25 Free California Life & Health Exam Practice Questions (2026)

18 min read|Updated 2026-10-14

How to Use This California Question Set

The California Life, Accident and Health or Sickness examination has 150 multiple-choice questions, and 60% raw — 90 correct answers — is a pass. In 2025, 60% of first-time candidates passed and 43% of repeat candidates did. The CDI License Examination Objectives, effective January 1, 2026, say where the questions come from: across the Life and the Accident & Health halves, General Insurance accounts for 40 questions, Life Insurance for 49 and Medical Expense for 45. Disability Income, Long-Term Care, Life Policy Riders and General Concepts of Medical and Disability Insurance are four questions each.

These 25 questions come from LanePrep's California Life & Health quiz bank and are sampled in roughly the same proportion. Life basics, contract law and policy types come first, then provisions, annuities, taxation and individual health policies, then disability, group health, senior products and the California rules. Each question shows its chapter, so a miss tells you which chapter to go back to.

The set is not a predictor on its own. Twenty-five questions cannot cover every objective, and the real exam may add 5 to 10 unscored experimental questions on top of the 150. What it does show is whether the general material has stuck and whether the California-specific rules — replacement of a senior's annuity, the replacement notice, the definition of transacting — are in place.

Work them before you read the answer. Every question has the explanation folded underneath it. Guessing and then reading is worth more than reading and then agreeing.

Practice Questions 1-8: Life Insurance Basics, Contract Law and Policy Types

The Life objectives put 22 of 75 questions in General Insurance and another 49 in Life Insurance, so the first third of this set stays on that side: risk management, when insurable interest must exist under the California Insurance Code, how a contract of adhesion is formed, how an out-of-state insurer is classified, adverse selection, two policy types matched to a stated need, and the provision that restores a lapsed policy.

Question 1 (Chapter 1)

Sarah is considering purchasing a new car. She knows that driving carries the risk of an accident, which could result in financial loss. To manage this risk, she decides to purchase an auto insurance policy. Which risk management technique is Sarah primarily employing?

A) Risk avoidance
B) Risk retention
C) Risk reduction
D) Risk transfer

Show answer & explanation

Answer: D

By purchasing an auto insurance policy, Sarah is transferring the financial burden of potential losses from an accident to the insurance company. Risk avoidance would mean not driving at all. Risk retention would mean self-insuring or paying for losses out of pocket. Risk reduction would involve measures like driving safely or installing safety features.

Question 2 (Chapter 1)

Under the California Insurance Code, when must an insurable interest exist for a life insurance policy to be valid?

A) At the time of the insured's death.
B) At the time the application is submitted and the policy is issued.
C) Only if the beneficiary is not a relative.
D) Throughout the entire duration of the policy.

Show answer & explanation

Answer: B

In life insurance, insurable interest must exist at the time the contract is entered into (issued). It does not need to exist at the time of the death of the insured.

Question 3 (Chapter 1)

An insurance contract is often described as a 'contract of adhesion.' What does this characteristic imply about the contract's formation in California?

A) It means the contract is legally binding only if both parties contribute equally to its drafting.
B) It means the contract can be altered or withdrawn by either party at any time before a claim is filed.
C) It means the contract's terms are subject to negotiation and modification by both parties.
D) It means the contract is drafted by one party (the insurer) and the other party (the insured) must accept or reject it as is.

Show answer & explanation

Answer: D

A contract of adhesion means that one party (the insurer) prepares the contract, and the other party (the insured) must accept or reject it as a whole, without the opportunity to negotiate its terms. If there is any ambiguity in the contract, courts typically interpret it in favor of the insured. Options A, B, and C contradict this definition.

Question 4 (Chapter 1)

A life insurance company operating in California is incorporated in another state, such as New York, but is authorized to do business in California. For regulatory purposes in California, this insurer would be classified as a(n):

A) Domestic insurer
B) Alien insurer
C) Non-admitted insurer
D) Foreign insurer

Show answer & explanation

Answer: D

A foreign insurer is an insurer organized under the laws of another state (e.g., New York) but authorized to do business in the state where it is currently operating (e.g., California). A domestic insurer is organized under the laws of the state where it is operating. An alien insurer is organized under the laws of another country. A non-admitted insurer is not authorized to do business in the state.

Question 5 (Chapter 1)

Which of the following is an example of 'adverse selection' in the insurance marketplace?

