25 Free Washington Life & Disability Exam Practice Questions (2026)

Answer: B

Under RCW 48.17.090(2), the Commissioner must find that the applicant has paid fees under RCW 48.14.010 and passed the examination, but fingerprinting is a separate requirement for resident applicants under OIC rule and statute. The OIC's fingerprint requirements page states fingerprints are required for resident applicants. The license cannot be issued until all requirements, including fingerprints, are satisfied. Option A is incorrect because fingerprints are required for residents, not just non-residents. Option C is incorrect because the license is not issued pending fingerprints. Option D is incorrect as there is no waiver for a clean record.

Answer: B

RCW 48.17.063 prohibits unlicensed activity: 'No person shall act as, or hold himself or herself out to be, an insurance producer... unless licensed...' Selling disability insurance requires a disability producer license (or combo license). Advertising and selling disability policies with only a life license constitutes unlicensed activity for the disability line. Option A is incorrect; disclosure does not permit unlicensed activity. Option C is incorrect; disability is not a subset of life insurance. Option D is incorrect; client consent does not override licensing requirements.

Answer: D

In Washington, a life insurance producer license includes authority to sell annuities. The PSI content outline for Life Producer includes an 'Annuities' section (9 items). RCW 48.17.010 defines 'life insurance' to include annuity contracts unless specified otherwise. Option A is incorrect as no separate variable annuity license exists in WA for this purpose. Option B is incorrect as no additional training is mandated by statute for appointment. Option C is incorrect as annuities are not under disability authority.

Answer: A

During a license suspension, the producer is prohibited from performing any acts that require a license. RCW 48.17.540 and 550 (refusal to renew, probation) imply suspension voids the license's authority. Servicing policies, collecting premiums, and receiving commissions all require a valid license and are prohibited. Option B, C, and D all describe activities requiring a license and are therefore incorrect. Only Option A correctly states the producer must cease all licensed activities.

Answer: B

B is correct because RCW 48.32A.050(1)(a) specifies that the Guaranty Association provides up to $300,000 in death benefit protection per life insurance policy. A is incorrect because $100,000 applies to cash surrender value, not death benefit. C is incorrect as $200,000 is not a specified limit for any Guaranty Association benefit in Washington. D is incorrect because $500,000 exceeds the statutory limit; the maximum death benefit protection is $300,000.

Answer: C

C is correct because RCW 48.23.030 mandates a minimum grace period of 31 days for life insurance policies in Washington. A and B are incorrect because 15 and 30 days are shorter than the required minimum. D is incorrect because while insurers may offer longer periods, the statutory minimum is 31 days, not 60 days.

Answer: A

A is correct because RCW 48.24.180 allows an employee to convert group life coverage to an individual policy without providing evidence of insurability upon termination of employment or loss of eligibility. B is incorrect because evidence of insurability is specifically not required for conversion under this statute. C is incorrect because there is no minimum coverage duration requirement for conversion rights. D is incorrect because the statute does not restrict conversion to term policies; permanent policies are typically available for conversion.

Answer: D

ACA metallic plans are categorized by actuarial value: Bronze (~60%), Silver (~70%), Gold (~80%), Platinum (~90%). Silver covers about 70% of average costs, which is more than Bronze (60%) but less than Gold (80%). Option D correctly describes this. Option A reverses the values (Bronze is lowest, not highest). Option B is incorrect because Platinum has the highest actuarial value and thus the highest premiums, not lower. Option C confuses metallic levels with network types (HMO/PPO); metallic levels relate to cost-sharing, not network structure.

Answer: D

For a risk to be insurable, it must meet several criteria: the loss must be due to chance (not intentional), definite and measurable (able to quantify), statistically predictable (allowing premium calculation), not catastrophic (so losses are spread), and the premium must be economically feasible for the insured. Option D correctly lists all these elements. Option A describes a certain event, which is not fortuitous and thus not insurable. Option B is incorrect; while risks should be spread across a large pool, affecting few people makes pooling ineffective. Option C describes risks from intentional acts, which are typically excluded as they violate the chance requirement and may involve moral hazard.

Answer: B

Key person insurance (also called key employee insurance) is owned and paid for by the employer, with the employer as beneficiary, to protect against financial losses from the death of a vital employee. Executive bonuses involve the employee owning the policy; buy-sell funding facilitates ownership transfer between business partners; split-dollar divides ownership and benefits between employer and employee.

Answer: A

Liquidity refers to the availability of cash to meet immediate financial obligations, such as estate taxes, funeral expenses, or debts, preventing the need to liquidate assets under duress. Income replacement supports ongoing living expenses for dependents, while wealth accumulation and charitable giving are other uses not directly related to tax payment needs.

Answer: D

Critical illness (or dread disease) insurance provides a lump-sum payment upon the diagnosis of a covered serious illness, such as cancer, heart attack, or stroke. AD&D pays for accidental death or dismemberment, vision care covers eye exams and corrective lenses, and credit disability makes loan payments if the borrower becomes disabled.

