100%
Complete Life, Accident, and Health
Insurance Exam Prep Manual 2025
An example of a tax-qualified retirement plan would be a(n)
A. Equity compensation plan
B. Executive index plan
C. 1035 exchange plan
D. Defined contribution plan
Rationale: Defined contribution plans (like 401(k)s) qualify for tax-deferred treatment. The
other plans are nonqualified or exchange provisions, not retirement plans.
Which of these factors is NOT taken into consideration when determining the cost of a long-term
care policy?
A. Health of applicant
B. Amount of benefits provided
C. Age of applicant
D. Personal income
Rationale: Premiums are based on age, health, and coverage, not personal income level.
A professional liability for which producers can be sued for mistakes of putting a policy into
effect is called
A. Fiduciary bond
B. Fiduciary trust
C. Errors and oversights
D. Errors and omissions
Rationale: E&O insurance protects agents from negligence in the sale or servicing of insurance
policies.
Legal purpose is a term used in contract law meaning
A. There must be an offer and acceptance
B. The contract must be aleatory
C. There must be legal reasons for entering into the contract
D. The contract must be a contract of adhesion
Rationale: A valid contract requires a lawful purpose; illegal intent voids enforceability.
The legal action provision in a health contract is limited to no more than
A. 2 years
B. 3 years
C. 4 years
D. 5 years
Rationale: Health policyholders have up to five years to take legal action after proof of loss
submission.
,100%
An insurance applicant with a below-average likelihood of loss is typically considered to be a
A. Subpar risk
B. Declined risk
C. Standard risk
D. Preferred risk
Rationale: Preferred risks present less danger of loss and qualify for lower premiums.
A disability income policy can prevent an insured from earning a higher income while disabled
by using
A. Elimination periods
B. Probationary periods
C. Deductibles
D. Benefit limits
Rationale: Benefit limits cap disability payments to discourage malingering or profit from
disability.
Consumer privacy regulations permit the release of an insured’s financial information when
A. The media requests it
B. The insured’s employer asks
C. An authorized agency makes a written request during a fraud investigation
D. The agent needs it for marketing
Rationale: Financial information may only be released when required by law, such as fraud
inquiries.
The open enrollment period for Medicare Part B is
A. October 15–December 7
B. January 1 through March 31
C. April 1–June 30
D. December 1–31
Rationale: Medicare Part B open enrollment occurs each year from January 1 to March 31.
In Michigan, legal action can be taken for up to
A. 1 year
B. 2 years
C. 3 years
D. 5 years
Rationale: Michigan law allows up to three years to bring action for unpaid health insurance
claims.
Which of the following describes a person NOT acceptable at standard rates because of health,
occupation, or hobbies?
A. Standard risk
B. Declined risk
C. Preferred risk
D. Substandard risk
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Rationale: Substandard applicants represent higher-than-average risk, leading to rated premiums
or denials.
A life insurance policyowner does NOT have the right to
A. Name a beneficiary
B. Receive dividends
C. Revoke an absolute assignment
D. Take policy loans
Rationale: Once assignment is absolute, ownership is permanently transferred and cannot be
revoked.
A provision allowing withdrawal of a policy’s cash value interest free is
A. Automatic premium loan
B. Policy loan
C. Partial surrender
D. Accelerated benefit
Rationale: A partial surrender lets the owner access cash value without loan interest.
Which of the following increases the probability of an insured’s loss?
A. Peril
B. Hazard
C. Exposure
D. Risk
Rationale: Hazards are conditions that raise the chance of loss, like smoking or icy roads.
Which life policy pays the face amount if the insured survives the policy term?
A. Term life
B. Whole life
C. Endowment policy
D. Universal life
Rationale: Endowments mature at the end of a period, paying if the insured is still alive.
How many employees must an employer have for COBRA eligibility?
A. 10
B. 15
C. 20
D. 50
Rationale: COBRA continuation coverage applies to employers with 20 or more workers.
The authority granted to a licensed producer is provided via the
A. Contract law
B. Law of Agency
C. Administrative code
D. Fiduciary duty
Rationale: The Law of Agency defines the relationship and authority between producer and
insurer.
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Which action is REQUIRED by a producer replacing an existing life policy?
A. Collect a service fee
B. Submit a list of policies to be replaced to the new insurer
C. Destroy the old policy
D. Notify the policy’s beneficiary
Rationale: Producers must submit a replacement list to ensure compliance and disclosure.
An individual avoiding stock investments to eliminate loss is practicing
A. Risk retention
B. Risk transfer
C. Risk sharing
D. Risk avoidance
Rationale: Avoidance removes exposure entirely by refusing participation in risk-related
activities.
Ron’s $100,000 policy has a cost-of-living rider and CPI rises 4%. How much may he increase
the face value?
A. $400
B. $1,000
C. $4,000
D. $40,000
Rationale: Cost-of-living riders allow proportional increases based on CPI changes.
To be eligible for small employer coverage, an employee must work a minimum of
A. 10 hours weekly
B. 25 hours weekly
C. 40 hours weekly
D. 17.5 hours weekly
Rationale: Michigan defines small group eligibility at 17.5 or more hours per week.
A life insurance application in Michigan may be backdated up to
A. 3 months
B. 6 months
C. 9 months
D. 12 months
Rationale: Backdating up to six months may lower age and premiums.
The policy paying on the death of the last person is
A. Joint life
B. Family plan
C. Survivorship life
D. Convertible term
Rationale: Survivorship (second-to-die) policies pay only after the last insured’s death.
Which provides Medicare supplement policies?
