17 Free Virginia Life, Annuities & Health Practice Questions: Life Insurance Policies (2026)
How to Use This Set
Life Insurance Policies is section 4.0 of Prometric's Series 11-01 outline: 10% of the exam, 14 of the 140 scored items. It covers the policy types themselves: term variations, joint and survivorship life, indexed, adjustable and variable products, juvenile life and group life. The questions below turn on telling similar products apart.
Open the answer only after you commit. These 17 questions come from LanePrep's Virginia L&H quiz bank.
Practice Questions 1-6: Term Variations, Joint Life, Group Conversion and Index Crediting
Return of premium and decreasing term, first-to-die coverage, the group conversion right, indexed crediting with a floor and the features of juvenile policies.
Question 1 (Chapter 3)
A Virginia resident buys a return of premium term life insurance policy. If the insured outlives the 30-year term, what happens to the premiums paid?
- A) The premiums are forfeited with no return.
- B) The death benefit is paid to the beneficiary tax-free.
- C) The policy automatically converts to a whole life policy at no additional cost.
- D) All or part of the premiums paid are returned to the policyowner.
Show answer & explanation
Answer: D
D is correct because return of premium term life insurance is designed to refund all or a portion of the premiums paid if the insured survives the term. A is incorrect as it describes standard term life without this rider. C is incorrect because the death benefit is only paid upon the insured's death, not survival. B is incorrect because return of premium term does not include an automatic conversion feature; conversion rights, if any, must be specified in the policy and are not inherent to the return of premium feature.
Question 2 (Chapter 3)
In Virginia, a joint life (first-to-die) life insurance policy covers two individuals. When does the death benefit payable under this policy?
- A) After both insureds have died.
- B) Only if both insureds die simultaneously.
- C) Upon the death of the last surviving insured.
- D) Upon the death of the first insured to die.
Show answer & explanation
Answer: D
D is correct because a joint life (first-to-die) policy pays the death benefit upon the first death among the insured individuals. A and C are incorrect as they describe survivorship (second-to-die) life insurance, which pays upon the last death. B is incorrect because simultaneous death is not required; the benefit pays upon the first death, regardless of timing.
Question 3 (Chapter 3)
Under Virginia law (§ 38.2-3332–3334), what right does an employee have upon termination of employment if they were covered under a group life insurance policy?
- A) The right to convert the group coverage to an individual life insurance policy without evidence of insurability.
- B) The right to receive a cash refund of premiums paid.
- C) The right to continue the exact same group coverage indefinitely at the same premium.
- D) The right to name a new beneficiary without insurer approval.
Show answer & explanation
Answer: A
A is correct because Virginia statutes §§ 38.2-3332 through 3334 grant employees the right to convert their group life insurance coverage to an individual policy upon leaving the group, without needing to provide evidence of insurability (such as a medical exam). B is incorrect because group life insurance does not typically refund premiums upon termination. C is incorrect because conversion results in an individual policy, not continuation of the group plan, and premiums are based on individual rates, not group rates. D is incorrect because while beneficiaries can usually be changed, this right is not specific to termination and is not the primary conversion right granted by these statutes.
Question 4 (Chapter 3)
In Virginia, a 50-year-old buys a $100,000 decreasing term life insurance policy to cover a mortgage. The death benefit decreases by $5,000 each year. What is the death benefit at the beginning of year 7 of the policy?
- A) $65,000
- B) $70,000
- C) $55,000
- D) $60,000
Show answer & explanation
Answer: B
The death benefit starts at $100,000 and falls by $5,000 at each policy anniversary. At the beginning of year 7 the benefit has been reduced six times, once at the start of each of years 2 through 7: $100,000 - 6 x $5,000 = $70,000, so B is correct. A assumes seven reductions, D assumes eight, and C assumes nine.
Question 5 (Chapter 3)
A Virginia resident buys a $250,000 indexed life insurance policy. The policy's cash value growth is tied to the S&P 500 index with a 70% participation rate and a 0% floor. If the S&P 500 returns -5% in a given year, what is the credited interest to the cash value for that year?
