17 Free South Carolina Life & Health Practice Questions: Life Policy Riders, Provisions and Options (2026)
How to Use This Set
This set covers the Life: Policy Riders, Provisions, Options, and Exclusions section of the South Carolina Life, Accident and Health exam. On the outline it carries 15 items, 11.5% of the 130 scored questions, so it is one of the two largest life sections.
The questions are about what a clause or option does and which clause a scenario triggers: riders that waive premiums or add coverage, exclusions, beneficiary designations, settlement and dividend options, nonforfeiture choices, and the contract provisions that apply after issue. Each of the 17 questions has an answer and an explanation you can open once you have committed to a choice. Try them in order, then reread only the ones you missed.
Practice Questions 1-6: Riders, Exclusions and Beneficiaries
Riders and exclusions are matched to a scenario: what the rider pays, what it waives, and whether a particular death is excluded. The beneficiary and surrender questions test who holds control of the policy.
Question 1 (Chapter 2)
A grandfather buys a $50,000 whole life policy on his 5-year-old grandson and adds a Payor Benefit rider. If the grandfather becomes disabled when the grandson is 10, what happens?
- A) The policy terminates immediately due to nonpayment of premiums.
- B) The grandson must prove insurability to keep the policy in force.
- C) The death benefit is paid out immediately upon the grandfather's disability.
- D) Premiums are waived until the grandson reaches age 21 or 25, as specified in the rider.
Show answer & explanation
Answer: D
D is correct because the Payor Benefit rider waives premiums if the payor (grandfather) dies or becomes disabled before the insured child reaches a specified age (usually 21 or 25). A is incorrect—the policy does not terminate; premiums are waived. B is incorrect—no insurability proof is needed. C is incorrect—the death benefit is not paid; only premiums are waived.
Question 2 (Chapter 2)
Which of the following is a standard exclusion found in life insurance policies?
- A) Death due to war
- B) Death resulting from cancer
- C) Death occurring while committing a felony
- D) Death after age 80
Show answer & explanation
Answer: A
A is correct because war is a standard exclusion in life insurance policies. B is incorrect—death from cancer is covered unless specifically excluded (not standard). C is incorrect—felony exclusion is not standard in life insurance (more common in AD&D). D is incorrect—there is no age-based death exclusion in standard life policies.
Question 3 (Chapter 2)
Under a life insurance policy, what is the effect of naming a beneficiary as 'irrevocable'?
- A) The policyowner cannot change the beneficiary without the irrevocable beneficiary's written consent.
- B) The beneficiary can be changed at any time by the policyowner without consent.
- C) The death benefit is paid only if the insured dies in an accident.
- D) The beneficiary must be a blood relative of the insured.
Show answer & explanation
Answer: A
A is correct because an irrevocable beneficiary designation requires the beneficiary's consent to change. B is incorrect—that describes revocable. C is incorrect—irrevocable has nothing to do with accidental death. D is incorrect—there is no requirement that the beneficiary be a relative.
Question 4 (Chapter 2)
A policyowner adds a Guaranteed Insurability rider to their whole life policy. At age 30, they exercise the rider to purchase $25,000 of additional coverage. Which statement is correct regarding the premium for this additional coverage?
- A) The premium is based on the insured's original age when the base policy was issued.
- B) No premium is required; the additional coverage is provided free of charge.
- C) The premium is the same as the base policy's premium per $1,000 of coverage.
- D) The premium is based on the insured's attained age at the time the additional coverage is purchased.
Show answer & explanation
Answer: D
The Guaranteed Insurability rider allows the policyowner to purchase additional coverage at specified times without evidence of insurability, but the premium for the additional coverage is based on the insured's attained age at the time of purchase, not the original issue age. Option A is incorrect because it describes the original age basis, which does not apply. Option B is incorrect because the rider does not provide free coverage; premiums must be paid. Option C is incorrect because the premium rate may differ from the base policy and is age-based.
Question 5 (Chapter 2)
A policyowner takes a partial surrender from the cash value of their whole life policy. Which statement is true regarding this transaction?
- A) The policy remains in force with a reduced death benefit and cash value.
- B) The policy is terminated and the insurer pays the full cash value.
- C) The policyowner must repay the amount within 30 days to avoid lapse.
- D) The transaction is considered a policy loan and accrues interest.
Show answer & explanation
Answer: A
A partial surrender reduces the cash value and, correspondingly, the death benefit (in most whole life policies), but the policy remains in force. Option B describes a full surrender, not partial. Option C is incorrect because a surrender is not a loan and does not require repayment. Option D is incorrect because a surrender is a withdrawal of cash value, not a loan; loans accrue interest, but surrenders do not.
Question 6 (Chapter 2)
Which of the following is NOT a standard settlement option for life insurance death benefits?
- A) Lump sum.
- B) Interest only.
- C) Extended term insurance.
- D) Fixed period.
Show answer & explanation
Answer: C
Standard settlement options for life insurance death benefits include lump sum, interest only, fixed period, fixed amount, and life annuity. Extended term insurance is a nonforfeiture option, not a settlement option for death benefits. Option A, B, and D are all valid settlement options.
