These twenty questions come from six sections of the official Alaska outline. Answer each one in your head first, then reveal the correct choice and the reason behind it.
Question 1 of 20
III. Completing the Application
An insurer bases a large part of its underwriting decision on statistical death rate data for large groups of people. What is this tool called?
- A. A morbidity table
- B. A mortality table
- C. An amortization schedule
- D. A dividend table
+Reveal answer
Answer: B. A mortality table
A mortality table shows expected death rates by age and is central to life underwriting and pricing. A morbidity table deals with sickness and disability, used in health insurance. An amortization schedule is a loan repayment tool. A dividend table relates to participating policy dividends, not risk selection.
Product Knowledge outline III - underwriting
Question 2 of 20
IV. Retirement and Other Insurance Concepts
In a third-party ownership arrangement, who has the right to name the beneficiary of the life insurance policy?
- A. The insured
- B. The policyowner
- C. The beneficiary
- D. The insurer
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Answer: B. The policyowner
Ownership rights, including naming or changing the beneficiary, belong to the policyowner. In third-party ownership the owner is someone other than the insured, but the owner still controls those rights. The insured has no ownership rights unless they also own the policy. The beneficiary only has a right to receive proceeds at death. The insurer administers the policy but does not choose the beneficiary.
IV. Retirement and Other Insurance Concepts (third-party ownership)
Question 3 of 20
I. Alaska Laws
When must an insurance producer notify the Director of Alaska of a change in home or business address?
- A. Within a set time period required by regulation
- B. Only at license renewal
- C. Only if the producer moves out of state
- D. Address changes never need to be reported
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Answer: A. Within a set time period required by regulation
Producers must report address changes to the Director within the time period fixed by rule so the Division can maintain accurate records and reach the licensee. Waiting until renewal, reporting only out-of-state moves, or never reporting all fail the notification duty. The exact day count varies, so the concept is tested.
AS 21.27 (producer address change notice); specific day count not stated because it may vary
Question 4 of 20
II. Alaska Laws
Before recommending an annuity to a retired Alaska consumer, a producer must gather information such as the client's financial situation, needs, and objectives. What standard does this support?
- A. Replacement notice requirement
- B. Annuity suitability requirement
- C. Guaranty association coverage
- D. Free look extension
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Answer: B. Annuity suitability requirement
Annuity suitability rules require the producer to collect the consumer's financial information and have reasonable grounds that a recommended annuity fits their needs. Replacement notices deal with changing existing coverage. Guaranty association coverage protects policyholders if an insurer fails. A free look extension addresses cancellation time, not the recommendation itself.
Alaska annuity suitability requirements
Question 5 of 20
I. Types of Policies
A universal life policy allows the owner to choose Option A (level death benefit) or Option B. Under Option B the death benefit generally equals:
- A. The face amount minus any cash value
- B. The face amount plus the accumulated cash value
- C. A fixed amount that never changes
- D. Twice the annual premium
+Reveal answer
Answer: B. The face amount plus the accumulated cash value
Under Option B (increasing), the beneficiary receives the specified face amount plus the accumulated cash value, so the total can grow. Option A pays only a level face amount. Subtracting cash value is not how either option works. Twice the annual premium is not a death benefit formula.
Types of Policies - universal life (concept item)
Question 6 of 20
II. Life Provisions
The guaranteed insurability rider gives the insured what benefit?
- A. A guaranteed cash value each year
- B. The right to buy additional coverage at set future dates without proving insurability
- C. A guaranteed interest rate on the policy loan
- D. Automatic increases in the death benefit for inflation
+Reveal answer
Answer: B. The right to buy additional coverage at set future dates without proving insurability
The guaranteed insurability rider lets the insured purchase more insurance at specified times or ages without a new medical exam. It does not guarantee cash value or loan interest rates, and it is not the same as a cost of living rider that increases benefits for inflation.
Life Provisions - Policy Riders (guaranteed insurability)
Question 7 of 20
III. Completing the Application
Sarah signs a life insurance application but leaves a health question blank, and the producer submits it anyway. What is the producer's duty?
- A. Guess the answer based on Sarah's appearance
- B. Have Sarah complete all questions before submitting
- C. Answer the question himself to save time
- D. Submit it because blanks are treated as no
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Answer: B. Have Sarah complete all questions before submitting
The producer must ensure the application is complete and accurate; unanswered questions should be filled in by the applicant before submission. Guessing or answering for the applicant risks misrepresentation. Blanks are not automatically treated as no and can create disputes at claim time.
