17 Free Tennessee Life & Health Practice Questions: Life Policy Riders, Provisions and Options (2026)
How to Use This Set
Riders, provisions, options and exclusions are Section II of the Tennessee Life exam: 15 items out of the 50 scored general-knowledge questions, the same weight as types of policies. It is the section about what is written into the contract and what each clause does when something goes wrong.
The questions below set each clause in a scenario: a lapse, a loan, a change of beneficiary, a death during a grace period. For each, name the clause first, then the consequence.
Practice Questions 1-6: Riders, Reinstatement and Assignments
Riders that add to the base policy, what reinstatement requires, and the language of the contract itself. Watch for the word EXCEPT in the reinstatement question, and for the difference between collateral and absolute assignment.
Question 1 (Chapter 2)
A 25-year-old policyowner in Nashville adds a Guaranteed Insurability Rider (GIR) to her whole life policy. She wants to increase her coverage at age 30 after being diagnosed with a chronic but manageable health condition. Which of the following is true?
- A) She must provide evidence of insurability because of her new health condition.
- B) She can purchase the additional coverage at her original age 25 premium rate.
- C) The rider is automatically cancelled once a chronic condition is diagnosed.
- D) She can purchase the additional coverage without a medical exam at her attained age 30 rate.
Show answer & explanation
Answer: D
The Guaranteed Insurability Rider allows the insured to purchase additional amounts of insurance at specified ages or life events without proving insurability (no medical exam). However, the premium for the additional coverage is based on the insured's attained age at the time the option is exercised.
Question 2 (Chapter 2)
A life insurance policy in Chattanooga lapses because the premium was not paid. Two years later, the insured wants to restore the original policy rather than buy a new one. To reinstate the policy, the insured must do all of the following EXCEPT:
- A) Provide evidence of insurability.
- B) Pay all back premiums plus interest.
- C) Pay any outstanding policy loans.
- D) Wait for a new two-year incontestability period to expire before the policy is active.
Show answer & explanation
Answer: D
Reinstatement requires evidence of insurability, payment of overdue premiums with interest, and repayment of loans. While a new incontestability period may apply to the information on the reinstatement application, the policy becomes active as soon as the insurer approves the reinstatement; the insured does not have to 'wait' for a period to expire for the policy to be 'active'.
Question 3 (Chapter 2)
An insured is diagnosed with a terminal illness and expected to die within 12 months. He has an Accelerated Death Benefit rider. If he uses this rider to withdraw 50% of his $200,000 policy, what happens when he dies?
- A) The beneficiary receives the full $200,000.
- B) The policy is cancelled once the accelerated benefit is paid.
- C) The insurer recovers the $100,000 from the insured's estate, not the policy.
- D) The beneficiary receives $100,000 (minus any interest/fees).
Show answer & explanation
Answer: D
Accelerated Death Benefits allow a terminally ill insured to access a portion of the death benefit while still alive. This payment reduces the final death benefit paid to the beneficiary.
Question 4 (Chapter 2)
Michael purchases a whole life policy and adds a Child Term Rider. He has three children: ages 5, 8, and 12. Two years later, he has another child. Which of the following statements is typically true regarding the Child Term Rider?
- A) The rider automatically covers all eligible children, including newly born or adopted children, for a single premium.
- B) Only the children listed at the time of purchase are covered.
- C) Each child requires a separate premium payment for coverage.
- D) The rider only covers children up to age 10.
Show answer & explanation
Answer: A
A Child Term Rider typically covers all eligible children in the family, including any new children born or adopted after the policy is issued, for a single premium. Coverage usually extends up to a specified age (e.g., 18, 21, or 25), and often allows for conversion to a permanent policy at the end of the term without evidence of insurability.
Question 5 (Chapter 2)
In a life insurance contract, what constitutes the 'consideration' provided by the policyowner?
- A) The policy's cash value and dividend payments.
- B) The death benefit amount and the beneficiary designation.
- C) The incontestability period and the grace period.
- D) The application and the initial premium payment.
Show answer & explanation
Answer: D
In a life insurance contract, consideration refers to the exchange of value between the parties. For the policyowner, the consideration is the completed application and the payment of the initial premium. For the insurer, the consideration is its promise to pay the death benefit according to the policy terms. This is a fundamental principle of contract law.
Question 6 (Chapter 2)
A policyowner takes out a loan from a bank and uses her life insurance policy as collateral for the loan. Which type of assignment has occurred?
