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Illinois Life Insurance and Annuity Law: Practice Questions

20 free practice questions with explanations. Pick an answer for each, then check your score.

Exam weight: 9 life-only questions on the Illinois Life state exam on the Illinois Life and Accident & Health producer state exams. Updated 2026-11-04.

Quick study guide

Section II of the Illinois Life state exam has only 9 scored questions, and most turn on a day count, a deadline or whose duty something is.

Required policy provisions (215 ILCS 5/224)

Provision	Illinois rule
Grace period	30 days or one month for premiums after the first; interest up to 6% a year allowed
Entire contract and incontestability	Policy plus attached application; incontestable after a stated time no later than 2 years from its date, except nonpayment
Misstated age	Pay what the premium would have bought at the correct age
Reinstatement	Within 3 years of default if not surrendered, with evidence of insurability and arrears plus interest up to 6%
Death claims	Settle within 2 months of due proof; 10% interest from death unless paid within 31 days
Free look	10 days from delivery, full refund including policy fees

Replacement (Part 917 and 5/224(2))

Replacement includes lapsing, surrendering, reducing or reissuing existing coverage, and borrowing more than 25% of its loan value. Exempt: credit and group coverage, non-renewable non-convertible term expiring within 5 years, same-company replacements, and policies with cash value under $500 and face under $5,000. The producer gives the signed Notice Regarding Replacement no later than when taking the application. The replacing insurer notifies the existing insurer within 3 working days and either delays issue 20 days or gives a 20-day unconditional refund right.

Solicitation and the Buyer's Guide (Part 930)

For agent-sold life policies the Buyer's Guide must reach the applicant before the insurer accepts the first premium; the Policy Summary comes with or before delivery. Before a presentation the agent states that he or she is a life insurance agent and names the insurer. Cost indexes compare only similar policies, and lower is better. Part 930 generally does not apply to annuities, credit, group or variable life.

Annuity best interest (Part 3120)

Part 3117 was repealed in 2020. Part 3120 (amended 2023) makes a producer recommending an annuity meet four obligations: care, disclosure, conflict of interest and documentation. Compensation sources and types are disclosed up front, the amount on request. Exchanges weigh surrender charges, lost benefits and any exchange in the past 60 months. Records are kept 7 years.

Other life rules

Illustrations (Part 1406) must be labeled "Life Insurance Illustration" and may not use "vanishing premium". Accelerated benefits (Part 1407) define terminal illness as death expected within 24 months; covered-condition riders may pay up to 75% of face (5/4). A viator may rescind within the earlier of 30 days after signing or 15 days after payment (215 ILCS 159/35). Section 236 bars discrimination among insureds of the same class and equal life expectancy, and refusals or surcharges based solely on blindness. Seminar ads must add "and insurance sales presentation" (909.85).

