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Free Virginia Life and Annuities Insurance Examination Practice Questions

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Sample Practice Questions

Try these 10 sample questions from the Virginia Life and Annuities Insurance Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

  1. 1A Virginia resident wants authority to sell and negotiate life insurance and annuity contracts for authorized insurers. Which license describes that authority?

    1. A. Life and annuities insurance agent
    2. B. Health agent
    3. C. Viatical settlement broker
    4. D. Insurance consultant

    Answer: A

    Explanation: Virginia describes the licensee as an agent authorized "to sell, solicit, or negotiate life insurance and annuity contracts." The requested sales authority is therefore the life and annuities agent license.

    Reference: Title38.2 — Definition of Life and annuities insurance agent

  2. 2An underwriter notes that an applicant's condition makes a covered loss more likely, while a separate event would directly cause the loss. What is the condition called?

    1. A. Exposure
    2. B. Peril
    3. C. Hazard
    4. D. Loss

    Answer: C

    Explanation: "Hazard - circumstance which tends to increase the probability or severity of a loss." The condition increases the chance or severity of loss and is a hazard. Peril names a cause, exposure names something subject to loss, and loss is the adverse result.

    Reference: NAIC Glossary of Insurance Terms — Hazard entry

  3. 3An adult buys life insurance on herself and names a friend as beneficiary. Does Virginia require the friend independently to have an insurable interest?

    1. A. Yes, for every nonrelative beneficiary
    2. B. Yes, unless the friend pays the premium
    3. C. No, an adult may insure herself for any person's benefit
    4. D. No, but only if the face amount is below $10,000

    Answer: C

    Explanation: Virginia permits an adult to "take out an insurance contract upon himself for the benefit of any person." The friend need not independently establish insurable interest when the insured procures her own policy.

    Reference: Title38.2 — § 38.2-301(A)

  4. 4At issue and on each anniversary, what minimum number of persons other than spouses or minor children must a Virginia group life policy cover?

    1. A. One
    2. B. Two
    3. C. Five
    4. D. Ten

    Answer: B

    Explanation: Virginia requires, "A group life insurance policy shall cover at least two persons, other than spouses or minor children, at the issue date and at each policy anniversary date." The minimum is two.

    Reference: Title38.2 — § 38.2-3322.2

  5. 5A Virginia owner receives a new individual life policy and decides to cancel it seven days after delivery. What statutory remedy applies when the policy is surrendered with a written cancellation request?

    1. A. The policy is void from the beginning and the premium is refunded
    2. B. The policy converts to term insurance
    3. C. Only half the premium is refunded
    4. D. Cancellation is unavailable until the first anniversary

    Answer: A

    Explanation: The required notice says that during ten days, if the policy is surrendered with a written request, "the policy shall be void from the beginning and the insurer shall refund any premium paid for the policy." The owner is within that period.

    Reference: Title38.2 — § 38.2-3301

  6. 6Under Virginia's definition, how do nonforfeiture values behave when a modified guaranteed annuity is held for less than its specified guarantee period?

    1. A. They are based on a market-value adjustment formula
    2. B. They become fixed at issue
    3. C. They equal total premiums paid
    4. D. They are determined only by dividends

    Answer: A

    Explanation: Virginia defines a modified guaranteed annuity as one in which benefits are guaranteed for specified periods and "nonforfeiture values are based upon a market-value adjustment formula if held for shorter periods." The shorter holding invokes that formula.

    Reference: Title38.2 — § 38.2-107.1

  7. 7A beneficiary receives a life policy's ordinary death proceeds and later receives interest from leaving those proceeds on deposit with the insurer. Which federal income-tax treatment generally applies?

    1. A. Both the death proceeds and later interest are taxable income.
    2. B. Neither the death proceeds nor later interest is taxable income.
    3. C. Death proceeds are generally excluded; later interest is taxable income.
    4. D. Death proceeds are taxable income; later interest is excluded.

    Answer: C

    Explanation: "Life insurance proceeds paid to you because of the death of the insured person generally aren’t taxable" Ordinary death proceeds are generally income-tax excluded, but interest paid on retained proceeds is taxable.

    Reference: IRS Publication 525 — Publication 525, Life Insurance Proceeds, lines 3927-3933

  8. 8A qualified retirement plan is designed to give substantially more favorable contribution rights to highly compensated employees. Which qualification rule is implicated?

