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Indiana Life Insurance EXAM 2025
AND PRACTICE QUESTIONS
|ACCURATE ANSWERS| VERIFIED
FOR GUARANTEED PASS |GRADED
A |NEW VERSION
1. Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition? A. It is more expensive B. It is more restrictive C. It is less restrictive ✅ D. It requires medical exams Rationale: "Accidental bodily injury" focuses on the result, not the cause, making it less restrictive than "accidental means." 2. A policyowner's rights are limited under which beneficiary designation? A. Primary beneficiary B. Contingent beneficiary C. Irrevocable beneficiary ✅ D. Revocable beneficiary Rationale: An irrevocable beneficiary cannot be changed without the beneficiary’s consent, limiting the policyowner's rights. 3. After COBRA coverage ends, which statement is TRUE about conversion to an individual policy? A. Evidence of insurability is always required B. No evidence of insurability is needed ✅ C. Benefits are reduced automatically D. The premium remains the same Rationale: COBRA allows conversion to individual policies without proof of insurability. 4. Reimbursement for treatment of a beneficiary's injury caused by a third party is called: A. Indemnity B. Subrogation ✅ C. Reinstatement D. Coordination of benefits Rationale: Subrogation lets the insurer seek reimbursement from the responsible third party.
5. If XYZ Company pays 100% of group premiums, what percent of eligible employees must be covered? A. 50% B. 75% C. 100% ✅ D. 25% Rationale: If the employer pays the full premium, all eligible employees must be covered. 6. The Life and Health Insurance Guaranty Association is: A. Funded by the government B. Funded by admitted insurers through assessments ✅ C. A federal program D. Run by policyowners Rationale: Insurers fund the association to protect policyholders if an insurer fails. 7. A producer must notify the Insurance Commissioner of an address change within: A. 10 days B. 30 days ✅ C. 60 days D. 90 days Rationale: Most states require notification within 30 days. 8. How long does an insurance company appointment remain in force? A. 1 year B. Until terminated ✅ C. 2 years D. 5 years Rationale: The appointment stays active until the insurer ends it. 9. Which of the following is NOT considered rebating? A. Offering special dividends B. Sharing commissions with another licensed producer ✅ C. Returning premium as inducement D. Giving gifts for business Rationale: Sharing commissions with a licensed agent is legal and not rebating. 10. A second disability occurring within five months due to the same cause is covered under the: A. Total Disability Rider B. Recurrent Disability Provision ✅ C. Residual Disability Benefit D. Continuation Clause Rationale: This provision allows continuation of benefits without a new elimination period.
17. Variable Whole Life Insurance is considered: A. A savings plan B. Both an insurance and securities product ✅ C. A guaranteed return product D. A term policy Rationale: It includes investment components and is regulated as a security. 18. In IOLI, who benefits when the insured dies? A. The insured’s family B. The insurer C. The policyowner ✅ D. The agent Rationale: In IOLI, the investor (policyowner) receives the death benefit. 19. Which policy CANNOT have an Automatic Premium Loan provision? A. Whole Life B. Universal Life C. Decreasing Term ✅ D. Variable Life Rationale: Term policies, like decreasing term, don’t build cash value. 20. All are features of Adjustable Life EXCEPT: A. Change premium payments B. Change face amount C. Use policy dividends to change face amount ✅ D. Change coverage period Rationale: Face amount is changed via application, not by using dividends. 21. Which is TRUE concerning a Variable Universal Life policy? A. Premiums are fixed annually B. Policyowner controls investments and premium amount ✅ C. Guaranteed minimum interest applies D. Premiums cannot be skipped Rationale: Variable Universal Life policies offer flexible premiums and allow the policyowner to direct investment choices. 22. Exchanging a term policy for a whole life policy without proof of health is allowed under the: A. Waiver of Premium Clause B. Conversion Provision ✅ C. Guaranteed Insurability Option D. Settlement Option Clause Rationale: The conversion provision allows switching from term to permanent coverage without evidence of insurability.
