17 Free Oklahoma Life & Health Practice Questions: Riders, Options, Beneficiaries and Policyowner Rights (2026)
How to Use This Riders and Beneficiaries Set
This is the second half of the exam's largest section, Provisions, Options, Exclusions, Riders, Clauses, and Rights: 42 of the 150 scored items (28 of 100 on the Life exam, 32 of 100 on the Accident and Health or Sickness exam). Where the provisions and clauses set covers the contract's built-in terms, this set covers what you can add and what the policyowner can do: riders, dividend options, nonforfeiture options, policy loans, beneficiary designations, and the tax treatment of cash values and dividends.
Nearly every question is a scenario with numbers, so the practice is in the arithmetic: a loan deducted from a death benefit, a rider that pays on top of the base policy, a surrender with a cost basis. Work each one on paper before you check the answer.
These 17 questions come from LanePrep's Oklahoma L&H quiz bank and follow three areas: beneficiary rules and common-disaster clauses together with dividends and living-benefit riders, how accidental death and waiver riders pay, and the policyowner's rights over loans, changes and taxes.
Ask who holds the right and who is affected by it. An irrevocable beneficiary changes what a policyowner can do alone.
Practice Questions 1-6: Beneficiaries, Dividends and Riders
Who is paid when the insured and the primary beneficiary die in the same accident, what an accelerated benefits rider does, which dividend option buys more coverage, how an accidental death rider adds to the base policy, what a loan does to the death benefit and what a guaranteed insurability rider guarantees.
Question 1 (Chapter 4)
A husband and wife are involved in a fatal car accident. The husband is the insured on a life policy, the wife is the primary beneficiary, and their son is the contingent beneficiary. The husband dies instantly, and the wife dies 12 days later. If the policy contains a Common Disaster Provision (Uniform Simultaneous Death Act) with a 30-day window, to whom will the proceeds be paid?
- A) The wife's estate
- B) The husband's estate
- C) The proceeds are split 50/50 between the wife's estate and the son
- D) The son
Show answer & explanation
Answer: D
The Common Disaster Provision stipulates that if the primary beneficiary dies within a specified timeframe (usually 30 days) following the insured's death in the same accident, it is legally assumed the primary beneficiary died first. This prevents the proceeds from entering the primary beneficiary's estate and ensures they go to the contingent beneficiary (the son).
Question 2 (Chapter 4)
An insured is diagnosed with a terminal illness and expected to die within 12 months. Their life insurance policy includes an Accelerated Benefits Rider. How does this rider function?
- A) It pays a double death benefit if the insured dies from the illness.
- B) It waives all future premiums but does not pay any benefits until death.
- C) It provides a monthly income stream that is separate from the death benefit.
- D) It allows the insured to receive a portion of the death benefit early to cover medical or living expenses.
Show answer & explanation
Answer: D
The Accelerated Benefits (or Living Benefits) rider allows an insured who is terminally ill (or sometimes chronically ill) to access a percentage of the policy's death benefit while still alive. The amount paid out is then deducted from the final death benefit paid to beneficiaries.
Question 3 (Chapter 4)
A policyowner has a 'participating' whole life policy and receives a dividend. He chooses to use the dividend to purchase small amounts of single-premium whole life insurance that increase his total death benefit. Which dividend option is this?
- A) Reduced Premium
- B) Paid-up Additions
- C) One-Year Term
- D) Accumulate at Interest
Show answer & explanation
Answer: B
The Paid-up Additions option uses the dividend to buy additional permanent coverage. These 'additions' have their own cash value and increase the total death benefit of the policy. This is often the default dividend option in participating policies.
Question 4 (Chapter 4)
An insured has a $100,000 life policy with an Accidental Death and Dismemberment (AD&D) rider for another $100,000. The insured is in a car accident and loses a leg. One month later, the insured dies from complications of the leg injury. What is the total payout?
- A) $100,000
- B) $150,000
- C) $250,000
- D) $200,000
Show answer & explanation
Answer: D
The base policy pays $100,000. The AD&D rider (often called 'Double Indemnity') pays an additional $100,000 if death results from an accident within a specified time (usually 90 days). Since the death was caused by the accident, the total payout is $200,000.
Question 5 (Chapter 4)
An insured has a life insurance policy with a $20,000 cash value and a $5,000 outstanding policy loan. If the insured dies, how much will the insurer pay the beneficiary if the face amount is $100,000?
- A) $95,000
- B) $100,000
- C) $80,000
- D) $75,000
Show answer & explanation
Answer: A
When an insured dies with an outstanding policy loan, the insurer deducts the loan balance (plus any accrued interest) from the death benefit before paying the beneficiary. $100,000 - $5,000 = $95,000.
Question 6 (Chapter 4)
An insured has a $100,000 policy with a Guaranteed Insurability Rider (GIR). The rider allows for $25,000 increases at ages 25, 28, 31, and 34. The insured is now 29 and has just been diagnosed with a chronic heart condition. Can he still exercise his option at age 31?
