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Illinois Insurance Regulation and Producer Licensing: Practice Questions

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

Exam weight: Part of the 22 common-rules questions on each Illinois state exam on the Illinois Life and Accident & Health producer state exams. Updated 2026-11-04.

Quick study guide

The Director

The Director of Insurance enforces all Illinois insurance laws and may make reasonable rules, investigate, examine, hold hearings and bring enforcement actions (215 ILCS 5/401). Hearing notices go out in writing at least 10 days ahead (5/402), and ignoring a subpoena without reasonable excuse can cost up to $2,000 (5/403). To prevent irreparable loss, the Director may order a cease and desist without notice and before a hearing, with the hearing 20 to 30 days after service (5/401.1). An examined producer has 14 calendar days after receiving the report to demand a hearing (5/500-110).

Who needs a license

No one may sell, solicit or negotiate insurance without a license for that line; knowingly doing so is a Class A misdemeanor (5/500-15). Paid advice on a policy's benefits is limited to licensed producers and a few professionals such as attorneys and CPAs. Insurers, and employees in clerical, underwriting or claims work who earn no commission, are exempt (5/500-20). An applicant must be at least 18, finish a 20-hour pre-licensing course per line (7.5 hours in a classroom or webinar) and pass both exam parts within 90 days of each other (5/500-25, 5/500-30). A business entity needs its own license and a designated licensed producer; a nonresident in good standing at home is licensed if the home state reciprocates (5/500-40).

Number	Rule
2 years	License term; fee $215 resident, $380 nonresident, $150 business entity (5/500-35, 5/500-135)
24 hours	CE before each renewal, 3 of them classroom or webinar ethics (5/500-35(b))
30 days	Report a change of address (5/500-35(g)) or a felony conviction (5/500-95)
12 months	Relicense after a lapse without an exam, paying double the unpaid renewal fee (5/500-35(d))
180 days	Temporary license after a producer's death or disability, renewable once (5/500-60)
90 days	One-per-lifetime temporary license for an applicant in insurer training (5/500-65)

Discipline

For causes such as a felony conviction, misappropriation or forgery, the Director may place a license on probation, suspend, revoke or refuse it and impose up to $10,000 per cause, $100,000 in total; after a revocation or denial the person cannot reapply for 3 years (5/500-70). A license can also be refused when controlled business (the producer's own, spouse's, employer's or own-business risks) outweighs all other business (5/500-125).

Money and paperwork

Premiums are held in a fiduciary capacity, and a premium paid to the producer counts as paid to the insurer (5/500-115). Holding premiums 15 days or more, or depositing them in any account, requires a premium fund trust account, never used as an operating account (50 Ill. Adm. Code 3113.40). Placing business with an insurer you have no agency contract with requires a bond of $2,500 or 5% of last year's brokered premiums, whichever is greater, up to $50,000 (5/500-130). Commissions go only to licensees (5/500-80), and each individual life or health application carries the soliciting licensee's name and signature (5/500-155).

