TheoryFree Life Health Insurance Practice Test
Take a free Life Health Insurance practice test for 2026 with questions, answers, explanations, PDF download and timed mock exam links.
Life Health Insurance Questions
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Q1At what point must insurable interest exist for a life insurance policy to be valid?
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✓ Correct answer: Only at the time the policy is applied for and issued
In life insurance, insurable interest must exist at the inception of the contract. Unlike property insurance, it need not exist at the time of loss.
Q2Which relationship would NOT automatically support insurable interest in another person's life?
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✓ Correct answer: A person insuring a casual acquaintance
Insurable interest requires a financial or close-family relationship. A casual acquaintance creates neither love-and-affection nor a financial stake, so no insurable interest exists.
Q3What is the defining characteristic of term life insurance?
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✓ Correct answer: It provides protection for a specified period with no cash value
Term life provides pure death-benefit protection for a stated term and ordinarily accumulates no cash value, making it the lowest-cost coverage per dollar of death benefit.
Q4A policyowner has annual renewable term insurance. What happens to the premium at each renewal?
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✓ Correct answer: It increases because it is based on the insured's attained age
Annual renewable term renews each year without evidence of insurability, but the premium rises because it is recalculated on the insured's higher attained age.
Q5Decreasing term insurance is most commonly used to cover which need?
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✓ Correct answer: A mortgage or other amortizing debt
Decreasing term has a death benefit that declines over time, matching it well to an amortizing debt such as a mortgage whose balance falls each year.
Q6Which is a feature of ordinary (straight) whole life insurance?
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✓ Correct answer: Level premiums and lifetime coverage with cash value
Straight whole life features level premiums payable for life, lifetime protection, and a guaranteed cash value that grows on a tax-deferred basis.
Q7In a whole life policy, what is guaranteed to equal the face amount at policy maturity?
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✓ Correct answer: The cash value
A whole life policy endows at maturity, meaning its guaranteed cash value grows to equal the face amount, at which point the policy pays out.
Q8A 20-pay whole life policy differs from straight whole life in that:
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✓ Correct answer: Premiums are paid only for 20 years but coverage lasts for life
Limited-pay whole life compresses premium payments into a set period; after that the policy is paid up, yet lifetime coverage continues.
Q9A single-premium whole life policy is most likely to be classified as a Modified Endowment Contract because:
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✓ Correct answer: It fails the 7-pay test by being overfunded early
A single large premium nearly always exceeds the 7-pay limit, causing the contract to be a MEC, which subjects lifetime distributions to LIFO taxation and possible penalties.
Q10A key feature distinguishing universal life from traditional whole life is:
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✓ Correct answer: Flexible premiums and an adjustable death benefit
Universal life unbundles the policy, allowing flexible premium payments and adjustable death benefit (subject to insurability for increases), with interest credited to cash value.
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