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New York Life Insurance, Annuity and Life Settlement Law: Practice Questions

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

Exam weight: New York rules in the life, annuity and life settlement sections on the New York Life, Accident and Health agent exam (17-55). Updated 2026-11-04.

Quick study guide

The 17-55 outline tags New York Insurance Law sections onto its life, annuity and life settlement items. Most questions turn on a number or on who may own a policy on whom.

Who may insure whom (3205, 3207)

An adult may insure his or her own life for anyone's benefit. Anyone else needs an insurable interest when the contract is made (love and affection for close relatives, or a lawful economic interest in the insured's continued life) and the insured's written consent, except that one spouse may insure the other and a child under 14½ may be insured by someone with an insurable interest. That child's coverage is capped at the greater of $50,000 or 50% of the buyer's own insurance (25% under age 4½).

Required life policy provisions (3203)

Provision	New York rule
Grace period	31 days (or one month); 61 days for flexible-premium policies, counted from when the cash value cannot cover a month's charges
Incontestability	2 years from issue during the insured's lifetime, except nonpayment and armed-forces conditions
Reinstatement	Within 3 years of default, with evidence of insurability and overdue premiums plus interest up to 6%
Free look	10 to 30 days from delivery (30 for mail order); 60 days for a replacement under Reg 60
Misstated age	Benefit is what the premium would have bought at the correct age
Exclusions	Suicide or hazardous occupation within 2 years of issue, aviation, residence in a named foreign country, war and military service

The policy plus an attached application is the entire contract; an unattached application cannot be used as evidence (3204). Applicant statements are representations, and a misrepresentation counts only if material: knowing the truth, the insurer would have refused the contract (3105). A breach of warranty counts only if it materially increases the risk (3106). Backdating to cut the premium is capped at six months (3208).

Other life and annuity rules

Group life conversion: 31 days, no evidence of insurability, any form but term (3220). Accelerated benefits: an illustration within five days, then a five-day wait before payment (3230). HIV tests need dated, written informed consent (2611). Variable contracts say so on page one (4240). Annuities (3219) mirror life policies, but a misstated sex also adjusts benefits. Nobody may use the Life Insurance Company Guaranty Corporation ($500,000 per life, 7708) to sell (7718).

Life settlements (Article 78)

A licensed broker (2137) represents only the owner. The owner may rescind until 15 days after receiving the proceeds, and no settlement may be made within two years of issue unless an exception such as terminal illness applies (7813). Installment payouts are banned (7814), ads may not call a policy "free" (7809), medical and identifying details generally need written consent to share (7810), and stranger-originated life insurance is illegal (7815).

