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WA Life & Health practice questions

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Question 1Washington Insurance Regulation and Licensing

How is the Washington insurance commissioner selected?

  1. Appointed by an insurance industry advisory board
  2. Elected by the voters to a four-year term Correct answer.
  3. Appointed by the governor to a six-year term
  4. Chosen by the legislature for a two-year term

Explanation

The insurance commissioner is a statewide elected official who serves a four-year term. The office is established by Washington's insurance code and is not filled by gubernatorial or legislative appointment.

Question 2Washington Insurance Regulation and Licensing

Under Washington law, a person may solicit, negotiate, or sell insurance only if the person:

  1. Has completed a home-study course in insurance ethics
  2. Works under the direct supervision of a licensed producer
  3. Holds a current Washington producer license Correct answer.
  4. Has obtained a business license from the city where the office is located

Explanation

Washington requires a current producer license before a person may solicit, negotiate, or sell insurance. Knowingly aiding an unlicensed person to transact insurance is itself a violation.

Question 3Washington Insurance Regulation and Licensing

An agent offers to pay part of a client's first-year premium out of her own commission to persuade the client to buy a life policy. How does Washington law treat this offer?

  1. It is permitted if the same offer is made to all similarly situated clients
  2. It is permitted if the client signs a written consent form
  3. It is permitted on policies with a face amount under $100,000
  4. It is prohibited as an unlawful rebate Correct answer.

Explanation

Washington prohibits rebating, which is offering any inducement not stated in the policy, including a share of commission, to persuade a buyer to purchase. A rebate is an unfair trade practice even when the client agrees to it.

Question 4Washington Insurance Regulation and Licensing

How many continuing education hours must a Washington producer complete in each two-year period, and how many must be in ethics?

  1. 8 hours total, including 1 hour of ethics
  2. 24 hours total, including 3 hours of ethics Correct answer.
  3. 12 hours total, including 2 hours of ethics
  4. 16 hours total, including 2 hours of ethics

Explanation

Washington producers must complete 24 continuing education credit hours every two years, at least 3 of which must be in ethics. Renewal of the license depends on completing these requirements.

Question 5Washington Insurance Regulation and Licensing

After initial licensing, how often is a Washington producer license renewed?

  1. Every three years
  2. Every year
  3. Every five years
  4. Every two years Correct answer.

Explanation

Producer licenses in Washington run on a two-year renewal cycle. Renewal is conditioned on completing the required continuing education and paying the renewal fee.

Question 6Washington Insurance Regulation and Licensing

An applicant knowingly gives false answers about a prior cancer diagnosis on a life insurance application to obtain a lower premium. In Washington, this conduct may be prosecuted as:

  1. A civil infraction carrying no criminal penalty
  2. A licensing violation only
  3. An unfair trade practice with no penalty attached
  4. Insurance fraud, which is a crime Correct answer.

Explanation

Washington's insurance fraud statute makes a knowing misrepresentation of a material fact on an application a crime. The conduct can also support denial of a claim and licensing action.

Question 7Washington Insurance Regulation and Licensing

An insurer has just executed an agency contract with a newly licensed Washington producer. Within what period must the insurer file the appointment with the commissioner?

  1. Before the end of the current calendar quarter
  2. Within 15 days
  3. Within 10 days
  4. Within 30 days Correct answer.

Explanation

An insurer must file an appointment with the commissioner within 30 days after the agency contract is executed or the first insurance application is submitted, whichever occurs first.

Question 8Washington Insurance Regulation and Licensing

An insurer terminates a producer's appointment for cause. What must the insurer do under Washington law?

  1. Report the termination only in its next annual statement
  2. Notify the producer within 60 days but not the commissioner
  3. Notify the commissioner within 30 days Correct answer.
  4. Nothing, if the producer has no active customers

Explanation

When an appointment ends, the insurer must notify the commissioner within 30 days and give notice to the producer. This keeps the licensing record accurate for the public and for other insurers.

