Life and Health Insurance Practice Test
All 50 states mandate a life and health insurance license for anyone discussing life insurance or health insurance rates with potential buyers. All life and health insurance sales professionals must be licensed, and often this requirement also extends to administrative staff at an insurance company or a brokerage firm. Even though administrators do not frequently make sales calls, they do often interact and discuss rate information with clients.
The life and health insurance licensing examination is computer-based and consists of 150 multiple-choice questions. Four possible answers are presented for every question. There are three different types of formats for these questions: a) direct questions, b) incomplete sentences, and c) answers that begin with “All of the following except…”
Candidates must correctly answer at least 70 percent of the questions in order to pass the examination and become a licensed life and health insurance professional. Candidates have 2 ½ hours to complete the examination and will be notified immediately upon completion whether or not they have earned a passing score.
The examination covers several different topics, below is a list of those topics and the weight each carries in the life and health insurance license examination:
- Insurance regulation: 5 percent
- General insurance: 5 percent
- Life insurance basics: 7 percent
- Life insurance policies: 7 percent
- Life insurance policy provisions, options, and riders: 8 percent
- Annuities: 6 percent
- Federal tax considerations for life insurance and annuities: 5 percent
- Qualified plans: 4 percent
- Health insurance basics: 5 percent
- Individual health insurance policy general provisions: 4 percent
- Disability income and related insurance: 3 percent
- Medical plans: 8 percent
- Health maintenance organizations: 3 percent
- Group health insurance: 7 percent
- Dental insurance: 2 percent
- Insurance for senior citizens and special needs individuals: 8 percent
- Federal tax considerations for health insurance: 3 percent
- Additional considerations for life and health insurance counselors: 10 percent
The life and health insurance license examination is offered at many testing centers throughout the United States. The test should be scheduled at least one week in advance. In many states, candidates are required to complete four working days worth of review classes prior to sitting for the examination. Requirements vary by state, but candidates generally have six months to take and pass the life and health insurance license examination from the time the review classes are completed.
Please Note: The format of the Life and Health Insurance Exam depends on the state in which you are applying for a license. Therefore, the specific number of questions you will be required to answer may vary from state to state.
1. In which case did the court rule that the sale of insurance from an entity in one state to an entity in another state was interstate commerce?
A. Sherman Antitrust Act
B. Paul v. Virginia
C. U.S. v. South-Eastern Underwriters Association
D. McCarran v. Ferguson
2. An insurer must provide information about their privacy practices and have a valid disclosure authorization in all of the following situations EXCEPT:
A. When an insurer gathers information directly from the applicant
B. When an insurer contacts a third party to gather information about the applicant
C. When an insured entity has his policy reinstated, renews his policy, or requests a change to his policy
D. When another insurer requests information about the applicant
3. All of the following are considered illegal actions for an insurer or an insurance producer EXCEPT:
A. Selling insurance across state lines
B. Lying about the policy that the insurer is selling or about a policy that another insurer is selling
C. Falsifying documents or taking any other action that makes it difficult or impossible for an applicant or a law enforcement agency to examine the insurance agency’s policies and practices
D.Using money collected for any purpose other than the one for which it was intended
4. The Commissioner of Insurance is:
A. An individual that coordinates and/or controls the activities of a single insurer
B. A state official that coordinates and controls the enforcement of insurance laws within a particular state
C. A federal official that coordinates and controls the enforcement of federal insurance laws
D. A local official that coordinates and controls the enforcement of insurance laws within a particular city
5. Which of the following insurance entities must have a license?
B. Insurance producers
C. Underwriters that do not receive a commission
D. Risk analysts
1. C: In the case of U.S. v. South-Eastern Underwriters Association, the court ruled that a company based in a particular state is engaging in interstate commerce when it sells insurance to an individual or organization based in another state. The legal acts and/or rulings mentioned in choices “A” and “B” are both related to the issue of interstate commerce, but neither actually involved rulings that classified selling insurance from one state to another as interstate commerce under the law. The Sherman Antitrust Act establishes regulations related to interstate commerce, but it does not actually define interstate commerce in terms of insurance. In the case of Paul v. Virginia, it was ruled that selling insurance from one state to another could not be considered interstate commerce under the law. This decision was eventually overturned, however, in the case of U.S. v. South-Eastern Underwriters Association. Choice “D” is the name of an act that was passed as a result of the ruling in the U.S. v. South-Eastern Underwriters Association case.
2. D: An insurer is required to inform an applicant of their privacy practices in any situation in which an insurer collects information directly from the applicant, any situation in which the insurer contacts a third party to collect information about the applicant, any situation in which an insured entity renews his policy or has his policy reinstated, and any situation in which an insured entity requests a change to his policy. The insurer must also have a valid disclosure authorization form signed by the applicant in order to collect information. However, an insurer is not required to have a signed valid disclosure authorization form to provide information to another insurer, as long as the insurer providing the information has informed the applicant or the insured entity that the information may be provided to other insurers.
3. A: An insurer and/or an insurance producer based in one state can sell insurance to an individual or an organization based in another state, as long as they are appropriately licensed and follow any and all applicable laws. It is illegal, however, for an insurer and/or an insurance producer to lie about a policy to make it sound better or worse than another policy, to falsify documents that may be used to evaluate the validity of the insurance company and/or the actions of an insurer or producer, and to use the money that the insurer or producer collects for any purpose other than the one intended.
4. B: The Commissioner of Insurance is a state official that is responsible for the enforcement of the insurance laws within a particular state. Each state has a state insurance department or a state insurance board, and the Commissioner of Insurance (also known as the Director or Superintendent of Insurance) is the official responsible for coordinating and controlling the enforcement actions of the state board that he leads. Choice “A” may refer to a number of positions, including human resources manager, corporate officer, or even regulatory examiner, but it does not refer to the Commissioner of Insurance. Choice “C” may refer to the Chairman of the Securities and Exchange Commission (SEC), but it does not refer to the Commissioner of Insurance. Finally, choice “D” is incorrect because there is no official at the local or city level in charge of insurance regulation.
5. B: Insurance producers are required to have a license in order to sell insurance in most states. However, insurers, risk analysts, underwriters, and individuals in other similar positions are not typically required to have a license. This is because most states have adopted a series of regulations designed by the National Association of Insurance Commissioners, rules that are collectively known as the Producer Licensing Model Act (PLMA). The regulations established by the PMLA are designed to act as a uniform set of guidelines that a state can use to create its own insurance regulations. These guidelines have been implemented in most states, and they list specific positions that should require a license and specific positions for which a license is not required. As a result, the specific positions that require a license will vary somewhat from state to state, but an insurance producer or any other individual that receives part or all of his pay in the form of a commission is required to have a license in most states.