100%
LAH Insurance Licensing Test Bank and
Study Resource 2025
All of the following statements regarding annuities are true EXCEPT
A) an annuity is classified as immediate or deferred, depending on when benefit payments begin
B) the annuitant is always the same person as the owner of the annuity
C) straight life annuities provide income as long as the annuitant lives
D) the surrender charge serves as a back-end load when the annuity is canceled in its early years
Rationale: The annuitant and owner can be different individuals (for example, a parent can own
an annuity on a child). The other statements are true regarding how annuities function and are
categorized.
Transferring total ownership of a life insurance policy may be accomplished in which of the
following ways?
A) Collateral assignment
B) Total surrender
C) Absolute assignment
D) Partial surrender
Rationale: Absolute assignment permanently transfers all ownership rights to another person.
Collateral assignment only transfers rights as security for a loan, while total and partial
surrenders deal with canceling or reducing the policy value.
A group life insurance plan is considered noncontributory when
A) the employee pays part or all of the premium for the plan
B) the service organization pays part of the premium
C) the employer pays all of the premium for the plan
D) the third-party administrator pays the premium for the plan
Rationale: “Noncontributory” means the employer pays 100% of the premium, while
“contributory” plans require employee contributions.
Which of the following types of life insurance policy was designed to combine the protection
features of traditional life insurance with the cash value growth potential of securities?
,100%
A) Term life
B) Universal life
C) Variable life
D) Whole life
Rationale: Variable life insurance links the policy’s cash value to investment accounts such as
mutual funds, allowing for potential growth and loss.
In an employer-paid group disability policy, if the employee becomes disabled and the benefit is
$2,000/month, which of the following is CORRECT?
A) Benefits are tax deductible to the employer.
B) Benefits are not taxable to the employee.
C) Benefits are taxable to employees.
D) Premiums are taxable to employer.
Rationale: When the employer pays the full premium, any benefits received by the employee are
taxable as income.
Group health insurance premiums paid by the employer are
A) sometimes tax deductible
B) partially tax deductible
C) not tax deductible
D) tax deductible as a business expense
Rationale: Employers may deduct health insurance premiums they pay for employees as a
legitimate business expense.
All of the following are required to sign an application for life insurance EXCEPT
A) the beneficiary
B) the applicant
C) the agent
D) the insured
Rationale: The beneficiary only receives policy proceeds and is not required to sign the
application.
Benefits received from a medical expense plan are
A) not taxable
,100%
B) fully taxable
C) taxable to the extent that they exceed premiums paid
D) taxable to the extent that they exceed the actual cost of medical care
Rationale: Medical expense benefits are generally not taxable because they are intended to
reimburse actual healthcare costs.
All of the following are ways in which insurers issue health insurance policies when an
impairment is indicated. Which is the most common approach used with disability income
policies?
A) Issuing the policy with a reduced-benefit amount
B) Issuing the policy with a reduced-benefit period
C) Issuing the policy with a longer elimination period
D) Issuing the policy with an exclusion rider
Rationale: A reduced-benefit amount is a standard way to manage higher-risk applicants while
still offering coverage.
Elimination (waiting) periods in disability income policies are designed to
A) help keep premium rates at a profitable level
B) last generally for 1 year
C) eliminate claims for long-term disabilities
D) specify a limited period of time at the start of disability when benefits are not payable
Rationale: The elimination period acts as a deductible in time form, delaying benefits to prevent
small or short-term claims.
To prevent the lapse of a whole life insurance policy at the end of the grace period, cash value
will be used by the insurer to pay the premium. This is called
A) extended term insurance
B) cash surrender within 30 days of the lapse
C) reduced paid-up insurance
D) automatic premium loan
Rationale: The automatic premium loan provision prevents unintentional lapse by using the
policy’s cash value to cover missed premiums.
, 100%
Information about an applicant's character, general reputation, personal habits, and lifestyle
would be included in
A) the attending physician's statement
B) the insurance application
C) the investigative consumer report
D) the MIB report
Rationale: Investigative consumer reports contain personal and lifestyle data gathered through
interviews and background checks.
With disability income insurance, an elimination (waiting) period may NOT be imposed when
the insured is disabled
A) while traveling
B) by sickness
C) while at work
D) by accidental injury
Rationale: Benefits for accidental injuries typically begin immediately, without a waiting
period.
Controlled business refers to
A) policies that are controlled by the insurer
B) policies that are vested with the writing agent or broker
C) insurance business written by an agent on himself or on a family member
D) insurance business that generates both commissions and renewals
Rationale: Controlled business means policies sold primarily to the agent’s family or associates
rather than the general public.
How are the premiums and benefits of individual life insurance taxed?
A) Deductibility of premiums, non-taxable death benefits
B) Deductibility of premiums, taxable death benefits
C) Non-deductibility of premiums, non-taxable death benefits
D) Non-deductibility of premiums, taxable death benefits
Rationale: Life insurance premiums are not tax-deductible, but the death benefit is received
income tax–free by the beneficiary.
