NAIFA LACP PRACTICE
TEST 150 QUESTIONS 2026
Question 1: A client wants permanent life insurance with level premiums, a
guaranteed death bene�t, and cash value guarantees. Which product most directly �ts these priorities?
Choices:
1) Annual renewable term insurance 2) Whole life insurance 3) Variable universal life insurance 4) Credit life insurance
Correct Answer: Whole life insurance
Explanation: Whole life is designed to provide permanent coverage with level premiums and contractual cash value and death bene�t guarantees, assuming required premiums are paid.Page 1
Question 2: What distinguishes a participating whole life policy from a non-
participating whole life policy?
Choices:
1) It must be owned by an employer 2) It has no cash value 3) It may pay policy dividends that are not guaranteed 4) It guarantees a higher death bene�t every year
Correct Answer: It may pay policy dividends that are not guaranteed
Explanation: A participating policy may pay dividends when declared by the insurer. Dividends are not guaranteed and can generally be taken in several ways, such as cash or paid-up additions.
Question 3: Which feature is most characteristic of universal life insurance?
Choices:
1) Premium and death-bene�t �exibility within contract limits 2) A �xed one-year term with no renewal option 3) Direct ownership of a stock index 4) Mandatory annuitization at retirement Correct Answer: Premium and death-bene�t �exibility within contract limits Explanation: Universal life typically permits �exible premium payments and, subject to contract rules and underwriting, adjustable death bene�ts. Policy values are credited under the insurer's declared-interest mechanism and guarantees.Page 2
Question 4: A client accepts market risk in exchange for investment choice inside a permanent life policy. Which product is most consistent with that preference?
Choices:
1) Variable life 2) Credit life 3) Whole life 4) Level term
Correct Answer: Variable life
Explanation: Variable life allocates cash value to separate-account investment options, so policy value can rise or fall with investment performance. It combines insurance protection with securities features.
Question 5: How does indexed universal life generally credit interest?
Choices:
1) By giving the policyowner direct ownership of index stocks 2) By linking credited interest to an external index subject to contract terms such as caps, participation rates, and �oors 3) By guaranteeing the exact annual return of the S&P 500 4) By placing all premiums in a money market mutual fund Correct Answer: By linking credited interest to an external index subject to contract terms such as caps, participation rates, and �oors Explanation: Indexed universal life credits interest using a formula tied to an external market index. The policyowner does not directly own the index, and credited interest is governed by contract features such as �oors, caps, or participation rates.Page 3