Question 9Washington Insurance Regulation and Licensing

A producer licensed and in good standing in Oregon applies for a Washington nonresident producer license. What does Washington generally require for that license?

  1. Completion of 20 hours of Washington prelicensing education
  2. Issuance based on the home state license without another exam Correct answer.
  3. Establishment of a business office located within Washington State
  4. Successful completion of the Washington producer exam for each line

Explanation

Washington issues nonresident producer licenses on a reciprocal basis to producers who are licensed and in good standing in their home state. Qualified nonresidents are not required to sit for the Washington exam or repeat prelicensing education.

Question 10Washington Insurance Regulation and Licensing

A Washington producer's license is suspended by another state's insurance regulator. Within what period must the producer report that action to the Washington commissioner?

  1. 10 days
  2. 90 days
  3. 30 days Correct answer.
  4. At the next license renewal

Explanation

A producer must report to the commissioner, within 30 days, any administrative action taken against the license by another state or regulator. Failing to report is itself a violation.

Question 11Washington Insurance Regulation and Licensing

Within what period must a licensed Washington producer notify the commissioner of a change of business address?

  1. 30 days before the move takes effect
  2. Within 10 days after the change
  3. Within 30 days after the change Correct answer.
  4. At the next scheduled license renewal

Explanation

Producers must keep the commissioner informed of address changes and must notify the office within 30 days after the change. Accurate contact information is required so regulatory notices reach the licensee.

Question 12Washington Insurance Regulation and Licensing

Which conduct describes twisting?

  1. Failing to forward a collected premium to the insurer
  2. Charging a fee that was never disclosed to the applicant in writing
  3. Misrepresenting a policy to induce a policyholder to lapse it Correct answer.
  4. Using illustrations that show non-guaranteed policy values

Explanation

Twisting is misrepresenting an existing policy in order to induce the policyholder to drop it and buy another. It is an unfair trade practice and grounds for license discipline.

Question 13Washington Insurance Regulation and Licensing

Sliding occurs when a producer:

  1. Tells an applicant that optional coverage is required by law Correct answer.
  2. Sells a policy that duplicates coverage the client already owns
  3. Uses an unlicensed assistant to solicit insurance
  4. Collects a premium but never remits it to the insurer

Explanation

Sliding is misrepresenting the voluntary nature of a coverage, typically by telling an applicant that optional coverage is mandatory. It deceives the buyer about what is actually being purchased.

Question 14Washington Insurance Regulation and Licensing

A producer wants to split her commission on a group life sale with a friend who referred the client but holds no insurance license. Is this permitted in Washington?

  1. Yes, as long as the referral fee is less than one hundred dollars
  2. Yes, provided the friend works in the same agency
  3. No, commissions may not be shared with an unlicensed person Correct answer.
  4. Yes, if the producer discloses the split to the client

Explanation

Paying a share of commission to an unlicensed person amounts to compensating unlicensed solicitation and is prohibited. Referral arrangements must be structured so that no unlicensed person is paid for procuring insurance.

Question 15Washington Insurance Regulation and Licensing

Premiums a Washington producer collects from applicants are held:

  1. In a fiduciary capacity and must not be commingled Correct answer.
  2. By the producer as a personal loan until the policy is issued
  3. As the producer's own funds once a receipt is issued
  4. In escrow with the commissioner until policy delivery

Explanation

Premiums collected on behalf of an insurer belong to the insurer or the insured, and the producer holds them in a fiduciary capacity. Commingling them with personal or agency operating funds is prohibited.

Question 16Washington Insurance Regulation and Licensing

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

  1. 5 days
  2. 10 days of delivery Correct answer.
  3. 20 days
  4. 3 days

Explanation

Individual life policies delivered in Washington must include a notice of the right to return the policy within 10 days of delivery for a full refund of premium. This free-look right runs from delivery, not from the application date.

