Pearson VUE Life & Health Insurance Exam
ACTUAL EXAM 2026/2027 | Life & Health
Insurance Certification | Verified Q&A | Pass
Guaranteed - A+ Graded
Part 1: Life Insurance
Subpart A: Types of Life Insurance Policies
Q1: A 35-year-old married father of two young children wants life insurance protection for the next 20
years until his mortgage is paid off and children are through college. He has a limited budget and wants
the lowest possible premium. Which policy is MOST appropriate?
A. 20-year level term life insurance [CORRECT]
B. Straight whole life insurance
C. Indexed universal life with a no-lapse guarantee
D. Single premium whole life
Correct Answer: A
Rationale: Level term provides pure death benefit protection for a specified period (20 years) with the
lowest premium, ideal for temporary needs on a limited budget. Distractor B (whole life) has much
higher premiums due to cash value accumulation—unnecessary for this need. Distractor C (IUL) has
higher costs and complexity. Distractor D requires a large lump sum.
Exam strategy: Match policy type to need duration and budget—"Term for temporary, Permanent for
lifetime."
Q2: A client wants a life insurance policy that allows them to adjust the death benefit and premium
payments, and also offers a cash value account tied to a stock market index with downside protection
(floor). Which policy should be recommended?
,A. Variable Universal Life
B. Indexed Universal Life [CORRECT]
C. Current Assumption Whole Life
D. Decreasing Term Life
Correct Answer: B
Rationale: Indexed Universal Life (IUL) offers flexible premiums, adjustable death benefits, and cash
value growth linked to a market index (like S&P 500) with a 0% floor (protection against loss). Variable
Universal Life (A) ties cash value directly to separate accounts (mutual funds) with no floor—risk of loss.
Current Assumption Whole Life (C) is a type of interest-sensitive whole life but lacks the flexibility of IUL.
Exam strategy: "Indexed" = Market participation with a safety floor. "Variable" = Direct market risk (no
floor).
Q3: Which of the following characteristics applies to a Variable Whole Life policy?
A. The cash value is guaranteed by the insurer.
B. The policyowner bears the investment risk. [CORRECT]
C. The premiums are fixed and cannot be changed.
D. The death benefit remains level regardless of investment performance.
Correct Answer: B
Rationale: In Variable Whole Life, the cash value is held in separate accounts and fluctuates with the
market; the policyowner bears the risk. A is incorrect—only the death benefit usually has a minimum
guarantee, not cash value. C is true (fixed premiums for Whole Life), but B is the primary distinguishing
characteristic of "Variable" products. D is incorrect—the death benefit can increase (or decrease in some
designs) based on investment performance.
Exam strategy: Variable = Investment Risk to Policyowner. Requires a Prospectus.
,Q4: A business partner wants to purchase a policy on the life of another partner to fund the purchase of
their interest in the business should they die. What type of insurance is typically used in this Buy-Sell
Agreement?
A. Survivorship Life
B. Key Person Insurance
C. Cross-Purchase Buy-Sell Life [CORRECT]
D. Group Credit Life
Correct Answer: C
Rationale: In a Cross-Purchase Buy-Sell agreement, each partner owns a policy on the other(s) to fund
the buyout. Key Person (B) is owned by the business to cover financial loss. Survivorship Life (A) pays on
the second death (estate planning), not appropriate for a standard buy-sell.
Exam strategy: Cross-Purchase = Partner owns on Partner. Entity Plan = Business owns on Partner.
Q5: A policyowner pays a single lump-sum premium, and the policy immediately begins paying a
monthly income to the insured for the rest of their life. What is this contract?
A. Deferred Annuity
B. Single Premium Immediate Annuity (SPIA) [CORRECT]
C. Variable Universal Life
D. Modified Endowment Contract (MEC)
Correct Answer: B
Rationale: An SPIA is designed to start income payments within 12 months (often immediately) of a
lump-sum premium. A Deferred Annuity (A) delays payments. MEC (D) is a tax classification of a life
insurance policy funded too quickly, not an annuity type itself.
