A surgeon is considering a disability contract with a 90-day elimination period, residual benefits, and an own-occupation definition. The surgeon sometimes can work reduced hours during recovery. Which provision most directly addresses partial earnings loss?

The residual or partial disability benefit, subject to its earnings-loss tests.

An applicant pays the first premium and receives a conditional receipt giving coverage, up to $500,000, from the later of the application or exam date if she is insurable as applied for. She applies for $400,000, completes the exam, and dies in an accident ten days later before underwriting ends. The file shows she would have been approved at the standard class applied for. What is the result?

The insurer owes the $400,000 death benefit, because she met the insurability standard when the receipt's coverage began

Two 45-year-old nonsmoking male applicants apply for the same insurer's best available underwriting class. Applicant 1 has normal blood pressure and cholesterol, no chronic conditions, and no adverse family history. Applicant 2 has well-controlled hypertension managed with a single daily medication and is otherwise healthy. Which applicant is most likely to qualify for the insurer's Preferred risk class rather than Standard?

Applicant 1, because Preferred criteria generally require the absence of chronic conditions and risk factors, even well-controlled ones

An applicant for a $500,000 policy has well-controlled Type 2 diabetes with no cardiovascular or renal complications, confirmed by recent labs and physician records. All other underwriting factors are favorable. The applicant would most likely be:

Issued on a substandard basis, such as a table rating or flat extra premium, reflecting modestly increased mortality risk

An insurer discovers, one year after a policy was issued, that the insured materially misrepresented a health condition on the application. The insured has since died. Assuming the policy is still within its contestable period, the insurer may:

Contest the claim and potentially rescind the policy or deny the claim if the misrepresentation was material to the underwriting decision

Which factor most directly determines whether an applicant for individual life insurance will be required to complete a medical exam (paramedical or physician's exam) as part of underwriting?

A combination of the applicant's age and the amount of insurance applied for, per the insurer's non-medical/exam requirement grid

CLU Individual Life Insurance Underwriting Practice Questions

Official outline: The American College CLU designation (courses)
Questions on this page: 7
Updated: Nov 3, 2026

