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Indiana Life Insurance EXAM 2025 | ALL
CURRENT EXAM VERSIONS 2025 |
ACCURATE REAL EXAM QUESTIONS
AND ANSWERS | ACCURATE AND
VERIFIED FOR GUARANTEED PASS |
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1. What does the term "premium mode" refer to in life insurance? a. The method by which the insurer calculates risk b. How often premium payments are made c. The amount of death benefit selected d. The duration of the policy ✅ Correct Answer: b. How often premium payments are made Rationale: Premium mode refers to the frequency of premium payments. The more frequently premiums are paid, the higher the overall cost due to administrative expenses. 2. What is a Whole Life Insurance policy? a. A policy that pays both the death benefit and the cash value b. A temporary policy with increasing premiums c. A policy that provides lifetime coverage, builds cash value, and has fixed premiums d. A policy that ends at age 65 ✅ Correct Answer: c. A policy that provides lifetime coverage, builds cash value, and has fixed premiums Rationale: Whole life insurance offers permanent coverage, builds guaranteed cash value, and premiums remain level. It pays either the death benefit or cash value, whichever is higher—not both. 3. How can a whole life policy be purchased? a. Monthly installments only b. Single Premium, Limited Pay, or Straight Life c. Only via employer-sponsored plans d. Only as a group policy ✅ Correct Answer: b. Single Premium, Limited Pay, or Straight Life Rationale: Whole life policies can be paid through a one-time single premium, limited pay over a few years, or straight life with continuous payments.
4. What defines a Term Life Insurance policy? a. It builds cash value over time b. It provides death benefit protection for a specified time c. It matures at age 100 d. Premiums never increase ✅ Correct Answer: b. It provides death benefit protection for a specified time Rationale: Term life offers coverage for a set period. If the insured survives the term, the policy expires with no payout. Premiums typically increase with age. 5. What is true of a Level Term policy? a. The death benefit increases over time b. The death benefit decreases gradually c. The death benefit remains the same throughout the term d. Premiums increase with age ✅ Correct Answer: c. The death benefit remains the same throughout the term Rationale: A level term policy has a constant death benefit for the duration of the term. 6. What is a Decreasing Term policy most suitable for? a. Estate planning b. Mortgage protection c. Retirement planning d. Long-term care ✅ Correct Answer: b. Mortgage protection Rationale: The death benefit declines over time, making it ideal for covering debts like a mortgage that also decrease. 7. What is an Increasing Term policy? a. A policy that has premiums that decrease b. A policy where the face amount increases c. A policy with decreasing death benefits d. A policy that builds cash value ✅ Correct Answer: b. A policy where the face amount increases Rationale: The face amount grows over time, though premiums often remain level. 8. What is a Renewable Term policy? a. One that provides cash value upon renewal b. Allows renewal without proof of insurability c. Requires full medical underwriting every year d. Has decreasing premiums ✅ Correct Answer: b. Allows renewal without proof of insurability Rationale: Renewable term policies allow policyholders to renew coverage without requalifying medically, but premiums increase with attained age.
✅ Correct Answer: b. A contract that provides income and builds cash value Rationale: Annuities are designed to accumulate and later distribute income, without a death benefit.
14. What are the three payout options at annuitization? a. Lump sum, monthly premium, or surrender b. Take money, Annuity Certain, or Life Annuity c. Refund, split-dollar, or dividend option d. Whole life, term, or endowment ✅ Correct Answer: b. Take money, Annuity Certain, or Life Annuity Rationale: Upon annuitization, one can take the funds, select a guaranteed period, or opt for income for life. 15. How are annuity premiums paid? a. Only as a single payment b. In monthly installments only c. Level or flexible premiums d. Paid by employer only ✅ Correct Answer: c. Level or flexible premiums Rationale: Annuities may be funded via consistent level payments or variable flexible contributions. 16. When do annuity benefits begin? a. Only at retirement b. Immediately or deferred c. Only at age 65 d. When the annuitant dies ✅ Correct Answer: b. Immediately or deferred Rationale: Benefits can start right away (immediate) or be postponed (deferred) to a later date. 17. How long do annuity benefits last? a. Only for 10 years b. Until age 100 c. For life or longer d. Until the annuitant requests a refund ✅ Correct Answer: c. For life or longer Rationale: Annuities can provide lifetime income and may include features to continue payments to beneficiaries. 18. How many lives can an annuity cover? a. Only one b. Two at most
c. One or two (joint/survivor) d. Unlimited ✅ Correct Answer: c. One or two (joint/survivor) Rationale: Annuities can be single or joint. Joint and survivor annuities pay as long as either annuitant lives.
