CA LIFE AND HEALTH INSURANCE EXAM 3 LATEST
VERSIONS (VERSION A, B AND C) ACTUAL EXAM 350
QUESTIONS AND CORRECT DETAILED ANSWERS
California Life & Health Insurance Exam 3 – Questions 1–200 with Explanations
1. Types of Life Insurance
1. Which type of life insurance provides coverage for a specified term and pays a death benefit
only if the insured dies during that term?
A. Whole life
B. Term life
C. Universal life
D. Variable life
Answer-: B
Explanation: Term life insurance provides coverage for a fixed period (e.g., 10, 20, or 30 years).
It pays a death benefit only if death occurs within that term. It does not accumulate cash value.
2. Whole life insurance:
A. Has a fixed premium and builds cash value
B. Provides temporary coverage
C. Offers only investment growth
D. Is renewable annually
Answer-: A
Explanation: Whole life policies have fixed premiums, a guaranteed death benefit, and a cash
value component that grows over time.
,3. Universal life insurance allows:
A. Flexible premiums and adjustable death benefit
B. Only fixed premiums
C. Term coverage only
D. No cash value accumulation
Answer-: A
Explanation: Universal life policies allow the policyholder to vary premium payments and adjust
the death benefit within certain limits. Cash value accumulates based on interest credited by
the insurer.
4. Variable life insurance differs from whole life because:
A. Policyholder directs investment of cash value
B. Premiums are fixed only
C. Death benefit cannot increase
D. No cash value
Answer-: A
Explanation: Variable life allows the policyholder to invest the cash value in separate accounts,
which can affect the death benefit and cash value depending on investment performance.
5. Which life insurance policy typically has the lowest initial premium?
A. Whole life
B. Term life
C. Universal life
D. Variable life
Answer-: B
Explanation: Term life insurance generally has the lowest premiums because it provides
coverage only for a set period without cash value accumulation.
2. Health Insurance Principles
6. The purpose of coinsurance is:
A. Share risk between insured and insurer
B. Provide tax benefits
C. Eliminate deductibles
D. Guarantee unlimited coverage
,Answer-: A
Explanation: Coinsurance requires the insured to pay a percentage of covered medical
expenses, encouraging responsible use and sharing risk with the insurer.
7. A deductible in health insurance is:
A. Amount paid by the insured before the insurer pays
B. Maximum out-of-pocket limit
C. Premium for coverage
D. A benefit paid at death
Answer-: A
Explanation: A deductible is the initial amount the insured must pay before insurance coverage
begins. It reduces small claims and administrative costs for the insurer.
8. Copayment differs from coinsurance because:
A. It is a fixed fee per service
B. It is a percentage of cost
C. It applies only to prescriptions
D. It is refundable
Answer-: A
Explanation: A copayment is a fixed dollar amount paid by the insured for each service (e.g.,
$20 per doctor visit). Coinsurance is a percentage of the claim.
9. Which plan allows insureds to choose any provider but has higher out-of-pocket costs?
A. HMO
B. PPO
C. POS
D. EPO
Answer-: B
Explanation: PPOs provide flexibility to see any provider, but patients pay higher out-of-pocket
costs for out-of-network care. HMOs require in-network providers.
10. Group health insurance is usually:
A. Less expensive than individual coverage
B. More expensive
, C. Taxable income
D. Non-renewable
Answer-: A
Explanation: Group plans are less expensive because risk is pooled among many individuals,
administrative costs are lower, and the employer often subsidizes premiums.
3. Policy Provisions & Contract Law
11. The grace period in life insurance:
A. Allows the insured to pay premiums late without policy lapse
B. Extends coverage beyond term
C. Eliminates death benefit
D. Is not required
Answer-: A
Explanation: The grace period (typically 30–31 days) allows late payment of premiums while
keeping the policy in force.
12. In a life insurance policy, the incontestability clause:
A. Limits the insurer’s right to contest after 2 years
B. Eliminates premiums
C. Cancels coverage after 1 year
D. Allows contest anytime
Answer-: A
Explanation: After the incontestability period (usually 2 years), the insurer cannot void the
policy due to misstatements on the application, except in cases of fraud.
13. An assignment of a life insurance policy means:
A. Transfer of ownership rights
B. Change of beneficiary
C. Policy lapse
D. Increase in death benefit
Answer-: A
Explanation: Policy assignment transfers ownership rights to another party, which can be
collateral or absolute.
