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2026 Edition

Life and Health Insurance Agent Licensing Practice Exam

Take this free life and health insurance practice test to study for your state's life and health insurance agent licensing exam.

To sell life and health insurance, you will have to hold an insurance agent license for each state in which you conduct business. In order to obtain a life and health insurance license, you must take and successfully pass an exam that is offered by the state licensing boards. State insurance exams for life and health insurance are typically about 150 questions long and cover such topics as insurance regulation, policy provisions, annuities, medical plans and federal tax considerations.

To prepare for your licensing exam, use Tests.com's full-length Life and Health Insurance Agent Practice Exam with answers fully explained for ideal study. It is written by insurance experts and instructors. Our interactive test platform allows you to simulate the exam. Take as many practice tests as you need. There's no time limit or recurrent charges.

The following practice exam is a sample from the full-length test.

For more information on life and health insurance exams and test prep, see Tests.com's Life and Health insurance study guide.  

If you are interested in property and casualty insurance sales, see our free Property and Casualty Insurance Agent Practice Exam.

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General Life Insurance Basics, Insurable Interest, Parties and Regulations 

1 All of the following are parties to a life insurance contract EXCEPT:
  1. Insurer
  2. Underwriter
  3. Beneficiary
  4. Owner
  5. Insured
Incorrect. Please choose another answer.
A beneficiary and the underwriter are not parties to a life insurance contract. An insured may be, but is not necessarily a party. A wife (owner) can take a policy out on her husband (insured), yet the husband is not a party to the insurance contract.

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2 Which term refers to the period during which a policyholder can pay the overdue premium without losing the policy?
Incorrect. Please choose another answer.
The grace period is a specific period of time after the due date of a premium during which the policy remains valid without penalty. In most states, the grace period is 30 days before the policy lapses. Underwriting could be considered an evaluation period, waiting periods can be in effect before a death benefit is paid, and a probation period is not applicable to life insurance.
3 James makes a good living and got a life insurance policy for the benefit of his wife. He recently experienced a life-changing event with the birth of his daughter. James should:
Incorrect. Please choose another answer.
Whenever an insured has a major life event such as marriage, the birth of a child, or the purchase of a new home, they should re-evaluate their life insurance needs. In this particular case, James would need additional life insurance coverage as his newborn daughter's care will likely depend a great deal on financial support provided by James.
4 Mr. Smith, a whole life insurance policy holder, needs funds for his nursing home expenses. Which part of the policy could he access for these funds?
Incorrect. Please choose another answer.
Life insurance policies can provide living benefits which means that the policy holder can use funds from the cash value as well as some or all of the death benefit amount prior to death. The amount that is taken from the death benefit will be subtracted from the amount received at the insured's death by the beneficiary.

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Types of Life Insurance Policies and Individual versus Group Life Insurance 

5 Jack and his wife Lyn just purchased a home with a 15-year mortgage. Wanting to make sure that Lyn would be able to pay off the mortgage balance in the event of Jack's death, Jack had a "temporary" need for life insurance. What type of policy should Jack purchase?
Incorrect. Please choose another answer.
Given Jack's temporary need for 15 years of coverage to pay off the mortgage balance, the best choice for Jack would be a 15-year term life insurance policy as the premiums would likely be far less than a permanent policy, and once the mortgage is paid off in 15 years, this particular need for Jack will no longer exist.
6 What is a key characteristic of Group Life Insurance?
Incorrect. Please choose another answer.
Group Life Insurance typically offers coverage to members of a group, such as employees of a company or members of an association, as part of a larger benefits package. Premiums are often lower than they are for individual policies.
7 Which type of life insurance policy covers the insured for a specific period and pays out a benefit only if the insured dies during that period?
Incorrect. Please choose another answer.
Term life insurance is designed to offer life insurance protection for a specific period or term. Common term limits include 10, 20, and 30 years. Variable, whole, and universal life insurance are types of permanent life insurance that a policyholder can maintain until they terminate premium payments or upon the death of the insured.

