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Indiana Life Insurance Final EXAM NEW
VERSION LATEST UPDATE 2025- 2026
WITH ACCURATE ANSWERS
GUARANTEED PASS BEST STUDYING
MATERIAL
1. Which of the following groups may NOT be insured by a group life insurance policy? A. Labor unions B. Employer-employee groups C. Debtor groups D. Individuals related by blood ✅ Correct Answer: D. Individuals related by blood Rationale: Group life insurance policies are designed for groups formed for purposes other than obtaining insurance, such as employment or membership. Relatives by blood do not constitute an eligible group. 2. K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she choose? A. Accumulate at Interest B. Cash C. One-Year Term Insurance D. Paid-Up Additional Insurance ✅ Correct Answer: D. Paid-Up Additional Insurance Rationale: This dividend option purchases additional amounts of whole life insurance, which increases the policy’s death benefit and helps protect against inflation. 3. A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the: A. Dividend provision B. Accelerated Benefits provision C. Policy Loan provision ✅ D. Settlement option Correct Answer: C. Policy Loan provision Rationale: Policy loans allow the policyholder to borrow up to the amount of the policy’s cash value. 4. What would be an accurate definition of "controlled business"? A. Business written for policyholders outside the state
B. Business written on strangers C. Business written on the agent's own life or interests ✅ D. Group policies only Correct Answer: C. Insurance business that is written on the agent's own life, property, or interests Rationale: Controlled business refers to insurance written for the agent themselves, their family, or business associates.
5. Which product would best serve a retired individual looking to invest a lump- sum of money through an insurance company? A. Term Life B. Whole Life C. Annuity ✅ D. Universal Life Correct Answer: C. Annuity Rationale: Annuities are designed to provide a steady income stream from a lump-sum investment, ideal for retirees. 6. Which of the following is an example of a nonforfeiture option? A. Dividends B. Paid-Up Additions C. Reduced Paid-Up Option ✅ D. Policy Loan Correct Answer: C. Reduced Paid-Up Option Rationale: Nonforfeiture options allow the policyholder to retain some benefits; the reduced paid-up option converts the policy to a smaller face amount of permanent insurance. 7. In a qualified retirement plan, the yearly contributions to an employee's account: A. Are not limited B. Are restricted to maximum levels set by the IRS ✅ C. Can be determined by the employer only D. Are set by the employee Correct Answer: B. Are restricted to maximum levels set by the IRS Rationale: The IRS sets annual contribution limits for qualified retirement plans. 8. Which of the following is NOT considered rebating? A. Giving a premium discount to the insured B. Offering a share of commission to a client C. Sharing commissions with another licensed agent ✅ D. Giving gifts to influence sale Correct Answer: C. Sharing commissions with an agent licensed in the same line of
13. The USA Patriot Act was enacted in: A. 1999 B. 2000 C. 2001 ✅ D. 2002 Correct Answer: C. 2001 Rationale: The act was passed in response to the 9/11 attacks to combat terrorism and money laundering. 14. Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase? A. Term Life ✅ B. Straight Life C. Endowment D. Annuity Correct Answer: A. Term Life Rationale: Term life provides high coverage at a low cost for a specific period. 15. During a life insurance sales transaction, which form must be completed if the customer is replacing existing coverage? A. Authorization Form B. Proof of Insurability C. Notice Regarding Replacement of Life Insurance or Annuity ✅ D. Beneficiary Statement Correct Answer: C. Notice Regarding Replacement of Life Insurance or Annuity Rationale: This form informs the applicant of potential consequences when replacing life insurance. 16. Which type of life policy contains a monthly mortality charge and self-directed investment choices? A. Whole Life B. Term Life C. Variable Universal Life ✅ D. Modified Endowment Contract Correct Answer: C. Variable Universal Life Rationale: VUL policies include flexible premiums, mortality charges, and separate investment accounts. 17. In Indiana, what is the maximum percentage of controlled business a producer may write in a 12-month period? A. 10% B. 25% ✅
C. 50%
D. 75%
Correct Answer: B. 25% Rationale: Indiana limits controlled business to 25% to encourage producers to serve the public.