Question 1, easy
A surgeon is considering a disability contract with a 90-day elimination period, residual benefits, and an own-occupation definition. The surgeon sometimes can work reduced hours during recovery. Which provision most directly addresses partial earnings loss?
- A.The incontestability clause, which limits the insurer's ability to contest the policy after it has been in force for a stated period.
- B.The accidental-death rider, which pays an additional benefit when the surgeon's reduced earnings result from an injury.
- C.The free-look provision, which lets the surgeon return the policy for a refund of premium during the initial review period.
- D.The residual or partial disability benefit, subject to its earnings-loss tests.
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Correct answer: D. The residual or partial disability benefit, subject to its earnings-loss tests.
A residual (partial) disability benefit pays a proportion of the full benefit when income falls after a disability, even though the insured works part time. It is separate from the own-occupation definition and the elimination period.
- A. Incontestability limits the insurer's right to challenge the policy and does not pay for lost earnings.
- B. An accidental-death rider pays on death, not for partial earnings loss.
- C. The free-look provision is a cancellation right after delivery and does not address earnings loss.
- D. The residual benefit pays when partial work reduces income, subject to earnings-loss tests.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 2, hard
An applicant pays the first premium and receives a conditional receipt giving coverage, up to $500,000, from the later of the application or exam date if she is insurable as applied for. She applies for $400,000, completes the exam, and dies in an accident ten days later before underwriting ends. The file shows she would have been approved at the standard class applied for. What is the result?
- A.The insurer must refund the premium, because coverage cannot begin until an underwriter formally approves the risk and issues the policy
- B.The insurer owes the $400,000 death benefit, because she met the insurability standard when the receipt's coverage began
- C.No benefit is due, because a policy must be delivered and in force before a death benefit exists
- D.The insurer owes 50% of the face amount, a standard split when death occurs during underwriting
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Correct answer: B. The insurer owes the $400,000 death benefit, because she met the insurability standard when the receipt's coverage began
Under an insurability-type conditional receipt, interim coverage begins when the stated conditions are met and depends on whether the applicant was in fact insurable as applied for, not on whether the underwriter had acted. She was insurable, and $400,000 is within the receipt's limit.
- A. A conditional receipt provides interim coverage from the stated date if the applicant is insurable, so coverage does not wait for formal approval or policy issue.
- B. Correct. Insurability, not completed approval, is the test under this receipt.
- C. Interim coverage under a conditional receipt can pay before delivery, which is its purpose.
- D. No standard 50% split exists for deaths during underwriting.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 3, medium
Two 45-year-old nonsmoking male applicants apply for the same insurer's best available underwriting class. Applicant 1 has normal blood pressure and cholesterol, no chronic conditions, and no adverse family history. Applicant 2 has well-controlled hypertension managed with a single daily medication and is otherwise healthy. Which applicant is most likely to qualify for the insurer's Preferred risk class rather than Standard?
- A.Applicant 1, because Preferred criteria generally require the absence of chronic conditions and risk factors, even well-controlled ones
- B.Applicant 2, because well-controlled hypertension on one medication is generally treated the same as normal blood pressure
- C.Both applicants equally, because Preferred placement generally depends only on age and tobacco status when health is stable
- D.Neither applicant, because Preferred is generally limited to applicants under age 40 regardless of health
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Correct answer: A. Applicant 1, because Preferred criteria generally require the absence of chronic conditions and risk factors, even well-controlled ones
Preferred risk classes require better-than-average health with no significant risk factors (normal vitals, no chronic conditions, favorable personal/family history). Applicant 1 fits that profile; Applicant 2's medicated hypertension, even if well controlled, typically places them in Standard (or a better Standard subclass) rather than Preferred, since Preferred criteria are stricter than merely 'insurable.'
- A. Preferred underwriting classes typically require the absence of chronic conditions and significant risk factors, even ones that are well managed, so Applicant 1's clean profile is more likely to qualify for Preferred than Applicant 2's controlled hypertension.
- B. Controlled hypertension is not treated like normal blood pressure. Treated hypertension is a chronic condition and a risk factor, and Preferred criteria typically exclude it even when medication controls it. It usually places the applicant in Standard.
- C. Preferred placement is not based only on age and tobacco status. Underwriters also weigh blood pressure, cholesterol, chronic conditions, and family history. Applicant 1 has none of these concerns, and Applicant 2 has treated hypertension, so they are not equally likely to qualify.
- D. Preferred classes are not restricted to applicants under 40. A healthy 45-year-old nonsmoker with normal blood pressure and cholesterol and no adverse family history can qualify, so Applicant 1 is a realistic Preferred candidate.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 4, medium
The standard incontestability clause found in most life insurance policies limits the insurer's right to contest the validity of the policy based on statements in the application to a period of how long after the policy is issued?
- A.1 year
- B.2 years
- C.3 years
- D.5 years
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Correct answer: B. 2 years
The near-universal standard incontestability period is two years from the policy's date of issue (while the insured is living). After this period elapses, the insurer generally cannot rescind or deny a claim based on misstatements made in the application, subject to limited exceptions such as fraud in some states or nonpayment of premium.
