Study Guide
Insurance License Exam Study Guide
Complete preparation for Life & Health and Property & Casualty insurance licensing exams in all 50 states.
📋 100–150 questions✅ 70% to pass🏛️ PSI / Pearson VUE🗺️ All 50 states
300K+
Annual test takers
US industry
2-3h
Test duration
Computer-based
150
Typical questions
Varies by state
70%
Passing score
Most states
1. Exam Overview
Insurance licensing is required in every US state to sell insurance products. The exam is administered by PSI or Pearson VUE (varies by state) and covers both general insurance concepts and state-specific laws.
Exam Structure
| Line of Authority | Questions | Time Limit | Pass Score |
|---|---|---|---|
| Life Only | 100–150 | 2–3 hours | 70% |
| Health Only | 100–150 | 2–3 hours | 70% |
| Life & Health Combined | 150–175 | 2.5–3.5 hours | 70% |
| Property Only | 100–150 | 2–3 hours | 70% |
| Casualty Only | 100–150 | 2–3 hours | 70% |
| Property & Casualty Combined | 150–175 | 2.5–3.5 hours | 70% |
State-specific section: Most state exams include 20–30 questions on state-specific insurance laws, regulations, and licensing requirements. These questions require studying your state's insurance department materials separately.
2. Life Insurance
Life insurance is the most tested topic on the Life & Health exam. Know the differences between all policy types and their key features.
Types of Life Insurance
Term LifeHigh frequency
Pure death benefit only; no cash value; coverage for a specific period (10, 20, 30 years); lowest initial premium; renewable and convertible
Whole LifeHigh frequency
Permanent coverage; guaranteed cash value growth; fixed premium; policy loans available; paid-up additions rider; guaranteed death benefit
Universal Life (UL)High frequency
Flexible premiums and death benefit; adjustable; interest-sensitive cash value; two death benefit options (A and B)
Variable LifeMedium frequency
Cash value invested in subaccounts (like mutual funds); variable death benefit; requires securities license (Series 6 or 7)
Variable Universal Life (VUL)Medium frequency
Combines flexibility of UL with investment component of variable; requires both insurance and securities license
Group Life InsuranceMedium frequency
Employer-sponsored; certificate of coverage; no individual underwriting for eligible employees; portability/conversion rights
Key Life Insurance Concepts
Insurable Interest
Must exist at policy inception; policyholder must have financial interest in insured's life
Beneficiary
Revocable (can be changed) vs. irrevocable (requires beneficiary consent to change)
Contestability Period
2 years — insurer can rescind policy for material misrepresentation on the application
Incontestability
After 2 years, insurer cannot contest the policy except for non-payment of premiums
Cash Surrender Value
Amount paid if policyholder voluntarily terminates the policy; taxable gain if exceeds premiums paid
1035 Exchange
Tax-free exchange of one life insurance policy for another or for an annuity (IRS Section 1035)
3. Annuities
Annuities are contracts between an individual and an insurance company designed to accumulate funds and provide a stream of income. They are heavily tested.
Immediate Annuity
Income payments begin within 1 year; purchased with single premium; good for retirement income
Deferred Annuity
Accumulation phase before income phase; tax-deferred growth; surrender charges during accumulation
Fixed Annuity
Guaranteed minimum interest rate; insurance company bears investment risk
Variable Annuity
Returns based on subaccount performance; annuitant bears investment risk; requires securities license
Indexed Annuity (FIA)
Returns linked to market index (e.g., S&P 500) with floor; participation rate and cap rate
Life Annuity
Income for life; no beneficiary payment after death; highest income of all payout options
Annuity Tax Treatment
Annuity withdrawals are taxed LIFO (Last In, First Out) — earnings come out first and are taxed as ordinary income. Withdrawals before age 59½ incur a 10% IRS penalty in addition to ordinary income tax.
4. Health Insurance
Individual Health Insurance Plans
HMO (Health Maintenance Organization)
Requires PCP; referrals needed for specialists; lowest premiums; in-network only (except emergencies)
PPO (Preferred Provider Organization)
No PCP required; no referrals; out-of-network covered at higher cost; most flexible; higher premiums
EPO (Exclusive Provider Organization)
No PCP or referrals; in-network only like HMO but PPO flexibility; no out-of-network except emergencies
POS (Point of Service)
Hybrid HMO/PPO; needs PCP and referrals for in-network; can go out-of-network at higher cost
HDHP + HSA
High deductible plan paired with Health Savings Account; HSA contributions tax-deductible; funds roll over
Key Health Insurance Terms
Deductible
Amount paid out-of-pocket before insurance begins paying
Co-payment
Fixed amount paid per service (e.g., $30 per doctor visit)
Co-insurance
Percentage of costs shared after deductible (e.g., 80/20 split)
Out-of-Pocket Maximum
Maximum annual amount insured pays; insurer covers 100% after this
Open Enrollment
Annual period when individuals can enroll or change plans
Pre-existing Condition
ACA prohibits denying coverage or charging more for pre-existing conditions
5. Medicare & Medicaid
Medicare Parts
Part A — Hospital Insurance
Inpatient hospital, skilled nursing facility, hospice, home health. Funded by payroll taxes — most beneficiaries pay no premium.
Part B — Medical Insurance
Doctor visits, outpatient care, preventive services, durable medical equipment. Monthly premium required (~$174/mo in 2024).
