PEARSON VUE HEALTH INSURANCE EXAM ACTUAL EXAM 2026 | ALL QUESTIONS AND
CORRECT ANSWERS | VERIFIED ANSWERS | JUST RELEASED
Question 1
P wants to name her husband as the beneficiary of her life policy. However, she wishes to retain
all of the rights of ownership. P should have her husband named as the:
A) Irrevocable beneficiary
B) Revocable beneficiary
C) Secondary beneficiary
D) Tertiary beneficiary
E) Contingent beneficiary
Correct Answer: B) revocable beneficiary
Rationale: A revocable beneficiary designation allows the policyowner to change the
beneficiary at any time without the beneficiary's consent. This ensures the policyowner
retains all ownership rights, including the right to surrender the policy or take out a loan.
An irrevocable beneficiary, by contrast, would require the beneficiary's written consent for
such changes.
Question 2
A contract that has as its basic function the systematic liquidation of accumulated assets through
periodic payments is called an:
A) Indemnity contract
B) Investment contract
C) Endowment
D) Annuity
E) Whole life policy
Correct Answer: D) annuity
Rationale: An annuity is designed to protect against the risk of outliving one's money. While
life insurance creates an estate, an annuity provides for the systematic liquidation of a
principal sum over a period of time, such as for the remainder of the annuitant's life.
Question 3
An insurance producer takes an application for a life insurance policy but does not collect the
initial premium. On delivery of the policy to the proposed insured, the producer must collect the
initial premium and which of the following?
A) A copy of the MIB report
B) The insured's signed statement of continued good health
C) A copy of the conditional receipt
D) A copy of the temporary insurance agreement
E) A new application
Correct Answer: B) The insured's signed statement of continued good health
Rationale: If the premium is not paid at the time of application, the policy is not in force
until it is delivered and the premium is paid. Because time has passed since the initial
, 2
application and medical exam, the insurer requires a statement of continued good health to
ensure the risk has not changed significantly.
Question 4
An employer can deduct premium payments as an ordinary business expense for which of the
following life coverages?
A) Buy and Sell Agreements
B) Group Life
C) Key Employee
D) Joint Life, if the business is the beneficiary
E) Corporate-owned Whole Life
Correct Answer: B) Group
Rationale: Premiums paid by an employer for Group Life insurance are generally tax-
deductible as a business expense. In contrast, premiums for Key Employee or Buy-Sell
insurance where the business is the beneficiary are not tax-deductible.
Question 5
A producer takes applications from identical twins who want to buy the same type of policy in
the same amount. The insurer issues the policies as applied for, but charges a 25 percent higher
premium for one of the policies. The difference in premiums is probably due to which of the
following factors?
A) Incontestability
B) Insurable interest
C) Consideration
D) Risk classification
E) Morbidity tables
Correct Answer: D) Risk classification
Rationale: Underwriting involves classifying risks. Even identical twins may have different
health histories, occupations, or lifestyles (e.g., smoking vs. non-smoking). If one is
classified as a "standard" risk and the other as "substandard," their premiums will differ
based on those classifications.
Question 6
In the event of an insured's death, which of the following provides an income for the family
during a designated period of time followed by a lump sum death benefit?
A) Family Income rider
B) Survivorship Life policy
C) Joint Life policy
D) Modified Life policy
E) Variable Annuity
Correct Answer: A) Family Income rider
, 3
Rationale: A Family Income rider uses decreasing term insurance combined with a
permanent policy. It provides a monthly income to the family for a set period starting from
the date of policy issue, and then pays the face amount of the permanent policy as a lump
sum at the end of that period.
Question 7
Which of the following statements is CORRECT about Group Life conversion privileges?
A) Under COBRA, a departing employee may remain in the Group Life plan indefinitely.
B) Death during the conversion period is covered even if the departing employee chose not to
convert the policy.
C) A departing employee must pay the employer the premium to remain covered.
D) The insurer must offer Term insurance as the only conversion choice.
E) Conversion is only allowed if the employee provides proof of insurability.
Correct Answer: B) Death during the conversion period is covered even if the departing
employee chose not to convert the policy.
Rationale: Group life policies typically have a 31-day conversion period. If the insured dies
during this window, the death benefit is paid automatically, regardless of whether the
individual had started the conversion process yet.
Question 8
Which of the following policies is an interest-sensitive form of permanent protection?
A) Universal Life
B) Limited-Pay Life
C) Graded Premium Whole Life
D) Modified Whole Life
E) Level Term
Correct Answer: A) Universal Life
Rationale: Universal Life is considered interest-sensitive because the cash value is credited
with a current interest rate that can fluctuate based on market conditions, though it usually
has a guaranteed minimum rate.
