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LA Life & Health practice questions

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Question 1Insurance Regulation (Louisiana laws, rules, and licensing)

In Louisiana, how is the Commissioner of Insurance selected, and what is the length of the term?

  1. Elected by voters for a four-year term Correct answer.
  2. Appointed by the industry for a two-year term
  3. Elected by the legislature for a six-year term
  4. Appointed by the governor for a four-year term

Explanation

Louisiana voters elect the Commissioner of Insurance, who heads the Department of Insurance, to a four-year term. The Commissioner administers and enforces the state's insurance laws.

Question 2Insurance Regulation (Louisiana laws, rules, and licensing)

The Louisiana Insurance Code is codified in which title of the Louisiana Revised Statutes?

  1. Title 22 Correct answer.
  2. Title 9
  3. Title 47
  4. Title 40

Explanation

The Louisiana Insurance Code is codified in Title 22 of the Louisiana Revised Statutes. Title 22 contains the licensing, marketing, and consumer protection rules enforced by the Commissioner.

Question 3Insurance Regulation (Louisiana laws, rules, and licensing)

Before soliciting a life insurance policy in Louisiana, a person must:

  1. Register with the guaranty association
  2. Complete 24 hours of continuing education
  3. Be appointed by two insurers
  4. Hold a valid producer license Correct answer.

Explanation

A person must hold a current Louisiana producer license for the line of insurance before soliciting, negotiating, or selling a policy. Appointment by an insurer is a separate step that follows licensing.

Question 4Insurance Regulation (Louisiana laws, rules, and licensing)

Which of the following is required to obtain a Louisiana resident producer license?

  1. Obtain a sponsorship letter from an insurer
  2. Pass a federal insurance examination
  3. Complete a 40-hour supervised internship
  4. Pass the state licensing exam Correct answer.

Explanation

Applicants for a Louisiana resident producer license must pass the state licensing exam for the line sought, along with other requirements such as prelicensing education and a background check. There is no federal insurance licensing exam.

Question 5Insurance Regulation (Louisiana laws, rules, and licensing)

An insurer appointing a Louisiana producer must file notice of the appointment with the Commissioner within how many days after the agency contract is executed or the first application is submitted?

  1. 10 days
  2. 15 days Correct answer.
  3. 60 days
  4. 30 days

Explanation

Louisiana requires the appointing insurer to file notice of appointment with the Commissioner within 15 days after the agency contract is executed or the first application is submitted. The appointment confirms the producer's authority to act for that insurer.

Question 6Insurance Regulation (Louisiana laws, rules, and licensing)

When an insurer terminates a producer's appointment in Louisiana, it must notify the Commissioner within how many days?

  1. 20 days
  2. 60 days
  3. 10 days
  4. 30 days Correct answer.

Explanation

When an insurer terminates a producer's appointment, it must notify the Commissioner within 30 days. The notice is separate from any notice the insurer gives the producer.

Question 7Insurance Regulation (Louisiana laws, rules, and licensing)

A nonresident producer applying for a Louisiana license generally must:

  1. Hold a valid home-state license Correct answer.
  2. Post a $50,000 surety bond
  3. Maintain a Louisiana office
  4. Pass the Louisiana licensing exam

Explanation

Louisiana grants nonresident producer licenses on a reciprocal basis to producers who hold a valid license in good standing in their home state. The nonresident applicant generally does not retake the Louisiana exam.

Question 8Insurance Regulation (Louisiana laws, rules, and licensing)

An insurance agency that sells policies in Louisiana must:

  1. Register as a broker-dealer
  2. Employ only salaried staff
  3. Obtain a business entity producer license Correct answer.
  4. File a certificate of authority with the Secretary of State

Explanation

An agency selling insurance in Louisiana must hold a business entity producer license, and it must designate a licensed individual producer who is responsible for its insurance activities. A corporate filing with the Secretary of State alone does not authorize insurance sales.

Question 9Insurance Regulation (Louisiana laws, rules, and licensing)

A temporary Louisiana producer license issued after a licensed producer's death may remain in effect for up to:

  1. 1 year
  2. 90 days
  3. 30 days
  4. 180 days Correct answer.

