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Nebraska Life Practice Exam

20 exam-style questions drawn from the same bank as our full Nebraska Life course (Nebraska 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. An annuity used to make periodic payments in a lawsuit award is a
Tax-sheltered annuityStructured settlementSplit annuityCharitable annuity
2. What is the primary purpose of credit life insurance?
To pay off the outstanding balance of a specified debt if the borrower dies before it is repaidTo fund federal estate-tax liabilities at the borrower's death using ILIT-held permanent proceedsTo provide a long-term savings vehicle for the borrower with tax-deferred cash-value buildupTo replace a borrower's income for the rest of the borrower's life on a lifetime-income annuity basis
3. A 60-year-old widow elects the 'life income only' (straight life) settlement option for a $500,000 death benefit. She dies after receiving 14 months of payments. What does the insurer pay to her estate or any contingent payee?
A lump-sum payment equal to the original face amount minus the total monthly payments already made to the widow.Nothing — straight life income terminates at the annuitant's death with no refund.The remaining unpaid principal balance, prorated against the widow's actual age at the date of death.Five years of guaranteed monthly payments paid to a contingent payee named on the settlement option election form.
4. The rider that raises coverage with inflation is the
Guaranteed insurabilityCost of living riderPaid-up additionsIncreasing term
5. Which of the following is a valid tax-free exchange under IRC §1035?
A life-insurance policy exchanged for an annuity contract.A non-qualified annuity exchanged for a Roth IRA.An annuity contract exchanged for a life-insurance policy.A life-insurance policy exchanged for shares of mutual-fund stock.
6. A non-natural entity such as a corporation owns a deferred annuity. How is the inside buildup taxed during the accumulation phase?
Taxed as long-term capital gainsTax-deferred, the same as a contract owned by an individualCurrently taxable as ordinary income each yearTax-free until annuitization
7. Surrendering a life policy for more than premiums paid creates
Taxable gainTax-free incomeA deductible lossA capital loss
8. The age at which unreduced Social Security retirement benefits begin for people born in 1960 or later is
70656267
9. A 403(b) tax-sheltered annuity plan is restricted to which group of employers?
Self-employed individuals only, including independent contractors and sole proprietors operating an unincorporated trade or business.For-profit corporations and other commercial private-sector employers, but not government or tax-exempt employers.Public schools, 501(c)(3) tax-exempt organizations, and certain ministers.State and local government employers only, including municipalities and their related public-sector instrumentalities.
10. A deferred compensation plan for state and local government employees is a
401(k)SEP IRA403(b)457 plan
11. How does Modified Endowment Contract status affect the income-tax treatment of the death benefit paid to the named beneficiary at the insured's death?
The death benefit paid to the named beneficiary becomes fully taxable as ordinary income at the marginal federal rate on the receipt year's returnMEC status converts the death benefit from §101(a)-excluded proceeds to long-term capital gain at preferential capital-gains rates under §1221The death benefit remains income-tax-free under IRC §101(a) — MEC status changes living-benefit taxation, not death-benefit treatment.Only the gain over the policy's investment-in-the-contract basis is taxable as ordinary income; the remaining basis portion is excluded under §101(a)
12. A policyowner has a 20-year-old whole life policy with $80,000 cash value, $35,000 in cumulative premiums paid, and a $20,000 outstanding policy loan. If she lapses the policy with the loan still outstanding (i.e., does not repay the loan and the loan is treated as a distribution), how much taxable gain does she recognize?
$0 — loans taken from any individual life insurance contract are categorically never taxable to the policy owner, even after the contract lapses with the loan outstanding$45,000 — the cash value (gross of the loan) minus basis is taxable when the policy lapses; the loan is treated as a distribution.$20,000 — only the original cash amount the policyowner actually received as proceeds of the loan is treated as a taxable distribution when the policy ultimately lapses with the loan outstanding$60,000 — the cash value ($80,000) minus the net cash actually received ($20,000) is taxable when the policy lapses with the loan outstanding
13. A client purchases an annuity today and is scheduled to receive monthly income beginning 18 months from now. This contract is properly classified as a:
Immediate annuityDeferred annuityHybrid annuityTerm-certain annuity
14. The notice required when coverage is denied or rated based on a consumer report is an
Privacy noticeReplacement noticeDeclination letterAdverse action notice
15. A medical exam done by a nurse or technician instead of a doctor is a
Paramedical examFull physicalInspection reportAttending physician statement
16. The rider waiving a child's policy premiums if the paying adult dies or is disabled is
Child term riderWaiver of premiumPayor benefitFamily income
17. A client wants permanent coverage but only wants to pay premiums until age 65, after which the policy must be fully paid up. Which whole life variation fits?
Single-premium whole lifeStraight (ordinary) whole lifeLimited-pay whole lifeModified whole life
18. A policy that pays dividends to its owners is
GuaranteedNonparticipatingVariableParticipating
19. The federal office whose sanctions list insurers must check customers against is
OFACNAICFinCENFINRA
20. An applicant whose expected mortality is average is rated
DeclinedStandardPreferredSubstandard

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