17 Free Nevada Life & Health Practice Questions: Life Insurance Policy Types and Annuities (2026)
How to Use This Policy Types Set
Policy types are the first topic of the Life-General section of the Nevada Life and Health exam: 15 of its 50 scored items, and 15 of the 144 scored items on the whole exam. The outline lists whole life, universal, variable and indexed life, term life, annuities and combination plans.
These 17 questions come from LanePrep's Nevada Life & Health quiz bank (chapter 2). They follow how the exam works the topic: naming a policy from the client's situation, the term, loan and conversion features that go with it, and annuity payouts, disclosure and surrender charges.
Name the need before you name the product. Most questions describe what the client wants: premiums that stop at a set age, flexible premiums with market exposure, income that starts now, a benefit that pays when the second spouse dies. The need points to one product.
Practice Questions 1-6: Matching the Policy to the Client
A client who wants to be paid up early, one who wants flexible premiums with market exposure, a retiree who needs income now and a couple planning for estate taxes each point to a different contract. Question 5 adds the licensing consequence of selling a variable annuity in Nevada.
Question 1 (Chapter 2)
John wants to purchase a permanent life insurance policy but prefers to pay all premiums within a specific, shorter period, such as 20 years, rather than for his entire life. After this period, he wants the policy to remain in force without further payments. Which type of whole life policy should he consider?
- A) Universal Life
- B) Variable Whole Life
- C) Ordinary Whole Life
- D) Limited-Pay Whole Life
Show answer & explanation
Answer: D
Limited-Pay Whole Life allows the insured to pay premiums for a specified period (e.g., 20 years or until age 65), after which the policy is considered 'paid up' and remains in force for life without further premiums. Ordinary Whole Life requires premiums for the entire life. Universal Life and Variable Whole Life offer different flexibilities or investment options but don't specifically target a fixed, shorter premium payment period for a fully paid-up policy in the same way.
Question 2 (Chapter 2)
A client wants a life insurance policy that combines the premium and death benefit flexibility of Universal Life with the potential for higher returns from investing in a separate account, similar to Variable Life. They are comfortable with market risk. What policy type would best suit this client?
- A) Ordinary Whole Life
- B) Interest-Sensitive Whole Life
- C) Indexed Life
- D) Variable Universal Life (VUL)
Show answer & explanation
Answer: D
Variable Universal Life (VUL) combines the flexible premiums and adjustable death benefits of Universal Life with the investment flexibility and market risk of Variable Life, allowing policyholders to allocate cash value to a separate account. Ordinary Whole Life has fixed premiums and guaranteed cash value. Interest-Sensitive Whole Life and Indexed Life offer different forms of interest-based or index-linked growth without direct separate account investment.
Question 3 (Chapter 2)
Lisa purchased a term life insurance policy with a unique feature: if she outlives the policy term, she will receive all the premiums she paid back. What type of term life insurance policy does Lisa have?
- A) Return-of-Premium Term
- B) Convertible Term
- C) Renewable Term
- D) Level Term
Show answer & explanation
Answer: A
Return-of-Premium Term life insurance is a type of term policy that, if the insured outlives the policy term, refunds all or a portion of the premiums paid. This feature typically comes with higher premiums than traditional term policies. Convertible and Renewable Term refer to options to change or extend coverage, not a premium refund.
Question 4 (Chapter 2)
Nancy is 65 years old and recently retired. She has a lump sum from her retirement savings and wants to ensure a guaranteed income stream for the rest of her life, starting immediately. Which type of annuity would be most suitable for her situation?
- A) Single Premium Immediate Annuity (SPIA)
- B) Flexible Premium Deferred Annuity
- C) Variable Deferred Annuity
- D) Indexed Deferred Annuity
Show answer & explanation
Answer: A
A Single Premium Immediate Annuity (SPIA) is purchased with a single lump sum and begins paying out income immediately, or within one year of purchase. This is ideal for someone like Nancy who has a lump sum and wants an immediate income stream. Deferred annuities delay payouts, and flexible premium annuities involve multiple payments.
Question 5 (Chapter 2)
A Nevada client is comfortable with investment risk and wants an annuity where their payout amounts can fluctuate based on the performance of underlying investment options, such as mutual funds. They understand this means their principal is not guaranteed. Which type of annuity is this, and what additional licensing is typically required for a Nevada producer to sell it?
- A) Fixed Annuity; only a Life line of authority is needed.