Practice questions

The Illinois Director of Insurance finds that a company is conducting its business in a way that is hazardous to its policyholders and that irreparable loss may occur unless she acts at once. Under 215 ILCS 5/401.1, what may she do?
1. A.Order it to cease and desist without notice or a prior hearing, serving with the order a notice of a hearing 20 to 30 days later
2. B.Order it to cease and desist without notice, and hold a hearing only if the company asks for one within 90 days
3. C.Order it to cease and desist only after a hearing held on at least 10 days' written notice to the company
4. D.Ask a circuit court for an injunction, because the Director cannot issue any order before a hearing is held
Show answer
Answer: A. Section 401.1(2) lets the Director, without notice and before a hearing, order a person or company to cease and desist when its conduct is hazardous to policyholders, creditors or the public and irreparable loss may occur unless she acts immediately. At the same time she must serve a notice of hearing set no fewer than 20 and no more than 30 days after service (401.1(3)), so the hearing is not left to the company to request. The 10-day notice in section 402 is the general rule for hearings, not a precondition to this emergency order. Violating such an order after it becomes final can cost up to $100 a day, capped at $5,000 (401.1(6)).
Source: Illinois content outline I.A.1: Insurance Director, general powers (5/401, 5/401.1, 5/403, 5/431); 215 ILCS 5/401.1; 215 ILCS 5/402
After a regulatory examination of an Illinois producer's agency, the Director delivers to the producer a copy of the examiners' report alleging violations. Under 215 ILCS 5/500-110, how long does the producer have to request a hearing?
1. A.14 calendar days after receiving the report, by written notice with a written statement of objections
2. B.90 days, the same period the Director has to issue a written order on the report
3. C.30 days after the report was mailed, by written or telephone notice to the Department
4. D.10 business days after the report is filed, after which the Director must hold one anyway
Show answer
Answer: A. Section 500-110(e) requires the Director to deliver a duplicate of the report or send it by certified or registered mail, and the person may request a hearing within 14 calendar days after receiving it by giving written notice together with a written statement of objections. If the report is refused or a hearing is not requested in time, the right to a hearing is waived. The 90-day period is the time the Director has to issue a written order after the report is filed or after the hearing. Violating that order is a business offense that can bring license action and a civil penalty of up to $20,000 (500-110(g)).
Source: Illinois content outline I.A.2: Insurance Director, examinations (5/132, 5/402, 5/403, 5/500-110); 215 ILCS 5/500-110
A retired claims manager with no Illinois license offers, for a $150 fee, to review people's life and health policies and explain their advantages and disadvantages. He does not sell any policies. Under 215 ILCS 5/500-15, may he do this?
1. A.No; paid advice on a policy's benefits is limited to licensed producers and a few listed professionals acting in their roles
2. B.Yes, as long as he discloses the fee to each client in writing before giving any advice
3. C.Yes, if he has at least five years of claims or underwriting experience with an insurer
4. D.Yes; because he does not sell, solicit or negotiate any policy, the licensing law does not apply to him
Show answer
Answer: A. Section 500-15(b) bars anyone from offering, for a fee, advice, counsel or opinion on the benefits, advantages or disadvantages of a policy that could be issued in Illinois unless the person is a licensed producer (for lines held), a practicing attorney, a bank trust officer, an actuary or CPA in a consulting capacity, or a licensed public adjuster, each acting incidental to that role. Not selling does not help, because the rule targets the paid advice itself, and neither disclosure nor industry experience is an exception. If a person violating subsection (a) or (b) also misappropriates money collected, it is a Class 4 felony (500-15(d)).
Source: Illinois content outline I.B.1.a: Persons required to be licensed, insurance producers (5/500-15); 215 ILCS 5/500-15
A salaried underwriter at an Illinois life insurer reviews applications and decides whether to accept the risks. She receives no commission on any policy. Under 215 ILCS 5/500-20, does she need a producer license?
1. A.No, because her function is underwriting and she receives no commission
2. B.Yes, because anyone who evaluates insurance applications must be licensed
3. C.No, but only after the insurer files an exemption request for her with the Director
4. D.Yes, unless she works only at the insurer's home office outside Illinois
Show answer