18. An insurer licensed in Indiana but domiciled in Texas is considered a(n): A. Domestic B. Foreign ✅ C. Alien D. Unauthorized Correct Answer: B. Foreign Rationale: A foreign insurer is licensed in a state but incorporated elsewhere in the U.S. 19. To attain a nonresident producer license in Indiana, the applicant must: A. Pass the Indiana licensing exam B. Reside in Indiana C. Be appointed by two insurers D. Be from a state with reciprocity with Indiana ✅ Correct Answer: D. Be from a state with reciprocity with Indiana Rationale: Nonresidents can be licensed if their home state has a reciprocal agreement. 20. Which best describes a contingent beneficiary? A. First to receive death benefit B. Person who receives benefits if the primary dies first ✅ C. Someone paid dividends D. The insurer Correct Answer: B. Person designated to receive policy proceeds if the primary beneficiary dies before the insured Rationale: Contingent beneficiaries receive benefits if the primary beneficiary is unavailable. 21. The Insurance Commissioner may suspend, revoke, or refuse to renew a producer's license for which of the following reasons? A. Failing to attend continuing education B. Selling only term policies C. Using fraudulent or dishonest practices ✅ D. Changing addresses without notice Correct Answer: C. Using fraudulent or dishonest practices Rationale: Fraudulent, coercive, or dishonest behavior is grounds for disciplinary action against a producer's license.
Correct Answer: C. The insured Rationale: In contracts of adhesion, ambiguities are interpreted in favor of the party that did not write the contract—usually the insured.
27. C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements is true? A. C is the owner and beneficiary B. ABC is the insured C. C is the beneficiary D. ABC is the policyowner, C is the insured, and ABC is the beneficiary ✅ Correct Answer: D. ABC is the policyowner, C is the insured, and ABC is the beneficiary Rationale: In a key person policy, the business owns and benefits from the policy, while the key employee is the insured. 28. Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? A. Term Life B. Whole Life C. Variable Life ✅ D. Universal Life Correct Answer: C. Variable Life Rationale: Variable life insurance involves securities; therefore, agents must register with FINRA (formerly NASD). 29. A producer's license may be denied, suspended, or revoked if the licensee: A. Fails to renew within 60 days B. Sells policies without a license C. Is found guilty of misrepresentation in obtaining the license ✅ D. Changes mailing address Correct Answer: C. Is found guilty of misrepresentation in obtaining the license Rationale: Providing false information to obtain a license is grounds for denial or revocation. 30. In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? A. Bilateral B. Adhesion C. Conditional D. Unilateral ✅ Correct Answer: D. Unilateral Rationale: Insurance contracts are unilateral because only the insurer is legally bound to fulfill its promise.
31. Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? A. Obtain signature and send blank forms B. Complete the application, review with customer, then submit ✅ C. Only collect payment first D. Mail forms without review Correct Answer: B. Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company. Rationale: Proper application procedures ensure full disclosure, accuracy, and legal compliance. 32. The payments on Q's annuity are no less than $250 quarterly. Which of the following does Q own? A. Immediate Annuity B. Flexible Installment Deferred ✅ C. Fixed Indexed Annuity D. Single Premium Deferred Correct Answer: B. Flexible Installment Deferred Rationale: This type of annuity allows the annuitant to make flexible payments over time, with a minimum amount required. 33. What is the underlying concept regarding level premiums? A. Premiums increase as risk increases B. Premiums stay the same regardless of age C. The early years are charged more than needed ✅ D. The premiums fluctuate with inflation Correct Answer: C. The early years are charged more than what is needed Rationale: Level premiums overcharge in early years to compensate for higher costs in later years. 34. An example of an Unfair Claims Settlement Practice would be: A. Paying a claim early B. Negotiating a fair settlement C. Denying a claim with explanation D. Failing to make prompt, fair, and equitable settlements ✅ Correct Answer: D. Failing to make prompt, fair, and equitable settlements Rationale: This violates insurance regulations and harms the policyholder's right to timely benefits. 35. P is a producer who is licensed in Indiana but a resident of Michigan. In Indiana, P is considered a:
A. 30
B. 45
C. 60
D. 90
- ANSWER A. 30
S is covered by a whole life policy. Which insurance product can cover his children? A. Assignment provision B. Payor benefit C. Accelerated benefit rider D. Child term rider
- ANSWER D. Child Term Rider If a producer commits an act of coercion or intimidation, how would the producer's insurance company be held responsible for this act? A. If the insurer oly suspends the producer, not terminate B. If the insurer reduces the commission level of the producer C. If the insurer approves of the act D. If the insurer does not make a public announcement of the act
- ANSWER C. If the insurer approves of the act Which of these types of policies may NOT have an Automatic Premium Loan provision attached to it?
