ILLINOIS LIFE INSURANCE EXAM-
2026/2027 UPDATED WITH 100%
CORRECT ANSWERS
Pooling of Risks - correct answerA large group of people contribute money to a fund out of which their
losses can be paid
Policyowner - correct answeris the person or org that applies for the policy and pays the premium
Actuarial Tables - correct answerAre statistical tables that are used when calculating premium rates and
mortality loss reserves
Life Insurance Policies transfer: - correct answerfinancial risks of premature death on a defined amount
Loss of income - correct answerthe face amount of life insurance is determined as a multiple of income
Life annuity - correct answercontract which is issued by a life insurance company protects an individual
against the financial risk of outliving a normal life expectancy according to the mortality actuarial tables
and running out of money in old age
Life annuity - correct answerguarantees monthly income benefits to the annuitant for the rest of his/her
life no matter how long he/she lives
Insurable interest - correct answera person must be in a position where he/she will lose money should
loss occur only at the time the policy is issued
Who must have insurable interest? - correct answerthe policy owner; he/she will lose money should hte
insured die prematurely
tax qualified plans - correct answercontributions can be deducted
,non qualified plans - correct answercontributions cannot be deducted
tax deferred plans - correct answertax on the interest and/or earnings is postponed as it compounds and
accumulates until it is withdrawn
tax free - correct answerno tax on benefits
cost basis - correct answertotal contributions made to the plan
Tax: premiums paid on individual life insurance policies... - correct answercannot be deducted (non-
qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - correct answeris usually not taxed (tax
free)
Participating policy - correct answerpays a dividend
Tax: dividends paid to the policyowner on participating policies... - correct answerare usually not taxed
(tax free)
Modified Endowment Contract - correct answerThe IRS has written rules that define when a life
insurance policy does not have a real, valid life insurance purpose and is in substance an investment or
savings plan
If a cash value life insurance policy does not have a valid life insurance purpose, the IRS classifies it as a -
correct answermodified endowment contract
Underwriter - correct answeris an insurance company employee who reviews applications and
additional information and decides whether the applicant is acceptable and what the correct premium
rate should be
, Application includes (7 items) - correct answerage, sex, occupation, dangerous recreational activities,
aviation, smoking, agent's report
Medical reports can be (3 items) - correct answerhealth questionare, paramedic examiner's report, and
physician's report
Who completes the health questionnaire? - correct answerthe agent and the applicant with questions
about applicant's health history as well as the applicant's parents' health history
Errors and changes on the application - correct answerif an error on an application occurs, underwriter
may require that it be correct and changes must be approved and initialed by the applicant
Medical Information Bureau Report (MIB) - correct answerit is a CLEARINGHOUSE for medical
information for insurance companies that belong to it
Inspection Report - correct answerdoes by an outside firm to verity that the producer completed the
application accurately and completely and to determine if the applicant has any moral or character risks
Fair Credit Reporting Act (4 items) - correct answer1. applicant has a right to be advised that there may
be information collected from outside sources
2. the applicant has a right to the name and address of the inspecting firm if rated or rejected
3. the applicant has a right to see the inspection report
4. the applicant has the right to have medical information sent to his or her physician
Representations must be - correct answerconcealed/false and material and intentional
Warranties - correct answerguaranteed statements in an application attachment regarding extra risk
upon which the insurance company can contest the policy within the first 2 years of the policy if the
statement is in anyway concealed or false
Which is more difficult to contest? Warranties or Representations? - correct answerRepresentations
2026/2027 UPDATED WITH 100%
CORRECT ANSWERS
Pooling of Risks - correct answerA large group of people contribute money to a fund out of which their
losses can be paid
Policyowner - correct answeris the person or org that applies for the policy and pays the premium
Actuarial Tables - correct answerAre statistical tables that are used when calculating premium rates and
mortality loss reserves
Life Insurance Policies transfer: - correct answerfinancial risks of premature death on a defined amount
Loss of income - correct answerthe face amount of life insurance is determined as a multiple of income
Life annuity - correct answercontract which is issued by a life insurance company protects an individual
against the financial risk of outliving a normal life expectancy according to the mortality actuarial tables
and running out of money in old age
Life annuity - correct answerguarantees monthly income benefits to the annuitant for the rest of his/her
life no matter how long he/she lives
Insurable interest - correct answera person must be in a position where he/she will lose money should
loss occur only at the time the policy is issued
Who must have insurable interest? - correct answerthe policy owner; he/she will lose money should hte
insured die prematurely
tax qualified plans - correct answercontributions can be deducted
,non qualified plans - correct answercontributions cannot be deducted
tax deferred plans - correct answertax on the interest and/or earnings is postponed as it compounds and
accumulates until it is withdrawn
tax free - correct answerno tax on benefits
cost basis - correct answertotal contributions made to the plan
Tax: premiums paid on individual life insurance policies... - correct answercannot be deducted (non-
qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - correct answeris usually not taxed (tax
free)
Participating policy - correct answerpays a dividend
Tax: dividends paid to the policyowner on participating policies... - correct answerare usually not taxed
(tax free)
Modified Endowment Contract - correct answerThe IRS has written rules that define when a life
insurance policy does not have a real, valid life insurance purpose and is in substance an investment or
savings plan
If a cash value life insurance policy does not have a valid life insurance purpose, the IRS classifies it as a -
correct answermodified endowment contract
Underwriter - correct answeris an insurance company employee who reviews applications and
additional information and decides whether the applicant is acceptable and what the correct premium
rate should be
, Application includes (7 items) - correct answerage, sex, occupation, dangerous recreational activities,
aviation, smoking, agent's report
Medical reports can be (3 items) - correct answerhealth questionare, paramedic examiner's report, and
physician's report
Who completes the health questionnaire? - correct answerthe agent and the applicant with questions
about applicant's health history as well as the applicant's parents' health history
Errors and changes on the application - correct answerif an error on an application occurs, underwriter
may require that it be correct and changes must be approved and initialed by the applicant
Medical Information Bureau Report (MIB) - correct answerit is a CLEARINGHOUSE for medical
information for insurance companies that belong to it
Inspection Report - correct answerdoes by an outside firm to verity that the producer completed the
application accurately and completely and to determine if the applicant has any moral or character risks
Fair Credit Reporting Act (4 items) - correct answer1. applicant has a right to be advised that there may
be information collected from outside sources
2. the applicant has a right to the name and address of the inspecting firm if rated or rejected
3. the applicant has a right to see the inspection report
4. the applicant has the right to have medical information sent to his or her physician
Representations must be - correct answerconcealed/false and material and intentional
Warranties - correct answerguaranteed statements in an application attachment regarding extra risk
upon which the insurance company can contest the policy within the first 2 years of the policy if the
statement is in anyway concealed or false
Which is more difficult to contest? Warranties or Representations? - correct answerRepresentations