23. A life policy with a death benefit that fluctuates based on investment performance is a: A. Whole Life Policy B. Variable Life Policy ✅ C. Term Policy D. Universal Life Policy Rationale: Variable Life policies have death benefits tied to investment performance. 24. What policy pays after both insureds die? A. Joint Life B. Survivorship Life ✅ C. Family Life D. First-to-Die Rationale: Survivorship (second-to-die) policies pay out after the second insured's death. 25. A policy that becomes a Modified Endowment Contract (MEC): A. Is cancelled by the insurer B. Has no death benefit C. Loses tax advantages ✅ D. Requires additional underwriting Rationale: MECs are taxed differently, especially for loans and withdrawals. 26. F needs coverage with a changing death benefit over time. What is needed? A. Increasing Term B. Decreasing Term ✅ C. Variable Life D. Universal Life Rationale: Decreasing Term policies have death benefits that reduce over time, often used for mortgages. 27. What policy pays a monthly income for 30 years then a lump sum? A. Family Income B. Family Maintenance ✅ C. Endowment D. Whole Life Rationale: Family Maintenance pays monthly income plus a lump sum at the end of a selected period. 28. What is TRUE regarding a policy loan? A. Loans are never repaid B. Unpaid interest is added to the debt ✅ C. No interest is charged D. Loan cancels the policy Rationale: Accrued interest increases the total policy loan debt if unpaid.
B. Whole life plus return of paid premiums if insured dies ✅ C. Increasing term only D. Only returns premiums if surrendered Rationale: It pays both the death benefit and the sum of all paid premiums.
36. Which provision identifies who may name beneficiaries and receive financial benefits? A. Consideration Clause B. Incontestable Clause C. Owner's Rights Provision ✅ D. Reinstatement Clause Rationale: This provision outlines the rights and powers of the policyowner. 37. If P is blinded in an accident, what pays the benefit? A. Disability Income B. AD&D Provision ✅ C. Waiver of Premium D. Reinstatement Rationale: AD&D pays for loss of sight or limb due to accident. 38. Loss of ability to perform 2+ daily living activities may trigger: A. Disability Income B. AD&D C. Long-Term Care Rider ✅ D. Accelerated Death Benefit Rationale: LTC riders are triggered by inability to perform basic activities. 39. M dies Jan 10, premium due Jan 1 not paid. What does insurer do? A. Cancel policy B. Pay face amount minus due premium ✅ C. Deny claim D. Refund previous premiums Rationale: During grace period, the insurer deducts unpaid premium from the payout. 40. Consideration clause includes application and: A. Signature B. Initial premium ✅ C. Policy delivery D. Medical exam Rationale: The applicant’s consideration is the application and first premium. 41. What provision allows withdrawal up to guaranteed cash value? A. Conversion B. Grace Period
C. Policy Loan Provision ✅ D. Waiver of Premium Rationale: Policy loan allows borrowing against cash value without surrender.
42. P dies 5 years after buying a policy with misrepresentations. What happens? A. Claim denied B. Death benefit paid ✅ C. Refund premiums D. Policy voided Rationale: After the contestability period (2 years), the policy is incontestable. 43. Which provision waives premiums if a juvenile policyowner becomes disabled? A. Waiver of Premium B. Payor Clause ✅ C. Disability Rider D. Owner’s Rights Rationale: The Payor Clause ensures policy remains in force if the payer is disabled. 44. All of the following are settlement options EXCEPT: A. Life income B. Fixed period C. “Only beneficiary may select” ✅ D. Fixed amount Rationale: Settlement options may be chosen by policyowner or beneficiary. 45. N, a student pilot, dies in flight. What limits insurer’s payout? A. Suicide Clause B. Exclusion Provision ✅ C. Consideration Clause D. Grace Period Rationale: Aviation exclusions may limit or deny benefits for high-risk activities. 46. What settlement option pays income to annuitant only, no beneficiary payout? A. Fixed period B. Life income ✅ C. Joint life D. Fixed amount Rationale: Life income pays the annuitant for life; nothing goes to the beneficiary after death. 47. What percent of life insurance premiums is deductible for federal income tax? A. 50% B. 0% ✅
C. Delay the first premium D. Change the death benefit Rationale: The Free Look gives policyholders a set number of days (usually 10) to cancel for a full refund.