A) An insurer only accepting applicants who are in perfect health.
B) Individuals with high health risks being more likely to purchase insurance than those with low risks.
C) An agent selling insurance to their family members.
D) A policyholder cancelling their policy because they no longer need coverage.

Show answer & explanation

Answer: B

Adverse selection occurs when people with a higher-than-average risk of loss are more likely to seek insurance coverage than those with a lower-than-average risk. This can lead to financial instability for an insurer if not properly managed through underwriting.

Question 6 (Chapter 2)

Mr. and Mrs. Garcia recently purchased a home in San Diego and took out a 30-year mortgage. They want a life insurance policy where the death benefit will gradually decrease over time, mirroring the outstanding balance of their mortgage. Which type of life insurance would be most suitable for this specific need?

A) Decreasing term life insurance
B) Level term life insurance
C) Whole life insurance
D) Universal life insurance

Show answer & explanation

Answer: A

Decreasing term life insurance is specifically designed for situations where the need for coverage diminishes over time, such as to cover a mortgage or other loans. The death benefit decreases annually, typically matching the amortization schedule of a loan. Level term maintains a constant death benefit, while whole life and universal life are permanent policies with cash values.

Question 7 (Chapter 2)

A policyholder owns a Universal Life policy in California and is considering two death benefit options. Option A provides a level death benefit, where the face amount remains constant. Option B provides an increasing death benefit, where the death benefit is the face amount plus the policy's cash value. What is the primary implication of choosing Option B over Option A, assuming the same initial face amount and premium payments?

A) Option B will accumulate cash value more slowly due to higher internal costs.
B) Option B will result in lower premiums.
C) Option B offers a guaranteed higher death benefit regardless of cash value growth.
D) Option B will have a fixed, rather than flexible, premium structure.

Show answer & explanation

Answer: A

With Universal Life death benefit Option B, the death benefit is the stated face amount plus the accumulating cash value. To maintain this increasing death benefit, the insurer's 'net amount at risk' stays higher than under Option A, where the net amount at risk falls as the cash value grows toward the level face amount. A higher net amount at risk means higher mortality charges are deducted from the policy, so the cash value accumulates more slowly under Option B for the same premium. Option B does not produce lower premiums, and it does not guarantee a higher death benefit regardless of cash value growth — the increase depends on the cash value. Universal life premiums are flexible under either death benefit option.

Question 8 (Chapter 3)

A life insurance policy lapses due to non-payment of premium. The policyowner wishes to restore the policy to its original force. Which provision allows for this, typically requiring payment of back premiums with interest and proof of insurability?

A) Grace Period
B) Automatic Premium Loan
C) Nonforfeiture Option
D) Reinstatement Provision

Show answer & explanation

Answer: D

The Reinstatement Provision allows a policyowner to restore a lapsed policy to its original status, usually within a specified timeframe (e.g., 3-5 years), by paying all back premiums with interest, repaying any policy loans with interest, and providing proof of insurability. The Grace Period is a short extension before lapse. Automatic Premium Loan prevents lapse by taking a loan. Nonforfeiture options are alternatives to lapsing without value.

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Practice Questions 9-17: Provisions, Annuities, Taxation and Individual Health Policies

This section crosses from life to health. A settlement option and the spendthrift clause come from the individual contract objectives, the two annuity questions cover a period-certain payout and the California rule on replacing a senior's annuity, one question works the tax on a surrendered policy, and the four health questions ask for the arithmetic and the definitions that individual medical expense and disability policies are built on.

Question 9 (Chapter 3)

Upon the death of the insured, the beneficiary opts to receive the death benefit in equal installments over a specified period, rather than a lump sum. Which settlement option has the beneficiary chosen?

A) Fixed Period
B) Interest Only
C) Fixed Amount
D) Life Income

Show answer & explanation

Answer: A

The Fixed Period Option allows the beneficiary to receive the death benefit in equal installments over a predetermined period. The amount of each installment is determined by the death benefit amount, the length of the period, and the interest rate. The Fixed Amount option pays a fixed dollar amount until the proceeds are exhausted. Interest Only means the principal remains with the insurer, and only interest is paid. Life Income provides payments for the remainder of the beneficiary's life.

Question 10 (Chapter 3)

A life insurance policyowner wants to ensure that the policy proceeds are protected from the beneficiary's creditors and cannot be assigned or commuted by the beneficiary. Which policy provision would achieve this goal?