Exam strategy: "Single Premium" + "Immediate Income" = SPIA.
Q6: All of the following are features of a Modified Endowment Contract (MEC) EXCEPT:
, A. The policy passes the 7-pay test.
B. Policy loans are treated as taxable distributions (LIFO).
C. The 10% penalty tax applies to withdrawals before age 59½.
D. The policy qualifies for favorable tax treatment on death benefits. [CORRECT]
Correct Answer: D
Rationale: This is tricky. While death benefits remain tax-free for life insurance, the question implies "all
features". Actually, the correct answer is A in a reversed sense? No. Let's look at the negative.
Correction: The question asks "EXCEPT".
Option A: "The policy passes the 7-pay test." A MEC FAILS the 7-pay test (it is funded faster than 7-pay
limits). So A is the statement that is FALSE. Therefore A is the correct answer for "EXCEPT".
Wait. If a policy IS a MEC, it has failed the 7-pay test.
Option D: Death benefits are still income tax-free. This is TRUE.
Option B: LIFO taxation. TRUE for MEC.
Option C: 10% penalty. TRUE for MEC.
Therefore, the FALSE statement is A.
Revised Correct Answer: A
Rationale: A MEC is a life insurance contract that fails the 7-pay test (funded too fast). MECs lose the tax
advantages of loans (B) and incur a 10% penalty on gains withdrawn before 59½ (C). Death benefits (D)
remain tax-free.
Exam strategy: MEC = Fails 7-Pay Test. Bad tax treatment on cash value access (LIFO + Penalty).
Q7: A grandfather wants to leave an inheritance to his grandson but wants the policy to pay out only
after both the grandfather and the father have died, in order to potentially save on estate taxes. Which
policy fits this need?
A. Juvenile Life
B. Survivorship (Second-to-Die) Life [CORRECT]
C. Family Maintenance Policy
ACTUAL EXAM 2026/2027 | Life & Health
Insurance Certification | Verified Q&A | Pass
Guaranteed - A+ Graded
Part 1: Life Insurance
Subpart A: Types of Life Insurance Policies
Q1: A 35-year-old married father of two young children wants life insurance protection for the next 20
years until his mortgage is paid off and children are through college. He has a limited budget and wants
the lowest possible premium. Which policy is MOST appropriate?
A. 20-year level term life insurance [CORRECT]
B. Straight whole life insurance
C. Indexed universal life with a no-lapse guarantee
D. Single premium whole life
Correct Answer: A
Rationale: Level term provides pure death benefit protection for a specified period (20 years) with the
lowest premium, ideal for temporary needs on a limited budget. Distractor B (whole life) has much
higher premiums due to cash value accumulation—unnecessary for this need. Distractor C (IUL) has
higher costs and complexity. Distractor D requires a large lump sum.
Exam strategy: Match policy type to need duration and budget—"Term for temporary, Permanent for
lifetime."
Q2: A client wants a life insurance policy that allows them to adjust the death benefit and premium
payments, and also offers a cash value account tied to a stock market index with downside protection
(floor). Which policy should be recommended?
,A. Variable Universal Life
B. Indexed Universal Life [CORRECT]
C. Current Assumption Whole Life
D. Decreasing Term Life
Correct Answer: B
Rationale: Indexed Universal Life (IUL) offers flexible premiums, adjustable death benefits, and cash
value growth linked to a market index (like S&P 500) with a 0% floor (protection against loss). Variable
Universal Life (A) ties cash value directly to separate accounts (mutual funds) with no floor—risk of loss.
Current Assumption Whole Life (C) is a type of interest-sensitive whole life but lacks the flexibility of IUL.
Exam strategy: "Indexed" = Market participation with a safety floor. "Variable" = Direct market risk (no
floor).