54. What is the purpose of the Incontestable Clause? A. Prevents claims for suicide B. Prevents contesting policy after a period ✅ C. Allows contesting anytime D. Allows altering beneficiaries Rationale: After the contestability period (usually 2 years), the insurer cannot deny claims due to misstatements. 55. What is typically required to reinstate a lapsed life policy? A. A claim form B. A new application only C. Proof of insurability and back premiums ✅ D. Beneficiary consent Rationale: Reinstatement usually requires medical proof and payment of missed premiums plus interest. 56. Which clause ensures the policy can't be changed once issued, except by agreement? A. Reinstatement Clause B. Insuring Clause C. Entire Contract Clause ✅ D. Suicide Clause Rationale: The Entire Contract Clause prohibits any changes unless agreed in writing by both parties. 57. An insurer may contest a policy for misrepresentation within: A. 1 year B. Anytime C. 2 years ✅ D. 5 years Rationale: The contestability period is typically two years from issue. 58. What rider allows policy continuation if the payer becomes disabled or dies? A. Waiver of Premium B. Payor Benefit Rider ✅ C. Guaranteed Insurability D. Accelerated Death Benefit Rationale: The Payor Benefit Rider waives premiums if the policyholder (payer) is unable to pay due to disability or death.
59. What allows coverage of new children in a family policy without extra underwriting? A. Term Rider B. Children’s Term Rider ✅ C. Payor Rider D. AD&D Rider Rationale: A children's term rider automatically covers new children born or adopted during the term. 60. What feature permits a term policy to convert to permanent without proof of health? A. Guaranteed Insurability B. Reinstatement Provision C. Conversion Privilege ✅ D. Renewable Term Rationale: Conversion privilege allows transition from term to whole life without medical exam. 61. What provision guarantees renewability of a term policy without a medical exam? A. Convertible Term B. Renewable Term ✅ C. Whole Life D. Endowment Rationale: Renewable term policies can be renewed at the end of the term without health questions. 62. Which rider increases death benefits automatically to match inflation? A. Waiver of Premium B. Cost-of-Living Rider ✅ C. Accelerated Death Benefit D. Payor Rider Rationale: The Cost-of-Living Rider increases the death benefit based on CPI or fixed percentages. 63. What triggers the Accelerated Death Benefit? A. Unemployment B. Loan default C. Terminal illness ✅ D. Reaching age 65 Rationale: Accelerated Death Benefit pays a portion of the death benefit early if the insured is terminally ill. 64. What allows the insured to buy more coverage at certain times without proof of insurability? A. AD&D Rider
70. What must a beneficiary do to claim a life insurance death benefit? A. Provide policy and application B. Submit proof of death ✅ C. File a lawsuit D. Wait 12 months Rationale: Death benefits are paid after the insurer receives proof of death (usually a death certificate). 71. When can a life insurance policy be backdated? A. Only on the insured's birthday B. Up to 6 months to save age and lower premiums ✅ C. Never D. Only after the policy is issued Rationale: Life insurance policies can typically be backdated up to 6 months to help the insured qualify for a lower age and premium. 72. What is the purpose of the Grace Period in a life insurance policy? A. To cancel the policy early B. To allow time to pay a missed premium without lapse ✅ C. To delay death benefit payments D. To avoid underwriting Rationale: The Grace Period (usually 30 or 31 days) allows the policyholder to make a late premium payment before the policy lapses. 73. Which of the following is TRUE about the Suicide Clause in a life insurance policy? A. Suicide is always covered B. Suicide is excluded for the first 2 years ✅ C. Suicide is covered only if witnessed D. Suicide is only covered if it occurs after age 65 Rationale: If the insured dies by suicide within the first 2 years, the insurer only refunds premiums paid. 74. If an insurer discovers misrepresentation after a policy has been in force for 3 years, what can it do? A. Cancel the policy B. Refund the premiums C. Nothing; the policy is incontestable ✅ D. Reduce the benefit Rationale: After the 2-year contestability period, the insurer cannot void the policy for misrepresentations (except for fraud in some cases). 75. What is a policy Dividend? A. A guaranteed bonus B. A return of excess premium from a mutual insurer ✅ C. A taxable interest D. An investment gain
Rationale: Dividends in participating policies are considered a return of excess premiums and are typically not taxable.
