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Indiana health and life insurance
EXAM 2025 AND PRACTICE QUESTIONS
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1. What is a warranty in an insurance contract? A. A general promise to pay claims B. An optional condition C. A legally binding endorsement D. An absolutely true statement upon which the validity of the policy depends ✅ Correct Answer: D Rationale: A warranty is a statement that must be true in every detail. If found untrue, it can void the contract. 2. When must the policy summary for a life insurance policy be delivered to the policyowner? A. At the time of application B. Upon first premium payment C. At the time of policy delivery D. After the free look period ✅ Correct Answer: C Rationale: The policy summary must be delivered when the policy is delivered to the policyowner to ensure informed consent. 3. How is the information obtained for an investigative consumer report? A. Through credit reports B. By reviewing medical records C. Through interviews with associates, friends, and neighbors D. Via criminal background checks ✅ Correct Answer: C Rationale: Investigative consumer reports gather information via personal interviews to assess character and lifestyle. 4. During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks? A. Claims
B. Sales C. Underwriting D. Policy delivery ✅ Correct Answer: C Rationale: Underwriting assesses risk, including adverse selection, before policy issuance.
5. In insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe? A. Aleatory B. Adhesion C. Conditional D. Unilateral ✅ Correct Answer: D Rationale: A unilateral contract binds only the insurer to perform under specific conditions. 6. What type of report may be used to assess risks associated with an applicant's lifestyle and character? A. Medical exam report B. Consumer credit report C. Investigative consumer report D. Agent’s report ✅ Correct Answer: C Rationale: This type of report includes personal interviews to evaluate lifestyle and habits. 7. What entities make up the Medical Information Bureau (MIB)? A. Federal agencies B. Insurance regulators C. Insurers D. Medical professionals ✅ Correct Answer: C Rationale: The MIB is formed by member insurance companies to share medical information on applicants. 8. What are the four elements of an insurance contract? A. Policy, Premium, Insured, Insurer B. Offer, Acceptance, Warranty, Endorsement C. Agreement, Consideration, Competent Parties, Legal Purpose D. Consent, Capacity, Contract, Compensation
C. To record the agent’s observations about the applicant D. To collect medical information ✅ Correct Answer: C Rationale: The agent's report provides personal insight that may assist underwriters.
14. Who is a field underwriter? A. Claims adjuster B. Applicant C. Medical examiner D. Agent/Producer ✅ Correct Answer: D Rationale: The agent acts as a field underwriter by screening applicants and completing applications. 15. What document describes the specific information about a policy? A. Policy summary B. Illustration C. Prospectus D. Certificate of authority ✅ Correct Answer: A Rationale: The policy summary outlines key facts such as premium, coverage, and benefits. 16. What is the name of the process that insurance companies use to determine whether or not an applicant is insurable? A. Quoting B. Reinsurance C. Underwriting D. Issuance ✅ Correct Answer: C Rationale: Underwriting evaluates risk to decide on policy approval. 17. When a change needs to be made on the application for insurance, which is the best method for correcting the information? A. Use white-out B. Have the applicant initial the correction C. Submit as-is D. Ask the insurer to adjust it ✅ Correct Answer: B Rationale: Corrections must be initialed by the applicant or a new application submitted.
18. In forming an insurance contract, when does an acceptance usually occur? A. After the free-look period B. When the first premium is paid C. When the insurer approves a prepaid application D. When the policy is reviewed ✅ Correct Answer: C Rationale: Acceptance happens when the insurer formally agrees to the offer (the application). 19. Whose responsibility is it to determine that all the questions on an insurance application are answered? A. Underwriter B. Policyowner C. Insurer D. Agent ✅ Correct Answer: D Rationale: The agent must ensure all questions are completed accurately before submission. 20. Insurance is a contract that protects the insured from what? A. Lawsuits B. Credit risks C. Loss D. Competition ✅ Correct Answer: C Rationale: Insurance is a mechanism to protect against financial loss. 21. At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy? A. Date of application B. Date the first premium clears C. Date the policy is delivered D. Date of application or medical exam, whichever is later ✅ Correct Answer: D Rationale: Coverage starts on the later of the application date or medical exam if a conditional receipt is issued. 22. When would a misrepresentation on an insurance application be considered fraud? A. If it is not discovered for 2 years B. When it is unintentional C. When it is intentional and material D. When the premium is unpaid
D. Age difference ✅ Correct Answer: C Rationale: Insurable interest must exist between applicant and insured at application.
