Life Health Insurance Exam Questions & Answers 2026 (11–20)

Question 1

In a universal life policy, Option B (increasing death benefit) pays which amount at death?

TheoryPractice · Accepted Answer

The specified amount plus the accumulated cash value. Under UL Option B, the beneficiary receives the level specified amount plus the cash value, so the total death benefit increases as cash value grows.

Question 2

Why must a producer selling variable life insurance hold a securities registration in addition to a life license?

TheoryPractice · Accepted Answer

The cash value is invested in separate-account subaccounts and is a security. Variable products place cash value in separate-account subaccounts with investment risk borne by the owner; this makes them securities, requiring FINRA registration plus the life license.

Question 3

In a variable life policy, who bears the investment risk of the separate account?

TheoryPractice · Accepted Answer

The policyowner. Because separate-account values fluctuate with subaccount performance, the policyowner assumes the investment risk, and the cash value can rise or fall.

Question 4

Adjustable life insurance allows the policyowner to do which of the following?

TheoryPractice · Accepted Answer

Convert between term and permanent coverage as needs change. Adjustable life lets the owner modify premium, face amount, and the term/permanent balance to fit changing needs, within limits and subject to insurability for benefit increases.

Question 5

A traditional endowment policy pays the face amount when:

TheoryPractice · Accepted Answer

The insured dies or the policy reaches its maturity date, whichever is first. An endowment pays the face amount at death or endows (pays the living insured) at the stated maturity date; modern tax law made most endowments lose favorable tax treatment.

Question 6

Under a universal life Option A, the death benefit is generally:

TheoryPractice · Accepted Answer

A level specified amount. UL Option A provides a level death benefit; as cash value grows, the net amount at risk to the insurer declines, helping keep cost-of-insurance charges lower.

Question 7

A participating life insurance policy is one that:

TheoryPractice · Accepted Answer

May pay policy dividends to the owner. Participating policies, typically issued by mutual insurers, may pay dividends representing a return of overcharged premium; dividends are not guaranteed.

Question 8

Policy dividends from a participating life policy are generally treated for tax purposes as:

TheoryPractice · Accepted Answer

A nontaxable return of premium until they exceed cumulative premiums paid. The IRS views dividends as a return of overpaid premium, so they are not taxable unless cumulative dividends exceed the total premiums the owner has paid.

Question 9

Which is NOT one of the standard nonforfeiture options in a whole life policy?

TheoryPractice · Accepted Answer

Automatic premium loan. The three statutory nonforfeiture options are cash surrender, reduced paid-up, and extended term. Automatic premium loan is a separate provision, not a nonforfeiture option.

Question 10

Choosing the reduced paid-up nonforfeiture option results in:

TheoryPractice · Accepted Answer

A smaller permanent policy with no further premiums due. Reduced paid-up uses the cash value as a single premium to buy a smaller, fully paid-up whole life policy, keeping permanent coverage with no more premiums.

Life Health Insurance Exam Questions & Answers 2026 (11–20)

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