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Quizzes > Business & Finance > Business & Industry

Free ALU 101 Practice Test - Challenge Your Underwriting Knowledge

Dive into this ALU 101 practice test and boost your underwriting exam prep

Editorial: Review CompletedCreated By: Anne StenslandUpdated Aug 25, 2025
Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art quiz scene with free ALU 101 practice test headline on teal background and life underwriting icons

This ALU 101 practice test helps you prepare for the ALU exam by working through real scenarios in life underwriting on risk, policy features, and premiums. Use it to spot gaps before the exam and get instant feedback with short explanations; when you're confident, move on to ALU 201 .

Which organization provides a coded database that helps life insurers share certain underwriting information about applicants to combat misrepresentation and fraud?
NAIC Consumer Bureau
FDIC
FINRA
MIB Group
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The primary purpose of an Attending Physician Statement (APS) in life underwriting is to
Replace the paramedical exam
Verify the applicant's identity
Set the policy premium mode
Obtain detailed medical history directly from a treating provider
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Which lab test is most directly used to verify nicotine exposure for smoking status classification?
TSH
Creatine kinase
Hemoglobin A1c
Cotinine
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An underwriter reviewing a Motor Vehicle Record (MVR) is primarily assessing
Citizenship status for residency underwriting
Applicant's credit score for premium billing risk
Education level for occupational class
Driving-related mortality risk indicators such as DUIs or reckless driving
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Which of the following best describes the contestability period in an individual life policy?
A timeframe when suicide is always covered
The time allowed for late premium payments without lapse
A limited time after issue when the insurer may rescind for material misrepresentation
The period during which policy loans are prohibited
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In life underwriting, a flat extra is typically applied to
All preferred class risks to improve mortality
A specific, time-limited hazard such as recent cancer treatment or hazardous avocation
Only to policies with annual premium mode
Applicants with low build (underweight) only
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Which reinsurance approach allows ceding of individual cases outside automatic treaty guidelines for a reinsurer's individual review?
Stop-loss retention
YRT automatic pool
Coinsurance with allowances
Facultative reinsurance
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Insurable interest at policy inception generally requires that the policyowner
Lives in the same household as the insured
Would suffer a financial loss or hardship from the insured's death
Is the irrevocable beneficiary
Is a relative, regardless of financial relationship
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In financial underwriting for income replacement, a common initial method to estimate face amount is to apply
The policyowner's credit limit
A percentage of current savings only
An income multiple based on age and earnings
A flat $100,000 amount to all applicants
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A preferred risk class typically requires which combination of build and blood pressure?
Any blood pressure if BMI is under 22
Any BMI if blood pressure is normal on medication
BMI and blood pressure within the insurer's preferred ranges without medication exceptions per guidelines
BMI under 30 regardless of blood pressure level
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Which scenario most clearly indicates a need for financial justification scrutiny in a personal policy application?
Face amount far exceeds typical income multiples without clear purpose
Applicant changing premium mode from annual to monthly
Naming a contingent beneficiary
Adding an accidental death benefit rider
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A common red flag for potential STOLI (stranger-originated life insurance) is
Third-party premium financing with minimal insurable interest evidence
Applicant owning a small business with a buy-sell need
Policy applied for by a spouse
Face amount aligned to income multiples and needs analysis
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What is the usual effect on underwriting of a positive marijuana test with negative cotinine in a company that differentiates tobacco and non-tobacco?
Automatically declined for one year
Converted to accidental death only
May be classified as non-tobacco with appropriate marijuana use assessment per company guidelines
Always issued at preferred best
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Which underwriting action is most appropriate for a recent history of DUI within the lookback period?
Decline automatically for life
Postpone or rate depending on recency, BAC level, and any pattern of alcohol misuse
Ignore if MVR shows no points
Issue preferred best with an exclusion rider
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Which action is most appropriate when an adverse underwriting decision is made based on medical information?
Provide appropriate adverse action notice and comply with applicable privacy and disclosure laws
Automatically refund only half the premium
Delete all records of the application
Discuss details with any inquiring family member
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A binding receipt, where permitted, differs from a conditional receipt because it
Eliminates the suicide exclusion
Provides coverage from the date of receipt regardless of insurability up to stated limits
Requires policy delivery before coverage starts
Is only used after underwriting approval
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A facultative automatic clause in a reinsurance treaty most likely
Requires all cases to be declined first
Prevents any cession below retention
Mandates coinsurance only for substandard risks
Allows cession of cases within certain parameters for quick reinsurer acceptance without full individual review
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Genetic testing results in underwriting are generally treated under which principle?
Automatically decline all with any positive result
Follow applicable laws and company policy, often restricting use or requiring applicant authorization
Ignore all genetic information under any circumstance
Use results without consent regardless of law
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In accelerated underwriting programs, which element is often substituted for routine paramed labs?
Employer reference letters
A single blood pressure reading by the applicant
Data-derived risk scores from prescription, MVR, credit-based mortality, and EHR sources
Agent's personal guarantee of health
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A re-underwriting request post-issue is most appropriately triggered by
Material new information suggesting misrepresentation or fraud
A beneficiary name change
Address update
Premium mode change
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Study Outcomes

  1. Understand life underwriting fundamentals -

    Learn the core principles and terminology covered in the ALU exam to build a strong foundation for life underwriting decisions.

  2. Apply risk classification methods -

    Use real-world underwriting scenarios from the ALU 101 practice test to practice assigning appropriate risk classes to applicants.

  3. Analyze policy illustrations -

    Break down illustrations and calculate premiums accurately, reinforcing your skills for life insurance exams and underwriting tasks.

  4. Evaluate coverage scenarios -

    Assess varied client profiles and determine the most suitable life insurance products based on underwriting exam prep techniques.

  5. Identify exam prep strategies -

    Discover targeted tips and self-assessment methods to boost your confidence and performance on the ALU exam.

Cheat Sheet

  1. Mortality Table Mastery -

    Understanding mortality tables is crucial for the alu exam and essential for any ALU 101 practice test. Familiarize yourself with lx (number of lives) and qx (mortality rates) in tables like the 2017 CSO. A mnemonic such as "LEAP" (Lives, Exposures, Age, Probabilities) helps cement these concepts (Source: Society of Actuaries).

  2. Risk Classification Systems -

    Learn how to assign risk classes - Preferred, Standard, Substandard - based on guidelines from the NAIC and A.M. Best. The mnemonic "PPP" (Physical, Personal, Policy factors) helps you recall classification criteria. Accurate risk classification questions frequently appear in underwriting exam prep resources (Source: NAIC).

  3. Insurable Interest and Legal Basics -

    Definitions of insurable interest and the principle of utmost good faith form the backbone of the ALU 101 practice test. Remember: Insurable interest must exist at policy inception; think "I WANT" (Insurable, Wealth, At, Need, Time) to remember core elements. Refer to state insurance statutes and the IRMI study guide for legal clarity.

  4. Premium Calculation and Actuarial Formulas -

    Master formulas for net and gross premiums, e.g., Net Premium = Σ (Dx × qx+1) / Σ Dx where Dx = vx × lx, to ensure accuracy on a self-assessment practice test. Practicing these calculations reinforces both the time value of money and mortality integration concepts. The University of Pennsylvania actuarial lecture notes are a top resource for detailed examples.

  5. Policy Provisions and Dividend Options -

    Study common policy clauses like incontestability, grace period, and the free-look period, as these are tested on the alu exam. Understand dividend options (cash, reduction of premium, paid-up additions) with the "3-C" rule: Cash, Credit, or Compound. The Life Office Management Association provides clear breakdowns in their life underwriting quiz materials.

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