Answer: A. Section 500-20(b)(1)(B) exempts an officer, director or employee of an insurer or producer whose function relates to underwriting, loss control, inspection or claims, provided the person receives no commission on policies covering Illinois risks. The exemption applies by law; no filing is required, and office location does not matter. An insurer itself never needs a producer license (500-20(a)), but its employees do if they sell, solicit or negotiate insurance or are paid commission on it.
Source: Illinois content outline I.B.1.e: Exemptions (5/500-15, 5/500-20); 215 ILCS 5/500-20
Under 215 ILCS 5/500-30, what is the minimum pre-licensing course for an Illinois Accident and Health producer license?
1. A.12.5 hours, with 5 of them completed in a classroom or webinar setting
2. B.40 hours, with 20 of them completed in a classroom setting
3. C.20 hours, with 7.5 of them completed in a classroom or webinar setting
4. D.20 hours, all of which may be completed by self-study
Show answer
Answer: C. Section 500-30(b) sets a minimum of 20 hours each for the Life and the Accident and Health courses, and 7.5 hours of each pre-licensing course must be completed in a classroom or webinar setting. The 12.5-hour course with 5 classroom or webinar hours is for Motor Vehicle. Before approving a resident application the Director must also find that the applicant is at least 18, has paid the fees and has passed the exams for the lines applied for (500-30(a)).
Source: Illinois content outline I.B.2.a: Obtaining a license, qualifications (5/500-30, 5/500-70); 215 ILCS 5/500-30
An Illinois insurance agency organized as a limited liability company wants to act as an insurance producer. Under 215 ILCS 5/500-30(c), what must the Director find before approving its license?
1. A.That every owner and employee of the agency has passed the producer licensing exam for each line it sells
2. B.Nothing, because a business entity operates under the individual licenses of its producers and needs none of its own
3. C.That it has posted a $50,000 surety bond with the Director in place of a business entity license
4. D.That it has paid the required fees and designated a licensed producer responsible for its compliance with Illinois insurance law
Show answer
Answer: D. Section 500-30(c) requires a business entity acting as a producer to obtain a producer license on the Uniform Business Entity Application, and the Director must find that it has paid the fees in section 500-135 ($150 every 2 years under 500-135(a)(3)) and designated a licensed producer responsible for its compliance. Only people who sell, solicit or negotiate need individual licenses, not every employee. A producer bond under section 500-130 is a separate requirement for producers placing business with insurers they have no agency contract with, not a substitute for a license.
Source: Illinois content outline I.B.1.c: Business entities (5/500-30, 5/500-35); 215 ILCS 5/500-30; 215 ILCS 5/500-135
An Indiana resident holds an Illinois nonresident producer license. She moves her home and legal residence to Wisconsin. Under 215 ILCS 5/500-40(c), what must she do about her Illinois license?
1. A.Pass the Illinois state exam within 90 days, since her Indiana license no longer supports it
2. B.File a change of address and certification from Wisconsin within 30 days; no fee or new application is needed
3. C.Nothing until the Illinois license comes up for renewal, when she reports the new address
4. D.Surrender the Illinois license and apply again as a new nonresident, paying the full license fee
Show answer
Answer: B. Section 500-40(c) requires a nonresident producer who moves from one state to another, or a resident producer who moves out of Illinois, to file a change of address and provide certification from the new resident state within 30 days after the change of legal residence, and says no fee or license application is required. Every Illinois licensee must also report a change of address within 30 days (500-35(g)), so waiting for renewal is too late. A nonresident license rests on a resident license in good standing at home and on the home state treating Illinois residents the same way (500-40(a)), not on the Illinois exam.
Source: Illinois content outline I.B.1.b: Nonresidents (5/500-40); 215 ILCS 5/500-40; 215 ILCS 5/500-35
An Illinois producer dies suddenly, and his widow needs time to sell his agency. Under 215 ILCS 5/500-60, what may the Director issue her?
1. A.A temporary producer license for 90 days that can never be renewed, since only one is allowed per lifetime
2. B.A temporary producer license for up to 180 days, which the Director may renew for another 180 days without an exam
3. C.A regular two-year producer license issued without an exam, because she inherits the business
4. D.A temporary license that stays valid until the agency is sold, however long the sale takes
Show answer
Answer: B. Section 500-60(a)(1) lets the Director issue a temporary license to the surviving spouse or court-appointed personal representative of a producer who dies or becomes disabled, for no more than 180 days, renewable at the Director's discretion for another 180 days without an exam. The license cannot continue after the business is disposed of, and the Director may require a licensed sponsor (500-60(b)). The 90-day, once-in-a-lifetime license is the separate temporary license for applicants under section 500-65. The $50 temporary license fee is paid on issuance but not on renewal (500-60(c), 500-135(a)(2)).
