IOWA INSURANCE EXAM - LIFE
EXAM QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES 2025
purpose of life insurance - CORRECT ANSWER -pay a death benefit to beneficiaries when
the insured dies
life insurance for personal use - CORRECT ANSWER -death benefit serves to replace the
insured's future loss income and pay expenses that occur upon death, living benefits
Group insurance vs. individual - CORRECT ANSWER --covers many non-related people
-less expensive per person
group insurance eligibility - CORRECT ANSWER --group cannot be formed for the express
purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - CORRECT ANSWER -covers one individual
ordinary life insurance - CORRECT ANSWER -face amounts grater than $25,000, premiums
are payable monthly, quarterly, semi annually, annually; includes every type of life insurance
and annuity product, flexible options
industrial life insurance - CORRECT ANSWER -"burial insurance", small face amounts 1000
or 2500 to 10,000; premiums paid frequently, no medical exam, agent meets personally with
policy owner to collect premium
,permanent life insurance - CORRECT ANSWER -provides life ins for the insured's entire life;
coverage is provided until insured dies or reaches 120 years old
True or false: Level premium of permanent life insurance - once the policy is issued
premiums remain level for the full duration of policy coverage - CORRECT ANSWER -true
Permanent life insurance accumulation element within the policy is __________
____________ - CORRECT ANSWER -cash value
Term life insurance - CORRECT ANSWER -coverage is temporary, time limit can be as short
as one year, as long as 20+ years or until the insured reaches a specific age (ex. 65). No cash
value, costs less than permanent life, premiums increase with age
Participating vs nonparticipating life insurance - CORRECT ANSWER -par - issued by mutual
ins co's, policyowner is eligible for policy dividends declared by the insurance co; dividends
are paid from insurers divisible surplus
non par - issued by stock ins co, no policy dividends
fixed life insurance - CORRECT ANSWER -insurer guarantees fixed death benefit and min
rate of return on policy's cash value, premiums are invested in co's general account
variable life insurance - CORRECT ANSWER -premiums are invested in investment sub
accounts managed by the insurer - guarantees min death benefit (face amount of policy);
cash values and death benefit raise and fall based on sub accounts investment
Regulation of Variable products - what do the Securities Exchange commission and financial
Industry Regulatory authority do? - CORRECT ANSWER -SEC - responsible for regulating the
securities that make up an insurer's separate account
FIRA - regulates producers who sell variable life products and companies that sell investment
products
, Actuary base life insurance premiums based on 3 things - CORRECT ANSWER -mortality,
interest, expenses
Interest factor - CORRECT ANSWER -added to premium calculations to recognize
investment earnings, used as credit - higher rate = lower premium
Expense factor - CORRECT ANSWER -worked into premium calculation to reflect costs that
insurer expects to incur (rent, commissions, benefits)
Premium Tax - CORRECT ANSWER -levied on insurance companies when they receive
premiums
Net Single premium - CORRECT ANSWER -uses factors of mortality and interest -
theoretical amount (excludes expense factor) that would be needed to fund the face amount
for the duration of the policy with single premium payment
Net level premium - CORRECT ANSWER -applying a factor to the net single premium,
spreads out premium for duration of premium paying period
Gross premium - CORRECT ANSWER -charged for the policy by adding the expense load to
the net single premium/net level premium
Level premium payment plan - CORRECT ANSWER -premium is fixed, remains over policy's
term
flexible premium plan - CORRECT ANSWER -policyowner can change the premium payment
amount after the first payment within range set by insurer, includes universal life insurance
and variable universal life insurance
Stranger - owned life insurance - CORRECT ANSWER -(stoli - aka investor-owned life
insurance) arrangement where investor or group convinces consumer to take out insurance
policy on his/her life in exchange for a lump sum payment
EXAM QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES 2025
purpose of life insurance - CORRECT ANSWER -pay a death benefit to beneficiaries when
the insured dies
life insurance for personal use - CORRECT ANSWER -death benefit serves to replace the
insured's future loss income and pay expenses that occur upon death, living benefits
Group insurance vs. individual - CORRECT ANSWER --covers many non-related people
-less expensive per person
group insurance eligibility - CORRECT ANSWER --group cannot be formed for the express
purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - CORRECT ANSWER -covers one individual
ordinary life insurance - CORRECT ANSWER -face amounts grater than $25,000, premiums
are payable monthly, quarterly, semi annually, annually; includes every type of life insurance
and annuity product, flexible options
industrial life insurance - CORRECT ANSWER -"burial insurance", small face amounts 1000
or 2500 to 10,000; premiums paid frequently, no medical exam, agent meets personally with
policy owner to collect premium
,permanent life insurance - CORRECT ANSWER -provides life ins for the insured's entire life;
coverage is provided until insured dies or reaches 120 years old
True or false: Level premium of permanent life insurance - once the policy is issued
premiums remain level for the full duration of policy coverage - CORRECT ANSWER -true
Permanent life insurance accumulation element within the policy is __________
____________ - CORRECT ANSWER -cash value
Term life insurance - CORRECT ANSWER -coverage is temporary, time limit can be as short
as one year, as long as 20+ years or until the insured reaches a specific age (ex. 65). No cash
value, costs less than permanent life, premiums increase with age
Participating vs nonparticipating life insurance - CORRECT ANSWER -par - issued by mutual
ins co's, policyowner is eligible for policy dividends declared by the insurance co; dividends
are paid from insurers divisible surplus
non par - issued by stock ins co, no policy dividends
fixed life insurance - CORRECT ANSWER -insurer guarantees fixed death benefit and min
rate of return on policy's cash value, premiums are invested in co's general account
variable life insurance - CORRECT ANSWER -premiums are invested in investment sub
accounts managed by the insurer - guarantees min death benefit (face amount of policy);
cash values and death benefit raise and fall based on sub accounts investment
Regulation of Variable products - what do the Securities Exchange commission and financial
Industry Regulatory authority do? - CORRECT ANSWER -SEC - responsible for regulating the
securities that make up an insurer's separate account
FIRA - regulates producers who sell variable life products and companies that sell investment
products
, Actuary base life insurance premiums based on 3 things - CORRECT ANSWER -mortality,
interest, expenses
Interest factor - CORRECT ANSWER -added to premium calculations to recognize
investment earnings, used as credit - higher rate = lower premium
Expense factor - CORRECT ANSWER -worked into premium calculation to reflect costs that
insurer expects to incur (rent, commissions, benefits)
Premium Tax - CORRECT ANSWER -levied on insurance companies when they receive
premiums
Net Single premium - CORRECT ANSWER -uses factors of mortality and interest -
theoretical amount (excludes expense factor) that would be needed to fund the face amount
for the duration of the policy with single premium payment
Net level premium - CORRECT ANSWER -applying a factor to the net single premium,
spreads out premium for duration of premium paying period
Gross premium - CORRECT ANSWER -charged for the policy by adding the expense load to
the net single premium/net level premium
Level premium payment plan - CORRECT ANSWER -premium is fixed, remains over policy's
term
flexible premium plan - CORRECT ANSWER -policyowner can change the premium payment
amount after the first payment within range set by insurer, includes universal life insurance
and variable universal life insurance
Stranger - owned life insurance - CORRECT ANSWER -(stoli - aka investor-owned life
insurance) arrangement where investor or group convinces consumer to take out insurance
policy on his/her life in exchange for a lump sum payment
