L&H Practice Test Questions with Answers
Assume that you are a Producer appointed by a Stock Company when you sell a Whole Life
policy to Margie. In this situation you would not be under any obligation to explain which of the
following to her?
a) Reduced Paid-Up
b) 10 Day Free Look
c) Accumulate at Interest
d) Extended Term ✔️✔️c) Accumulate at Interest
Since the policy pays no dividends, you would be under no obligation to explain Accumulate at
Interest (a Dividend Option).
A 75-year-old is the beneficiary of a $200,000 Variable Universal Life policy. Which Settlement
Option is least appropriate for this individual?
a) Straight Life Annuity
b) Fixed Period Annuity Certain
c) Fixed Amount Annuity Certain
d) Cash ✔️✔️a) Straight Life Annuity
A Straight Life Annuity stops all benefits when you die...most 75-year-olds are on borrowed
time already.
,What must be paid when an Annuity owner age 60 surrenders an Annuity for cash?
a) A tax
b) A 10% penalty
c) Both a tax and a 10% penalty
d) Neither a tax nor a 10% penalty ✔️✔️a) A tax
Always a tax on the interest earned. 10% penalty as well if you are younger than 59 1/2. No
penalty thereafter.
If a Variable Universal Life policy is deemed by the IRS to be a Modified Endowment Contract
(MEC), the policy:
a) Will lose some of its tax benefits
b) Will endow sooner
c) Will no longer guarantee dividends
d) Will not be taxed ✔️✔️a) Will lose some of its tax benefits
Once a policy is declared a MEC, any loan or withdrawal is subject to taxation as well as a 10%
tax penalty if the owner is younger than age 59 1/2.
In comparing a Whole Life policy to a Term policy, which is true?
a) Both mature in 2 ways
,b) Both can mature and both can expire
c) Both can mature and both can lapse
d) Both can expire and both can lapse ✔️✔️c) Both can mature and both can lapse
Both mature upon death, and both can lapse for nonpayment.
Under the Uniform Individual Health Policy Provisions law, which of the following is true
regarding the Grace Period Provision?
a) The premium mode determines the length of the Grace Period.
b) If the policy owner pays weekly, the Grace Period is 10 days.
c) Losses occurring during the Grace Period are not covered.
d) If the policy owner pays quarterly, the Grace Period is 10 days. ✔️✔️a) The premium mode
determines the length of the Grace Period.
Premium Mode = frequency of premium payment. Weekly = 7 days; Monthly =10 days; All
other = 31 days
Which provision of an individual Medical Expense policy dictates to whom benefits are paid?
a) Time of Payment of Claims
b) Claim Forms
c) Notice of Claim
, d) Payment of Claim ✔️✔️d) Payment of Claim
Payment of Claim = Who gets paid
How are Non-Qualified Annuity payouts taxed to the Annuitant?
a) All income benefits are received tax-free.
b) Taxes must be paid on all income benefits received.
c) Taxes must be paid on the interest earned as defined by the Exclusion ratio.
d) Non-Qualified Annuities are taxed identically to Qualified Annuities ✔️✔️c) Taxes must be
paid on the interest earned as defined by the Exclusion ratio.
The principal was paid in with after-tax dollars; therefore, those dollars coming out are not taxed
again. The interest earned, however, was tax-deferred; coming out, it is taxed. Sooooooo, if you
are being paid $4,000 each month, the IRS Exclusion ratio might indicate that $2,500 is not
taxable and that $1,500 is taxable
A Life insurance application is considered to be incomplete if it is missing which of the
following signatures?
a) An irrevocable beneficiary
b) An officer of the insurance company
c) The personal physician of the proposed insured
d) The proposed adult insured ✔️✔️d) The proposed adult insured
Assume that you are a Producer appointed by a Stock Company when you sell a Whole Life
policy to Margie. In this situation you would not be under any obligation to explain which of the
following to her?
a) Reduced Paid-Up
b) 10 Day Free Look
c) Accumulate at Interest
d) Extended Term ✔️✔️c) Accumulate at Interest
Since the policy pays no dividends, you would be under no obligation to explain Accumulate at
Interest (a Dividend Option).
A 75-year-old is the beneficiary of a $200,000 Variable Universal Life policy. Which Settlement
Option is least appropriate for this individual?
a) Straight Life Annuity
b) Fixed Period Annuity Certain
c) Fixed Amount Annuity Certain
d) Cash ✔️✔️a) Straight Life Annuity
A Straight Life Annuity stops all benefits when you die...most 75-year-olds are on borrowed
time already.
,What must be paid when an Annuity owner age 60 surrenders an Annuity for cash?
a) A tax
b) A 10% penalty
c) Both a tax and a 10% penalty
d) Neither a tax nor a 10% penalty ✔️✔️a) A tax
Always a tax on the interest earned. 10% penalty as well if you are younger than 59 1/2. No
penalty thereafter.
If a Variable Universal Life policy is deemed by the IRS to be a Modified Endowment Contract
(MEC), the policy:
a) Will lose some of its tax benefits
b) Will endow sooner
c) Will no longer guarantee dividends
d) Will not be taxed ✔️✔️a) Will lose some of its tax benefits
Once a policy is declared a MEC, any loan or withdrawal is subject to taxation as well as a 10%
tax penalty if the owner is younger than age 59 1/2.
In comparing a Whole Life policy to a Term policy, which is true?
a) Both mature in 2 ways
,b) Both can mature and both can expire
c) Both can mature and both can lapse
d) Both can expire and both can lapse ✔️✔️c) Both can mature and both can lapse
Both mature upon death, and both can lapse for nonpayment.
Under the Uniform Individual Health Policy Provisions law, which of the following is true
regarding the Grace Period Provision?
a) The premium mode determines the length of the Grace Period.
b) If the policy owner pays weekly, the Grace Period is 10 days.
c) Losses occurring during the Grace Period are not covered.
d) If the policy owner pays quarterly, the Grace Period is 10 days. ✔️✔️a) The premium mode
determines the length of the Grace Period.
Premium Mode = frequency of premium payment. Weekly = 7 days; Monthly =10 days; All
other = 31 days
Which provision of an individual Medical Expense policy dictates to whom benefits are paid?
a) Time of Payment of Claims
b) Claim Forms
c) Notice of Claim
, d) Payment of Claim ✔️✔️d) Payment of Claim
Payment of Claim = Who gets paid
How are Non-Qualified Annuity payouts taxed to the Annuitant?
a) All income benefits are received tax-free.
b) Taxes must be paid on all income benefits received.
c) Taxes must be paid on the interest earned as defined by the Exclusion ratio.
d) Non-Qualified Annuities are taxed identically to Qualified Annuities ✔️✔️c) Taxes must be
paid on the interest earned as defined by the Exclusion ratio.
The principal was paid in with after-tax dollars; therefore, those dollars coming out are not taxed
again. The interest earned, however, was tax-deferred; coming out, it is taxed. Sooooooo, if you
are being paid $4,000 each month, the IRS Exclusion ratio might indicate that $2,500 is not
taxable and that $1,500 is taxable
A Life insurance application is considered to be incomplete if it is missing which of the
following signatures?
a) An irrevocable beneficiary
b) An officer of the insurance company
c) The personal physician of the proposed insured
d) The proposed adult insured ✔️✔️d) The proposed adult insured