A) Automatic Premium Loan
B) Reinstatement Provision
C) Conversion Privilege
D) Spendthrift Clause

Show answer & explanation

Answer: D

A Spendthrift Clause is included in a life insurance policy to protect the proceeds from the beneficiary's creditors and to prevent the beneficiary from assigning, pledging, or commuting (taking a lump sum instead of installments) the benefits. This ensures the funds are paid out as intended by the policyowner, often in installments. The other options are unrelated to protecting beneficiary proceeds from creditors.

Question 11 (Chapter 4)

A client selects a 'Life with 10-Year Period Certain' payout option. If the annuitant dies exactly 6 years after the annuity payments begin, what happens to the remaining payments?

A) The insurance company retains the remaining funds as a profit.
B) Payments stop immediately upon the annuitant's death, regardless of the period certain.
C) The beneficiary continues to receive payments for the remaining 4 years of the period certain.
D) The beneficiary receives a lump-sum payment equal to the total premiums paid minus the payments already made.

Show answer & explanation

Answer: C

In a 'Life with Period Certain' option, the insurer guarantees payments for the life of the annuitant, but if they die before the 'certain' period ends, the beneficiary receives the remaining payments for the balance of that period.

Question 12 (Chapter 4)

A 72-year-old client approaches an agent wanting to exchange their existing annuity for a new one that offers a slightly higher interest rate. Under California Insurance Code §10509.8, what is the primary concern the agent must address before facilitating this transaction?

A) Whether the client has completed the mandatory 8-hour annuity suitability training.
B) Whether the new annuity is a variable product requiring FINRA registration.
C) Whether the replacement is necessary and beneficial, as unnecessary replacement of an annuity for a senior is a violation.
D) Whether the client has a reverse mortgage that would automatically disqualify them from the exchange.

Show answer & explanation

Answer: C

California Insurance Code §10509.8 specifically prohibits the unnecessary replacement of annuities for consumers aged 65 and older. The agent must ensure the new product provides a genuine benefit to the senior, as surrender charges and new commission structures often make replacements detrimental.

Question 13 (Chapter 5)

After holding a whole life policy for 25 years, Mr. Lee decides to surrender it. He paid a total of $70,000 in premiums over the years, and the policy's cash value at surrender is $95,000. How will the surrender value be treated for federal income tax purposes?

A) The $25,000 gain ($95,000 - $70,000) will be taxed as ordinary income.
B) The entire $95,000 surrender value is taxable as ordinary income.
C) The entire $95,000 surrender value is tax-free, as it's from a life insurance policy.
D) Only the $70,000 cost basis is taxable, as it represents the return of his investment.

Show answer & explanation

Answer: A

When a life insurance policy is surrendered, any gain above the policyholder's cost basis (total premiums paid, less any tax-free dividends received) is taxed as ordinary income. In this case, the gain is $95,000 (surrender value) - $70,000 (cost basis) = $25,000. Options B, C, and D misstate the tax treatment of the gain.

Question 14 (Chapter 6)

Maria has a health insurance policy with a $1,000 annual deductible, 80/20 coinsurance, and a $5,000 stop-loss limit (excluding the deductible). After meeting her deductible, Maria incurs $20,000 in covered medical expenses. How much will Maria have to pay out-of-pocket for these expenses, in addition to her deductible?

A) $5,000
B) $6,000
C) $4,000
D) $1,000

Show answer & explanation

Answer: C

First, Maria meets her $1,000 deductible. Then, for the remaining $20,000 in expenses, coinsurance applies. Maria's share is 20% of $20,000, which is $4,000. The stop-loss limit is $5,000, meaning Maria will not pay more than $5,000 in coinsurance out-of-pocket after the deductible. Since her 20% share ($4,000) is less than the $5,000 stop-loss limit, she will pay $4,000 in coinsurance. Her total out-of-pocket for these expenses (after deductible) is $4,000.

Question 15 (Chapter 6)

Maria's individual health insurance policy states that the insurer cannot cancel the policy, and the premiums cannot be increased for her individually, although they may be increased for an entire class of policyholders. Which type of renewability clause does Maria's policy have?

