KENTUCKY LIFE INSURANCE RELIABLE EXAM QUESTIONS
WITH ANSWERS GRADED A+ 2025/2026
Modified Endowment Contract (MEC) - TAMRA: All single premium policies, any policy
that does not satisfy the 7-pay test // money taken from the policy is taxed as ordinary
income // if policy owner is younger than 59 1/2 and not disabled 10% penalty is
assigned
Joint Life Policies - First-to-die, contract comes to an end at the first death, no further
insurance protection for the other person or persons covered by the policy
Survivorship Policies - Second-to-die, covers 2 lives and guarantees payment only
when second insured dies
Adjustable Life Policies - Policyholder can adjust face amount of policy,
amount/frequency of premium payments, period of insurance protection
Universal Life Insurance - Flexible premium, adjustable death benefits, accumulates
cash values: earlier models have front-end load, later models have back end load.
Insurance costs are debited and guaranteed and excess interest are credited.
Universal Life Death Benefit Option A - Level death benefit throughout life of policy (can
be increased with proof of insurability, can also be reduced.)
Universal Life Death Benefit Option B - Increasing death benefit made up of the policy
face value plus cash value account
Risk Corridor - The minimum separation between the cash value and death benefit.
Partial Withdrawal - Permanent deduction of the cash value and cannot be reversed, no
interest credited or paid, repayment treated as premium payment
Cash Value of ULP $0 - Contract expires, policy goes into grace period,
Variable Life - Securities based, whole life, NASD registration required, separate
account holds assets, fluctuating death benefit but never below a guaranteed minimum
(face amount of policy,) but no guaranteed CV, traditionally a fixed premium
Variable Universal Life - Flexible premiums, choice of death benefits (A or B,) NASD
registration required, separate account holds assets, fluctuating death benefit but never
below a guaranteed minimum (face amount of policy,) but no guaranteed CV
Indeterminate Premium Policies - Low current premium for first 3 years, premium is
adjusted at end of 3 year duration based on investment return, mortality, and expenses,
which can result in increase or decrease of premium (within a stated maximum)
,Level Term Insurance - Term insurance where the face value of policy remains the
same from the date the policy is issued until the date the policy expires.
Decreasing Term - A type of life insurance that features a level premium and a death
benefit that decreases each year over the duration of the policy.
Convertible Term Insurance - Term to Permanent, no requirement of proof of
insurability, most people convert at attained age to avoid paying back premiums, time-
limit varies by policy
Renewable Term - Insurance which can, at the election of the policyowner, be renewed
at the end of a term attained age without evidence of insurability within a time limit
(commonly 30 days)
Interim Term - Interim term coverage provides instantaneous coverage and is intended
for people who plan on purchasing permanent life insurance coverage within one year,
no proof of insurability, at attained age, built in time limit
Family Income Policies - Income is paid upon death of family breadwinner, combination
of permanent and decreasing term coverage, children are added without additional
premium and can convert at specified age without proof of insurability. Benefit duration
lasts not starting from death but from when policy was purchased.
Family Maintenance Policies - Combination of level term and permanent policies,
income provided starting from insured's death
Jumping Juvenile Policy - Purchased by parent, the child reaches age 21, coverage
increases to five times the face amount, premiums remain the same and no evidence of
insurability is required.
Industrial Life Insurance - A type of insurance in which the policies are sold in small
amounts and an agent of the company collects the premiums at the insured's home
usually monthly or weekly (by home service companies)
Monthly Debit Ordinary Policy - Higher premium amounts but paid monthly and
collected at policyowner's home or by mail or bank account
Annuities - A fixed sum of money paid to someone each year, typically for the rest of
their life.
Annuitant - The person who receives the payments from an annuity
Beneficiary - Receives any survivor benefits payable under the annuity on the death of
the annuitant
, Fixed Annuity - Specifies a fixed, guaranteed minimum rate of interest paid on the
principle amount invested in the annuity, taxes are deferred during accumulation period
Variable Annuity - Offers a variable, nonguaranteed rate of interest, taxes are deferred
during accumulation period
Fixed Payout - For a fixed annuity, the cash value accumulation at the beginning of the
annuity period is simply annuitized—that is, the accumulation is converted into a stream
of periodic payments. The result is a fixed dollar amount payout that remains the same
for the rest of the contract.
Nonforfeiture Options - Three options available by law to policyowners that enable them
to recover a policy's cash-value upon surrender of that policy. (1) Cash (2) Reduced
Paid-Up Insurance (3) Extended Term Insurance
Immediate Annuities - - Can only be funded using the Single Premium payment method
- First income payment is made one payout interval from the date of annuity purchase
- Typically designed to provide income immediately upon retirement
- In exchange for a lump sum premium the company pays them a monthly income for
the rest of their life.
Deferred Annuities - - Can be funded through either the single premium payment or
through periodic premium payments
- Begin payout at sometime in the future
Single Premium Annuity - An Annuity purchased with one lump-sum payment, generally
with after tax dollars, annuity is paid in a set amount in period
Level Premium Annuity - Annuitant agrees to make monthly payments in level amounts
into the annuity during the accumulation period.
Flexible Premium - A policy feature that allows the policyholder to vary premium
payments in the amount and/or timing.