Practice questions

With her business partner's written consent, Dana buys a policy on his life and names herself beneficiary. Three years later the partnership dissolves, and Dana keeps paying the premiums until he dies. Under New York Insurance Law section 3205, what happens to the claim?
1. A.Valid, and it pays Dana, since insurable interest is needed only when the contract is made
2. B.It pays Dana only the partnership debts still owed at the date of death
3. C.The insurer refunds Dana's premiums and pays the benefit to the partner's estate
4. D.Void from the date the partnership ended and her economic interest stopped
Show answer
Answer: A. Section 3205(b)(2) requires a person who buys insurance on someone else's life to have an insurable interest at the time the contract is made, here a lawful and substantial economic interest in the partner's continued life. Nothing requires that interest to continue, so ending the partnership does not void the policy or redirect the benefit. The insured's estate could sue to recover benefits only if the policy had been made without an insurable interest in the first place (3205(b)(4)).
Source: New York 17-55 outline: Life Insurance Basics, insurable interest (3205); N.Y. Ins. Law 3205
A New York universal life policy lets the owner vary the amount and timing of premiums. The insurer determines that the net cash surrender value can no longer cover a month of charges. How long is the grace period?
1. A.90 days from the date of the last premium payment
2. B.31 days from the next scheduled premium due date
3. C.61 days, starting on the day the insurer determines the value is insufficient
4. D.There is no grace period, because premiums are flexible
Show answer
Answer: C. Section 3203(a)(1) gives policies with variable premium amounts and frequency a 61-day grace period, beginning when the insurer determines the net cash surrender value is too low to keep the policy in force for one month, within which the owner pays enough to keep it in force for three months from that date. The 31-day (or one-month) grace period applies to all other life policies. Flexible-premium policies are not exempt.
Source: New York 17-55 outline: Policy Provisions, grace period (3203(a)(1)); N.Y. Ins. Law 3203
A New York whole life policy has been in force for 30 months when the insured dies. The insurer then finds an innocent but material misstatement about a heart condition in the attached application. Can the insurer contest the policy?
1. A.Yes, because the contestable period for New York life policies is three years
2. B.No, but the insurer may reduce the death benefit by half instead
3. C.Yes, because a material misstatement can be contested at any time
4. D.No, because it became incontestable after two years in force during the insured's life
Show answer
Answer: D. Section 3203(a)(3) requires every New York life policy to become incontestable after it has been in force during the insured's lifetime for two years from its date of issue. The only required exceptions are nonpayment of premiums and violation of policy conditions on armed-forces service (disability and accidental death benefits may also be excepted). After 30 months the insurer cannot rescind for the misstatement, and nothing allows it to pay a reduced amount instead.
Source: New York 17-55 outline: Policy Provisions, incontestability (3203(a)(3)); N.Y. Ins. Law 3203
An agent delivers a new individual life policy that does not replace any existing coverage. Under New York Insurance Law section 3203(a)(11), how long must the owner have to return it for a refund?
1. A.Exactly 20 days from the date the application was signed
2. B.60 days from delivery, for every life policy
3. C.At least 10 and no more than 30 days from the date the policy was delivered
4. D.At least 30 days from the policy date
Show answer
Answer: C. Section 3203(a)(11) requires a right to surrender the policy with a written cancellation request within a period of not less than 10 nor more than 30 days from delivery, with a refund of any premium paid, including fees and charges; a policy sold by mail order must allow 30 days. The 60-day period comes from Regulation 60 (11 NYCRR 51.6(d)) and applies only when the policy replaces existing life insurance or an annuity.
Source: New York 17-55 outline: Policy Provisions, right to examine (3203(a)(11)); N.Y. Ins. Law 3203; 11 NYCRR 51.6 (Regulation 60)
Which exclusion does New York Insurance Law section 3203(b) NOT allow in an individual life policy?
1. A.Death from aviation under conditions specified in the policy
2. B.Death while the insured resides in a specified foreign country
3. C.Suicide at any time while the policy is in force
4. D.Suicide within two years from the date of issue
Show answer
Answer: C. Section 3203(b)(1) bars exclusions for death caused in a specified manner except suicide within two years of issue, aviation under stated conditions, hazardous occupations if death occurs within two years of issue, and the war and military-service exclusions of 3203(c); exclusion by foreign residence is also allowed. A suicide exclusion with no time limit is therefore not permitted. When an allowed exclusion applies, the insurer still pays the policy reserve, or the premiums paid less dividends and debt if the policy has been in force two years or less (3203(b)(3)).
Source: New York 17-55 outline: Policy Provisions, exclusions (3203(b),(c)); N.Y. Ins. Law 3203
Under New York Insurance Law section 3105, when is a misrepresentation in a life insurance application material enough to let the insurer avoid the contract?