19. Are annuity benefits guaranteed? a. Only variable annuities are guaranteed b. Fixed annuities are guaranteed, variable are not c. No annuities offer guarantees d. All annuities guarantee returns ✅ Correct Answer: b. Fixed annuities are guaranteed, variable are not Rationale: Fixed annuities provide guaranteed payments. Variable annuities offer potential for higher returns with greater risk and require securities registration. 20. What is the Insuring Clause in a policy? a. A benefit limitation b. The payment schedule c. A promise to pay under stated conditions d. A tax exclusion ✅ Correct Answer: c. A promise to pay under stated conditions Rationale: It’s a general statement of the insurer’s obligation to pay the death benefit under policy terms. 21. What is the Suicide Clause? a. Covers accidental deaths only b. Protects against adverse selection within a timeframe c. Waives premium upon suicide d. Pays double the benefit ✅ Correct Answer: b. Protects against adverse selection within a timeframe Rationale: If suicide occurs within 1–2 years, the insurer can deny the claim to prevent manipulation. After the period, death is treated normally. 22. What is a Family Life Insurance policy? a. Term insurance for all members b. Separate contracts for each member c. A single policy with whole life on breadwinner and term on others d. Covers only dependent children ✅ Correct Answer: c. A single policy with whole life on breadwinner and term on others Rationale: It's a package policy with convertibility for family members and automatic coverage for newborns.
✅ Correct Answer: b. Employer is the owner and beneficiary Rationale: The business insures the key employee, and while premiums aren’t deductible, benefits are tax-free.
28. What is a Split-Dollar Plan? a. Life policy split between two insurers b. Employer and employee share premium and benefit c. Government-subsidized policy d. Spouse and child coverage in one plan ✅ Correct Answer: b. Employer and employee share premium and benefit Rationale: It’s a strategy where premium and death benefit are shared. The employee’s benefit may be taxable. 29. What is Universal Life Insurance? a. Term policy with a savings account b. Whole life with flexible premiums and interest-sensitive cash value c. An endowment product d. Policy that matures at age 90 ✅ Correct Answer: b. Whole life with flexible premiums and interest-sensitive cash value Rationale: It allows flexible premium payments and earns interest based on market rates above a guaranteed minimum. 30. What is Group Life Insurance? a. Individual contracts sold in bulk b. Covers all people over 65 c. Single contract covering multiple people d. Always requires proof of insurability ✅ Correct Answer: c. Single contract covering multiple people Rationale: Group life provides coverage for many under one contract, usually employer-sponsored, with conversion options if leaving the group. 31. Annuities don’t have: a. Cash value b. Tax-deferred growth c. A death benefit d. A clue ✅ Correct Answer: c. A death benefit Rationale: Annuities are not designed to pay a death benefit; they focus on accumulating and distributing income. 32. Which of the following factors determine a Life Annuity’s income payout? a. Age, sex, and annuity value
b. Age and insurability only c. Age only d. Age and sex only ✅ Correct Answer: a. Age, sex, and annuity value Rationale: These are the primary factors used to calculate income benefits from a life annuity.
