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Free Life - Series 101 Practice Questions

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Sample Practice Questions

Try these 10 sample questions from the Life - Series 101 practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

  1. 1A Louisiana resident plans to solicit life insurance applications for compensation. What licensing rule applies before the first solicitation?

    1. A. A producer license is required
    2. B. An insurer appointment alone is sufficient
    3. C. A temporary license is automatically created
    4. D. A business-entity registration alone is sufficient

    Answer: A

    Explanation: R.S. 22:1543(A) provides: "No person shall act as or hold himself out to be an insurance producer unless licensed by the Department of Insurance." The planned solicitation therefore requires producer licensure.

    Reference: Louisiana Laws - Louisiana State Legislature — R.S. 22:1543(A)

  2. 2An insurer declines a life application partly because of information in the applicant's consumer report. What FCRA step follows that decision?

    1. A. Send a privacy opt-out notice to the applicant
    2. B. Send an adverse action notice to the applicant
    3. C. Send a policy cancellation notice to the applicant
    4. D. Send a medical-exam notice to the applicant

    Answer: B

    Explanation: "the decision  is based partly or completely on information in a consumer report, Section 615(a) of the FCRA requires you to provide a notice of the adverse action to the consumer." A decision based even partly on a consumer report triggers an adverse action notice; the other notices serve different decisions.

    Reference: FTC Consumer Reports: What Insurers Need to Know — FTC guidance, Adverse Action Notice

  3. 3A building has faulty electrical wiring that increases the probability of a fire loss. In insurance terminology, what is the faulty wiring?

    1. A. A hazard
    2. B. A peril
    3. C. A loss
    4. D. A risk transfer

    Answer: A

    Explanation: "Hazard - circumstance which tends to increase the probability or severity of a loss." The wiring is a condition increasing the likelihood of loss; fire is the peril and an actual fire damage event would be the loss.

    Reference: NAIC Glossary of Insurance Terms — Hazard definition

  4. 4A stranger with no relationship to an insured person seeks to purchase life coverage on that person's life for the stranger's benefit. What requirement prevents the purchase?

    1. A. An insurer appointment in the insured's state
    2. B. A beneficiary designation by the insurer
    3. C. A premium deposit in the insured's name
    4. D. An insurable interest in the insured's life

    Answer: D

    Explanation: "Only someone who has an "insurable interest" can purchase an" A purchaser must have an insurable interest; merely choosing a beneficiary or making a payment does not establish that interest.

    Reference: NAIC Life Insurance Consumer Guide — Insurable interest discussion

  5. 5A customer needs a death benefit only while a child remains financially dependent and does not seek permanent cash value. Which policy type fits that limited period?

    1. A. Whole life insurance
    2. B. Universal life insurance
    3. C. Term life insurance
    4. D. Variable life insurance

    Answer: C

    Explanation: "purchased for a period of time (a term)." Term protection is purchased for a specified period; the other products are permanent cash-value forms.

    Reference: NAIC Life Insurance Consumer Guide — Term life insurance

  6. 6A Louisiana individual life insured misses a premium after the first premium but dies during the policy's grace period. What is the policy's coverage status during that period?

    1. A. It lapses on the missed premium's due date
    2. B. It resumes only after the overdue premium is paid
    3. C. It continues in full force during the grace period
    4. D. It converts to paid-up insurance for that period

    Answer: C

    Explanation: "during which period of grace the policy shall continue in full force" The statute keeps the policy in full force during the grace period; a timely claim is not defeated by immediate lapse, although overdue amounts may be deducted.

    Reference: Louisiana Revised Statutes, Standard Life Policy Provisions — R.S. 22:931(A)(1)

  7. 7A deferred annuity has stopped building its account value and has begun making regular income payments to the owner. Which phase has begun?

    1. A. The accumulation period
    2. B. The premium period
    3. C. The payout period
    4. D. The free-look period

    Answer: C

    Explanation: "They have an accumulation period and a payout period." Annuities distinguish accumulation from payout; income payments characterize the payout period.

    Reference: NAIC Buyer's Guide to Annuities — How annuities work; Accumulation and payout

  8. 8A beneficiary receives the principal death proceeds of an ordinary life policy directly after the insured's death, with no interest or transfer-for-value exception. Which federal income-tax treatment generally applies?

    1. A. Include the entire principal as ordinary income
    2. B. Include the net principal as a capital gain
    3. C. Exclude the principal from taxable income
    4. D. Include principal only above the insured's basis

    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 excluded from a beneficiary's income. Basis-over-proceeds analysis applies to surrender, and interest paid later is separate.

