17 Free Louisiana Life & Health Practice Questions: Policy Types and Annuities (2026)
How to Use This Set
Types of Life Insurance Policies is 17% of the Life exam and 8% of the combined exam, and Annuities is 11% of the Life exam and 7% of the combined exam. This set covers permanent and term products, universal life, joint and survivorship contracts, and the annuity vocabulary the exam keeps coming back to.
Practice Questions 1-6: Whole Life, Joint Policies and Annuity Risk
Limited pay, single premium and joint life, plus the annuity parties and purchasing power.
Question 1 (Chapter 5)
An applicant wants a permanent life insurance policy where the premiums are paid up quickly, such as within 20 years, but the coverage continues for life. Which policy should the producer recommend?
- A) Continuous Premium Whole Life
- B) Single Premium Whole Life
- C) Adjustable Life
- D) Limited Payment Whole Life
Show answer & explanation
Answer: D
Limited Payment Whole Life (e.g., 20-Pay Life) allows the policyowner to pay premiums for a set number of years, after which the policy is 'paid up' for life. Continuous premium requires payments until age 100. Single premium is one lump sum. Adjustable life allows changes but is not defined solely by the quick pay-up period.
Question 2 (Chapter 5)
In an annuity contract, who is the person whose life expectancy is used to determine the amount of the income payments?
- A) The Owner
- B) The Beneficiary
- C) The Payor
- D) The Annuitant
Show answer & explanation
Answer: D
The annuitant is the 'measuring life' for the annuity. While the owner and annuitant are often the same person, the payments are calculated based on the annuitant's age and gender.
Question 3 (Chapter 5)
A business owner wants to buy life insurance to fund a buy-sell agreement with a partner. They want a policy that covers both lives but pays out only when the first partner dies. Which policy should they buy?
- A) Survivorship Life
- B) Double Indemnity Life
- C) Family Income Policy
- D) Joint Life
Show answer & explanation
Answer: D
Joint Life (First-to-Die) is ideal for business partnerships or couples where the need for funds arises upon the first death. Survivorship Life (Second-to-Die) is for estate taxes after the second death.
Question 4 (Chapter 5)
A producer is explaining 'Indexed Whole Life' to a client in Shreveport. Which statement is CORRECT?
- A) The cash value interest is tied to an external index, but the policy has a guaranteed minimum interest rate
- B) The cash value is invested directly in the stock market
- C) The death benefit is fixed, but premiums vary based on the S&P 500
- D) It is a securities product requiring a FINRA license
Show answer & explanation
Answer: A
Indexed Whole Life (and Indexed Annuities) are insurance products, not securities. They credit interest based on an index (like the S&P 500) but protect the principal with a floor or guaranteed minimum rate. Variable products invest directly in the market.
Question 5 (Chapter 5)
Which of the following is TRUE regarding a Single Premium Whole Life policy?
- A) It creates an immediate cash value
- B) It has no cash value for the first 10 years
- C) It is a form of term insurance
- D) The face amount increases every year
Show answer & explanation
Answer: A
Because a large lump sum is paid upfront in a Single Premium Whole Life policy, it generates immediate cash value, unlike continuous premium policies which may take a few years to build significant cash.
Question 6 (Chapter 5)
A retiree in Shreveport is concerned about the 'purchasing power risk' associated with their retirement income. They currently have a Fixed Annuity that pays $1,200 per month. Why might this product be a concern for this specific client?
- A) The fixed payments may not keep pace with inflation over time.
- B) The monthly payments could decrease if the stock market performs poorly.
- C) The insurer can reduce the interest rate below the guaranteed minimum.
- D) The principal is not guaranteed in a fixed annuity.
Show answer & explanation
Answer: A
Fixed annuities provide a guaranteed, stable payment. However, because the payment amount is fixed, it does not increase to account for inflation, meaning the 'purchasing power' of those dollars may decline over time. Option B describes a Variable Annuity. Options C and D are incorrect because fixed annuities have guaranteed minimums and principal protection.
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Practice Questions 7-12: Paid-Up Plans, Annuity Rights, Universal Life and Participation Rates
These questions test what flexible premiums, ownership and payout options actually do.
Question 7 (Chapter 5)
A 35-year-old client in Alexandria wants a life insurance policy that provides permanent protection and builds cash value, but they want to stop paying premiums when they retire at age 65. Which policy is most appropriate?
- A) 20-Year Level Term
- B) Continuous Premium Whole Life
- C) Single Premium Whole Life
- D) Life Paid-Up at 65 (Limited Pay Whole Life)
Show answer & explanation
Answer: D
A Limited Pay Whole Life policy, such as 'Life Paid-Up at 65,' allows the owner to pay premiums for a set period (until age 65), after which the policy is fully paid for but continues to provide coverage and build cash value until age 100 or death.
Question 8 (Chapter 5)
A policyowner has a 'Continuous Premium Whole Life' policy. If the insured lives to be 100 years old, what happens to the policy?
- A) The policy expires and the insurer keeps the cash value.
- B) The premiums increase significantly to cover the increased risk.
- C) The insurer pays the face amount to the policyowner and the coverage ends.
- D) The policy is converted to a term policy automatically.
Show answer & explanation
Answer: C
Whole life policies are designed to 'endow' at age 100, meaning the cash value has grown to equal the face amount. At that point, the insurer pays the face amount to the owner and the contract is fulfilled.
Question 9 (Chapter 5)
A client wants to use an annuity to fund their child's college education. They plan to make a lump-sum deposit now and have the annuity pay out over 4 years when the child turns 18. Which payout option is most appropriate for this goal?