76. Which of the following would NOT be considered a dividend option? A. Cash B. Reduce the face amount of policy ✅ C. Paid-up additions D. Purchase one-year term Rationale: Reducing the face amount is not a recognized dividend option. The main options include cash, premium reduction, paid-up additions, and one-year term. 77. What does the Automatic Premium Loan provision do? A. Pays dividends B. Pays overdue premiums from the cash value ✅ C. Cancels the policy D. Pays death benefit in advance Rationale: If the premium isn't paid by the end of the grace period, the policy will automatically borrow from its cash value to keep it in force. 78. Which of the following statements is TRUE about universal life insurance? A. It has a fixed premium B. It allows flexible premiums and death benefits ✅ C. It builds no cash value D. It's a term policy Rationale: Universal life insurance allows policyholders to adjust premium payments and death benefits. 79. What does the Insuring Clause specify? A. The amount of the premium B. The insurer’s promise to pay the benefit ✅ C. The policy exclusions D. The settlement options Rationale: The Insuring Clause is the insurer's promise to pay the death benefit to the beneficiary under the terms of the contract. 80. Who assumes the investment risk in a variable life policy? A. The insurer B. The policyowner ✅ C. The agent D. The beneficiary Rationale: In variable policies, the policyowner bears the investment risk because the cash value is invested in separate accounts (e.g., stocks, bonds). 81. What type of policy has level premiums and death benefit but allows the owner to invest in sub-accounts? A. Whole Life
Rationale: An annuity provides a steady income stream, typically used for retirement, either for life or for a specified period.
87. What is the tax consequence of cashing in a life insurance policy for its cash value? A. Fully taxable B. Taxed only on the amount above premiums paid ✅ C. Always tax-free D. Taxed as income Rationale: The portion of the cash surrender value above the total premiums paid (the gain) is taxable as ordinary income. 88. What is the key purpose of a Buy-Sell Agreement funded with life insurance? A. Avoid taxes B. Ensure business continuation at an owner’s death ✅ C. Fund employee retirement D. Avoid lawsuits Rationale: A Buy-Sell Agreement ensures that the business can continue by allowing remaining owners to buy out a deceased owner’s share using life insurance. 89. Who can make changes to a revocable beneficiary designation? A. Only the beneficiary B. The policyowner ✅ C. The agent D. The insurer Rationale: A policyowner may change a revocable beneficiary at any time without the beneficiary’s permission. 90. What is the purpose of a Contingent Beneficiary? A. To co-own the policy B. To receive benefits if the primary beneficiary dies first ✅ C. To fund premiums D. To manage the trust Rationale: The contingent beneficiary is next in line to receive the death benefit if the primary beneficiary is unable to. A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
- ANSWER Each partner owns, is the beneficiary of and pays the premiums for life insurance on the other partners equal to his or her share of the purchase price. Which statement regarding a Key Employee Life policy is NOT true?
- The application must be signed by the key employee
- Its purpose is to prevent the financial loss that may ensue if a key employee dies
- The beneficiary is named by the key employee
- The company purchases, owns, pays the premiums and is the beneficiary
- ANSWER The beneficiary is named by the key employee. P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:
- ANSWER In this situation, benefits will be paid to P because P survived the accident and is the primary beneficiary. C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most? - ANSWER The cost Which type of contract liquidates and estate through recurrent payments? - ANSWER Annuity - A contract that provides for the liquidation of all or part of an estate through periodic payments is known as an annuity. Equity indexed annuities are invested in which of the following: - ANSWER S&P 500 - An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index - typically the S&P 500. P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
- ANSWER An immediate annuity - An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase Which of these is an element of a Single Premium annuity? - ANSWER Lump-sum payment - A lump-sum payment is required for a Single Premium annuity. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? - ANSWER Variable A variable annuity's cash value will depend on the results of its investment funds. N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities? - ANSWER Flexible Installment Deferred Variable annuities may invest premiums in each of the following EXCEPT
- Common Stock
- Money Market securities
- Insurer's corporate business account
- Junk bonds - ANSWER Insurer's corporate business account - Variable annuities may invest premiums in each of these EXCEPT the "Insurer's corporate business account".
