Free Rhode Island life insurance practice test.

Answer B. One large lump-sum payment that fully funds the policy

A single-premium whole life policy is fully paid for with one lump-sum premium at purchase, immediately creating substantial cash value. Level lifetime payments describe ordinary whole life, so that is wrong. Payments to age 65 describe a limited-pay design, not single-premium. Whole life premiums do not increase with age, so the increasing-payment choice is wrong.

Answer A. Pay a reduced or no premium as long as the cash value can cover the policy charges

Universal life's flexible premium lets the owner pay more, less, or nothing in a given period as long as the accumulated cash value is enough to cover the cost of insurance and expense charges. It does not give a free continuing death benefit. The insurer does not permanently pay premiums for the owner. Flexibility does not automatically convert the policy into a variable product.

Answer B. It increases as the insured gets older

ART renews every year without evidence of insurability, and the premium rises each year because the insured is older and the mortality risk is higher. It does not stay level, that describes level term. It does not decrease. Refunding premiums describes return of premium term, not ART.

Answer A. Life with period certain

Life with period certain pays for life but guarantees a minimum number of years, so a beneficiary receives the remaining payments if the annuitant dies early, matching James's goal. Straight life stops at death with nothing to a beneficiary. Cash refund returns unpaid principal as a lump sum, not a guaranteed number of years. Joint and survivor covers two lives, which is not what James described.

Answer B. Survivorship life

Survivorship life pays at the second death and is generally less costly than covering two lives separately, matching their goals. Joint life pays at the first death, which is the opposite of what they want. Two separate whole life policies cost more and each pays at its own insured's death. Term on each life also pays at individual deaths, not the second death. Key point: pay after both die equals survivorship life.

Answer D. Long term care rider

The long term care rider allows the insured to access policy benefits during life to pay for qualifying long term care such as nursing home or home health care. A disability income rider pays periodic income when the insured is disabled and unable to work, not care costs. Guaranteed insurability allows future coverage purchases. A term rider only adds temporary death benefit coverage.

Answer B. The policy and any attached application make up the whole agreement

The entire contract provision means the written policy plus any attached copy of the application together form the complete agreement, so nothing outside those documents binds the parties. The first choice is wrong because the application alone is not the contract. The third is wrong because the insurer cannot alter the contract by internal memo. The fourth is wrong because verbal promises are not part of the written contract.

Answer A. The proposed insured and the producer

A standard adult application requires the signature of the proposed insured (who is also the applicant here) and the producer who took the application. The producer signs to attest the information was gathered properly. 'Only the producer' omits the applicant. The beneficiary does not sign the application. Two witnesses are not a required element of a life application.

Answer C. A stranger originated life insurance arrangement that is prohibited

This describes STOLI, a stranger originated life insurance scheme where investors with no insurable interest arrange a policy for their own profit. It is prohibited because it lacks insurable interest at inception. A viatical settlement involves an existing policy sold by a terminally ill insured, not a policy created for investors. A key person policy covers a valued employee, and an accelerated death benefit is a living benefit, neither of which applies here.

Answer B. To explain the policy's provisions, riders, exclusions, and any ratings to the owner

Delivery is the producer's chance to review and explain the policy so the owner understands what was bought, including provisions, riders, exclusions, and any rated premiums. Collecting premium may happen but is not the core purpose of explaining the contract. A new application is not completed at delivery; the application was already taken. Coverage timing is set by the contract and conditional receipt, not by the delivery meeting binding it retroactively.

Answer B. Consideration

Consideration is the value each party gives. The insured gives the premium and truthful statements, and the insurer gives the promise to pay claims. Legal purpose means the contract cannot be for something illegal. Offer and acceptance is the agreement itself. Competent parties refers to the legal capacity of the people involved.

Answer B. Carlos owns a policy on his wife Linda's life

Third-party ownership means the owner and the insured are different people, which is true when Carlos owns a policy on Linda's life. Sarah owning a policy on her own life is first-party ownership even though she names a beneficiary. Naming a revocable beneficiary is a standard feature and does not change who owns the policy. Adding a rider to one's own policy involves a single person as owner and insured, not third-party ownership.

Answer C. A life settlement sells the policy for cash to a third party, while a 1035 exchange swaps one policy for another with the same owner

In a life settlement the owner sells the policy for cash and gives up ownership to a buyer. In a 1035 exchange the owner trades one policy or annuity for another and keeps ownership, with favorable tax treatment. A 1035 exchange does not pay a cash lump sum. Life settlements are not limited to the terminally ill; that is a viatical. A 1035 exchange does not transfer ownership to an investor.

Answer A. Social Security Disability Insurance (SSDI)

SSDI pays monthly benefits to insured workers who have a qualifying disability. Survivor benefits are for dependents of a deceased worker. Delayed retirement credits apply to those who postpone retirement. Medicare Part D is prescription drug coverage, not an income benefit.

Answer A. The cost of coverage above $50,000 is taxable income to the employee

For employer paid group term life, the cost of coverage up to $50,000 is a tax free benefit, but the cost of coverage exceeding $50,000 is imputed as taxable income to the employee. Saying all premiums are taxable is wrong because the first $50,000 is tax free. Saying nothing is ever taxable ignores the $50,000 threshold. The death benefit itself remains income tax free to the beneficiary.

Answer C. The Director of the Department of Business Regulation

In Rhode Island, the insurance regulator is the Director of the Department of Business Regulation, who administers and enforces the insurance code. The Attorney General handles criminal and general legal matters, not day to day insurance regulation. The Governor appoints officials but does not directly regulate insurers. The NAIC is a national coordinating body with no direct legal authority over Rhode Island licensees.

RI Gen. Laws Title 27 (Insurance; Director of Business Regulation authority)

Answer D. Foreign insurer

A foreign insurer is one organized in a different US state than the one where it is doing business, so a Connecticut company operating in Rhode Island is foreign there. Domestic means formed in Rhode Island itself. Alien means formed in another country. A reciprocal insurer describes an ownership structure, not the place of formation.

RI Gen. Laws Title 27 (definition of foreign insurer)

Answer C. Limited-pay whole life payable to age 65

A limited-pay policy paid up at 65 lets Marcus finish premiums by retirement while coverage continues for life. Ordinary whole life would require premiums for his entire life, so it does not stop at 65. Annual renewable term is not permanent and ends coverage. Single-premium requires one large lump sum now, which does not match his plan to pay over time until 65.

Answer B. The consumer receives a comparison and understands the effects of dropping the old policy

Replacement regulations exist so the consumer gets proper notice and comparison information and understands the consequences of surrendering or lapsing an existing policy before buying a new one. The insurer does not pay the consumer's premium. There is no automatic reinstatement of the old policy. Replacement rules protect the buyer, not the producer's commission.

Answer C. Return of premium

Return of premium term refunds the premiums paid if the insured is still living at the end of the term. Convertible allows a switch to permanent coverage. Renewable allows continuing the term. Decreasing means the benefit shrinks, and none of these three give money back at the end.