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Health and Life Insurance – Indiana
EXAM 2025 | ACTUAL REAL EXAM
ACCURATE QUESTIONS AND ANSWERS
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1. What does the Guaranteed Insurability Rider allow the policyholder to do? A. Cancel the policy at any time B. Borrow against the cash value C. Buy additional coverage without proving insurability D. Change beneficiaries annually ✅ Correct Answer: C. Buy additional coverage without proving insurability Rationale: The Guaranteed Insurability Rider permits the policy owner to purchase more permanent insurance at specified intervals without medical proof. 2. What is the function of a Waiver of Premium rider? A. Refunds all premiums after a claim B. Suspends premium payments during disability C. Increases coverage automatically D. Applies only to accidental deaths ✅ Correct Answer: B. Suspends premium payments during disability Rationale: This rider keeps the policy active by waiving premiums when the insured becomes disabled. 3. What is the purpose of a Payor Provision in a juvenile life insurance policy? A. Transfers ownership of the policy B. Pays double the face value at death C. Waives premiums if the payor dies or is disabled D. Grants policy loans for education ✅ Correct Answer: C. Waives premiums if the payor dies or is disabled Rationale: This rider ensures that the policy stays in force even if the person responsible for paying premiums cannot pay due to death or disability. 4. The Accidental Death Benefit Rider provides: A. A refund of all premiums B. Double or triple the face value if death is accidental C. A guaranteed income for beneficiaries
D. Coverage for natural causes of death ✅ Correct Answer: B. Double or triple the face value if death is accidental Rationale: This rider provides an extra benefit if death occurs due to a covered accident.
5. What does the Return of Premium rider offer? A. Pays extra interest on the policy B. Refunds premiums if the insured survives the term C. Adds the total premiums paid to the death benefit D. Eliminates future premiums after 10 years ✅ Correct Answer: C. Adds the total premiums paid to the death benefit Rationale: If the insured dies within the stated term, the policy pays both the face value and all paid premiums. 6. What is the primary role of the Actuarial Department in an insurance company? A. Sell policies B. Investigate fraud C. Calculate rates and reserves D. Handle complaints ✅ Correct Answer: C. Calculate rates and reserves Rationale: The actuarial department uses statistical analysis to set premiums and ensure financial solvency. 7. An Alien Insurer in the United States is one that: A. Is unauthorized to sell policies B. Is based in another country C. Is formed by two domestic insurers D. Only sells surplus lines ✅ Correct Answer: B. Is based in another country Rationale: Alien insurers have headquarters outside the U.S. but may still operate here if admitted. 8. What is an Admitted Insurer? A. A company with no legal license B. A reinsurer that underwrites excess risk C. A company licensed to operate in a state D. A foreign-based insurer ✅ Correct Answer: C. A company licensed to operate in a state Rationale: Admitted insurers have a certificate of authority from the state insurance department. 9. What is the role of a Broker in insurance? A. Represents the insurer
14. A Domestic Insurer is one that: A. Operates only within its home city B. Is incorporated and operating in the same state C. Is a foreign company with U.S. offices D. Only sells to families ✅ Correct Answer: B. Is incorporated and operating in the same state Rationale: A domestic insurer is one that is legally formed under the laws of the state in which it does business. 15. A Foreign Insurer is: A. From another country B. From another state but licensed in your state C. Not authorized to sell in any state D. A federal government insurer ✅ Correct Answer: B. From another state but licensed in your state Rationale: A foreign insurer is domestic to one state but considered foreign in others where it operates. 16. What is a Fraternal Benefit Society? A. A private insurance company B. A stock company owned by shareholders C. A nonprofit organization offering insurance to its members D. A government insurer ✅ Correct Answer: C. A nonprofit organization offering insurance to its members Rationale: These societies are member-based and provide insurance and other benefits. 17. What defines an Industrial Insurer? A. Provides coverage for large businesses B. Offers small policies with weekly premiums C. Covers manufacturing-related losses only D. Sells only to industrial workers ✅ Correct Answer: B. Offers small policies with weekly premiums Rationale: Also known as home service or debit insurers, they issue small face-value policies. 18. What is insurance? A. A type of investment B. The elimination of financial loss C. The transfer of risk through pooling of funds D. A savings plan for retirement ✅ Correct Answer: C. The transfer of risk through pooling of funds
Rationale: Insurance works by spreading financial risk across a large number of policyholders.
