Free Missouri life insurance practice test.

Answer B. Losing cash value to negative index returns

The floor, often zero percent, means that if the index falls, the credited interest will not go below the floor, so the policyowner does not lose cash value to negative index returns. The floor does not excuse the owner from paying premiums. It does not guarantee the death benefit can never be reduced. And it does not eliminate cost of insurance charges, which are still deducted.

Answer C. Flexible premium annuity

A flexible premium annuity lets the owner make deposits at different times and in different amounts. A single premium annuity takes only one lump sum. An immediate annuity begins payouts right away and is generally funded by a single premium. A fixed period annuity describes a payout option, not how premiums are paid.

Answer A. A survivorship (second-to-die) policy

Survivorship life fits because it pays at the second death, when estate costs typically arise, and it is usually cheaper than insuring each life separately since the insurer waits for the second death to pay. Two individual policies cost more and pay at each death. Joint life pays at the first death, too early for estate settlement needs. A single-life term policy on one spouse would not match the second-death timing.

Answer A. Examine the policy and return it for a full premium refund shortly after delivery

The free look lets the owner review the delivered policy and, if not satisfied, return it within the stated number of days for a full refund. It is not a full first-year cancellation right. Changing a beneficiary is a separate owner right unrelated to the free look. Borrowing against cash value is a policy loan feature, not the free look.

Answer B. It limits the insurer's liability if the insured dies by suicide within a stated period after the policy starts

A suicide clause limits the insurer's payout to a return of premiums if the insured dies by suicide within a set early period (commonly the first two years). After that period, suicide is covered like any other death. It is not a permanent bar, so the first choice is wrong. It applies to suicide specifically, not all self-inflicted injury forever, so the third is wrong. It is separate from the contestable period, which deals with material misstatements, so the fourth is wrong.

Answer D. On the date of the application or medical exam, if the applicant proves insurable as applied for

A conditional receipt makes coverage effective as of the application or exam date, but only if the applicant turns out to be insurable exactly as applied for. Coverage does not wait until the policy is mailed. It is not unconditional because insurability is still a condition. There is no automatic thirty day delay under a conditional receipt.

Answer B. An investigative report includes information gathered from personal interviews about character and reputation

An investigative consumer report goes beyond routine data and includes information about a person's character, reputation, and lifestyle gathered through interviews with neighbors, friends, or associates. A consumer report does not require a court order, an investigative report is not limited to medical records, and both types are covered by FCRA.

Answer A. When the client accepts the new terms and pays any required premium at delivery

A counteroffer means no contract yet exists on the original terms, so coverage begins only when the client accepts the new terms and pays required premium, usually at delivery. It does not relate back to the application date because those terms were not accepted. Mailing alone does not create acceptance. Coverage does not start automatically after a set number of days without acceptance.

Answer A. An insured pays one small premium and dies, and the beneficiary receives a large death benefit

Aleatory means the exchange of value is unequal and depends on chance, shown clearly when a tiny premium produces a large payout. Being unable to change terms illustrates adhesion. Only the insurer promising illustrates a unilateral contract. Requiring proof of loss illustrates a conditional contract.

Answer A. Key person insurance

Key person insurance is when a business owns a policy on an important employee to offset financial loss if that person dies, a common third-party ownership use. Credit life insurance pays off a borrower's debt, not a business loss. Group term conversion is changing group coverage to individual coverage. A modified endowment is a tax classification, not an ownership arrangement.

Answer A. Proper licensing or authorization as required by state viatical settlement law

Viatical settlement brokers and providers must be licensed or authorized under state viatical settlement law before doing business. Simply holding a life producer license is generally not enough on its own. Approval from a buyer's family is not a legal requirement. A federal securities license alone does not authorize viatical brokering under state insurance law.

Missouri viatical settlements law, RSMo Chapter 376 (licensing of providers and brokers)

Answer D. Cancel the settlement contract within a set period after receiving the proceeds and return the money

A rescission right lets the owner change his mind, cancel the settlement, and return the proceeds within the required period. It does not let him renegotiate a higher payment. It does not force the insurer to pay the death benefit. It is not a right to change beneficiaries. Missouri sets a specific number of days for rescission, so this item tests the concept rather than the exact count.

Answer C. The employer pays the entire premium

In a noncontributory plan the employer pays the whole premium and employees contribute nothing. A plan where employees pay is contributory. A split arrangement is still contributory since employees contribute. Insurers do not pay premiums for the group.

Answer D. Key person coverage offsets the business's loss from an employee's death, while a buy-sell provides funds to transfer ownership

Key person insurance reimburses the business for losses tied to a vital employee's death, while a buy-sell funds the purchase of a deceased owner's interest. The reversed description is wrong, neither is owned only by employees, and neither requires naming the family as beneficiary because the business is the beneficiary.

Answer B. Social Security disability benefits

A worker who cannot engage in substantial work due to a qualifying long-term disability may receive Social Security disability benefits. Retirement benefits are for those who reach retirement age, not a disabled 40 year old. Survivor benefits require a death. Medicare pays for hospital services, not monthly cash income.

Answer B. No, they are considered a personal expense and not deductible

Premiums for personal life insurance are a nondeductible personal expense. They are never fully deductible, not half deductible, and there is no interest portion to deduct on a personal policy. Students often assume insurance costs are deductible, but personal life premiums are not.

Answer B. The Director of the Department of Commerce and Insurance

Missouri's insurance laws are administered by the Director of the Department of Commerce and Insurance, who supervises the industry and enforces the insurance code. The Attorney General handles general legal matters for the state, not insurance regulation directly. The State Treasurer manages state funds, not insurance oversight. There is no separate Governor's licensing board with this authority.

Answer D. Yes, as long as the cash value can cover the monthly deductions

Universal life allows flexible premiums, so Jerome can pay less or even skip a payment as long as there is enough cash value to cover the monthly cost of insurance and expenses. It does not require a fixed level premium, so choice two is wrong. Lowering a payment does not automatically cancel the death benefit as long as the account supports charges. Surrendering the policy would end coverage, so choice four is wrong.

Answer B. The insurance company

In a fixed annuity the insurer guarantees a minimum interest rate and bears the investment risk. The annuitant bears the risk in a variable annuity, not a fixed one. The producer never bears the contract's investment risk. The guaranty association only steps in if an insurer becomes insolvent; it does not carry ordinary investment risk.

Answer A. It generally costs less than two individual policies

A joint life policy typically costs less than two separate individual policies because it insures two lives under one contract and pays only once, at the first death. It does not pay at both deaths, since coverage ends after the first death. It is one policy, not two separate cash value accounts. Both insureds still generally must be underwritten, so insurability is not skipped.