    Reference: IRS Publication 525, Taxable and Nontaxable Income — Publication 525; Life insurance proceeds

  9. 9A producer is licensed only for property insurance and wants to negotiate a Louisiana life policy. Which conclusion follows?

    1. A. The producer may negotiate after disclosing the limitation
    2. B. The producer may negotiate if no premium is collected
    3. C. The producer must first be licensed for the life line
    4. D. The producer may negotiate through any business entity

    Answer: C

    Explanation: R.S. 22:1543(B) states: "No insurance producer shall sell, solicit, make an application for, procure, negotiate for, or place for others, any policies for any lines of insurance as to which he is not then qualified and duly licensed in this state." A property-only license does not authorize life negotiations.

    Reference: Louisiana Laws - Louisiana State Legislature — R.S. 22:1543(B)

  10. 10An insurer proposes to disclose a non-customer consumer's nonpublic personal information to a nonaffiliated marketer, outside the Privacy Rule exceptions. What must it provide first?

    1. A. A claim notice including a review deadline
    2. B. An underwriting notice including a medical release
    3. C. A privacy notice including an opt-out notice
    4. D. A renewal notice including a premium estimate

    Answer: C

    Explanation: "Before you share NPI with nonaffiliated third parties outside of the exceptions described within (see "Exceptions"), you must give your non-customer consumers a privacy notice, including an opt-out notice." The proposed nonaffiliate sharing is outside the exceptions, so the consumer must receive the stated privacy and opt-out notices first.

    Reference: FTC Privacy Rule Guide under GLBA — Privacy Rule, nonaffiliate sharing

Topics in this practice bank

These topics describe the available practice for Life - Series 101. Review the examination outline and its sources for scope and allocation details.