Explanation

A temporary producer license may be issued to allow continuation of business after the death or disability of a licensed producer, for a period not to exceed 180 days. The temporary licensee must be qualified and supervised as required by law.

Question 10Insurance Regulation (Louisiana laws, rules, and licensing)

Louisiana resident life and health producers must complete how much continuing education every two years?

  1. 12 hours, including 2 hours of ethics
  2. 16 hours, including 3 hours of ethics
  3. 24 hours, including 3 hours of ethics Correct answer.
  4. 30 hours, including 6 hours of ethics

Explanation

Louisiana requires resident life and health producers to complete 24 hours of continuing education every two years, including at least 3 hours in ethics. CE must be completed before the license is renewed.

Question 11Insurance Regulation (Louisiana laws, rules, and licensing)

Premiums a Louisiana producer collects from policyholders are held:

  1. As an insurer reserve
  2. In escrow for five years
  3. As the producer's personal funds
  4. In a fiduciary capacity Correct answer.

Explanation

Premiums and returned premiums a producer collects are trust funds held in a fiduciary capacity. The producer must account for and remit them to the insurer or the person entitled to them.

Question 12Insurance Regulation (Louisiana laws, rules, and licensing)

A licensed Louisiana producer may share commissions with:

  1. An unlicensed office assistant
  2. A bank teller who took the application
  3. Another licensed producer Correct answer.
  4. Any person who referred the client

Explanation

Louisiana law allows a producer to share commissions only with another properly licensed producer. Paying commissions to unlicensed persons encourages unlicensed selling and is prohibited.

Question 13Insurance Regulation (Louisiana laws, rules, and licensing)

Twisting is best described as:

  1. Failing to remit collected premiums
  2. Inducing lapse through misrepresentation Correct answer.
  3. Paying a commission to an unlicensed person
  4. Charging a rate higher than filed

Explanation

Twisting is inducing a policyholder to lapse or surrender a policy through misrepresentation or misleading comparison, to the detriment of the policyholder. It is an unfair trade practice.

Question 14Insurance Regulation (Louisiana laws, rules, and licensing)

An individual life insurance policy delivered in Louisiana must give the owner a right to return it for a full refund within:

  1. 30 days
  2. 10 days Correct answer.
  3. 3 days
  4. 5 days

Explanation

Louisiana gives the owner of an individual life insurance policy a 10-day right to examine the policy after delivery and return it for a full refund. The free-look period begins when the policy is delivered.

Question 15Insurance Regulation (Louisiana laws, rules, and licensing)

When replacing a life insurance policy in Louisiana, the producer must give the applicant:

  1. Only an oral warning
  2. A written replacement notice Correct answer.
  3. A 30-day free-look extension
  4. A copy of the Insurance Code

Explanation

A producer replacing a life policy must give the applicant a written replacement notice and follow the disclosure rules. The notice helps the applicant compare the existing and proposed coverage.

Question 16Insurance Regulation (Louisiana laws, rules, and licensing)

Insurable interest in a life insurance applicant must exist:

  1. Only at the time of death
  2. Only when a claim is filed
  3. At the time of application Correct answer.
  4. At both application and death

Explanation

Insurable interest must exist at the time the life insurance application is made. A policy taken out by someone with no insurable interest is a wagering contract and is void.

Question 17Insurance Regulation (Louisiana laws, rules, and licensing)

If an insurer arbitrarily fails to pay a Louisiana claim within 30 days after satisfactory proof of loss, it may be liable for:

  1. Twice the policy limit
  2. A 10% penalty only
  3. No extra amount if the claim is later paid
  4. A 50% penalty and attorney fees Correct answer.

Explanation

Under Louisiana law, an insurer that arbitrarily fails to pay a claim within 30 days after satisfactory proof of loss may owe a penalty of 50% of the damages plus attorney fees. The penalty is designed to deter bad-faith claims handling.

