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Delaware Life Practice Exam

20 exam-style questions drawn from the same bank as our full Delaware Life course (Delaware 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. Annual renewable term (ART) premiums increase each year because:
Cash value accumulation forces a corresponding premium adjustmentThe insurer must recover acquisition costs in the early yearsState insurance codes require annual rate adjustments on term contractsThe mortality cost of insuring the same person rises each year as the insured ages
2. A client exchanges a whole life policy with a $30,000 cash value and a $40,000 cost basis (an unrealized loss) for a new universal life policy under IRC §1035. What carries over to the new contract?
Cost basis is forfeited because §1035 only preserves gain, not lossThe client may deduct the $10,000 loss in the year of exchangeThe basis is reset to the new policy's $30,000 cash valueThe original $40,000 cost basis carries over to the new policy
3. Industrial life policies have largely been replaced in the modern U.S. market by which product?
Variable universal life with separate-account subaccount investment optionsDecreasing term mortgage protection paired with amortizing residential loansEmployer-sponsored group term life issued under a single master contractFinal-expense (preneed) whole life with monthly premium payment by EFT
4. An applicant pays the first premium and receives a conditional receipt on March 1. She dies of an unrelated cause on March 10, before the medical exam. Underwriting later concludes she would have been a standard risk. The insurer must:
Deny the claim outright because the policy contract was never formally delivered to the applicantPay the death benefit as if coverage had been in force from March 1Pay only a return of premium plus interestRefund the premium only
5. An insured names her three children — Ana, Bea, and Carlos — as equal beneficiaries 'per stirpes'. Carlos dies before the insured, leaving two children of his own. How are the proceeds paid?
One-half each to Ana and Bea under the per-capita-among-survivors rule; Carlos's two children take nothingOne-third each to Ana, Bea, and Carlos's probate estate, which then distributes Carlos's share per his willOne-quarter each to Ana, Bea, and the two grandchildren under the per-capita-at-each-generation ruleOne-third each to Ana and Bea; Carlos's two children split the remaining one-third equally
6. A beneficiary elects the 'Life Income with 10-Year Period Certain' settlement option. What does she receive?
A single lump-sum cash distribution at the end of the 10-year period, with no monthly payments paid during the certain period under the option's standard election formPayments for the beneficiary's life, with the entire unused balance of the proceeds returned to the insurer's general account at the beneficiary's date of deathEqual periodic payments calculated to amortize the proceeds over exactly 10 years and then terminating, regardless of whether the beneficiary is still alive at year 10Payments for life, but if she dies before 10 years have elapsed, payments continue to a contingent payee for the balance of the 10-year period
7. When a life sale involves replacement, the producer must:
Wait 90 days from the date the existing in-force policy was last paid before submitting the new application to the replacing insurer, in order to satisfy a statutory cooling-off period for life replacement transactionsCancel and surrender the existing in-force policy in writing before applying for the new replacement policy, so that the new application is not technically a replacement under the NAIC model regulation as adopted by statesSkip any reference to the existing in-force policy and start fresh, treating the new policy as a stand-alone first-time purchase with no required replacement notice or disclosure to the consumerProvide the applicant with a Notice Regarding Replacement, obtain a signed replacement-related question on the application, and submit a copy of the notice (and any sales materials) to the replacing insurer
8. Constructive delivery occurs when:
The applicant physically signs the policy acceptance form on the contract's delivery receipt and personally returns the executed acknowledgment to the insurer's home office underwriting departmentThe insurer relinquishes control of the policy by mailing it to the producer with unconditional instructions to deliver it, regardless of when the producer physically hands it overThe applicant pays the first modal premium in full at the producer's office at the time the agent presents the policyThe soliciting producer leaves a voicemail message stating that the contract is ready for pickup at the agency office
9. The primary purpose of an annuity is to:
Provide a federally income-tax-free death benefit to the named primary beneficiaries under IRC §101(a)Provide reimbursement coverage for accident and health medical expenses incurred by the annuitantLiquidate a sum of money systematically over a stated period or for lifeReplace a homeowner's insurance policy after the insured retires from full-time employment status
10. Under the NAIC Model Credit Life and Credit Accident & Health Insurance Act (Model #370), the amount of credit life insurance generally cannot exceed:
The greater or initial indebtedness, depending on whether the loan is closed-end or open-endTwice the contract's original loan balance under the standard NAIC #370 open-end credit rulesThe borrower's annual gross income reported on the loan application under the IRS-issued Form W-2$250,000 regardless of the actual amount of the underlying creditor's outstanding loan balance
11. A long-term care (LTC) rider attached to a life policy under IRC §7702B differs from a chronic illness (§101(g)) rider primarily because:
Chronic illness riders cover only inpatient nursing home care under the NAIC long-term care model definition, while LTC riders cover only home and community-based care under the HIPAA qualified LTC services standardLTC riders are reimbursement or per-diem products subject to specific HIPAA-defined triggers and may require qualified LTC services; chronic illness riders pay an acceleration of the death benefit on similar but generally less stringent triggersOnly LTC riders pay any benefit at all; chronic illness riders are educational consumer-disclosure documents that do not generate any contractual cash payment when the insured triggers a qualifying condition under HIPAA's definitionLTC riders are always issued at no additional charge by the carrier, while chronic illness riders invariably carry a substantial extra premium per the standard NAIC accelerated benefits model regulation form
12. An insurer chooses to qualify a permanent life policy under the Cash Value Accumulation Test rather than the GPT. Which statement best describes the operating rule of the CVAT?