- ANSWER Decreasing Term Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits? A. 3 B. 4 C. 5 D. 6
- ANSWER 5 months An example of rebating would be: A. a mutual insurance company paying dividends to its policyowners B. reducing the premiums across the board for a specific risk class C. offering a client something of value not stated in the contract in exchange for their business D. using intimidation in order to restrain or monopolize the business of insurance - ANSWER C. offering a client something of value not stated in the contract in exchange for their business
What does the insuring agreement in a Life insurance contract establish? A. An insurer's basic promise B. The insurance policy's grace period C. An insurer's required reserve amount D. The obligations of the beneficiary
- ANSWER A. An insurer's basic promise Which of the following consists of an offer, acceptance, and consideration? A. Warranty B. Estoppel C. Contract D. Representation
- ANSWER C. Contract When does a life insurance contract become effective if the initial premium is not collected during the application process?
- ANSWER When producer delivers policy and collects initial premium According to Indiana law, group life insurance conversion privileges must NOT: A. allow the converted policy to exceed 75% of the original group life amount B. allow a time period to convert group life coverage to an individual life policy C. require a rate increase D. require evidence of insurability
- ANSWER D. Require evidence of insurability What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? A. State Guaranty Association B. Fair Labor Standards Board C. Fair Credit Reporting Act D. National Association of Insurance Commissioners
- ANSWER C. Fair Credit Reporting Act D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed? A. Limited-pay life B. Graded Premium C. Level term D. Endowment
- ANSWER C. Level term
When must insurable interest be present in order fora life insurance policy to be valid? - ANSWER At the time of application When the application is made Which statement is TRUE in regards to a policy loan? - ANSWER Past-due interest on a policy loan is added to the total debt What group term life feature permits anm individual to depart from the group and continue to be convered without providing evidence of insurability? - ANSWER Conversion Which type of life insurance beneficiary require his/her consent when a change of beneficiary is attempted by the policyowner? - ANSWER Irrevocable beneficiary Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated: A. 1970 - Fair Credit Reporting Act B. 1959 - Intervention by (SEC) The Securities and Exchange Commission C. 1999 - Financial Service Modernization Act D. 1945 - The McCarran-Ferguson Act - ANSWER A. 1970 - Fair Credit Reporting Act A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as: - ANSWER a fraternal benefit society How long does an insurance company appointment remain in force? A. 1 year B. 2 years C. 3 years D. Until terminated - ANSWER D. until terminated Which of the following is NOT an unfair claim settlement practice? - ANSWER Needing written documentation of claim details A Term Life rider offers the insured: - ANSWER additional life coverage Dividends payable to a policyowner are? A. guaranteed B. declared by the State C. declared by the insurance company D. strictly regulated - ANSWER C. Declared by the insurance company A producer who makes misleading statements that lead to the termination of an existing insurance policy so that a new policy with another insurer can be taken out has committed: A. Coercion B. Rebating
C. Defamation D. Twisting - ANSWER D. Twisting In order to sell a(n) ______ life policy, a producer is required to register with the Financial Industry Regulatory Authority - ANSWER Variable Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted? - ANSWER If Tom's employment is terminated, 20% of the funds could be forfeited Which of these statements concerning an Individual Straight Life annuity is accurate? A. Life expectancy of the annuitant is not a factor B. The payments are received tax-free C. Only availble to employees of nonprofit charitable, educational, and religious organizations D. Payments are made to an annuitant for life - ANSWER D. Payments are made to an annuitant for life An immediate annuity consists of a: - ANSWER Single Premium K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? A. Proceeds will be paid to P's estate B. Proceeds will be divided equally between K's and P's estate C. Proceeds will be payable to K's estate if P dies within a specified time D. The courts will decide who will receive death benefits - ANSWER C. Proceeds will be payable to K's estate if P dies with a specified time In Indiana which of the following is considered an unfair competition practice? - ANSWER Coercion A life insurance policy can be backdated before the application date for up to: - ANSWER 6 months A ____ rider may be used to include coverage for children under their parents' life insurance policy - ANSWER term A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following? - ANSWER Aviation exclusion At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid? - ANSWER At the time of application