Answer: B

In a variable life insurance policy, the cash value is allocated to separate accounts (e.g., mutual funds), and both the death benefit and cash value fluctuate based on the performance of those investments. Option A is incorrect because the death benefit is not guaranteed and can vary. Option C is incorrect because the cash value is in separate accounts, not the general account. Option D is incorrect because variable life policies typically have fixed premiums, but the defining characteristic is the investment risk, not premium flexibility.

Answer: D

A joint life and survivor (survivorship) policy pays the death benefit only after both insureds have died, i.e., upon the death of the last surviving insured. It is often used for estate planning to pay estate taxes. Option A describes a joint life (first-to-die) policy. Option B incorrectly adds a term element. Option C is not a standard policy type.

Answer: D

D is correct. A spouse rider adds term coverage on the spouse's life to the insured's own policy for a stated amount, without a separate contract. A covers only children. B, the family term rider, bundles spouse and children coverage and would also work, but the rider designed specifically for the spouse alone is the spouse rider. C waives premiums during the insured's disability and adds no coverage.

Answer: C

The guaranteed insurability rider (also called a guaranteed purchase option) allows the insured to purchase additional coverage at predetermined intervals or life events (e.g., age, marriage, birth of a child) without having to provide proof of good health or undergo medical underwriting. Option A describes a cost of living rider. Option B describes a waiver of premium rider. Option D describes a disability income benefit rider.

Answer: B

The grace period (typically 30 or 31 days) keeps the policy in force after the premium due date. If the insured dies during this period, the death benefit is payable, but the insurer deducts the unpaid premium from the proceeds. The policy is not lapsed until after the grace period ends, and the insurer does not need to prove prior uninsurability to deny a claim during the grace period; the claim is paid subject to the premium deduction.

Answer: A

A is correct because equity-indexed annuities credit interest based on the performance of an external equity index (like the S&P 500), but typically include a participation rate (e.g., 80%) and/or an upper cap (e.g., 6%) that limits the amount of index gain credited to the annuity. B is incorrect because the principal is not directly invested in the market; it is held in the insurer's general account and protected from loss. C is incorrect because EIAs do not forfeit premiums based on lifespan; they are investment products, not pure life contingencies. D is incorrect because earnings in annuities are taxed as ordinary income upon withdrawal, not capital gains.

Answer: A

Under IRC § 7702A, a life insurance policy that fails the 7-pay test is classified as a Modified Endowment Contract (MEC). For MECs, cash value withdrawals and loans are taxed using the last-in, first-out (LIFO) rule, meaning earnings are withdrawn and taxed as ordinary income before the basis is accessed. Option B is incorrect because death benefits from a MEC remain income-tax-free. Option C is incorrect because the exclusion ratio applies to annuitization of non-MEC annuities, not MEC withdrawals. Option D is false; MECs remain subject to state insurance regulation.

Answer: B

Under IRC Section 1035, exchanging a life insurance policy for an annuity contract is tax-free when done directly between insurers, provided no cash is received. The annuity contract assumes the basis (adjusted cost basis) of the life insurance policy for determining future taxable gains upon withdrawal or annuitization. Option A is incorrect because no gain is recognized in the exchange. Option C is incorrect as gains are not taxed at the time of exchange. Option D is incorrect because the type of annuity (immediate/deferred) or life insurance (term/permanent) does not affect the tax-free status of the exchange under Section 1035.

Answer: B

Under an 'own occupation' definition of total disability, the insured is considered totally disabled if they cannot perform the material duties of their regular occupation, even if they can work in another job. Therefore, the full total disability benefit is payable. Options A, C, and D are incorrect: benefits are not denied, and partial or residual benefits apply only when the policy defines disability differently or when the insured suffers a loss of income but can still work in their own occupation.

Answer: D

The grace period in an individual accident and health policy is a uniform required provision that typically lasts 7 to 31 days. During this time, if the overdue premium is paid, coverage remains in force. It does not allow indefinite delay, is not limited to the first premium, and reinstatement after lapse requires evidence of insurability. Options A, B, and C are incorrect for these reasons.

Answer: A

Presumptive disability provisions in individual disability income policies specify that certain losses (such as the loss of sight in both eyes, hearing, speech, or use of two limbs) are automatically presumed to result in total and permanent disability, triggering benefit eligibility without requiring proof of inability to work in any occupation. Options B, C, and D are incorrect because they impose additional occupational or procedural requirements that are not part of the presumptive disability definition.

Answer: B

HMOs generally require members to receive care from in-network providers and use a gatekeeper (primary care physician) for specialist referrals, with coverage typically unavailable for out-of-network care except in emergencies. PPOs offer more flexibility, allowing members to see out-of-network providers, albeit at a higher cost-sharing rate, and usually do not require referrals for specialists. Option A is incorrect because PPOs do not require referrals; Option C is incorrect because PPOs usually have higher premiums than HMOs due to greater flexibility; Option D is incorrect because both plan types can have deductibles, and HMOs are not deductible-free by design.

Answer: B

Under the Affordable Care Act (ACA) and Washington state law, dependent children can remain on a parent's group health plan until age 26, regardless of student status, marital status, or financial dependence. This applies to both group and individual plans. Options A, C, and D are incorrect as they represent outdated or state-specific limits that have been superseded by the federal ACA provision, which sets a uniform maximum age of 26 for dependent coverage.