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Practice Questions 7-12: Settlement Options, Assignment and Dividends
How the death benefit is paid out, what happens when a policy is pledged as collateral, and what a dividend option does with the money.
Question 7 (Chapter 2)
A policyowner selects the 'life income' settlement option for a life insurance death benefit. What does this mean?
- A) The beneficiary receives the entire death benefit as a single lump sum payment.
- B) The beneficiary receives interest only for a specified period, then the lump sum.
- C) The death benefit is used to purchase a paid-up addition to the policy.
- D) The beneficiary receives guaranteed periodic payments for the rest of their life.
Show answer & explanation
Answer: D
The life income settlement option (also called life annuity option) provides the beneficiary with guaranteed periodic payments for the remainder of their life. Option A describes the lump sum option. Option B describes the interest only option followed by lump sum, which is not standard; interest only is a standalone option. Option C describes using the benefit to buy paid-up additions, which is a dividend option or settlement option variant, not the life income option.
Question 8 (Chapter 2)
Under a life insurance policy, if the insured dies by suicide 24 months after the policy date, and the state has a one-year suicide provision, what is the insurer's obligation?
- A) Refund of premiums only
- B) Payment of the death benefit minus surrender charges
- C) Payment of the full death benefit
- D) Denial of the claim
Show answer & explanation
Answer: C
C is correct because if suicide occurs after the suicide clause period (typically one or two years, here specified as one year), the full death benefit is payable. A is incorrect as it applies only within the suicide period. B is incorrect as suicide after the period does not trigger surrender charges. D is incorrect as the claim is not denied after the period expires.
Question 9 (Chapter 2)
Under a life insurance policy, if the policyowner assigns the policy as collateral for a bank loan, what happens to the death benefit proceeds?
- A) The beneficiary receives the full death benefit; the bank has no claim.
- B) The death benefit is paid to the policyowner's estate.
- C) The assignment automatically names the bank as the beneficiary.
- D) The bank is entitled to the death benefit proceeds up to the amount of the outstanding loan balance.
Show answer & explanation
Answer: D
D is correct because an assignment as collateral gives the lender (bank) a right to the death benefit proceeds to satisfy the loan balance; any excess goes to the beneficiary. A is incorrect as the bank has a claim. B is incorrect as proceeds follow the assignment, not necessarily the estate. C is incorrect as assignment does not change the beneficiary designation; it creates a lien on proceeds.
Question 10 (Chapter 2)
A policyowner selects the 'life income with period certain' settlement option for a life insurance death benefit. What does this mean?
- A) The beneficiary receives a lump sum after a specified period.
- B) The beneficiary receives interest only for a specified period, then the lump sum.
- C) The death benefit is held and earns interest until the beneficiary reaches a specified age.
- D) The beneficiary receives installments for life, with payments guaranteed for a minimum period (e.g., 10 years) even if the beneficiary dies early.
Show answer & explanation
Answer: D
D is correct because life income with period certain guarantees payments for the beneficiary's life, but if they die before the period certain ends, payments continue to a contingent beneficiary for the remainder of the period. A is incorrect as it describes a fixed period option. B is incorrect as it describes interest then lump sum. C is incorrect as it describes a delayed lump sum or interest accumulation.
Question 11 (Chapter 2)
According to the 'Consideration Clause' in a life insurance policy, what does the policyowner's consideration typically consist of?
- A) The insurer's promise to pay the death benefit.
- B) The payment of premiums and the truthful statements made in the application.
- C) The policy's cash value accumulation.
- D) The policyowner's agreement to not commit suicide.
Show answer & explanation
Answer: B
In a life insurance contract, the policyowner's consideration is typically the payment of premiums and the truthful statements made in the application. The insurer's consideration (A) is its promise to pay the death benefit. Cash value accumulation (C) is a feature of some policies, not the consideration itself. The suicide clause (D) is a policy provision related to specific circumstances of death.
Question 12 (Chapter 2)
A policyowner with a participating whole life policy chooses the 'paid-up additions' dividend option. What does this mean?
- A) The dividends are used to reduce the next premium payment.
- B) The dividends are used to purchase small, single-premium whole life policies.
- C) The dividends are paid out as a cash lump sum to the policyowner.
- D) The dividends are left with the insurer to accumulate interest.
Show answer & explanation
Answer: B
The 'paid-up additions' dividend option uses the dividends to purchase small, single-premium whole life policies at the insured's attained age. These additions increase the policy's death benefit and cash value. Reducing premiums (A), cash payout (C), and accumulating interest (D) are other common dividend options.
Practice Questions 13-17: Exclusions, Nonforfeiture and Universal Life
Hazard exclusions, what a lapsed policy turns into, the age misstatement adjustment, and the contract's consideration and waiver features.
Question 13 (Chapter 2)
Laura has a life insurance policy with an 'aviation exclusion.' If Laura, a commercial airline pilot, dies in a crash while piloting a regularly scheduled commercial flight, what would be the typical implication of this exclusion?
- A) The death benefit would be fully paid because it was a commercial flight.
