Life & Health Practice Questions (2026) — Free Sample Questions with Answers

Answer: C

Ask the existing insurer to cancel the old policy before the new policy is issued: The producer should not have the old coverage cancelled first, and notifying the existing insurer is the replacing insurer's duty.

Note the replacement on the application, but only if the applicant is 65 or older: Replacement disclosure applies to applicants of every age.

Have the Notice Regarding Replacement signed and submit it, listing replaced policies: Correct. The producer must present and read the Notice Regarding Replacement, have the applicant and producer sign it, list the policies being replaced, leave copies of any sales materials used, and submit the paperwork with the application.

Nothing, because surrendering an old policy to pay for a new one is not a replacement: Using values of an existing policy to buy a new one is a replacement (or financed purchase) under the model.

The producer identifies the replacement on the application, provides the signed Notice Regarding Replacement, lists the replaced policies, and leaves copies of sales materials. Replaced policies often get an extended free look. Exact time frames vary by state; check your state's insurance code.

Answer: D

Controlled business: Controlled business means writing coverage mainly on oneself, family, or employees, not misleading replacement.

Rebating: Rebating is offering an inducement, such as part of the commission, that is not stated in the policy.

Sliding: Sliding is adding coverages the applicant did not request or misrepresenting that they are required.

Twisting: Correct. Twisting is inducing a policyowner to lapse, surrender, or replace a policy through misrepresentation or incomplete comparison, to the policyowner's detriment.

Twisting = a replacement induced by misrepresentation, an unfair trade practice under the NAIC Unfair Trade Practices model.

Answer: A

Aleatory: Correct. An aleatory contract involves an exchange of unequal values that depends on an uncertain event: a small premium can buy a large benefit.

Adhesion: Adhesion means the insurer drafts the terms and the applicant takes them as written.

Unilateral: Unilateral means only the insurer makes legally enforceable promises.

Conditional: Conditional means the insurer pays only if the insured meets certain conditions, such as filing proof of loss.

Aleatory = unequal exchange based on chance; adhesion = take it or leave it; unilateral = only the insurer promises; conditional = duties must be met.

Answer: D

Convert to individual term within 90 days after a medical exam: Conversion requires no medical evidence, and the typical window is 31 days, not 90.

Keep group life for 18 months at 102% of the premium: That describes COBRA continuation, which applies to group health plans, not group life.

No right at all, because group coverage ends at termination: Group life contracts include a conversion privilege for members whose coverage ends.

Convert to individual whole life in 31 days with no evidence: Correct. Group life typically lets a departing member convert to an individual permanent policy without evidence of insurability within 31 days. If he dies during that window, the group benefit is payable.

Group life conversion: an individual permanent policy, no evidence of insurability, typically within 31 days, with coverage in force during the window. Exact time frames vary by state; check your state's insurance code.

Answer: D

1. Identify the option: Option B (increasing) = specified amount + cash value.
2. Add: $250,000 + $40,000 = $290,000.
3. Compare: Option A would pay a level $250,000, because the cash value is part of that amount.

$250,000: That is the Option A (level) benefit, where the cash value is part of the specified amount.

$210,000: The cash value is added under Option B, not subtracted from the specified amount.

$40,000: That is the cash value alone; the death benefit also includes the specified amount.

$290,000: Correct. Option B pays the specified amount plus the cash value: $250,000 + $40,000 = $290,000.

UL Option A = level death benefit (the specified amount); Option B = specified amount plus cash value.

Answer: A

Use the cash value to buy $150,000 of term coverage for as long as it lasts: Correct. Extended term is the usual automatic nonforfeiture option: the net cash value buys term insurance for the same face amount for a limited period.

Use the cash value to buy a smaller policy that is paid up for life: That is reduced paid-up insurance, which the owner must choose; it is not the usual default.

Keep the cash value, because nonforfeiture options apply only to term policies: Nonforfeiture options apply to cash-value policies; the Standard Nonforfeiture Law prevents the owner losing the cash value.

Mail Gwen the cash surrender value and end the policy: Cash surrender must be elected by the owner; it is not the automatic option.