- B) Indexed Annuity; only a Life line of authority is needed.
- C) Immediate Annuity; no additional licensing beyond a general insurance license.
- D) Variable Annuity; a separate variable-products line of authority and FINRA registration are required.
Show answer & explanation
Answer: D
A Variable Annuity allows the annuitant to choose investment options within a separate account, and payouts fluctuate based on their performance, meaning the annuitant bears the investment risk. In Nevada, selling variable annuities requires a separate variable-products line of authority in addition to a Life license, and also requires FINRA registration because they are considered securities. Fixed and Indexed annuities generally fall under the Life line of authority without FINRA registration. Immediate Annuity describes payout timing, not the investment type.
Question 6 (Chapter 2)
Mr. and Mrs. Smith are wealthy and primarily concerned with providing funds to pay estate taxes and preserve their assets for their children after both of them have passed away. They want a single life insurance policy that will pay out only upon the death of the second spouse. What type of policy should they consider?
- A) Joint Life (First-to-Die)
- B) Individual Universal Life policies
- C) Decreasing Term Life
- D) Survivorship Life (Second-to-Die)
Show answer & explanation
Answer: D
Survivorship Life (Second-to-Die) insurance covers two lives and pays out the death benefit only upon the death of the second insured. This makes it particularly suitable for estate planning purposes, such as paying estate taxes, as the need for funds often arises after both spouses have passed. Joint Life (First-to-Die) pays upon the first death. Individual policies would be more costly for this specific need. Decreasing Term Life is temporary and not typically used for estate tax planning.
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Practice Questions 7-12: Separate Accounts, Term Features, Payouts, Caps and Loans
These questions work through variable life's separate account, renewable and convertible term, the annuity payout that pays most, indexed-annuity caps and policy loans. Two of them hinge on one phrase: attained age.
Question 7 (Chapter 2)
A Nevada client is interested in a Variable Life insurance policy. They understand the investment risks involved and that the cash value and death benefit can fluctuate. What is a defining characteristic of the separate account where the policy's cash value is invested?
- A) It is part of the insurer's general account and offers guaranteed returns.
- B) It is regulated by state insurance departments only and invests solely in bonds.
- C) It provides a fixed interest rate, regardless of market performance.
- D) It is kept separate from the insurer's general assets and is subject to investment risk.
Show answer & explanation
Answer: D
The cash value of a Variable Life policy is invested in a separate account, which is kept separate from the insurer's general assets. This separate account is subject to investment risk, meaning its value can go up or down based on the performance of the underlying investments. It is regulated by both state insurance departments and the SEC/FINRA, and returns are not guaranteed.
Question 8 (Chapter 2)
Michael has a 10-year level term life insurance policy with a 'renewable' feature. As the end of the term approaches, he wants to continue his coverage. What is a key implication of exercising the renewable feature on his policy?
- A) His new premium will be based on his attained age at the time of renewal.
- B) He will need to provide evidence of insurability and undergo a new medical exam.
- C) The death benefit will automatically decrease for the new term.
- D) The policy will convert to a whole life policy with no change in premium.
Show answer & explanation
Answer: A
A renewable term policy allows the insured to continue coverage for another term without proving insurability. However, the premium for the new term will be based on the insured's attained age at the time of renewal, meaning it will be higher than the previous term's premium due to increased mortality risk.
Question 9 (Chapter 2)
A single, retired client wants to maximize their monthly income from an annuity and is not concerned about leaving any remaining funds to beneficiaries after their death. Which annuity payout option would provide the highest possible periodic payment?
- A) Life with 10-Year Period Certain
- B) Joint and Survivor Annuity
- C) Straight Life Annuity
- D) Installment Refund Annuity
Show answer & explanation
Answer: C
A Straight Life Annuity provides the highest possible payout because payments are guaranteed only for the lifetime of the annuitant. There is no provision for beneficiaries, and payments cease upon the annuitant's death, regardless of how much has been paid out. Options A, B, and D all include provisions for beneficiaries or minimum payout periods, which reduce the periodic payment amount.
Question 10 (Chapter 2)
A client is considering an Indexed Annuity and is reviewing the contract terms. They notice a 'cap rate' of 8% and a 'floor' of 0%. What does the cap rate signify in the context of an indexed annuity?
- A) The minimum interest rate the annuity will earn, even if the index performs poorly.
- B) The maximum amount of premium the client can contribute to the annuity annually.