Source: Illinois content outline I.B.1.d: Temporary insurance producers (5/500-60, 5/500-65); 215 ILCS 5/500-60; 215 ILCS 5/500-135
An insurer wants a new recruit to start working while she finishes her pre-licensing requirements. Which statement about a temporary insurance producer license for an applicant under 215 ILCS 5/500-65 is correct?
1. A.It lasts one year and permanently excuses her from the Illinois licensing exam
2. B.It lasts 90 days and may be renewed as often as the appointing insurer requests
3. C.It lasts 180 days and the Director may renew it once for another 180 days without an exam
4. D.It lasts 90 days, she must be enrolled in the insurer's training program, and she may hold only one in her lifetime
Show answer
Answer: D. Section 500-65(a) allows a temporary license for an applicant, without an exam, for 90 days, during which the applicant must be enrolled in a training course or program run by or for the appointing insurer and be working through the pre-licensing requirements. Under 500-65(b) an individual may not hold more than one in a lifetime, and the insurer files the application and fee (500-65(d)). The Director may refuse these licenses to a company's applicants when more than 50% of its temporary licensees in a 6-month period failed to get full licenses (500-65(c)). The 180-day renewable license is the section 500-60 license for keeping an existing business running.
Source: Illinois content outline I.B.1.d: Temporary insurance producers (5/500-60, 5/500-65); 215 ILCS 5/500-65
An Illinois producer forgets to pay her renewal fee and her license lapses. Eight months after the renewal due date she wants to be licensed again. Under 215 ILCS 5/500-35(d), what applies?
1. A.She may be licensed without an exam only within 60 days of the due date, so she must start over
2. B.She may be licensed without retaking the exam, but must pay a penalty of double the unpaid renewal fee
3. C.She may be licensed by paying the regular renewal fee, with no penalty for the lapse
4. D.She must pass the licensing exam again, because any lapse ends the license for good
Show answer
Answer: B. Section 500-35(d) says an individual producer who lets a license lapse may, within 12 months after the due date of the renewal fee, be issued a license without passing a written exam, but a penalty of double the unpaid renewal fee applies after the due date. At eight months she is inside the 12-month window, so no exam is needed but the penalty is. A producer who cannot meet renewal procedures because of military service may request a waiver (500-35(e)).
Source: Illinois content outline I.B.1.f: Reinstatement (5/500-35); 215 ILCS 5/500-35
An Illinois producer serves on a formal committee of a state professional insurance association. Under 215 ILCS 5/500-35(b), how can this service count toward her continuing education?
1. A.For up to 12 hours per two-year period, including up to 3 of the required ethics hours
2. B.Not at all, because only courses taken in a classroom count toward Illinois CE
3. C.For all 24 required hours, including the ethics hours, if the association certifies her attendance
4. D.For up to 4 hours per two-year period, hour for hour, but never toward the 3 required ethics hours
Show answer
Answer: D. Section 500-35(b)(1) requires at least 24 hours of CE before each license renewal, 3 of them in classroom or webinar ethics instruction. Under 500-35(b)(3) active participation in a state or national professional insurance association (board, formal committee, subcommittee or task force service) may earn up to 4 hours per biennial period, hour for hour, submitted by the association, and that credit cannot satisfy the ethics requirement. Self-study and webinar courses also count, so CE is not limited to classrooms. A license automatically terminates if the CE requirement is not met (500-35(b)(2)).
Source: Illinois content outline I.B.3.a: Maintaining a license, continuing education (5/500-35); 215 ILCS 5/500-35
Under 215 ILCS 5/500-135, what license fee does an individual Illinois resident pay for an insurance producer license?
1. A.$150, payable once every 2 years
2. B.$380, payable once every 2 years
3. C.$215, payable once every 2 years
4. D.$50, payable every year
Show answer
Answer: C. Section 500-135(a)(1) sets the producer license fee at $215 for an Illinois resident and $380 for a nonresident, payable once every 2 years, matching the 2-year license term in section 500-35(a). The $150 fee every 2 years is for a business entity (500-135(a)(3)). A $50 fee applies to issuing a temporary producer license (500-135(a)(2)) and to processing a request to take the licensing exam (500-135(a)(5)), and an annual $50 fee applies to certain limited line licenses (500-135(a)(4)).
Source: Illinois content outline I.B.2.b and I.B.3.d: License fees and required fees (5/500-135); 215 ILCS 5/500-135
