Free Virginia Life Practice Exam — 20 Questions, No Signup

1. Borrowing against a policy's cash value is a
Collateral assignmentWithdrawalPartial surrenderPolicy loan
2. The provision listing the premium and statements on the application as the insured's part of the bargain is the
Insuring clauseConsideration clauseOwnership clauseEntire contract
3. Paying the premium once a year is the
Single premiumAnnual modeMonthly modeLevel mode
4. The federal law regulating consumer reports used in underwriting is the
Gramm-Leach-Bliley ActHIPAAFair Credit Reporting ActERISA
5. A payout that returns any unpaid premium in a lump sum at death is
Life onlyPeriod certainCash refundInstallment refund
6. A report from the applicant's own doctor is an
Paramedical examInspection reportMIB reportAttending physician statement
7. An indirect rollover must be completed within
90 days60 days120 days30 days
8. A client owns a whole-life policy with $40,000 of cumulative premium paid and $55,000 of cash value. He exchanges it for a new universal-life policy in a properly executed §1035 exchange. What is his cost basis in the new contract?
$55,000, because the basis in the new contract equals the cash value that was actually transferred to the new universal life policy$40,000 — the basis carries over from the old contract under Rev. Rul. 2003-51.$0, because the basis fully resets to zero at issue under IRC §1035's tax-free exchange treatment for newly delivered contracts$15,000, because the basis in the new contract equals the cash-value gain ($55,000 cash value minus $40,000 premiums paid)
9. Which 1035 exchange is NOT allowed tax free?
Annuity to annuityLife to lifeLife to annuityAnnuity to life insurance
10. Most state insurance codes require individual life policies to contain a 'free-look' provision allowing the policyowner to return the policy for a full refund within at least:
30 days of delivery5 days of delivery20 days of delivery10 days of delivery
11. The provision letting a new owner return the policy for a full refund is the
Incontestable clauseGrace periodReinstatementFree look
12. An exclusion for death caused by acts of war is the
Suicide clauseWar exclusionAviation exclusionHazard exclusion
13. An indirect rollover from an employer plan has mandatory federal withholding of
25%10%20%15%
14. A father gifts a fully paid-up life-insurance policy to his adult daughter. No money or other consideration changes hands. Several years later the father dies and the daughter, as both owner and beneficiary, collects the death benefit. Which statement correctly describes the §101(a)(2) analysis?
The death-benefit proceeds are taxable to the daughter to the extent of the policy's federally determined fair-market gift-tax value at the date of the original father-to-daughter transfer, with anything above that value also taxableThe §101(a)(2)(B)(v) carryover-basis safe harbor must be affirmatively elected on the executor's IRS Form 706 estate-tax return in order for the gratuitous transfer of the in-force life-insurance policy to preserve the income-tax exclusionThe §101(a)(2) transfer-for-value rule applies to the gratuitous transfer of the in-force life-insurance policy because the daughter received the contract 'for free' without paying her father any consideration, and so the entire death-benefit proceeds become fully taxable to herA pure gift is not a transfer 'for valuable consideration,' so no transfer-for-value problem arises and the death benefit is income-tax-free under §101(a).
15. Loans from a non-MEC life policy are generally
Fully taxableNot taxableSubject to penaltyTaxed as gain first
16. Which client situation generally raises the strongest suitability concern when recommending a deferred annuity?
An 85-year-old using emergency funds to purchase a long-surrender-period contractA 62-year-old rolling over a 401(k) for guaranteed lifetime incomeA 45-year-old saving for retirement with stable incomeA 55-year-old funding a tax-deferred retirement supplement
17. The nonprofit that shares coded medical information among member insurers is the
CLUEFCRAMIBNAIC
18. Which practice involving credit life insurance is generally prohibited under the NAIC Credit Life Model Regulation and related state rules?
Disclosing the credit-life premium amount as a separate line item on the loan disclosure documentsRefunding unearned premium to the borrower when a loan is paid off early through prepaymentConditioning approval of a loan on the borrower's purchase of credit life from a creditor-affiliated insurerIssuing the credit-life policy as decreasing term whose face tracks the amortizing loan balance
19. Annual renewable term (ART) premiums increase each year because:
State insurance codes require annual rate adjustments on term contractsThe insurer must recover acquisition costs in the early yearsCash value accumulation forces a corresponding premium adjustmentThe mortality cost of insuring the same person rises each year as the insured ages
20. A transfer to which party is an exception to the transfer for value rule?
An investorA creditorA strangerThe insured