  • Louisiana Insurance Regulation
    • Licensing
    • Licensing / Requirements
    • Licensing / Types of licenses
    • Licensing / Types of licenses / Individual producer
    • Licensing / Types of licenses / Business entity
    • Licensing / Types of licenses / Resident versus nonresident
    • Licensing / Types of licenses / Temporary
    • Licensing / Maintenance and duration
    • Licensing / Maintenance and duration / Expiration
    • Licensing / Maintenance and duration / Renewal
    • Licensing / Maintenance and duration / Change of name, address, telephone number
    • Licensing / Maintenance and duration / Assumed names
    • Licensing / Maintenance and duration / Reporting of actions
    • Licensing / Maintenance and duration / Continuing education requirements including exemptions and penalties
    • Licensing / Maintenance and duration / Inactivity due to extenuating circumstances
    • Licensing / Maintenance and duration / Inactivity due to military service
    • Licensing / Disciplinary actions
    • Licensing / Disciplinary actions / Hearings
    • Licensing / Disciplinary actions / Cease and desist order
    • Licensing / Disciplinary actions / License probation, suspension, revocation, or refusal to issue or renew
    • Licensing / Disciplinary actions / Penalties with or without suspension of license
    • State regulation
    • State regulation / Commissioner's general duties and powers
    • State regulation / Company regulation
    • State regulation / Company regulation / Certificate of authority
    • State regulation / Company regulation / Unfair claims settlement practices
    • State regulation / Company regulation / Appointment
    • State regulation / Company regulation / Termination of appointment
    • State regulation / Company regulation / State of domicile
    • State regulation / Producer regulation
    • State regulation / Producer regulation / Controlled business
    • State regulation / Producer regulation / Shared commissions
    • State regulation / Producer regulation / Payment to unlicensed entities
    • State regulation / Producer regulation / Commissions, compensations, fees
    • State regulation / Producer regulation / Appointments
    • State regulation / Producer regulation / Advertising
    • State regulation / Producer regulation / Life and health Guaranty Association prohibited advertising and disclaimer
    • State regulation / Producer regulation / Illustrations
    • State regulation / Producer regulation / Replacement
    • State regulation / Unfair trade practices
    • State regulation / Unfair trade practices / Misrepresentation
    • State regulation / Unfair trade practices / False advertising
    • State regulation / Unfair trade practices / Defamation
    • State regulation / Unfair trade practices / Boycott, coercion and intimidation
    • State regulation / Unfair trade practices / False financial statements
    • State regulation / Unfair trade practices / Unfair discrimination
    • State regulation / Unfair trade practices / Rebating
    • State regulation / Unfair trade practices / Refusing to insure
    • State regulation / Unfair trade practices / Unfair Financial Planning Practices
    • State regulation / Examination of books and records
    • State regulation / Insurance fraud
    • State regulation / Privacy of Consumer Financial Information
  • Licensing and Regulation
    • Federal Regulation
    • Federal Regulation / Fair Credit Reporting Act
    • Federal Regulation / Fraud and False Statements (18 USC Sections 1033 and 1034)
    • Federal Regulation / Privacy (Gramm Leach Bliley)
    • Federal Regulation / National Do Not Call List
  • General Insurance Concepts
    • Risk
    • Risk / Methods of Handling Risk (e.g., Avoidance, Retention, Sharing, Reduction, Transfer)
    • Risk / Elements of Insurable Risks
    • Risk / Definitions (e.g., Risk, Hazard, Peril, Loss)
    • Classifications of Insurers
    • Classifications of Insurers / Mutual, Stock
    • Classifications of Insurers / Admitted, Non-Admitted
    • Classifications of Insurers / Foreign, Domestic, Alien
    • Elements of a Contract
    • Elements of a Contract / Consideration
    • Elements of a Contract / Competent Parties
    • Elements of a Contract / Legal Purpose
    • Elements of a Contract / Offer
    • Elements of a Contract / Acceptance
    • Authority and Powers of Producers
    • Authority and Powers of Producers / Express
    • Authority and Powers of Producers / Implied
    • Authority and Powers of Producers / Apparent
    • Authority and Powers of Producers / The Law of Agency
    • Legal Interpretations Affecting Contracts
    • Legal Interpretations Affecting Contracts / Reasonable Expectations
    • Legal Interpretations Affecting Contracts / Indemnity
    • Legal Interpretations Affecting Contracts / Good Faith
    • Legal Interpretations Affecting Contracts / Fraud
    • Legal Interpretations Affecting Contracts / Warranties, Representations, Misrepresentations, and Concealment
  • Life Insurance Basics
    • Insurable Interest
    • Personal Uses of Life Insurance
    • Personal Uses of Life Insurance / Survivor Protection
    • Personal Uses of Life Insurance / Estate Creation
    • Personal Uses of Life Insurance / Liquidity
    • Personal Uses of Life Insurance / Estate Conservation
    • Determining Amount of Personal Life Insurance
    • Determining Amount of Personal Life Insurance / Human Life Value Approach
    • Determining Amount of Personal Life Insurance / Needs Approach
    • Business Uses of Life Insurance
    • Business Uses of Life Insurance / Buy-Sell Funding
    • Business Uses of Life Insurance / Key Person
    • Business Uses of Life Insurance / Executive Bonuses
    • Factors in Premium Determination
    • Factors in Premium Determination / Mortality
    • Factors in Premium Determination / Interest
    • Factors in Premium Determination / Expense
    • Premium Frequency
    • Field Underwriting
    • Field Underwriting / Application Procedures
    • Field Underwriting / Warranties and Representations
    • Policy Delivery
    • Policy Delivery / Effective Date of Coverage
    • Policy Delivery / Policy Review
    • Policy Delivery / Premium Collection