Question 18Insurance Regulation (Louisiana laws, rules, and licensing)

The Louisiana Life and Health Insurance Guaranty Association covers a covered life insurance death benefit up to:

  1. $100,000
  2. $300,000 Correct answer.
  3. $500,000
  4. $1,000,000

Explanation

The Louisiana Life and Health Insurance Guaranty Association protects covered policyholders when a member insurer becomes insolvent. For a covered life insurance death benefit, the cap is $300,000.

Question 19Insurance Regulation (Louisiana laws, rules, and licensing)

A lapsed individual life insurance policy may generally be reinstated within how many years of lapse?

  1. 5 years
  2. 1 year
  3. 3 years Correct answer.
  4. 2 years

Explanation

A lapsed individual life policy may generally be reinstated within three years of lapse by paying overdue premiums with interest and providing evidence of insurability. The insurer may impose conditions allowed by the policy.

Question 20Insurance Regulation (Louisiana laws, rules, and licensing)

A stranger-originated life insurance (STOLI) arrangement is:

  1. Permitted for policies over $1 million
  2. Permitted if the policy is delivered in Louisiana
  3. Allowed only for annuities
  4. Prohibited for lack of insurable interest Correct answer.

Explanation

STOLI arrangements are prohibited because the investor lacks an insurable interest in the insured's life at the time the policy is issued. Such arrangements are treated as wagering on a human life.

Question 21Insurance Regulation (Louisiana laws, rules, and licensing)

A Louisiana producer convicted of a felony must report it to the Commissioner within:

  1. 30 days Correct answer.
  2. 60 days
  3. 90 days
  4. 10 days

Explanation

A Louisiana producer must report an administrative action or criminal prosecution to the Commissioner within 30 days. Prompt reporting allows the Department to evaluate the producer's continued fitness.

Question 22Insurance Regulation (Louisiana laws, rules, and licensing)

Charging different premiums to applicants of the same class and risk based on race is:

  1. It is required for actuarial soundness
  2. It is unfair discrimination Correct answer.
  3. It is permitted with Commissioner approval
  4. It is allowed for group policies only

Explanation

Charging different premiums to applicants in the same class and with the same risk characteristics based on race is unfair discrimination and is prohibited. Rates must be based on actuarial risk factors permitted by law.

Question 23Insurance Regulation (Louisiana laws, rules, and licensing)

The Louisiana Commissioner of Insurance may examine an insurer's books and records:

  1. Only with the insurer's written consent
  2. At any reasonable time Correct answer.
  3. Only during the first year of operation
  4. Only after a court order

Explanation

The Commissioner has broad authority to examine the books, records, and accounts of insurers and producers at any reasonable time. Examinations may be conducted without the insurer's consent.

Question 24Insurance Regulation (Louisiana laws, rules, and licensing)

When the Commissioner finds that an insurer has committed an unfair trade practice, the Commissioner may:

  1. Only file a criminal charge
  2. Issue a cease and desist order Correct answer.
  3. Do nothing unless a consumer sues
  4. Only revoke the insurer's charter

Explanation

The Commissioner may issue a cease and desist order to stop an unfair trade practice. The order can be enforced through administrative or court proceedings.

Question 25Insurance Regulation (Louisiana laws, rules, and licensing)

A licensed Louisiana producer must notify the Commissioner of a change of address within:

  1. 90 days
  2. 30 days Correct answer.
  3. 10 days
  4. 60 days

Explanation

A licensed producer must notify the Commissioner of a change of address within 30 days. Keeping the Department's records current ensures official notices reach the producer.

Question 26General Insurance Concepts

Which type of risk can be transferred to an insurer through an insurance policy?

  1. A business risk that is taken in order to earn a profit
  2. Pure risk, which involves only loss or no loss Correct answer.
  3. A loss that is certain to happen regardless of precautions
  4. Speculative risk, which carries a chance of financial gain

Explanation

Insurance is built to handle pure risks, where the only possible outcomes are loss or no loss, so the chance of loss can be estimated and priced. Speculative risks include the possibility of gain and are normally retained or managed rather than insured. A certain loss involves no uncertainty at all, which removes the element insurance requires.

Question 27General Insurance Concepts

In life insurance, insurable interest must exist at which point in time?