LAH Insurance Licensing Test Bank and
Study Resource 2025
All of the following statements regarding annuities are true EXCEPT
A) an annuity is classified as immediate or deferred, depending on when benefit payments begin
B) the annuitant is always the same person as the owner of the annuity
C) straight life annuities provide income as long as the annuitant lives
D) the surrender charge serves as a back-end load when the annuity is canceled in its early years
Rationale: The annuitant and owner can be different individuals (for example, a parent can own
an annuity on a child). The other statements are true regarding how annuities function and are
categorized.
Transferring total ownership of a life insurance policy may be accomplished in which of the
following ways?
A) Collateral assignment
B) Total surrender
C) Absolute assignment
D) Partial surrender
Rationale: Absolute assignment permanently transfers all ownership rights to another person.
Collateral assignment only transfers rights as security for a loan, while total and partial
surrenders deal with canceling or reducing the policy value.
A group life insurance plan is considered noncontributory when
A) the employee pays part or all of the premium for the plan
B) the service organization pays part of the premium
C) the employer pays all of the premium for the plan
D) the third-party administrator pays the premium for the plan
Rationale: “Noncontributory” means the employer pays 100% of the premium, while
“contributory” plans require employee contributions.
Which of the following types of life insurance policy was designed to combine the protection
features of traditional life insurance with the cash value growth potential of securities?
,100%
A) Term life
B) Universal life
C) Variable life
D) Whole life
Rationale: Variable life insurance links the policy’s cash value to investment accounts such as
mutual funds, allowing for potential growth and loss.
In an employer-paid group disability policy, if the employee becomes disabled and the benefit is
$2,000/month, which of the following is CORRECT?
A) Benefits are tax deductible to the employer.
B) Benefits are not taxable to the employee.
C) Benefits are taxable to employees.
D) Premiums are taxable to employer.
Rationale: When the employer pays the full premium, any benefits received by the employee are
taxable as income.
Group health insurance premiums paid by the employer are
A) sometimes tax deductible
B) partially tax deductible
C) not tax deductible
D) tax deductible as a business expense
Rationale: Employers may deduct health insurance premiums they pay for employees as a
legitimate business expense.
All of the following are required to sign an application for life insurance EXCEPT
A) the beneficiary
B) the applicant
C) the agent
D) the insured
Rationale: The beneficiary only receives policy proceeds and is not required to sign the
application.
Benefits received from a medical expense plan are
A) not taxable
,100%
B) fully taxable
C) taxable to the extent that they exceed premiums paid
D) taxable to the extent that they exceed the actual cost of medical care
Rationale: Medical expense benefits are generally not taxable because they are intended to
reimburse actual healthcare costs.
All of the following are ways in which insurers issue health insurance policies when an
impairment is indicated. Which is the most common approach used with disability income
policies?
A) Issuing the policy with a reduced-benefit amount
B) Issuing the policy with a reduced-benefit period
C) Issuing the policy with a longer elimination period
D) Issuing the policy with an exclusion rider
Rationale: A reduced-benefit amount is a standard way to manage higher-risk applicants while
still offering coverage.
Elimination (waiting) periods in disability income policies are designed to
A) help keep premium rates at a profitable level
B) last generally for 1 year
C) eliminate claims for long-term disabilities
D) specify a limited period of time at the start of disability when benefits are not payable
Rationale: The elimination period acts as a deductible in time form, delaying benefits to prevent
small or short-term claims.
To prevent the lapse of a whole life insurance policy at the end of the grace period, cash value
will be used by the insurer to pay the premium. This is called
A) extended term insurance
B) cash surrender within 30 days of the lapse
C) reduced paid-up insurance
D) automatic premium loan
Rationale: The automatic premium loan provision prevents unintentional lapse by using the
policy’s cash value to cover missed premiums.
, 100%
Information about an applicant's character, general reputation, personal habits, and lifestyle
would be included in
A) the attending physician's statement
B) the insurance application
C) the investigative consumer report
D) the MIB report
Rationale: Investigative consumer reports contain personal and lifestyle data gathered through
interviews and background checks.
With disability income insurance, an elimination (waiting) period may NOT be imposed when
the insured is disabled
A) while traveling
B) by sickness
C) while at work
D) by accidental injury
Rationale: Benefits for accidental injuries typically begin immediately, without a waiting
period.
Controlled business refers to
A) policies that are controlled by the insurer
B) policies that are vested with the writing agent or broker
C) insurance business written by an agent on himself or on a family member
D) insurance business that generates both commissions and renewals
Rationale: Controlled business means policies sold primarily to the agent’s family or associates
rather than the general public.
How are the premiums and benefits of individual life insurance taxed?
A) Deductibility of premiums, non-taxable death benefits
B) Deductibility of premiums, taxable death benefits
C) Non-deductibility of premiums, non-taxable death benefits
D) Non-deductibility of premiums, taxable death benefits
Rationale: Life insurance premiums are not tax-deductible, but the death benefit is received
income tax–free by the beneficiary.