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8 Which of the following is a type of permanent life insurance that offers both a death benefit and a cash value component?
Incorrect. Please choose another answer.
Universal life insurance is a type of permanent life insurance that includes a death benefit and a cash value component, which can accumulate over time. Term life insurance policies only provide a death benefit; they don't accumulate cash value. With decreasing term insurance, the policy's death benefit will decrease over time, and renewable term insurance refers to the policyholder's option to renew the coverage when the initial term expires.
9 Which type of life insurance is considered to be more risky based on its investment component?
Incorrect. Please choose another answer.
Because the underlying investments are equities such as mutual funds, variable life insurance policies are considered to be securities. As these investments move up and down with the movements of the equities market, variable life insurance is considered to be more risky than other types of policies as there is the probability that the value of the policy's investment component could decrease.

Life Insurance Application and Underwriting 

10 Life insurance underwriters look at a variety of factors when determining the acceptance of an applicant. These factors can include:
Incorrect. Please choose another answer.
Underwriters look at many factors that can deem an applicant for life insurance as being more or less risky. These criteria can include hobbies, occupation, lifestyle, gender, age, income, and many more.

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11 What does underwriting in life insurance involve?
Incorrect. Please choose another answer.
Underwriting is the process by which insurers assess the risk associated with an insurance applicant. Medical records and medical exam results are sometimes used by underwriters to determine insurability. A, C, and D occur during the application process.
12 In a life insurance contract, the principle of "Utmost Good Faith" implies:
Incorrect. Please choose another answer.
"Utmost Good Faith" mandates that both parties to the insurance contract must deal in good faith, disclosing all material facts. Incomplete or misleading information submitted on an application by the insured can result in the contract being voided and a death benefit not being paid.
13 Which of the following needs to have an insurable interest for an underwriter to issue an insurance policy?
Incorrect. Please choose another answer.
The person or entity that is the policy beneficiary will have an effect on the acceptance of the policy. This is because the beneficiary must be at risk of suffering some type of loss should the insured pass away.

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Selling Life Insurance, Determining Coverage Needs and Issuance and Delivery 

14 Which of the following deals with a set of relationships where one person is authorized to act on behalf of another in order to create a legal relationship with a third party.
Incorrect. Please choose another answer.
The law of agency regulates the relationship between agents and principals as well as agents and third parties with whom they deal on the principal's behalf.
15 All of the following can be considered life-changing events that could result in a change in the amount of life insurance coverage needed EXCEPT:

I. Birth of a child
II. Divorce
III. Marriage
IV. Change in job title
 
Incorrect. Please choose another answer.
While a new job with a drastic change in income and / or hazardous duties could result in a change of life insurance coverage needs, simply changing job titles will not.
16 When conducting a life insurance needs analysis, what factors should be considered to determine the amount of coverage needed?
Incorrect. Please choose another answer.
Age, lifestyle, dependents, and future financial obligations should all be taken into account during the information-gathering process to determine the recommended face amount and policy type.

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Life Insurance for Business Owners and in Estate Planning 

17 Term life insurance should always be used in buy / sell agreements.
Incorrect. Please choose another answer.
Permanent life insurance should be used with buy / sell agreements in order to ensure that the insured will not need to re-qualify for life insurance after a certain amount of time elapses.
18 In estate planning, how does life insurance typically benefit the policyholder's beneficiaries?
Incorrect. Please choose another answer.
In estate planning, life insurance can provide the necessary funds to cover estate taxes and other associated final expenses, such as medical and funeral costs, thereby preserving the value of the estate for the beneficiaries.
19 For a small business owner, how can life insurance be instrumental in ensuring business continuity?
Incorrect. Please choose another answer.
Life insurance for business owners can be crucial in buy-sell agreements and ensures business continuity. It is indispensable when the death benefit is used to purchase the deceased partner's share from their estate, cover operational costs during the transition, and pay creditors asking for payment when the business owner passes away.

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20 Corporate owned life insurance proceeds may be used for the following purposes:

I. To find, replace, and train a new employee or executive
II. To fund other corporate debt obligations
III. To redeem the deceased employee's stock

 
Incorrect. Please choose another answer.
There are many purposes in which the proceeds of corporate owned life insurance may be used.

Policy Components, Riders and Non-forfeiture Options 

21 What is the most common component in all life insurance policies?
Incorrect. Please choose another answer.
While there are many different options and riders on life insurance, all policies possess a death benefit.
22 Which of the following is a type of 'Non-forfeiture Option' in a life insurance policy?
Incorrect. Please choose another answer.
Non-forfeiture options allow policyholders to receive benefits from their policy even if it lapses, typically in the form of reduced paid-up insurance, extended term insurance, or a cash surrender value. Reduced paid-up insurance is permanent insurance with a lower face amount, extended term insurance will expire at a future date, and the cash surrender value will be less than the policy's cash value.