  1. At both the time of application and the time of death
  2. Only at the time the insured person dies
  3. At the time the policy is applied for Correct answer.
  4. Only when the beneficiary files a claim

Explanation

For life insurance, insurable interest must be present when coverage is applied for, but it need not continue until the insured dies. This rule prevents policies from becoming wagers on a human life while allowing coverage to stay in force if a relationship later changes. The claim-filing stage plays no role in the test.

Question 28General Insurance Concepts

Which concept states that predicted losses become more accurate as the number of similar exposure units increases?

  1. The doctrine of subrogation
  2. The principle of adverse selection
  3. The principle of indemnity
  4. The law of large numbers Correct answer.

Explanation

The law of large numbers holds that as the number of independent, similar exposure units grows, actual results move closer to expected results. Insurers depend on it to set rates that are credible and stable. Indemnity and subrogation deal with how claims are paid, not with the accuracy of statistical prediction.

Question 29General Insurance Concepts

Which situation best illustrates adverse selection?

  1. A policyowner cancels a policy in order to buy coverage from another insurer
  2. A low-risk applicant buys coverage at a standard rate
  3. An insurer groups applicants with similar characteristics into a single rating class
  4. High-risk applicants seek coverage more eagerly than low-risk people Correct answer.

Explanation

Adverse selection is the tendency of people who expect losses to seek or keep insurance more actively than those who do not, which can leave an insurer with a poorer-than-average risk pool. Underwriting and risk classification exist largely to control this tendency. A normal purchase, a rating class, and a replacement transaction do not describe it.

Question 30General Insurance Concepts

The principle of indemnity requires that an insured be restored to...

  1. The full original purchase price of the damaged property
  2. A financial position better than the one held before the loss
  3. A benefit equal to the policy's face amount in every case
  4. The same financial position held before the loss Correct answer.

Explanation

Indemnity means the insured is made whole financially after a covered loss, no better and no worse off. Paying more than the actual loss would create a profit motive and encourage fraud. Original cost and face amount are only measures used within that limit.

Question 31General Insurance Concepts

A life insurance contract is described as aleatory because...

  1. The amounts exchanged by the parties may be unequal Correct answer.
  2. Only the insurer is legally bound to perform
  3. Both parties exchange promises of equal value
  4. The insurer drafts the terms and the insured must accept them

Explanation

In an aleatory contract the values exchanged hinge on an uncertain event, so they may be very unequal, as when a modest premium buys a large death benefit. An exchange of equal value describes a commutative contract. The remaining choices describe unilateral and adhesion features rather than the aleatory element.

Question 32General Insurance Concepts

A life insurance policy is a contract of adhesion because...

  1. Both parties negotiate the terms equally
  2. The insured must perform first before the insurer is obligated to pay anything
  3. The contract becomes enforceable only after a loss occurs
  4. The insurer drafts the terms and the insured must accept them Correct answer.

Explanation

In a contract of adhesion one party writes the terms and the other takes them or leaves them, which is why ambiguities are generally resolved in favor of the insured. Equal bargaining describes a negotiated contract instead. Order of performance and enforceability after a loss relate to different contract characteristics.

Question 33General Insurance Concepts

An insurance contract is unilateral, meaning that...

  1. Only the insurer makes a legally enforceable promise Correct answer.
  2. The insurer may cancel the policy at any time without notice
  3. The insured and the insurer share the cost of losses
  4. Both parties make legally enforceable promises

Explanation

In a unilateral contract only the insurer makes an enforceable promise, namely to pay covered claims. The insured makes no promise to pay premiums but may lose coverage by not paying. Mutual promises describe a bilateral contract, and cost sharing refers to deductibles or coinsurance.

Question 34General Insurance Concepts

In an insurance application, a representation is...

  1. A statement the applicant believes to be true Correct answer.
  2. A guarantee that a stated fact is absolutely correct
  3. An intentional concealment of a material fact
  4. A promise that a future condition will be maintained

Explanation

A representation is a statement of fact made to the best of the applicant's knowledge and belief, and it generally need only be substantially true. An absolute guarantee of accuracy carries a stricter standard. Deliberately hiding a material fact is concealment, a separate act.

