Free Georgia life insurance practice test.

Answer B. Single-premium is funded with one lump sum while limited-pay uses payments over a set number of years

Single-premium whole life is paid in full with one lump-sum payment, while limited-pay spreads premiums over a fixed period such as 20 years or to age 65. The first choice is backwards. Both build cash value, so the third is wrong. Both are permanent and last for life, so neither expires like term, making the fourth wrong.

Answer C. It decreases because the cash value is tied to investment performance

Variable universal life places cash value in separate account subaccounts tied to investments, so the owner bears the investment risk and the cash value can drop when markets fall. Choice A is wrong because variable products generally do not guarantee the cash value against market loss. Choice B is wrong because insurers do not refund premiums for poor market performance. Choice D is wrong because a market drop does not automatically cancel the death benefit.

Answer A. Both the death benefit and the premium

Level term keeps both the face amount and the premium the same for the entire term period, which is why the first choice is correct. The second and third choices describe increasing or annually adjusting products, not level term. The fourth is wrong because level term is specifically designed to hold both values steady.

Answer D. The annuitant

The annuitant is the person whose life is used to measure payments and who receives the income during the payout phase. The insurer makes the payments but does not receive them. The producer earns commission but is not paid the annuity income. A contingent beneficiary only receives money if a named beneficiary dies before payment, not during the normal payout to the living annuitant.

Answer B. It bars the insurer from denying a claim based on misstatements in the application, except for nonpayment of premium

After the incontestable period, usually two years, the insurer cannot void the policy or deny a claim for misstatements in the application, with narrow exceptions such as nonpayment. It is not about raising premiums, taking loans, or doubling benefits.

Answer B. Insurable interest in the insured

When the policyowner and the insured are different, the applicant must have insurable interest in the insured's life at the time of application. A guaranteed rate of return has nothing to do with eligibility to apply. A general power of attorney is not required to buy coverage on another person. A replacement form is only needed when existing coverage is being replaced.

Answer D. To classify and price risk based on the applicant's characteristics

Underwriting is the process of evaluating and classifying risk so the insurer can decide whether to issue a policy and at what premium. Collecting premiums is billing, not underwriting. Paying claims is the claims function. Advertising is marketing, not risk selection.

Answer C. Collect the premium and, when required, obtain a statement of continued good health

When premium is collected at delivery rather than with the application, coverage has not yet begun, so the producer must collect the first premium and, when the insurer requires it, obtain a statement of continued good health confirming the applicant's condition has not changed. Coverage is not already in force. Reapplying is unnecessary. Simply waiting leaves the applicant unprotected and does not complete delivery.

Answer D. Unilateral

An insurance contract is unilateral because only one party, the insurer, makes an enforceable promise to pay if a covered event occurs; the insured is not legally forced to keep paying premiums. Bilateral is wrong because that means both parties make binding promises. Aleatory refers to the unequal exchange of dollars, which is a different feature. Conditional refers to duties that must be met before payment, also a different feature.

Answer A. Execute an absolute assignment of ownership to the grandson

To hand over complete ownership rights, Ellen should make an absolute assignment, which permanently transfers all ownership to the grandson. Changing the beneficiary does not transfer ownership control. Canceling and reapplying wastes the existing coverage and may cost more at older ages or worse health. The free look is a short cancellation window at policy issue and does not transfer ownership.

Answer A. Stranger-originated life insurance (STOLI)

STOLI occurs when a policy is initiated for the benefit of investors who have no insurable interest in the insured, which is prohibited. Twisting is using misrepresentation to get someone to replace one policy with another. Rebating is offering something of value to induce a purchase. Concealment is failing to disclose a known material fact.

Answer B. The present value of the insured's expected future earnings

The human life value approach estimates the economic loss to survivors by calculating the present value of the wage earner's future income. Debts alone reflect only part of the needs approach, the home's value is an asset not an income measure, and affordability is a budgeting factor, not the basis of this calculation.

Answer B. The blackout period

The blackout period is the time when survivor benefits stop, typically after the youngest child reaches a certain age, until the surviving spouse becomes eligible again at retirement age. The elimination period is a waiting period in disability policies. The grace period is time to pay a late premium. The probationary period is an early period when certain claims are excluded.

Answer C. Administer oaths and subpoena witnesses and records

As part of hearing authority, the Commissioner may administer oaths, take testimony, and subpoena witnesses and documents. The Commissioner is not a police officer and cannot make arrests. Criminal convictions require the court system, not the Commissioner. The Commissioner cannot unilaterally seize personal bank accounts without legal process.

O.C.G.A. Title 33, Chapter 2 (hearing and subpoena powers)

Answer C. His license is no longer valid and he cannot transact insurance

A lapsed or expired license means the producer is no longer authorized to transact insurance business until it is renewed or reinstated. He may not keep selling just because paperwork is pending. Licenses are not automatically reissued without meeting renewal requirements. Georgia typically allows reinstatement within a set period, so the loss is not necessarily permanent.

O.C.G.A. Title 33, Chapter 23 (license expiration, renewal, and continuing education)

Answer B. False advertising

Publishing materials that contain untrue or misleading statements about a policy is false advertising and misrepresentation. Coercion involves intimidation to control business. A boycott is an agreement to restrain trade among competitors. Unfair discrimination involves unequal treatment within the same risk class.

O.C.G.A. Title 33, Chapter 6 (Misrepresentation and False Advertising)

Answer B. A misappropriation of fiduciary funds regardless of intent to repay

Spending premium money that belongs to the insurer or insured is misappropriation of fiduciary funds even if the producer intends to pay it back. Intent to repay does not make the use lawful. It is not a commission draw because the funds are not the producer's earned commission. A grace period is extra time for a policyowner to pay a renewal premium and has nothing to do with a producer's use of collected funds.

O.C.G.A. 33-23-33 (misappropriation of fiduciary funds)

Answer B. To protect policyholders and beneficiaries if a member insurer becomes insolvent

The Guaranty Association exists to pay covered claims and protect policyholders, beneficiaries, and annuitants when a member insurance company becomes insolvent and cannot meet its obligations. Licensing and appointment are functions of the Commissioner, not the Association. Rate setting is not a Guaranty Association function. Investigating fraud and imposing penalties is done by the Commissioner's office, not the Association.

O.C.G.A. Title 33, Chapter 38 (Georgia Life and Health Insurance Guaranty Association Act)

Answer D. Limited-pay whole life

Limited-pay whole life lets the owner finish paying premiums by a chosen point such as age 65 while coverage continues for life. Straight whole life requires premiums for life, so payments would not stop. Term to 65 would expire, not stay in force. Adjustable life lets you change features but is not defined by being paid up at a set age.

Answer A. A promise that credited interest will never fall below a stated floor

Interest sensitive products include a guaranteed minimum rate, meaning the credited rate can rise with current rates but will never drop below the contract floor. Choice B is wrong because premiums are not guaranteed to fall each year. Choice C is wrong because dividends belong to participating policies and are never guaranteed. Choice D is wrong because these products credit a declared interest rate rather than being invested directly in the stock market.