Question 17Washington Insurance Regulation and Licensing

Under Washington's Insurance Fair Conduct Act, a first-party claimant may bring a civil action against an insurer when the insurer:

  1. Requires the insured to submit a proof of loss form
  2. Unreasonably denies a claim for coverage or benefits Correct answer.
  3. Offers a settlement amount that the claimant personally considers too low
  4. Cancels a policy at renewal after proper written notice

Explanation

The Insurance Fair Conduct Act permits a first-party claimant to sue an insurer that unreasonably denies coverage or payment of benefits. Available relief can include actual damages and attorneys' fees.

Question 18Washington Insurance Regulation and Licensing

Before the commissioner may revoke a producer's license, the licensee is entitled to:

  1. Automatic reinstatement of the license while the matter is pending
  2. A stay of all proceedings pending review by the governor
  3. A jury trial in the county where the producer resides
  4. Notice and an opportunity for a hearing Correct answer.

Explanation

Revocation is an administrative action that requires notice of the charges and an opportunity for a hearing. A licensee who disagrees with the final order may seek judicial review in superior court.

Question 19Washington Insurance Regulation and Licensing

During a market conduct examination, the Washington commissioner's examiners may review:

  1. Records only when a felony is suspected
  2. The insurer's books and records, including claim files Correct answer.
  3. Only records the insurer volunteers to provide
  4. Only the annual statement the insurer filed with regulators

Explanation

The commissioner has broad examination authority and may inspect the insurer's books, records, and claim files. Examinations may be routine or prompted by specific concerns.

Question 20Washington Insurance Regulation and Licensing

A Washington insurer is notified of a claim on March 1. Under the state's unfair claim settlement practices rules, the insurer must acknowledge the notification no later than:

  1. 5 business days after notification
  2. 30 calendar days after notification
  3. 10 working days after notification Correct answer.
  4. 2 business days after notification

Explanation

Washington's claim handling rules require an insurer to acknowledge notification of a claim within 10 working days. Failing to acknowledge timely is an unfair claim settlement practice.

Question 21General Insurance Concepts

Which type of risk is considered insurable because it involves only the chance of loss and no possibility of gain?

  1. Pure risk Correct answer.
  2. Speculative risk
  3. Market risk
  4. Business risk

Explanation

Pure risk involves only the possibility of loss or no loss, with no chance of gain, which is why insurers will accept it. Speculative risk involves the possibility of gain as well as loss and is generally not insurable. Insurance is built on the transfer of pure risk from an individual to a pool.

Question 22General Insurance Concepts

Fire is an example of a _____, while oily rags stored next to a furnace are an example of a _____.

  1. peril; hazard Correct answer.
  2. loss; peril
  3. hazard; peril
  4. peril; loss

Explanation

A peril is the actual cause of a loss, such as fire, windstorm, or theft. A hazard is a condition that increases the likelihood or severity of a loss, such as oily rags near a heat source. Keeping the two concepts distinct is essential when evaluating how a policy responds to a claim.

Question 23General Insurance Concepts

Which statement accurately describes a mutual insurer?

  1. It is owned by its stockholders.
  2. It is owned by its producers.
  3. It is owned by the state government.
  4. It is owned by its policyholders. Correct answer.

Explanation

A mutual insurer is owned by its policyholders, who may receive dividends if the company has favorable results. A stock insurer, by contrast, is owned by shareholders who provide capital and expect a return. The ownership structure affects how earnings are distributed and how the company is governed.

Question 24General Insurance Concepts

Which of the following is an essential element of a legally enforceable insurance contract?

  1. A probationary period
  2. Consideration Correct answer.
  3. A promise to renew
  4. A verbal agreement only

Explanation

A valid contract requires offer and acceptance, consideration, legal purpose, and competent parties. Consideration is the value each party gives, such as the premium paid by the insured and the promise to pay covered claims by the insurer. Without consideration, no enforceable contract exists.

Question 25General Insurance Concepts

Purchasing a homeowners policy is best described as which risk management technique?

  1. Avoidance
  2. Reduction
  3. Transfer Correct answer.
  4. Retention

Explanation

Buying insurance transfers the financial consequence of a loss to the insurer in exchange for a premium. Retention means the individual keeps the risk, avoidance means eliminating the exposure, and reduction means lessening the likelihood or severity of loss. Insurance is the classic example of transfer.

