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Wyoming Life Practice Exam

20 exam-style questions drawn from the same bank as our full Wyoming Life course (Wyoming 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. A paramedical exam typically includes all of the following EXCEPT:
Height, weight, and blood pressureA coronary angiogramA health-history interviewBlood and urine specimens
2. 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:
Refund the premium onlyPay the death benefit as if coverage had been in force from March 1Pay only a return of premium plus interestDeny the claim outright because the policy contract was never formally delivered to the applicant
3. All of the following are characteristics of an SPDA EXCEPT:
Earnings accumulate on a tax-deferred basisAccepts ongoing flexible contributionsFunded with a single lump-sum premiumIncome payments begin more than 12 months after purchase
4. Which form of term life insurance has a level premium and a death benefit that decreases on a stated schedule, making it commonly paired with a mortgage?
Level termIncreasing termDecreasing termAnnual renewable term
5. A non-natural entity such as a corporation owns a deferred annuity. How is the inside buildup taxed during the accumulation phase?
Tax-deferred, the same as a contract owned by an individualTaxed as long-term capital gainsCurrently taxable as ordinary income each yearTax-free until annuitization
6. An insured pays premium on January 1. He misses his July 1 premium and dies on July 18 — within the 31-day grace period. Outstanding policy loan is $5,000; APL is not in effect. How will the insurer typically settle the claim?
Deny the claim outright because the policy was in arrears on the date of death and the grace-period extension applies only to lapse, not to claim coveragePay the face amount minus the overdue premium and minus the outstanding policy loan (with accrued interest)Pay only the policy's accumulated cash surrender value because the contract was technically in lapsed status at the moment of the insured's death during the grace periodPay the full face amount with no deductions, because death during a contractual grace period is fully covered without any reduction for unpaid premium or outstanding loan
7. Three shareholders of a closely held C-corporation own life-insurance policies on each other to fund a cross-purchase buy-sell agreement. When one shareholder retires, the remaining shareholders agree to buy his policies on each other for fair value. Why is this transaction a classic transfer-for-value trap?
Because corporate-owned life insurance is uniformly disallowed by IRC §264 and all the related employer-owned-life-insurance rules applicable to closely held shareholder-funded buy-sell arrangements among co-shareholdersBecause policies used in a closely held C-corporation cross-purchase buy-sell arrangement are categorically always classified as MECs from issue under §7702A regardless of the contract's actual premium-funding patternBecause the transfer between co-shareholders is for valuable consideration and shareholder-to-shareholder is NOT one of the five safe-harbor categories — so the death proceeds become taxable above basis.Because cross-purchase buy-sell life-insurance arrangements among shareholders of a closely held C-corporation are categorically forbidden by §101(a)(2), regardless of how the cross-purchase is structured between the participating shareholders
8. What is the maximum 2024 employer contribution to an employee's SEP IRA, expressed as a percentage of compensation?
Up to 25% of compensation, capped at the §415(c) annual addition limit.Up to 3% of compensation, matched dollar-for-dollar under the §408(p) SIMPLE-IRA matching rules.Up to 100% of compensation, with no statutory ceiling under §408(k) for the SEP contribution.Up to 50% of compensation, capped at the regular §408 individual IRA dollar limit of $7,000.
9. Paying the premium once a year is the
Single premiumAnnual modeMonthly modeLevel mode
10. 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
11. A non-MEC universal-life policy has been in force for twelve years. The owner increases the death benefit substantially and is required to provide new evidence of insurability. Under §7702A, what is the federal-tax effect of that change?
Nothing — the §7702A 7-pay testing window contractually closes at the end of contract year 7 and the policy is permanently grandfathered from any further re-testing for the remainder of its lifeThe policy automatically becomes a MEC under §7702A solely because any death-benefit increase that requires fresh medical underwriting is itself a per-se material change regardless of premium patternThe contract is disqualified entirely under §7702 and the inside buildup becomes immediately taxable as ordinary income to the policyowner in the year of the death-benefit increaseA 'material change' has occurred; the contract is treated as newly issued and a fresh 7-pay test begins, which may convert the policy to a MEC if the existing cash value plus future premiums exceed the new 7-pay limit.
12. A policy's cost basis for tax purposes is generally the
Total premiums paidCash valueFace amountDividends earned
13. 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 insurer retains ownership of both the master policy and every individual certificate it issuesEach employee individually owns the policy, and the employer is mailed an enrollment certificateThe state insurance regulator owns the master policy under group filing rules; each enrolled employee is given a certificate
14. 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)Fully taxable as ordinary incomeTax-free only if the insured is age 59½ or olderTaxable to the extent the benefit exceeds basis in the contract
15. A deferred compensation plan for state and local government employees is a
401(k)SEP IRA403(b)457 plan
16. An insured chooses the paid-up additions dividend option. What does this option do?
Buys small single-premium blocks of additional whole life that increase both cash value and death benefitPays the dividend in cash to the owner, with no effect on the cash value or face amount of the policyHolds the dividend on deposit and credits interest under the accumulate-at-interest dividend optionApplies the dividend to reduce the next contract-year premium dollar-for-dollar on the base policy
17. Which of the following is TRUE about MEC status?
MEC status automatically disappears and reverts to ordinary life-insurance tax treatment once the policy is more than ten contract years old, regardless of original premium funding pattern.Once a contract is classified as a MEC, all subsequent distributions are subject to MEC rules — and a 1035 exchange to a new policy carries the MEC taint forward.The death benefit paid on a MEC is included in the named beneficiary's gross income because the contract failed the §7702A 7-pay test during its first seven contract years after issue.MEC status is reset and removed each year if the seven-pay test is satisfied retroactively for the contract's cumulative premiums-paid history through that contract anniversary date.
18. The test measuring whether a policy is funded faster than seven level annual premiums is the
Seven-pay testExclusion testGuideline premium testCorridor test
19. An annuity owner dies during the accumulation phase before annuitization. Who receives the contract's death benefit?
The insurer retains the account valueThe beneficiary named in the contractThe annuitantThe estate of the annuitant
20. A family income (or 'family income benefit') rider provides which of the following?
A single lump-sum payment to the named beneficiary equal to ten times the policy face amount on the insured's death from any cause within the original termA monthly income to the surviving family beginning on the insured's death and continuing only until the end of a fixed period that started at policy issueLifetime monthly income payments for the surviving spouse, regardless of when the insured dies during the rider's level-decreasing-term coverage periodA guaranteed pension benefit for each surviving child until age 25, separately calculated and paid in addition to the base policy's ordinary death benefit

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