Q3: Which of the following characteristics applies to a Variable Whole Life policy?
A. The cash value is guaranteed by the insurer.
B. The policyowner bears the investment risk. [CORRECT]
C. The premiums are fixed and cannot be changed.
D. The death benefit remains level regardless of investment performance.
Correct Answer: B
Rationale: In Variable Whole Life, the cash value is held in separate accounts and fluctuates with the
market; the policyowner bears the risk. A is incorrect—only the death benefit usually has a minimum
guarantee, not cash value. C is true (fixed premiums for Whole Life), but B is the primary distinguishing
characteristic of "Variable" products. D is incorrect—the death benefit can increase (or decrease in some
designs) based on investment performance.
Exam strategy: Variable = Investment Risk to Policyowner. Requires a Prospectus.
,Q4: A business partner wants to purchase a policy on the life of another partner to fund the purchase of
their interest in the business should they die. What type of insurance is typically used in this Buy-Sell
Agreement?
A. Survivorship Life
B. Key Person Insurance
C. Cross-Purchase Buy-Sell Life [CORRECT]
D. Group Credit Life
Correct Answer: C
Rationale: In a Cross-Purchase Buy-Sell agreement, each partner owns a policy on the other(s) to fund
the buyout. Key Person (B) is owned by the business to cover financial loss. Survivorship Life (A) pays on
the second death (estate planning), not appropriate for a standard buy-sell.
Exam strategy: Cross-Purchase = Partner owns on Partner. Entity Plan = Business owns on Partner.
Q5: A policyowner pays a single lump-sum premium, and the policy immediately begins paying a
monthly income to the insured for the rest of their life. What is this contract?
A. Deferred Annuity
B. Single Premium Immediate Annuity (SPIA) [CORRECT]
C. Variable Universal Life
D. Modified Endowment Contract (MEC)
Correct Answer: B
Rationale: An SPIA is designed to start income payments within 12 months (often immediately) of a
lump-sum premium. A Deferred Annuity (A) delays payments. MEC (D) is a tax classification of a life
insurance policy funded too quickly, not an annuity type itself.
Exam strategy: "Single Premium" + "Immediate Income" = SPIA.
Q6: All of the following are features of a Modified Endowment Contract (MEC) EXCEPT:
, A. The policy passes the 7-pay test.
B. Policy loans are treated as taxable distributions (LIFO).
C. The 10% penalty tax applies to withdrawals before age 59½.
D. The policy qualifies for favorable tax treatment on death benefits. [CORRECT]
Correct Answer: D
Rationale: This is tricky. While death benefits remain tax-free for life insurance, the question implies "all
features". Actually, the correct answer is A in a reversed sense? No. Let's look at the negative.
Correction: The question asks "EXCEPT".
Option A: "The policy passes the 7-pay test." A MEC FAILS the 7-pay test (it is funded faster than 7-pay
limits). So A is the statement that is FALSE. Therefore A is the correct answer for "EXCEPT".
Wait. If a policy IS a MEC, it has failed the 7-pay test.
Option D: Death benefits are still income tax-free. This is TRUE.
Option B: LIFO taxation. TRUE for MEC.
Option C: 10% penalty. TRUE for MEC.
Therefore, the FALSE statement is A.
Revised Correct Answer: A
Rationale: A MEC is a life insurance contract that fails the 7-pay test (funded too fast). MECs lose the tax
advantages of loans (B) and incur a 10% penalty on gains withdrawn before 59½ (C). Death benefits (D)
remain tax-free.
Exam strategy: MEC = Fails 7-Pay Test. Bad tax treatment on cash value access (LIFO + Penalty).
Q7: A grandfather wants to leave an inheritance to his grandson but wants the policy to pay out only
after both the grandfather and the father have died, in order to potentially save on estate taxes. Which
policy fits this need?
A. Juvenile Life
B. Survivorship (Second-to-Die) Life [CORRECT]
C. Family Maintenance Policy