Practice questions

The fifth-year annual premium on an Illinois whole life policy was due on 1 March and has not been paid. The insured dies on 18 March. Under 215 ILCS 5/224(1)(b), what does the beneficiary receive?
1. A.Nothing, because the policy lapsed when the premium was not paid on 1 March
2. B.The full death benefit, because the overdue premium is waived at death
3. C.Only the cash surrender value the policy had on 1 March
4. D.The death benefit, less the overdue premium and any interest the company charges on it
Show answer
Answer: D. Section 224(1)(b) requires a grace period of 30 days or one month for any premium after the first, during which the policy stays in force. If the policy becomes a claim during the grace period, the overdue premium may be deducted from the settlement, with interest the company may charge at no more than 6% a year. The policy had not lapsed on 18 March, and nothing in the section waives the premium.
Source: Illinois outline II.C.7: Policy provisions (215 ILCS 5/224); 215 ILCS 5/224
An Illinois life policy was issued 28 months ago, and the insured has just died. The insurer finds that the insured left a heart condition off the application. The policy states the longest contestable period Illinois allows. Under 215 ILCS 5/224(1)(c), may the insurer rescind the policy?
1. A.No, because Illinois life policies are incontestable from the date of issue
2. B.Yes, because a material misrepresentation can be contested at any time
3. C.Yes, because the contestable period in Illinois runs for 3 years
4. D.No, because the policy became incontestable no later than 2 years from its date
Show answer
Answer: D. Section 224(1)(c) requires a provision that after the policy has been in force during the insured's lifetime for a specified time, not later than 2 years from its date, it is incontestable except for nonpayment of premiums (and, at the company's option, certain disability, accidental death, war and aviation provisions). At 28 months the period has run, so a misrepresentation can no longer be used to rescind. A policy may be incontestable from issue, but that is optional, not the rule.
Source: Illinois outline II.C.7: Policy provisions (215 ILCS 5/224); 215 ILCS 5/224
An Illinois whole life policy lapsed for nonpayment 30 months ago. Its value was applied to extended term insurance, which is still in force, and the policy was never surrendered. Under 215 ILCS 5/224(1)(i), can the owner reinstate it?
1. A.No, because the reinstatement period ends 2 years after default
2. B.Yes, with evidence of insurability and payment of overdue premiums with interest of no more than 6% a year
3. C.Yes, without evidence of insurability, because the extended term coverage is still in force
4. D.No, because a policy on extended term insurance can only be replaced, not reinstated
Show answer
Answer: B. Section 224(1)(i) says that if the nonforfeiture insurance is in force and the original policy has not been surrendered and cancelled, the policy may be reinstated within 3 years from default. The owner must give evidence of insurability satisfactory to the company and pay premium arrears with interest at no more than 6% a year, plus any other policy debt. Thirty months is within 3 years, and evidence of insurability is still required.
Source: Illinois outline II.C.7: Policy provisions (215 ILCS 5/224); 215 ILCS 5/224
A new individual life policy that replaces no other coverage is delivered to its owner in Illinois. Under 215 ILCS 5/224(1)(n), what right must the policy or an attached notice describe?
1. A.To return it within 20 days of delivery for a refund of premium less any medical exam costs
2. B.To surrender it within 10 days of delivery, with a written cancellation request, for a refund of all premium and policy fees
3. C.To cancel it within 3 business days of signing the application
4. D.To surrender it within 30 days of the application date for a refund of premium less a policy fee
Show answer
Answer: B. Section 224(1)(n) requires a provision or attached notice that for 10 days from delivery the policy may be surrendered with a written request for cancellation, and the insurer will refund any premium paid, including policy fees or other charges. The period runs from delivery, not from the application, and the refund is not reduced by fees. The 20-day period applies to replacement policies under section 224(2).
Source: Illinois outline II.C.7: Policy provisions (215 ILCS 5/224); 215 ILCS 5/224
Which of these transactions involving a client's existing life policy is a replacement under 50 Ill. Adm. Code 917.30, when it is done in connection with buying a new policy?
1. A.Keeping the existing policy exactly as it is and adding the new one
2. B.Naming a different beneficiary on the existing policy
3. C.Borrowing 10% of the existing policy's loan value to pay the new premium
4. D.Borrowing 40% of the existing policy's loan value to pay the new premium
Show answer
Answer: D. Section 917.30 defines replacement as buying new life insurance or an annuity when the producer knows or should know the existing coverage will be lapsed, surrendered, converted to reduced paid-up or extended term, reduced in benefits or term, reissued with less cash value, or pledged or borrowed against for amounts exceeding 25% of its loan value in total. Borrowing 40% exceeds that limit; borrowing 10% does not. A beneficiary change and keeping both policies leave the existing coverage intact.
Source: Illinois outline II.B.2: Replacement, definitions (Reg. 917); 50 Ill. Adm. Code 917.30
