Life License Practice Test 02 EXAM
Questions with 100% correct answers
(Verified | Updated2025/2026 RATED A+
An insurance contract must contain all of the following to be considered legally binding EXCEPT -
CORRECT ANSWERS Beneficiary's consent. The four essential elements of all legal contracts are
offer and acceptance; consideration; competent parties; and legal purpose.
Equity indexed annuities - CORRECT ANSWERS Seek higher returns. Equity Indexed Annuities
are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed
annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate
that is actually credited is often tied to a familiar index like the Standard and Poor's 500.
What is the other term for the cash payment settlement option? - CORRECT ANSWERS Lump
sum. Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump
sum.
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that
should one of them die prematurely, the other would be financially able to buy the interest of the
deceased partner. What type of insurance policy may be used to fund this agreement? - CORRECT
ANSWERS Any form of life insurance. Any form of Life insurance may be used to fund a buy-sell
agreement.
J purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an
automobile accident. How much will his wife receive from the policy? - CORRECT ANSWERS
$100,000. In joint life policies, the death benefit is paid upon the first death only.
All of the following are personal uses of life insurance EXCEPT - CORRECT ANSWERS Estate
liquidation. Personal uses of life insurance include survivor protection, estate creation and conservation,
cash accumulation, and liquidity.
, Which of the following is an example of a limited-pay life policy? - CORRECT ANSWERS Life
Paid-up at Age 65. Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65.
The policy endows when the insured turns 100. It is the premium paying period that is limited, not the
maturity.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is
all the insurance that he can afford at this time, he wants to be sure that additional coverage will be
available in the future. Which of the following options should be included in the policy? - CORRECT
ANSWERS Guaranteed insurability option. The guaranteed insurability option allows the
insured to purchase specific amounts of additional insurance at specific times without proving
insurability.
Which is NOT true about beneficiary designations? - CORRECT ANSWERS The beneficiary must
have insurable interest in the insured. A beneficiary is the person or interest to whom the policy
proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable
interest in the policyholder.
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the
insured dies as a result of war or while serving in the military? - CORRECT ANSWERS Military
service or war. There are two different types of exclusions that may be used by life insurers that limit
the death benefit if the insured dies as a result of war or while serving in the military. The status clause
excludes all causes of death while the insured is on active duty in the military. The results clause only
excludes the death benefit if the insured is killed as a result of an act of war.
What is the name of the insured who enters into a viatical settlement? - CORRECT ANSWERS
Viator. Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical
settlement contract.
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10
years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never
changed the beneficiary, the policy proceeds will go to - CORRECT ANSWERS The insured's
estate. Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's
estate.
Questions with 100% correct answers
(Verified | Updated2025/2026 RATED A+
An insurance contract must contain all of the following to be considered legally binding EXCEPT -
CORRECT ANSWERS Beneficiary's consent. The four essential elements of all legal contracts are
offer and acceptance; consideration; competent parties; and legal purpose.
Equity indexed annuities - CORRECT ANSWERS Seek higher returns. Equity Indexed Annuities
are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed
annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate
that is actually credited is often tied to a familiar index like the Standard and Poor's 500.
What is the other term for the cash payment settlement option? - CORRECT ANSWERS Lump
sum. Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump
sum.
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that
should one of them die prematurely, the other would be financially able to buy the interest of the
deceased partner. What type of insurance policy may be used to fund this agreement? - CORRECT
ANSWERS Any form of life insurance. Any form of Life insurance may be used to fund a buy-sell
agreement.
J purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an
automobile accident. How much will his wife receive from the policy? - CORRECT ANSWERS
$100,000. In joint life policies, the death benefit is paid upon the first death only.
All of the following are personal uses of life insurance EXCEPT - CORRECT ANSWERS Estate
liquidation. Personal uses of life insurance include survivor protection, estate creation and conservation,
cash accumulation, and liquidity.
, Which of the following is an example of a limited-pay life policy? - CORRECT ANSWERS Life
Paid-up at Age 65. Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65.
The policy endows when the insured turns 100. It is the premium paying period that is limited, not the
maturity.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is
all the insurance that he can afford at this time, he wants to be sure that additional coverage will be
available in the future. Which of the following options should be included in the policy? - CORRECT
ANSWERS Guaranteed insurability option. The guaranteed insurability option allows the
insured to purchase specific amounts of additional insurance at specific times without proving
insurability.
Which is NOT true about beneficiary designations? - CORRECT ANSWERS The beneficiary must
have insurable interest in the insured. A beneficiary is the person or interest to whom the policy
proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable
interest in the policyholder.
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the
insured dies as a result of war or while serving in the military? - CORRECT ANSWERS Military
service or war. There are two different types of exclusions that may be used by life insurers that limit
the death benefit if the insured dies as a result of war or while serving in the military. The status clause
excludes all causes of death while the insured is on active duty in the military. The results clause only
excludes the death benefit if the insured is killed as a result of an act of war.
What is the name of the insured who enters into a viatical settlement? - CORRECT ANSWERS
Viator. Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical
settlement contract.
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10
years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never
changed the beneficiary, the policy proceeds will go to - CORRECT ANSWERS The insured's
estate. Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's
estate.