Question 35General Insurance Concepts

In insurance terminology, a warranty is...

  1. A written request for coverage sent to the insurer
  2. A promise that a specified condition will be maintained Correct answer.
  3. An oral statement about the applicant's health history
  4. A clause that restores a lapsed policy

Explanation

A warranty is a promise by the insured that certain facts are true or that a condition will be maintained, and a material breach can affect coverage. Statements made on the application are representations. A request for coverage is an application, and restoring a lapsed policy is a reinstatement provision.

Question 36General Insurance Concepts

When an insurer knowingly gives up a right granted by the policy, the insurer has made a...

  1. Waiver Correct answer.
  2. Subrogation
  3. Warranty
  4. Representation

Explanation

A waiver is the voluntary surrender of a known right, such as accepting a late premium and giving up the right to cancel for nonpayment. Estoppel may then prevent the insurer from later reasserting that right. Representations and warranties involve statements, while subrogation involves recovery from a third party.

Question 37General Insurance Concepts

The parol evidence rule generally provides that...

  1. A policy cannot be modified at any time after it is issued
  2. Prior oral agreements cannot change a written contract Correct answer.
  3. Oral statements made before delivery always override the written policy
  4. An agent's oral promises are permanently binding on the insurer

Explanation

The parol evidence rule holds that a complete written contract supersedes earlier oral understandings, so the written policy controls. A policy can still be changed after issue by a written endorsement signed by an authorized representative. Oral promises may bind an insurer only through doctrines such as estoppel.

Question 38General Insurance Concepts

After paying a covered auto claim, an insurer seeks repayment from the driver who caused the accident. This right is called...

  1. Reinsurance
  2. Subrogation Correct answer.
  3. Assignment
  4. Indemnity

Explanation

Subrogation allows an insurer that has paid a claim to stand in the insured's shoes and recover from the party responsible for the loss. It supports the indemnity principle by preventing double recovery. Reinsurance is insurer-to-insurer risk transfer, and assignment transfers a policyholder's rights to another person.

Question 39General Insurance Concepts

Reinsurance is best understood as...

  1. A government program that guarantees insurer solvency
  2. Coverage an individual buys to replace group coverage
  3. Insurance an insurer buys to spread its own risk Correct answer.
  4. A pool that returns unused premium to policyholders

Explanation

Reinsurance is insurance for insurers: a primary insurer transfers part of its risk to a reinsurer, which stabilizes results and adds capacity. It does not alter the original insured's contract. Guaranty funds and dividend-paying mutuals are separate mechanisms.

Question 40General Insurance Concepts

Which statement accurately describes a mutual insurer?

  1. It is owned by its policyholders and operated for their benefit Correct answer.
  2. It is owned by a government entity and run for public benefit
  3. It is owned by stockholders who receive dividends from company profits
  4. It is owned by the agents who sell its products

Explanation

A mutual insurer is owned by its policyholders, who may receive dividends as a return of divisible surplus. A stock insurer is owned by shareholders and seeks profit for them. Government-run plans and agent-owned companies are different structures altogether.

Question 41General Insurance Concepts

A reciprocal insurance exchange is a group of individuals or businesses that...

  1. Receive dividends based on the insurer's profits
  2. Insure each other through an attorney-in-fact Correct answer.
  3. Share ownership through publicly traded stock
  4. Buy coverage from a single government agency

Explanation

In a reciprocal exchange, members insure one another and use an attorney-in-fact to manage the exchange's operations. Each member is both an insured and, in effect, an insurer of the other members. Stock ownership and profit dividends describe stock and mutual insurers instead.

Question 42General Insurance Concepts

Authority that an insurer deliberately grants an agent in a written agency agreement is called...

  1. Customary authority
  2. Express authority Correct answer.
  3. Apparent authority
  4. Implied authority

Explanation

Express authority is spelled out in the agency contract, whether given orally or in writing. Implied authority covers acts that are reasonably necessary to carry out the express powers, while apparent authority rests on a third party's reasonable belief. Customary practice alone is not a separate grant of authority.