- A) -3.5%
- B) 7%
- C) -5%
- D) 0%
Show answer & explanation
Answer: D
D is correct because with a 0% floor, the policy cannot credit negative interest even if the linked index performs poorly. The participation rate (70%) applies only to positive returns; a negative index return results in 0% credited interest due to the floor. A is incorrect because the floor prevents negative crediting. B is incorrect because 7% would be 70% of a 10% return, not applicable here. C is incorrect because the floor protects against negative returns.
Question 6 (Chapter 3)
In Virginia, which of the following is a characteristic of juvenile life insurance?
- A) It often includes a guaranteed purchase option allowing the child to increase coverage as an adult without evidence of insurability.
- B) It is primarily purchased to provide income replacement for the child's future earnings.
- C) The death benefit is typically very high, often exceeding $500,000.
- D) It is only available as a term life insurance policy.
Show answer & explanation
Answer: A
A is correct because juvenile life insurance policies frequently include a guaranteed purchase option (or similar rider) that allows the insured to purchase additional coverage at specified future ages or events without providing evidence of insurability. B is incorrect because juvenile life is not for income replacement; it's for final expenses and future insurability. C is incorrect because juvenile policies usually have modest face amounts (e.g., $10,000-$50,000), not excessively high benefits. D is incorrect because juvenile life is commonly offered as permanent insurance (e.g., whole life), not exclusively term.
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Practice Questions 7-12: Joint and Survivorship Life, Flexible Policies and Group Rules
Which death triggers payment, how an adjustable policy flexes, and the rules for dependents and employee participation in group life.
Question 7 (Chapter 3)
In Virginia, a 40-year-old purchases a joint life (first-to-die) policy insuring themselves and their business partner with a $500,000 death benefit. The business partner dies first. When is the death benefit paid?
- A) Upon the death of the second insured.
- B) Upon the death of whichever insured dies last.
- C) Only if both insureds die within the same calendar year.
- D) Upon the death of the first insured.
Show answer & explanation
Answer: D
Joint life (first-to-die) pays the death benefit upon the death of the first insured to die. In this scenario, the business partner dying first triggers the benefit payment. It does not wait for the second death (A, B) or require simultaneous death (C).
Question 8 (Chapter 3)
A Virginia resident purchases a survivorship life (second-to-die) policy insuring themselves and their spouse with a $600,000 death benefit. The insured dies first at age 60, and the spouse survives until age 80. When is the death benefit paid, and what is the amount?
- A) The death benefit of $600,000 is paid immediately upon the first death (at age 60) to the named beneficiary.
- B) The death benefit of $300,000 is paid upon the first death, and the remaining $300,000 is paid upon the second death.
- C) No death benefit is paid because survivorship life policies only pay if both insureds die within a specified period, such as 10 years of each other.
- D) The death benefit of $600,000 is paid upon the second death (at age 80) to the named beneficiary.
Show answer & explanation
Answer: D
Survivorship life (second-to-die) insurance pays the death benefit only upon the death of the second insured. The first death triggers no payout; the benefit is paid when the surviving spouse dies. The amount remains the full face amount ($600,000) unless otherwise specified by the policy. Option A incorrectly describes first-to-die payment. Option B incorrectly splits the benefit. Option C invents a non-standard requirement for simultaneous or near-simultaneous death, which is not a feature of standard survivorship life policies.
Question 9 (Chapter 3)
A Virginia resident purchases a 20-year level premium term life insurance policy. After 15 years, the insured wants to stop paying premiums but retain some death benefit. Which option is available under standard policy provisions and Virginia law?
- A) The insured can exercise a nonforfeiture option to receive a reduced paid-up policy, providing a smaller death benefit that requires no further premiums.
- B) The insured can stop paying premiums and retain the full $250,000 death benefit, as level premium term policies accumulate cash value that can fund the policy.
- C) The insured can convert the policy to a single premium whole life policy by paying a lump sum equal to the current cash value.
- D) The insured can stop paying premiums and the policy will automatically continue with the same death benefit for the remaining term due to the level premium design.
Show answer & explanation
Answer: A
Level premium term life insurance policies do not accumulate cash value (unlike permanent policies). Therefore, stopping premium payments typically results in the policy lapsing. However, many term policies include nonforfeiture options, such as a reduced paid-up option, where the policyholder can stop paying premiums and receive a smaller, fully paid-up death benefit that requires no further payments. This is a standard provision in many term policies, though not universal, and is permitted under Virginia law as part of policy design. Option B is incorrect because term policies do not accumulate cash value. Option C is incorrect; conversion to single premium whole life is not a standard nonforfeiture option for term policies. Option D is incorrect; stopping premiums causes the policy to lapse, not continue. The reduced paid-up nonforfeiture option (A) is the correct available choice for retaining some death benefit without further premiums.