Under the Standard Nonforfeiture Law, a lapsing owner may take cash, reduced paid-up or extended term. Extended term (same face amount, shorter period) is usually automatic if no choice is made.

Answer: B

1. 1. Divide the proceeds by branch (one per child): $300,000 ÷ 3 = $100,000 per branch.
2. 2. Ann and Cara are living, so each receives $100,000.
3. 3. Ben's $100,000 branch passes to his two children: $100,000 ÷ 2 = $50,000 each.

$0: This is the per capita result, where a deceased beneficiary's share goes to the surviving named beneficiaries (Ann and Cara).

$50,000: Correct. Per stirpes ("by the branch") passes Ben's one-third share ($100,000) to his descendants, split equally between his two children.

$75,000: This divides $300,000 equally among the four living descendants (Ann, Cara and two grandchildren); per stirpes divides by branch first.

$100,000: Each grandchild does not receive Ben's whole share; the two grandchildren split the $100,000.

Per stirpes keeps a deceased beneficiary's share in that branch of the family; per capita divides the proceeds only among the named beneficiaries who are still living.

Answer: D

The insurer refunds the premium, because no policy was issued: A refund is the result only if the applicant would not have qualified as applied.

The insurer pays only if death occurs after policy delivery: The conditional receipt exists to provide coverage before delivery once the insurability condition is met.

The insurer pays a reduced amount for the period before issue: Once the condition is met, the full applied-for coverage applies; there is no reduced benefit.

The insurer pays the claim as if the policy had been issued: Correct. Under a conditional receipt, coverage is effective on the date of the application or exam (whichever is later) if the applicant is found insurable as applied for.

A conditional receipt provides coverage from the later of the application or the medical exam, conditional on the applicant being insurable as applied for. Without premium paid, there is no coverage until delivery.

Answer: D

1. Gain in the policy = cash value − premiums paid = $80,000 − $50,000 = $30,000.
2. A MEC is taxed LIFO (gain first): the first $30,000 of the $40,000 withdrawal is taxable gain, and the remaining $10,000 is a tax-free return of basis.
3. Devon is under 59½, so a 10% penalty applies to the taxable portion: 10% × $30,000 = $3,000.
4. Result: $30,000 taxable as ordinary income plus a $3,000 penalty tax.

$30,000 is taxable as ordinary income, with no penalty tax: This applies the gain-first rule correctly but forgets the 10% penalty on MEC distributions taken before age 59½.

$40,000 is taxable as ordinary income, plus a $4,000 penalty tax: Only the $30,000 of gain is taxable; the other $10,000 of the withdrawal is a return of premiums paid.

Nothing is taxable, because the withdrawal is less than the premiums paid: That is the FIFO (basis-first) rule for a non-MEC policy. A MEC is taxed gain-first.

$30,000 is taxable as ordinary income, plus a $3,000 penalty tax: Correct. A MEC distribution is taxed gain-first (LIFO). The $30,000 of gain comes out first and is taxable, the remaining $10,000 is a tax-free return of basis, and because Devon is under 59½ a 10% penalty applies to the taxable $30,000 (IRC 7702A and IRC 72).

MEC withdrawals and loans are taxed gain-first (LIFO), and the taxable portion carries a 10% penalty before age 59½; the death benefit stays income-tax-free.

Answer: A

1. 1. In 2026, the family HSA contribution limit = $8,750.
2. 2. Raj is 55 or older, so he may add a $1,000 catch-up.
3. 3. His spouse is 50, below the catch-up age, so no second catch-up.
4. 4. Maximum = $8,750 + $1,000 = $9,750.

$9,750: Correct. In 2026 the family HSA limit is $8,750, and an eligible account holder age 55 or older may add a $1,000 catch-up: $8,750 + $1,000 = $9,750.

$8,750: This is the 2026 family limit without Raj's $1,000 age-55 catch-up.

$5,400: This is the 2026 self-only limit ($4,400) plus catch-up, but Raj has family coverage.

$10,750: Only Raj is 55 or older, so only one $1,000 catch-up applies; his 50-year-old spouse does not qualify.