Question 26General Insurance Concepts

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

  1. Only at the time of the insured's death
  2. At the time a claim is settled
  3. Only if the beneficiary is a charity
  4. At the time the policy is applied for Correct answer.

Explanation

Insurable interest in life insurance is measured when coverage begins, typically at application. Once the policy is issued, it may remain in force even if the relationship later changes, such as after a divorce. For property insurance, by contrast, interest must exist at the time of loss.

Question 27General Insurance Concepts

The principle of indemnity provides that after a loss the insured should:

  1. collect from two sources
  2. receive punitive damages
  3. profit from the loss
  4. be made financially whole Correct answer.

Explanation

Indemnity means the insured is restored to approximately the same financial condition as before the loss, no better and no worse. This principle prevents an insured from profiting from insurance. It is the foundation for limits, deductibles, and rules against double recovery.

Question 28General Insurance Concepts

Which principle obligates both the applicant and the insurer to disclose all material facts relevant to the risk?

  1. Utmost good faith Correct answer.
  2. The principle of adhesion
  3. The principle of subrogation
  4. The principle of indemnity

Explanation

Utmost good faith requires each party to deal honestly and to disclose material information that would affect the other's decision. An applicant who hides material facts may create grounds for rescission of the policy. The insurer also has disclosure obligations, such as explaining important policy terms.

Question 29General Insurance Concepts

An insurance policy is drafted by the insurer and offered to the applicant on a take-it-or-leave-it basis. This makes the policy a:

  1. contract of indemnity
  2. conditional contract
  3. contract of adhesion Correct answer.
  4. unilateral contract

Explanation

A contract of adhesion is written by one party with little or no input from the other, who accepts or rejects it as written. Because of this imbalance, ambiguities in the wording are generally construed against the party who drafted the policy. That rule is a key consumer protection in insurance.

Question 30General Insurance Concepts

An insurance contract is aleatory because:

  1. it is enforceable only by one party
  2. the parties exchange exactly equal value
  3. it must be approved by the state
  4. the values exchanged are unequal Correct answer.

Explanation

An aleatory contract is one in which the amounts exchanged may be unequal and depend on a chance event. A policyholder may pay modest premiums and receive a large claim payment, or receive nothing. This uncertainty of the exchange distinguishes insurance from contracts with equal value transfers.

Question 31General Insurance Concepts

The law of large numbers helps insurers to:

  1. predict losses more accurately Correct answer.
  2. eliminate all uncertain risk
  3. avoid state regulation
  4. increase the number of exclusions

Explanation

The law of large numbers states that as the number of similar exposure units increases, actual loss experience tends to approach the expected or predicted level. This makes rates more reliable and helps an insurer maintain adequate reserves. It is a foundation of actuarial pricing.

Question 32General Insurance Concepts

Adverse selection is best described as:

  1. a rate increase ordered by the state
  2. insurers rejecting high-risk applicants
  3. low-risk people buying extra coverage
  4. high-risk people seeking coverage Correct answer.

Explanation

Adverse selection is the tendency of those who face greater risk to seek or retain insurance more readily than those who face less risk. Left unchecked, it raises average claims and threatens the financial soundness of the pool. Underwriting and rating are used to counter it.

Question 33General Insurance Concepts

What is the primary purpose of reinsurance?

  1. spread risk among insurers Correct answer.
  2. eliminate the need for reserves
  3. guarantee a profit for the ceding insurer
  4. increase the number of agents

Explanation

Reinsurance allows an insurer (the ceding company) to transfer part of its risk to another insurer, spreading exposure and stabilizing results. It protects against large or catastrophic losses and increases capacity. It does not guarantee profit and does not remove the need for reserves.