    • Policy Delivery / Statement of Good Health
    • Company Underwriting
    • Company Underwriting / Sources of Information
    • Company Underwriting / Classifications of Risk (Preferred, Standard, Substandard, Declined)
  • Types of Life Insurance Policies
    • Term Life Insurance
    • Term Life Insurance / Level
    • Term Life Insurance / Decreasing
    • Term Life Insurance / Increasing Term
    • Whole (Permanent, Ordinary) Life Insurance
    • Whole (Permanent, Ordinary) Life Insurance / Single Premium
    • Whole (Permanent, Ordinary) Life Insurance / Continuous Premium
    • Whole (Permanent, Ordinary) Life Insurance / Limited Payment
    • Whole (Permanent, Ordinary) Life Insurance / Adjustable Life
    • Universal Life
    • Variable Life
    • Variable Universal
    • Index Whole Life
    • Specialized Policies
    • Specialized Policies / Joint Life
    • Specialized Policies / Survivorship Life
    • Specialized Policies / Juvenile
    • Specialized Policies / Return of Premium Term Insurance
    • Group Life Insurance
    • Group Life Insurance / Eligible Groups
    • Group Life Insurance / Characteristics of Group Life Insurance
    • Group Life Insurance / Conversion from Group to Individual
    • Credit Life
    • Credit Life / Individual
    • Credit Life / Group
  • Life Insurance Policy Provisions, Options, and Riders
    • Standard Life Insurance Provisions
    • Standard Life Insurance Provisions / Ownership
    • Standard Life Insurance Provisions / Assignment
    • Standard Life Insurance Provisions / Right to Examine (Free Look)
    • Standard Life Insurance Provisions / Payment of Premiums
    • Standard Life Insurance Provisions / Grace Period
    • Standard Life Insurance Provisions / Misstatement of Age/Sex
    • Standard Life Insurance Provisions / Incontestability
    • Standard Life Insurance Provisions / Reinstatement
    • Standard Life Insurance Provisions / Entire Contract
    • Beneficiary Designation Options
    • Beneficiary Designation Options / Individuals
    • Beneficiary Designation Options / Classes
    • Beneficiary Designation Options / Estates
    • Beneficiary Designation Options / Minors
    • Beneficiary Designation Options / Trusts
    • Types of Beneficiaries
    • Types of Beneficiaries / Revocable versus Irrevocable
    • Types of Beneficiaries / Primary and Contingent
    • Beneficiary-Related Clauses
    • Beneficiary-Related Clauses / Common Disaster
    • Beneficiary-Related Clauses / Spendthrift
    • Settlement Options
    • Settlement Options / Cash Payment (Lump Sum)
    • Settlement Options / Interest Only
    • Settlement Options / Life Income
    • Settlement Options / Fixed-Period
    • Settlement Options / Fixed-Amount Installments
    • Nonforfeiture Options
    • Nonforfeiture Options / Cash Surrender Value
    • Nonforfeiture Options / Extended Term
    • Nonforfeiture Options / Reduced Paid-Up Insurance
    • Policy Loan and Withdrawal Options
    • Policy Loan and Withdrawal Options / Loans
    • Policy Loan and Withdrawal Options / Automatic Premium Loans
    • Policy Loan and Withdrawal Options / Withdrawals Partial Surrenders
    • Dividend Options
    • Dividend Options / Paid-Up Additions
    • Dividend Options / Cash Payment (Lump Sum)
    • Dividend Options / One Year Term
    • Dividend Options / Reduction of Premium
    • Dividend Options / Accumulation at Interest
    • Disability Riders
    • Disability Riders / Waiver of Premium
    • Disability Riders / Disability Income Benefit
    • Disability Riders / Payor Benefit Life
    • Riders Covering Additional Insureds
    • Riders Covering Additional Insureds / Spouse
    • Riders Covering Additional Insureds / Children
    • Riders Covering Additional Insureds / Family
    • Riders Affecting Death Benefit Amount
    • Riders Affecting Death Benefit Amount / Accidental Death
    • Riders Affecting Death Benefit Amount / Guaranteed Insurability
    • Riders Affecting Death Benefit Amount / Cost of Living
    • Riders Affecting Death Benefit Amount / Return of Premium
    • Riders Affecting Death Benefit Amount / Accelerated (Living) Benefit Provision Rider
    • Riders Affecting Death Benefit Amount / Long-Term Care Rider
    • Policy Exclusions
  • Annuities
    • Annuity Principles and Concepts
    • Annuity Principles and Concepts / Accumulation Period versus Annuity Period
    • Annuity Principles and Concepts / Owner, Annuitant, and Beneficiary
    • Immediate versus Deferred Annuities
    • Annuity (Benefit) Payment Options
    • Annuity (Benefit) Payment Options / Life Contingency Options
    • Annuity (Benefit) Payment Options / Annuities Certain
    • Annuity (Benefit) Payment Options / Pure Life versus Life with Guaranteed Minimum
    • Annuity (Benefit) Payment Options / Single Life versus Multiple Life
    • Annuity Products
    • Annuity Products / Fixed Annuities
    • Annuity Products / Equity Indexed Annuities
    • Annuity Products / Variable Annuities
    • Uses of Annuities
    • Uses of Annuities / Lump-Sum Settlements
    • Uses of Annuities / Retirement Income
    • Uses of Annuities / Education
    • Uses of Annuities / Long-Term Care Rider
  • Federal Tax Considerations for Life Insurance
    • Requirements of Life Insurance Qualified Plans
    • Federal Tax Considerations for Qualified Plans
    • Federal Tax Considerations for Qualified Plans / Withdrawals
    • Federal Tax Considerations for Qualified Plans / Rollovers versus Transfers
    • Qualified Plan Types, Characteristics, and Purchasers
    • Qualified Plan Types, Characteristics, and Purchasers / Individual Retirement Accounts (IRAs; Traditional versus Roth)
    • Qualified Plan Types, Characteristics, and Purchasers / 401k
    • Qualified Plan Types, Characteristics, and Purchasers / 403b
    • Qualified Plan Types, Characteristics, and Purchasers / SEP
    • Qualified Plan Types, Characteristics, and Purchasers / SIMPLE
    • Taxation of Personal Life Insurance
    • Taxation of Personal Life Insurance / Premiums
    • Taxation of Personal Life Insurance / Dividends
    • Taxation of Personal Life Insurance / Settlements
    • Modified Endowment Contracts (MECs)

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