Free Iowa life insurance practice test.

Answer D. Variable universal life cash value can rise or fall with investments, while whole life cash value is guaranteed

Variable universal life places cash value in separate accounts that can gain or lose based on market performance, while whole life provides a guaranteed cash value. Whole life does not lose value in a market drop because its cash value is guaranteed. They do not share the same fixed value, and both do build cash value, so those choices are wrong.

Answer D. Reduced paid up insurance

Reduced paid up insurance uses the cash value to buy a smaller amount of permanent coverage that stays in force for life with no more premiums. Extended term keeps the full face amount but only for a limited time. Cash surrender ends the policy for the cash. Automatic premium loan is not a nonforfeiture option; it uses cash value to pay premiums temporarily.

Answer C. A prohibited unfair or deceptive practice subject to penalty

Knowingly falsifying an application is an unfair and deceptive practice and can lead to license discipline, fines, or other penalties. It is never a minor clerical matter because it misrepresents the risk. It is not an acceptable accommodation regardless of the client relationship. It is not protected judgment because the producer has no authority to enter false facts.

Answer B. It authorizes the producer to represent that specific insurer

An appointment is the insurer's authorization for a licensed producer to represent and act on behalf of that company. It does not replace the license, which is separate and required. Commission rates are set by contract, not by the appointment law. Appointments do not shift the insurer's legal liability to the producer.

Iowa Code Chapter 522B (appointment of producers)

Answer C. Prohibited, because advertising guaranty association coverage to sell insurance is not permitted

Iowa law prohibits using the existence of the guaranty association in advertising or as an inducement to buy insurance. Even though the association is real, promoting it as a selling point is banned. A client waiver cannot make a prohibited practice legal, and it is not a required disclosure to feature in a sales pitch.

Iowa Code Chapter 508C (prohibited use of guaranty association in sales/advertising)

Answer B. The death benefit gradually declines over the term

Decreasing term has a face amount that drops over the term, often used to cover a mortgage balance. The premium usually stays level, not rising. Term insurance has no cash value. Term does not last for life; it ends when the term expires.

Answer D. Policy loan provision

The policy loan provision allows the owner of a policy that has built cash value to borrow against that value. The automatic premium loan provision is a separate feature that uses cash value to pay an overdue premium, not a general borrowing right. Reinstatement restores a lapsed policy. Waiver of premium keeps a policy in force if the insured becomes disabled.

Answer D. The free look period

The free look period lets the owner examine the delivered policy and return it for a full premium refund if not satisfied. The grace period is extra time to pay a late premium without lapse. The reinstatement period is the time to restore a lapsed policy. The contestable period is the time the insurer may challenge the policy for misstatements.

Answer D. A producer license issued by the Iowa Insurance Division

Iowa law requires anyone who sells, solicits, or negotiates insurance to hold a producer license issued by the Iowa Insurance Division. A county business license does not authorize insurance sales. A certificate of authority is what an insurer (company) holds, not an individual producer. There is no federal insurance sales permit because insurance is regulated by the states.

Iowa Code Chapter 522B (producer licensing)

Answer D. Commingling and misappropriation of funds

Mixing client premium funds with personal funds and keeping them is commingling and misappropriation, a serious violation of a producer's fiduciary duty. Rebating is giving part of a commission or premium back to induce a sale. Twisting is using misrepresentation to get a client to replace a policy. Concealment is hiding a material fact. The described conduct is mishandling of funds.

Iowa Code Chapter 522B (grounds for discipline; fiduciary handling of funds)

Answer B. Universal life offers flexible premiums while whole life has fixed premiums

The key difference is flexibility: universal life lets the owner vary premiums and benefit, while whole life has fixed, scheduled premiums. Both have death benefits, so saying universal has none is wrong. Both are permanent, so calling whole life temporary is wrong. Whole life credits a fixed, guaranteed rate rather than investing in the stock market; that describes variable life.

Answer B. Waiver of premium rider

The waiver of premium rider pays the premiums if the insured becomes totally disabled, keeping the policy in force. The guaranteed insurability rider lets her buy more coverage later without proof of insurability. Accidental death pays extra if death is by accident. The payor benefit waives premiums if the person paying (not the insured) dies or is disabled, typically on a juvenile policy.

Answer C. No later than at the time the policy is delivered

Disclosure rules require the buyer's guide and policy summary be provided no later than policy delivery so the buyer can understand the coverage. Waiting until a claim is filed defeats the purpose of informing the buyer. The contestable period is unrelated to disclosure timing. These documents must be provided as required, not only on request.

Answer D. A refund of the premium paid

The free look right lets the policyowner examine the new policy and, if not satisfied, return it within the stated period for a full refund of premium paid. There is no cancellation fee during free look. It is not limited to future premiums. Free look applies to life insurance policies, not only annuities.

Answer C. The Iowa Life and Health Insurance Guaranty Association

The Iowa Life and Health Insurance Guaranty Association pays covered claims up to statutory limits when a member insurer becomes insolvent. The Division's general fund is not a claims payer. FDIC covers bank deposits, not life insurance. Reinsurance is an arrangement between insurers and does not directly protect the individual policyholder.

Iowa Code Chapter 508C (Iowa Life and Health Insurance Guaranty Association)

Answer D. Term life insurance

Term life covers a set period and pays only if death occurs during that term, with no cash value. Whole life is permanent coverage that lasts for life and builds cash value. Universal life is a flexible permanent policy with cash value. Variable life is permanent coverage with investment-based cash value. Only term is temporary period coverage.

Answer B. To return the policy for a full refund of premium

The free look period lets a new policyowner examine the policy and return it for a full premium refund if not satisfied. Increasing the death benefit is not a free look right. Conversion is a term policy feature unrelated to the free look. Borrowing against cash value is a policy loan, not part of the free look.

Answer B. A conditional receipt

A conditional receipt is given when the applicant pays with the application and can provide coverage before the policy is issued, as long as conditions such as insurability are met. A buyer's guide explains policy types but grants no coverage. A policy illustration shows projected values, not coverage. A free look notice tells the owner of the right to return the policy but does not provide temporary coverage.

Answer A. She must not transact insurance until she reinstates or renews the license as allowed by law

An expired license means the producer has no authority to transact insurance and must follow the reinstatement/renewal process before acting again. There is no automatic grace to keep selling. An appointment does not by itself grant licensing authority; the license must be valid. A new appointment filing does not cure a lapsed license.

Iowa Code Chapter 522B (license renewal and expiration)

Answer B. Within 30 days of the change

Iowa requires producers to keep their contact information current and report an address change to the Division within 30 days. Waiting 90 days or 6 months is too long and would leave Division records inaccurate. Saying no notice is required is wrong because keeping the address current is a continuing duty, not something that waits for renewal.

Iowa Code Chapter 522B (producer licensing, address change notification)