A producer proposes a new individual whole life policy from a different insurer that would replace the client's existing coverage. In which case is the transaction exempt from Part 917 under 50 Ill. Adm. Code 917.50?
1. A.The existing policy is individual universal life bought through a different producer
2. B.The existing policy is non-convertible term that expires in 4 years and cannot be renewed
3. C.The existing policy is convertible 10-year term with 4 years left to run
4. D.The existing policy is whole life with a $3,000 cash value and a $25,000 face amount
Show answer
Answer: B. Section 917.50(e) exempts existing coverage that is non-convertible term life expiring in 5 years or less that cannot be renewed. Convertible term is not covered by that exemption. The small-policy exemption in 917.50(g) needs both a total cash value under $500 and total face amounts under $5,000, so a $3,000 cash value and $25,000 face do not qualify, and who sold the existing policy does not matter.
Source: Illinois outline II.B.3: Replacement, exemptions (Reg. 917); 50 Ill. Adm. Code 917.50
An Illinois producer's client will surrender an existing annuity to buy a new one from another insurer. Under 50 Ill. Adm. Code 917.60, when must the producer present the Notice Regarding Replacement of Life Insurance or Annuity to the applicant?
1. A.Only if the applicant asks for a comparison of the two contracts
2. B.At delivery of the new contract
3. C.No later than at the time of taking the application
4. D.Within 3 working days after the application is signed
Show answer
Answer: C. Section 917.60(b)(1) requires the producer, where replacement is involved, to present the notice in the form of Exhibit A no later than at the time of taking the application, list the contract numbers being replaced and sign it. A copy, together with the Exhibit B notice signed by the producer, goes to the replacing insurer with the application. The 3-working-day deadline belongs to the replacing insurer, which must send the Exhibit B notice to the existing insurer.
Source: Illinois outline II.B.4: Replacement, duties of agent (Reg. 917); 50 Ill. Adm. Code 917.60
An insurer issues a life policy that replaces a client's existing coverage with another company and chooses not to delay issuing it. Under 215 ILCS 5/224(2), what right must it give the policyowner?
1. A.An unconditional refund of all premiums paid, if requested within 20 days of delivery
2. B.An unconditional refund of all premiums paid, if requested within 10 days of delivery
3. C.A refund of premiums less a cancellation fee, if requested within 30 days of delivery
4. D.An unconditional refund of all premiums paid, if requested within 45 days of the application
Show answer
Answer: A. Section 224(2) requires a replacing insurer either to delay issuing its policy for at least 20 days after sending a policy summary to the existing insurer, or to give notice of an unconditional right to a refund of all premiums exercisable within 20 days from delivery. Under the second option it must also send the existing insurer a policy summary within 3 working days after issue. Ten days is the ordinary free look under 224(1)(n), and 30 or 45 days do not appear in the section.
Source: Illinois outline II.B.5: Replacement, duties of replacing insurer (Reg. 917; 215 ILCS 5/224(2)); 215 ILCS 5/224; 50 Ill. Adm. Code 917.70
An agent takes an application for an individual whole life policy, and the applicant offers a check for the first premium. Under 50 Ill. Adm. Code 930.50, by when must the applicant receive the Buyer's Guide?
1. A.At the end of the first policy year, with the annual report
2. B.Only if the applicant asks for it in writing
3. C.Within 10 days after the policy is delivered
4. D.Before the insurer accepts the initial premium or premium deposit
Show answer
Answer: D. Section 930.50(a) requires the insurer, except for direct response products, to provide every applicant a Buyer's Guide before accepting the initial premium or premium deposit. For direct response policies the guide goes with or before delivery of the policy, and the Policy Summary must be delivered with or before delivery of either kind. Section 930.50(b) adds that both must be given to a prospect on request before application, but the duty to deliver does not depend on a request.
Source: Illinois outline II.C.4: Life solicitation, disclosure requirements (Reg. 930); 50 Ill. Adm. Code 930.50
Under 50 Ill. Adm. Code 930.70(b), what must an Illinois agent tell a prospect before starting a life insurance sales presentation?
1. A.The agent's license number and the date the license expires
2. B.The names of every insurer that has appointed the agent
3. C.That the agent is acting as a life insurance agent, and the full name of the insurer the agent represents
4. D.The amount of commission the agent will earn on the sale
Show answer
Answer: C. Section 930.70(b) requires the agent, before commencing a life insurance sales presentation, to say that he or she is acting as a life insurance agent and to give the full name of the insurer being represented; with no agent, the insurer identifies itself. Section 930.70(c) adds that titles like financial planner or investment advisor may not be used to imply the agent is paid in a way unrelated to sales unless that is true. Part 930 does not require commission, license-number or appointment disclosures at that point.
Source: Illinois outline II.C.5: Life solicitation, agents' responsibilities (Reg. 930); 50 Ill. Adm. Code 930.70