An Illinois producer places business with insurers it has no agency contract with. Last calendar year it brokered $300,000 of premiums that way. Under 215 ILCS 5/500-130, what bond must it keep in force?
1. A.$2,500, the flat amount required of every producer who brokers business
2. B.$15,000, because 5% of last year's brokered premiums is greater than $2,500
3. C.No bond, because the bond requirement applies only to surplus lines producers
4. D.$50,000, the maximum, because the producer brokers more than $250,000
Show answer
Answer: B. Section 500-130(a) requires a producer who places insurance with an insurer it has no agency contract with to keep a continuous bond in favor of the people of Illinois for $2,500 or 5% of premiums brokered in the previous calendar year, whichever is greater, but not over $50,000 in total. Five percent of $300,000 is $15,000, which is more than $2,500 and under the cap. The surety may cancel only on 30 days' written notice (500-130(c)), acting without a required bond can lead to revocation (500-130(d)), and the producer must give an injured party the surety's name and bond number within 3 working days of a request (500-130(e)).
Source: Illinois content outline I.B.2.c: Bond requirements (5/500-130); 215 ILCS 5/500-130
An applicant for an Illinois producer license expects that in his first year most of his premium volume would come from insuring his own life, his wife's car and his employer's business. Under 215 ILCS 5/500-125, what may the Director do?
1. A.Nothing, because a producer may write any amount of business on his family and employer
2. B.Refuse the license if premiums on that controlled business would exceed premiums on all his other business
3. C.Issue the license but limit his commission on controlled business to 10% of the premium
4. D.Refuse the license only if controlled business would exceed 25% of his total premiums
Show answer
Answer: B. Section 500-125(b) defines controlled business as insurance on the person's own life, person, property or risks or those of a spouse, or on the risks of an employer or the person's own business. Under 500-125(a) a license may not be granted if the Director has reasonable cause to believe that in the 12 months after issuance controlled business premiums would exceed premiums on all other business; for a license extension the test looks at either of the 2 preceding calendar years. The statute's test is controlled business against all other business, not a 25% threshold or a commission cap.
Source: Illinois content outline I.B.3.b: Controlled business (5/500-125); 215 ILCS 5/500-125
After a hearing, the Illinois Director finds three separate causes for discipline against a producer. Under 215 ILCS 5/500-70(d), what is the largest civil penalty the Director may impose?
1. A.$30,000, at up to $10,000 for each cause
2. B.$100,000, the overall cap, whatever the number of causes
3. C.$15,000, at up to $5,000 for each cause
4. D.$10,000 in total, however many causes are found
Show answer
Answer: A. Section 500-70(d) allows, after a hearing, a civil penalty of up to $10,000 for each cause for denial, suspension or revocation, in addition to or instead of license action, with a total of no more than $100,000. Three causes therefore allow up to $30,000; the $100,000 figure is a ceiling, not an automatic amount. A licensee notified of a denial, suspension, revocation or nonrenewal may demand a hearing within 30 days after the notice is mailed (500-70(b)), and a person whose license is revoked or denied cannot apply for any license for 3 years (500-70(g)).
Source: Illinois content outline I.B.4: License suspension, revocation or denial (5/500-70); 215 ILCS 5/500-70
A licensed Illinois producer is convicted of a felony that has nothing to do with insurance. Under 215 ILCS 5/500-95, what must she do?
1. A.Report the conviction on her next renewal application, when the Department asks about criminal history
2. B.Report the conviction to the Director within 30 days after the judgment is entered, with a copy of the judgment and related orders
3. C.Report it by telephone to the Department within 10 days after she is sentenced
4. D.Report it within 30 days only if the felony involved insurance, money or dishonesty
Show answer
Answer: B. Section 500-95 requires an individual who is convicted of a felony while licensed as a producer to report the conviction to the Director within 30 days after the entry date of the judgment, and within the same 30 days to provide a copy of the judgment, the probation or commitment order and other relevant documents. The duty covers any felony, not just insurance-related ones, and waiting for renewal is too late. A felony conviction is itself a ground for discipline unless the person shows the Director sufficient rehabilitation to warrant the public trust (500-70(a)(6)).
Source: Illinois content outline I.B.4.a: Felony convictions (5/500-95); 215 ILCS 5/500-95; 215 ILCS 5/500-70
An Illinois resident producer deposits clients' premium checks in a bank account and sends the money to the insurers within five days. Under 50 Ill. Adm. Code 3113.40, must she keep a premium fund trust account (PFTA)?
