Virginia Life Insurance Practice Exam Free - 2026

• A. The policy is canceled prospectively and she receives a pro rata refund
• B. The policy is void from the beginning and the insurer must refund the premium paid
• C. She forfeits the first premium as a cancellation charge
• D. The request is denied because life policies cannot be returned after delivery

Correct answer: B. The policy is void from the beginning and the insurer must refund the premium paid

Explanation: Virginia individual life policies carry a 10-day right to examine. If the policy is surrendered to the insurer or its agent with a written cancellation request within 10 days of delivery, it is void from the beginning and any premium paid is refunded. See Va. Code § 38.2-3301.

• A. 10 days, with coverage suspended until payment
• B. 60 days, with coverage suspended until payment
• C. 31 days, and the policy continues in full force during the grace period
• D. 31 days, but only if the insurer approves an extension request

Correct answer: C. 31 days, and the policy continues in full force during the grace period

Explanation: Individual life policies in Virginia must provide a grace period of not less than 31 days for premiums after the first, and the policy continues in full force during the grace period; an overdue premium with interest may be deducted from any settlement. See Va. Code § 38.2-3303.

• A. Nonpayment of premiums
• B. Any material misstatement in the application
• C. The insured's change of occupation
• D. An innocent misstatement about tobacco use

Correct answer: A. Nonpayment of premiums

Explanation: A Virginia individual life policy must be incontestable after it has been in force during the insured's lifetime for two years from its date of issue, except for nonpayment of premiums (and permitted exceptions for disability and accidental death benefit provisions). See Va. Code § 38.2-3305.

• A. void the policy and refund all premiums
• B. pay the full face amount but bill the estate for back premiums
• C. deny the claim if the misstatement occurred within two years
• D. pay the amount the premium would have purchased at the insured's correct age

Correct answer: D. pay the amount the premium would have purchased at the insured's correct age

Explanation: When age is misstated, Virginia law requires that the amount payable equal the amount the premium would have purchased at the insured's correct age; the policy is not voided. See Va. Code § 38.2-3306.

• A. A Roth IRA, funded with after-tax contributions
• B. A traditional IRA, funded with deductible contributions
• C. A nonqualified deferred annuity
• D. A SEP IRA funded by her employer

Correct answer: A. A Roth IRA, funded with after-tax contributions

Explanation: Roth IRA contributions are never deductible, but qualified distributions - including the earnings - are received tax-free, and amounts can be left in the account for life. Traditional IRA and SEP dollars are taxed when withdrawn, and a nonqualified annuity's earnings are taxable at distribution. See irs.gov.

• A. ERISA requires every employer with 10 or more workers to fund a pension
• B. ERISA guarantees each worker a benefit equal to final salary
• C. ERISA does not require an employer to establish a plan; it sets minimum participation, vesting, accrual, and funding standards and fiduciary duties for plans that are voluntarily established
• D. ERISA applies only to government and church plans

Correct answer: C. ERISA does not require an employer to establish a plan; it sets minimum participation, vesting, accrual, and funding standards and fiduciary duties for plans that are voluntarily established

Explanation: ERISA regulates most voluntarily established private-sector retirement and health plans - setting minimum standards for participation, vesting, benefit accrual, and funding, imposing fiduciary responsibilities, and giving participants the right to sue - but it does not compel any employer to create a plan. Government and church plans are actually among those exempt from ERISA. See dol.gov.

• A. The rollover is valid because it was completed in the same tax year
• B. The rollover is valid because IRAs have no time limit
• C. Only half of the deposit is treated as a rollover
• D. The distribution is taxable, because a rollover must be completed by the 60th day after the day the funds are received

Correct answer: D. The distribution is taxable, because a rollover must be completed by the 60th day after the day the funds are received

Explanation: Rollover treatment does not apply to any transfer made after the 60th day following the day the distributee received the distribution. June 1 to August 20 is 80 days, so absent an IRS hardship waiver the amount is included in income. The tax year in which the deposit lands is irrelevant. See 26 U.S.C. 402(c)(3).

• A. Directly back to the issuing insurer at face value
• B. A life settlement provider licensed with the state insurance regulator, which may hold the policy or resell it to institutional investors
• C. Her insurance producer personally
• D. The policy's named beneficiary

Correct answer: B. A life settlement provider licensed with the state insurance regulator, which may hold the policy or resell it to institutional investors

Explanation: Life settlement transactions run through settlement companies or providers, and consumers are advised to confirm the buyer is properly licensed with the state insurance commissioner. Providers either keep policies until maturity or resell them to hedge funds and institutional investors. Surrendering to the insurer pays only cash value, not a negotiated settlement, and producers do not buy clients' policies personally. See finra.org.

• A. A viatical settlement
• B. An accelerated death benefit claim paid by the insurer
• C. A Section 1035 exchange
• D. A policy loan

Correct answer: A. A viatical settlement

Explanation: A viatical settlement is the sale of a terminally ill person's life insurance policy to an investor at a discount from the death benefit, with the price reflecting the insured's life expectancy; ordinary life settlements, by contrast, typically involve older insureds who are not terminally ill. An accelerated death benefit comes from the insurer itself under a policy rider, not from a third-party purchaser.

• A. Below the cash surrender value
• B. Exactly equal to the death benefit
• C. More than the $40,000 cash surrender value but less than the $500,000 death benefit
• D. Exactly equal to the total premiums she has paid

Correct answer: C. More than the $40,000 cash surrender value but less than the $500,000 death benefit

Explanation: A life settlement makes economic sense only because the price exceeds what the insurer would pay on surrender, while the investor profits by paying less than the net death benefit it will eventually collect. An offer below cash surrender value should simply be declined in favor of surrendering. Premiums paid are not the pricing benchmark. See finra.org.

• A. Federal law bars the buyer from ever seeing his medical records
• B. Only the original insurer may review his health history
• C. His records are sealed once the policy is sold
• D. The buyer may obtain his health information and share it with other entities, such as lenders or third-party investors, and may track his health status going forward

Correct answer: D. The buyer may obtain his health information and share it with other entities, such as lenders or third-party investors, and may track his health status going forward

Explanation: Because the purchase price depends on life expectancy, settlement buyers evaluate the insured's health and may share that information with other entities including lenders or third-party investors, and investors have an ongoing interest in the insured's status. Consumers are urged to review how their information will be used before selling. See finra.org.

• A. The daughter, because a beneficiary designation survives any sale
• B. The settlement provider or its investors, who became the policy's owner and beneficiary and paid the premiums after the sale
• C. The insured's estate
• D. The insurer keeps it, because settled policies are void at death

Correct answer: B. The settlement provider or its investors, who became the policy's owner and beneficiary and paid the premiums after the sale

Explanation: A life settlement transfers ownership of the policy: the buyer takes over premium payments, names itself beneficiary, and collects the death benefit when the insured dies. The original beneficiary's expectation ends at the sale - a consequence the seller should weigh, since the family receives only whatever remains of the settlement proceeds. See finra.org.