17 Free Utah Life & Health Practice Questions: Life Policies, Provisions and Riders (2026)
How to Use This Life Policies, Provisions and Riders Set
This set covers Chapter 3, Life Insurance Policies and Policy Provisions, Options and Riders. On the combined exam's outline it maps to Life Insurance Policies, weighted 7%, and Life Insurance Policy Provisions, Options and Riders, weighted 9%. That is a large share of the life side of the exam.
The questions move from policy shapes to the clauses, riders and options that decide what happens when something goes wrong. Work each question first, then read the explanation.
Practice Questions 1-6: Policy Types, Taxation and Beneficiaries
Limited payment whole life, the incontestable clause, the waiver of premium rider, how surrender is taxed, what a policy loan does at death and what happens when a beneficiary predeceases the insured.
Question 1 (Chapter 3)
David owns a whole life insurance policy that requires premium payments for only 20 years, after which no further premiums are due but coverage continues for his entire life. This type of policy is best described as:
- A) Ordinary whole life insurance
- B) Limited payment whole life insurance
- C) Single premium whole life insurance
- D) Interest-sensitive whole life insurance
Show answer & explanation
Answer: B
Limited payment whole life insurance allows the policy to be paid up after a specified number of years (e.g., 20 payments or payment to age 65), after which no further premiums are required but coverage continues for life. Ordinary whole life (straight life) requires premiums to be paid for the entire life of the insured. Single premium whole life is funded with one upfront payment. Interest-sensitive whole life adjusts cash value based on current interest rates but does not specify a limited payment period.
Question 2 (Chapter 3)
The incontestable clause in a life insurance policy limits the insurer's ability to deny a claim based on misrepresentations in the application after a certain period. In Utah, how long must a life insurance policy be in force before the incontestable clause takes effect?
- A) 6 months
- B) 1 year
- C) 5 years
- D) 2 years
Show answer & explanation
Answer: D
Under Utah Insurance Code § 31A-21-204, the incontestable clause in a life insurance policy prevents the insurer from contesting the policy based on misrepresentations in the application after the policy has been in force for two years during the insured's lifetime. This is a standard provision in life insurance policies. Options A, B, and C are incorrect as they do not match the Utah statutory period of two years.
Question 3 (Chapter 3)
An insured adds a waiver of premium rider to their life insurance policy. Under what circumstance will this rider waive the policy premiums?
- A) When the insured is diagnosed with a terminal illness and has less than 12 months to live.
- B) When the insured reaches retirement age (e.g., 65) and stops working.
- C) When the policy's cash value is sufficient to cover the premium payments.
- D) When the insured becomes totally and continuously disabled as defined in the rider and remains disabled for the required waiting period.
Show answer & explanation
Answer: D
A waiver of premium rider waives the policy premiums if the insured becomes totally and continuously disabled, as defined in the rider, and remains disabled for the specified waiting period (commonly 3 or 6 months). It is not triggered by terminal illness (that is an accelerated benefit rider), retirement age, or sufficient cash value (which relates to automatic premium loan or nonforfeiture options).
Question 4 (Chapter 3)
A policyowner surrenders their whole life insurance policy for its cash value. Which of the following statements is true regarding the tax treatment of the cash surrender value received?
- A) Only the amount exceeding the total premiums paid (the gain) is subject to income tax.
- B) The entire amount received is tax-free as a return of premium.
- C) The amount received is fully taxable as ordinary income.
- D) No tax is due if the policy is surrendered within the first 5 years.
Show answer & explanation
Answer: A
When a life insurance policy is surrendered for its cash value, the amount received is tax-free up to the total premiums paid into the policy (the cost basis). Any amount received that exceeds the total premiums paid is considered gain and is subject to ordinary income tax. This follows the general tax rule for life insurance cash value distributions. Option B is incorrect because only the cost basis is tax-free. Option C is incorrect because the return of premium is not taxable. Option D is incorrect as there is no 5-year tax exemption rule for surrender.
Question 5 (Chapter 3)
An insured takes a policy loan against the cash value of their whole life insurance policy. If the insured dies before repaying the loan, what happens to the outstanding loan balance?
- A) The outstanding loan balance is deducted from the death benefit before payment to the beneficiary.
- B) The loan is forgiven, and the full death benefit is paid to the beneficiary.
- C) The beneficiary must repay the loan to receive any death benefit.
- D) The death benefit is increased to cover the outstanding loan balance.
