Life & Health Insurance Exam Study Guide 2026

When age is misstated, insurers adjust the death benefit to the amount the actual premium would have purchased at the correct age rather than voiding the policy.

The replacement ratio is the proportion of pre-disability income that a disability policy replaces, typically ranging from 50–80%.

Policy dividends are treated as a return of the premium (cost basis) and are not taxable income unless they exceed the total premiums paid.

Under the Affordable Care Act (ACA), a Qualified Health Plan (QHP) is considered 'affordable' if the employee's required contribution for self-only coverage does not exceed a certain percentage of their household income. This percentage is adjusted annually. For 2025, the affordability threshold is set at 9.12% of the employee's household income, meaning if the premium exceeds this, the coverage is deemed unaffordable.

The Legal Actions provision typically requires the insured to wait at least 60 days after submitting proof of loss before initiating legal action against the insurer.

A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients' interests ahead of their own, with a duty to preserve good faith and trust. Insurance agents, when handling client premiums and returns, are acting in a position of trust and are legally considered fiduciaries, meaning they must handle these funds responsibly and ethically.