AZ Life & Health Exam Flashcards

Q: How many questions are on the Arizona life and health insurance exam?

The Arizona life and health insurance exam has 150 total questions covering both general insurance concepts and Arizona state-specific regulations. You have 2 hours and 30 minutes to complete the exam and need a score of 70% on each section separately to pass. The exam fee is $59 and is administered by PSI Services.

Q: Does Arizona require pre-license education for insurance?

No, Arizona does not require pre-license education for insurance producers. However, completing a prep course is highly recommended due to the separate 70% passing requirement for both the general and state sections.

Q: What is the Arizona Life and Health Insurance Guaranty Association?

The Arizona Life and Health Insurance Guaranty Association protects policyholders when an insurance company becomes insolvent. It provides coverage up to $300,000 for life insurance death benefits, $100,000 for life insurance cash value, $250,000 for annuity present value, and tiered health insurance benefits ($500,000 major medical, $300,000 disability/LTC, $100,000 other health). Producers cannot use this protection as a sales inducement.

Q: What are the Arizona producer continuing education requirements?

Arizona resident producers must complete 48 hours of continuing education (CE) every 4 years, of which at least 6 hours must be in ethics. The license term is 4 years, expiring on the last day of the producer's birth month.

Question 1

DIFI (Department of Insurance and Financial Institutions)

Accepted Answer

The Arizona state agency responsible for regulating the business of insurance and financial institutions. Created on July 1, 2020, through the merger of the Department of Insurance and the Department of Financial Institutions.

Question 2

Director of Insurance Selection

Accepted Answer

Appointed by the Governor and confirmed by the State Senate. Serves at the pleasure of the Governor and holds the power to enforce Arizona Revised Statutes (A.R.S.) Title 20.

Question 3

Arizona Revised Statutes (A.R.S.) Title 20

Accepted Answer

The primary body of Arizona state statutory law governing the insurance industry, including licensing, policy provisions, and trade practices.

Question 4

Director's Rulemaking Authority

Accepted Answer

The Director can adopt rules to implement and interpret A.R.S. Title 20 (compiled in the Arizona Administrative Code Chapter 6). Rules carry the force of law but cannot exceed statutory authority.

Question 5

DIFI Market-Conduct Examination

Accepted Answer

The Director's authority to audit insurers' sales, claims, and underwriting practices to ensure compliance with Arizona law. Expenses are generally paid by the insurer being examined.

Question 6

Cease-and-Desist Order

Accepted Answer

An administrative order issued by the Director directing an insurer or producer to immediately stop a prohibited or unlawful insurance activity.

Question 7

Certificate of Authority

Accepted Answer

A license issued by DIFI authorizing an insurance company (admitted insurer) to transact insurance business within the state of Arizona.

Question 8

Admitted vs. Non-Admitted Insurer

Accepted Answer

Admitted insurers hold a Certificate of Authority from DIFI and are backed by the Guaranty Fund. Non-admitted (surplus lines) insurers do not hold a Certificate of Authority and are not backed by the Guaranty Fund.

Question 9

Arizona Pre-Licensing Education Hours

Accepted Answer

None. Arizona does not mandate pre-licensing education classroom hours for insurance producers, though candidates must still pass the licensing exam.

Question 10

Arizona Insurance Exam Passing Score

Accepted Answer

A score of 70% or higher is required on BOTH the general (national) and state-law sections. The scores are not averaged, and each section must be passed independently.

Question 11

License Application Timeline After Passing the Exam

Accepted Answer

An applicant must submit their NIPR license application and fees within 12 months (1 year) of passing the exam, or the exam results expire.

Question 12

Arizona Producer License Term and Expiration

Accepted Answer

Valid for 4 years, expiring on the last day of the licensee's birth month.

Question 13

Arizona Continuing Education (CE) Requirements

Accepted Answer

Resident producers with a major line of authority must complete 48 hours of approved CE every 4 years, aligned with their license term.