19. Who is the Insured in a policy? A. The company issuing the policy B. The agent selling the policy C. The customer receiving coverage D. The state regulator ✅ Correct Answer: C. The customer receiving coverage Rationale: The insured is the person or entity covered by the insurance policy. 20. Who is the Insurer? A. The policyholder B. The insurance company C. The reinsurer D. The underwriter ✅ Correct Answer: B. The insurance company Rationale: The insurer provides the insurance coverage and takes on the risk. 21. What is Lloyd’s of London? A. A reinsurance company B. A government entity C. A group of underwriters for unusual risks D. A U.S.-based insurance company ✅ Correct Answer: C. A group of underwriters for unusual risks Rationale: Lloyd’s is not an insurance company but a marketplace for specialized insurance. 22. A Multi-Line Insurer provides: A. Only life insurance B. Policies to just businesses C. A range of insurance products D. Health insurance only ✅ Correct Answer: C. A range of insurance products Rationale: Multi-line insurers cover auto, home, life, health, and more. 23. A Mutual Insurance Company is: A. Owned by shareholders B. Government-run C. Owned by policyholders and pays dividends D. An alien insurer ✅ Correct Answer: C. Owned by policyholders and pays dividends
29. Reinsurance is best described as: A. Selling expired policies B. Group health coverage C. One insurer sharing risk with another D. Transferring policies to another state ✅ Correct Answer: C. One insurer sharing risk with another Rationale: Reinsurers help insurers spread large risks. 30. What is a Reinsurer? A. A company that pays dividends B. An agent handling renewals C. A company that insures other insurance companies D. A company that reissues lapsed policies ✅ Correct Answer: C. A company that insures other insurance companies Rationale: Reinsurers absorb part of the risk to help stabilize insurers’ operations. 31. A Risk Retention Group is: A. A type of reinsurance company B. A group-owned insurer for liability coverage C. A state-run insurance pool D. A homeowner’s association ✅ Correct Answer: B. A group-owned insurer for liability coverage Rationale: It is formed by businesses with similar risks. 32. What is Self-Insurance? A. Transferring risk to a third party B. Establishing a fund to pay future claims C. Buying policies from surplus lines insurers D. Avoiding all types of risk ✅ Correct Answer: B. Establishing a fund to pay future claims Rationale: Businesses or individuals assume the risk rather than transferring it to insurers. 33. A Stock Insurance Company is: A. Owned by policyholders B. A nonprofit insurer C. Owned by shareholders and issues nonparticipating policies D. A mutual benefit organization ✅ Correct Answer: C. Owned by shareholders and issues nonparticipating policies Rationale: Stock companies aim to earn profits for shareholders.
34. Surplus Lines Insurance is: A. Offered by government agencies B. Available through traditional insurers only C. Coverage for risks not available in the admitted market D. Standard life insurance ✅ Correct Answer: C. Coverage for risks not available in the admitted market Rationale: Surplus lines insurers handle high-risk or unusual coverage. 35. Which department handles the review and classification of applications? A. Claims B. Actuarial C. Underwriting D. Legal ✅ Correct Answer: C. Underwriting Rationale: The underwriting department evaluates risk and determines policy terms. 36. What is the Principle of Indemnity? A. Paying the insured more than the loss amount B. Restoring the insured to their original financial condition C. Sharing losses among insureds D. Providing profit to the insured ✅ Correct Answer: B. Restoring the insured to their original financial condition Rationale: Indemnity ensures that the insured is made whole, not profiting from the loss. 37. What does the Law of Large Numbers state? A. Larger policies have higher premiums B. The more exposures, the more accurate the predictions C. Small groups give more predictable outcomes D. Losses increase with age ✅ Correct Answer: B. The more exposures, the more accurate the predictions Rationale: Insurance relies on large groups to accurately predict future losses. 38. A Peril is: A. The insured person B. The accident or cause of loss C. A reduction in risk D. A type of premium ✅ Correct Answer: B. The accident or cause of loss Rationale: A peril is the event that causes a loss, such as fire or theft. 39. What is a Loss in insurance terms? A. The amount of premiums collected B. A deductible payment
✅ Correct Answer: C. Blindness or poor health Rationale: Physical hazards are tangible conditions like health problems.