VERSIONS (VERSION A, B AND C) ACTUAL EXAM 350
QUESTIONS AND CORRECT DETAILED ANSWERS
California Life & Health Insurance Exam 3 – Questions 1–200 with Explanations
1. Types of Life Insurance
1. Which type of life insurance provides coverage for a specified term and pays a death benefit
only if the insured dies during that term?
A. Whole life
B. Term life
C. Universal life
D. Variable life
Answer-: B
Explanation: Term life insurance provides coverage for a fixed period (e.g., 10, 20, or 30 years).
It pays a death benefit only if death occurs within that term. It does not accumulate cash value.
2. Whole life insurance:
A. Has a fixed premium and builds cash value
B. Provides temporary coverage
C. Offers only investment growth
D. Is renewable annually
Answer-: A
Explanation: Whole life policies have fixed premiums, a guaranteed death benefit, and a cash
value component that grows over time.
,3. Universal life insurance allows:
A. Flexible premiums and adjustable death benefit
B. Only fixed premiums
C. Term coverage only
D. No cash value accumulation
Answer-: A
Explanation: Universal life policies allow the policyholder to vary premium payments and adjust
the death benefit within certain limits. Cash value accumulates based on interest credited by
the insurer.
4. Variable life insurance differs from whole life because:
A. Policyholder directs investment of cash value
B. Premiums are fixed only
C. Death benefit cannot increase
D. No cash value
Answer-: A
Explanation: Variable life allows the policyholder to invest the cash value in separate accounts,
which can affect the death benefit and cash value depending on investment performance.
5. Which life insurance policy typically has the lowest initial premium?
A. Whole life
B. Term life
C. Universal life
D. Variable life
Answer-: B
Explanation: Term life insurance generally has the lowest premiums because it provides
coverage only for a set period without cash value accumulation.
2. Health Insurance Principles
6. The purpose of coinsurance is:
A. Share risk between insured and insurer
B. Provide tax benefits
C. Eliminate deductibles
D. Guarantee unlimited coverage
,Answer-: A
Explanation: Coinsurance requires the insured to pay a percentage of covered medical
expenses, encouraging responsible use and sharing risk with the insurer.
7. A deductible in health insurance is:
A. Amount paid by the insured before the insurer pays
B. Maximum out-of-pocket limit
C. Premium for coverage
D. A benefit paid at death
Answer-: A
Explanation: A deductible is the initial amount the insured must pay before insurance coverage
begins. It reduces small claims and administrative costs for the insurer.
8. Copayment differs from coinsurance because:
A. It is a fixed fee per service
B. It is a percentage of cost
C. It applies only to prescriptions
D. It is refundable
Answer-: A
Explanation: A copayment is a fixed dollar amount paid by the insured for each service (e.g.,
$20 per doctor visit). Coinsurance is a percentage of the claim.
9. Which plan allows insureds to choose any provider but has higher out-of-pocket costs?
A. HMO
B. PPO
C. POS
D. EPO
Answer-: B
Explanation: PPOs provide flexibility to see any provider, but patients pay higher out-of-pocket
costs for out-of-network care. HMOs require in-network providers.
10. Group health insurance is usually:
A. Less expensive than individual coverage
B. More expensive
, C. Taxable income
D. Non-renewable
Answer-: A
Explanation: Group plans are less expensive because risk is pooled among many individuals,
administrative costs are lower, and the employer often subsidizes premiums.
3. Policy Provisions & Contract Law
11. The grace period in life insurance:
A. Allows the insured to pay premiums late without policy lapse
B. Extends coverage beyond term
C. Eliminates death benefit
D. Is not required
Answer-: A
Explanation: The grace period (typically 30–31 days) allows late payment of premiums while
keeping the policy in force.
12. In a life insurance policy, the incontestability clause:
A. Limits the insurer’s right to contest after 2 years
B. Eliminates premiums
C. Cancels coverage after 1 year
D. Allows contest anytime
Answer-: A
Explanation: After the incontestability period (usually 2 years), the insurer cannot void the
policy due to misstatements on the application, except in cases of fraud.
13. An assignment of a life insurance policy means:
A. Transfer of ownership rights
B. Change of beneficiary
C. Policy lapse
D. Increase in death benefit
Answer-: A
Explanation: Policy assignment transfers ownership rights to another party, which can be
collateral or absolute.