- A) Collateral assignment
- B) Absolute assignment
- C) Beneficiary assignment
- D) Irrevocable assignment
Show answer & explanation
Answer: A
A collateral assignment is a temporary transfer of some policy rights to another party, typically a lender, as security for a loan. If the policyowner repays the loan, the rights revert. An absolute assignment is a permanent and complete transfer of all policy rights. Beneficiary assignment is not a recognized type of policy assignment. Irrevocable assignment refers to a beneficiary designation that cannot be changed without the beneficiary's consent, not an ownership transfer.
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Practice Questions 7-12: Grace Period, Beneficiaries and Settlement Options
What happens in the days after a missed premium, who must consent to a change of beneficiary, and which settlement option keeps the principal intact. Match the option to what the beneficiary wants.
Question 7 (Chapter 2)
A policyowner in Memphis fails to pay her life insurance premium by the due date. The policy includes a standard grace period provision. What is the immediate effect of this provision?
- A) The policy remains in force for a specified period, typically 30 or 31 days, allowing the policyowner to pay the premium without losing coverage.
- B) The policy immediately lapses.
- C) The insurer automatically takes a loan from the policy's cash value to pay the premium.
- D) The policy is automatically converted to a reduced paid-up policy.
Show answer & explanation
Answer: A
The grace period is a standard policy provision that allows the policyowner a specified period (commonly 30 or 31 days) after the premium due date to pay the premium without the policy lapsing. If the insured dies during the grace period, the death benefit is usually paid, minus the unpaid premium. The policy does not immediately lapse (B). Automatic premium loan (C) is a separate provision that must be elected. Conversion to reduced paid-up (D) is a non-forfeiture option, not an immediate effect of missing a premium with a grace period.
Question 8 (Chapter 2)
Robert is the policyowner of a life insurance policy and has designated his daughter, Emily, as the beneficiary. The policy states that Emily is an 'irrevocable' beneficiary. What does this designation mean for Robert if he later wishes to change the beneficiary to his son, David?
- A) Robert can change the beneficiary at any time without Emily's consent.
- B) Robert needs the insurer's approval to change the beneficiary, but not Emily's.
- C) Robert must obtain Emily's written consent to change the beneficiary.
- D) Robert can never change the beneficiary under any circumstances.
Show answer & explanation
Answer: C
An irrevocable beneficiary designation means the policyowner cannot change the beneficiary, assign the policy, or take out a loan without the written consent of the irrevocable beneficiary. This gives the beneficiary vested rights in the policy. If Emily were a revocable beneficiary, Robert could change her designation at any time (A) without her consent. Options B and D are incorrect because consent from the irrevocable beneficiary is the key requirement.
Question 9 (Chapter 2)
A beneficiary in Chattanooga receives a substantial life insurance death benefit. She wants to preserve the principal amount for future needs but would like to receive regular payments from the accumulated interest. Which settlement option would best suit her needs?
- A) Fixed Period Option
- B) Fixed Amount Option
- C) Life Income Option
- D) Interest Only Option
Show answer & explanation
Answer: D
The Interest Only Option allows the beneficiary to leave the death benefit principal with the insurer and receive regular payments of only the interest earned. The principal remains intact and can be withdrawn later, or paid out under a different settlement option. Fixed Period (A), Fixed Amount (B), and Life Income (C) all involve the distribution of the principal over time.
Question 10 (Chapter 2)
An insured in Maryville has a life insurance policy with a Disability Income rider. After becoming totally disabled for six months, what benefit will this specific rider provide?
- A) It will pay the policy's face amount in monthly installments.
- B) It will only waive the policy's monthly premiums.
- C) It will pay a lump sum equal to the cash value of the policy.
- D) It will provide a monthly income check to the insured and waive the premiums.
Show answer & explanation
Answer: D
A Disability Income rider provides a monthly income benefit to the insured while they are totally disabled, in addition to waiving the premiums. A 'Waiver of Premium' rider only waives the costs without providing a cash income.
Question 11 (Chapter 2)
A Tennessee insurer discovers that an insured committed material fraud regarding a terminal illness on an application three years ago. The policy contains a standard two-year Incontestability clause. What action can the insurer take?
- A) Void the policy and return all premiums.
- B) Deny any future claims based on the fraud.
- C) Sue the insured for the cost of the death benefit.
- D) The insurer must honor the policy because the contestable period has ended.
Show answer & explanation
Answer: D
Under the policy's standard Incontestability provision, a life insurance policy becomes incontestable after it has been in force for two years during the lifetime of the insured, except for non-payment of premiums. Even material fraud generally cannot be used to void the policy after this period.
Question 12 (Chapter 2)
A policyowner in Bartlett has a $5,000 outstanding loan on his whole life policy. The annual interest on the loan is due, but the policyowner does not pay it. What is the insurer's standard action?