Life General Knowledge Outline III - Application completion
Question 8 of 20
IV. Retirement and Other Insurance Concepts
Social Security survivor benefits are best described as providing what type of protection?
- A. A lump-sum payout equal to a life insurance policy
- B. Income to eligible dependents after a covered worker dies
- C. A guaranteed retirement pension for everyone at age 40
- D. Coverage that fully replaces private life insurance
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Answer: B. Income to eligible dependents after a covered worker dies
Social Security survivor benefits pay monthly income to eligible dependents such as a surviving spouse caring for children or minor children after a covered worker dies. It is ongoing income, not a single lump sum equal to a policy, so that is wrong. Retirement benefits are not available at age 40, so that is wrong. Survivor benefits supplement but do not fully replace private life insurance, so that is wrong.
IV. Retirement and Other Insurance Concepts (Social Security)
Question 9 of 20
I. Alaska Laws
A producer collects premiums from clients and holds those funds; how must the producer treat that money?
- A. As funds held in a fiduciary capacity, kept separate from personal money
- B. As personal income once collected
- C. As a loan the producer may spend and repay later
- D. As the insurer's property that the producer cannot access at all
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Answer: A. As funds held in a fiduciary capacity, kept separate from personal money
Premiums a producer collects are held in a fiduciary capacity and must be kept separate from the producer's own funds to prevent misuse. Treating them as personal income or as a loan to spend is misappropriation. Saying the producer cannot access them at all is wrong because the producer handles and forwards them but must not commingle them.
AS 21.27 (fiduciary duty for premiums)
Question 10 of 20
II. Alaska Laws
What is the main purpose of the Alaska Life and Health Insurance Guaranty Association?
- A. To set premium rates for all insurers
- B. To protect policyholders when a member insurer becomes insolvent
- C. To license insurance producers
- D. To investigate producer fraud
+Reveal answer
Answer: B. To protect policyholders when a member insurer becomes insolvent
The guaranty association protects policyholders, within limits, when a member insurer becomes insolvent and cannot pay claims. It does not set rates, which is a rating and filing function. Licensing producers is the division's job. Investigating fraud is a regulatory and enforcement function, not the guaranty association's role.
Alaska Life and Health Insurance Guaranty Association
Question 11 of 20
I. Types of Policies
Indexed universal life credits interest based on which of the following?
- A. A fixed rate set for the life of the policy
- B. The performance of a stated market index, subject to caps and floors
- C. The dividends declared by a mutual insurer
- D. The prime lending rate published by the insurer's bank
+Reveal answer
Answer: B. The performance of a stated market index, subject to caps and floors
Indexed universal life ties interest crediting to a named market index such as the S&P 500, usually with a cap limiting gains and a floor protecting against loss. A fixed rate for life describes a guaranteed rate, not indexed crediting. Dividends belong to participating whole life. The prime lending rate is not the crediting basis for indexed products.
Types of Policies - indexed life (concept item)
Question 12 of 20
II. Life Provisions
Which policy provision lets the insured borrow money from the insurer using the policy's cash value as security?
- A. Assignment provision
- B. Policy loan provision
- C. Reinstatement provision
- D. Entire contract provision
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Answer: B. Policy loan provision
The policy loan provision allows borrowing against the cash value. Assignment transfers ownership rights. Reinstatement restores a lapsed policy. The entire contract provision defines what documents make up the contract.
Life Provisions - Policy Provisions (policy loan)
Question 13 of 20
III. Completing the Application
When an applicant pays the initial premium at the time of application, what does the producer give them?
- A. A binding receipt guaranteeing coverage
- B. A conditional receipt
- C. A free look notice
- D. A policy summary
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Answer: B. A conditional receipt
A conditional receipt is issued when premium is paid with the application; coverage becomes effective only if the applicant is found insurable under the insurer's rules. A binding receipt is used in property insurance, not typical life. A free look notice comes with the delivered policy, not at application. A policy summary describes the policy but does not provide any interim coverage.
Life General Knowledge Outline III - Application (conditional receipts)
Question 14 of 20
IV. Retirement and Other Insurance Concepts
Which statement about group life insurance is correct?
