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Iowa Life Practice Exam

20 exam-style questions drawn from the same bank as our full Iowa Life course (Iowa 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. Generally, a worker must accumulate how many quarters of coverage to be fully insured for Social Security retirement benefits?
20 quarters (about 5 years) of covered employment with FICA withholding80 quarters (about 20 years) of covered employment under the SSA standard40 quarters (about 10 years) of covered employment60 quarters (about 15 years) of covered employment under the §414(a) rule
2. Which of the following BEST describes the difference between a regular consumer report and an INVESTIGATIVE consumer report under FCRA?
Investigative consumer reports are obtained only with a court order and certified consumer-signed written authorizationInvestigative reports are based on personal interviews with the consumer's neighbors, friends, or associates concerning character, reputation, and lifestyleInvestigative consumer reports contain only credit and debt data assembled by the three nationwide consumer reporting agenciesInvestigative consumer reports are limited to drivers and contain MVR data covering moving violations within the prior three years
3. In a fixed annuity, the investment risk during the accumulation phase is borne by:
The insurance companyThe annuitantThe beneficiaryThe owner
4. Premiums paid into a fixed annuity are deposited into the insurer's:
Reinsurance poolGeneral accountSuspense accountSeparate account
5. Which entity bears the investment risk in a traditional fixed deferred annuity?
The annuitantThe ownerThe insurerThe beneficiary
6. Within how many days must an indirect (participant-receiving) rollover distribution be deposited into the receiving plan or IRA to avoid being treated as a taxable distribution?
180 days60 days30 days90 days
7. Which statement best describes the funding of a Simplified Employee Pension (SEP) IRA?
Only self-employed individuals and unincorporated sole proprietors may sponsor a SEP plan; for-profit corporations are categorically excluded from §408(k) plan eligibility.The employer makes contributions to each eligible employee's IRA; employees may not contribute under the SEP feature.The employee contributes solely through salary-reduction elective deferrals; the employer is contractually prohibited from making any direct SEP contribution under §408(k).Both the participating employer and each covered employee make matching SEP contributions on a dollar-for-dollar basis under IRC §408(k)(6) rules.
8. An applicant pays the initial premium with the application and receives a conditional receipt. Two days later, before any underwriting is completed, the applicant dies. Under the conditional receipt, when does coverage exist?
Coverage exists immediately on the receipt date in all cases, regardless of any later underwriting finding by the carrierCoverage never exists until the policy contract is delivered to the applicant and the first premium is paid in fullCoverage exists only if the applicant survives the carrier's standard underwriting period and any required medical examCoverage exists only if the applicant would have been approved as a standard risk on the receipt date
9. A producer offers a $50 gift card to anyone who purchases a life insurance policy. Under the NAIC Unfair Trade Practices Act (Model #880) adopted by every state, this offer is best characterized as:
Permitted if disclosed on the applicationPermitted only for term insurance and never for permanent cash-value life policiesA normal and permitted marketing expenseA prohibited rebate or inducement not specified in the policy
10. A spouse term (or 'other-insured') rider differs from a separate spouse-owned life policy primarily in that the rider:
Provides level term coverage on the spouse that is administratively bundled into the primary insured's policy and usually expires at a stated age (often 65)Pays the spouse-rider death benefit only after both the primary insured and the covered spouse die, similar in mechanics to a survivorship second-to-die life policyCannot be removed from the underlying primary insured's contract once it has been added at policy issue, even on a written request from the policyownerDoes not require any additional premium because the spouse-rider mortality charge is absorbed by the primary insured's base whole life premium under standard pricing
11. Under IRC §79, employer-paid group term life insurance is generally tax-free to the employee for coverage up to:
$100,000$50,000$25,000$10,000
12. Under the NAIC Life and Health Insurance Guaranty Association Model Act (Model #520), membership in the state's life and health guaranty association is:
Limited to domestic insurers only, with foreign and alien insurers categorically excluded from membership under NAIC Model #520 jurisdictional-eligibility provisionsVoluntary for any insurer that wishes to participate, with each carrier electing membership at the time of admitted-market licensure under NAIC Model #520 voluntary-participation provisionsRequired only for insurers carrying over $1 billion in policyholder surplus under the NAIC Model #520 large-insurer-only mandatory-membership threshold provisionRequired as a condition of authority to write life or health business in the state
13. Credit life insurance is designed to pay:
The borrower's gross income for the next five years following death of the insuredFuneral and burial costs of the borrower's spouse under the small face-amount policy formA lump-sum benefit to the borrower's surviving immediate family membersThe outstanding balance of a debt to the creditor if the borrower dies
14. An Accelerated Death Benefit (ADB/living benefit) rider allows an insured to receive a portion of the death benefit while alive when which condition is met?
The insured surrenders the policy for cashThe insured turns age 65The insured involuntarily loses full-time employment for a continuous period of more than 90 daysThe insured is diagnosed with a qualifying terminal, chronic, or critical illness
15. Which statement correctly contrasts a defined benefit (DB) plan with a defined contribution (DC) plan?
DB plans are funded only by employee salary-reduction elective deferrals under the ERISA contribution rules; DC plans are funded only by employer matching and discretionary nonelective contributions under their own contribution rulesDB plans promise a specific retirement benefit and place investment risk on the employer; DC plans specify the contribution and place investment risk on the employeeDC plans guarantee a specific monthly retirement benefit at the participant's normal retirement age under a formula based on final pay and years of service; DB plans do not provide any defined benefit guaranteeDC plans participant benefits are guaranteed by the federal PBGC under ERISA Title IV up to the statutory annual benefit limits; DB plans participant benefits are categorically not covered by any federal pension insurance program
16. All of the following are characteristics of an SPDA EXCEPT:
Income payments begin more than 12 months after purchaseAccepts ongoing flexible contributionsEarnings accumulate on a tax-deferred basisFunded with a single lump-sum premium
17. Under the federal Gramm-Leach-Bliley Act and its Safeguards Rule, a life insurance producer who collects nonpublic personal financial information from applicants must:
Encrypt all telephone calls with applicants end-to-end under the federal Gramm-Leach-Bliley Act's standard call-confidentiality provision applicable to nonpublic personal financial information collectionRefuse to collect any Social Security numbers from applicants under any circumstances under the federal Gramm-Leach-Bliley Safeguards Rule's strict identifier-collection prohibition for life-insurance applicationsProvide an initial and annual privacy notice and maintain a written information security program with administrative, technical, and physical safeguardsRegister the customer database with the U.S. Department of Commerce under the federal Gramm-Leach-Bliley Act's customer-database-registration provision applicable to all financial institutions handling personal information
18. An MIB report contains a code suggesting a prior cardiac impairment. Under MIB rules, the underwriter may use this information to:
Decline the applicant solely on the basis of the MIB-coded cardiac impairment entry, with no further verificationCancel the pending application without prior notice to the applicant or any FCRA adverse-action disclosureCharge a higher substandard-class premium based on the coded impairment without ordering an APS or new examInvestigate further but not base the underwriting decision solely on the MIB report
19. 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 requirement6 months5 years12 to 24 months
20. On a non-MEC universal life policy, a policyowner takes a partial WITHDRAWAL (not a loan) of $15,000 from a $50,000 cash value. Her cumulative premiums to date total $40,000. How much of the withdrawal is taxable income?
$5,000 — only the cost-recovery shortfall is taxed.$10,000 — only the gain portion of the contract is taxed.$15,000 — all withdrawals from life insurance are immediately taxable.$0 — withdrawals from a non-MEC are FIFO and recover basis first.

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