45. What is a Moral Hazard? A. Being overweight B. Taking unnecessary risks C. Intentional dishonesty or drug use D. Getting into accidents frequently ✅ Correct Answer: C. Intentional dishonesty or drug use Rationale: Moral hazards stem from character or ethical issues. 46. What is a Morale Hazard? A. Overconfidence leading to risky behavior B. Fraudulent insurance claims C. A history of illnesses D. An unforeseen accident ✅ Correct Answer: A. Overconfidence leading to risky behavior Rationale: A morale hazard is due to careless or indifferent attitudes. 47. What is Risk in insurance terms? A. The premium paid B. A guaranteed return C. The possibility of loss D. The profit from insurance ✅ Correct Answer: C. The possibility of loss Rationale: Risk is the chance that a loss might occur. 48. What is a Speculative Risk? A. A risk with only the chance of loss B. Risk with no chance of gain C. Risk involving both gain and loss possibilities D. A guaranteed financial loss ✅ Correct Answer: C. Risk involving both gain and loss possibilities Rationale: Speculative risks, such as investing, can result in profit or loss and are uninsurable. 49. Pure Risk is: A. Involves only the chance of loss B. A type of gambling C. A business investment D. Always profitable ✅ Correct Answer: A. Involves only the chance of loss Rationale: Pure risk is insurable and does not include the possibility of gain.
50. Which of the following are elements of an insurable risk? A. Speculative, accidental, frequent B. Definite, measurable, predictable C. Guaranteed, risky, intentional D. Profitable, moral, catastrophic ✅ Correct Answer: B. Definite, measurable, predictable Rationale: Insurable risks must be accidental, measurable, predictable, and not catastrophic. 51. What is Risk Management? A. Selling insurance B. Identifying and handling exposures to loss C. Ignoring low-probability losses D. Transferring risk to others ✅ Correct Answer: B. Identifying and handling exposures to loss Rationale: Risk management evaluates threats and plans accordingly. 52. Which of the following is a method of risk treatment? A. Reinvestment B. Avoidance C. Denial D. Doubling coverage ✅ Correct Answer: B. Avoidance Rationale: Risk treatment includes avoidance, reduction, retention, transfer, and sharing. 53. What is Avoidance in risk management? A. Ignoring the problem B. Elimination of exposure C. Sharing the cost of a loss D. Buying more insurance ✅ Correct Answer: B. Elimination of exposure Rationale: Avoidance involves completely staying away from the risk source. 54. What does Reduction mean in risk management? A. Eliminating risk entirely B. Minimizing severity or likelihood of a loss C. Sharing premiums with another D. Retaining total risk ✅ Correct Answer: B. Minimizing severity or likelihood of a loss Rationale: Examples include installing alarms or wearing seatbelts.
C. Unequal value exchange and chance D. Guaranteed payment regardless of loss ✅ Correct Answer: C. Unequal value exchange and chance Rationale: In insurance, small premiums may yield large payouts only upon a covered loss. Accelerated benefit rider
- ANSWER allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and expected to die within 1-2 years. Suicide Clause
- ANSWER No benefit paid if suicide is committed within two years of policy issuance. Misstatement of age or sex provision
- ANSWER allows the insurer to adjust the policy benefits if the insureds age or sex is misstated on the policy application. Nonforfeiture Options
- ANSWER are the options you have for your cash value if your terminate a policy that has cash value. You are closing your account (surrendering your policy) what do you want us to do with your cash Dividend Options
- ANSWER the options a policyowner has when receiving dividend payments from an insurance policy. Participating policies pay dividends to policyowners if the company's operations result in a divisible surplus. Conditional contract - ANSWER certain conditions must be met by all parties in the contract. Concealment - ANSWER the failure of the insured to disclose to the company a fact material to the acceptance of the risk at the time application is made. Consideration - ANSWER something of value that each interested party gives each other. Insure-payment premium. Insurer- promising to pay. Contract of adhesion - ANSWER one author - the insurance company. Express authority - ANSWER the explicit authority granted to the agent by the insurer as written in the agency contract Fiduciary Responsibility - ANSWER describes the relationship between the agent or producer and client or company funds. Because the agent handles money of the insured and insurer, he/she has a fiduciary responsibility.
