17 Free South Carolina Life & Health Practice Questions: Life Application, Underwriting and Retirement Concepts (2026)

Question 1 (Chapter 3)

During the application process, a South Carolina producer collects the initial premium and issues a conditional receipt. The applicant dies two days later before underwriting is complete. Under what condition would the death benefit be payable?

• A) Only if the applicant would have been approved as a standard risk.
• B) If the applicant was insurable at the standard rate or better on the date of the application.
• C) Only if the premium was collected by check and has cleared the bank.
• D) Always, as the conditional receipt provides immediate full coverage upon premium payment.

Question 2 (Chapter 3)

A client attempts to pay a $50,000 life insurance premium in cash to a South Carolina producer. What action is the producer required to take under the USA PATRIOT Act and anti-money laundering regulations?

• A) Accept the cash payment and issue the policy immediately to avoid losing the sale.
• B) Refuse the cash payment and insist on a check or electronic transfer without further action.
• C) Report the transaction to the insurer's anti-money laundering compliance officer as a suspicious activity.
• D) Keep the cash and submit a Currency Transaction Report (CTR) directly to the IRS.

Question 3 (Chapter 3)

When delivering a life insurance policy in South Carolina, what must the producer explain to the client regarding the policy's effective date if a conditional receipt was issued?

• A) Coverage began on the date the application was signed, regardless of insurability.
• B) Coverage began on the date of the medical exam, if one was required.
• C) Coverage begins only after the first annual premium is paid in full.
• D) Coverage may have begun on the application date or the date of the medical exam, but only if the applicant was insurable at the applied rate.

Question 4 (Chapter 3)

In South Carolina, what is a defining characteristic of a noncontributory group life insurance plan?

• A) The employer pays 100% of the premium, and all eligible employees are automatically covered.
• B) Employees must pay at least 50% of the premium to be eligible for coverage.
• C) Coverage is only available to employees who have worked for the company for at least 10 years.
• D) Employees can choose their coverage amount up to a maximum set by the employer.

Question 5 (Chapter 3)

A South Carolina producer is completing a life insurance application for a client who wants to name a minor child as the primary beneficiary. The client asks if they need to appoint a guardian for the proceeds. What is the producer's correct response regarding South Carolina law?

• A) South Carolina law requires a guardian or custodian to be named for any minor beneficiary to receive the death benefit directly.
• B) A guardian must be appointed only if the death benefit exceeds $10,000.
• C) The insurance company will automatically hold the proceeds in trust until the child reaches the age of majority, so no action is needed.
• D) Naming a minor as beneficiary is prohibited under South Carolina statutes for life insurance policies.

Question 6 (Chapter 3)

A South Carolina client owns a life insurance policy on their spouse and has designated their revocable living trust as the owner and beneficiary. The client later divorces and wants to change the beneficiary to their new partner. What is required to make this change?

• A) The trustee of the revocable living trust must sign a beneficiary change form, as the trust is the policy owner.
• B) The client can simply notify the insurance company verbally of the change.
• C) The client must first amend the trust document before the insurance company will accept a beneficiary change.
• D) No change is permitted after a divorce; the ex-spouse remains the contingent beneficiary.

Question 7 (Chapter 3)

In South Carolina, a life insurance policy is delivered to the applicant who paid the initial premium with a check. The check is later returned for insufficient funds. What is the effect on the policy's coverage if the insurer issued a conditional receipt at the time of application?

• A) Coverage remains in force because the conditional receipt guarantees protection regardless of payment.
• B) Coverage may be considered in force from the date of application only if the insurer receives payment within a specified grace period, typically 60 days.
• C) Coverage is void from the outset because the initial premium was not successfully paid.
• D) The policy automatically converts to a term life insurance policy if the check is not honored.

Question 8 (Chapter 3)

In South Carolina, a producer is discussing the use of a life insurance policy to fund a buy-sell agreement between two business partners. What is the primary advantage of using life insurance for this purpose?

• A) It provides immediate liquidity to purchase the deceased partner's share upon their death.
• B) It allows the business to deduct the premium payments as a current business expense.
• C) It guarantees that the surviving partner will receive a salary continuation from the business.
• D) It eliminates the need for a written buy-sell agreement between the partners.

Question 9 (Chapter 3)

A South Carolina producer is explaining the USA PATRIOT Act and anti-money laundering requirements to a client applying for life insurance. Which statement accurately describes the producer's obligation?

• A) The producer must report suspicious transactions, such as a large cash payment for a life insurance policy, as part of anti-money laundering compliance.
• B) The producer must report any cash premium payment over $1,000 to the Financial Crimes Enforcement Network (FinCEN).
• C) The producer must verify the client's identity using a government-issued photo ID for all applications.
• D) The producer is exempt from anti-money laundering requirements if the policy face amount is less than $100,000.