Question 34General Insurance Concepts

An agent's authority that arises when the insurer's conduct leads a third party to reasonably believe the agent has that authority is called:

  1. fiduciary authority
  2. implied authority
  3. apparent authority Correct answer.
  4. express authority

Explanation

Apparent authority is created by the insurer's words or actions that would cause a reasonable person to believe the agent has certain powers, even if no formal grant exists. Express authority is written in the agency agreement, and implied authority covers acts reasonably necessary to carry out express duties. Insurers can be bound by acts within an agent's apparent authority.

Question 35General Insurance Concepts

An agent who places client premium payments into a personal bank account has violated which duty?

  1. The fiduciary duty Correct answer.
  2. The duty of disclosure
  3. The duty of indemnity
  4. The duty to report

Explanation

A fiduciary duty requires an agent to hold premiums and other funds belonging to the insurer or client in a position of trust. Commingling those funds with personal money is prohibited and can result in license discipline. The agent must account for and remit funds properly.

Question 36General Insurance Concepts

The right of subrogation allows an insurer that has paid a claim to:

  1. deny a subsequent claim
  2. cancel the policy retroactively
  3. pursue the party at fault Correct answer.
  4. increase the premium at renewal

Explanation

Subrogation lets the insurer step into the insured's shoes and recover the amount it paid from the legally responsible third party. This supports the principle of indemnity because the insured does not collect twice for the same loss. Any recovery beyond the insurer's payment belongs to the insured.

Question 37General Insurance Concepts

Leaving the keys in the ignition of an unlocked vehicle is an example of:

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

Explanation

A morale hazard is indifference or carelessness that arises because insurance exists, such as failing to lock a car. A moral hazard, by contrast, involves a deliberate dishonest act such as intentionally causing a loss. Physical hazards are tangible conditions like a slippery floor.

Question 38General Insurance Concepts

An insurer voluntarily gives up a known policy right, and a court later prevents it from enforcing that right. The legal doctrine that bars the insurer is:

  1. concealment
  2. estoppel Correct answer.
  3. reformation
  4. subrogation

Explanation

Waiver is the voluntary surrender of a known right, and estoppel prevents a party from asserting a right after another party has relied on the earlier conduct. Together they can stop an insurer from denying coverage it appeared to accept. The insured generally must show reliance on the insurer's conduct.

Question 39General Insurance Concepts

A statement in an insurance application that the applicant guarantees to be absolutely true is known as:

  1. a warranty Correct answer.
  2. a concealment
  3. a representation
  4. a waiver

Explanation

A warranty is a statement guaranteed to be true; a breach may allow the insurer to void the contract depending on materiality and state law. A representation is a statement believed to be true to the best of the applicant's knowledge. Most modern applications ask for representations rather than warranties.

Question 40General Insurance Concepts

Which type of reinsurance requires the reinsurer to evaluate and accept or reject each individual risk submitted by the ceding insurer?

  1. Treaty-based reinsurance
  2. Facultative reinsurance Correct answer.
  3. Obligatory reinsurance
  4. Automatic reinsurance

Explanation

Facultative reinsurance is arranged risk by risk, giving the reinsurer the option to accept or decline each submission. Treaty reinsurance, by contrast, obligates the reinsurer to accept all risks that fall within the terms of the agreement. Facultative arrangements are useful for unusually large or unusual exposures.

Question 41Life Insurance Basics

Insurable interest in a life insurance transaction must exist at which point?

  1. Whenever a beneficiary is changed
  2. When the policy is applied for and issued Correct answer.
  3. Only at the moment the insured dies
  4. At the time of each premium payment

Explanation

For life insurance, insurable interest is required at the time the contract is formed; once the policy is issued, the coverage may continue even if the relationship later ends. Because a death benefit is not indemnity for a financial loss, the law does not require insurable interest at the time of death.

Question 42Life Insurance Basics

Life insurance is classified as an aleatory contract because:

  1. the insured may cancel at any time without penalty
  2. both parties exchange promises of equal monetary value
  3. the values exchanged are unequal and depend on chance Correct answer.
  4. the insurer is the only party bound to perform under the policy

Explanation

An aleatory contract involves an exchange of unequal values contingent on an uncertain event. A policyowner may pay a small premium and the insurer may owe a large death benefit, or the insurer may owe nothing if the insured outlives the policy.