- B) The death benefit would likely be paid, as most aviation exclusions apply only to private or experimental aircraft.
- C) The death benefit would be fully paid because she was a licensed pilot.
- D) The death benefit would likely be excluded, and only a refund of premiums paid would be returned.
Show answer & explanation
Answer: B
Most modern aviation exclusions in life insurance policies are limited and typically apply only to specific hazardous aviation activities, such as flying private planes, experimental aircraft, or engaging in stunt flying. Commercial airline pilots or passengers on commercial flights are usually covered, meaning the full death benefit would likely be paid (A). Therefore, the death benefit would likely NOT be excluded (D). The exclusion is not based on being a licensed pilot (C) but on the type of aviation activity.
Question 14 (Chapter 2)
Mr. Smith owns a whole life policy with a $100,000 face amount and $20,000 in cash value. He stops paying premiums and fails to select a nonforfeiture option. If the policy specifies 'Extended Term' as the automatic option, what will the insurer do?
- A) Pay Mr. Smith $20,000 in cash and cancel the policy.
- B) Use the $20,000 to purchase a smaller whole life policy that is fully paid up.
- C) Use the $20,000 to purchase a $100,000 term policy for as long a period as the cash value allows.
- D) Keep the $20,000 and terminate the coverage for non-payment.
Show answer & explanation
Answer: C
The Extended Term nonforfeiture option uses the existing cash value to purchase term insurance with the same face amount as the original policy ($100,000). The duration of the term coverage is determined by how much the $20,000 can buy at the insured's attained age.
Question 15 (Chapter 2)
At the time of application, an applicant states they are 35 years old. When the insured dies five years later, the insurer discovers the insured was actually 38 at the time of application. How will the insurer handle the claim?
- A) Deny the claim entirely due to material misrepresentation.
- B) Adjust the death benefit to the amount the premium paid would have purchased at the correct age.
- C) Pay the full death benefit because the policy is past the contestable period.
- D) Pay the death benefit but deduct the difference in premiums plus 10% penalty.
Show answer & explanation
Answer: B
The Misstatement of Age provision is an exception to the Incontestability Clause. Regardless of how long the policy has been in force, if the age is discovered to be wrong, the insurer adjusts the benefit to what the premiums would have bought at the correct age.
Question 16 (Chapter 2)
In a South Carolina life insurance contract, the 'Consideration' provided by the insurance company is represented by which of the following?
- A) The initial premium payment
- B) The statements made in the application
- C) The promise to pay the death benefit according to the policy terms
- D) The delivery of the policy to the owner
Show answer & explanation
Answer: C
Consideration is the value exchanged in a contract. For the applicant, it is the premium and the statements in the application. For the insurer, it is the promise to pay the claim (the insuring clause).
Question 17 (Chapter 2)
A South Carolina resident owns a universal life policy with a Waiver of Monthly Deduction rider. After becoming totally disabled, the insurer waives the cost of insurance and administrative fees. What happens to the policy's cash value if no further premiums are paid?
- A) The cash value continues to grow at the declared interest rate.
- B) The cash value may decrease over time due to monthly deductions for the cost of insurance and administrative fees being waived, but other charges may still apply.
- C) The cash value remains unchanged because no deductions are made.
- D) The cash value is automatically used to purchase paid-up additions.
Show answer & explanation
Answer: B
B is correct because, under a Waiver of Monthly Deduction rider for universal life, the insurer waives the cost of insurance and administrative fees, but other charges (such as premium expense charges or surrender charges, if applicable) may still be deducted from the cash value, potentially causing it to decrease over time if no premiums are paid. A is incorrect because growth is not guaranteed and depends on the policy's performance; moreover, other charges may offset growth. C is incorrect because it ignores other potential charges beyond the waived fees. D is incorrect because paid-up additions are a dividend option, not an automatic feature of this rider.
The Mistakes That Cost Marks
Mixing up settlement options and nonforfeiture options. Lump sum, interest only, fixed period, fixed amount and life income are ways to pay a death benefit. Extended term and reduced paid-up are what a lapsing policy turns into. The exam puts one list's term in the other list's question.
Treating a rider as a payout. A payor benefit rider waives premiums, it does not pay the death benefit. A guaranteed insurability rider buys more coverage at the attained age without evidence of insurability, it is not free and it is not priced at the original issue age.
Believing that the incontestable clause covers everything. A misstatement of age adjusts the benefit to what the premium would have bought at the correct age, however long the policy has been in force.
Reading exclusions as absolutes. War is a standard exclusion. An aviation exclusion is narrower than it sounds and does not usually reach a commercial airline crew or passenger. Check what the exclusion actually names.
Confusing a partial surrender with a loan. A partial surrender permanently reduces cash value and death benefit. A loan accrues interest and has to be repaid. Waiver of monthly deduction on a universal life policy waives specific charges, not every charge, which is why the cash value can still change.
Mixing up the two sides of consideration. The owner's consideration is the premium plus the application statements. The insurer's is its promise to pay.
Your Next Step
Review every question you missed against the outline section it belongs to, then run the set again a few days later. When the misses stop clustering, move on to the next section.
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