1. A.When the applicant intended to deceive the insurer
2. B.When the misrepresented condition caused the insured's death
3. C.Whenever the answer differs from the facts, because applicant statements are warranties
4. D.When knowing the true facts would have led the insurer to refuse to make the contract
Show answer
Answer: D. Section 3105(b)(1) says no misrepresentation avoids a contract unless it is material, and it is material only if knowledge of the true facts would have led the insurer to refuse to make the contract; evidence of the insurer's practice with similar risks is admissible (3105(c)). Intent is not required for life insurance (it is required only for hospital, medical, surgical or prescription drug expense policies under 3105(b)(2)), and no causal link to the death is needed. Section 3204(c) makes applicant statements representations, not warranties.
Source: New York 17-55 outline: General Insurance, representations/misrepresentations (3105); statements of the applicant (3204); N.Y. Ins. Law 3105; N.Y. Ins. Law 3204
A father insured for $300,000 wants to buy life insurance on his 10-year-old son, who has no other coverage and depends on him for support. What is the most a New York insurer may knowingly issue on the son's life?
1. A.$50,000
2. B.$300,000
3. C.$150,000
4. D.$75,000
Show answer
Answer: C. Section 3207(b) limits insurance on a child under 14 years and six months to the greater of $50,000 or 50 percent of the insurance in force on the person effecting it (25 percent if the child is under four years and six months). Half of $300,000 is $150,000, which exceeds $50,000, so $150,000 is the cap. $75,000 would be the 25 percent figure for a child under four and a half, and the limits stop applying once the child reaches 14 and a half.
Source: New York 17-55 outline: Life Insurance Policies, life insurance on minors (3207(b)); N.Y. Ins. Law 3207
To give a client a lower premium based on a younger age, how far back may a New York life policy be dated before the date of the application?
1. A.No more than six months
2. B.No more than one year
3. C.No more than three months
4. D.No more than 30 days
Show answer
Answer: A. Section 3208(a) bars an insurer from knowingly issuing a life policy that takes effect more than six months before the application date if that reduces the premium below the rate for the insured's age nearest birthday at application. Section 3208(b) separately forbids an agent or broker from putting an earlier date on the application itself. A policy issued in violation is not invalidated (3208(c)).
Source: New York 17-55 outline: Field underwriting, backdating of policies (3208); N.Y. Ins. Law 3208
Mia's group life coverage ends when she leaves her job on 1 March. The written notice of her conversion right reaches her 30 days later, on 31 March. Under New York Insurance Law section 3220, how long does she have to convert?
1. A.One year after the notice was given
2. B.45 days after the notice was given
3. C.Her right expired 31 days after 1 March, because the notice came late
4. D.90 days after 1 March in every case
Show answer
Answer: B. Section 3220 normally gives a departing member 31 days to convert, without evidence of insurability, to any individual form the insurer issues except term. The certificate holder must be told of the privilege within 15 days before or after the event; if notice comes more than 15 but less than 90 days after it, the conversion period is extended to 45 days after the notice. Only if no notice is given within 90 days does the right end at the 90-day mark.
Source: New York 17-55 outline: Group life insurance, conversion to individual policy (3220); N.Y. Ins. Law 3220
A policyowner applies to accelerate the death benefit under a New York life policy rider. After the insurer sends the required illustration and death benefit computations, when may it pay?
1. A.Immediately, since the owner has already applied
2. B.Not until five days after that information was sent in writing
3. C.Not until 30 days after the application was received
4. D.Only after the policy's free-look period has ended
Show answer
Answer: B. Section 3230(d) requires the insurer, within five days of receiving the application to accelerate, to send an illustration of the effect on cash value and loans, computations of the death benefit payable at death and on acceleration, and a notice that other options such as a policy loan may be available. Section 3230(c) then bars payment for five days after that information is sent, and the owner may rescind the request at any time during the application process. The 30-day figure is the time the owner has to sign the application after the insurer dates it (3230(b)(1)).
Source: New York 17-55 outline: Riders, accelerated (living) benefit provisions (3230); N.Y. Ins. Law 3230
A New York life insurer wants an applicant to take an HIV test as part of underwriting. What must it do before testing?
1. A.Obtain a written referral from the applicant's personal physician
2. B.Get the applicant's dated, written informed consent and give general AIDS and HIV information
3. C.Report the applicant's name and test date to the state Department of Health
4. D.Have the agent note the applicant's oral consent on the application form
Show answer
Answer: B. Section 2611(a) bars an insurer from requesting or requiring an HIV-related test without the individual's written informed consent and without giving general information about AIDS and HIV transmission. Under 2611(b) the consent must be dated, describe the test and its purpose, include the Department of Health's toll-free number and let the applicant name who receives specific results after an adverse underwriting decision. Oral consent is not enough, and the section requires no physician referral or name reporting.