Question 10 (Chapter 3)

During the underwriting process for a South Carolina life insurance applicant, the producer receives an attending physician's statement (APS) that indicates the applicant has a controlled heart condition. The applicant has also signed an authorization for the release of medical information. Which action by the producer would violate the Fair Credit Reporting Act (FCRA) in this situation?

• A) Sharing the APS with the insurer's underwriting department for risk classification.
• B) Using the medical information solely to determine the applicant's eligibility and premium rate.
• C) Providing a summary of the medical findings to the applicant upon request, as required by FCRA.
• D) Discussing the specific details of the applicant's heart condition with a colleague who is not involved in the underwriting or processing of the application.

Question 11 (Chapter 3)

Under South Carolina law, which of the following actions by a producer during the life insurance application process would most likely constitute an unfair trade practice under the state's Unfair Trade Practices Act?

• A) Providing a client with a balanced illustration showing both guaranteed and non-guaranteed elements of a policy.
• B) Recommending a policy replacement that is in the client's best interest after a thorough comparison.
• C) Using a copyrighted sales presentation from the insurer with permission.
• D) Failing to disclose a material mistake in the application after it has been signed, knowing the insurer relied on the incorrect information.

Question 12 (Chapter 3)

A South Carolina producer is completing a life insurance application for a client who is both the applicant and proposed insured. The client is 68 years old and wants to purchase a $250,000 term life policy. During the application, the client discloses they are a private pilot who flies recreationally 50 hours per year. Which underwriting action is most appropriate for this risk?

• A) Decline the application due to the high-risk occupation.
• B) Issue the policy at standard rates as recreational flying is not considered hazardous.
• C) Apply a flat extra premium based on the frequency and type of flying activity.
• D) Require the client to obtain a student pilot license before considering the application.

Question 13 (Chapter 3)

In South Carolina, a life insurance policy is delivered to a client who is 62 years old and has named their 8-year-old grandchild as the primary beneficiary. The client asks if they need to appoint a guardian or custodian for the proceeds under South Carolina law. What is the producer's correct response?

• A) No, minors can directly receive life insurance proceeds in South Carolina without restriction.
• B) Yes, a court-appointed guardian is always required for any minor beneficiary.
• C) No, but the proceeds must be paid to a legal guardian or custodian if the beneficiary is a minor, or to a trust established for the minor's benefit.
• D) Yes, but only if the death benefit exceeds $50,000.

Question 14 (Chapter 3)

A South Carolina client is applying for a life insurance policy and discloses they are a private pilot who flies recreationally 50 hours per year. During underwriting, the insurer is most likely to classify this risk using which method?

• A) Standard rate, as recreational flying is not considered a risk factor by insurers.
• B) Flat extra premium, where a fixed dollar amount per $1,000 of coverage is added annually.
• C) Table rating, where an additional premium is added based on the perceived risk.
• D) Decline coverage, as all aviation activities are automatically uninsurable.

Question 15 (Chapter 3)

A South Carolina producer is discussing retirement plan options with a self-employed client. The client wants to make tax-deductible contributions and have the flexibility to contribute varying amounts each year based on business profitability. Which retirement plan is best suited for this client's needs?

• A) A traditional Individual Retirement Account (IRA) with a fixed annual contribution limit.
• B) A Simplified Employee Pension (SEP) IRA, which allows for tax-deductible contributions and flexible annual funding.
• C) A Savings Incentive Match Plan for Employees (SIMPLE) IRA, which requires mandatory employer contributions.
• D) A Roth IRA, which offers tax-free withdrawals but non-deductible contributions.

Question 16 (Chapter 3)

A South Carolina producer is completing an application for a client who wants to purchase a life insurance policy on their fiancé(e). The client and fiancé(e) are not yet married. What is the key underwriting consideration regarding insurable interest in this situation?

• A) Insurable interest does not exist because the parties are not married, so the policy cannot be issued.
• B) Insurable interest exists based on the expectation of marriage and the financial/emotional relationship, so the policy can be issued.
• C) Insurable interest only exists if the client has already paid for the wedding venue.
• D) Insurable interest requires the fiancé(e) to be named as the policy owner, not the insured.

Question 17 (Chapter 3)

A South Carolina producer is explaining the suicide clause in a life insurance policy to a client. The client asks what happens if the insured dies by suicide after the suicide clause period has expired. What is the correct outcome?

• A) The death benefit is reduced by 50%.
• B) No death benefit is payable under any circumstances if suicide is the cause of death.
• C) The death benefit is paid in full, as the suicide clause no longer applies.
• D) The death benefit is paid only if the policyowner can prove the insured was of sound mind at the time of application.