Show answer & explanation
Answer: A
When a policy loan is taken, the outstanding loan balance (including interest) is deducted from the death benefit if the insured dies before repayment. The beneficiary receives the net amount. Options B, C, and D are incorrect because loans are not forgiven, the beneficiary is not responsible for repayment, and the death benefit is not increased to cover the loan.
Question 6 (Chapter 3)
In a life insurance policy, if the primary beneficiary predeceases the insured and no contingent beneficiary is named, who receives the death benefit upon the insured's death?
- A) The death benefit is forfeited to the insurance company.
- B) The death benefit is paid to the insured's next of kin as determined by state law.
- C) The death benefit is paid to the insured's estate.
- D) The death benefit is held in trust until a beneficiary is designated.
Show answer & explanation
Answer: C
If the primary beneficiary predeceases the insured and no contingent beneficiary is named, the death benefit is paid to the insured's estate. Options A, B, and D are incorrect because the benefit is not forfeited, automatically paid to next of kin, or held in trust—it defaults to the estate unless a beneficiary is properly designated.
Get the 25-question sample set by email
Want a full-exam practice set to study offline? Drop your email — we'll send 25 questions across every content area, each with the answer and explanation.
No spam. Just the questions and one optional follow-up.
Practice Questions 7-12: Cash Value, Decreasing Term and Nonforfeiture
Reaching cash value without a loan, a decreasing term calculation, first-to-die coverage, the nonforfeiture option with the longest coverage, policy loan effects and a per stirpes distribution.
Question 7 (Chapter 3)
An insured owns a universal life insurance policy and wants to access a portion of the cash value without surrendering the policy or taking a loan. Which option allows this?
- A) Policy loan
- B) Automatic premium loan
- C) Reduced paid-up option
- D) Partial withdrawal
Show answer & explanation
Answer: D
A partial withdrawal allows the policyowner to withdraw a portion of the cash value from a universal life policy without surrendering the policy or taking a loan. This reduces the cash value and may affect the death benefit. Option A (policy loan) requires repayment with interest. Option B (automatic premium loan) uses cash value to pay premiums automatically. Option C (reduced paid-up) is a nonforfeiture option that ends premium payments and reduces the death benefit.
Question 8 (Chapter 3)
Sarah purchases a $300,000 decreasing term life insurance policy to cover her 20-year mortgage. The death benefit decreases by $15,000 each year. After 8 years, she dies in a car accident. What amount will her beneficiary receive?
- A) $180,000
- B) $300,000
- C) $120,000
- D) $240,000
Show answer & explanation
Answer: A
The death benefit decreases by $15,000 per year. After 8 years, the decrease is 8 × $15,000 = $120,000. Starting from $300,000, the remaining death benefit is $300,000 - $120,000 = $180,000. Option B is incorrect because it ignores the decreasing feature. Option C is the amount of decrease, not the remaining benefit. Option D incorrectly subtracts only 4 years of decrease.
Question 9 (Chapter 3)
Linda purchases a joint life (first-to-die) policy covering herself and her husband with a $400,000 death benefit. Ten years later, her husband dies in an accident. What happens to the policy?
- A) The death benefit of $400,000 is paid to Linda, and the policy terminates.
- B) The policy continues to cover Linda until her death, with the same $400,000 death benefit.
- C) The policy converts to an individual policy on Linda with a reduced death benefit.
- D) The premiums are refunded, and no death benefit is paid.
Show answer & explanation
Answer: A
A joint life (first-to-die) policy pays the death benefit upon the first death of any insured and then terminates. When Linda's husband dies, the $400,000 death benefit is paid to the beneficiary (typically Linda), and the policy ends. Option B is incorrect because the policy does not continue after the first death. Option C is incorrect as there is no automatic conversion to an individual policy. Option D is incorrect because the death benefit is paid, not refunded as premiums.
Question 10 (Chapter 3)
Which nonforfeiture option provides the longest period of coverage but no cash value upon surrender?
- A) Cash surrender value
- B) Reduced paid-up insurance
- C) Extended term insurance
- D) Automatic premium loan
Show answer & explanation
Answer: C
Extended term insurance uses the policy's cash value to purchase term insurance with a death benefit equal to the original policy's face amount, providing coverage for a specific period. It offers the longest duration of coverage among nonforfeiture options but has no cash value. Option A provides immediate cash but ends coverage. Option B provides reduced paid-up coverage with some cash value. Option D is not a standard nonforfeiture option; it is a premium payment method using cash value to avoid lapse.