Source: New York 17-55 outline: Underwriting, medical examinations and lab tests including HIV (2611); N.Y. Ins. Law 2611
Under New York Insurance Law section 4240, what must appear on the first page of a variable life policy or variable annuity delivered in New York?
1. A.A notice of the Life Insurance Company Guaranty Corporation's coverage limits
2. B.A guarantee that the account value will never fall below the premiums paid
3. C.A statement that benefits or values under the contract are on a variable basis
4. D.The selling agent's securities registration number
Show answer
Answer: C. Section 4240(a)(11) requires any contract paying benefits on a variable basis to describe the essential features of how the variable amounts are determined, state clearly that those amounts may decrease or increase, and carry on its first page a statement that they are on a variable basis. A variable contract does not guarantee the account value, and advertising the guaranty corporation to sell insurance is forbidden by section 7718. Separate account assets belong to the insurer, which may not hold itself out as a trustee (4240(a)(12)).
Source: New York 17-55 outline: Life Insurance Basics, regulation of variable products (4240); N.Y. Ins. Law 4240
The owner of an individual deferred annuity issued in New York misstated the annuitant's age and sex on the application. What does New York Insurance Law section 3219 require?
1. A.The contract is void, because age and sex are treated as warranties
2. B.Benefits are adjusted to what the payments would have bought at the correct age and sex
3. C.Only the age is corrected, because sex is not used in annuity pricing
4. D.The insurer may correct the misstatement only within two years of issue
Show answer
Answer: B. Section 3219(a)(5) requires annuity contracts to provide that if the age or sex of the annuitant is misstated, benefits are those the payments would have purchased at the correct age or sex, and any over- or underpayment is credited or charged against later payments with interest at no more than 6 percent a year. The two-year incontestable clause in 3219(a)(2) expressly excludes statements of age, sex and identity, so the correction can be made at any time. The life policy rule in 3203(a)(5) mentions only age.
Source: New York 17-55 outline: Annuities, required provisions (3219, 4220, 4223); N.Y. Ins. Law 3219
An agent's sales flyer says: "Your policy is protected up to $500,000 by the New York Life Insurance Company Guaranty Corporation, so buying from us is risk-free." Under New York Insurance Law section 7718, this flyer is:
1. A.Allowed for annuity sales but not for life insurance sales
2. B.Allowed, because $500,000 is the corporation's actual limit per life
3. C.Allowed if the flyer also shows the insurer's financial strength rating
4. D.Prohibited, because no one may use the guaranty corporation's existence to sell insurance
Show answer
Answer: D. Section 7718 forbids any insurer, agent, broker or other person from using the existence of the guaranty corporation in any advertisement or statement to sell, solicit or induce the purchase of covered insurance. An insurer may only give a policyholder written information prepared by the corporation and approved by the superintendent, in response to the policyholder's written request. The $500,000 figure is accurate as the corporation's aggregate limit for all benefits, including cash values, on any one life (7708), but accuracy does not make the sales use legal.
Source: New York 17-55 outline: Licensee responsibilities, Life Insurance Company Guaranty Corporation (7718); N.Y. Ins. Law 7718; N.Y. Ins. Law 7708
A certified public accountant is retained by a client to review life settlement offers. She does not advertise as being in the life settlement business and bills by the hour whether or not a settlement happens. Under New York Insurance Law section 7802, she is:
1. A.Not a life settlement broker, because the definition excludes her here
2. B.A life settlement intermediary acting for her client
3. C.A life settlement broker who must be licensed under section 2137
4. D.A life settlement provider, because she evaluates the offers
Show answer
Answer: A. Section 7802(j) defines a life settlement broker as a person who, for compensation, solicits, negotiates or offers to negotiate a life settlement contract, but excludes a licensed attorney, certified public accountant or accredited financial planner retained in a professional capacity who does not advertise as being in the business and is paid regardless of whether a settlement is made. A provider is the party that enters into the contract with the owner (7802(m)), and an intermediary runs a forum of offers and counteroffers (7802(l)).
Source: New York 17-55 outline: Life Settlement, definitions (7802(j)); N.Y. Ins. Law 7802
An agent has held a New York insurance producer license with a life line of authority for three years and wants to negotiate life settlements for clients. Under New York Insurance Law section 2137, what applies?
1. A.Only a corporation or firm may be licensed as a life settlement broker
2. B.She must complete the prelicensing course and pass the written examination like any new applicant
3. C.She may act as a life settlement broker under her producer license without applying for anything
