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Life & Health InsuranceFree Life & Health Insurance Producer License practice test
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A policyholder buys coverage that keeps the same face amount and the same premium for a fixed 20-year span, after which the protection ends. Which type of policy is this?
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Q1. A policyholder buys coverage that keeps the same face amount and the same premium for a fixed 20-year span, after which the protection ends. Which type of policy is this?
Correct answer: A. Level term life
Level term keeps both the death benefit and the premium constant for a set period and provides no cash value; when the term expires the coverage stops.
Q2. Which life insurance product is most often chosen to align with a shrinking obligation such as a home mortgage balance?
Correct answer: B. Decreasing term life
Decreasing term features a face amount that declines over the policy period while the premium stays level, matching a debt like a mortgage that reduces over time.
Q3. A permanent policy offers a guaranteed level premium, guaranteed cash value growth, and coverage that lasts for the insured's entire lifetime. Which policy is described?
Correct answer: B. Whole (ordinary) life
Whole life is permanent insurance with a fixed level premium, a guaranteed cash value, and coverage extending to the policy's maturity age.
Q4. Which feature distinguishes universal life from traditional whole life?
Correct answer: B. It offers flexible premiums and an adjustable death benefit
Universal life is a flexible-premium permanent policy that lets the owner adjust premium payments and the death benefit within limits, unlike the fixed structure of whole life.
Q5. An agent selling variable universal life must hold which additional qualification because the policy's cash value is held in separate-account subaccounts?
Correct answer: B. A registered securities (FINRA) registration
Because variable products place cash value in securities-based separate accounts subject to investment risk, they are regulated as securities and require the producer to hold a FINRA securities registration in addition to a life license.
Q6. Under an annually renewable term policy, what happens at each renewal?
Correct answer: A. The premium rises to reflect the insured's increasing age, with no new evidence of insurability required
Annually renewable term guarantees the right to renew each year without proving insurability, but the premium increases annually as the insured ages.
Q7. In an indexed universal life policy, how is interest generally credited to the cash value?
Correct answer: A. Based on the performance of a stated market index such as a broad stock index, subject to a cap and floor
Indexed universal life credits interest according to gains in a referenced market index, typically limited by a cap on the upside and protected by a floor that prevents index losses from reducing the credited amount.
Q8. An individual purchases a deferred annuity and makes payments for several years before income begins. What is the correct label for the period during which payments are made and interest accrues before payout starts?
Correct answer: B. The accumulation phase
The accumulation (pay-in) phase is when contributions are made and the contract grows on a tax-deferred basis; annuitization is the later phase when the contract is converted into income payments.
Q9. How does an endowment policy differ from ordinary whole life?
Correct answer: B. An endowment pays the face amount to the insured if they survive to the stated maturity date
An endowment matures (endows) at a specified date, paying the face amount to the living insured at that point, whereas whole life is designed to pay the face amount at death.
Q10. After a life policy has been in force for two years, the incontestable clause generally prevents the insurer from doing what?
Correct answer: B. Contesting the policy or denying a claim based on misstatements in the application
Once the two-year incontestability period has passed, the insurer generally cannot void the contract or deny a claim due to misstatements or concealment in the original application (fraud exceptions aside).
Exam facts and objectives sourced from the official NAIC (National Association of Insurance Commissioners) certification page. Last reviewed June 2026.
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