Question 43General Insurance Concepts

Apparent authority exists when...

  1. The agent performs duties customary for the position
  2. The insurer lists the agent's powers in the agency contract
  3. A third party reasonably believes the agent has authority Correct answer.
  4. A state statute defines what agents may do

Explanation

Apparent authority grows out of the insurer's words or conduct that lead a reasonable third party to believe the agent has the power to act, and the insurer may be bound even without an actual grant. Listed powers reflect express authority, and customary duties relate to implied authority. Statutes set legal limits but do not create apparent authority.

Question 44General Insurance Concepts

An agent who deposits client premium payments into a personal bank account has committed...

  1. Twisting
  2. Rebating
  3. Commingling Correct answer.
  4. Coercion

Explanation

Premiums held on behalf of an insurer or a client are fiduciary funds that must be kept in a separate premium or trust account. Mixing those funds with personal money is commingling. Rebating, twisting, and coercion are unfair trade practices involving inducements, misrepresentation, or pressure.

Question 45General Insurance Concepts

The main purpose of a deductible in an insurance policy is to...

  1. Increase the amount the insurer will pay on each covered claim
  2. Make the insured share in the cost of a loss Correct answer.
  3. Guarantee that the policy will be renewed at each anniversary
  4. Replace the need for the insured to keep an emergency fund

Explanation

A deductible is the portion of a covered loss the insured absorbs before the insurer pays, so the insured shares in each loss. Deductibles reduce small claims and premium costs and help limit moral hazard. They do not raise benefits, promise renewal, or take the place of personal savings.

Question 46General Insurance Concepts

Which situation is an example of a moral hazard?

  1. An insured takes extra care because a policy is in force
  2. A risk is spread across a large number of policyholders
  3. An applicant's dishonest tendencies increase the chance of loss Correct answer.
  4. A physical condition makes a building more likely to burn

Explanation

A moral hazard is a loss exposure created by an applicant's character, habits, or dishonest tendencies, such as a record of fraud or arson. Tangible conditions of property are physical hazards, and careless attitudes are morale hazards. Spreading risk among many policyholders is pooling, not a hazard.

Question 47General Insurance Concepts

Indifference or carelessness toward loss that develops because insurance is in place is known as...

  1. A physical hazard
  2. A morale hazard Correct answer.
  3. A speculative risk
  4. A moral hazard

Explanation

A morale hazard is an attitude of indifference or carelessness that arises from carrying insurance, such as leaving a car unlocked or skipping maintenance. A moral hazard involves dishonest intent, and a physical hazard is a tangible condition. Speculative risk involves the chance of gain and is not a hazard at all.

Question 48General Insurance Concepts

Which of the following is an example of a peril?

  1. An oily rag stored next to a furnace
  2. A fire that destroys a warehouse Correct answer.
  3. A driver's history of reckless driving
  4. A poorly maintained electrical system

Explanation

A peril is the actual cause of a loss, such as fire, windstorm, or theft. Hazards are conditions that increase the chance or severity of a loss, which is what the other choices describe. Distinguishing the two helps determine whether a given loss is covered.

Question 49General Insurance Concepts

A business that sets aside its own funds to pay expected losses instead of buying commercial coverage is using...

  1. Self-insurance Correct answer.
  2. Reinsurance
  3. Subrogation
  4. Coinsurance

Explanation

Self-insurance is the planned retention of risk, in which a business funds expected losses from its own resources. It differs from transferring risk to an insurer and from reinsurance, which is bought by insurers. Coinsurance and subrogation are unrelated claim concepts.

Question 50General Insurance Concepts

An insurer earns $12 million in premiums and incurs $7 million in losses and loss adjustment expenses. What is its loss ratio?

  1. 71.4%
  2. 140%
  3. 58.3% Correct answer.
  4. 41.7%

Explanation

The loss ratio equals incurred losses and loss adjustment expenses divided by earned premiums, so $7 million divided by $12 million equals about 0.583, or 58.3%. It shows the share of premium consumed by claims and is a key measure of underwriting results. The remaining figures come from using the wrong numerator, inverting the ratio, or taking the complement.