    1. A. Exclusive benefit of employees and beneficiaries
    2. B. Nondiscrimination in contributions or benefits
    3. C. Limits on contributions and allocations
    4. D. Vesting of participants' plan benefits

    Answer: B

    Explanation: "contributions or benefits must not discriminate in favor of highly compensated employees." The described favoritism implicates nondiscrimination. Exclusive benefit, limits and vesting are separate real qualified-plan requirements.

    Reference: IRS 401(k) Plan Qualification Requirements — 401(k) Plan Qualification Requirements, nondiscrimination, lines 484-507

  9. 9Before receiving an initial Virginia resident life and annuities agent license, what examination condition must an applicant normally satisfy?

    1. A. Complete a 16-hour prelicensing course only
    2. B. Pass the examination prescribed by the Commission
    3. C. Pass only a FINRA securities examination
    4. D. Serve under a temporary license for one year

    Answer: B

    Explanation: The controlling rule says, "No individual who is a resident of the Commonwealth shall obtain a license as a life and annuities agent from the Commission unless the individual has passed an examination in a form and manner prescribed by the Commission." Thus the Commission-prescribed examination is required.

    Reference: Title38.2 — § 38.2-1815(A)

  10. 10A life insurer wants the most reliable aggregate mortality estimate from a large risk pool. Which pooling design best applies the law of large numbers?

    1. A. Pool exposures whose losses arise from one correlated event.
    2. B. Pool independent, comparably distributed exposures.
    3. C. Pool exposures selected for very different loss probabilities.
    4. D. Pool exposures dominated by a single shared catastrophe.

    Answer: B

    Explanation: "pooling and diversification of risk exposures when they are independent" The NAIC discussion ties the strongest law-of-large-numbers effect to exposures that are independent and identically distributed; correlated or heterogeneous pools weaken that effect.

    Reference: NAIC A Regulator's Introduction to the Insurance Industry — Law of large numbers discussion, lines 584-589

Topics in this practice bank

These topics describe the available practice for Virginia Life and Annuities Insurance Examination. Review the examination outline and its sources for scope and allocation details.