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23 Permanent life insurance policies always have two components. What are they?

I. Death benefit
II. Cash value
III. Living Benefits
IV. Conversion Benefit

 
Incorrect. Please choose another answer.
Permanent life insurance policies consist of both a death benefit component and a cash value component.

Claims, Settlement Options and Tax Concepts 

24 A beneficiary on a life insurance policy will receive what value upon the death of the insured?
Incorrect. Please choose another answer.
The death benefit is the amount that is paid to the policy beneficiary upon the death of the insured. Should a permanent life insurance policy holder decide to cancel the policy prior to the insured's death, they will receive the amount of the cash surrender value.
25 What is a 'Settlement Option' in a life insurance policy?
Incorrect. Please choose another answer.
Settlement options refer to the various ways in which the proceeds from a life insurance policy can be paid out to the beneficiaries, such as a lump sum, installments, or an annuity. If not specified by the policyowner at time of application, the beneficiary can choose the settlement option.

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26 John, who had a life insurance policy with a death benefit, died on August 31st, after a long bout with cancer. He had been hospitalized for a month before his death. His wife contacted the insurance company to file her claim for the death benefit on September 5th, after John's burial, and after she had time to collect her emotions to deal with her personal loss. The insurance agent filed the papers to process the claim with his supervisor, and the death benefit was settled on October 30th. Were any laws violated in this scenario?
Incorrect. Please choose another answer.
Although it typically takes approximately two weeks to settle death benefit claims, insurance companies are required to settle such claims within 30 days. Some claims may require additional time if they require additional investigation. Here, there is nothing suspicious about John's death.

Living Benefits and Viatical and Life Settlements 

27 Which of the following is a rider that allows a terminally ill person to access at least a portion of the death benefit proceeds prior to death?
Incorrect. Please choose another answer.
A living benefit on a life insurance policy is typically a policy rider that allows an insured who has a qualifying terminal illness to access some or all of the death benefit proceeds in order to pay medical bills or other financial obligations. The death benefit proceeds on the policy will be reduced by the amount that is accessed by the insured.
28 What distinguishes a 'Viatical Settlement' from a 'Life Settlement'?
Incorrect. Please choose another answer.
In a viatical settlement, a terminally ill policyholder sells their life insurance policy at a discount from its face value for immediate cash, whereas a life settlement involves the sale of a life insurance policy by a policyholder who is not necessarily terminally ill.

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29 Living benefits on a life insurance policy can be typically be accessed via:
Incorrect. Please choose another answer.
The living benefits that are accessed from a life insurance policy can typically be taken out either in one lump sum amount or they could be received via regular installments. With the installment method, the insured may wish to use these funds to pay his or her ongoing monthly bills.

General Health Insurance Basics, Regulation and Social Health Insurance 

30 The insured party has no part in determining the wording of an insurance contract. In this respect, insurance contracts are considered to be __________.
Incorrect. Please choose another answer.
If a contract contains unclear wording, then a court will interpret the language used against the writer of the contract - unless the wording that is used is required by law to be stated in a specific way.
31 What role does government regulation typically play in health insurance?
Incorrect. Please choose another answer.
Government regulation in health insurance often involves setting standards for policy provisions, ensuring consumer protection, and overseeing the practices of insurance companies to maintain fairness and accessibility in the market. This is typically done at a state level through each state's Department of Insurance. It does not directly provide health insurance to all citizens, nor does it determine which medical procedures are covered, nor set premiums.

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32 A(n) __________ in an insurance contract is a statement by the issuing insurance company that sets out the essential element of insurance - to pay for losses covered in the policy.
Incorrect. Please choose another answer.
This promise of covering losses is in exchange for the premium that is paid by the insured and the compliance with the policy terms.

Types of Health Insurance Policies and HMO and PPO 

33 Which of the following is not a form of health insurance?

I. Dental insurance
II. Vision insurance
III. Disability insurance
IV. Long-term care insurance

 
Incorrect. Please choose another answer.
All of the above are types of health insurance policies.
34 What is a key difference between a PPO (Preferred Provider Organization) and an HMO (Health Maintenance Organization)?
Incorrect. Please choose another answer.
Unlike HMOs, PPOs allow members to see providers outside of their network without a referral, although at a higher cost. HMO members must first see their chosen Primary Care Provider (PCP) to receive care, and can then be referred to a specialist if needed.