33. Early annuity withdrawal before age 59½ is subject to: a. Taxes and a 10% penalty b. Taxes only c. Penalty only d. Capital gains tax ✅ Correct Answer: a. Taxes and a 10% penalty Rationale: Withdrawals before 59½ are taxed and face an additional 10% penalty unless exempt. 34. An annuity paid over 20 years before taking benefits is a: a. Long-term annuity b. Immediate annuity c. Delayed annuity d. Deferred annuity ✅ Correct Answer: d. Deferred annuity Rationale: A deferred annuity accumulates value over time before annuitization begins. 35. A Straight Life Annuity pays: a. Until age 100 b. Only at death c. Until annuity is exhausted d. Throughout the annuitant's life ✅ Correct Answer: d. Throughout the annuitant's life Rationale: It provides guaranteed income for the lifetime of the annuitant. 36. A Life Annuity with Period Certain ensures payments: a. Until the annuitant dies b. For a set time, even if annuitant dies c. Only to spouse d. As long as the annuity earns interest ✅ Correct Answer: b. For a set time, even if annuitant dies Rationale: This guarantees income for life and for a minimum period, continuing payments to beneficiaries if death occurs early. What are the different types of insurance contracts? - ANSWER 1. Valued Contracts: They have a pre-determined, face amount. When Joe dies, his family will receive the death benefit placed on the contract.
A life insurance policy that has cash value which grows faster than the cash value of a Seven Pay Whole Life policy is known as a. An Endowment policy. b. Modified Life policy. c. A Modified Endowment Contract. d. A Modified Superstock Pro. - ANSWER A Modified Endowment Contract Which of the following is true concerning cash value in a Whole Life insurance policy? a. It grows tax deferred. b. It is never guaranteed. c. It is taxed yearly. d. It is always paid in addition to the death benefit. - ANSWER It grows tax deferred Cash value that remains in a Whole Life policy is tax deferred. If you cash in (surrender) the policy, then you will be taxed on the interest dollars earned. Whole Life insurance policies mature in two ways. They are a. Death, or age 95. b. Death, or age 100. c. Death, or age 65. d. Death, or at that point when the insured ceases to live. - ANSWER Death, or age 100 A Whole Life policy matures at age 100 or at death. Continuous Premium is another term for a. Life Paid at 65. b. 20 - Pay Life. c. Straight Life. d. Limited Pay. - ANSWER Straight Life Continuous Premium, or Straight Life, means you pay premium through age 100. What is limited in "Limited Pay Whole Life?" a. The death benefit b. The coverage period c. The acceptable causes of death d. The payment period - ANSWER The payment period
Limited Pay Whole Life means that premiums are paid for a certain, specified period of time, such as 20 years or until age 65. A Whole Life policy matures at age 100. The tax implications for the policyowner/insured are that he/she a. Will be taxed on the entire value of the policy. b. Will be taxed only on the interest dollars that grew in the policy, not the premium dollars paid. c. Will be taxed and pay a 10% penalty d. Will not be taxed at all. - ANSWER Will be taxed only on the interest dollars that grew in the policy, not the premium dollars paid. If a policyowner/insured lived to age 100, the policy would ENDOW and the insurance company would pay the face amount of the policy to the policyowner. However, it is NOT a death benefit, and therefore is NOT tax free. The policyowner would be taxed on the interest earned on the policy. Complete this statement. In Whole Life, the shorter the payment period, the faster______ a. The growth of cash value. b. The growth of the death benefit. c. The death. d. The policy matures. - ANSWER The growth of cash value The faster you put cash into the policy, the faster the cash values will grow. A Term insurance policy provides a. Death benefit but no cash value. b. Cash value but no death benefit. c. Cash value plus a death benefit. d. A guaranteed retirement income. - ANSWER Death Benefit but no cash value Unlike Whole Life policies, Term insurance policies do not have cash value. A life insurance death benefit is a. Always credited as income and taxed on the deceased's final income tax return. b. Not subject to Federal income tax. c. Subject to Federal Income tax on the growth, but not on the premium dollars paid. d. Taxed as ordinary income to the beneficiary. - ANSWER Not subject to Federal Income Tax