Question 10 (Chapter 3)
A Virginia policyowner initially purchased a life insurance policy with a specific death benefit and premium schedule. Over time, their financial situation changed, and they now wish to increase the death benefit and adjust their premium payments without purchasing a new policy. Which type of flexible premium policy would allow them to make these changes?
- A) Universal life
- B) Indexed life
- C) Ordinary whole life
- D) Adjustable life
Show answer & explanation
Answer: D
Adjustable life insurance is specifically designed to offer flexibility, allowing the policyowner to change the death benefit, premium payments, and even the period of coverage to adapt to changing needs. While universal life (A) offers premium flexibility, adjustable life provides broader flexibility in both premium and death benefit adjustments. Indexed life (B) is a type of interest-sensitive policy, and ordinary whole life (C) has fixed premiums and death benefits.
Question 11 (Chapter 3)
A Virginia employer offers a group life insurance policy to its employees. Under Virginia Code § 38.2-3323, which of the following statements is true regarding the extension of this policy to cover dependents?
- A) Dependents can only be covered if the employee pays 100% of the additional premium.
- B) A policy on dependents may include a dependent who is already insured under another group life policy issued to the same policyholder.
- C) Premiums for dependent coverage may be paid by the policyholder, the employee, or both.
- D) Only spouses and minor children are eligible for dependent coverage, regardless of financial dependency.
Show answer & explanation
Answer: C
Virginia Code § 38.2-3323 states that 'The premiums for the insurance shall be paid by the policyholder from funds contributed by the employee or member, or from funds contributed by the policyholder, or from both.' Option A is too restrictive. Option B is incorrect as the code states 'A policy on dependents shall not include any dependent who is insured under another group life insurance policy issued to the policyholder.' Option D is too specific and not fully supported by the general language of the statute regarding 'dependents'.
Question 12 (Chapter 3)
A Virginia company is setting up a contributory group life insurance plan for its employees. What is a typical requirement for employee participation in such a plan?
- A) 100% of eligible employees must participate.
- B) Participation is mandatory for all employees, regardless of contribution.
- C) At least 75% of eligible employees must participate.
- D) Only employees who pass a medical exam are eligible to participate.
Show answer & explanation
Answer: C
For contributory group life insurance plans, where employees contribute to the premium, a common requirement to prevent adverse selection is that at least 75% of eligible employees must participate. This ensures a sufficient spread of risk. Option A describes noncontributory plans, and options B and D are generally incorrect for standard group plans.
Practice Questions 13-17: Adjustable Life, Conversion Premiums, Assignment and Variable Life
Adjustable life in scenario form, how a converted group policy is priced, the collateral assignment and who controls the investments in variable universal life.
Question 13 (Chapter 3)
A Virginia resident initially purchased a life insurance policy with a $200,000 death benefit and a premium of $100 per month. Five years later, their financial situation changed significantly; they now need a higher death benefit of $300,000 and can only afford a premium of $80 per month. Which type of flexible premium policy would allow them to make these adjustments without purchasing a new policy?
- A) Universal Life
- B) Ordinary Whole Life
- C) Adjustable Life
- D) Decreasing Term Life
Show answer & explanation
Answer: C
Adjustable Life insurance is unique in its flexibility, allowing the policyowner to adjust the death benefit, premium, and even the period of protection to meet changing needs. Universal Life (Option A) also offers premium flexibility and adjustable death benefits, but Adjustable Life is specifically designed for this broad range of changes, including converting between term and whole life characteristics. Ordinary Whole Life (Option B) and Decreasing Term Life (Option D) are much less flexible in terms of adjusting both death benefit and premiums.
Question 14 (Chapter 3)
A Virginia employee covered under a group life insurance policy terminates their employment. They decide to exercise their right to convert their group coverage to an individual life insurance policy. Which statement accurately describes how the premium for the new individual policy will be determined?
- A) The premium will be the same as the group rate, adjusted for the individual's health.
- B) The premium will be based on the individual's attained age and the insurer's standard rates for the converted policy type, without evidence of insurability.
