Idaho retirement and other insurance concepts practice questions
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Section IV of the Idaho Life exam's general part, Retirement and Other Insurance Concepts, has 8 of the 50 general questions. [1] It lists third-party ownership, life settlements, group life insurance (conversion privilege; contributory vs. noncontributory), retirement plans (qualified and nonqualified), life insurance needs analysis and suitability (personal needs; business needs such as key person and buy sell), Social Security benefits, and tax treatment of insurance premiums, proceeds and dividends (individual life, group life, modified endowment contracts). [1] This page covers the Idaho group life rules and the federal tax and retirement figures, with 10 practice questions.
Group life in Idaho (Idaho Code chapter 20)
- Grace period: the policyholder gets thirty one days to pay any premium except the first, and coverage stays in force during that time unless the policyholder gave written notice of discontinuance. [2]
- Incontestability: the group policy cannot be contested, except for nonpayment of premium, after two years from its date of issue. [3]
- Funeral expense payment: the policy may let the insurer pay up to $500 of the death benefit to someone who paid funeral or last illness expenses. [4]
- Credit union groups: the policy must cover at least twenty five members at issue, and members may not pay the entire premium. [5]
- Union groups: a noncontributory policy issued to a labor union must insure all eligible members, except those without satisfactory evidence of insurability or who reject coverage in writing. [6]
Conversion (Idaho Code 41-2018 to 41-2021)
- Leaving the group: a person whose coverage ends because employment or membership ends may get an individual policy without evidence of insurability, if they apply and pay the first premium within thirty one days. They may choose any form the insurer usually issues except term insurance. The amount cannot exceed the coverage that ended, and the premium is based on attained age. [7]
- Group policy ends: people insured for at least five years may convert, but the policy may limit the amount to the smaller of the coverage lost (less new group coverage) or $2,000. [8]
- Death during the conversion period: the amount the person could have converted is paid as a group claim, whether or not they applied. [9]
- Late notice: if the person is not told of the right at least fifteen days before the period ends, they get extra time ending fifteen days after notice. [10]
Taxes and retirement plans (federal)
- Life insurance proceeds: the IRS says proceeds received as a beneficiary "aren't includable in gross income," but any interest received on them is taxable. [11]
- 2026 limits: the IRS raised the 401(k), 403(b) and 457 employee deferral limit to $24,500 and the IRA limit to $7,500 for 2026. The catch-up limit for workers 50 and over in those workplace plans is $8,000, and the IRA catch-up is $1,100. [12]
Practice questions
1. How long is the grace period in an Idaho group life policy?
A. 10 days
B. 30 days
C. 31 days
D. 60 days
Answer: C. (Idaho Code 41-2011) [2]
2. What is the most a group life insurer may pay from the death benefit to someone who paid funeral expenses?
Answer: $500. (Idaho Code 41-2016) [4]
3. What is the smallest credit union group that can be insured at issue?
Answer: Twenty five members. (Idaho Code 41-2008(3)) [5]
4. An employee leaves the job. How long does she have to apply for an individual policy and pay the first premium?
Answer: Thirty one days after coverage ends, with no evidence of insurability. (Idaho Code 41-2018) [7]
5. Can the converted policy be term insurance?
Answer: No. The person may choose any form the insurer customarily issues except term insurance. (41-2018(1)) [7]
6. The employer cancels the group plan. Which employees may convert?
Answer: Those insured under the group for at least five years, and the amount may be limited to $2,000 or the coverage lost, whichever is smaller. (Idaho Code 41-2019) [8]
7. A former employee dies 20 days after leaving, before applying to convert. What is paid?
Answer: The amount he could have converted, as a claim under the group policy. (Idaho Code 41-2020) [9]
8. A beneficiary receives $100,000 of life proceeds plus $800 of interest. What is taxable income?
Answer: The $800 of interest. The proceeds themselves are not includable in gross income. [11]
9. What is the 2026 IRA contribution limit for someone under 50?
Answer: $7,500. [12]
10. What is the 2026 employee deferral limit for a 401(k)?
Answer: $24,500, plus an $8,000 catch-up for employees 50 and over. [12]
Study tips for section IV
- Group life numbers: 31 day grace, 31 days to convert, 5 years and $2,000 when the group plan ends, $500 for funeral expenses.
- Tax rule of thumb from the IRS: proceeds generally not income, interest on proceeds is.
- Qualified and nonqualified plans, needs analysis, key person and buy sell, life settlements and MECs are also on this section. [1]
Practice the whole Life exam with the free Idaho life practice test.
Prep Retention is independent and is not affiliated with Pearson VUE or the state.
Sources
Laws and exam documents quoted as of October 2026.
- Pearson VUE, Idaho content outlines 121301 (effective July 31, 2025): https://www.pearsonvue.com/content/dam/VUE/vue/en/documents/publications/121301.pdf
- Idaho Code 41-2011: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2011/
- Idaho Code 41-2012: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2012/
- Idaho Code 41-2016: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2016/
- Idaho Code 41-2008: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2008/
- Idaho Code 41-2004: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2004/
- Idaho Code 41-2018: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2018/
- Idaho Code 41-2019: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2019/
- Idaho Code 41-2020: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2020/
- Idaho Code 41-2021: https://legislature.idaho.gov/statutesrules/idstat/Title41/T41CH20/SECT41-2021/
- IRS, Life Insurance and Disability Insurance Proceeds: https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds
- IRS, 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111): https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500