- A. Each member must provide evidence of insurability to join
- B. The master contract is held by the employer or group sponsor
- C. Individual members receive their own policy contract
- D. Coverage is permanent whole life for every member
+Reveal answer
Answer: B. The master contract is held by the employer or group sponsor
In group life, one master contract is issued to the sponsor (usually the employer) and individual members receive certificates of coverage, not their own contracts. Group plans usually do not require individual evidence of insurability for the guaranteed amount, so that choice is wrong. Members get certificates rather than full policies, so that choice is wrong. Group life is typically annually renewable term, not permanent whole life, so that choice is wrong.
IV. Retirement and Other Insurance Concepts (group life)
Question 15 of 20
I. Alaska Laws
What is an appointment in Alaska insurance law?
- A. An insurer's authorization for a producer to represent and sell its products
- B. A scheduled meeting between the producer and the Director
- C. The producer's license renewal date
- D. A consumer's request for a policy illustration
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Answer: A. An insurer's authorization for a producer to represent and sell its products
An appointment is the insurer formally authorizing a licensed producer to act on its behalf and sell its products. It is not a meeting, not a renewal date, and not a consumer request. Students confuse appointment with licensing, but a license lets you sell while an appointment ties you to a specific insurer.
AS 21.27 (producer appointment)
Question 16 of 20
II. Alaska Laws
A producer keeps a client's premium payment in his personal bank account instead of forwarding it to the insurer. Which prohibited practice is this?
- A. Twisting
- B. Rebating
- C. Commingling of funds
- D. Defamation
+Reveal answer
Answer: C. Commingling of funds
Commingling is mixing client or insurer funds with the producer's personal funds, which is prohibited. Twisting is using misrepresentation to get someone to replace a policy. Rebating is giving something of value not stated in the contract to induce a sale. Defamation is making false statements harming an insurer. Only commingling describes misusing the premium account.
Alaska producer conduct and unfair trade practices (commingling)
Question 17 of 20
I. Types of Policies
A pure or straight life annuity payout option pays income for as long as the annuitant lives and then:
- A. Continues paying the same amount to a beneficiary for life
- B. Stops with no further payments to anyone
- C. Refunds all remaining premiums to the estate
- D. Doubles the payment to the surviving spouse
+Reveal answer
Answer: B. Stops with no further payments to anyone
A pure life (straight life) option pays the largest income while the annuitant lives and stops entirely at death, with nothing paid to survivors. Continued payments to a beneficiary describe a joint and survivor option. A refund of premiums describes a refund or period certain option. Doubling for a spouse is not a real payout option.
Types of Policies - annuities (concept item)
Question 18 of 20
II. Life Provisions
Marcus wants his life policy to pay an extra benefit if he dies in a car accident. Which rider should he add?
- A. Waiver of premium rider
- B. Accidental death benefit rider
- C. Guaranteed insurability rider
- D. Cost of living rider
+Reveal answer
Answer: B. Accidental death benefit rider
The accidental death benefit rider pays an additional amount if death results from an accident. Waiver of premium pays premiums during disability. Guaranteed insurability lets him buy more coverage without proof of insurability. Cost of living increases the benefit for inflation.
Life Provisions - Policy Riders (accidental death)
Question 19 of 20
III. Completing the Application
For a policy issued without prepaid premium, when does coverage generally become effective?
- A. When the application is signed
- B. When the policy is delivered and the first premium is paid
- C. When underwriting begins
- D. When the producer is appointed
+Reveal answer
Answer: B. When the policy is delivered and the first premium is paid
When no premium accompanies the application, coverage typically takes effect upon policy delivery and payment of the first premium, provided the insured's health is unchanged. Signing the application alone does not create coverage. Underwriting starting or the producer's appointment status does not trigger coverage.
Life General Knowledge Outline III - Policy delivery
Question 20 of 20
IV. Retirement and Other Insurance Concepts
Under a qualified retirement plan, how are the earnings on contributions treated while they stay in the plan?
- A. Taxed each year as ordinary income
- B. Tax-deferred until money is withdrawn
- C. Completely tax-free forever
- D. Taxed only as capital gains when earned
+Reveal answer
Answer: B. Tax-deferred until money is withdrawn
Qualified plan earnings grow tax-deferred, meaning no tax is due until funds are distributed, at which point they are taxed as ordinary income. They are not taxed annually while inside the plan, so that is wrong. They are not permanently tax-free; distributions are eventually taxed, so that is wrong. The growth is taxed as ordinary income at withdrawal, not as capital gains, so that is wrong.
IV. Retirement and Other Insurance Concepts (retirement plans; tax treatment)