According to the Illinois Life Insurance Buyer's Guide required by Part 930, how should a shopper use the Surrender Cost Index and the Net Payment Cost Index?
1. A.To pick the policy with the highest index numbers, which signal the best value
2. B.To decide whether term or whole life insurance better fits the shopper's needs
3. C.To forecast the dividends a participating policy will pay in future years
4. D.To compare only similar policies, looking for low index numbers
Show answer
Answer: D. The Buyer's Guide in Exhibit A to Part 930 tells shoppers to use the two indexes only for comparing the relative costs of similar policies and to look for policies with low cost index numbers. Section 930.70(g) likewise requires any statement about the indexes to explain that they are useful only for comparing similar policies. They do not choose between policy types, and the guide stresses that future dividends cannot be guaranteed.
Source: Illinois outline II.C.4: Life solicitation, Buyer's Guide content (Reg. 930); 50 Ill. Adm. Code 930, Exhibit A (Life Insurance Buyer's Guide); 50 Ill. Adm. Code 930.70
Under the Illinois annuity best-interest rule (50 Ill. Adm. Code 3120.50), which item must a producer disclose only if the consumer or the consumer's representative asks for it?
1. A.Whether the producer can sell products from one insurer or from two or more insurers
2. B.A reasonable estimate of the amount of cash compensation, which may be stated as a range
3. C.Whether the producer is licensed to sell fixed, fixed indexed and variable annuities
4. D.A description of the sources and types of cash and non-cash compensation the producer will receive
Show answer
Answer: B. Section 3120.50(a)(2)(A) requires the producer, before recommending or selling an annuity, to disclose on a form like Appendix A the role in the transaction, the products the producer is licensed to sell, the insurers the producer can sell for, the sources and types of compensation, and the consumer's right to ask for more. Only on request under 3120.50(a)(2)(B) must the producer give a reasonable estimate of the cash compensation amount, which may be a range of amounts or percentages, and say whether it is paid once or repeatedly.
Source: Illinois outline II.C.6: Suitability in the sale of life insurance and annuities (Reg. 3120); 50 Ill. Adm. Code 3120.50
An Illinois producer is considering recommending that a client exchange one annuity for another. Under the care obligation in 50 Ill. Adm. Code 3120.50(a)(1)(J), the producer must consider whether the client had another annuity exchange or replacement, in particular within the preceding:
1. A.12 months
2. B.36 months
3. C.120 months
4. D.60 months
Show answer
Answer: D. For an exchange or replacement, section 3120.50(a)(1)(J) makes the producer consider the whole transaction: surrender charges, a new surrender period, lost benefits and higher fees; whether the new product would substantially benefit the consumer over its life; and whether the consumer had another exchange or replacement, in particular within the preceding 60 months. The other periods do not appear in the rule.
Source: Illinois outline II.C.6: Suitability in the sale of life insurance and annuities (Reg. 3120); 50 Ill. Adm. Code 3120.50
Under 50 Ill. Adm. Code 3120.80, how long must insurers and producers keep the consumer information, disclosures and other information used in making an annuity recommendation?
1. A.5 years after the contract is delivered
2. B.For as long as the annuity remains in force
3. C.7 years after the insurer completes the transaction
4. D.3 years after the application is signed
Show answer
Answer: C. Section 3120.80(a) requires insurers, general agents, independent agencies and producers to keep, and make available to the Director, the information collected from the consumer, the disclosures made (including summaries of oral disclosures) and other information used in the recommendation for 7 years after the insurance transaction is completed by the insurer. An insurer may keep the records for a producer but does not have to. The 3-year periods in this topic belong to replacement notices (917.70) and illustrations (1406.80).
Source: Illinois outline II.C.6: Suitability in the sale of life insurance and annuities (Reg. 3120); 50 Ill. Adm. Code 3120.80
Which of the following may a producer NOT do when using an illustration to sell a life policy in Illinois under 50 Ill. Adm. Code 1406.70?
1. A.Describe a plan to pay future premiums from dividends as a "vanishing premium"
2. B.Show the guaranteed values before the non-guaranteed values
3. C.Show the policy's values in a chart as well as in a table
4. D.Label the illustration "Life Insurance Illustration"
Show answer
Answer: A. Section 1406.70(b)(8) bars using "vanish", "vanishing premium" or a similar term implying the policy becomes paid up to describe a plan for using non-guaranteed elements to pay part of future premiums. The label "Life Insurance Illustration" is required by 1406.70(a). Section 1406.50(a) allows charts in addition to tables and requires guaranteed elements to be shown before the corresponding non-guaranteed ones.
Source: Illinois outline II.E: Illustrations (Reg. 1406); 50 Ill. Adm. Code 1406.70; 50 Ill. Adm. Code 1406.50
A producer sells a universal life policy, from a form the insurer markets with illustrations, without showing the applicant an illustration. Under 50 Ill. Adm. Code 1406.80(b), what must happen?
