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Free FLMI Practice Questions

10 free, exam-style Fellow, Life Management Institute (FLMI) practice questions with answers and explanations. No signup required. Work through them below, then take the full free FLMI practice test to study every exam domain.

Question 1

Thomas Greene's life insurance application stated his age as 40. After his death, the insurer discovered he was actually 45 at the time of application. Under the misstatement of age provision, the insurer will:

  1. Reduce the death benefit by the percentage difference between the stated and actual ages
  2. Pay the death benefit that the premiums paid would have purchased at the correct age
  3. Adjust the death benefit based on current mortality tables for the correct age
  4. Calculate a pro-rated death benefit using the age difference as a discount factor
Show answer & explanation

Correct answer: B - Pay the death benefit that the premiums paid would have purchased at the correct age

Question 2

Evergreen Insurance Company receives a claim on a policy that was issued only eight months ago. The claimant is the insured's recently named beneficiary, and the cause of death is inconsistent with the medical information provided in the application. These circumstances represent:

  1. A routine claim that should be paid immediately
  2. Potential red flags for insurance fraud
  3. A claim that must be denied automatically
  4. Normal claims processing procedures
Show answer & explanation

Correct answer: B - Potential red flags for insurance fraud

Question 3

Kevin Lee, age 32 with an annual income of $60,000, applies for a $5,000,000 life insurance policy. The underwriter is likely to question this application because:

  1. Kevin is too young to purchase life insurance
  2. The coverage amount appears disproportionate to Kevin's income
  3. Kevin should only purchase term insurance at his age
  4. The underwriter must deny applications over $1,000,000
Show answer & explanation

Correct answer: B - The coverage amount appears disproportionate to Kevin's income

Question 4

Michael Torres died 14 months after his life insurance policy was issued. The claims examiner discovers that Michael failed to disclose a prior cancer diagnosis on his application. Because the policy is within the two-year contestable period, the insurer:

  1. Must pay the full death benefit because the cause of death was unrelated to cancer
  2. Has the right to investigate and potentially deny the claim based on the material misrepresentation
  3. Must pay double the face amount as a penalty for investigating
  4. Cannot take any action because cancer is a pre-existing condition
Show answer & explanation

Correct answer: B - Has the right to investigate and potentially deny the claim based on the material misrepresentation

Question 5

A data set contains the following claim amounts: $1,000, $2,000, $3,000, $4,000, $50,000. The mean is $12,000 but the median is $3,000. In this case, which measure of central tendency better represents the typical claim amount?

  1. The mean, because it provides a more comprehensive statistical summary
  2. The median, because it is not distorted by the outlier of $50,000
  3. The mode, because it represents the most commonly occurring claim value
  4. Neither measure is appropriate when dealing with skewed insurance data
Show answer & explanation

Correct answer: B - The median, because it is not distorted by the outlier of $50,000

Question 6

Greenfield Insurance Company provides its agent, James, with business cards, a company email address, and an office with the company logo. A customer, believing James has authority to bind coverage, enters into an insurance contract through James. Even if James exceeded his actual authority, Greenfield may be bound by the contract under the doctrine of:

  1. Express contractual authority
  2. Implied contractual authority
  3. Apparent authority
  4. Subsequent ratification doctrine
Show answer & explanation

Correct answer: C - Apparent authority

Question 7

An insurance company is deciding whether to launch Product A or Product B. Product A has a 60% chance of earning $500,000 and a 40% chance of earning $100,000. The EMV of Product A is:

  1. $300,000
  2. $340,000
  3. $400,000
  4. $500,000
Show answer & explanation

Correct answer: B - $340,000

Question 8

A bond with a duration of 7 years will experience approximately what percentage change in price for a 1% increase in interest rates?

  1. A 1% decrease
  2. A 3.5% decrease
  3. A 7% decrease
  4. A 14% decrease
Show answer & explanation

Correct answer: C - A 7% decrease

Question 9

The immediate expensing of acquisition costs under SAP compared to deferral under GAAP means that SAP generally reports:

  1. Higher surplus than GAAP
  2. Lower surplus than GAAP
  3. The same surplus as GAAP
  4. Higher net income than GAAP
Show answer & explanation

Correct answer: B - Lower surplus than GAAP

Question 10

The correct order of RBC action levels from least severe to most severe is:

  1. Mandatory Control, Authorized Control, Regulatory Action, Company Action
  2. Company Action, Regulatory Action, Authorized Control, Mandatory Control
  3. Regulatory Action, Company Action, Mandatory Control, Authorized Control
  4. Authorized Control, Mandatory Control, Company Action, Regulatory Action
Show answer & explanation

Correct answer: B - Company Action, Regulatory Action, Authorized Control, Mandatory Control

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