- C) The premium will be lower than the group rate due to the absence of administrative costs.
- D) The premium will be based on the individual's age at the time they originally joined the group.
Show answer & explanation
Answer: B
When converting group life insurance to an individual policy, the new premium is typically based on the individual's attained age (their age at the time of conversion) and the insurer's standard rates for the type of individual policy chosen. A key advantage of conversion is that it can be done without evidence of insurability, meaning health status does not affect eligibility, though it does not mean the premium will be the same as the group rate or lower. Group rates are generally lower than individual rates due to the pooling of risk and lower administrative costs.
Question 15 (Chapter 3)
A Virginia resident needs a loan and decides to use their existing whole life insurance policy as collateral. They enter into an agreement with the lender where the lender has a claim to a portion of the policy's death benefit, but only up to the amount of the outstanding loan. What type of policy assignment is this?
- A) Absolute Assignment
- B) Gratuitous Assignment
- C) Collateral Assignment
- D) Beneficiary Assignment
Show answer & explanation
Answer: C
A Collateral Assignment is a temporary and partial transfer of the ownership rights of a life insurance policy to another party (the assignee) as security for a debt. The assignee (lender) has rights to the policy's death benefit only up to the amount of the outstanding loan. Once the loan is repaid, the assignment is terminated. An Absolute Assignment (Option A) is a permanent and complete transfer of all policy rights. Gratuitous Assignment (Option B) is not a standard insurance term. Beneficiary Assignment (Option D) refers to changing the beneficiary, not assigning ownership rights.
Question 16 (Chapter 3)
A Virginia policyowner initially purchased an adjustable life insurance policy with a $150,000 death benefit and a premium of $75 per month. Five years later, their financial situation improved, and they now wish to increase the death benefit to $250,000 and adjust their premium payments to $100 per month. Which characteristic of adjustable life insurance allows them to make these changes?
- A) It is a variable product, allowing investment in sub-accounts.
- B) It combines features of term and whole life insurance, offering flexible adjustments to coverage and premiums.
- C) It has a guaranteed renewability clause that permits changes without evidence of insurability.
- D) It automatically adjusts the death benefit based on inflation.
Show answer & explanation
Answer: B
Adjustable life insurance is unique in its flexibility, allowing the policyowner to increase or decrease the death benefit and change premium payments to suit their changing needs. This flexibility stems from its ability to combine features of both term and whole life insurance within a single policy. Increasing the death benefit typically requires evidence of insurability, unless a specific rider (like a guaranteed insurability rider) is in place. It is not a variable product (A) nor does it automatically adjust for inflation (D).
Question 17 (Chapter 3)
A Virginia resident purchases a variable universal life insurance policy. Which statement accurately describes the policyowner's control over the investment component of this policy?
- A) The policyowner has no control; the insurer manages all investments in the general account.
- B) The policyowner directs the investment of the cash value into a variety of separate account sub-accounts.
- C) The policyowner can only choose between a fixed interest account and a money market account.
- D) The policyowner can only invest in the insurer's proprietary mutual funds, with no other options.
Show answer & explanation
Answer: B
Variable universal life (VUL) insurance offers policyowners significant control over the investment component. The cash value is invested in a separate account, which consists of various sub-accounts (similar to mutual funds) chosen by the policyowner. This allows for potential higher returns but also means the policyowner bears the investment risk. Option A describes traditional whole life, and C and D are too restrictive for VUL policies.
The Mistakes That Cost Marks
Reversing first-to-die and second-to-die. A joint life (first-to-die) policy pays on the first death. Survivorship (second-to-die) pays only on the last death, and the full face amount is paid then.
Miscounting a decreasing benefit. Count the number of reductions that have actually happened at the point the question asks about, not the number of years.
Applying the participation rate to a negative return. An indexed policy with a 0% floor does not credit negative interest, whatever the index did.
Thinking group conversion requires health evidence. A departing employee can convert without evidence of insurability, but the individual policy is priced on attained age at the insurer's rates, not at the old group rate.
Confusing the assignments. A collateral assignment is a temporary, partial transfer that secures a debt up to the loan amount. An absolute assignment transfers all ownership rights.
Giving the variable policyowner too little control. In variable universal life the owner directs the cash value among separate account sub-accounts and bears the investment risk.
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