MICHIGAN LIFE INSURANCE STATE
PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ Increasing term rider.
Answer: will allow for a greater amount of coverage each year. Increasing
term riders provide an additional term insurance face amount at death, equal
to either all premiums paid or the amount of cash value.
◍ Contracts of Adhesion.
Answer: written by one party and the other party cannot negotiateif
ambiguous, the court will decide in favor or the insured
◍ 2003-Do Not Call Implementation Act.
Answer: The Do Not Call Registry allows consumers to include their phone
numbers on the list to which telemarketers cannot make solicitation calls.
◍ 1945 McCarran and Ferguson Act.
Answer: This law made it clear that the states' continued regulation of
insurance was in the public's best interest. However, it also made possible
the application of federal antitrust laws to the extent that [the insurance
business] is not regulated by state law.
◍ Obligee.
Answer: Who the surety bond protects, who the promise is owed to
◍ Lloyd's of London.
Answer: not an insurer but rather a syndicate of individuals and companies
that individually underwrite insurance.
◍ Exclusive Provider Organizations (EPOs).
Answer: a hybrid of an HMO and a PPO. EPOs typically offer a little more
, flexibility than an HMO and are generally have a lower cost than a PPO
◍ Symbol 8.
Answer: hired autos only-- coverage only for autos leased, hired, rented, or
borrowed from the named insured's employees or family members.
Typically, used for liability and physical damage coverage.
◍ Incontestable Clause.
Answer: allows an insurer to contest a claim during the contestable period.
However, statements related to age and sex or gender can be contested at
any time. The company reserves the right to the premium adjust if the age of
the insured is misstated.
◍ Reinstatement Period.
Answer: allows an insured to reinstate a lapsed insurance policy. Typically,
this must be done within three years of the policy lapse, but in some state,
may be allowed as long as seven years. If the insurer does not accept or
reject the reinstatement within 45 days, coverage will be automatically
reinstated as if it had never lapsed.
◍ defined benefit plan.
Answer: establishes a definite future benefit, predetermined by a specific
formula.
◍ Alien Insurer.
Answer: An insurance company that is incorporated outside the United
States
◍ HO-5 Comprehensive Form.
Answer: Owner occupants comprehensive form
◍ Exposure.
Answer: The potential for accidents and other losses
◍ Actual Cash Value (ACV).
Answer: replacement cost - depreciation
◍ Loss Ratio.
, Answer: incurred losses/earned premiums
◍ Reinsurer.
Answer: The company assuming the risk is the
◍ Private vs. Government Insurance.
Answer: There are two types of insurance companies:
◍ Equity indexed annuities (EIA).
Answer: are a type of fixed annuity that offer the potential for higher
credited rates of return than their traditional counterparts but also guarantee
the owner's principal.
◍ Symbol 9.
Answer: non-owned autos, any auto owned by an employee or partner while
used in the insured's business or personal affairs
◍ Profit-sharing plans, Stock bonus plans, and Money purchase plans.
Answer: There are three primary types of defined contribution plans:
◍ Social Security.
Answer: funded by payroll taxes collected from employees, employers, and
those who are self-employed.
◍ Symbol 4.
Answer: Owned autos other than private passenger autos only
◍ Apparent Authority.
Answer: The authority an agent is believed by third parties to have because
of the behavior of the principal.
◍ Risk Management.
Answer: The process of analyzing exposures that create risk and designing
programs to handle them is
◍ Captive Agent.
Answer: an insurance agent who represents only one insurance company and
who is, in effect, an employee of that company
, ◍ Symbol 48.
Answer: Trailers in insured's possession
◍ Commercial Auto Policy.
Answer: Includes liability & physical damage, medical payments can be
added by endorsement
◍ Speculative Risk.
Answer: Chance of loss or gain
◍ the shorter the payment period, the higher the premium.
Answer: The statement which best describes the relationship between the
premiums of a whole life policy and the premium payment period is
◍ Underwriting Department.
Answer: responsible for reviewing applications, conducting investigations to
gain additional information about applicants, assigning risk classifications,
and approving or declining an application.
◍ Supplementary Payments.
Answer: Paid in addition to the policy's limit of liability
◍ Exchange Privilege Rider.
Answer: also known as the substitute, insured rider, outlines the conditions
and processes for changing the insured of an insurance policy.
◍ Avoidance.
Answer: eliminating certain risk by not engaging in certain activity
◍ Direct writing.
Answer: the company sells the insurance through salaried employees of the
company
◍ Financial Strength Rating.
Answer: a report card of the company
◍ Symbol 2.
