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Free Life Insurance Basics Practice Questions

Arizona Life exam — 78 practice questions.

Subtopics: Insurable interest, Premium components, Risk pooling, STOLI, Underwriting, Insurable interest in self, Third-party interest, Insurable interest parties, Personal uses, Liquidity, Human life value, Needs approach, Buy-sell funding, Key person, Term vs permanent, Participating policies, Separate account, Variable products licensing, Premium factors, Mortality, Interest assumption, Premium mode, Advertising, Field underwriting, Application accuracy, Sources of underwriting, Risk classification, Substandard risk, Effective date, Statement of good health, Backdating, MIB, Unfair discrimination underwriting, Group vs individual, Warranties vs representations, Disclosure statement, Estate conservation, Executive compensation, Expense factor, Declined risk, Surrender comparison index, Net amount at risk, Legal reserve, CSO mortality table, Level premium funding, Cash value accumulation, Endowment maturity, Free look period, Policy replacement rules, Twisting, Churning, Rebating, Defamation, Binding receipt, Insuring clause, Consideration clause, Owner vs insured, Stranger-originated life insurance, Suitability, Sales illustration, Producer appointment, Paramedical exam, Inspection report, Nonmedical limit, Split-dollar plan, Section 162 executive bonus, Dependency period need, Social Security blackout period, Capital retention approach, Final expense need, Insurance age, Flat extra premium, Postponed risk, Agent's report, Policy summary, Material misrepresentation

Read the Life Insurance Basics study guide

Sample questions & answers

1. For an individual life insurance policy, insurable interest must exist:

At the time the policy is applied for

In life insurance, insurable interest must exist at policy inception, not at the time of loss.

2. The three primary factors used to determine a life insurance premium are:

Mortality, interest, and expense

Life premiums are based on mortality (expected claims), interest (assumed earnings), and expense (operating costs).

3. The principle that lets insurers predict losses more accurately as similar exposures increase is the:

Law of large numbers

The law of large numbers states that as the number of similar exposure units grows, actual results approach predicted results.

4. Stranger-originated life insurance (STOLI) arrangements are problematic because they:

Lack insurable interest at inception

STOLI schemes involve investors with no insurable interest in the insured, conflicting with the requirement that interest exist at inception.

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Practice: Life Insurance Basics

Take a randomized, timed-style practice test. Answer choices are shuffled and your results are scored instantly with an explanation for every question.

Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Pennsylvania Insurance Department and the exam administrator before relying on it.