Question 14

Arizona Ethics CE Requirement

Accepted Answer

At least 6 hours of the required 48 continuing education hours must be dedicated to ethics training.

Question 15

CE Carryover and Course Repetition

Accepted Answer

Excess CE hours cannot be carried forward to the next 4-year license cycle, and producers cannot repeat the same course for credit within a single compliance period.

Question 16

Reporting Personal/Professional Changes to DIFI

Accepted Answer

Producers must report a change of address, legal name, administrative action by another state, or criminal prosecution/conviction within 30 days of the event.

Question 17

Standard Free Look for Individual Life Insurance

Accepted Answer

10 days from policy delivery. The policyowner can return the policy for a full refund of all premiums paid, voiding the contract from the start.

Question 18

Incontestability Period in Arizona

Accepted Answer

2 years. After a life insurance policy has been in force during the insured's lifetime for 2 years, the insurer cannot void it or deny claims based on application misrepresentations.

Question 19

Suicide Exclusion Period

Accepted Answer

A maximum of 2 years from policy issue. If the insured dies by suicide within this window, the insurer's liability is limited to a refund of premiums paid.

Question 20

Misstatement of Age or Sex on a Life Application

Accepted Answer

The policy is NOT voided. Instead, the insurer adjusts the death benefit to what the premiums paid would have purchased at the correct age or sex.

Question 21

Life Insurance Grace Period

Accepted Answer

Typically 31 days. If the insured dies during this period, the death benefit is paid to the beneficiary, minus the unpaid premium.

Question 22

Life Insurance Policy Reinstatement

Accepted Answer

The right to restore a lapsed policy (usually within 3 years) by providing evidence of insurability and paying back premiums plus interest. Reinstatement starts a new 2-year contestability period for application statements.

Question 23

Entire Contract Provision

Accepted Answer

Specifies that the policy, including the attached application and any riders, constitutes the entire agreement between the parties. No outside documents can be incorporated by reference.

Question 24

Arizona Annuity Best-Interest Standard

Accepted Answer

Under A.R.S. 20-1243.03, effective January 1, 2021, producers recommending annuities must act in the consumer's best interest and cannot prioritize their own financial gain over the client's.

Question 25

Four Components of the Annuity Best-Interest Obligation

Accepted Answer

1. Care (diligence in matching needs), 2. Disclosure (producer role and compensation), 3. Conflict of Interest (managing material conflicts), and 4. Documentation (written basis of recommendation).

Question 26

Consumer Suitability Profile for Annuities

Accepted Answer

Financial and personal information a producer must collect before recommending an annuity, including age, income, financial objectives, time horizon, liquidity needs, and risk tolerance.

Question 27

Arizona Annuity Producer Training

Accepted Answer

Producers must complete a one-time 4-hour annuity best-interest training course, plus company product-specific training, before soliciting or selling annuities in the state.

Question 28

Annuity Suitability Record Retention

Accepted Answer

Producers and insurers must retain records of annuity recommendations, suitability profiles, and disclosures for at least 5 years.

Question 29

Federal Safe Harbor for Arizona Annuity Sales

Accepted Answer

Producers who comply with comparable federal standards (e.g., SEC's Regulation Best Interest or Investment Advisers Act fiduciary duties) are deemed to satisfy Arizona's best-interest rules.

Question 30

Annuity Disclosure Requirements at Application

Accepted Answer

Producers must deliver a detailed product disclosure document and the NAIC Buyer's Guide to Annuities at or before the time of application.

Question 31

Market Value Adjustment (MVA)

Accepted Answer

A feature in some fixed/indexed annuities that adjusts the surrender value up or down depending on interest rate changes since the policy was issued.

Question 32

Definition of Insurance Replacement

Accepted Answer

A transaction where new life insurance or an annuity is purchased, causing an existing policy to be lapsed, surrendered, reduced in value, or borrowed against.