28. When must insurable interest exist in a life insurance policy? A. At the time of claim B. At the time of death C. At the time of application D. At the time of policy delivery ✅ Correct Answer: C Rationale: Insurable interest is required when the policy is applied for. 29. What are the three main instances when insurable interest exists in life insurance? A. Friends, neighbors, and coworkers B. Family, business, or creditor-debtor C. Employer, agent, and attorney D. All policyholders and beneficiaries ✅ Correct Answer: B Rationale: Insurable interest includes self, close family, and those with financial dependence or business ties. 30. What is the purpose of establishing the target premium for a universal life policy? A. To increase dividends B. To provide loans C. To prevent the policy from lapsing D. To ensure maximum death benefit ✅ Correct Answer: C Rationale: The target premium helps maintain sufficient funding for policy sustainability. 31. If the annuitant dies during the accumulation period, who will receive the annuity benefits? A. Insurance company B. Policyowner C. Contingent annuitant D. Beneficiary ✅ Correct Answer: D Rationale: The beneficiary receives the accumulated value if the annuitant dies before payouts begin. 32. Whole life policies provide protection until the insured reaches what age? A. 90
B. 95
C. 100
D. 120
✅ Correct Answer: C Rationale: Traditional whole life policies mature at age 100.
33. What is the difference between a single premium and a flexible premium in a deferred annuity? A. Interest rates B. Death benefit options C. Number of payments D. Tax status ✅ Correct Answer: C Rationale: A single premium annuity is funded with one payment, while flexible premiums involve multiple payments. 34. What are the two classifications of annuities according to when payments begin? A. Fixed and variable B. Qualified and non-qualified C. Immediate and deferred D. Single and joint ✅ Correct Answer: C Rationale: Immediate annuities begin payouts within a year; deferred annuities start later. 35. In variable universal life insurance, what does the term "variable" refer to? A. Premium amount B. Loan provisions C. Cash value and death benefit D. Policy term ✅ Correct Answer: C Rationale: Both the cash value and death benefit can fluctuate based on investment performance. 36. What type of insurance would perform the function of cash accumulation? A. Term life B. Whole life C. Credit life D. Group term ✅ Correct Answer: B Rationale: Whole life insurance builds cash value over time.
B. Death benefit C. Premium D. Term length ✅ Correct Answer: B Rationale: The face amount (death benefit) declines over time, typically aligned with a debt like a mortgage.
43. What type of annuity pays the largest amount but only while the annuitant is alive? A. Joint life B. Period certain C. Straight life D. Refund annuity ✅ Correct Answer: C Rationale: A straight life annuity pays the highest income but ends at the annuitant's death. 44. Who receives income payments from an annuity? A. Owner B. Beneficiary C. Annuitant D. Insurer ✅ Correct Answer: C Rationale: The annuitant is the person receiving the periodic payments from the annuity. 45. What type of life insurance is best suited to cover a mortgage? A. Whole life B. Universal life C. Decreasing term D. Variable life ✅ Correct Answer: C Rationale: Decreasing term insurance is designed to match the declining balance of a mortgage. 46. In what type of life insurance policy can the policyowner skip premium payments without the policy lapsing? A. Term life B. Whole life C. Universal life D. Variable life ✅ Correct Answer: C
Rationale: Universal life allows flexibility by using the cash value to cover skipped premiums.