Premiums paid into the contract in the first seven contract years may not exceed the cumulative 7-pay limit prescribed by IRC §7702A for MEC purposes.Cumulative premiums paid into the contract may never exceed the GPT guideline single premium or the cumulative guideline level premium, whichever is greater, throughout the policy's lifetime.The contract's death benefit must always equal at least 250% of accumulated cash value through age 40, then declining gradually under the §7702(d) corridor tableCash value at any time may not exceed the net single premium that would fund the future benefits, computed using §7702 statutory assumptions.
13. Mara, age 62, opened her first Roth IRA three years ago and has contributed $5,000 each year. She now wants to withdraw $20,000 (her $15,000 in contributions plus $5,000 of earnings). How is the distribution taxed?
The $15,000 of contributions is tax-free; the $5,000 of earnings is taxable and subject to a 10% penalty.The $15,000 of contributions is tax-free; the $5,000 of earnings is taxable but not subject to the 10% penalty.The entire $20,000 is taxable as ordinary income because the account is less than 5 years old.The entire $20,000 is tax-free because Mara is over age 59½.
14. An accelerated death benefit rider for terminal illness typically requires that the insured be certified as having a life expectancy of no more than how long?
There is no life-expectancy requirement5 years6 months12 to 24 months
15. An insured carries a $200,000 whole life policy with an ADB rider equal to the face amount. The insured is severely injured in an auto accident, lingers in a coma for 100 days, and then dies from those injuries. How is the claim settled under the typical ADB clause?
$400,000 — both base and ADB are paid because death resulted from the accident$200,000 — base only, because coma is treated as a sickness, not an accident$200,000 — base only, because the 90-day causation window in most ADB riders has elapsed$600,000 — base, ADB, and a triple-indemnity bonus for catastrophic injury
16. Compared with paying premiums annually, paying monthly will generally result in:
A higher total annual outlay because of mode-of-payment loadingA lower total annual outlay overall, because of distributed payment timingNo premium owed at all under the standard NAIC modal-loading rule waiverAn identical total annual outlay to the annual-pay mode under the contract
17. Under a joint and 50% survivor annuity, what happens after the first annuitant dies?
The surviving annuitant receives 50% of the original payment for lifeThe contract pays a lump sum and terminatesThe surviving annuitant receives 100% of the original payment for lifePayments stop entirely
18. Within the 3 years immediately preceding normal retirement age, a 457(b) participant may use a 'special catch-up' provision. How does this catch-up generally compare to the standard age-50 catch-up?
It is identical in dollar amount and structure to the §414(v) age-50 catch-up, but is available three years earlier at age 45 rather than at age 50 for §457 participants.It allows the §457(b) participant to make unlimited additional deferrals into the plan during the entire three-year window leading up to normal retirement age.It allows an additional $1,000 in deferral, identical to the IRC §219(b)(5)(B) Traditional and Roth IRA age-50 catch-up contribution amount.It allows up to twice the basic annual deferral limit, but the participant cannot use it in the same year as the age-50 catch-up.
19. What is the key consequence of naming a beneficiary 'irrevocably'?
The owner cannot change the beneficiary, take a loan, or assign the policy without the irrevocable beneficiary's written consentThe beneficiary may unilaterally surrender the policy, pocket the entire cash surrender value, and end coverage at any time without obtaining the policy owner's signed consentThe designation is treated as a federal gift complete only at the insured's eventual death, with the gift-tax value determined at that time under the IRC §2503 annual exclusionThe owner may still change the beneficiary, take a loan, or assign the contract at any time without obtaining the irrevocable beneficiary's signed consent on file with the insurer
20. If an insurer revises its pricing assumption to use a HIGHER assumed interest rate on accumulated reserves, what is the most likely effect on the gross level premium for a new whole life policy, holding mortality and expense assumptions constant?
The premium is unaffected because mortality is the only required input under state law.The premium is unaffected because interest only matters for dividends.The premium goes down because future benefits are discounted at a higher rate.The premium goes up because the insurer is more aggressive.

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