- A) No, because he is no longer insurably fit.
- B) Yes, but he must pay a higher 'rated' premium due to the heart condition.
- C) Yes, he can purchase the additional coverage at standard rates without evidence of insurability.
- D) No, because he missed the age 28 option, which voided the rider.
Show answer & explanation
Answer: C
The primary purpose of the Guaranteed Insurability Rider is to allow the insured to purchase additional coverage at specific intervals without proving they are still healthy (no evidence of insurability required).
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Practice Questions 7-12: Rider Payouts and Nonforfeiture Options
More common-disaster timing, principal sum against capital sum, cost-of-living and waiver riders on universal life, a suicide after the clause has run its course and extended term insurance on a policy with a loan.
Question 7 (Chapter 4)
An Oklahoma life policy contains a Common Disaster provision. The insured and primary beneficiary are in a wreck. The insured dies immediately. The primary beneficiary dies 48 hours later. How will the insurer pay the claim?
- A) To the primary beneficiary's estate.
- B) The insurer keeps the proceeds due to the simultaneous death.
- C) To the contingent beneficiary.
- D) The proceeds are split 50/50 between both estates.
Show answer & explanation
Answer: C
Under the Common Disaster provision (Uniform Simultaneous Death Act), if the primary beneficiary dies within a specified window (usually 10-30 days) after the insured, they are presumed to have predeceased the insured. This sends the money to the contingent beneficiary or the insured's estate, not the beneficiary's estate.
Question 8 (Chapter 4)
An insured has an AD&D rider. He is injured in a construction accident and loses his sight in both eyes. The rider's 'Principal Sum' is $50,000. How much will the rider pay for this loss?
- A) $25,000 (the Capital Sum)
- B) $100,000 (Double Indemnity)
- C) $50,000 (the Principal Sum)
- D) $0, as AD&D only pays for death.
Show answer & explanation
Answer: C
In AD&D, the 'Principal Sum' is paid for accidental death or the loss of two primary parts (two limbs, or sight in both eyes). The 'Capital Sum' (usually 50% of the principal) is paid for the loss of one part.
Question 9 (Chapter 4)
An insured has a Cost of Living (COLA) rider. If the Consumer Price Index (CPI) increases by 3%, what happens to the policy?
- A) The face amount increases by 3% automatically.
- B) The premium is reduced by 3%.
- C) The cash value is adjusted for inflation.
- D) The insurer pays a 3% dividend bonus.
Show answer & explanation
Answer: A
A COLA rider automatically increases the face amount of the policy to keep pace with inflation, typically tied to an index like the CPI.
Question 10 (Chapter 4)
An insured has a Universal Life policy and adds a 'Waiver of Cost of Insurance' rider. If the insured becomes totally disabled, how does this rider differ from a standard 'Waiver of Premium' rider?
- A) It pays a monthly income to the insured in addition to waiving costs.
- B) It waives the entire planned premium regardless of the cash value balance.
- C) It only waives the mortality and expense charges, not the full premium needed to build cash value.
- D) It only applies if the insured is hospitalized for more than 30 days.
Show answer & explanation
Answer: C
In Universal Life policies, the 'Waiver of Cost of Insurance' rider specifically waives the monthly deductions for the cost of insurance and administrative fees, but it does not typically waive the portion of the premium intended for the cash account (unlike a standard Waiver of Premium on a Whole Life policy).
Question 11 (Chapter 4)
An insured has a life insurance policy with an Accidental Death (Double Indemnity) rider. The insured commits suicide 3 years after the policy was issued. How will the insurer respond to the claim?
- A) The insurer will pay the face amount but deny the accidental death benefit.
- B) The insurer will pay the face amount and the accidental death benefit.
- C) The insurer will deny the entire claim due to the suicide clause.
- D) The insurer will only refund the premiums paid.
Show answer & explanation
Answer: A
Since the suicide occurred after the 2-year suicide clause expired, the base policy's face amount is payable. However, Accidental Death riders specifically exclude suicide from the definition of an 'accident,' so the rider benefit will not be paid.
Question 12 (Chapter 4)
An insured has a $100,000 whole life policy with a $10,000 outstanding loan. He stops paying premiums and the policy goes into 'Extended Term' nonforfeiture. How does the loan affect this?
- A) The loan is forgiven, and the insured gets $100,000 of term insurance.
- B) The face amount of the term insurance is reduced to $90,000, and the cash value used to buy the term is also reduced by the loan amount.
- C) The policyowner must pay the loan back before the Extended Term option can be used.
- D) The Extended Term option is unavailable if there is an outstanding loan.
Show answer & explanation
Answer: B
When a policy with a loan enters a nonforfeiture option, the loan amount is deducted from both the face amount (death benefit) and the cash value. In this case, the insured would receive $90,000 of term insurance for as long a period as the remaining net cash value can buy.