Health insurance contracts - ANSWER are indemnity contracts and will only reimburse the actual cost of the loss. You cannot profit from an indemnity contract. Implied Authority - ANSWER authority not specifically granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities. Insurable Interest - ANSWER requires that an individual have a valid concern for the continuation of the life or well-being of the person insured. Without insurable interest, an insurance contract is not legally enforceable and would be considered a wagering contrct. Law of agency - ANSWER establishes a relationship in which one person is authorized to represent and act for another person or company. In applying the law of agency, the insurance company is the principal. An agent or producer will always be deemed to represent the insurance company and not the applicant. Legal Purpose - ANSWER means an insurance contract must be legal and not in opposition of public policy. If an insurance contract has insurable interest and the insured has provided written consent, it has legal purpose. Without legal effect the contract would be null and voic. Life Insurance Contracts - ANSWER are valued contracts, which means it will pay a stated amount. Offer and acceptance - ANSWER Offer that may be made by the applicant by signing the application, paying the first premium, and if necessary, submitting to a physical examination. Policy insurance is applied for, constitutes acceptance by the company. Policy - ANSWER A written contract in which one party promises to indemnify another against loss that arises from an unknown event. Policy Rider - ANSWER A legal attachment amending a policy. Additional benefits or a reduction in benefits are often incorporated in policies by the attachment of either a benefit or an exclusion rider. Representations - ANSWER Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief, but that are not warranted as exact in every detail. Stranger-Originated Life Insurance (STOLI) - ANSWER life insurance arrangements where investors persuade consumers (usually seniors) to take out new life insurance policies, with the investors named as beneficiary. Investors loan money to the insured to
Increasing Term - ANSWER term life insurance that provides and increasing face amount over time based on specific amounts or a percentage of the original face amount. Convertible term - ANSWER a provision that allows policy owners to convert their term insurance into permanent policies without showing proof of insurability. Convertible term provides temporary coverage that may be changed to permanent coverage without evidence of insurability. Renewable term - ANSWER term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability. Annual Renewable term - ANSWER is term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability. Term Rider - ANSWER is a type of life insurance product which covers children under their parent's policy. Family plan policies usually cover the family head with permanent insurance, and the coverage on the spouse and children is a term insurance in the form of a rider. Whole life insurance policy - ANSWER provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium. With Whole Life - Straight Life insurance - ANSWER premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death. With Whole Life - Limited Pay - ANSWER the coverage remains on a limited-pay life policy until age 100 or death, whichever happens first. Whole Life - Modified - ANSWER a policy where the premium stays fixed for the first 5 years and the increases in year 6 and stays level for the remainder of the policy. Modified whole life has all of the same features of any other whole life except the insurance company cuts you a break on premium for the first few years. Whole Life - Modified Endowment Contract (MEC) - ANSWER best described as a policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. Joint Life Policy - ANSWER covers the lives of 2 individuals and save on premium cost by averaging the ages of the two insureds. Joint life policies pay the face amount after the first person covered on the policy dies.