4. D.She needs a life settlement broker license, but no written examination or prelicensing course
Show answer
Answer: D. Section 2137 provides a separate life settlement broker license for individuals, firms, associations and corporations, and section 7814(a)(7) bars paying or accepting broker compensation without it. Section 2137(f)(1)(A) waives the written examination and prelicensing education for an insurance producer with a life line of authority licensed in New York for at least one year. Individual licensees must be at least 18 (2137(c)).
Source: New York 17-55 outline: Life Settlement, broker license requirements (2137); N.Y. Ins. Law 2137; N.Y. Ins. Law 7814
An owner signs a life settlement contract and receives the proceeds, then changes his mind. Under New York law, until when may he rescind?
1. A.Until 30 days after the insurer recorded the change of ownership
2. B.Until 10 days after he signed the contract
3. C.He may not rescind once the proceeds are paid
4. D.Until 15 days after he received the life settlement proceeds
Show answer
Answer: D. Section 7813(g) requires every life settlement contract to give the owner an unconditional right to rescind from execution until 15 days after receiving the proceeds, by notice to the provider by midnight of the fifteenth day. The owner must then repay the proceeds and any premiums, loans and loan interest the provider paid, and if the insured dies during that period the contract is deemed rescinded subject to the same repayment. Section 7811(a)(5) requires this right to appear in the owner's disclosure document, and a failure to give written notice of it extends the right until 30 days after notice is given (7813(i)).
Source: New York 17-55 outline: Life Settlement (Article 78 rescission and disclosures); N.Y. Ins. Law 7813; N.Y. Ins. Law 7811
A life settlement provider wants to give an insured's medical records to an investor who is buying the settled policy. Under New York Insurance Law section 7810, what is needed?
1. A.The consent of the insurer that issued the policy
2. B.Only the provider's own approval, since it now owns the policy
3. C.Prior written consent from both the owner and the insured
4. D.Nothing, because medical information loses its protection once a policy is settled
Show answer
Answer: C. Section 7810(a) bars disclosure of an insured's or owner's identity, or the insured's financial or medical information, except in listed cases; disclosure to effect the sale or transfer of a settled policy is allowed only if the owner and the insured have both given prior written consent (7810(a)(2)). Anyone who acquires a settled policy must also protect identifying information (7810(b)), and such nonpublic personal information is subject to the Gramm-Leach-Bliley Act rules for financial institutions (7810(c)).
Source: New York 17-55 outline: Life Settlement, privacy (7810); N.Y. Ins. Law 7810
Which of the following is prohibited in a New York life settlement?
1. A.A provider paying a licensed broker compensation for the specific contract, disclosed to the owner
2. B.A provider paying the owner the settlement proceeds in installments
3. C.An insurance agent telling a client that life settlements are available
4. D.A provider checking on the insured's health once every three months when life expectancy exceeds one year
Show answer
Answer: B. Section 7814(c) bars a provider from entering into any life settlement contract that pays the proceeds in installments, and 7814(b) bars requiring the insured to have a medical exam after settlement. Compensation to a licensed broker is allowed when it is for a specific contract and clearly disclosed (7814(a)(9)), no insurer may stop an agent from mentioning life settlements (7814(f)), and health-status contacts every three months are allowed for an insured with a life expectancy over one year (7813(k)).
Source: New York 17-55 outline: Life Settlement, prohibited practices (7814); N.Y. Ins. Law 7814; N.Y. Ins. Law 7813
Investors with no insurable interest in a 78-year-old offer him a "no cost" policy: they will fund the premiums through a trust and take over the policy benefits once it is issued. Under New York law, this arrangement is:
1. A.A lawful life settlement, because the insured agreed to it
2. B.An exempt premium finance arrangement outside Article 78
3. C.Allowed if the investors wait until the contestable period ends to take ownership
4. D.Stranger-originated life insurance, which no person may engage in
Show answer
Answer: D. Section 7815(a) defines stranger-originated life insurance as any act, practice or arrangement at or before issue to initiate a policy for the intended benefit of someone with no insurable interest in the insured, including premiums funded by a person who could not lawfully buy the policy, agreements to transfer the policy or its benefits, and trusts used to get around insurable interest law. Section 7815(c) bans it outright, so waiting does not cure it. Section 7809(c) also bars promoting the purchase of a policy with words such as "free" or "no cost".
Source: New York 17-55 outline: Life Settlement, stranger-originated life insurance (7815); N.Y. Ins. Law 7815; N.Y. Ins. Law 7809

Where these questions come from: New York Life, Accident and Health agent exam outline (series 17-55, PSI candidate information bulletin updated 28 Apr 2023), sections: Life Insurance Basics (8%), Life Insurance Policies (8%), Life Insurance Policy Provisions, Options, and Riders (10%), Annuities (7%), Life Settlement (3%), plus the representations and warranties items of General Insurance (4%). See how we write questions.