Iowa Life Insurance Practice Exam Free - 2026

• A. Permitted, because the association does exist
• B. Permitted if the statement is put in writing
• C. Permitted only if the guaranty limits are also disclosed
• D. Prohibited; no person may use the existence of the guaranty association for sales, solicitation, or inducement to purchase

Correct answer: D. Prohibited; no person may use the existence of the guaranty association for sales, solicitation, or inducement to purchase

Explanation: Iowa Code section 508C.18 prohibits any person, including a member insurer or agent, from making any statement that uses the existence of the guaranty association for the purpose of sales, solicitation, or inducement to purchase insurance. Instead, section 508C.18A requires the insurer to deliver a summary document with the policy that warns coverage may be limited. Truthfulness, written form, or added disclosure does not make the sales use lawful. See Iowa Code § 508C.18.

• A. Notify the existing insurer within five business days and give the owner the right to return the policy within 30 days of delivery for a full refund
• B. Give the owner a 10-day free look and no notice to the existing insurer is required
• C. Notify the existing insurer within 30 days and give the owner a 10-day free look
• D. Wait for the existing insurer to request the illustration; the standard free look applies

Correct answer: A. Notify the existing insurer within five business days and give the owner the right to return the policy within 30 days of delivery for a full refund

Explanation: 191 IAC 16.26(1)(b) requires the replacing insurer to notify any affected existing insurer within five business days of receiving an application indicating replacement, and 16.26(1)(d) requires notice of the owner's right to return the policy within 30 days of delivery for an unconditional full refund. The producer must also present and read the replacement notice at application (16.24). A 10-day free look applies only to nonreplacement sales under 191 IAC 15.9, and the notification deadline is five business days, not 30. See 191 IAC 16.26.

• A. None; the policy is binding once delivered
• B. She may return the policy within ten days after receipt and get a prompt refund of the premium paid
• C. She may return it within 30 days for a full refund
• D. She may return it within 20 days but forfeits the first premium

Correct answer: B. She may return the policy within ten days after receipt and get a prompt refund of the premium paid

Explanation: 191 IAC 15.9 gives the owner of an individual life insurance policy or annuity the right, within ten days after receipt, to return it to the insurer or the producer, and the premium paid will be promptly refunded with the policy voided. The 30-day period applies only when the transaction is a replacement governed by 191 IAC chapter 16, and no Iowa rule provides a 20-day period or a forfeited premium. See 191 IAC 15.9.

• A. Convert only after passing a medical exam
• B. Convert within 60 days to any plan the insurer offers, including term
• C. Convert within 31 days after termination, without evidence of insurability, to any individual form the insurer customarily issues except term insurance
• D. Convert only if the group policy itself terminates

Correct answer: C. Convert within 31 days after termination, without evidence of insurability, to any individual form the insurer customarily issues except term insurance

Explanation: Iowa Code section 509.2(8) requires group life policies to let a person whose coverage ends because of termination of employment obtain an individual policy without evidence of insurability, provided application and first premium are made within thirty-one days after termination; the policy may be any form customarily issued except term insurance, up to the amount that ceased. No medical exam is required, the period is 31 (not 60) days, and the right does not depend on the group policy terminating (that separate right is in 509.2(9)). See Iowa Code § 509.2.

• A. Subrogation
• B. Concealment
• C. Waiver
• D. Estoppel

Correct answer: B. Concealment

Explanation: Concealment is the intentional withholding of a material fact that the insurer needs in order to evaluate the risk, and it can support rescission during the contestable period. Waiver is the voluntary surrender of a known right by the insurer, and estoppel prevents a party from reversing a position that another party relied upon. Subrogation is a property and casualty recovery concept and has essentially no role in life insurance.

• A. Insurable interest
• B. Adverse selection
• C. Estoppel
• D. Indemnity

Correct answer: C. Estoppel

Explanation: Estoppel prevents a party from asserting a right it has consistently appeared to give up when the other party reasonably relied on that conduct to its detriment. Adverse selection describes the tendency of poorer risks to seek coverage, and indemnity is the principle of restoring a loss without profit. Insurable interest concerns the relationship required at policy inception and has nothing to do with premium acceptance patterns.