- A) Cancel the policy immediately for non-payment.
- B) Report the policyowner to a credit bureau.
- C) Add the unpaid interest to the loan balance.
- D) Deduct the interest from the policy's face amount immediately.
Show answer & explanation
Answer: C
If interest on a policy loan is not paid when due, it is typically added to the existing loan balance, provided the total indebtedness does not exceed the policy's cash value.
Practice Questions 13-17: Dividends, Suicide Clause and Contract Basics
Tax treatment of dividends, the suicide exclusion, simultaneous death, and consideration. These questions test careful reading of the facts given.
Question 13 (Chapter 2)
A policyowner in Clarksville has a participating whole life policy. He chooses to have his annual dividends 'Accumulate at Interest.' What are the tax implications of this choice?
- A) The dividends are taxable as ordinary income, but the interest is tax-deferred.
- B) The dividends are generally not taxable, but the interest earned on them is taxable as ordinary income.
- C) Both the dividends and the interest are fully tax-exempt.
- D) The dividends are considered a capital gain and taxed at a lower rate.
Show answer & explanation
Answer: B
Dividends are considered a return of unused premium and are generally not taxable. However, if they are left with the insurer to accumulate at interest, the interest earned on those dividends is taxable as ordinary income in the year it is credited.
Question 14 (Chapter 2)
A policyowner in Brentwood has a life insurance policy that has been in force for 18 months. He commits suicide. What is the insurer's obligation under the standard Suicide clause in Tennessee?
- A) The insurer must pay the full death benefit.
- B) The insurer is only obligated to refund the premiums paid, without interest.
- C) The insurer must pay the death benefit minus a 10% penalty.
- D) The insurer is not obligated to pay anything, including premiums.
Show answer & explanation
Answer: B
The standard Suicide clause allows insurers to exclude coverage for suicide if it occurs within the first two years of the policy. If the insured commits suicide within this period, the insurer's liability is limited to a refund of premiums paid.
Question 15 (Chapter 2)
An insured in Nashville names his wife as the primary beneficiary and his only son as the contingent beneficiary. If both the insured and his wife die in a common accident, and it cannot be determined who died first, how will the proceeds be distributed under the Uniform Simultaneous Death Act as adopted in Tennessee?
- A) The proceeds are paid to the wife's estate.
- B) The proceeds are paid to the son.
- C) The proceeds are split 50/50 between the wife's estate and the son.
- D) The proceeds are escheated to the State of Tennessee.
Show answer & explanation
Answer: B
Under the Uniform Simultaneous Death Act, if the order of death cannot be determined, the law assumes the insured survived the beneficiary. Therefore, the primary beneficiary (wife) is deemed to have died first, and the proceeds pass to the contingent beneficiary (the son).
Question 16 (Chapter 2)
A beneficiary in Murfreesboro chooses a settlement option where the insurer retains the death benefit principal and pays out only the earnings at regular intervals. Which option has been selected?
- A) Fixed Amount
- B) Fixed Period
- C) Interest Only
- D) Life Income
Show answer & explanation
Answer: C
Under the Interest Only option, the insurer holds the principal and pays the interest earned to the beneficiary. This preserves the principal for a later date or for a secondary beneficiary.
Question 17 (Chapter 2)
In a life insurance contract, the 'Consideration' provided by the insurance company is the:
- A) Payment of the initial premium.
- B) Promise to pay the death benefit according to the policy terms.
- C) Statements made on the application.
- D) Underwriting expenses incurred.
Show answer & explanation
Answer: B
Consideration is the exchange of value. The applicant's consideration is the premium and the statements in the application. The insurer's consideration is the promise to pay the claim (the insuring clause).
The Mistakes That Cost Marks
Mixing up attained age and original age. A guaranteed insurability option buys more coverage without evidence of insurability, at the premium for the age you have reached when you exercise it.
Treating consideration as one-sided. The applicant's consideration is the application and the initial premium; the insurer's is its promise to pay.
Confusing collateral and absolute assignment. A collateral assignment is a temporary transfer as loan security; an absolute assignment is permanent and complete.
Forgetting that an irrevocable beneficiary must consent. A change of beneficiary then needs that beneficiary's written consent.
Taxing the dividend instead of the interest. Dividends are generally a return of premium and not taxed; interest earned on dividends left to accumulate is taxed as ordinary income.
Picking a settlement option that spends the principal. Fixed period, fixed amount and life income all distribute principal; interest only preserves it.
Assuming unpaid loan interest cancels the policy. Unpaid loan interest is normally added to the loan balance; the policy is not cancelled at once.
Your Next Step
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