Free Minnesota life insurance practice test.

Answer D. Variable life

Variable life is a market-sensitive policy whose cash value is placed in separate account subaccounts, so values can go up or down with market performance. Whole life has guaranteed, non-market cash value. Decreasing term has no cash value at all. A fixed annuity credits a guaranteed rate and is not tied to market subaccounts.

Answer A. Refund the premiums paid instead of paying the death benefit

During the suicide exclusion period, the insurer's liability is limited to a refund of premiums paid rather than the full death benefit. Paying the full benefit would ignore the exclusion period. Denying and keeping premiums is wrong because premiums are returned. Paying only cash value is not the standard remedy for suicide within the exclusion period.

Answer A. It is stranger-originated life insurance that lacks insurable interest

This describes STOLI, which is prohibited because the investor lacks an insurable interest in the insured's life at policy inception. The free look and replacement rules address different consumer protections. Guaranty association limits cap payouts if an insurer becomes insolvent and have nothing to do with insurable interest.

Answer C. Policyholders of a licensed life insurer that becomes insolvent

The Guaranty Association exists to protect policyholders and beneficiaries of licensed insurers that become insolvent, up to statutory limits. It does not protect stock investors, who take normal investment risk. It does not overturn claims that were lawfully denied by a solvent insurer. It has nothing to do with producer appointment terminations.

Answer B. The insured's estate

When the named beneficiary predeceases the insured and there is no contingent or other surviving beneficiary, the death proceeds are paid to the insured's estate. They do not go to the deceased beneficiary's estate because that person had no vested right at the insured's death. Insurers cannot simply keep the money. The guaranty association only steps in when an insurer becomes insolvent, not for beneficiary succession.

Answer B. A viatical involves a terminally or chronically ill insured, while a life settlement involves an insured who is not terminally ill

A viatical settlement involves selling a policy when the insured is terminally or chronically ill, while a life settlement typically involves an older insured who is not terminally ill. The distinction is health status, not deductibility, policy type, and the two terms are not identical.

Answer C. A combination plan (family policy)

A combination or family plan blends permanent coverage on the main insured with term coverage on other family members in one policy. A single premium annuity is a payout product, not family life coverage. Variable universal life is one permanent policy on one insured, not a family blend. A modified endowment contract is a tax status, not a product design.

Answer A. Entire contract provision

The entire contract provision says the policy plus the attached application make up the whole agreement, and no outside documents can be used to change it. The incontestability provision limits when the insurer can contest the policy. The consideration clause describes the premium and statements that create the contract. Reinstatement covers restoring a lapsed policy.

Answer C. The death benefit is adjusted to what the premium would have bought at the correct age

The misstatement of age provision adjusts the benefit to the amount the premium paid would have purchased at the correct age, rather than voiding the contract. Age misstatement is not treated as fraud that voids coverage, so the policy is not void and full unchanged payment is not required. The insurer adjusts the benefit rather than demanding repayment from the beneficiary.

Answer A. Provide the applicant with the required replacement notice and submit replacement forms with the application

In a replacement, the producer must give the applicant the required notice and submit the proper replacement forms along with the application so the transaction is documented. There is no rule requiring contact with the existing insurer before the first meeting. There is no blanket 30-day waiting period to deliver the new policy. Prior Commissioner approval is not required for an individual replacement.

Answer B. After the policy has been in force for a stated period during the insured's lifetime, the insurer generally cannot void it for misstatements

Incontestability means that after the policy has been in force for a set period during the insured's lifetime, usually two years, the insurer generally cannot deny a claim based on misstatements in the application, except for cases like nonpayment or certain fraud allowances. The insurer cannot contest forever. The right to cancel for a refund is the free look, a different provision. There is no doubling of benefits tied to the contestable period.

Answer A. Received income-tax-free by the beneficiary

Life insurance death benefits paid to a beneficiary are generally received free of federal income tax. They are not ordinary income, not capital gains, and not subject to mandatory withholding. Estate tax can apply in some cases, but income tax on the benefit itself generally does not.

Answer A. Convertibility

Convertibility allows changing a term policy to a permanent policy without evidence of insurability. Renewability lets you continue term coverage for another term without a new exam but keeps it term. Reinstatement restores a lapsed policy. Nonforfeiture applies to cash value options in permanent policies, not term conversion.

Answer A. The insured to receive part of the death benefit early if diagnosed with a qualifying terminal illness

An accelerated death benefit rider lets a terminally or chronically ill insured collect a portion of the death benefit while still living to help with expenses. Doubling the benefit for accidental death describes an accidental death rider. Borrowing against cash value is a policy loan, not this rider. Raising premiums after a claim is not a rider feature at all.

Answer B. A representation

Statements on a life application are treated as representations, which are believed to be true to the best of the applicant's knowledge. A warranty is a guaranteed exact statement, a higher standard not used for applicants. Concealment is deliberately hiding a material fact, and fraud requires intent to deceive, neither of which fits an honest mistake.

Answer B. A period after delivery to return the policy for a full premium refund

The free look lets the owner examine the delivered policy and return it during the stated period for a full refund of premium paid. It is not about increasing coverage. A grace period is a separate provision for late premium payments, not the free look. Policy loans are a separate feature tied to cash value.

Answer B. At the time the policy is applied for and issued

For life insurance, insurable interest must exist at the inception of the policy, when it is applied for and issued. It does not need to exist at the time of death, unlike property insurance. It is not an annual requirement. Whether a claim is contested does not change when insurable interest must have existed.

Answer A. A source of income for eligible dependents after a worker's death

Social Security survivor benefits provide income to eligible dependents, such as a spouse or children, when a covered worker dies. They are not a guarantee on private policies, not a premium deduction, and not a substitute for disability insurance, which is a separate benefit.

Answer B. The policyowner

In variable life, cash value is placed in separate accounts (subaccounts) chosen by the owner, so the policyowner bears the investment risk and rewards. The insurer does not guarantee the separate account performance. The guaranty association does not cover investment losses in variable products. A reinsurer helps the insurer spread mortality risk, not the owner's investment risk.

Answer D. It keeps the policy in force without premium payments if the insured becomes totally disabled

A waiver of premium rider keeps the policy active and pays the premiums for the owner if the insured becomes totally disabled, usually after a waiting period. Refunding premiums on survival describes a return of premium feature, not this rider. Doubling the benefit for accidental death describes an accidental death benefit rider. The owner cannot skip premiums at will; the rider only triggers on qualifying disability.