Question 43Life Insurance Basics

Which applicant characteristic has the greatest effect on the premium charged for a life insurance policy?

  1. Marital status
  2. Occupation
  3. Number of children
  4. Age at issue Correct answer.

Explanation

Mortality risk rises with age, so the age at which the policy is issued is the dominant rating factor. Occupation and health are also considered, but they affect mortality risk far less than age.

Question 44Life Insurance Basics

Under Washington law, an individual life insurance policy must include a grace period of at least:

  1. 15 days
  2. 10 days
  3. 30 days Correct answer.
  4. 7 days

Explanation

Washington requires a grace period of at least 30 days for individual life insurance, during which the policy stays in force even though the premium is late. If the insured dies during the grace period, the overdue premium is deducted from the proceeds.

Question 45Life Insurance Basics

Who holds the contractual rights to change the beneficiary, borrow against the cash value, and surrender a life insurance policy?

  1. The insured, even when someone else owns the policy
  2. The primary beneficiary
  3. The policyowner Correct answer.
  4. The insurer

Explanation

Ownership rights belong to the policyowner, who may be the insured or another person such as a spouse or business. Because those rights follow ownership, the insured has no control over the contract when someone else owns it.

Question 46Life Insurance Basics

The incontestability clause provides that, after the policy has been in force for a stated period (commonly two years), the insurer generally may no longer:

  1. contest the policy for misstatements on the application Correct answer.
  2. require new evidence of insurability before reinstating a lapsed policy
  3. cancel coverage for nonpayment of premium
  4. adjust the benefit because of a misstated age

Explanation

The incontestability clause bars the insurer from rescinding a policy for misrepresentation after the contestable period expires. Nonpayment of premium remains a valid ground for termination, and a misstated age is handled by benefit adjustment rather than rescission.

Question 47Life Insurance Basics

Statements an applicant makes on a life insurance application are generally treated as:

  1. guarantees that the applicant will remain in good health
  2. representations believed to be true to the best of the applicant's knowledge Correct answer.
  3. warranties that must be literally true in every respect
  4. unenforceable statements of personal opinion that carry no legal effect whatsoever

Explanation

Application answers are representations, meaning the applicant asserts they are true to the best of his or her knowledge. This differs from a warranty, which must be literally true; a materially false representation can support rescission during the contestable period.

Question 48Life Insurance Basics

A whole life policy that lapsed for nonpayment may generally be reinstated within how long after the lapse, if the insured provides evidence of insurability and pays the overdue premiums with interest?

  1. 1 year
  2. 3 years Correct answer.
  3. 30 days
  4. 6 months

Explanation

The standard reinstatement provision allows the owner to restore a lapsed policy within about three years of lapse. The owner must prove insurability and pay all overdue premiums plus interest, and any policy loan is usually restored or repaid.

Question 49Life Insurance Basics

An insurer discovers at the time of the death claim that the insured's age was understated on the application. The insurer will typically:

  1. void the policy for fraud regardless of when the misstatement is discovered
  2. rescind the contract and return all premiums with interest
  3. increase the death benefit to offset the additional premium owed
  4. pay the benefit the premium paid would have bought at the correct age Correct answer.

Explanation

Under the misstatement-of-age provision, the insurer adjusts the benefit to the amount the premium actually paid would have purchased at the true age. The policy itself is not voided, and no extra premium is collected at the time of claim.

Question 50Life Insurance Basics

If the insured dies by suicide within the first two years after a life policy is issued, the insurer will typically:

  1. pay the full face amount to the named beneficiary
  2. pay the cash surrender value in addition to the full face amount of the policy
  3. refund premiums paid, less any indebtedness, and deny the face amount Correct answer.
  4. pay nothing and keep all premiums already paid

Explanation

The suicide clause limits the insurer's liability during the first two years to a return of premiums paid. Once that period ends, suicide is treated like any other cause of death and the full benefit is payable.