A. Federal government
Complete Life, Accident, and Health
Insurance Exam Prep Manual 2025
An example of a tax-qualified retirement plan would be a(n)
A. Equity compensation plan
B. Executive index plan
C. 1035 exchange plan
D. Defined contribution plan
Rationale: Defined contribution plans (like 401(k)s) qualify for tax-deferred treatment. The
other plans are nonqualified or exchange provisions, not retirement plans.
Which of these factors is NOT taken into consideration when determining the cost of a long-term
care policy?
A. Health of applicant
B. Amount of benefits provided
C. Age of applicant
D. Personal income
Rationale: Premiums are based on age, health, and coverage, not personal income level.
A professional liability for which producers can be sued for mistakes of putting a policy into
effect is called
A. Fiduciary bond
B. Fiduciary trust
C. Errors and oversights
D. Errors and omissions
Rationale: E&O insurance protects agents from negligence in the sale or servicing of insurance
policies.
Legal purpose is a term used in contract law meaning
A. There must be an offer and acceptance
B. The contract must be aleatory
C. There must be legal reasons for entering into the contract
D. The contract must be a contract of adhesion
Rationale: A valid contract requires a lawful purpose; illegal intent voids enforceability.
The legal action provision in a health contract is limited to no more than
A. 2 years
B. 3 years
C. 4 years
D. 5 years
Rationale: Health policyholders have up to five years to take legal action after proof of loss
submission.
,100%
An insurance applicant with a below-average likelihood of loss is typically considered to be a
A. Subpar risk
B. Declined risk
C. Standard risk
D. Preferred risk
Rationale: Preferred risks present less danger of loss and qualify for lower premiums.
A disability income policy can prevent an insured from earning a higher income while disabled
by using
A. Elimination periods
B. Probationary periods
C. Deductibles
D. Benefit limits
Rationale: Benefit limits cap disability payments to discourage malingering or profit from
disability.
Consumer privacy regulations permit the release of an insured’s financial information when
A. The media requests it
B. The insured’s employer asks
C. An authorized agency makes a written request during a fraud investigation
D. The agent needs it for marketing
Rationale: Financial information may only be released when required by law, such as fraud
inquiries.
The open enrollment period for Medicare Part B is
A. October 15–December 7
B. January 1 through March 31
C. April 1–June 30
D. December 1–31
Rationale: Medicare Part B open enrollment occurs each year from January 1 to March 31.
In Michigan, legal action can be taken for up to
A. 1 year
B. 2 years
C. 3 years
D. 5 years
Rationale: Michigan law allows up to three years to bring action for unpaid health insurance
claims.
Which of the following describes a person NOT acceptable at standard rates because of health,
occupation, or hobbies?
A. Standard risk
B. Declined risk
C. Preferred risk
D. Substandard risk
,100%
Rationale: Substandard applicants represent higher-than-average risk, leading to rated premiums
or denials.
A life insurance policyowner does NOT have the right to
A. Name a beneficiary
B. Receive dividends
C. Revoke an absolute assignment
D. Take policy loans
Rationale: Once assignment is absolute, ownership is permanently transferred and cannot be
revoked.
A provision allowing withdrawal of a policy’s cash value interest free is
A. Automatic premium loan
B. Policy loan
C. Partial surrender
D. Accelerated benefit
Rationale: A partial surrender lets the owner access cash value without loan interest.
Which of the following increases the probability of an insured’s loss?
A. Peril
B. Hazard
C. Exposure
D. Risk
Rationale: Hazards are conditions that raise the chance of loss, like smoking or icy roads.
Which life policy pays the face amount if the insured survives the policy term?
A. Term life
B. Whole life
C. Endowment policy
D. Universal life
Rationale: Endowments mature at the end of a period, paying if the insured is still alive.
How many employees must an employer have for COBRA eligibility?
A. 10
B. 15
C. 20
D. 50
Rationale: COBRA continuation coverage applies to employers with 20 or more workers.
The authority granted to a licensed producer is provided via the
A. Contract law
B. Law of Agency
C. Administrative code
D. Fiduciary duty
Rationale: The Law of Agency defines the relationship and authority between producer and
insurer.
, 100%
Which action is REQUIRED by a producer replacing an existing life policy?
A. Collect a service fee
B. Submit a list of policies to be replaced to the new insurer
C. Destroy the old policy
D. Notify the policy’s beneficiary
Rationale: Producers must submit a replacement list to ensure compliance and disclosure.
An individual avoiding stock investments to eliminate loss is practicing
A. Risk retention
B. Risk transfer
C. Risk sharing
D. Risk avoidance
Rationale: Avoidance removes exposure entirely by refusing participation in risk-related
activities.
Ron’s $100,000 policy has a cost-of-living rider and CPI rises 4%. How much may he increase
the face value?
A. $400
B. $1,000
C. $4,000
D. $40,000
Rationale: Cost-of-living riders allow proportional increases based on CPI changes.
To be eligible for small employer coverage, an employee must work a minimum of
A. 10 hours weekly
B. 25 hours weekly
C. 40 hours weekly
D. 17.5 hours weekly
Rationale: Michigan defines small group eligibility at 17.5 or more hours per week.
A life insurance application in Michigan may be backdated up to
A. 3 months
B. 6 months
C. 9 months
D. 12 months
Rationale: Backdating up to six months may lower age and premiums.
The policy paying on the death of the last person is
A. Joint life
B. Family plan
C. Survivorship life
D. Convertible term
Rationale: Survivorship (second-to-die) policies pay only after the last insured’s death.
Which provides Medicare supplement policies?
A. Federal government