A) Cancellable
B) Optionally Renewable
C) Conditionally Renewable
D) Guaranteed Renewable

Show answer & explanation

Answer: D

A Guaranteed Renewable policy ensures that the insurer cannot cancel the policy (except for non-payment of premiums) and must renew it up to a specified age. While the insurer cannot increase premiums for an individual insured, they can increase premiums for an entire class of policyholders. This is a common and desirable renewability feature for health insurance. Noncancelable policies offer the highest level of protection, where premiums cannot be increased at all.

Question 16 (Chapter 6)

What is the primary difference between a 'Probationary Period' and an 'Elimination Period' in a disability policy?

A) The probationary period is the time the insured must be disabled; the elimination period is the time the insurer has to pay the claim.
B) They are identical terms used interchangeably in California insurance contracts.
C) The probationary period only applies to accidents; the elimination period only applies to sickness.
D) The probationary period is the time after the policy is issued before sickness is covered; the elimination period is the time the insured must be disabled before benefits begin.

Show answer & explanation

Answer: D

The probationary period prevents adverse selection by excluding coverage for illnesses that start shortly after policy issuance. The elimination period is a 'waiting period' during a disability before the insurer begins paying benefits.

Question 17 (Chapter 6)

When a health insurance policy includes a 'Coordination of Benefits' (COB) provision, what is its purpose?

A) To allow the insured to collect 200% of their medical expenses from multiple policies.
B) To force the insured to choose only one policy to use for any given claim.
C) To ensure that the total benefits paid by all plans do not exceed the actual medical expenses incurred.
D) To automatically terminate the secondary policy if the primary policy pays the claim.

Show answer & explanation

Answer: C

The COB provision prevents 'over-insurance' by coordinating payments between multiple plans so that the insured is indemnified (restored to their original position) rather than profiting from the claim.

Practice Questions 18-25: Disability, Group Health, Senior Products and California Rules

The Accident & Health objectives give Medical Expense 45 of 75 questions, with Senior Health Products the largest single piece at 15. The last section samples that side: the own-occupation definition of disability, long-term care benefit triggers, COBRA and PPACA rules, Medicare Part A for someone without premium-free eligibility, the replacement notice, and what the Insurance Code means by transacting insurance.

Question 18 (Chapter 6)

A policyholder has an 'Own Occupation' disability policy. They suffer a severe injury that prevents them from performing the duties of their current job as a surgeon, but they are physically capable of teaching medical students. Under this policy, how is their disability status determined?

A) They are not considered disabled because they can perform 'any occupation'.
B) They are considered partially disabled only if their income drops by more than 50%.
C) They are considered totally disabled because they cannot perform the duties of their specific occupation.
D) The insurer will require them to retrain for a new career before paying benefits.

Show answer & explanation

Answer: C

An 'Own Occupation' definition of disability considers the insured totally disabled if they cannot perform the material duties of their regular occupation at the time the disability begins, regardless of their ability to work in another field.

Question 19 (Chapter 6)

In the context of Long-Term Care insurance, what are the 'Activities of Daily Living' (ADLs) used for?

A) To determine the premium rate based on the applicant's age.
B) To calculate the maximum benefit period of the policy.
C) To serve as benefit triggers to determine if the insured qualifies for coverage.
D) To define the types of medical treatments covered by the policy.

Show answer & explanation

Answer: C

ADLs (such as bathing, dressing, eating, transferring, toileting, and continence) are the standard triggers used to determine if an individual requires long-term care services.

Question 20 (Chapter 7)

John worked for a company with 60 employees in California. After being laid off, he wants to continue his health coverage. Under which federal law can John elect to continue his group health benefits for a limited period?

A) The Family and Medical Leave Act (FMLA)
B) The Employee Retirement Income Security Act (ERISA)
C) The Health Insurance Portability and Accountability Act (HIPAA)
D) The Consolidated Omnibus Budget Reconciliation Act (COBRA)

Show answer & explanation

Answer: D

COBRA (Consolidated Omnibus Budget Reconciliation Act) is the federal law that allows eligible employees and their dependents to continue group health benefits for a limited period after certain qualifying events, such as job loss. ERISA sets standards for employee benefit plans. FMLA provides unpaid leave for specific family and medical reasons. HIPAA primarily addresses health information privacy and portability of coverage.

Question 21 (Chapter 7)

Under the PPACA, what is the maximum age for a child to remain on their parent's health insurance policy?

A) 19th birthday
B) 21st birthday
C) 26th birthday
D) 29th birthday

Show answer & explanation

Answer: C

The PPACA allows children to remain on their parent's health insurance plan until they reach the age of 26, regardless of student or marital status.