Part C — Medicare Advantage
Alternative to Original Medicare; provided by private insurers; typically includes Parts A, B, and often D.
Part D — Prescription Drug
Prescription medications; provided by private insurers; monthly premium varies; formulary determines covered drugs.
Medicaid
Medicaid is a joint federal-state program providing health coverage to low-income individuals. Eligibility and benefits vary by state. Key distinctions tested: Medicare is age-based (65+) or disability-based; Medicaid is income-based. Dual-eligible individuals qualify for both.
6. Disability Income & Long-Term Care
Disability Income Insurance
Elimination Period
Waiting period before benefits begin (like a deductible in time); 30, 60, 90, 180 days common — longer = lower premium
Own Occupation
Benefits paid if unable to perform your specific occupation — broadest definition, most expensive
Any Occupation
Benefits only if unable to perform ANY occupation — most restrictive, least expensive
Benefit Period
How long benefits are paid — short-term (up to 2 years) vs. long-term (to age 65 or lifetime)
Long-Term Care (LTC) Insurance
LTC covers services that assist with Activities of Daily Living (ADLs) when an individual can no longer perform them independently. Benefit trigger: inability to perform 2 of 6 ADLs (bathing, dressing, eating, transferring, toileting, continence) OR cognitive impairment.
7. Property & Casualty Insurance
Homeowners Insurance (HO Forms)
| Form | Coverage | Property Type |
|---|---|---|
| HO-1 Basic Form | 10 named perils | Owner-occupied (limited use) |
| HO-2 Broad Form | 16 named perils | Owner-occupied dwelling |
| HO-3 Special Form | Open perils on dwelling, 16 named on contents | Most common; owner-occupied |
| HO-4 Renters | 16 named perils on contents only; no dwelling | Renters (tenants) |
| HO-5 Comprehensive | Open perils on dwelling AND contents | Premium owner-occupied |
| HO-6 Condo | Unit walls-in; named perils on contents | Condo unit owners |
Auto Insurance Coverages
Bodily Injury Liability
Pays for injuries to others when you are at fault; required in most states
Property Damage Liability
Pays for damage to others' property when you are at fault; required in most states
Collision
Pays for damage to your vehicle from collision regardless of fault; requires deductible
Comprehensive
Pays for non-collision damage (theft, fire, hail, flooding, animal strike)
Uninsured/Underinsured Motorist
Protects you if hit by uninsured or underinsured driver
Medical Payments (MedPay) / PIP
Pays medical expenses regardless of fault; PIP (no-fault states) includes lost wages
8. Policy Provisions & Insurance Law
Standard Policy Provisions
Grace Period
30 days after premium due date; coverage continues; late fee may apply
Reinstatement
Restore lapsed policy within 3 years; must pay back premiums plus interest; health evidence may be required
Free-Look Period
10 days (15 for annuities) to review policy and return for full refund; starts on delivery date
Subrogation
After insurer pays, they assume insured's legal rights to recover from responsible third party
Coinsurance (P&C)
Requirement to insure property to at least 80% of value; penalty for under-insurance at time of loss
Pro Rata Cancellation
Insurer cancels mid-term; refund is proportional to unused premium with no penalty
9. Ethics & Insurance Regulations
State law and ethics questions appear in both the general and state-specific sections. Know the most common regulatory violations.
Unfair Trade Practices
Misrepresentation
Making false statements about a policy; deliberately misleading clients about coverage
Twisting
Inducing a policyholder to lapse, forfeit, or surrender a policy by misrepresenting the facts
Churning
Replacing an in-force policy with another from the same insurer for agent's financial benefit
Rebating
Sharing commission with applicant as inducement to purchase; illegal in most states
Unfair Discrimination
Charging different rates or denying coverage based on protected class (not actuarial risk)
10. Study Strategies
2 weeks out
Study all Life & Health or P&C concepts systematically. Create flashcards for key terms, grace periods, and policy types.
1 week out
Take full practice exams. Review your state insurance manual for state-specific content (20–30% of exam).
3 days out
Focus on weak areas identified by practice exams. Review policy provisions, unfair trade practices, and government programs.
Night before
Light review of key terms. Sleep well — rested recall is better than cramming.
Most tested topics (Life & Health): Types of life insurance (whole, term, universal), Medicare Parts A–D, annuity payout options, grace period and free-look provisions, and unfair trade practices. These topics account for approximately 40% of questions.
11. Test Day Tips
✓Bring government-issued photo ID and your testing authorization (if required)
✓Arrive 15 minutes early — late arrivals are typically turned away
✓No notes, phones, or materials allowed in the testing room
✓Read every question fully — insurance questions often contain qualifying words like 'not', 'except', 'always', 'never'
✓For policy provision questions: remember grace period = 30 days, free-look = 10 days (15 for annuities)
✓For ethics questions: if an answer sounds like it benefits the agent at the client's expense, it's likely prohibited
✓Don't change answers unless you have a clear reason — first instinct is often correct
✓Flag uncertain questions and return to them at the end
How FullPracticeTests Helps You Pass
Our insurance license practice exams are built to match PSI and Pearson VUE exam content and format, with full explanations covering life, health, and P&C concepts.
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Full-Exam Coverage
Life, Health, P&C questions aligned with state licensing exam content
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Complete Explanations
Every answer explained with the relevant insurance concept or regulation
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Topic Analytics
See your performance by topic area to focus your remaining study time
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State Content
State law and regulation questions aligned with common state exam topics