47. If the insured dies at age 80 under a whole life policy with no outstanding loans, what amount will be paid? A. Premiums paid B. Cash value C. Full death benefit D. Nothing ✅ Correct Answer: C Rationale: Whole life pays the full death benefit upon the insured's death before maturity. 48. Under a 20-pay whole life policy, how long must premiums be paid? A. Until age 100 B. Until retirement C. For 20 years or until death D. For 10 years ✅ Correct Answer: C Rationale: Premiums are paid for 20 years or until the insured dies, whichever occurs first. 49. What is a whole life policy called when premiums are paid for a specific number of years only? A. Flexible premium policy B. Variable life C. Limited pay whole life D. Term-to-whole conversion ✅ Correct Answer: C Rationale: Limited pay policies offer lifetime coverage with a defined premium payment period. 50. What type of life insurance policy offers pure death protection only? A. Whole life B. Universal life C. Term life D. Variable life ✅ Correct Answer: C Rationale: Term life provides only a death benefit without any cash value component. 51. Under Option B of a universal life policy, what happens to the death benefit? A. It decreases each year B. It remains level
C. Single premium whole life D. Renewable term ✅ Correct Answer: C Rationale: A single premium policy is fully funded upfront, generating immediate cash value.
57. What type of annuity credits its interest based on a stock index like the S&P 500? A. Fixed annuity B. Variable annuity C. Immediate annuity D. Equity-indexed annuity ✅ Correct Answer: D Rationale: Equity-indexed annuities combine fixed returns with index-linked performance. 58. What type of premium is charged on a straight life policy? A. Decreasing B. Flexible C. Single payment D. Level for life ✅ Correct Answer: D Rationale: Straight life insurance charges a fixed, level premium throughout the insured’s life. 59. When would a 20-pay whole life policy endow? A. When the 20th premium is paid B. At retirement C. When the insured reaches age 100 D. Upon policy surrender ✅ Correct Answer: C Rationale: All whole life policies endow (mature) when the insured reaches age 100. 60. Mortality tables are used by insurance companies to predict what? A. Investment performance B. Premium payments C. Life expectancy and death rates D. Customer satisfaction ✅ Correct Answer: C Rationale: Mortality tables help insurers calculate premiums and risks by predicting death rates. What law protects consumers from the circulation of inaccurate or obsolete information? - ANSWER Fair Credit Reporting Act
What do individuals use to transfer their risk of loss to a larger group?
- ANSWER insurance What type of annuity can be purchased with a single premium? - ANSWER Immediate annuity What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100? - ANSWER Single premium whole life What is the main reason for purchasing an annuity? - ANSWER To provide income that the annuitant cannot outlive What happens to the cash value when a whole life insurance policy matures? - ANSWER Cash value is paid to the policyowner What type of annuity requires an agent to have a securities license? - ANSWER Variable annuity In an annuity, the accumulated money is converted into a stream of income during which phase? - ANSWER Annuitization period How long will a life annuity with a 15-year period certain pay? - ANSWER For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years If the annuitant dies before the annuitization period starts, what will the beneficiary receive? - ANSWER Either the amount paid into the annuity or the cash value, whichever is greater During partial withdrawal from a universal life policy, what portion, if any, will be taxed? - ANSWER Interest earned on the withdrawn cash value What are the two phases of an annuity? - ANSWER Accumulation and annuitization (or pay-in and pay-out) In flexible premium payment annuities, the term flexible refers to what? - ANSWER Amount of premium Whose life expectancy is taken into consideration in an annuity contract? - ANSWER Annuitant
When does an insurance policy go into effect? - ANSWER When the policy is delivered and the premium is paid What law protects consumers from the circulation of inaccurate or obsolete information?
- ANSWER Fair Credit Reporting Act What do individuals use to transfer their risk of loss to a larger group? - ANSWER insurance What is a warranty in an insurance contract? - ANSWER An absolutely true statement upon which the validity of the policy depends When must the policy summary for a life insurance policy be delivered to the policyowner? - ANSWER At the time of policy delivery How is the information obtained for an investigative consumer report? - ANSWER Through interviews with the applicant's associates, friends and neighbors During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks? - ANSWER Underwriting In insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe? - ANSWER unilateral What type of report may be used to assess risks associated with an applicant's lifestyle and character? - ANSWER Investigative consumer report What entities make up the Medical Information Bureau? - ANSWER Insurers What are the four elements of an insurance contract? - ANSWER Agreement (offer and acceptance), consideration, competent parties, and legal purpose If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do? - ANSWER Send the application back to the applicant for signature What term describes the fee a person pays an insurance company to receive coverage?