In 2026, HSA limits are $4,400 self-only and $8,750 family, plus $1,000 for an account holder 55 or older.

Answer: A

Business overhead expense (BOE) policy: Correct. BOE reimburses the business's ongoing fixed costs (rent, utilities, employee salaries) during the owner's disability. It does not replace the owner's own income; premiums are generally deductible to the business and benefits are taxable.

Key employee disability policy: Key employee DI pays the business for losses when a valuable employee is disabled; it is not built to reimburse listed overhead expenses.

Individual disability income policy: Individual DI replaces the insured's own lost income, not the practice's overhead bills.

Disability buy-sell policy: A disability buy-sell funds the purchase of a disabled owner's interest by the other owners; Dr. Patel is the sole owner and wants to keep operating.

BOE coverage keeps a business running by reimbursing its fixed overhead while the owner is disabled; the owner's own salary is not covered.

Answer: A

1. 1. Deductible = $2,000; remaining charges = $30,000 − $2,000 = $28,000.
2. 2. Omar's coinsurance = 20% × $28,000 = $5,600.
3. 3. Omar's uncapped share = $2,000 + $5,600 = $7,600.
4. 4. The OOP maximum caps Omar at $5,000.
5. 5. Insurer pays $30,000 − $5,000 = $25,000.

$25,000: Correct. Omar's share before the cap would be $2,000 + 20% of $28,000 ($5,600) = $7,600, but the $5,000 out-of-pocket maximum limits him to $5,000, so the insurer pays $30,000 − $5,000 = $25,000.

$22,400: This leaves Omar paying $7,600 and ignores the out-of-pocket maximum.

$24,000: This is 80% of the full $30,000; it ignores both the deductible and the cap.

$23,000: This charges Omar the deductible on top of a $5,000 cap that already includes it.

Once the insured's deductible and coinsurance reach the out-of-pocket maximum (stop-loss), the plan pays 100% of further covered charges.

Answer: B

Both the accident and the sickness: Sickness is covered only if it begins more than 10 days after reinstatement, so the March 6 illness is excluded.

The accident only: Correct. A reinstated policy covers accidental injury sustained after reinstatement, but only sickness that begins more than 10 days after reinstatement. The March 6 sickness began 5 days after reinstatement. Exact time frames vary by state; check your state's insurance code.

The sickness only: Accidents are covered immediately upon reinstatement, and the sickness falls inside the 10-day window.

Neither until 45 days have passed: The 45-day rule is when a pending application is deemed approved; it is not a waiting period for losses.

Reinstatement: accidents are covered immediately and sickness after 10 days; if the insurer does not act on a reinstatement application within 45 days, the policy is reinstated automatically.

Answer: B

She can buy Plan F, because she is still inside her 6-month open enrollment period: Wrong: Plans C and F cannot be sold to anyone who became eligible for Medicare on or after 1/1/2020 (MACRA).

She is in open enrollment and can buy Plan G without medical underwriting: Correct: her 6-month Medigap open enrollment runs March–August 2026, insurers must accept her without health underwriting, and Plan G is the broadest plan open to people first eligible on or after 1/1/2020.

Her open enrollment ended 30 days after her Part B effective date: Wrong: 30 days is the Medigap free-look period; open enrollment lasts 6 months.

The insurer may decline her for health history since she is past 65: Wrong: during open enrollment the insurer cannot deny, delay, or price on health status.

Medigap open enrollment is 6 months starting the first month a person is 65+ and enrolled in Part B; Plans C and F are closed to the newly eligible.

Answer: A

Her mother's plan, because her birthday falls earlier in the year: Correct: under the NAIC COB birthday rule, the plan of the parent whose birthday (month and day) comes first in the calendar year is primary.

Her father's plan, because he is the older parent: Wrong: the rule looks at month and day only, not the parent's age or birth year.

Her father's plan, because the father's plan is always primary: Wrong: the old gender rule was replaced by the birthday rule.

Both plans split each claim equally between them: Wrong: COB names a primary and a secondary plan; it does not split claims evenly.

For dependent children of married parents, the plan of the parent with the earlier birthday in the calendar year pays first.