- A. Incorrect. A one-year period is shorter than the standard provision. It is not the norm for individual life policies, although it is sometimes confused with the one-year periods that apply to other items, such as certain suicide-exclusion provisions in some states.
- B. Correct. The standard incontestability clause, modeled on the NAIC standard provisions and required in most states, bars the insurer from contesting the policy on the basis of application statements after it has been in force for two years from the date of issue (fraud exceptions may apply in some states).
- C. Incorrect. Three years is longer than the standard contestable period for life insurance. The number is familiar from other contexts, such as the three-year estate tax rule under IRC Section 2035, which is unrelated to incontestability.
- D. Incorrect. Five years is far longer than the standard contestable period. It is not used for the standard incontestability clause and may be confused with the longer waiting or lookback periods found in other types of insurance and tax rules.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 5, medium
An applicant for a $500,000 policy has well-controlled Type 2 diabetes with no cardiovascular or renal complications, confirmed by recent labs and physician records. All other underwriting factors are favorable. The applicant would most likely be:
- A.Declined outright, since diabetes is an automatic disqualifier
- B.Issued at standard rates with no rating, since diabetes never affects premiums
- C.Issued on a substandard basis, such as a table rating or flat extra premium, reflecting modestly increased mortality risk
- D.Required to wait two years before any policy can be issued
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Correct answer: C. Issued on a substandard basis, such as a table rating or flat extra premium, reflecting modestly increased mortality risk
Underwriters rate impairments on a continuum rather than as automatic accept/decline decisions. A well-controlled chronic condition with no complications typically results in a substandard rating (table rating or flat extra) rather than outright decline or automatic standard issue, because the mortality risk, while elevated, is still insurable.
- A. Incorrect. Controlled diabetes without complications is insurable, just not always at standard rates.
- B. Incorrect. The extra mortality risk of diabetes is typically reflected in premium, even when well controlled.
- C. Correct. This reflects standard substandard-underwriting practice for a manageable chronic impairment.
- D. Incorrect. There is no universal mandatory waiting period tied to a diagnosis like this.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 6, medium
An insurer discovers, one year after a policy was issued, that the insured materially misrepresented a health condition on the application. The insured has since died. Assuming the policy is still within its contestable period, the insurer may:
- A.Contest the claim and potentially rescind the policy or deny the claim if the misrepresentation was material to the underwriting decision
- B.Pay the claim in full without investigation, because the insured's death ends the insurer's right to challenge statements on the application
- C.Reduce the death benefit proportionally to reflect the higher premium the correct health information would have required, but pay the claim
- D.Not contest the claim, because the contestable period ends when the insured dies and the insurer's right to rescind ends at that point
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Correct answer: A. Contest the claim and potentially rescind the policy or deny the claim if the misrepresentation was material to the underwriting decision
The incontestability clause limits an insurer's ability to contest a policy based on misrepresentation only after the contestable period (commonly two years) has elapsed. Within that period, a material misrepresentation can still be grounds to rescind coverage or deny the claim.
- A. Correct. Within the contestable period, material misrepresentation is still actionable.
- B. Incorrect; death does not end the insurer's right to challenge a material misrepresentation made within the contestable period, and the insurer may investigate before paying.
- C. Incorrect; there is no general proportional-reduction remedy for a health misrepresentation in an ordinary life contract; that adjustment applies to age or sex misstatements.
- D. Incorrect; death of the insured does not itself end the contestable period; incontestability depends on the elapsed time, and a death inside the period preserves the insurer's right to contest.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026
Question 7, easy
Which factor most directly determines whether an applicant for individual life insurance will be required to complete a medical exam (paramedical or physician's exam) as part of underwriting?
- A.A combination of the applicant's occupation and the policy's premium payment mode, per the insurer's classification manual
- B.A combination of the state where the policy is delivered and the beneficiary designation, per the state insurance code
- C.A combination of the applicant's gender and the agent's experience level, per the insurer's producer guidelines
- D.A combination of the applicant's age and the amount of insurance applied for, per the insurer's non-medical/exam requirement grid
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Correct answer: D. A combination of the applicant's age and the amount of insurance applied for, per the insurer's non-medical/exam requirement grid
Insurers use an age/amount grid. A table cross-referencing applicant age and face amount. To determine what underwriting requirements (non-medical, paramedical exam, blood/urine specimens, EKG, APS) apply to a given case.
- A. Occupation can affect risk classification or rating, but the premium payment mode has no bearing on underwriting requirements. Exam requirements come from age and face amount thresholds, not a classification manual pairing these two items.
- B. The state of delivery affects regulatory items such as forms and disclosures, and the beneficiary designation does not change the insured's risk. Neither one triggers a medical exam requirement.
- C. Gender may influence mortality rates and premiums, but it does not decide whether an exam is needed. The agent's experience is irrelevant to the applicant's underwriting requirements, and producer guidelines do not set exam thresholds.
- D. Correct. Insurers use a non-medical/exam requirement grid combining the applicant's age and the face amount applied for to determine whether an exam is needed.
- Source: Exam outline: The American College CLU designation (courses), accessed October 2026

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