Term insurance policies only mature in one way...you die during the term. Which required life insurance policy provision states that the statements made on the application are considered to be representations? a. Representation clause b. Entire Contract clause c. Consideration clause d. Insuring clause - ANSWER Entire Contract Clause Contains three parts: The entire agreement is contained in the policy and application, all statements in the application are presentations, and only executive officers can make changes in the policy. The Free Look Provision begins on a. The date the insured dies. b. The policy delivery date. c. The application date. d. January 1st each year. - ANSWER The Policy delivery date Which required life insurance policy provision outlines the procedure for transferring ownership of the contract? a. Ownership clause b. Assignment clause c. Reinstatement clause d. Insuring clause - ANSWER Assignment Clause Which required life insurance policy provision contains the company's consideration? a. Insuring clause b. Consideration clause c. Container clause d. Entire Contract clause - ANSWER The Insuring Clause contains the company's promises.. Who is authorized to make changes to a life insurance contract? a. Only the underwriter b. Only the policyowner c. Only the agent
d. Only an executive officer of the company - ANSWER Only an executive officer of the insurance company can authorize changes to the policy for the company, not the agent or an underwriter. Obviously, the changes must be approved by the policyowner. Which of the following is NOT true concerning a policy loan? a. Interest on the loan is paid in advance. b. Interest on the loan can be fixed or adjustable. Incorrect c. Term policies permit policy loans up to the policy's face amount. d. The loan amount cannot exceed the cash value. - ANSWER Term policies permit policy loans up to the policy's face amount. The required life insurance policy provision which would prohibit the company from challenging a statement on an application nine years after the policy was issued is called the a. Insuring clause. b. Entire Contract clause. c. Incontestable clause. d. Statute of Limitations clause - ANSWER Incontestable clause Statements on the application can be the basis for challenging paying claims for a limited amount of time such as two (or three) years. The two kinds of provisions found in a life insurance policy are called Select one: a. Legal and illegal. b. Optional and discretionary. c. Binding and non-binding. d. Required and discretionary. - ANSWER Required and discretionary Which of the following life policies would provide reinstatement rights? a. Decreasing Term b. A Whole Life policy with cash value c. Renewable Term d. All Term policies - ANSWER A Whole Life policy with cash value If a revocable beneficiary and an insured die at the same time, the death benefit is a. Paid to the insured's estate. b. Automatically doubled. c. Not paid. d. Paid to the beneficiary's estate. - ANSWER Paid to the insured's estate
Which of the following is NOT true concerning a dividend paid by a Mutual Company? a. Dividends are taxable. b. The interest paid on a dividend is taxable. c. Dividends can best be described as a return of an overcharge. d. Dividends might be paid if you purchase a policy through a mutual company. - ANSWER Dividends are taxable Dividends paid by a Mutual company are a return of unneeded premium and therefore not taxable. Nonforfeiture options are available with a. All Life insurance policies. b. All Term insurance policies. c. Policies that have cash value. d. Policies that have matured. - ANSWER Policies that have cash value Nonforfeiture options are only available with policies that have cash value because there must be cash available to sustain the policy if the premiums are not paid on time. A rated individual cannot select which of the following options? a. Paid-up Additions. b. Extended Term. c. Reduced Paid-up. d. Cash. - ANSWER Extended Term A rated individual represents an adverse selection risk. If we allowed them to select Extended Term as a Nonforfeiture option, it means they would have the same level of death benefit without paying additional premium dollars. Which Nonforfeiture option could provide coverage until age 100? a. Extended Term b. Rollover Life c. Reduced Paid-up d. Cash - ANSWER Reduced Paid-Up There is no such thing as "Rollover Life". Extended Term provides the same face amount but only for a specified period of time, so it would not continue until age 100. Reduced Paid-up will.