- ANSWER premium What is the main responsibility of a company's underwriting unit? - ANSWER Risk selection and classification
What is the best way to handle incomplete insurance applications? - ANSWER Return the application to the applicant for completion What is the purpose of the agent's report during the application process? - ANSWER The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process Who is a field underwriter? - ANSWER Agent/Producer What document describes the specific information about a policy? - ANSWER Policy summary What is the name of the process that insurance companies use to determine whether or not an applicant is insurable? - ANSWER Underwriting When a change needs to be made on the application for insurance, which is the best method for correcting the information? - ANSWER Complete a new application or ask the applicant to initial the correction on the original application In forming an insurance contract, when does an acceptance usually occur? - ANSWER When the insurer approves a prepaid application Whose responsibility is it to determine that all the questions on an insurance application are answered? - ANSWER agents Insurance is a contract that protects the insured from what? - ANSWER loss At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy? - ANSWER Either on the date of the application or the date of the medical exam (whichever occurs last) When would a misrepresentation on an insurance application be considered fraud? - ANSWER When it is intentional and material What type of report provides information about the applicant's hobbies, habits and financial status? - ANSWER Investigative consumer report In insurance, when is the offer usually made on a contract? - ANSWER When the insurance application is submitted If an applicant does not receive a copy of the new insurance policy, who would be held responsible? - ANSWER agent
Who is entitled to the cash values in a life insurance policy? - ANSWER Policyowner What type of life insurance policy provides permanent protection? - ANSWER whole life insurance What type of life insurance offers an applicant a cash value element? - ANSWER Permanent insurance (usually, whole life) What policy component must decrease in decreasing term insurance? - ANSWER Face amount What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives? - ANSWER Straight life Who receives income payments from an annuity? - ANSWER Annuitant What type of life insurance is best suited to cover a mortgage? - ANSWER Decreasing term In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing? - ANSWER Universal Life Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? - ANSWER The full death benefit Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period? - ANSWER For 20 years or until the insured's death, whichever occurs first. A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy? - ANSWER Limited pay whole life What type of life insurance policy offers pure death protection? - ANSWER Term life insurance Under Option B in a universal life policy, what happens to the death benefit? - ANSWER Under Option B, the death benefit increases each year by the amount of the cash value increases In a joint life policy, when is the death benefit paid? - ANSWER Upon the first death
What type of life insurance policy is Life Paid-up at Age 65? - ANSWER Limited pay whole life Can a business or a corporation be an annuitant? - ANSWER No, an annuitant must always be a natural person What elements of an adjustable life policy can be changed by the policyowners? - ANSWER The amount and payment period of the premium, the face amount, and the period for protection What type of whole life insurance policy generates immediate cash value? - ANSWER Single premium whole life What type of annuity credits its interest based upon an index such as S&P 500? - ANSWER Equity indexed annuity What type of premium is charged on a straight life policy? - ANSWER A level premium for the life of the insured When would a 20-pay whole life policy endow? - ANSWER When the insured reaches age 100 Mortality tables are used by insurance companies to predict what? - ANSWER Life expectancy and the death rates for specific groups of individuals An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
- ANSWER Decreasing term What universal life option has a gradually increasing cash value and a level death benefit? - ANSWER Option A What are the death benefit options in universal life policies? - ANSWER Option A - level death benefit, and Option B - increasing death benefit What does the term "level" refer to in level term insurance? - ANSWER Face amount An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity? - ANSWER Flexible premium deferred annuity The death protection component of a universal life policy is expressed as what type of coverage? - ANSWER annually renewable term