1. A.The insurer must mail an illustration within 30 days after the first policy anniversary
2. B.The application must be withdrawn and resubmitted with a signed illustration attached
3. C.The producer certifies on an insurer form that no illustration was used, and an illustration matching the policy as issued is provided no later than delivery
4. D.Nothing more, because illustrations are optional when the applicant does not ask for one
Show answer
Answer: C. Under 1406.80(b)(1), if no illustration is used the producer certifies that in writing on a form provided by the insurer, and the applicant acknowledges on the same form that an illustration conforming to the policy as issued will be provided no later than delivery; the form goes to the insurer with the application. Under 1406.80(b)(2), that basic illustration is sent with the policy and signed by the producer and policyowner by delivery. The insurer keeps these records until 3 years after the policy is no longer in force (1406.80(d)).
Source: Illinois outline II.E: Illustrations (Reg. 1406); 50 Ill. Adm. Code 1406.80
An insurer advertises a free event for seniors where annuities will be offered for sale. Under 50 Ill. Adm. Code 909.85(e), if the ad calls the event a "seminar", what must it add?
1. A.A statement that attendees will not be contacted afterward
2. B.The Illinois license number of every producer who will attend
3. C.The words "and insurance sales presentation" right after "seminar", in the same type size and font
4. D.A notice that the event has been approved by the Department of Insurance
Show answer
Answer: C. Section 909.85(e) bars ads for events where insurance products will be sold from using "seminar", "class", "informational meeting" or similar terms unless the words "and insurance sales presentation" immediately follow, in the same type size and font. Section 909.85 also requires lead-generating ads aimed at people 65 or older to disclose that an insurer or producer may contact them, if that is the fact, so promising no contact is not the rule. Implying government approval is prohibited by 909.70(c).
Source: Illinois outline II.A: Advertising and sales (Reg. 909); 50 Ill. Adm. Code 909.85
For an accelerated benefit provision regulated by 50 Ill. Adm. Code Part 1407, a terminal illness is a condition that a licensed physician believes would generally result in the insured's death within:
1. A.6 months
2. B.24 months
3. C.12 months
4. D.36 months
Show answer
Answer: B. Section 1407.20 defines terminal illness as a medical condition that, in the opinion of a physician licensed to practice medicine in all its branches, would generally result in the insured's death within 24 months, or a condition requiring continuous confinement in an eligible institution until death. The shorter periods are not in the Illinois definition. Separately, 215 ILCS 5/4 treats riders paying up to 75% of the face amount on diagnosis of a listed covered condition, such as heart attack or stroke, as life insurance.
Source: Illinois outline II.D: Accelerated benefits (215 ILCS 5/4; Reg. 1407); 50 Ill. Adm. Code 1407.20; 215 ILCS 5/4
A viator signs a viatical settlement contract that all parties have executed by 1 June, and the settlement proceeds are paid to the viator on 5 June. Under 215 ILCS 159/35, by when must the viator act to rescind the contract?
1. A.15 June
2. B.1 July
3. C.20 June
4. D.5 July
Show answer
Answer: C. Section 159/35(a)(7) gives the viator the right to rescind before the earlier of 30 calendar days after the contract is executed by all parties (here 1 July) or 15 calendar days after the proceeds are paid (here 20 June), so 20 June controls. Rescission works only if the viator gives notice and repays the proceeds and any premiums, loans and loan interest paid on the policy's account within that period. If the insured dies during the rescission period, the contract is treated as rescinded, subject to repayment within 60 days after death.
Source: Illinois outline II.F: Viatical settlements (215 ILCS 159); 215 ILCS 159/35
A legally blind applicant with no other health issues applies for an individual life policy in Illinois. The insurer wants to add a 50% surcharge solely because of the blindness. Under 215 ILCS 5/236, the surcharge is:
1. A.Prohibited only if the applicant was blind from birth
2. B.Prohibited, because a life company may not charge a different rate solely because of blindness
3. C.Allowed, because blindness always raises mortality risk
4. D.Allowed if the applicant signs a written consent to the higher rate
Show answer
Answer: B. Section 236(c) bars a life company from refusing to insure, limiting coverage or charging a different rate for the same coverage solely because of blindness or partial blindness. For every other condition, including the underlying cause of the blindness, blind applicants are held to the same actuarial standards as sighted applicants. The applicant's consent and the cause or onset of blindness do not change that, and section 236(d) similarly bars refusals based solely on military or National Guard status.
Source: Illinois outline II.G: Unfair practices (215 ILCS 5/236); 215 ILCS 5/236

Where these questions come from: Illinois content outline (Pearson VUE #121402, Life or Accident and Health state exam), Life exam sections II.A: Advertising and sales, II.B: Replacement, II.C: Life solicitation (including suitability and policy provisions), II.D: Accelerated benefits, II.E: Illustrations, II.F: Viatical settlements and II.G: Unfair practices. See how we write questions.