- A) Straight Life
- B) Joint and Survivor
- C) Life with 20-Year Period Certain
- D) Annuity Certain (Fixed Period)
Show answer & explanation
Answer: D
An 'Annuity Certain' or 'Fixed Period' option pays for a specified period of time (e.g., 4 years) regardless of whether the annuitant lives or dies. This is ideal for funding a specific, time-bound obligation like tuition.
Question 10 (Chapter 5)
A grandmother in Shreveport purchases a deferred annuity. She names her adult son as the annuitant and her granddaughter as the beneficiary. Who has the right to surrender the contract for its cash value during the accumulation phase?
- A) The son (Annuitant)
- B) The granddaughter (Beneficiary)
- C) The grandmother (Owner)
- D) The son and granddaughter jointly
Show answer & explanation
Answer: C
The Owner of the annuity (the grandmother) holds all contractual rights, including the right to surrender the policy, name beneficiaries, and make withdrawals. The annuitant is the person whose life expectancy is used to calculate payouts but has no ownership rights unless they are also the owner.
Question 11 (Chapter 5)
A policyowner in Houma has a Universal Life policy. They decide to skip two months of premium payments because of an unexpected medical bill. What happens to the policy?
- A) The policy stays in force as long as there is enough cash value to cover the monthly mortality and expense charges
- B) The policy immediately lapses
- C) The insurer automatically takes a loan to pay the premiums
- D) The face amount is automatically reduced to a 'Paid-Up' status
Show answer & explanation
Answer: A
Universal Life features flexible premiums. As long as the cash value is sufficient to cover the monthly 'cost of insurance' (mortality) and administrative fees, the policy will remain in force even if the owner skips premium payments.
Question 12 (Chapter 5)
A producer is explaining the 'Participation Rate' of an Equity-Indexed Annuity to a client. If the index grows by 10% and the annuity has an 80% participation rate (with no cap), how much interest will be credited to the annuity?
- A) 10%
- B) 8%
- C) 80%
- D) 2%
Show answer & explanation
Answer: B
The participation rate determines what percentage of the index's gain is credited to the annuity. 80% of a 10% gain equals 8% interest credited.
Practice Questions 13-17: Universal Life Withdrawals, Term Types and Fixed Annuities
The final five match the product to a stated need.
Question 13 (Chapter 5)
A client has a Universal Life policy with a $100,000 face amount. They have accumulated $20,000 in cash value. If the client takes a $10,000 'partial surrender' (withdrawal), what is the permanent effect on the policy?
- A) The face amount is reduced by $10,000
- B) The client must pay back the $10,000 with interest
- C) The policy is converted to term insurance
- D) There is no effect on the face amount
Show answer & explanation
Answer: A
Unlike a policy loan, a partial surrender (withdrawal) in a Universal Life policy permanently reduces the death benefit (face amount) by the amount of the withdrawal. It is not a loan and does not need to be repaid.
Question 14 (Chapter 5)
A business owner in New Orleans wants a life insurance policy that will keep pace with the rising cost of equipment for their shop over the next 15 years. They anticipate needing more coverage each year. Which type of term policy should the producer recommend?
- A) Increasing Term
- B) Level Term
- C) Decreasing Term
- D) Renewable Term
Show answer & explanation
Answer: A
Increasing Term insurance features a death benefit that grows over the policy's term, making it ideal for meeting increasing financial obligations or keeping pace with inflation. Level term stays the same, and decreasing term is used for declining debts like mortgages.
Question 15 (Chapter 5)
A retiree in Monroe wants an annuity that provides a guaranteed, fixed monthly income for life, regardless of how the stock market performs. They are most concerned about safety of principal. Which product should they choose?
- A) Variable Annuity
- B) Fixed Annuity
- C) Equity-Indexed Annuity
- D) Increasing Term Annuity
Show answer & explanation
Answer: B
Fixed annuities offer a guaranteed minimum interest rate and a fixed payout amount, shielding the owner from market risk. Equity-indexed annuities have some market exposure, and variable annuities (not listed in the core outline but a common distractor) carry full market risk.
Question 16 (Chapter 5)
A business owner in Slidell takes out a 10-year, $100,000 business loan that is amortized over the decade. Which type of life insurance is the most cost-effective way to ensure the loan is paid if the owner dies?
- A) 10-year Level Term
- B) 10-year Decreasing Term
- C) Whole Life
- D) Universal Life
Show answer & explanation
Answer: B
Decreasing term is the most cost-effective for amortized loans because the death benefit decreases as the loan balance decreases, resulting in lower premiums than level term or permanent insurance.
Question 17 (Chapter 5)
A retiring couple in Metairie chooses a 'Joint and Survivor' annuity payout option. If the husband dies first, what happens to the payments?
- A) They stop immediately.
- B) They continue to the surviving wife for the rest of her life.
- C) They are paid in a lump sum to the children.
- D) They are reduced by 50% and paid to the estate.
Show answer & explanation
Answer: B
The Joint and Survivor option guarantees that payments will continue as long as at least one of the annuitants is alive.
The Mistakes That Cost Marks
Confusing limited pay with continuous premium. Limited pay is paid up after a set period; continuous premium runs until age 100.
Mixing up the annuity parties. The owner holds contract rights; the annuitant is the measuring life; the beneficiary receives what is left.
Missing the effect of a universal life withdrawal. A partial surrender permanently reduces the face amount.
Choosing the wrong payout for the goal. Annuity certain fits a fixed term obligation and joint and survivor fits two lives.
Applying participation rate wrongly. Multiply the index gain by the participation rate; with no cap, that is the credit.
Your Next Step
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