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35 A business client is looking for ways to decrease its monthly premiums. To get down to the premium level sought after by the company, the agent realizes they have to go to a high deductible health plan. As part of your advice to the business, what should you include in your discussion?
Incorrect. Please choose another answer.
Health savings accounts (HSA) are used with high deductible health insurance policies. With an HSA, money that is saved on the premium may be put into the account and then funds are used for certain medical fees. Because the funds in the HSA account can be used for medical services, participants often use them for un-covered procedures such as chiropractic visits or other health-related services that are not covered by their insurance policy.

Health Insurance Policy Components and Exclusions 

36 The components of a long-term care insurance policy include all of the following EXCEPT:
Incorrect. Please choose another answer.
Own occupation is a type of benefit trigger that is found in a disability insurance policy, not in long-term care insurance policies. An elimination period in a long-term care insurance policy is the number of days that an insured must pay for their care after a qualifying claim, but before benefits begin to pay (such as with a deductible). The benefit duration in a long-term care policy states how long benefits will be paid to an insured, and the benefit amount may be stated either as a daily or monthly amount. (Some recent long-term care insurance plans also offer a lump-sum benefit payout option).
37 Which of the following is a common exclusion in most health insurance policies?
Incorrect. Please choose another answer.
Most health insurance policies do not cover cosmetic surgery as it is generally considered elective and not medically necessary. In contrast, emergency room visits, annual physical exams, and prescription medications are typically covered as they are essential for maintaining health and treating illnesses.

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38 When constructing a major medical insurance policy, several criteria must be established, including:
Incorrect. Please choose another answer.
While major medical insurance policies typically have high deductibles, these must be established in the policy as well as the maximum amount of out-of-pocket costs that will be paid by the policy holder. The elimination period is not part of a major medical insurance policy.

Selling Health Insurance, Issuance and Delivery and Tax Considerations 

39 As a marketing tool, Ted, a health insurance agent, offered to send an applicant and his wife on a weekend vacation to a local resort to induce the applicant to purchase a policy. Is this practice permitted and, if not, what is it called?
Incorrect. Please choose another answer.
Rebating is the act of offering an applicant an inducement to purchase insurance. It is prohibited as an unfair trade practice. Another example would be returning a portion of the applicant's policy premium from the agent's commission.
40 An agent is in need of generating business. He gets an idea of asking his client to let his policy lapse so that the agent can sell him a new similar policy. Is this permissible and, if not, what is this action called?
Incorrect. Please choose another answer.
Twisting involves an agent suggesting that an individual let their current insurance coverage lapse in order to purchase a new policy, typically with similar benefits. It is a prohibited activity. In this case, the new policy does not necessarily benefit the client, however, the agent will likely receive a commission on the sale of the new policy.

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41 Sara, a health insurance agent, is finalizing the delivery of a health insurance policy to a client. She explains that policy delivery is more than just handing over the document. What additional step should Sara emphasize is crucial during the policy delivery process?
Incorrect. Please choose another answer.
Sara should emphasize the importance of a detailed review of the policy upon delivery, ensuring that the client understands the coverage, terms, conditions, exclusions, and their rights under the policy. The other options, while relevant in different contexts, do not specifically pertain to the complexity and importance of the policy delivery process.

Deductibles and Copayments 

42 A __________ is the amount that an insured person is expected to pay for a medical expense at the time of the visit.
Incorrect. Please choose another answer.
A copayment is the amount or portion of the total cost that is the patient's responsibility upon receiving a medical service such as an annual check-up.
43 How does the choice of deductible affect health insurance premiums?
Incorrect. Please choose another answer.
When a policyholder chooses a higher deductible, it means they are willing to pay more out-of-pocket before their insurance coverage starts. This higher initial cost-sharing reduces the insurer's risk, often leading to lower premium costs. Conversely, choosing a lower deductible, which reduces out-of-pocket costs for the insured, generally results in higher premiums since the insurer is taking on more risk.