- C) The guaranteed death benefit percentage if the annuitant dies during the accumulation phase.
- D) The maximum percentage of index gain that will be credited to the annuity's cash value.
Show answer & explanation
Answer: D
The cap rate (or interest rate cap) in an Indexed Annuity is the maximum percentage of interest the annuity can earn in a given period, regardless of how well the underlying index performs. Even if the index gains 15%, with an 8% cap, the annuity will only be credited with 8% interest. The floor (often 0%) protects against losses, but the cap limits upside potential.
Question 11 (Chapter 2)
Maria has an Ordinary Whole Life policy with a substantial cash value. She needs immediate funds for an emergency but does not want to surrender her policy. She decides to take a policy loan. What is the immediate impact of this loan on her policy?
- A) The death benefit will be immediately reduced by the loan amount, and interest will be charged.
- B) The cash value will be reduced by the loan amount, and the policy will lapse if the loan is not repaid within 60 days.
- C) The death benefit will be reduced by the outstanding loan amount if she dies before repayment, and interest will accrue.
- D) The policy's cash value growth will cease until the loan is fully repaid.
Show answer & explanation
Answer: C
When a policy loan is taken, the outstanding loan amount, plus any accrued interest, will be subtracted from the death benefit if the insured dies before the loan is repaid. The cash value continues to grow, and the policy does not lapse solely due to a loan unless the outstanding loan and interest exceed the cash value. Interest is charged on the loan, but the death benefit itself is not immediately reduced, only the payout at claim time.
Question 12 (Chapter 2)
Michael has a 15-year level term life insurance policy with a 'convertible' feature. Five years into the policy, his health has declined, and he wants to secure permanent coverage without having to prove his insurability. If he converts his term policy to a whole life policy, what will be the likely impact on his premiums?
- A) His new whole life premiums will be lower than his current term premiums.
- B) His new whole life premiums will be based on his original age at the time he purchased the term policy.
- C) His new whole life premiums will be significantly higher than his current term premiums, based on his attained age at conversion.
- D) His premiums will remain the same, but the death benefit will be reduced.
Show answer & explanation
Answer: C
When a term policy is converted to a whole life policy, the new premiums for the permanent coverage are typically based on the insured's attained age (current age) at the time of conversion, making them significantly higher than the original term premiums. While insurability is guaranteed, the cost reflects the increased age and the permanent nature of the new policy.
Practice Questions 13-17: Refund Options, Endowments, Prospectuses and Surrender Charges
The last five questions cover refund options on annuity payouts, second-to-die cover seen from a different angle, an endowment, the disclosure document for variable life and the penalty for leaving a deferred annuity early.
Question 13 (Chapter 2)
A client is looking for an annuity payout option that will provide a guaranteed income for their entire life. However, they are also concerned that if they die shortly after payments begin, a significant portion of their initial investment might be forfeited. They want to ensure that if they die before receiving payments equal to their purchase price, their beneficiary will receive the remainder as a lump sum. Which payout option should they choose?
- A) Life Only
- B) Life with Period Certain
- C) Cash Refund
- D) Installment Refund
Show answer & explanation
Answer: C
A Cash Refund annuity payout option guarantees that if the annuitant dies before receiving payments equal to the purchase price, the balance of the purchase price will be paid to the beneficiary in a lump sum. Life Only provides the highest payout but no refund. Life with Period Certain guarantees payments for a minimum period. Installment Refund pays the balance in installments, not a lump sum.
Question 14 (Chapter 2)
Mr. and Mrs. Chen are a wealthy couple primarily concerned with minimizing estate taxes for their heirs. They want a life insurance policy that will provide a substantial death benefit to cover these taxes, but only after both of them have passed away. Which type of combination plan would be most appropriate for their estate planning needs?
- A) Joint Life (First-to-Die)
- B) Individual Whole Life policies for each spouse
- C) Survivorship Life (Second-to-Die)
- D) Two separate Term Life policies
Show answer & explanation
Answer: C
Survivorship Life (Second-to-Die) policies are specifically designed to pay out the death benefit only upon the death of the second insured. This makes them ideal for estate planning, as estate taxes are typically due after the second spouse's death. Joint Life (First-to-Die) would pay out too early for this specific need, and individual policies or term policies might be more expensive or not align with the 'second-to-die' payout trigger.