1. A.No; a PFTA is required only when premiums are held for 15 days or more before being remitted
2. B.Yes, and she must open a separate PFTA at a different bank for each insurer she represents
3. C.No; a PFTA is required only of producers who collect more than $150 in premiums a month
4. D.Yes; depositing collected premiums in any account requires a PFTA, even if they are remitted within 15 days
Show answer
Answer: D. Section 3113.40(c) requires a PFTA if a licensee holds any premiums for 15 days or more before remitting them, or deposits collected premiums in a financial institution or other account or uses them, even though they are remitted within 15 days. A resident must keep the PFTA at a financial institution in Illinois, but a separate PFTA for each insurer is not required unless an insurer demands it (3113.40(a)). The PFTA may not be used as a general operating or claim payment account (3113.40(i)), and the premiums are fiduciary funds under 215 ILCS 5/500-115(a).
Source: Illinois content outline I.C: Fiduciary responsibilities (5/500-115; Reg. 3113); 50 Ill. Adm. Code 3113.40; 215 ILCS 5/500-115
An Illinois producer collects a $900 premium from an insured for a policy she requested, never sends it to the insurer and spends it. Under 215 ILCS 5/500-115, which statement is correct?
1. A.It is only a Class A misdemeanor, because this is the producer's first offense of its kind
2. B.The insurer may rescind the policy and recover the premium from the insured a second time
3. C.The insured has no coverage, because the insurer never actually received the premium payment
4. D.The insurer is deemed to have received the premium, and knowingly converting more than $150 is a Class 3 felony
Show answer
Answer: D. Section 500-115(a) says money a producer receives for insurance is held in a fiduciary capacity, and 500-115(b) says an insurer that issues a policy is deemed to have received the premium if the insured paid any producer requesting the coverage, so the insured is protected. Under 500-115(d), knowingly misappropriating or converting premiums over $150 is a Class 3 felony; $150 or less is a Class A misdemeanor for a first offense and a Class 4 felony for later ones. Misappropriating money is also a ground for license action (500-70(a)(4)).
Source: Illinois content outline I.C: Fiduciary responsibilities (5/500-115; Reg. 3113); 215 ILCS 5/500-115
An Illinois producer will charge a client a $300 service fee, separate from her commission, on a policy with a $2,000 annual premium. Under 215 ILCS 5/500-80(e), what must she do?
1. A.File the fee with the Director and wait for written approval before she collects it from the client
2. B.Mention the fee orally when the policy is delivered, since written disclosure is needed only above 25% of the premium
3. C.Give a written disclosure of the fee before the policy is delivered, signed by the client because the fee exceeds 10% of the premium
4. D.Nothing special, because fees charged separately from commissions are not regulated by the Insurance Code
Show answer
Answer: C. Section 500-80(e)(1) requires a producer who charges a fee separate from commission to give the consumer a written disclosure clearly stating the amount before the policy is delivered, and to keep a copy for 7 years. Because $300 is 15% of the $2,000 premium, more than 10%, the disclosure must also carry the consumer's signature acknowledging the fee (500-80(e)(2)). If the policy is cancelled within 90 days of inception, a prorated part of the fee must be refunded within 30 days after the producer receives proof of cancellation (500-80(e)(3)). No Director approval is required.
Source: Illinois content outline I.D: Commissions and compensation (5/151, 5/500-80); 215 ILCS 5/500-80
An Illinois producer takes an application for an individual accident and health policy. Under 215 ILCS 5/500-155, what must the application bear?
1. A.The name and signature of the licensee who solicited and wrote the application
2. B.The signature of the producer's supervising general agent or agency manager
3. C.The producer's license number and the date the license expires
4. D.Only the insurer's name, since the producer appears on the commission statement
Show answer
Answer: A. Section 500-155 requires a policy whose solicitation involves a producer to identify the name of the producer, representative or firm, and requires an individual life or accident and health application, and a master application for group life or accident and health coverage, to bear the name and signature of the licensee who solicited and wrote it. A supervisor's signature does not satisfy the rule. Signing another person's name to an application is forgery, a ground for discipline under 500-70(a)(10).
Source: Illinois content outline I.E: Disclosure (5/500-155); 215 ILCS 5/500-155

Where these questions come from: Illinois content outline (Pearson VUE #121402, Life or Accident and Health state exam), section I.A–I.E: Insurance Director, license and registration, fiduciary responsibilities, commissions and compensation, and disclosure (7 to 20 of the 22 common-rules questions). See how we write questions.