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44 The "deductible" in a long-term care insurance policy is referred to as the __________.
Incorrect. Please choose another answer.
A long-term care insurance policy's elimination period is the number of days that the insured must pay for services out-of-pocket until the insurance coverage begins to pay.

Health Insurance Claims and Indemnity vs. Reimbursement 

45 On a health insurance claim form, the exact procedures that were performed for the insured are represented by standard codes that are referred to as __________.
Incorrect. Please choose another answer.
Each CPT also corresponds to one or more International Classification of Diseases (ICD-9) codes. For example, 99214 may be used for a physical and 90658 indicates a flu shot.
46 What is the difference between indemnity and reimbursement in health insurance?
Incorrect. Please choose another answer.
In an indemnity plan, the insurer pays a predetermined amount for covered services, regardless of the actual cost. In contrast, a reimbursement plan reimburses the actual expenses incurred up to the policy's coverage limits.

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47 What type of notice is used to show all of the services or supplies that were billed to Medicare during a 3-month period, what Medicare paid, and what the patient may owe the provider?
Incorrect. Please choose another answer.
A MSN, or Medicare Summary Notice, can also be checked for any changes to a patient's claims.

Disability and Related Insurance and Seniors and Special Needs Individuals 

48 As a professional surgeon, which type of disability coverage would offer the most liberal definition of benefit triggers for the policy holder in terms of benefit receipt if the insured were to break his or her hand?
Incorrect. Please choose another answer.
Own occupation offers the most liberal definition of disability as the insured is considered to be totally disabled if he or she is unable to engage in the principal duties of his or her own occupation.
49 Social Security should be considered one's primary source of disability income coverage.
Incorrect. Please choose another answer.
Although Social Security may provide disability benefits, in the majority of cases, these benefits are inadequate. Therefore, Social Security disability benefits should only be used to supplement an individual disability income policy.

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50 What does "Own Occupation" mean in a disability insurance policy?
Incorrect. Please choose another answer.
An "Own Occupation" disability insurance policy defines disability as the inability to perform the duties of one's own occupation. This means the policyholder can receive benefits even if they are capable of working in a different occupation.

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Quality starts with who wrote the material. Our writers:

Susan Wright, MBA, CLU, RHU, REBC, has worked in the insurance and financial services industry for over 20 years, where she has focused, in part, on producing training and educational materials. She has held roles at several large insurance and investment companies. Ms. Wright has been licensed as an insurance agent and an NASD/FINRA securities broker. She has earned nine industry professional designations, including: Chartered Life Underwriter, Registered Health Underwriter, Registered Employee Benefits Consultant, Certified Senior Advisor and Certified in Long-Term Care.

Noah Sobin, is a licensed life insurance agent and insurance consultant who has worked as an agent for over ten years and as an insurance underwriter for five years. He has worked for Lincoln Financial Group and Prudential Financial. He earned his BA in Economics from Flordia State University.

Susan Wright, MBA, CLU, RHU, REBC
 has worked in the insurance and financial services industry for over 20 years, where she has focused, in part, on producing training and educational materials. She has held roles at several large insurance and investment companies. Ms. Wright has been licensed as an insurance agent and an NASD/FINRA securities broker. She has earned nine industry professional designations, including: Chartered Life Underwriter, Registered Health Underwriter, Registered Employee Benefits Consultant, Certified Senior Advisor and Certified in Long-Term Care.
 
Noah Sobin is a licensed life insurance agent and insurance consultant who has worked as an agent for over ten years and as an insurance underwriter for five years. He has worked for Lincoln Financial Group and Prudential Financial. He earned his BA in Economics from Flordia State University.
Our practice exam covers life and health insurance exam subject areas that are common across the country and is not specific to any one state but rather applicable to all states. It covers all of the following areas which are typically covered in your actual state Life & Health Insurance examination:
  • General insurance
  • Insurance regulation
  • Life insurance basics
  • Life insurance policies
  • Life insurance policy provisions, options, and riders
  • Annuities
  • Federal tax considerations for life insurance and annuities
  • Qualified plans
  • Health Insurance basics
  • Individual health insurance policy general provisions
  • Disability income and related insurance
  • Medical plans
  • Health maintenance organizations
  • Group health insurance
  • Dental insurance
  • Insurance for special needs individuals and senior citizens
  • Federal tax considerations for health insurance
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