Question 11 (Chapter 3)
Which of the following best describes how a policy loan affects a life insurance policy's cash value and death benefit?
- A) The cash value is reduced by the loan amount, and the death benefit is reduced by the same amount.
- B) The cash value remains unchanged, but the death benefit is reduced by the outstanding loan balance plus interest.
- C) The loan is taken against the cash value, which continues to earn interest; if the insured dies with an outstanding loan, the death benefit is reduced by the loan balance plus interest.
- D) Policy loans are not permitted; any withdrawal reduces the death benefit dollar-for-dollar.
Show answer & explanation
Answer: C
A policy loan is taken against the cash value, which continues to earn interest (though the loan may accrue interest). The cash value is not reduced by the loan amount; rather, the loan is a lien on the cash value. If the insured dies with an outstanding loan, the death benefit is decreased by the loan balance plus any accrued interest. Option A is incorrect because the cash value is not reduced; it remains intact as collateral. Option B is incorrect because the cash value is not unchanged in the sense that the loan is an obligation against it, but the key is that it continues to earn interest. Option D is incorrect because policy loans are a standard feature of cash value life insurance.
Question 12 (Chapter 3)
Maria purchases a 20-year level premium term life insurance policy with a $250,000 death benefit. After 15 years, she outlives the term and the policy expires. Which of the following statements is true regarding her policy?
- A) Maria will receive a refund of all premiums paid because she outlived the term.
- B) The death benefit decreases each year after the 10th year to match her declining financial responsibilities.
- C) Maria can convert the policy to a whole life policy without evidence of insurability at any time during the term.
- D) The policy has no cash value and no benefit is payable since she survived the term.
Show answer & explanation
Answer: D
Level premium term life insurance provides a death benefit only if the insured dies during the specified term. If the insured outlives the term, the policy expires with no cash value and no death benefit payable, unless it is a return-of-premium term policy (which Maria did not purchase). Option A is incorrect because standard level term does not refund premiums. Option B describes decreasing term, not level term. Option C is incorrect because conversion rights, if available, are typically limited to a specific period (e.g., first 10 years) and require evidence of insurability unless otherwise stated in the policy; the scenario does not mention a conversion privilege.
Practice Questions 13-17: Variable Death Benefits, Settlement Options and Universal Life
Joint life defined, the variable universal life death benefit in a falling market, the life income settlement option, reduced paid-up insurance and choosing a level death benefit.
Question 13 (Chapter 3)
Which of the following best describes the 'joint life (first-to-die)' life insurance policy?
- A) A policy that pays the death benefit only after all insureds have died.
- B) A policy that pays the death benefit upon the first death among the insureds, after which the policy terminates.
- C) A policy that covers only juvenile insureds.
- D) A policy that requires the insureds to be married to each other.
Show answer & explanation
Answer: B
A joint life (first-to-die) policy covers two or more individuals and pays the death benefit upon the first death. After the first death, the policy terminates and no further benefit is payable. It is commonly used to cover financial obligations like a mortgage that would be affected by the loss of one income. Option A describes a survivorship (second-to-die) policy. Option B correctly describes first-to-die. Option C is incorrect as joint life is not limited to juveniles. Option D is incorrect as the insureds do not need to be married (e.g., business partners can be covered).
Question 14 (Chapter 3)
An insured owns a variable universal life insurance policy. During a market downturn, the cash value decreases significantly. Which statement is true regarding the death benefit?
- A) The death benefit decreases proportionally with the cash value.
- B) The death benefit remains unchanged regardless of cash value fluctuations.
- C) The death benefit increases to offset the cash value loss.
- D) The insurer must add funds to restore the lost cash value.
Show answer & explanation
Answer: B
B is correct. Under the level death-benefit option a variable universal life policy pays the stated face amount, so a fall in the sub-accounts reduces the cash value but not the death benefit. A is wrong because the benefit is not proportional to the cash value, C is wrong because the benefit does not rise to offset losses, and D is wrong because the insurer bears no obligation to replace investment losses; that risk sits with the policyowner.
Question 15 (Chapter 3)
Which of the following statements accurately describes the 'life income' settlement option (straight life) for a life insurance death benefit?
- A) The beneficiary receives a fixed amount each month for a specified period, such as 10 or 20 years.
- B) The beneficiary receives payments for life, with payments ceasing upon the beneficiary's death, even if that occurs shortly after payments begin.