  • 1.0 Insurance Regulation
    • 1.1 Licensing General Provisions and Definitions (38.2-1800 ) Process (38.2-1819) Types of licensees Agents (38.2-1800.1(A), 1801, 1814–1815.1, 1817–1818, 1822(A), (B), 1824) Consultants (38.2-1837–1839) Nonresidents (38.2-1836, 1845) Business entities (38.2-1800.1(B), 1820, 1822(C), (D)) Viatical Settlements (38.2-1865.1; 6000; 14VAC5-71-20) Exceptions (38.2-1821.1, 1822 (G)) Maintenance Duration and termination (38.2-1825, 1826) Address and/or name changes (38.2-1826(A)) Assumed names (38.2-1822(E), (F)) Requirement to report felony convictions (38.2-1826(B)) Requirement to report other states actions (38.2-1826(C)) Continuing education (38.2-1866, 1868.1–1871) Appointment procedures (38.2-1825, 1833–1834.1) Agent's contract with insurer versus agent's appointment with insurer Agent's appointment versus agency's appointment Solicitation prior to appointment Appointment requirement after becoming licensed Acknowledgment of appointment/notice to agent Requirement to cease solicitation Termination of appointment/notice to agent Termination of license without active appointment Disciplinary actions Probation, suspension, revocation or refusal to issue or renew (38.2-1821, 1831, 1832) Cease and desist order (38.2-219) Penalties (38.2-218, 1823)
    • 1.2 State regulation State Corporation Commission's general duties and powers (38.2-200) Agent regulation Acting for an unlicensed insurer (38.2-1802) Record retention (38.2-1809(B)) Activities of unlicensed individuals (38.2-1821.1(B), 1822(G); AL 2002-9) Payment and sharing of commissions (38.2-1812) Charging of fees (38.2-310) Illegal compensation; exceptions (38.2-1812.2) Fiduciary capacity (38.2-1813) Responsibility of trust accounts (38.2-1813) Unfair trade practices Misrepresentation (38.2-502, 512) False advertising (38.2-503) Defamation (38.2-504) Boycott, coercion and intimidation (38.2-505) Notice of Adverse Underwriting Decisions (38.2-610) False statements and entries (38.2-506) Unfair discrimination (38.2-508, 38.2-508.1, 38.2-508.2) Rebating (38.2-509) Twisting (38.2-1831(5)) Referrals (38.2-1821.1 (B) 8) Insurance information and privacy protection (38.2-604, 613) Notice of information practices (38.2-604, 608, 609, 613; 38.2-604.1)
  • 2.0 General Insurance
    • 2.1 Concepts Risk management key terms Risk Exposure Hazard Peril Loss Methods of handling risk Avoidance Retention Sharing Reduction Transfer Elements of insurable risks Adverse selection Law of large numbers Reinsurance
    • 2.2 Insurers Types of insurers Stock companies Mutual assessment insurers Fraternal benefit societies Private versus government insurers Admitted versus nonadmitted insurers Domestic, foreign and alien insurers Financial status (independent rating services) and operating results Marketing (distribution) systems
    • 2.3 Agents and general rules of agency Types Captive Independent Insurer as principal Agent of insurer Authority and powers of agents Express Implied Apparent Responsibilities to the applicant/insured
    • 2.4 Contracts Elements of a legal contract Offer and acceptance Consideration Competent parties Legal purpose Distinct characteristics of an insurance contract Contract of adhesion Aleatory contract Personal contract Unilateral contract Conditional contract Legal interpretations affecting contracts Ambiguities in a contract of adhesion Reasonable expectations Indemnity Utmost good faith Representations/misrepresentations Warranties Concealment Fraud Waiver and estoppel
  • 3.0 Life Insurance Basics
    • 3.1 Insurable interest (38.2-301, 302, 3105)
    • 3.2 Personal uses of life insurance Survivor protection Estate creation Cash accumulation Liquidity Estate conservation
    • 3.3 Determining amount of personal life insurance Human life value approach Needs approach Types of information gathered Determining lump-sum needs Planning for income needs
    • 3.4 Business uses of life insurance Buy-sell funding Key person Executive bonuses
    • 3.5 Classes of life insurance policies Group versus individual Permanent versus term Participating versus nonparticipating Fixed versus variable life insurance and annuities Regulation of variable products (FINRA and Virginia) (38.2-3113; 14 VAC 5-20-30, 80) Types of variable products
    • 3.6 Premiums Factors in premium determination Mortality Interest Expense Premium concepts Net single premium Gross annual premium Premium payment mode
    • 3.7 Agent responsibilities Rules Governing Advertisement of Life Insurance and Annuities (14VAC 5-41) Solicitation and sales presentations (14 VAC 5-41) Life, Accident and Sickness Insurance Guaranty Association (14 VAC 5-30-10 -70 ) Policy summary Buyer's guide Replacement (14 VAC 5-30-40) Use and disclosure of insurance information (38.2-613) Field underwriting Notice of information practices (38.2-604) Adverse underwriting decisions (38.2-610 – 612 ) Application procedures Required signatures Changes in the application Consequences of incomplete applications Warranties and representations Collecting the initial premium and issuing the receipt Disclosures at point of sale (e.g., HIPAA, HIV consent) USA PATRIOT Act/anti-money laundering Delivery Policy review Effective date of coverage Premium collection Statement of good health
    • 3.8 Individual underwriting by the insurer Information sources and regulation Application Agent report Attending physician statement Investigative consumer (inspection) report Medical Information Bureau (MIB) Medical examinations and lab tests including HIV (38.2-613.01; 14 VAC 5-180-50) Unfair discrimination (38.2-508, 38.2-508.1, 38.2-508.2) Classification of risks Preferred Standard Substandard Declined