Question 33

Twisting vs. Churning

Accepted Answer

Twisting is using misrepresentation to induce a client to replace a policy with a different insurer. Churning is repeatedly and needlessly replacing policies (often internally) to generate new producer commissions.

Question 34

Notice Regarding Replacement

Accepted Answer

A mandatory, signed disclosure document that the producer must present and leave with the applicant when a replacement is proposed, explaining the risks and restarts of the new policy.

Question 35

Replacing Insurer Notification Timeline

Accepted Answer

The replacing insurer must notify the existing insurer of the proposed replacement within 5 business days of receiving the application, allowing the existing insurer to attempt conservation.

Question 36

Replacement Recordkeeping Duration

Accepted Answer

Both producers and replacing insurers must retain copies of all replacement notices, comparisons, and documentation for at least 5 years.

Question 37

Right of Conservation

Accepted Answer

The existing insurer's right to contact their policyholder and provide a comparison or explanation to encourage keeping the current policy in force rather than replacing it.

Question 38

Arizona Health Insurance Marketplace

Accepted Answer

Arizona does not run a state exchange. Residents purchase ACA-compliant individual policies through the federal exchange at HealthCare.gov.

Question 39

Free Look for Individual Health Policies

Accepted Answer

10 days under A.C.C. R20-6-501, allowing the policyholder to return the policy for a full premium refund.

Question 40

Notice of Claim Timeline (Individual Health)

Accepted Answer

Written notice of a claim must be given to the insurer within 20 days of the occurrence of any covered loss, or as soon as reasonably possible.

Question 41

Health Insurance Claim Forms and Proof of Loss Timelines

Accepted Answer

The insurer must furnish claim forms within 15 days of receiving notice. The claimant must submit written proof of loss within 90 days of the loss.

Question 42

Legal Actions Provision for Health Policies

Accepted Answer

A policyholder cannot bring legal action against the insurer sooner than 60 days after submitting proof of loss, nor later than 3 years after proof of loss is required.

Question 43

Arizona Life and Disability Insurance Guaranty Fund

Accepted Answer

A state safety net that pays covered claims for insolvent member insurers. Funded post-insolvency by assessing remaining solvent insurers in proportion to their premium volume.

Question 44

Guaranty Fund Limits for Life and Annuities

Accepted Answer

Life insurance death benefits: up to $300,000 per life; cash surrender value: up to $100,000 per life; annuity present value: up to $250,000 per contract owner.

Question 45

Guaranty Fund Health Insurance Limits

Accepted Answer

Major medical/hospital: up to $500,000; Disability income & Long-Term Care: up to $300,000; other health benefits: up to $100,000.

Question 46

Guaranty Fund Advertising Prohibition

Accepted Answer

Under A.R.S. 20-685.01, it is an unfair trade practice to use the existence of the Guaranty Fund to solicit, induce, or promote the sale of insurance.

Question 47

Arizona Senior (65+) Free Look Periods

Accepted Answer

Under A.R.S. 20-1233 (annuity contracts), annuity contracts sold to seniors (age 65+) have an extended 30-day free look (10 days otherwise). Many Arizona prep sources also describe an extended 20-day free look on life insurance policies sold to seniors age 65+.

Question 48

Rebating

Accepted Answer

Offering or giving any inducement, premium discount, or valuable consideration to purchase insurance that is not specified in the policy contract. It is a prohibited unfair trade practice.

Question 49

Arizona Civil Penalties for Unfair Trade Practices

Accepted Answer

Under A.R.S. 20-456: up to $1,000 per act (aggregate $10,000 limit) for non-intentional violations; up to $5,000 per act (aggregate $50,000 per 6-month period) for intentional violations.

Question 50

COBRA vs. Arizona State Continuation

Accepted Answer

Federal COBRA applies to employers with 20 or more employees (18-36 months coverage). Arizona state continuation (mini-COBRA) applies to small employers with fewer than 20 employees.

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