C. producer D. representative - ANSWER C. producer The cash value in a(n) _______ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors. A. Universal B. Graded C. Term D. Endowment - ANSWER A. Universal An individual working part-time has an annual income of $25,000. If this individual has IRA, what is the maximum deductible IRA contribution allowable? A. No deduction allowed B. $6, C. $5, D. $4,000 - ANSWER B. $6, How often must the Commissioner examine each domestic insurance company? A. Every year B. Every 2 years C. Every 3 years D. Every 5 years - ANSWER D. Every 5 years Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? A. Aleatory B. Adhesion C. Unilateral D. Consideration - ANSWER A. Aleatory During the course of an insurance business transaction, who does the producer legally represent? A. Producer B. Insured C. Insurance company D. Beneficiary - ANSWER C. Insurance company E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? A. F
B. The dissolved partnership C. E's family D. E's estate - ANSWER A. F K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this? A. Variabl eLife B. Adjustable Life C. Graded Premium Whole Life D. Modified Whole Life - ANSWER D. Modified Whole Life Which of the following is NOT a situation that involves life insurance policy replacement? A. Depleting cash value in an existing policy and applying for a new one B. Converting a term policy to a permanent policy with the same insurer C. Taking a reduced paid up option for a policy and applying for a new one D. Terminating an existing policy and applying for one with better coverage - ANSWER B. Converting a term policy to a permanent policy with the same insurer In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT: A. Applicant B. Owner C. Payor D. Insured - ANSWER D. Insured Which Unfair Competition Practice involves a producer suggesting that an insurance policy is like a share of stock? A. Twisting B. Intimidation C. Misrepresentation D. Sliding - ANSWER C. Misrepresentation What action can a policyowner take if an application for a bank loan requires collateral? A. Utilize accelerated benefits provision B. Borrow against policy cash value and use as a down payment C. Assign policy ownership to the bank D. Name bank as beneficiary - ANSWER C. Assign policy ownership to the bank A domestic insurance company in Indiana MUST: A. own real estate in Indiana B. write insurance on risks located only in Indiana
What does a certificate of authority allow? A. A nonresident producer to conduct insurance business B. An insurance company to exceed coverage limits that the Guaranty Fund covers C. An insurance company to conduct insurance business in Indiana D. A resident producer to sell insurance contracts - ANSWER C. An insurance company to conduct insurance business in Indiana The Accelerated Death Benefit provision in a life insurance policy is also known as a(n): A. 1035 exchange B. Inter vivos gift C. Non-forfeiture option D. Living Benefit - ANSWER D. Living Benefit If a new life insurance policy is replacing an existing one, the insured is given the right to return for a full refund at least ____ days after policy delivery. A. 10 B. 20 C. 30 D. 40 - ANSWER B. 20 A(n) ________ of authority permits an insurance company to transact business in Indiana. A. award B. stamp C. document D. certificate - ANSWER D. certificate A life insurance arrangement which circumvents insurable interest statutes is called: A. a contract of adhesion B. an indemnity contract C. key person insurance D. Investor-Originated Life Insurance - ANSWER D. Investor-Originated Life Insurance Before a life insurance policy is issued, which of these components of the contract is required? A. Applicant's signature on application B. Beneficiary's signature C. A conditional receipt D. Attending Physician Statement (APS) - ANSWER A. Applicant's signature on application
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? A. If the primary beneficiary is a minor at the time of the insured's death B. If the primary beneficiary dies before the insured C. If the insured died of accidental causes D. If the insured died of natural causes - ANSWER B. If the primary beneficiary dies before the insured A newly licensed producer must complete 24 hours of continuing education every ____ years. A. 2 B. 3 C. 4 D. 5 - ANSWER A. 2 A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid: A. mandatory income tax withholding on the transfer amount B. paying transfer fees C. paying trustee fees D. ever paying income taxes on the distributions - ANSWER A. mandatory income tax withholding on the transfer amount At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? A. Before the appointment is scheduled B. Upon completion of the application C. At the policy's delivery D. When the insurer receive's the MIB report - ANSWER B. Upon completion of the application An individual covered under a Group Life insurance policy is considered to be a(n): A. annuitant B. policyowner C. certificate holder D. contingent - ANSWER C. certificate holder Which type of contract liquidates an estate through recurrent payments? A. Universal life insurance B. Whole life insurance C. Annuity D. 401(k) - ANSWER P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the