Question 9
Reinstatement of a life insurance policy requires an insured to take all of the following actions
EXCEPT:
A) Provide evidence of insurability
B) Make collateral assignment to the insurer
C) Pay back interest on any outstanding policy loan
D) Pay all past-due premiums
E) Complete the reinstatement application within the specific time limit (usually 3 years)
Correct Answer: B) make collateral assignment to the insurer
Rationale: Reinstatement aims to put the original policy back in force. This requires paying
, 4
back premiums and interest and proving insurability. Collateral assignment is a method
used to secure a debt using the policy as security and is not a requirement for
reinstatement.
Question 10
Which of the following statements about a Renewable Term policy is CORRECT?
A) It is renewable at the option of the insurer.
B) It is renewable at the option of the insured.
C) It is renewable at the option of the insurer, with proof of insurability.
D) It is renewable at the option of the insured, with proof of insurability.
E) It can only be renewed for a maximum of five years.
Correct Answer: B) It is renewable at the option of the insured.
Rationale: A "Renewable" feature allows the policyowner to renew the coverage at the end
of the term without providing evidence of insurability. This is an option that belongs to the
insured/policyowner, not the insurer.
Question 11
If an insured commits suicide after the Suicide clause in the insured's life insurance policy has
expired, the insurer will take which of the following actions?
A) Refuse to pay the Death benefit or refund any premiums
B) Refund only the premiums paid
C) Refund the premiums paid plus interest
D) Pay the Death benefit
E) Pay only 50% of the face amount
Correct Answer: D) Pay the Death benefit
Rationale: The Suicide clause typically lasts for two years. If the insured commits suicide
within those two years, the insurer only refunds premiums. If the suicide occurs after the
period has expired, the insurer must pay the full death benefit.
Question 12
Which of the following policy provisions provides for continuation of coverage despite
nonpayment of premiums?
A) Entire Contract
B) Ownership clause
C) Nonforfeiture Option
D) Insuring clause
E) Reinstatement clause
Correct Answer: C) Nonforfeiture Option
Rationale: Nonforfeiture options (like Extended Term or Reduced Paid-Up) use the cash
value of a permanent policy to keep some form of insurance in force if the policyowner
CORRECT ANSWERS | VERIFIED ANSWERS | JUST RELEASED
Question 1
P wants to name her husband as the beneficiary of her life policy. However, she wishes to retain
all of the rights of ownership. P should have her husband named as the:
A) Irrevocable beneficiary
B) Revocable beneficiary
C) Secondary beneficiary
D) Tertiary beneficiary
E) Contingent beneficiary
Correct Answer: B) revocable beneficiary
Rationale: A revocable beneficiary designation allows the policyowner to change the
beneficiary at any time without the beneficiary's consent. This ensures the policyowner
retains all ownership rights, including the right to surrender the policy or take out a loan.
An irrevocable beneficiary, by contrast, would require the beneficiary's written consent for
such changes.
Question 2
A contract that has as its basic function the systematic liquidation of accumulated assets through
periodic payments is called an:
A) Indemnity contract
B) Investment contract
C) Endowment
D) Annuity
E) Whole life policy
Correct Answer: D) annuity
Rationale: An annuity is designed to protect against the risk of outliving one's money. While
life insurance creates an estate, an annuity provides for the systematic liquidation of a
principal sum over a period of time, such as for the remainder of the annuitant's life.
Question 3
An insurance producer takes an application for a life insurance policy but does not collect the
initial premium. On delivery of the policy to the proposed insured, the producer must collect the
initial premium and which of the following?
A) A copy of the MIB report
B) The insured's signed statement of continued good health
C) A copy of the conditional receipt
D) A copy of the temporary insurance agreement
E) A new application
Correct Answer: B) The insured's signed statement of continued good health
Rationale: If the premium is not paid at the time of application, the policy is not in force
until it is delivered and the premium is paid. Because time has passed since the initial
, 2
application and medical exam, the insurer requires a statement of continued good health to
ensure the risk has not changed significantly.
Question 4
An employer can deduct premium payments as an ordinary business expense for which of the
following life coverages?
A) Buy and Sell Agreements
B) Group Life
C) Key Employee
D) Joint Life, if the business is the beneficiary
E) Corporate-owned Whole Life
Correct Answer: B) Group
Rationale: Premiums paid by an employer for Group Life insurance are generally tax-
deductible as a business expense. In contrast, premiums for Key Employee or Buy-Sell
insurance where the business is the beneficiary are not tax-deductible.
