The Life Insurance Contract and Riders — practice questions

9.3% of the exam ≈14 real questions 15 free questions here

Common provisions, beneficiaries, nonforfeiture, dividend and settlement options, exclusions and riders: about 14 of the 150 combined questions.

Where people lose points

• Suicide within the contestable period usually returns premiums, not the death benefit.
• Per stirpes passes a deceased beneficiary's share to their heirs; per capita splits among survivors.
• Extended term keeps the face amount for a limited time.
• Delivery by certified mail or with a signed receipt starts the free look (10113.6).

Questions and answers, explained

All 10 questions above, with the correct answer and why it is correct. Everything here is on the life insurance contract and riders.

1. Under Insurance Code section 10113.6, which method of delivering a life policy starts the free look period without the insurer bearing the burden of proving delivery?

   • AOrdinary first-class mail with no receipt
   • BPosting the policy on the insurer's website
   • CRegistered or certified mail, or personal delivery with a signed receiptCorrect
   • DLeaving the policy with the owner's neighbor, or emailing a link the owner never opens

   Why: Section 10113.6 lists registered or certified mail, personal delivery with a signed written receipt, first-class mail with a signed receipt, or other means the commissioner approves. Otherwise the insurer bears the burden of proving delivery, although a policy is deemed received six months after issue if premiums have been paid.

   Reference Cal. Ins. Code 10113.6 — CA Life objectives II.E.6

2. Andrés, 28, is healthy now but worries that future health problems could keep him from buying more life insurance as his family grows. Which rider addresses this concern?

   • AAccidental death and dismemberment rider.
   • BCost of living rider.
   • CPayor benefit rider.
   • DGuaranteed insurability rider.Correct

   Why: The guaranteed insurability rider lets the insured buy specified additional amounts of coverage at scheduled option dates or life events (such as marriage or the birth of a child) without new evidence of insurability, with premiums for the new coverage based on attained age. The cost of living rider (option B) also adds coverage, but only to track inflation — it is not tied to protecting future insurability at option dates.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

3. Tomás owns a $200,000 life policy with an accelerated death benefit provision. He is diagnosed as terminally ill with a life expectancy under 12 months. What may he do?

   • ANothing; death benefits can only be paid after death.
   • BReceive a portion of the death benefit during his lifetime, with the remainder paid to his beneficiary at death.Correct
   • CReceive the full face amount now and keep the policy in force for his beneficiary.
   • DAccess the benefit only by taking a policy loan at interest.

   Why: Accelerated (living) benefit provisions let a terminally or chronically ill insured receive part of the death benefit early; whatever is advanced, plus any charges, reduces what the beneficiary later receives. Option C is impossible — the insurer cannot pay the full benefit and still owe it at death. A policy loan (option D) is a separate way to access cash value and is not required to use this provision.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

4. Marta named her sister as irrevocable beneficiary of her life policy. Marta now wants to change the beneficiary to her new spouse. What must happen?

   • ANothing; as policyowner, Marta may change the beneficiary at any time.
   • BMarta must surrender the policy and buy a new one.
   • CMarta must obtain her sister's written consent to make the change.Correct
   • DThe insurer may approve the change without involving the sister.

   Why: An irrevocable beneficiary has a vested interest in the policy, so the owner cannot change the designation — or generally exercise rights that impair it, such as taking policy loans or surrendering — without that beneficiary's written consent. Option A is true only for a revocable beneficiary, the default designation and the distinction this question tests. Surrendering a policy with an irrevocable beneficiary would itself require consent.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

5. Pedro, 55, can no longer afford his whole life premiums, but he wants to keep the SAME face amount of protection for as long as his policy values will allow, without paying anything more. Which nonforfeiture option should he elect?

   • ACash surrender.
   • BReduced paid-up insurance.
   • CExtended term insurance.Correct
   • DAutomatic premium loan.

   Why: Extended term uses the cash value as a net single premium to buy term insurance for the policy's full face amount, lasting for as long as that value will fund it — and it is typically the automatic option if the owner makes no election. Reduced paid-up (option B) is the mirror image: lifetime coverage but at a smaller face amount. The APL is not a nonforfeiture option; it is a loan provision that requires remaining cash value and keeps premiums due.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

6. All of the following causes of death are commonly addressed by life insurance policy exclusions EXCEPT:

   • ADeath while serving in a declared war zone.
   • BDeath while piloting a private aircraft.
   • CDeath from cancer five years after the policy was issued.Correct
   • DDeath while participating in professional auto racing.