Joint Survivor or Last Survivor Policies - ANSWER Cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. Joint Life Survivor or Last Survivor policies only pay the death benefit upon death of the last insured person. Family Maintenance Policy - ANSWER pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period. Family Income Policies - ANSWER pay an income beginning at the insured's death and continues for a period specified from the date of policy issue. Adjustable Life policy - ANSWER owner is usually looking for a policy offering flexible premiums. As financial needs and objectives change, the policyowner can make adjustments to the premium and or face amount of an adjustable Life insurance policy. Universal Life Insurance Policy - ANSWER incorporates flexible premiums and an adjustable death benefit. The investment gains from a universal life policy usually go toward the cash value. Variable life insurance policies - ANSWER Require a producer to have proper FINRA and National Association of Securities and Dealers (NASD) securities registration prior to selling any variable policy contract, whether it be life insurance or an annuity, as they include regulated securities. These policies are also known as interest sensitive policies. Variable Universal Whole Life (VUL) - ANSWER the policyowner controls the investment of cash values and selects the timing and amount of premium payments. Variable Universal Life policies give a policy owner the best of both Variable Life and Universal Life. If a policy owner was looking for a policy that allowed them to control how much and when the premium was due, what investment accounts were used for funding, and where the returns from those investment accounts went they would be looking for a variable universal life policy. Equity Index Universal Life Insurance - ANSWER Equity Index Universal Life Insurance or Equity Indexed Life combines most of the features, benefits and security of traditional life insurance with the potential of earned interest based on the upward movement of an equity index. Guaranteed minimum interest rate. Investor (or stronger) originated life insurance policy S(I)OLI - ANSWER when the insured dies, the policyowner (investor) benefits. In normal circumstances, it is a beneficiary with insurable interest who benefits from the death of an insured.
Policy Loan (cash withdrawal) Provisions - ANSWER apply to policies that have cash value also have policy loan and withdrawal provisions. Automatic Premium Loan Provision (or rider) - ANSWER Allows the insurance company to deduct overdue premium from an insured's cash value by the end of the grace period if a payment is missed on a life policy. Other Insureds - ANSWER aka dependent riders, may be added to a primary policy to cover a spouse or "another insured" children or adopted children Incontestability Period - ANSWER provides that, for certain reasons such as misstatements on the application, the company may void a life insurance policy after it has been in force during the insured's lifetime usually one or two years after issue. After that period it is considered incontestable. Assignment Clause - ANSWER allows the right to transfer policy rights to another person or entity. Absolut Assignment - ANSWER is a policy assignment under which the assignee receives full control over the policy and also full rights to its benefits. Collateral Assignment - ANSWER An assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owed. How often do commissioners have to examine insurers? - ANSWER At least every 5 years, but as many times as deemed necessary How many days for commissioner to notify a producer of the hearing on unfair trade practice - ANSWER 5 days How many days to hold a hearing after written demand - ANSWER 30 Days How many days for a company to respond to an unfair trade practice complaint - ANSWER 20 days How many days to demand hearing after notice of license denial or non renewal? - ANSWER 63 days Minimum age to apply for insurance license - ANSWER 18 How many months To reinstate a lapsed license without taking examination - ANSWER 12 months
License renewal period - ANSWER Every 2 years Maximum period for a temporary license - ANSWER 180 Days How many days does a producer have to report change of name or address to commissioner? - ANSWER 30 days How many days to report criminal or administrative actions taken against a producer - ANSWER 30 days How many days for insurers to report new directors and principal officers - ANSWER 30 days CE hours required for producers license - ANSWER 24 hours Required CE hours in ethics every renewal period - ANSWER 3 hours Maximum allowed commissions from controlled businesses in any 12 month period - ANSWER 25% Maximum value of any gift or merchandise given by an insurer or producer to a customer to avoid rebating - ANSWER $ Civil fine for licensing law violations - ANSWER $50-$10, Fine for insurers for transacting insurance without a certificate of authority - ANSWER $25, Fine for violation of cease and desist order - ANSWER $25, Fine for willful violation of the insurance code or willful violation of cease and desist order - ANSWER $50, Penalty of 3 times the unpaid renewal fee for fees received after the due date - ANSWER 3x the renewal fee Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? - ANSWER Limited pay whole life (explanation: premiums payments will cease at her age 65, but coverage will continue to her death or age 100)
