Free practice exam · no signup needed

Alaska Life Practice Exam

20 exam-style questions drawn from the same bank as our full Alaska Life course (Alaska Insurance Producer — Life — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. Bob owns a whole life policy with a $40,000 cash value and $25,000 basis. He sells the policy to his unrelated business partner Carol for $40,000. Carol later collects the $200,000 death benefit. Under the transfer-for-value rule of IRC §101(a)(2), how much of the $200,000 is excludable from Carol's income?
$40,000 (the consideration she paid) plus subsequent premiums she paid; the rest is taxable.Nothing — the entire benefit is taxable because the policy was transferred for value.$25,000 (Bob's basis); the rest is taxable.All $200,000 — death benefits are always tax-free.
2. An IUL policy has a cap of 10%, a participation rate of 90%, and a floor of 0%. The chosen index returns 15% during the crediting period. What rate is credited to the cash value?
13.5%9%0%10%
3. A modified whole life policy differs from straight whole life primarily because:
Premiums are lower in the early years and higher thereafterThe face amount steps down after a specified periodThe policy converts to term insurance at age 65Cash value accumulation is suspended for the first five years
4. Which condition will cause a purported §1035 exchange to fail and become a fully taxable transaction?
The owner takes constructive receipt of the cash value before it is transferred to the new carrierThe new replacement contract carries a higher face death benefit than the original surrendered life-insurance policy contract on the insuredThe new replacement contract is issued by a different insurance carrier than the original surrendered policy contract was issued byThe named insured under the new contract is the same person as the named insured under the original surrendered policy contract
5. The provision that defines the policy, application, and any attached riders or amendments as the complete agreement between the parties is the:
Free look provisionEntire contract provisionInsuring clauseReinstatement provision
6. An applicant for a resident producer license was convicted of felony insurance fraud five years ago. Under the NAIC Producer Licensing Model Act and 18 U.S.C. §1033 (federal Violent Crime Control and Law Enforcement Act), the applicant generally:
Is barred from working in the insurance business unless the applicant first obtains written §1033 consent from the appropriate state insurance regulatorMust complete an additional 40 hours of ethics continuing education before applying under the NAIC Model #218 felony-applicant remediation provision applicable to dishonesty convictionsMay obtain a resident producer license without any restriction once court-ordered probation is complete, under the NAIC Model #218 post-probation-rehabilitation provision applicable to felony applicantsIs permanently barred from working in the insurance business in any capacity under 18 U.S.C. §1033 for any prior felony conviction involving dishonesty regardless of any waiver mechanism
7. Which statement about MEC status under IRC §7702A is correct?
MEC rules under §7702A apply only to variable life contracts issued through SEC-registered separate accounts with subaccount investment risk borne by the policyownerOnce a contract is classified as a MEC, it remains a MEC for the rest of its existence and any contract received in a §1035 exchange from it is also a MECMEC status under §7702A automatically resets and is removed every seven contract years if no excess premiums are paid during that contract period under the contract's funding patternA MEC loses the §101(a) death benefit federal income-tax exclusion at the insured's death, and the proceeds are fully taxable to the named beneficiary as ordinary income
8. Which statement best describes the general 'transfer for value' rule of IRC §101(a)(2)?
If a life-insurance contract is transferred for valuable consideration, the death-benefit exclusion under §101(a) is lost; the proceeds are taxable above the transferee's basis (consideration paid plus subsequent premiums) unless a statutory safe harbor applies.The §101(a)(2) transfer-for-value rule applies only to transfers of life-insurance contracts between two unrelated parties for cash consideration and never to non-cash consideration, related-party transfers, or transfers where the parties have any prior business or familial relationship to each otherAny transfer of an in-force life-insurance policy automatically taxes the full death benefit ultimately paid, regardless of whether the transfer was gratuitous, for valuable consideration, or under one of the statutory safe-harbor exceptions listed in §101(a)(2)(B)Transfers for value preserve the §101(a) exclusion if the new owner of the contract pays at least one annual premium installment after the transfer date; this single-premium payment is treated as substituted consideration that restores the income-tax exclusion automatically
9. Which form of term life insurance has a level premium and a death benefit that decreases on a stated schedule, making it commonly paired with a mortgage?
Annual renewable termIncreasing termDecreasing termLevel term
10. Two 35-year-old male nonsmokers apply for $250,000 of 20-year term. Applicant A receives a Preferred Plus rating, while Applicant B is rated Standard with a Table 4 substandard table rating. Which factor most directly explains the difference in their gross premiums?