   Why: Standard life policy exclusions target extraordinary hazards: war or military service, aviation (typically non-fare-paying private pilots or crew), and hazardous occupations or hobbies such as racing. Death from illness — even one diagnosed after issue — is exactly the risk life insurance exists to cover and, after the contestability period, cannot be denied. Fare-paying airline passengers are generally covered, which is why aviation exclusions are limited to private aviation roles.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

7. A universal life policyowner is comparing a "waiver of monthly deductions" rider with a "waiver of specified premium" rider. Which statement correctly distinguishes them?

   • AWaiver of monthly deductions covers only the policy's cost of insurance and expense charges during disability, while waiver of specified premium credits a stated premium that can also continue building cash value.Correct
   • BWaiver of monthly deductions credits a stated premium, while waiver of specified premium pays only the mortality charges.
   • CThe two riders waive identical amounts; only the elimination period differs.
   • DNeither rider can be attached to universal life, because universal life premiums are flexible.

   Why: Because universal life has no fixed premium, insurers offer two versions of disability protection: one that merely keeps the policy alive by absorbing the monthly cost of insurance and expense charges, and one that credits an agreed premium amount so the accumulation account can keep growing. Option B simply reverses the two definitions — the closest distractor. Option D is wrong because flexible premiums are precisely why the two distinct designs exist.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

8. A juvenile policy's payor benefit rider waives premiums if the adult payor dies or becomes totally disabled, until the insured child reaches age 21. The payor dies when the child is 12. What happens when the child turns 21?

   • AThe policy terminates without value.
   • BThe waiver continues for the remaining life of the policy.
   • CPremiums become payable again, and the policy will lapse into a nonforfeiture option if the now-adult insured does not pay them.Correct
   • DThe insurer refunds all premiums it waived over the nine-year period.

   Why: The payor benefit is time-limited by design: it carries the policy only until the child reaches the age stated in the rider, at which point the young adult is presumed able to pay, and premiums resume. Option B is the closest distractor — it confuses the payor rider with waiver of premium on the insured's own disability, which can run much longer. The policy does not simply terminate; unpaid premiums push it into the grace period and then a nonforfeiture option.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

9. A $250,000 whole life policy carries a double indemnity rider, and the insured dies in a covered accident. All of the following are true EXCEPT:

   • AThe rider doubles the $250,000 face amount, producing a $500,000 death benefit before any adjustments.
   • BThe policy's accumulated cash value is also doubled and added to the settlement.Correct
   • CAny outstanding policy loan and accrued loan interest are still deducted from the settlement.
   • DThe extra benefit is payable only if death results from the accident within the period stated in the rider.

   Why: Double indemnity doubles the face amount only; in a whole life policy the cash value is not added to the death benefit at all, so there is nothing to double. Option C remains true because indebtedness is netted from any death settlement, accidental or not. Option D reflects the standard requirement that death follow the injury within a stated number of days.

   Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

10. All of the following are typical features of a children's term rider EXCEPT:

    • AA single flat premium covers all eligible children, including those born or legally adopted after the rider is issued.
    • BCoverage on each child ends at an age stated in the rider, commonly somewhere between 18 and 25.
    • CCoverage may be converted to permanent insurance on the child's life without evidence of insurability.
    • DThe rider accumulates cash value on each covered child that the owner may borrow against.Correct

    Why: A children's term rider is pure term protection: one premium covers the whole class of children, it terminates at a stated age, and its main planning value is the guaranteed conversion right that preserves each child's insurability. Option C is true and is the feature most easily confused with cash value, but conversion is an insurability privilege, not an accumulation feature. Term coverage of any kind builds no cash value and supports no policy loan.

    Reference CA Life objectives II.E and III (The individual life insurance contract; riders)

Drill other domains

• Basic Insurance Concepts and Contract Law (17.3%)
• The Insurance Marketplace, Licensing and Ethics (9.3%)
• Life Insurance Basics, Underwriting and Claims (7.3%)
• Types of Life Policies and Group Life (8%)
• Annuities (5.3%)
• Replacement, Cancellation, Taxation and Social Security Disability (5.3%)

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