Question 22 (Chapter 7)

Under the Medical Loss Ratio (MLR) rule of the PPACA, what percentage of premium dollars must be spent on clinical services and quality improvement for a large group health plan?

A) 70%
B) 80%
C) 85%
D) 90%

Show answer & explanation

Answer: C

The PPACA requires health insurers to spend a minimum percentage of premium dollars on medical care and quality improvement. This is 80% for individual/small group plans and 85% for large group plans.

Question 23 (Chapter 7)

A 68-year-old individual who has never contributed to Social Security and is not eligible for premium-free Medicare Part A applies for coverage. Under Medicare rules, what is the consequence of their enrollment status regarding Part A?

A) They must pay a monthly premium to receive Part A benefits.
B) They are ineligible for Part A coverage entirely.
C) They are automatically enrolled in Part A at no cost due to their age.
D) They must wait until they accumulate 40 quarters of coverage to enroll.

Show answer & explanation

Answer: A

Individuals who do not have 40 quarters of Social Security coverage can purchase Part A by paying a monthly premium. Option B is incorrect because they are eligible to purchase it; C is incorrect because it is only free for those with sufficient work credits.

Question 24 (Chapter 7)

A client is applying for a new life insurance policy and the agent notices the client has an existing policy that will be replaced. What must the agent provide to the client?

A) A 'Notice Regarding Replacement' form.
B) A 'Statement of Insurability' form.
C) A 'Certificate of Creditable Coverage' from the previous insurer.
D) A 'Letter of Intent' to cancel the old policy.

Show answer & explanation

Answer: A

When replacing an existing life insurance policy or annuity, the agent must provide a 'Notice Regarding Replacement' (§10509.4) to ensure the client understands the implications of switching coverage. This is a mandatory disclosure requirement.

Question 25 (Chapter 8)

Which of the following activities constitutes 'transacting' insurance under §35?

A) Only the actual issuance of a policy by the insurer.
B) Only the collection of premiums.
C) Only the delivery of a policy to a client.
D) Solicitation, negotiations preliminary to execution, and execution of a contract.

Show answer & explanation

Answer: D

Transacting is broadly defined in §35 to include solicitation, negotiations, execution of the contract, and transaction of matters subsequent to the execution.

The Mistakes That Cost Marks

Reading insurable interest as a condition at death. In life insurance it must exist when the contract is entered into. It does not have to exist when the insured dies, and the exam phrases the question so that the intuitive answer is the wrong one.

Stopping the arithmetic at the deductible. Deductible, coinsurance share and stop-loss limit are three separate numbers. Work the coinsurance share on the expenses that remain after the deductible, then check it against the stop-loss limit before answering.

Confusing the probationary period with the elimination period. One runs from policy issue before sickness is covered; the other runs from the start of a disability before benefits begin. Both are waiting periods, which is why candidates swap them.

Treating the 80% medical loss ratio as universal. It is 80% for individual and small group plans and 85% for large group plans. The question will tell you the group size.

Answering a California rule from another state's material. Replacing a senior's annuity without a genuine benefit is a violation of §10509.8, the replacement notice is required whenever an existing policy is being replaced, and 'transacting' under §35 begins at solicitation. National study material does not teach any of this, and the exam embeds these rules throughout rather than keeping them in a separate section.

Your Next Step

How did you score?

20 or more correct (80%+): You are above the pass mark with room to spare. Book the exam, then spend the remaining days on the two topic sets that go deeper than this sample: Medicare and senior health products, the largest block on the health side, and life policy provisions and riders.
15-19 correct (60-79%): You are at or just above the 60% pass mark, which leaves no margin for a bad day. Note the chapter of every question you missed and work those chapters first. Then take the two topic sets above; they test the same material at closer range.
Under 15 correct: You need the material, not more questions. Start with the three-week plan in how to pass the California Life & Health exam on your first try and work through the audio chapters before testing yourself again. The 2025 repeat pass rate was 43%, and the candidates it describes are mostly the ones who came back with the same preparation.

Chapters 1 and 9 of the LanePrep California course are free at /ca/l-and-h/preview — full audio and the chapter quiz, no signup. The cost breakdown shows what a retake adds to the bill.

Question counts and content weighting come from the California Department of Insurance License Examination Objectives (effective January 1, 2026). Read October 2026.

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