Virginia Life & Health Insurance Licensing –
Practice Exam 2026
(Original Practice Questions – Not Actual State/PSI
Items)
Instructions:
Each question has one best answer.
The correct answer is shown in bold.
Rationale is provided in italics after each question.
Section 1: Insurance Concepts & Policy Provisions (1–25)
1. Which of the following best describes the principle of indemnity in insurance?
A. The insured should profit from a loss
B. The insured should be restored to approximately the same financial position as before the
loss
C. The insurer should profit from premiums
D. The agent should profit from commissions
Answer: B
Rationale: Indemnity means the insured is made whole, not better off, after a covered loss.
2. In a life insurance policy, the incontestability clause typically prevents the insurer from
contesting the policy after it has been in force for how many years?
A. 1 year
B. 2 years
C. 5 years
D. 10 years
Answer: B
Rationale: Most life policies become incontestable after 2 years, except for fraud or certain
exceptions.
3. Which rider allows the policyowner to purchase additional coverage at specified future dates
without evidence of insurability?
A. Waiver of premium rider
B. Guaranteed insurability rider
, C. Accidental death benefit rider
D. Payor benefit rider
Answer: B
Rationale: The guaranteed insurability rider permits buying more coverage at set times without
new underwriting.
4. The grace period in a life insurance policy is primarily designed to:
A. Allow the insurer to cancel the policy at any time
B. Prevent the policy from lapsing immediately if a premium is missed
C. Increase the cash value automatically
D. Waive all premiums permanently
Answer: B
Rationale: The grace period (often 30–31 days) keeps coverage in force despite a late premium.
5. Which settlement option provides income for a specified period, after which payments stop
regardless of whether the beneficiary is alive?
A. Life income option
B. Fixed period option
C. Lump sum
D. Interest only
Answer: B
Rationale: The fixed period option pays for a set time, then stops.
6. A policyowner assigns a life insurance policy as collateral for a loan. This is an example of:
A. Absolute assignment
B. Collateral assignment
C. Beneficiary change
D. Policy surrender
Answer: B
Rationale: Collateral assignment uses the policy as security while retaining ownership rights.
7. Which of the following is a characteristic of term life insurance?
A. Builds cash value over time
B. Provides coverage for a specified period with no cash value
C. Guarantees lifetime coverage
D. Always level premium for life
Answer: B
Rationale: Term insurance provides pure death benefit protection for a set term with no cash
value.
8. The suicide clause in a life insurance policy typically excludes coverage for death by suicide
within how many years from issue?
A. 6 months
, B. 1 year
C. 2 years
D. 5 years
Answer: C
Rationale: Most policies exclude suicide within the first 2 years.
9. Which of the following best describes a participating life insurance policy?
A. Pays dividends that are guaranteed
B. Pays dividends that are not guaranteed and represent a return of excess premium
C. Has no cash value
D. Is always term insurance
Answer: B
Rationale: Participating policies may pay non-guaranteed dividends from favorable experience.
10. A life insurance policy’s cash value grows on a tax-deferred basis. This means:
A. Taxes are paid annually on growth
B. Taxes are deferred until withdrawal or surrender, subject to rules
C. No taxes are ever due
D. Taxes are paid only by the insurer
Answer: B
Rationale: Cash value growth is tax-deferred; taxes may be due upon withdrawal/surrender.
11. Which provision allows the policyowner to reinstate a lapsed policy within a certain period,
subject to conditions?
A. Incontestability clause
B. Reinstatement provision
C. Grace period
D. Nonforfeiture option
Answer: B
Rationale: Reinstatement permits restoring a lapsed policy if requirements are met.
12. The entire contract clause in a life insurance policy states that:
A. Only the policy document is the contract
B. The policy and attached application constitute the entire contract
C. Oral statements by the agent are part of the contract
D. The insurer can change terms at any time
Answer: B
Rationale: The entire contract includes the policy and application; prevents reliance on outside
statements.