An accelerated death benefit is one which a. Doubles the death benefit if the insured's death is accelerated by interested parties. b. Provides for a faster growth of cash value. c. Provides a portion of the death benefit to the insured before they die. d. Provides for a faster payment of the death benefit to the beneficiary. - ANSWER Provides a portion of the death benefit to the insured before they die Which of the following is NOT true concerning the maturity of Life insurance policies? a. Whole Life policies mature in two ways. b. Term insurance policies mature in one way. c. Endowment policies mature in two ways. d. Life insurance policies never mature until the insured is dead. - ANSWER Life insurance policies never mature until the insured is dead. Both Whole Life and Endowment policies can and do mature while the insured is still alive. For Whole Life this occurs at age 100; for Endowments, at the end of the predetermined "Endowment period". Which settlement option is considered the most flexible? a. Interest b. Cash c. Fixed Period d. Fixed Amount - ANSWER Interest The Interest option allows you to then pick another option, hence, it is the most flexible. Which of the following would be subject to taxation in the year in which it's earned? a. Dividends paid to a mutual insurer policyowner b. Life insurance policy death benefit c. Growth in Cash Value of a Whole Life policy d. Interest earned on a reinvested Life insurance policy death benefit - ANSWER Interest earned on a reinvested life insurance policy death benefit The death benefit itself is tax free, but then the interest earned on the invested death benefit WOULD be taxed. Survivorship Life insurance can do all of the following EXCEPT a. Be used as an estate planning tool. b. Pay upon the death of the last insured.
b. A Life insurance policy designed for adolescents who participate in track and field events. c. A Life insurance policy whose face amount jumps five times when the insured reaches a certain age, such as age 21. d. A Life insurance policy whose premium jumps five times when the insured reaches a certain age, such as age 21. - ANSWER A life insurance policy whose face amount jumps five times when the insured reaches a certain age, such as 21. With Graded Premium Whole Life, the premium a. Is guaranteed to remain level throughout the life of the policy. b. Will decrease. c. Will be waived for the first five years of coverage. d. Will increase - ANSWER Will Increase (Think stair-steps) A Family policy is constructed using what two kinds of Life insurance products? a. Whole Life and Decreasing Term b. Convertible Term and Decreasing Term c. Whole Life and Level Term d. Whole Life and Convertible Term - ANSWER Whole Life & Convertible Term When will the death benefit of a Joint Life policy be paid? a. When all insureds have died b. When the second insured dies c. When the first insured dies d. When all the even numbered insureds die - ANSWER When the first insured dies If you purchase an IRA with pre-tax dollars, it means that a. Only the growth will be taxed on payout. b. All money paid out will be subject to tax. c. You will not be taxed during the payout period. d. You can only be taxed on a maximum of $2000 per year. - ANSWER All money paid out will be subject to tax If you are able to purchase an IRA with pre-tax dollars, you are either not in another Qualified Pension Plan, or you are in a Qualified Pension Plan and are earning a low to medium income. Since none of the money in your IRA was ever taxed, it will ALL be taxed as income when you withdraw the money. What are the Federal income tax implications of a Buy-Sell agreement funded by Life insurance?
a. The premiums are tax deductible; the proceeds are not taxed. b. The premiums are not tax deductible; the proceeds are not taxed. c. The premiums are not tax deductible; the proceeds are taxed. d. The premiums are tax deductible; the proceeds are taxed. - ANSWER The premiums are not tax deductible; the proceeds are not taxed The IRS's opinion is that if a business is going to get a tax-free death benefit, then the business is not entitled to also deduct the premium payments as a before-tax business expense. Two types of corporate pension plans are a. Defined investment and defined growth. b. Defined growth and defined contribution. c. Defined benefit and defined investment. d. Defined benefit and defined contribution. - ANSWER Defined Benefit and Defined Contribution In the Defined Contribution plan, the amount set aside per employee per years is defined (stated), i.e. the contribution is defined. In the Defined Benefit Plan, how much a retired person will receive in benefits each month is defined. A Keogh plan would allow an annual contribution of up to a. 20 percent of total earned income. b. 10 percent of total earned income. c. 15 percent of total earned income. d. 30 percent of total earned income. - ANSWER 20% of total earned income Maximum annual contributions are limited to the lesser of $30,000 or 20 percent of total earned income (25% of the after-contribution income). To whom is the death benefit paid in a Key Employee Life Insurance policy? a. The estate of the employee b. The employee c. Any beneficiary the employee names d. The employer - ANSWER The Employer It is paid to the employer because he/she is the policyowner. Which of the following is NOT a requirement of a Qualified Retirement Plan?