- C) The beneficiary receives interest only on the death benefit proceeds, with the principal paid to a contingent beneficiary upon the primary beneficiary's death.
- D) The death benefit is held by the insurer, and the beneficiary can withdraw funds at any time up to the full amount.
Show answer & explanation
Answer: B
The 'life income' (straight life) settlement option provides the beneficiary with a guaranteed income for life, with payments stopping upon the beneficiary's death. There is no guaranteed period; if the beneficiary dies soon after payments begin, payments cease. Option A describes a fixed period option. Option C describes the interest only option. Option D describes a flexible withdrawal or lump sum option, not a life income settlement.
Question 16 (Chapter 3)
Jennifer purchases a universal life insurance policy. She wants to adjust her death benefit downward due to changing financial needs. Which of the following is required to decrease the death benefit on her universal life policy?
- A) She can decrease the death benefit at any time without restriction or proof of insurability.
- B) Decreasing the death benefit is not allowed; she would need to surrender the policy and purchase a new one.
- C) She must increase her premium payments to offset the lower death benefit.
- D) She must submit a written request and may need to provide evidence of insurability.
Show answer & explanation
Answer: D
In a universal life policy, decreasing the death benefit typically requires the policyholder to submit a written request and may require evidence of insurability, especially if the decrease is significant. Increasing the death benefit usually requires evidence of insurability, but decreasing it may also require underwriting approval to prevent adverse selection. Option A is incorrect because unrestricted changes are not permitted. Option B is incorrect because death benefit adjustments are allowed. Option C is incorrect because premium payments are not directly tied to death benefit amount in this way; premiums can be adjusted independently within policy limits.
Question 17 (Chapter 3)
A Utah resident owns a universal life insurance policy and wants to ensure the death benefit remains level for the insured's lifetime, regardless of cash value performance. Which option should they select to achieve this goal?
- A) Select the increasing death benefit option.
- B) Select the level death benefit option.
- C) Pay premiums equal to the target premium each year.
- D) Add a cost-of-living rider to the policy.
Show answer & explanation
Answer: B
To maintain a level death benefit in a universal life policy, the policyowner must select the level death benefit option. This keeps the death benefit constant regardless of cash value fluctuations. Option A (increasing death benefit) would cause the benefit to rise, Option C (paying target premium) does not guarantee a level death benefit if cash value underperforms, and Option D (cost-of-living rider) increases the benefit over time to match inflation, which is not the goal here.
The Mistakes That Cost Marks
Mixing up the nonforfeiture options. Cash surrender ends coverage and pays out. Reduced paid-up buys a smaller paid-up policy. Extended term buys term insurance for the original face amount for a limited period. The automatic premium loan is a premium method, not a nonforfeiture option.
Thinking a loan is forgiven at death. An unpaid policy loan, with interest, comes off the death benefit. The beneficiary does not repay it and the benefit is not increased to cover it.
Waiver of premium against accelerated benefits. Waiver of premium follows total and continuous disability. Terminal illness is the accelerated benefit rider.
First-to-die against second-to-die. A first-to-die policy pays at the first death and then ends. A survivorship policy waits for the last.
Taxing the whole surrender. The cost basis comes back tax-free. Only the gain above the premiums paid is taxable.
Doing the decreasing term sum halfway. Work out the total decrease, then subtract it from the starting amount. Both the decrease and the remaining amount appear as wrong options.
Your Next Step
Missed more than a few? Go back to the audio for Chapter 3, then retest. When you are ready for the whole exam, the course preview lets you try LanePrep's Utah Life and Accident & Health course, and the free Utah practice question set samples every part of the outline. To see how this topic fits the exam, read the format and outline page.
Free: 25 Utah L&H practice questions
Liked this article? Get 25 exam-style questions emailed to you — with full answer explanations, no credit card. Closest thing to studying offline.
No spam. Just the questions and one optional follow-up.
Study this topic with LanePrep
Listen to these audio chapters on your commute — no screen required.
Related Articles
How to Pass the Utah Life & Health Exam on the First Try (2026)
8 min read
$157 All-In: Utah Life & Health License Cost 2026
8 min read
25 Free Utah Life, Accident & Health Exam Practice Questions (2026)
25 min read
17 Free Utah Life & Health Practice Questions: General Insurance and Life Basics (2026)
17 min read
17 Free Utah Life & Health Practice Questions: Annuities, Tax and Qualified Plans (2026)
18 min read