How is HS 323 tested?

HS 323 is assessed by an online proctored course final exam made up of multiple-choice questions. The CLU program has no single cumulative designation exam; each course has its own exams, quizzes, and knowledge checks, and a passing final course grade is required.

What score do I need to pass HS 323?

The American College requires a passing final course grade to complete HS 323. The College generally uses about a 70% threshold to pass a course, but candidates should confirm the exact requirement within their course.

What topics does HS 323 cover?

HS 323 covers life insurance policy types and provisions, annuities and their uses, the income, estate, and gift taxation of life insurance and annuities, needs analysis, business applications such as buy-sell and key person planning, product suitability, illustrations and replacement, and ethics.

Is HS 323 required for the CLU designation?

Yes. HS 323 is one of the required courses in the current CLU curriculum, which The American College streamlined to four required courses. Candidates must pass it along with the other required courses to earn the CLU.

Who administers HS 323?

HS 323 is administered by The American College of Financial Services, the institution that grants the CLU designation. The course is delivered online with proctored testing.

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100+ Free HS 323 Practice Questions

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An agent who alters a client's application answers about tobacco use to obtain a lower-rate class is engaging in:

A permissible accommodation

Acceptable field underwriting

Fraud and misrepresentation that can void the policy and lead to license loss

A standard underwriting shortcut

to track

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2026 Statistics

Key Facts: HS 323 Exam

Required

CLU Course

The American College CLU Curriculum

MCQ

Online Proctored Final

The American College HS 323

~70%

Course Pass Threshold

The American College Course Policy

100

Free Practice Questions

OpenExamPrep

Required CLU Courses

The American College CLU Program

HS 323 The Tools and Techniques of Life Insurance Planning is one of the required courses in The American College Chartered Life Underwriter (CLU) program. It focuses on life insurance policies and annuities and their use in financial planning, including term, whole, universal, variable, and indexed life; annuity types and payout options; the income, estate, and gift tax treatment of life insurance and annuities (Section 101, MEC/7-pay, 1035 exchanges, incidents of ownership, the three-year rule); needs analysis for individuals and businesses; buy-sell, key person, and executive benefit applications; product selection and suitability; and ethics. Assessment is an online proctored course final exam of multiple-choice questions; the CLU program has no single high-stakes cumulative final, and a passing final course grade (generally about 70%) is required.

Sample HS 323 Practice Questions

Try these sample questions to test your HS 323 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which feature most clearly distinguishes a whole life policy from a level term policy of the same face amount?

A.Whole life accumulates guaranteed cash value while level term does not

B.Term provides a higher death benefit at all ages

C.Whole life premiums always exceed the death benefit

D.Term policies pay dividends but whole life does not

Explanation: Whole life is a form of permanent insurance that builds a guaranteed cash value and provides lifetime coverage. Level term provides only a death benefit for a stated period with no cash value accumulation.

2In a universal life policy, which element gives the policyowner the ability to vary the premium amount and timing within policy limits?

A.A fixed, guaranteed level premium schedule

B.Flexible premiums applied to an accumulation account from which mortality and expense charges are deducted

C.A mandatory single premium at issue

D.A premium tied to a stock index with no policy charges

Explanation: Universal life unbundles the policy into a flexible-premium accumulation account that is credited with interest and debited for cost of insurance and expense charges. This structure lets the owner adjust premium amount and timing as long as the account can support the charges.

3Death benefit Option B (Option 2) under a universal life policy generally provides:

A.A level death benefit equal to the specified amount only

B.Only the cash value with no specified amount

C.The specified amount plus the accumulation (cash) value

D.A decreasing death benefit that mirrors a mortgage balance

Explanation: Under UL Option B, the total death benefit equals the specified face amount plus the policy's accumulation value, so the benefit increases as cash value grows. Option A pays a level death benefit, with the net amount at risk decreasing as cash value rises.

4Variable universal life (VUL) differs from traditional universal life primarily because:

A.VUL guarantees a fixed minimum interest rate on all subaccounts

B.VUL prohibits policy loans

C.VUL pays no death benefit during the first ten years

D.VUL cash value is invested in separate-account subaccounts and bears investment risk borne by the policyowner

Explanation: In VUL, the policyowner directs cash value among separate-account investment subaccounts and bears the investment risk and reward. Because of the securities component, VUL is sold with a prospectus by registered representatives.

5In an indexed universal life (IUL) policy, the 'cap rate' refers to:

A.The maximum interest crediting rate the insurer will apply even if the linked index returns more

B.The minimum guaranteed rate credited each year

C.The percentage of premium allocated to expenses

D.The maximum policy loan interest rate

Explanation: An IUL credits interest based on the performance of an external index subject to a cap, which limits the maximum credited rate, and usually a floor (often 0%) that protects against index losses. The participation rate and spread further shape how much index movement is credited.

6The incontestability clause in a life insurance policy generally provides that after the policy has been in force for a stated period (commonly two years) during the insured's lifetime, the insurer:

A.May rescind the contract at any time for any reason

B.May not contest the policy on the basis of material misstatements in the application, except for nonpayment of premium

C.Must double the death benefit

D.May increase premiums without notice

Explanation: The incontestability clause bars the insurer from contesting the policy for material misrepresentation after the contestable period (typically two years) while the insured is living. Fraud rules vary by state, and nonpayment of premium remains a basis to lapse coverage.

7Under a typical life insurance suicide clause, if the insured dies by suicide within the stated exclusion period (commonly two years), the insurer will usually:

A.Pay the full death benefit immediately

B.Pay double the face amount

C.Refund the premiums paid (or pay the reserve) rather than the full face amount

D.Deny all liability and retain the premiums

Explanation: The suicide clause limits the insurer's liability to a return of premiums paid (sometimes less indebtedness) if suicide occurs within the exclusion period. After the period expires, suicide is covered like any other cause of death.

8The 'grace period' provision in a life insurance policy primarily protects the policyowner by:

A.Permitting unlimited free policy loans

B.Guaranteeing dividends for one year

C.Extending the contestable period indefinitely

D.Allowing a stated period (often 31 days) after a missed premium during which coverage remains in force

Explanation: The grace period keeps coverage in force for a set time (commonly 30 or 31 days) after a premium due date. If the insured dies during the grace period, the death benefit is paid less any unpaid premium.

9Which nonforfeiture option allows a policyowner who stops paying premiums to keep the same face amount of coverage for a limited period using the existing cash value?

A.Extended term insurance

B.Reduced paid-up insurance

C.Automatic premium loan

D.Cash surrender

Explanation: Extended term insurance uses the net cash value as a single premium to buy paid-up term coverage equal to the original face amount for as long as the cash value will fund it. Reduced paid-up keeps lifetime coverage but at a smaller face amount.

10A waiver of premium rider generally provides that if the insured becomes totally disabled as defined in the policy:

A.The death benefit is paid immediately

B.The insurer waives premiums while the disability continues, keeping the policy in force

C.The cash value is forfeited

D.Future dividends are doubled

Explanation: Under a waiver of premium rider, the insurer pays the premiums on the policyowner's behalf during a qualifying total disability after an elimination period, so coverage and cash value growth continue. The policy stays in force as though premiums were being paid.

About the HS 323 Practice Questions

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