekly premium basis. It is made up of
several types of individual life insurance, such as temporary (term),
permanent (whole).
◉ Group life insurance. Answer: Insurance written for members of a
group, such as a place of employment, association, or a union.
Coverage is provided to the members of that group under one
master contract. The group is underwritten as a whole, not on each
individual member. One of the benefits of group life coverage is
usually there is no evidence of insurability required.
◉ Term life insurance. Answer: Life insurance that pays a death
benefit if the policyholder dies within a specific time period but has
no remaining value at the end of this time.
◉ Whole life insurance. Answer: Sometimes called straight life
insurance or ordinary life insurance; can provide lifetime insurance
coverage; in this case, fixed premiums are paid for life; pays interest
on the cash value portion with a guaranteed minimum interest rate
during life of the contract.
,◉ Joint survivor or last survivor life policies. Answer: Cover the lives
of two individuals and saves on premium costs by averaging the ages
of the two insureds. Joint Life Survivor or Last Survivor policies only
pay the death benefit upon the death of the last insured person. For
example, say B and M purchase a joint life survivor policy. If B were
to die first and then M died 10 years later, no benefits would be paid
out from the policy until M died. A Joint Life and Survivor policy
covers two lives but only pays benefits after the death of the last
insured.
◉ Family maintenance policy. Answer: Pays a monthly income from
the date of death of the insured to the end of the preselected period.
◉ Family income policy. Answer: Combines Whole Life insurance
with a Decreasing Term
Rider also written on the same person.
◉ Adjustable life policy. Answer: Whole life insurance policy, but you
can change your policy as your needs change. You can change your
premium payments to increase or decrease coverage.
◉ Universal life insurance policy. Answer: Incorporates flexible
premiums and an adjustable death benefit. The investment gains
from a Universal Life Policy usually go toward the cash value. The
policy owner can use the cash value to manipulate the flexible
, aspects of a universal life insurance policy. A customer who wants a
policy that gives them the most options and the most control would
be looking for a Universal Life Policy. Universal policies use gains to
fund the cash value and give the policy owner options for flexible
premiums and adjustable death benefits.
◉ Variable Life Insurance. Answer: Life insurance in which the
benefits are a function of the returns being generated on the
investments selected by the policyholder.
◉ Equity index universal life insurance. Answer: Combines most of
the features, benefits, and security of traditional life insurance with
the potential of earned interest based on the upward movement of
an equity index.
◉ Cash value. Answer: The equity amount or "savings" accumulation
in a whole life policy.
◉ Endowment policy. Answer: Is a contract providing for payment of
the face amount at the end of a fixed period, at a specified age of the
insured, or at the insured's death before the end of the stated period.
◉ Face amount plus cash value policy. Answer: Contract that
promises to pay at the insured's death the face amount of the policy
plus a sum equal to the policy's cash value.
