TheoryLife Health Insurance Practice Test Video
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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.
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