Question 5
A producer takes applications from identical twins who want to buy the same type of policy in
the same amount. The insurer issues the policies as applied for, but charges a 25 percent higher
premium for one of the policies. The difference in premiums is probably due to which of the
following factors?
A) Incontestability
B) Insurable interest
C) Consideration
D) Risk classification
E) Morbidity tables
Correct Answer: D) Risk classification
Rationale: Underwriting involves classifying risks. Even identical twins may have different
health histories, occupations, or lifestyles (e.g., smoking vs. non-smoking). If one is
classified as a "standard" risk and the other as "substandard," their premiums will differ
based on those classifications.
Question 6
In the event of an insured's death, which of the following provides an income for the family
during a designated period of time followed by a lump sum death benefit?
A) Family Income rider
B) Survivorship Life policy
C) Joint Life policy
D) Modified Life policy
E) Variable Annuity
Correct Answer: A) Family Income rider
, 3
Rationale: A Family Income rider uses decreasing term insurance combined with a
permanent policy. It provides a monthly income to the family for a set period starting from
the date of policy issue, and then pays the face amount of the permanent policy as a lump
sum at the end of that period.
Question 7
Which of the following statements is CORRECT about Group Life conversion privileges?
A) Under COBRA, a departing employee may remain in the Group Life plan indefinitely.
B) Death during the conversion period is covered even if the departing employee chose not to
convert the policy.
C) A departing employee must pay the employer the premium to remain covered.
D) The insurer must offer Term insurance as the only conversion choice.
E) Conversion is only allowed if the employee provides proof of insurability.
Correct Answer: B) Death during the conversion period is covered even if the departing
employee chose not to convert the policy.
Rationale: Group life policies typically have a 31-day conversion period. If the insured dies
during this window, the death benefit is paid automatically, regardless of whether the
individual had started the conversion process yet.
Question 8
Which of the following policies is an interest-sensitive form of permanent protection?
A) Universal Life
B) Limited-Pay Life
C) Graded Premium Whole Life
D) Modified Whole Life
E) Level Term
Correct Answer: A) Universal Life
Rationale: Universal Life is considered interest-sensitive because the cash value is credited
with a current interest rate that can fluctuate based on market conditions, though it usually
has a guaranteed minimum rate.
Question 9
Reinstatement of a life insurance policy requires an insured to take all of the following actions
EXCEPT:
A) Provide evidence of insurability
B) Make collateral assignment to the insurer
C) Pay back interest on any outstanding policy loan
D) Pay all past-due premiums
E) Complete the reinstatement application within the specific time limit (usually 3 years)
Correct Answer: B) make collateral assignment to the insurer
Rationale: Reinstatement aims to put the original policy back in force. This requires paying
, 4
back premiums and interest and proving insurability. Collateral assignment is a method
used to secure a debt using the policy as security and is not a requirement for
reinstatement.
Question 10
Which of the following statements about a Renewable Term policy is CORRECT?
A) It is renewable at the option of the insurer.
B) It is renewable at the option of the insured.
C) It is renewable at the option of the insurer, with proof of insurability.
D) It is renewable at the option of the insured, with proof of insurability.
E) It can only be renewed for a maximum of five years.
Correct Answer: B) It is renewable at the option of the insured.
Rationale: A "Renewable" feature allows the policyowner to renew the coverage at the end
of the term without providing evidence of insurability. This is an option that belongs to the
insured/policyowner, not the insurer.
Question 11
If an insured commits suicide after the Suicide clause in the insured's life insurance policy has
expired, the insurer will take which of the following actions?
A) Refuse to pay the Death benefit or refund any premiums
B) Refund only the premiums paid
C) Refund the premiums paid plus interest
D) Pay the Death benefit
E) Pay only 50% of the face amount
Correct Answer: D) Pay the Death benefit
Rationale: The Suicide clause typically lasts for two years. If the insured commits suicide
within those two years, the insurer only refunds premiums. If the suicide occurs after the
period has expired, the insurer must pay the full death benefit.
Question 12
Which of the following policy provisions provides for continuation of coverage despite
nonpayment of premiums?
A) Entire Contract
B) Ownership clause
C) Nonforfeiture Option
D) Insuring clause
E) Reinstatement clause
Correct Answer: C) Nonforfeiture Option
Rationale: Nonforfeiture options (like Extended Term or Reduced Paid-Up) use the cash
value of a permanent policy to keep some form of insurance in force if the policyowner