Practice Questions 13-17: Policy Changes, Loans, Beneficiary Rights and Taxes
What the insurer requires to increase coverage, interest on a policy loan, an irrevocable beneficiary's consent, and the tax treatment of cash dividends and of a surrender.
Question 13 (Chapter 4)
An insured has a $500,000 whole life policy and wants to use the 'Policy Change' provision to exchange it for a $750,000 policy. What will the insurer likely require?
- A) Nothing; the owner has an absolute right to increase coverage.
- B) Evidence of insurability and an increase in premium.
- C) A 6-month waiting period before the change takes effect.
- D) The insurer will only allow the change if the insured is under age 40.
Show answer & explanation
Answer: B
The Policy Change provision allows for modifications. If the change results in a higher risk for the insurer (like increasing the face amount or moving to a lower premium plan), the insurer will require evidence of insurability.
Question 14 (Chapter 4)
Under Oklahoma Statute 36 O.S. § 4008, what is the maximum fixed interest rate that an insurer may charge on a life insurance policy loan?
- A) 5% per year
- B) 8% per year
- C) 10% per year
- D) 12% per year
Show answer & explanation
Answer: B
36 O.S. § 4008 stipulates that life insurance policies must contain a provision for policy loans and may charge a maximum fixed interest rate of 8% per year. Insurers may also offer variable rates based on specific market indexes, but the fixed cap is 8%.
Question 15 (Chapter 4)
A policyowner has a Whole Life policy and has named his business partner as an irrevocable beneficiary. The policyowner now wants to take a policy loan to expand the business. What is required?
- A) Nothing; the owner has the absolute right to borrow against the cash value.
- B) The owner must first change the beneficiary to 'revocable' before applying for the loan.
- C) The owner must obtain the written consent of the irrevocable beneficiary to take the loan.
- D) Irrevocable beneficiaries are only allowed on term policies, so this scenario is impossible.
Show answer & explanation
Answer: C
An irrevocable beneficiary has a vested interest in the policy. The policyowner cannot exercise ownership rights that affect the beneficiary's interest—such as taking a loan, surrendering the policy, or changing the beneficiary—without that beneficiary's written consent.
Question 16 (Chapter 4)
A policyowner has a participating policy and chooses the 'Cash' dividend option. How are these dividends treated for federal income tax purposes?
- A) They are fully taxable as capital gains.
- B) They are generally not taxable because they are considered a return of overpaid premium.
- C) They are taxable as ordinary income only if they exceed $500.
- D) They are 100% tax-deductible if used to buy more insurance.
Show answer & explanation
Answer: B
Dividends from a mutual (participating) insurer are viewed by the IRS as a return of part of the premium paid. Therefore, they are not considered income and are not taxable unless the total dividends received exceed the total premiums paid into the policy.
Question 17 (Chapter 4)
A policyowner surrenders his Whole Life policy for its $25,000 cash value. Over the years, he has paid $20,000 in total premiums. What is the tax treatment of the $25,000 payment?
- A) The entire $25,000 is tax-free.
- B) The entire $25,000 is taxable as ordinary income.
- C) $20,000 is tax-free as a return of cost basis, and $5,000 is taxable as ordinary income.
- D) $20,000 is taxable as a capital gain, and $5,000 is tax-free.
Show answer & explanation
Answer: C
When a policy is surrendered for cash, the portion of the cash value that represents the 'cost basis' (the total premiums paid) is received tax-free. Any amount received in excess of the cost basis is taxable as ordinary income.
The Mistakes That Cost Marks
Paying the estate when a common-disaster clause applies. If the primary beneficiary dies within the stated period after the insured, the clause treats the beneficiary as having died first. The proceeds go to the contingent beneficiary instead of the beneficiary's estate.
Adding the accidental-death amounts wrongly. An accidental death rider pays on top of the base policy when death results from an accident within the stated time. The principal sum is paid for accidental death or the loss of two limbs or both eyes, the capital sum (usually half) for one. Suicide is not an accident under the rider, even when the base policy's face amount is payable.
Forgetting the loan. An outstanding policy loan and its interest come off the death benefit, and on a policy that moves to extended term insurance the amount of term insurance shrinks by the loan too.
Skipping the irrevocable beneficiary's consent. A loan, a surrender or a beneficiary change that touches the irrevocable beneficiary's interest needs that beneficiary's written consent.
Taxing dividends and surrenders wrongly. Cash dividends are generally a return of premium and are not taxed until they exceed the premiums paid. A surrender is tax-free up to the premiums paid (the cost basis) and ordinary income above it.
Your Next Step
All chapters are audio lessons: chapter 1 is free, no signup. The full bank is in the free Oklahoma Life & Health practice questions hub. Continue with underwriting and replacement or go back to policy provisions and clauses.
Question counts and content weighting come from PSI's Oklahoma content outlines, effective 8/1/2026.
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