  • 4.0 Life Insurance Policies
    • 4.1 Term life insurance Level term Annual renewable term Level premium term Decreasing term Increasing term Return of premium
    • 4.2 Whole life insurance Ordinary whole life Continuous premium (straight life) Limited payment Interest sensitive/current assumption Indexed life Equity indexed life Single premium Variable whole life Variable universal life
    • 4.3 Flexible premium policies Adjustable life Universal life
    • 4.4 Specialized policies Joint life (first-to-die) Survivorship life (second-to-die) Juvenile/student life
    • 4.5 Group life insurance Characteristics of group plans Types of eligible groups (38.2-3318.1) Employer/employee Debtor groups Labor union groups Group underwriting requirements Benefit payments (38.2-3330) Covered dependents (38.2-3323) Lives covered (38.2-3322.2) Conversion to individual policy (38.2-3332–3334) Contributory vs. noncontributory
    • 4.6 Credit life insurance (individual versus group)
  • 5.0 Life Insurance Policy Provisions, Options and Riders
    • 5.1 Standard provisions Ownership Assignment (38.2-3111) Entire contract (38.2-3304) Right to examine (free look) (38.2-3301) Payment of premiums (38.2-3302) Grace period (38.2-3303) Reinstatement (38.2-3311) Incontestability (38.2-3107, 3305) Misstatement of age and misstatement of gender (38.2-3108, 3306) Exclusions Suicide (38.2-3106) War clause Interest on proceeds (38.2-3115) Prohibited provisions including backdating (38.2-3104, 3316)
    • 5.2 Beneficiaries Designation options Individuals Classes Estates Minors Trusts Succession Revocable versus irrevocable Annulment or divorce (38.2-305(C)) Common disaster clause Spendthrift clause
    • 5.3 Settlement options Cash payment Interest only Fixed-period installments Fixed-amount installments Life income Single life Joint and survivor
    • 5.4 Nonforfeiture options Cash surrender value Extended term Reduced paid-up insurance
    • 5.5 Policy loans (38.2-3308) Cash loans Automatic premium loans Withdrawals or partial surrenders Educational loans (38.2-3113.3)
    • 5.6 Dividend options (38.2-3307) Cash payment Reduction of premium payments Accumulation at interest One-year term option Paid-up additions Paid-up insurance
    • 5.7 Disability riders Waiver of premium Waiver of cost of insurance Disability income benefit Payor benefit life/disability (juvenile insurance)
    • 5.8 Accelerated benefit provision/rider (38.2-3115.1; 14 VAC 5-70-40) Conditions for payment Diagnosis of terminal illness Diagnosis of catastrophic illness Permanent confinement Inability to perform ADLs Disclosure (14 VAC 5-70-80) Written disclosure required Effect on death benefit Cash value Loans and loan interest Tax consequences Premium
    • 5.9 Riders covering additional insureds Spouse/other-insured term rider Children's term rider Family term rider
    • 5.10 Riders affecting the death benefit amount Accidental death Guaranteed insurability Cost of living Return of premium
  • 6.0 Annuities
    • 6.1 Annuity principles and concepts Accumulation period versus annuity period Owner, annuitant and beneficiary Insurance aspects of annuities
    • 6.2 Immediate versus deferred annuities Single premium immediate annuities (SPIAs) Deferred annuities Premium payment options Nonforfeiture Surrender charges Bail-out provisions Death benefits
    • 6.3 Annuity (benefit) payment options Life contingency options Pure life versus life with guaranteed minimum Single life versus multiple life Annuities certain (types)
    • 6.4 Annuity products Fixed annuities General account assets Interest rate guarantees (minimum versus current) Level benefit payment amount Variable Annuities Equity indexed annuities Market value adjusted annuities (modified guaranteed annuities) (38.2-107.1, 3113.1)
    • 6.5 Uses of annuities Lump-sum settlements Qualified retirement plans including group versus individual Personal uses Tax-deferred growth Retirement income Education funds Charitable gift annuity (38.2-106.1, 3113.2) Suitability in Annuity Transactions (14VAC5-45)
  • 7.0 Federal Tax Considerations for Life Insurance and Annuities
    • 7.1 Taxation of personal life insurance Amounts available to policyowner Cash value increases Dividends Policy loans Surrenders Amounts received by beneficiary General rule and exceptions Settlement options Values included in insured's estate Cost Recovery Rule
    • 7.2 Modified endowment contracts (MECs) Modified endowment versus life insurance Seven-pay test Distributions
    • 7.3 Taxation of non-qualified annuities Individually-owned Accumulation phase (tax issues related to withdrawals) Annuity phase and the exclusion ratio Distributions at death Corporate-owned
    • 7.4 Taxation of individual retirement accounts (IRAs) Traditional IRAs Contributions and deductible amounts Premature distributions (including taxation issues) Annuity phase benefit payments Values included in the annuitant's estate Amounts received by beneficiary Roth IRAs Contributions and limits Distributions
    • 7.5 Rollovers and transfers (IRAs and qualified plans)
    • 7.6 Section 1035 exchanges
  • 8.0 Qualified Plans
    • 8.1 General requirements
    • 8.2 Federal tax considerations Tax advantages for employers and employees Taxation of distributions (age-related)
    • 8.3 Plan types, characteristics and purchasers Simplified employee pensions (SEPs) Self-employed plans (HR 10 or Keogh plans) Profit-sharing and 401(k) plans SIMPLE plans 403(b) tax-sheltered annuities (TSAs)

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