reducing it to $900. What option does this describe? - ANSWER REDUCTION OF PREMIUM Death due to plane crash for a fare-paying passenger - ANSWER Which of the following is NOT typically excluded from life policies? Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? - ANSWER OPTION B There is no current income taxation upon the growth in the annuity - ANSWER Annuity contracts grow tax deffered. That means that 40 - ANSWER What is the number of credits required for fully status for social security disability benefits? questions directed to determine the appicants's sexual orientation - ANSWER According to underwriting rules pertaining to AIDS & HIV all of the following questions will be allowed on an application for health insurance EXCEPT the Commissioner - ANSWER Who is responsible for issuing a certificate of authority 12 months - ANSWER A producer has completed all of his continuing education hows but his license has just lapsed. Within what time frame must the producer reinstate his license if he wants to avoid taking an exam to regain his licensed status Limited to 25% of a producer's annual commission income - ANSWER In Indiana, controlled business is Charge a higher premium - ANSWER If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to to create an estate - ANSWER Which of the following is the best reason to purchase life INSURANCE rather than ANNUITIES? When would a 20-PAY WHOLE LIFE policy endow? - ANSWER When the insured reaches age 100 Any licensed person whose activities affect interstate commerce and who knowingly make false material statement related to the business of insurance may be imprisoned for up to - ANSWER 10 YEARS Which of the following is true about the commissioner of Insurance - ANSWER The Commissioner is authorized to participate in the NAIC Payor Benefit Rider - ANSWER Which of the following riders would NOT cause the Death Benefit to increase?
Promptly forwarding premiums to the insurance company - ANSWER Pertaining to insurance what is the definition of a fiduciary responsibility? The contribution is known and the benefit is unknown - ANSWER In a defined contribution plan The COMMISSIONER must be notified in ALL of the following circumstances EXCEPT - ANSWER A change of the PRODUCERS BUSINESS PHONE NUMBER Under the REPLACEMENT REGULATION, Rule 16.1 which of the following statements would best describe the PRODUCER'S DUTIES? - ANSWER The PRODUCER must conduct a REASONABLE INVESTIGATION to determine if a replacement will take place Providing the applicant with a signed copy of the IMPORTANT NOTICE REGARDING REPLACEMENT - ANSWER Under Rule 24, LIFE INSURANCE SOLICITATION, producers duties include all of the following EXCEPT Which of the following is INCORRECT concerning a NONCONTRIBUTORY GROUP PLAN? - ANSWER The employees receive INDIVIDUAL policies In a DIRECT ROLLOVER, how is the money transferred from one plan to the new one?
- ANSWER From trustee to trustee A father owns a life insurance policy on his 15 year old daughter. The policy contains the optional PAYER BENEFIT RIDER. If the father becomes disabled, what will happen to the LIFE INSURANCE PREMIUMS? - ANSWER The insured's premiums will be waived until she is 21 During PARTIAL WITHDRAWAL from a UNIVERSAL LIFE policy, which portion will be taxed? - ANSWER INTEREST The ANNUITY OWNER dies during the ACCUMULATION PERIOD of his annuity. The cash value of his annuity EXCEEDS the premiums he paid. There is NO NAMED BENEFICIARY. Which of the following is true? - ANSWER The CASH VALUE will be paid to the ANNUITANT'S ESTATE An insured purchased a 15-year level term life insurance policy with a face amount of 100,000. The policy contained an ACCIDENTAL DEATH RIDER, offering a DOUBLE indemnity benefit. The insured gets in an accident, is hopspitalized for 10 weeks and then dies. What amount would his Beneficiary receive as a settlement? - ANSWER 200,