Answer: Owned autos only
PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ Increasing term rider.
Answer: will allow for a greater amount of coverage each year. Increasing
term riders provide an additional term insurance face amount at death, equal
to either all premiums paid or the amount of cash value.
◍ Contracts of Adhesion.
Answer: written by one party and the other party cannot negotiateif
ambiguous, the court will decide in favor or the insured
◍ 2003-Do Not Call Implementation Act.
Answer: The Do Not Call Registry allows consumers to include their phone
numbers on the list to which telemarketers cannot make solicitation calls.
◍ 1945 McCarran and Ferguson Act.
Answer: This law made it clear that the states' continued regulation of
insurance was in the public's best interest. However, it also made possible
the application of federal antitrust laws to the extent that [the insurance
business] is not regulated by state law.
◍ Obligee.
Answer: Who the surety bond protects, who the promise is owed to
◍ Lloyd's of London.
Answer: not an insurer but rather a syndicate of individuals and companies
that individually underwrite insurance.
◍ Exclusive Provider Organizations (EPOs).
Answer: a hybrid of an HMO and a PPO. EPOs typically offer a little more
, flexibility than an HMO and are generally have a lower cost than a PPO
◍ Symbol 8.
Answer: hired autos only-- coverage only for autos leased, hired, rented, or
borrowed from the named insured's employees or family members.
Typically, used for liability and physical damage coverage.
◍ Incontestable Clause.
Answer: allows an insurer to contest a claim during the contestable period.
However, statements related to age and sex or gender can be contested at
any time. The company reserves the right to the premium adjust if the age of
the insured is misstated.
◍ Reinstatement Period.
Answer: allows an insured to reinstate a lapsed insurance policy. Typically,
this must be done within three years of the policy lapse, but in some state,
may be allowed as long as seven years. If the insurer does not accept or
reject the reinstatement within 45 days, coverage will be automatically
reinstated as if it had never lapsed.
◍ defined benefit plan.
Answer: establishes a definite future benefit, predetermined by a specific
formula.
◍ Alien Insurer.
Answer: An insurance company that is incorporated outside the United
States
◍ HO-5 Comprehensive Form.
Answer: Owner occupants comprehensive form
◍ Exposure.
Answer: The potential for accidents and other losses
◍ Actual Cash Value (ACV).
Answer: replacement cost - depreciation
◍ Loss Ratio.
, Answer: incurred losses/earned premiums
◍ Reinsurer.
Answer: The company assuming the risk is the
◍ Private vs. Government Insurance.
Answer: There are two types of insurance companies:
◍ Equity indexed annuities (EIA).
Answer: are a type of fixed annuity that offer the potential for higher
credited rates of return than their traditional counterparts but also guarantee
the owner's principal.
◍ Symbol 9.
Answer: non-owned autos, any auto owned by an employee or partner while
used in the insured's business or personal affairs
◍ Profit-sharing plans, Stock bonus plans, and Money purchase plans.
Answer: There are three primary types of defined contribution plans:
◍ Social Security.
Answer: funded by payroll taxes collected from employees, employers, and
those who are self-employed.
◍ Symbol 4.
Answer: Owned autos other than private passenger autos only
◍ Apparent Authority.
Answer: The authority an agent is believed by third parties to have because
of the behavior of the principal.
◍ Risk Management.
Answer: The process of analyzing exposures that create risk and designing
programs to handle them is
◍ Captive Agent.
Answer: an insurance agent who represents only one insurance company and
who is, in effect, an employee of that company
, ◍ Symbol 48.
Answer: Trailers in insured's possession
◍ Commercial Auto Policy.
Answer: Includes liability & physical damage, medical payments can be
added by endorsement
◍ Speculative Risk.
Answer: Chance of loss or gain
◍ the shorter the payment period, the higher the premium.
Answer: The statement which best describes the relationship between the
premiums of a whole life policy and the premium payment period is
◍ Underwriting Department.
Answer: responsible for reviewing applications, conducting investigations to
gain additional information about applicants, assigning risk classifications,
and approving or declining an application.
◍ Supplementary Payments.
Answer: Paid in addition to the policy's limit of liability
◍ Exchange Privilege Rider.
Answer: also known as the substitute, insured rider, outlines the conditions
and processes for changing the insured of an insurance policy.
◍ Avoidance.
Answer: eliminating certain risk by not engaging in certain activity
◍ Direct writing.
Answer: the company sells the insurance through salaried employees of the
company
◍ Financial Strength Rating.
Answer: a report card of the company
◍ Symbol 2.
Answer: Owned autos only