• A. A neighbor insuring the life of the family next door who sometimes watch her home
• B. A charity insuring the life of a prospective donor it has approached once by mail
• C. An investor insuring the life of a stranger in poor health in exchange for a cash payment
• D. A business partner insuring the life of a co-owner under a buy-sell arrangement

Correct answer: D. A business partner insuring the life of a co-owner under a buy-sell arrangement

Explanation: Business partners have a genuine financial stake in one another's continued life, particularly when a buy-sell agreement funds the purchase of a deceased owner's interest, so insurable interest clearly exists. Mere proximity as a neighbor creates no financial dependence. Insuring a stranger for speculative gain is exactly the wagering arrangement the doctrine exists to prevent, and a charity needs an actual relationship and consent.

• A. Both parties are expected to deal honestly and disclose material facts
• B. The insurer alone must disclose material facts, since it drafted the policy language
• C. The applicant alone must disclose material facts, since the insurer relies on the answers
• D. The insurer must pay any claim submitted in good faith by the beneficiary

Correct answer: A. Both parties are expected to deal honestly and disclose material facts

Explanation: Utmost good faith imposes a mutual duty: the applicant must disclose material information about the risk and the insurer must deal fairly and describe the coverage accurately. The duty is not one-sided, so the options placing the obligation on only one party are incomplete. Honesty does not obligate an insurer to pay claims that fall outside the policy terms.

• A. Reciprocity
• B. Adverse selection
• C. The law of large numbers
• D. Indemnity

Correct answer: B. Adverse selection

Explanation: Adverse selection is the tendency for those most likely to have a claim to be the most eager to buy coverage, and underwriting screens exist to keep that imbalance from distorting the risk pool. The law of large numbers actually helps insurers by making aggregate losses more predictable as the pool grows. Indemnity concerns restoring a loss without allowing a profit, and reciprocity is the arrangement under which states honor one another's resident producer licenses when issuing a nonresident license.

• A. It permits the insurer to charge every applicant in the pool an identical rate regardless of risk class
• B. It allows an insurer with enough exposure units to operate without holding reserves for future claims
• C. As the number of similar exposure units grows, actual results come closer to predicted results
• D. As the number of exposure units grows, the chance that any individual insured suffers a loss declines

Correct answer: C. As the number of similar exposure units grows, actual results come closer to predicted results

Explanation: The law of large numbers states that predictions become more reliable as the pool of similar, independent exposures increases, which is what lets actuaries set adequate premiums. It says nothing about any single insured's experience and does not remove the need to hold reserves for future claims. Rating still varies by risk classification, so uniform pricing is not a consequence of the principle.

• A. The beneficiary must submit receipts to substantiate the loss
• B. Death benefits are limited to documented funeral expenses
• C. The insurer may reduce the benefit to the beneficiary's actual economic loss
• D. The stated face amount is paid regardless of the precise dollar value of the loss

Correct answer: D. The stated face amount is paid regardless of the precise dollar value of the loss

Explanation: A life policy pays the agreed face amount because the value of a human life cannot be measured precisely, making it a valued contract rather than one that reimburses proven loss. Property insurance follows indemnity and asks for proof of actual loss, which is why the receipt and economic loss choices do not fit. Benefits are not capped at funeral costs; the face amount controls.

• A. A life insurance policy exchanged for an annuity contract
• B. An annuity contract exchanged for a life insurance policy
• C. An annuity contract exchanged for a certificate of deposit
• D. A life insurance policy exchanged for shares of stock

Correct answer: A. A life insurance policy exchanged for an annuity contract

Explanation: Section 1035 permits a life policy to be exchanged for an annuity, a life policy for another life policy, or an annuity for another annuity, all without current recognition of gain. The reverse direction, annuity to life insurance, is specifically not permitted because it would convert taxable gain into a tax-free death benefit. Stocks and bank deposits are not insurance contracts and fall entirely outside the provision.