Question 15 (Chapter 2)
A client is looking for a policy that provides a death benefit if they die within a specified period, but if they are still alive at the end of that period, the policy will pay out the face amount to them. This policy is designed to mature and pay out at an earlier age than traditional whole life. What type of policy is the client interested in?
- A) Whole Life
- B) Term Life
- C) Endowment Policy
- D) Universal Life
Show answer & explanation
Answer: C
An Endowment Policy is characterized by paying out the face amount to the insured if they are still alive at the end of a specified period (e.g., age 65), or to the beneficiary if the insured dies within that period. This makes it mature and pay out earlier than a traditional Whole Life policy, which typically matures at age 100. Term Life only pays a death benefit if the insured dies within the term and has no living benefit payout. Universal Life is a permanent policy that builds cash value but does not typically 'mature' and pay out the face amount to the insured at an earlier, specified age.
Question 16 (Chapter 2)
Ms. Rodriguez is interested in purchasing a Variable Life insurance policy. As an insurance producer, you explain that due to the investment component of this product, she will receive a specific document outlining the investment objectives, risks, and charges before she can purchase the policy. What is this document called?
- A) Policy Illustration
- B) Buyer's Guide
- C) Prospectus
- D) Policy Summary
Show answer & explanation
Answer: C
Variable Life insurance policies are considered securities because their cash value is invested in a separate account subject to market fluctuations. As such, they are regulated by the SEC in addition to state insurance departments. Before purchasing, a client must receive a prospectus, which details the investment objectives, risks, and charges associated with the policy. A Buyer's Guide and Policy Summary are general insurance disclosure documents, and a Policy Illustration projects future values but is not the primary disclosure for securities.
Question 17 (Chapter 2)
Ms. Chen purchased a deferred annuity five years ago and has been making regular contributions. Due to an unexpected financial emergency, she needs to access a significant portion of her accumulated funds. She is aware that if she withdraws too much too soon, she might incur a penalty. What is this penalty typically called?
- A) Early withdrawal penalty (IRS)
- B) Surrender charge
- C) Administrative fee
- D) Market Value Adjustment (MVA)
Show answer & explanation
Answer: B
Most deferred annuities impose a surrender charge if the contract owner withdraws funds exceeding a certain percentage (e.g., 10%) of the cash value or premiums paid, or if they surrender the contract entirely, within a specified period (the surrender charge period). The IRS early withdrawal penalty (A) is a separate tax penalty for withdrawals before age 59½. An administrative fee (C) is a regular charge, and a Market Value Adjustment (D) applies to certain fixed annuities upon surrender, but the primary penalty for early withdrawal is the surrender charge.
The Mistakes That Cost Marks
Mixing up renewable and convertible term. Renewable term continues the same coverage without proof of insurability, at a premium based on your attained age at renewal. Convertible term lets you switch to permanent coverage without proof of insurability, and the new premium is typically based on your attained age at conversion. In both cases the premium rises (questions 8 and 12).
Choosing the wrong payout option. Straight life pays the most because it guarantees nothing to anyone after the annuitant dies. Refund options give up some income for a guarantee: a cash refund pays the unpaid balance as a lump sum, while an installment refund pays it in installments (questions 9 and 13).
Forgetting that variable means securities. A variable product invests in a separate account kept apart from the insurer's general assets, the owner carries the investment risk, and a prospectus has to be delivered. In Nevada the producer needs the separate variable line of authority and FINRA registration on top of an active Life line (NRS 683A.261(1)(e); questions 5, 7 and 16).
Reading a cap as a floor. In an indexed annuity the cap is the most that can be credited in a period, and the floor is what protects against loss (question 10).
Thinking a policy loan cuts the death benefit on day one. The outstanding loan and interest are subtracted from the death benefit if the insured dies before repayment (question 11).
Confusing first-to-die with second-to-die. Joint life pays at the first death. Survivorship life pays at the second, which is why it fits estate-tax planning (questions 6 and 14).
Calling every deferred-annuity penalty the same thing. The surrender charge comes from the contract, the IRS early-withdrawal penalty is a tax rule for withdrawals before age 59 and a half, and a market value adjustment changes the surrender value as interest rates move (question 17).
Your Next Step
Mark the ones you missed, then move on to life provisions, riders and exclusions, the next block of the Life-General section. For the rest of the course, start from the free Nevada Life & Health practice questions page. LanePrep teaches each chapter as audio, and you can open the free course preview to try it.
Item counts and weights come from Pearson VUE's Nevada Insurance Content Outlines. Read October 2026.
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