Free practice exam · no signup needed

Hawaii Life Practice Exam

20 exam-style questions drawn from the same bank as our full Hawaii Life course (Hawaii 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. Which two features distinguish ordinary whole life insurance from term insurance?
Decreasing premium and increasing death benefit, common on amortizing loansLevel premium for life and a guaranteed cash value that grows tax-deferredNo medical underwriting and no cash value, as is typical of credit lifeVariable death benefit and equity-indexed cash-value crediting features
2. Under the NAIC Standard Nonforfeiture Law (adopted in substantially uniform form by every state), a policyowner who stops paying premiums on a permanent life policy with accumulated cash value generally has which three nonforfeiture choices?
Convert to term insurance, accelerate the death benefit, or assign the contractSurrender for cash, Reduced Paid-Up insurance (RPU), or Extended Term Insurance (ETI)Free-look return, reinstatement under the contract's standard provision, or APLLump-sum face amount, settlement annuity, or charitable rollover under IRC §170
3. Producers selling covered life products must report suspected money laundering using which form, filed by the insurer with FinCEN?
IRS Form 8300 for receipt of cash over $10,000IRS Form W-9 to request taxpayer identification numberSuspicious Activity Report (SAR-IC, FinCEN Form 108/SAR)IRS Form 1099-R for retirement distribution reporting
4. 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?
5 yearsThere is no life-expectancy requirement6 months12 to 24 months
5. Under IRC §408, contributions to a Traditional IRA are generally:
Excluded from the owner's federal gross income only if rolled over within 90 days of contribution under IRC §408 indirect-rollover rulesTax-deductible (subject to income limits if covered by an employer plan), with earnings tax-deferred until distributionAlways fully income-tax-free in retirement, regardless of the contributing owner's marginal income tax rate or annual earned income levelMade with after-tax dollars contributed by the owner, with all subsequent distributions of contributions and earnings tax-free as qualified
6. An employer pays the premium on a $200,000 group term life policy covering one of its key employees, age 45. Under IRC §79, what is the income tax effect on the employee?
The entire employer-paid annual premium is taxable to the employee as ordinary W-2 wages on the year-end Form W-2.Nothing — employer-paid group term life insurance premiums are never imputed or taxed to the covered employee at any face amount.The cost (per the IRS Table I rates) of coverage in excess of $50,000 is imputed income to the employee.The death benefit, if paid, is included in the employee's beneficiary's gross income because the coverage was employer-paid group life.
7. Which of the following is NOT one of the §101(a)(2) statutory safe-harbor transferees that preserve the income-tax-free death benefit?
A partner of the insured, or a partnership in which the insured is a partner.A corporation in which the insured is a shareholder or officer.An ex-spouse of the insured pursuant to a §1041 incident-to-divorce transfer.The insured.
8. Under a universal life policy's Option A (Option 1) death benefit, the death benefit is:
Increasing at a fixed annual rate of 5% under the standard CPI-linked riderEqual to the face amount plus the contract's accumulated cash valueLevel — generally equal to the policy's specified face amountEqual to the contract's current cash value only, with no separate face amount
9. Which of the following statements BEST distinguishes HIPAA from GLBA in the life-insurance context?
HIPAA covers state motor-vehicle driving records and MVR data, while GLBA covers medical records and protected health information held by hospitals and clinicsHIPAA and GLBA are different statutory names for the same federal financial-services privacy regulation enacted by Congress to govern insurance underwriting practicesHIPAA governs protected health information (PHI) held by covered healthcare entities; GLBA governs nonpublic personal financial information held by financial institutions, including insurersOnly HIPAA applies to life and health insurers under federal law; GLBA applies exclusively to commercial banks, credit unions, broker-dealers, and securities advisors under SEC rules
10. A life policy form contains a provision stating that the insurer may, in its discretion, deny coverage for any reason during the first three years after issue. Under the NAIC standard provisions framework adopted by every state, this provision is:
Enforceable because the parties freely agreed to it under the standard freedom-of-contract doctrine recognized under every state's insurance code regulating individual life policy formsNot approvable — it contradicts the standard incontestability and required-provisions framework and is misleading on its faceEnforceable only against the beneficiary at claim time, not against the named insured during the lifetime of the policy under the standard provisions frameworkEnforceable only when the applicant has personally initialed the discretionary-denial provision at the time the application is signed under the NAIC standard provisions
11. An annually renewable term (ART) policy is characterized by which premium structure?
Premiums that increase each year based on the insured's attained ageA single level premium guaranteed for lifePremiums that step up at the end of each level period (e.g., every 10 years)Premiums that are waived entirely after the first policy year
12. A 45-year-old withdraws $10,000 of earnings from her Traditional IRA to pay off credit card debt. Absent an exception, the distribution is subject to:
Ordinary income tax only — no penalty applies under any circumstanceA 25% excise tax under IRC §4974A 20% mandatory withholding but no penaltyOrdinary income tax plus a 10% additional tax under IRC §72(t)
13. Constructive delivery occurs when:
The soliciting producer leaves a voicemail message stating that the contract is ready for pickup at the agency officeThe 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 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 department
14. 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?
20%0% — there is no penalty5%10%
15. Which settlement option pays the beneficiary a guaranteed income for as long as they live, with NO refund if they die early?
Life income with period certainFixed-period optionLife income with refundStraight life income (pure life)
16. Under IRC §101(g), accelerated death benefits paid because the insured is terminally ill are generally treated for federal income tax purposes as:
Tax-free, like death proceeds under §101(a)Taxable to the extent the benefit exceeds basis in the contractTax-free only if the insured is age 59½ or olderFully taxable as ordinary income
17. Why is indexed universal life NOT regulated as a security despite being linked to an equity index?
FINRA has formally exempted IUL from Rule 2330 covering variable-product suitability standardsThe contract's accumulated cash value can never exceed $50,000 in total under the carrier's product rulesThe insurer holds the cash value in its general account and bears investment risk via a guaranteed floorThe product is sold only to accredited investors as defined by the SEC under Regulation D, Rule 501(a)
18. In a typical employer-sponsored group life plan, who is the policy owner and who receives a certificate of insurance?
The employer owns the master policy; each covered employee receives a certificate of insuranceThe state insurance regulator owns the master policy under group filing rules; each enrolled employee is given a certificateEach employee individually owns the policy, and the employer is mailed an enrollment certificateThe insurer retains ownership of both the master policy and every individual certificate it issues
19. A non-MEC universal-life policy lapses when the cumulative loan balance exceeds the cash value. At lapse, cumulative net premiums were $50,000, gross cash value was $80,000, and the outstanding loan was $80,000 (so the owner receives nothing). What does the policyowner report on Form 1099-R?
$80,000 of ordinary income, equal to the gross cash value of the contract at the moment of lapse — i.e., the entire pre-loan cash-value figure is treated as taxable incomeNothing — no actual cash was received by the policyowner from the carrier at lapse, so there is no reportable taxable amount on the Form 1099-R for the lapse year$30,000 of ordinary income — the gain in the contract ($80,000 cash value − $50,000 basis), even though no cash is received ('phantom income').$30,000 of long-term capital gain at preferential federal capital-gains rates because the underlying universal-life policy was held for more than one calendar year
20. Which annuity funding arrangement allows the owner to make ongoing premium contributions of varying amounts during the accumulation phase?
FPDASPIAGroup single-pay annuitySPDA

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.