13. Which of the following is a nonforfeiture option?
A. Paid-up additions
B. Cash surrender
Practice Exam 2026
(Original Practice Questions – Not Actual State/PSI
Items)
Instructions:
Each question has one best answer.
The correct answer is shown in bold.
Rationale is provided in italics after each question.
Section 1: Insurance Concepts & Policy Provisions (1–25)
1. Which of the following best describes the principle of indemnity in insurance?
A. The insured should profit from a loss
B. The insured should be restored to approximately the same financial position as before the
loss
C. The insurer should profit from premiums
D. The agent should profit from commissions
Answer: B
Rationale: Indemnity means the insured is made whole, not better off, after a covered loss.
2. In a life insurance policy, the incontestability clause typically prevents the insurer from
contesting the policy after it has been in force for how many years?
A. 1 year
B. 2 years
C. 5 years
D. 10 years
Answer: B
Rationale: Most life policies become incontestable after 2 years, except for fraud or certain
exceptions.
3. Which rider allows the policyowner to purchase additional coverage at specified future dates
without evidence of insurability?
A. Waiver of premium rider
B. Guaranteed insurability rider
, C. Accidental death benefit rider
D. Payor benefit rider
Answer: B
Rationale: The guaranteed insurability rider permits buying more coverage at set times without
new underwriting.
4. The grace period in a life insurance policy is primarily designed to:
A. Allow the insurer to cancel the policy at any time
B. Prevent the policy from lapsing immediately if a premium is missed
C. Increase the cash value automatically
D. Waive all premiums permanently
Answer: B
Rationale: The grace period (often 30–31 days) keeps coverage in force despite a late premium.
5. Which settlement option provides income for a specified period, after which payments stop
regardless of whether the beneficiary is alive?
A. Life income option
B. Fixed period option
C. Lump sum
D. Interest only
Answer: B
Rationale: The fixed period option pays for a set time, then stops.
6. A policyowner assigns a life insurance policy as collateral for a loan. This is an example of:
A. Absolute assignment
B. Collateral assignment
C. Beneficiary change
D. Policy surrender
Answer: B
Rationale: Collateral assignment uses the policy as security while retaining ownership rights.
7. Which of the following is a characteristic of term life insurance?
A. Builds cash value over time
B. Provides coverage for a specified period with no cash value
C. Guarantees lifetime coverage
D. Always level premium for life
Answer: B
Rationale: Term insurance provides pure death benefit protection for a set term with no cash
value.
8. The suicide clause in a life insurance policy typically excludes coverage for death by suicide
within how many years from issue?
A. 6 months
, B. 1 year
C. 2 years
D. 5 years
Answer: C
Rationale: Most policies exclude suicide within the first 2 years.
9. Which of the following best describes a participating life insurance policy?
A. Pays dividends that are guaranteed
B. Pays dividends that are not guaranteed and represent a return of excess premium
C. Has no cash value
D. Is always term insurance
Answer: B
Rationale: Participating policies may pay non-guaranteed dividends from favorable experience.
10. A life insurance policy’s cash value grows on a tax-deferred basis. This means:
A. Taxes are paid annually on growth
B. Taxes are deferred until withdrawal or surrender, subject to rules
C. No taxes are ever due
D. Taxes are paid only by the insurer
Answer: B
Rationale: Cash value growth is tax-deferred; taxes may be due upon withdrawal/surrender.
11. Which provision allows the policyowner to reinstate a lapsed policy within a certain period,
subject to conditions?
A. Incontestability clause
B. Reinstatement provision
C. Grace period
D. Nonforfeiture option
Answer: B
Rationale: Reinstatement permits restoring a lapsed policy if requirements are met.
12. The entire contract clause in a life insurance policy states that:
A. Only the policy document is the contract
B. The policy and attached application constitute the entire contract
C. Oral statements by the agent are part of the contract
D. The insurer can change terms at any time
Answer: B
Rationale: The entire contract includes the policy and application; prevents reliance on outside
statements.
13. Which of the following is a nonforfeiture option?
A. Paid-up additions
B. Cash surrender