Premium Determination - Annuitant's age
Annuitant's sex
Assumed interest rate
Income amount and payment guarantee
Loading for company expenses
Accumulation Units - A variable annuity contract owner's interest in the separate
account prior to annuitization, bought by the net purchase payment
Annuity Unit - The number of annuity units denotes the share of the funds an annuitant
will receive from a variable annuity account after the accumulation period ends and
WITH ANSWERS GRADED A+ 2025/2026
Modified Endowment Contract (MEC) - TAMRA: All single premium policies, any policy
that does not satisfy the 7-pay test // money taken from the policy is taxed as ordinary
income // if policy owner is younger than 59 1/2 and not disabled 10% penalty is
assigned
Joint Life Policies - First-to-die, contract comes to an end at the first death, no further
insurance protection for the other person or persons covered by the policy
Survivorship Policies - Second-to-die, covers 2 lives and guarantees payment only
when second insured dies
Adjustable Life Policies - Policyholder can adjust face amount of policy,
amount/frequency of premium payments, period of insurance protection
Universal Life Insurance - Flexible premium, adjustable death benefits, accumulates
cash values: earlier models have front-end load, later models have back end load.
Insurance costs are debited and guaranteed and excess interest are credited.
Universal Life Death Benefit Option A - Level death benefit throughout life of policy (can
be increased with proof of insurability, can also be reduced.)
Universal Life Death Benefit Option B - Increasing death benefit made up of the policy
face value plus cash value account
Risk Corridor - The minimum separation between the cash value and death benefit.
Partial Withdrawal - Permanent deduction of the cash value and cannot be reversed, no
interest credited or paid, repayment treated as premium payment
Cash Value of ULP $0 - Contract expires, policy goes into grace period,
Variable Life - Securities based, whole life, NASD registration required, separate
account holds assets, fluctuating death benefit but never below a guaranteed minimum
(face amount of policy,) but no guaranteed CV, traditionally a fixed premium
Variable Universal Life - Flexible premiums, choice of death benefits (A or B,) NASD
registration required, separate account holds assets, fluctuating death benefit but never
below a guaranteed minimum (face amount of policy,) but no guaranteed CV
Indeterminate Premium Policies - Low current premium for first 3 years, premium is
adjusted at end of 3 year duration based on investment return, mortality, and expenses,
which can result in increase or decrease of premium (within a stated maximum)
,Level Term Insurance - Term insurance where the face value of policy remains the
same from the date the policy is issued until the date the policy expires.
Decreasing Term - A type of life insurance that features a level premium and a death
benefit that decreases each year over the duration of the policy.
Convertible Term Insurance - Term to Permanent, no requirement of proof of
insurability, most people convert at attained age to avoid paying back premiums, time-
limit varies by policy
Renewable Term - Insurance which can, at the election of the policyowner, be renewed
at the end of a term attained age without evidence of insurability within a time limit
(commonly 30 days)
Interim Term - Interim term coverage provides instantaneous coverage and is intended
for people who plan on purchasing permanent life insurance coverage within one year,
no proof of insurability, at attained age, built in time limit
Family Income Policies - Income is paid upon death of family breadwinner, combination
of permanent and decreasing term coverage, children are added without additional
premium and can convert at specified age without proof of insurability. Benefit duration
lasts not starting from death but from when policy was purchased.
Family Maintenance Policies - Combination of level term and permanent policies,
income provided starting from insured's death
Jumping Juvenile Policy - Purchased by parent, the child reaches age 21, coverage
increases to five times the face amount, premiums remain the same and no evidence of
insurability is required.
Industrial Life Insurance - A type of insurance in which the policies are sold in small
amounts and an agent of the company collects the premiums at the insured's home
usually monthly or weekly (by home service companies)
Monthly Debit Ordinary Policy - Higher premium amounts but paid monthly and
collected at policyowner's home or by mail or bank account
Annuities - A fixed sum of money paid to someone each year, typically for the rest of
their life.
Annuitant - The person who receives the payments from an annuity
Beneficiary - Receives any survivor benefits payable under the annuity on the death of
the annuitant
, Fixed Annuity - Specifies a fixed, guaranteed minimum rate of interest paid on the
principle amount invested in the annuity, taxes are deferred during accumulation period
Variable Annuity - Offers a variable, nonguaranteed rate of interest, taxes are deferred
during accumulation period
Fixed Payout - For a fixed annuity, the cash value accumulation at the beginning of the
annuity period is simply annuitized—that is, the accumulation is converted into a stream
of periodic payments. The result is a fixed dollar amount payout that remains the same
for the rest of the contract.
Nonforfeiture Options - Three options available by law to policyowners that enable them
to recover a policy's cash-value upon surrender of that policy. (1) Cash (2) Reduced
Paid-Up Insurance (3) Extended Term Insurance
Immediate Annuities - - Can only be funded using the Single Premium payment method
- First income payment is made one payout interval from the date of annuity purchase
- Typically designed to provide income immediately upon retirement
- In exchange for a lump sum premium the company pays them a monthly income for
the rest of their life.
Deferred Annuities - - Can be funded through either the single premium payment or
through periodic premium payments
- Begin payout at sometime in the future
Single Premium Annuity - An Annuity purchased with one lump-sum payment, generally
with after tax dollars, annuity is paid in a set amount in period
Level Premium Annuity - Annuitant agrees to make monthly payments in level amounts
into the annuity during the accumulation period.
Flexible Premium - A policy feature that allows the policyholder to vary premium
payments in the amount and/or timing.
Premium Determination - Annuitant's age
Annuitant's sex
Assumed interest rate
Income amount and payment guarantee
Loading for company expenses
Accumulation Units - A variable annuity contract owner's interest in the separate
account prior to annuitization, bought by the net purchase payment
Annuity Unit - The number of annuity units denotes the share of the funds an annuitant
will receive from a variable annuity account after the accumulation period ends and