Different mortality assumptions reflecting risk classificationDifferent assumed interest rates because they live in different ZIP codesDifferent expense loadings because of different sales channelsDifferent commission schedules paid to their agents
11. Which of the following best describes the principal estate-planning purpose of an ILIT?
To provide an income-tax-free stream of retirement income paid directly to the insured from trust principal.To allow the insured to take income-tax-free policy loans from the trust-held cash value of the underlying contract.To shelter the death benefit from federal estate tax by removing the insured's incidents of ownership.To convert otherwise-ordinary-income non-MEC withdrawals into preferentially taxed long-term capital gains for the insured.
12. A beneficiary chooses the 'life income with 20-year period certain' settlement option. The beneficiary dies after 7 years of payments. What happens to the remaining payments?
The insurer refunds the remaining cash account balance to the original deceased insured's probate estate as residual proceeds.Payments stop immediately on the date of the beneficiary's death, because the certain period applies only to a living payee.The insurer doubles the next periodic payment to the contingent payee and then terminates the settlement option contract entirely.Payments continue to a contingent payee for the remaining 13 years of the certain period.
13. An owner takes a withdrawal from a non-qualified deferred annuity at age 55. In addition to ordinary income tax on earnings, which federal penalty generally applies?
5%20%0% — there is no penalty10%
14. Under the USA PATRIOT Act (31 U.S.C. § 5318) and FinCEN regulations, which life insurance products are subject to insurer anti-money-laundering (AML) program requirements?
Permanent life insurance and annuities with cash value or investment featuresOnly employer-sponsored group term life products issued through a master contract with employee certificatesAll individual life insurance products sold in the U.S. market, including pure non-cash-value level-term policiesOnly credit life insurance issued on closed-end installment loans secured by a covered borrower's amortizing debt
15. Why are most modern endowment contracts treated unfavorably under federal tax law?
They generally fail the IRC §7702 definition of life insurance, losing tax-deferred inside buildupThey are classified as registered variable contracts requiring a Securities Act of 1933 prospectus for saleThey violate state-level NAIC suitability rules for seniors purchasing permanent life insurance contracts at advanced agesThey cannot be sold to any applicant under age 18 under the federal juvenile-policy underwriting prohibition rule
16. After the application is submitted, the applicant remembers she forgot to disclose a recent hospitalization. What is the proper procedure to amend the application?
The soliciting producer may quietly add the missing hospitalization information to the application without notifying the applicantThe change can only be made by the carrier's home office underwriter after a formal post-application addendum filingThe applicant must reinitial each amendment, or a new application must be completedNo amendment is permitted once the application has been signed by the applicant and submitted to the carrier underwriter
17. Social Security retirement benefits, authorized by the Social Security Act (42 U.S.C. §401 et seq.), are funded primarily by:
General federal income tax revenues appropriated by Congress through the TreasuryFICA payroll taxes paid by employees and employers (and SECA for the self-employed)Voluntary annual contributions from working taxpayers' individual retirement accountsMonthly premiums paid by enrolled Medicare Part B and Part D beneficiaries to the SSA
18. On a traditional whole life policy, the premium is described as 'level.' What does that mean?
It rises slightly each year to match the cost of insurance.It is the same dollar amount each modal period for the life of the policy.It can be skipped without lapsing the policy as long as cash value remains.It is a single one-time payment at issue.
19. To sell variable life or variable universal life insurance, a producer must hold a state insurance license and which additional registration?
A state-chartered banking license issued by the producer's resident state banking departmentA FINRA registration (Series 6 or 7) and SEC-registered representative statusA Certified Financial Planner (CFP) certification issued by the CFP Board of StandardsA separate property and casualty producer license with a personal-lines underwriting endorsement
20. What is the key distinction between a consumer report and an investigative consumer report under FCRA?
Investigative consumer reports are categorically exempt from the FCRA's adverse-action notice and consumer-disclosure requirements at issueAn investigative consumer report includes information obtained through personal interviews about character, reputation, and lifestyleOnly investigative consumer reports may be lawfully used by life insurers in their underwriting evaluations under the FCRA frameworkA consumer report is voluntary on the part of the applicant, while an investigative consumer report is a mandatory FCRA underwriting step

Want a different set? Refresh the page for 20 new questions — the full course has 500+, each with a complete explanation, plus full-length timed exam simulations and an AI tutor.