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Life and Health Insurance Producer Exam

Life policy types: practice questions

Our Life & Health Insurance bank has 26 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

What is the human life value approach?

  1. Estimating the insured's future earnings that would be lost at death
  2. Estimating how long the insured is expected to live
  3. Estimating the cost of the insured's funeral, medical bills and other final expenses
  4. Estimating the value of the insured's property and investments
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A. Estimating the insured's future earnings that would be lost at death — The needs approach looks at survivors' specific needs.

Question 2

What is term life insurance?

  1. Coverage for the insured's whole life that builds a guaranteed cash value each year
  2. Coverage for a specified period that pays only if the insured dies in that period
  3. Coverage that pays the insured when they reach a certain age
  4. Coverage that pays medical bills after an accidental injury
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B. Coverage for a specified period that pays only if the insured dies in that period — Term is temporary protection.

Question 3

What is a modified whole life policy?

  1. Whole life with a death benefit that grows each year while the premium stays level
  2. Whole life whose cash value is invested in stocks
  3. Whole life with lower premiums in early years that increase later
  4. Whole life that converts to term after 10 years
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C. Whole life with lower premiums in early years that increase later — Graded premium policies are similar.

Question 4

How are policy dividends generally taxed?

  1. Not taxable, as a return of premium, until they exceed premiums paid
  2. Taxed only if the beneficiary receives them after death
  3. Taxed as capital gains at a special lower rate each year
  4. Fully taxable as ordinary income in the year they are paid, like interest income
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A. Not taxable, as a return of premium, until they exceed premiums paid — Interest earned on dividends left with the insurer is taxable.

Question 5

What does a convertible term policy allow?

  1. Exchanging it for permanent insurance without proof of insurability
  2. Cashing it in for its full face amount at any time
  3. Exchanging it for a health insurance policy at no cost and without any medical questions
  4. Adding a spouse to the coverage after the wedding
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A. Exchanging it for permanent insurance without proof of insurability — Conversion is usually based on attained age.

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