NC State LIFE Insurance Exam Questions and Answers
Already Graded A+
Insurable Interest
Something of value that, if lost, would cause you financial harm. Must exist upfront at
time of application. Legitimate financial reason for buying insurance.
Impersonation
Wrong person takes medical examination/test in connection with application for
insurance. *Can be contested beyond 2 year incontestable clause*
Adhesion
Ins. Co. designs original contract. Insured has little or no control of content, no room for
bargaining, no negotiations. Insured must take it or leave it.
Indemnity
Person restored to original condition he/she enjoyed prior to loss. Does not profit a gain
from the insurance.
Aleatory
Ins. contract is "out of balance". Insured or bene might receive much more than he she
pays into the policy or may pay premiums for a long time and yet have no loss.
Conditional
Ins. contract is conditional. Both parties must meet conditions. Even when a loss
occurs. Ex) Life Ins. policy only pays on condition that proof of death is provided.
Reinsurance
Ins. between ins. co's. Ins. co's go to each other for help. Ex) A given risk is not
acceptable to an ins. co. due to adverse medical/underwriting considerations or large
amt of ins. involved is over co's retention limit
Misrepresentation/Concealment
Making misleading statements. Intentionally misrepresenting benefits, terms of policy.
Concealing known material facts. Ex) Implying ins. policy equates shares of stock,
implying dividends are guaranteed, overstating future values
Interested Adjusted Cost Comparisons
Similar policies are compared & int. is taken into account. Cost determined by
considering int. that might have been earned on premiums had they been invested.
(Surrender Cost Index measured at 10 & 20 years)
Traditional Net Cost Comparisons
Similar policies compared without taking the effect of int. into account. (Net Payment
Cost Index measured at 10 & 20 yrs)
Capital Stock ("Stock")
Ins. Co. owned by stockholders. Ex) Lincoln Financial
Mutual Insurance Company
Ins. Co. owned by the policyholders. Ex) State Farm, NW Mutual
Fraternal Benefit Societies
Under jurisdiction of Dept. of Ins.
-nonprofit org.
-a society, voluntary assoc. or corp.
-cannot issue capital stock
, -org. solely for mutual benefit of members & their families
-must have lodge system w/ ritualistic form of work
-do not issue any prop/liability pol. (No homeowners/auto ins)
-agents who sell to captive audience must be licensed by NCDOI
Ex) International Order if the Forester, Woodland of the World
Health Maintenance Organization (HMO)
Form of Ins. Co. Ownership
Commissioner of Insurance
Elected by the ppl for period of 4 yrs. Oversees state's dept. of ins. Approves rates, but
does not set them. Authority to give notice of hearing regarding violation, notice must
specify time & place of hearing & take place no less than 10 days after notice served.
Keep on file list of rates & explanations of coverages. Examine each annual statement,
reports all violations to attorney general. May petition court for restraining order if public
is in danger. If unable to fulfill term = governor appoints someone else.
Dept of Insurance
Agent qualification & licensing & ensuring all laws directly relating to matters of ins. are
executed and enforced. Main purpose of ins. reg. = promote public welfare.
Domestic Insurance Company
Incorporated or organized in NC. Ex) Durham Life
Foreign Insurance Co
Incorporated or organized under laws of a state other than NC. Ex) MetLife
Alien Insurance Company
Incorporated or organized under laws of any jurisdiction outside the U.S. Ex) Canada
Life
Prearrangement (Funeral) Ins. Policy
Funeral is prefunded with life ins. At time of app, prior to acceptance of initial premium,
must disclose policy is being used to fund prearrangement and effect on
prearrangement in event of changes, bene designation, or any penalties due to failure
to pay premium or surrendering policy.
Contract of Insurance
Agreement where insurer is bound to pay $ or its equivalent or some act of value to the
insured, upon indemnity or reimbursement for the destruction, loss or injury of
something in which insured has interest. Insurance is transfer of risk from an
individual/business to an Ins. Co. .. insured pays premium to co. in exchange for
accepting the risk.
Social Security
-Retirement
-Disability
-Survivor (death benefit $255)
-Medical (Medicare/Medicaid)
**unemployment not covered!!
-By law employer must contribute matching amount.
-PMI Primary Ins. Amount = equal to person's full retirement benefit at age 65 or for
disability
-Most begin retirement benefits at 65, but can slightly reduced at age 62.
Already Graded A+
Insurable Interest
Something of value that, if lost, would cause you financial harm. Must exist upfront at
time of application. Legitimate financial reason for buying insurance.
Impersonation
Wrong person takes medical examination/test in connection with application for
insurance. *Can be contested beyond 2 year incontestable clause*
Adhesion
Ins. Co. designs original contract. Insured has little or no control of content, no room for
bargaining, no negotiations. Insured must take it or leave it.
Indemnity
Person restored to original condition he/she enjoyed prior to loss. Does not profit a gain
from the insurance.
Aleatory
Ins. contract is "out of balance". Insured or bene might receive much more than he she
pays into the policy or may pay premiums for a long time and yet have no loss.
Conditional
Ins. contract is conditional. Both parties must meet conditions. Even when a loss
occurs. Ex) Life Ins. policy only pays on condition that proof of death is provided.
Reinsurance
Ins. between ins. co's. Ins. co's go to each other for help. Ex) A given risk is not
acceptable to an ins. co. due to adverse medical/underwriting considerations or large
amt of ins. involved is over co's retention limit
Misrepresentation/Concealment
Making misleading statements. Intentionally misrepresenting benefits, terms of policy.
Concealing known material facts. Ex) Implying ins. policy equates shares of stock,
implying dividends are guaranteed, overstating future values
Interested Adjusted Cost Comparisons
Similar policies are compared & int. is taken into account. Cost determined by
considering int. that might have been earned on premiums had they been invested.
(Surrender Cost Index measured at 10 & 20 years)
Traditional Net Cost Comparisons
Similar policies compared without taking the effect of int. into account. (Net Payment
Cost Index measured at 10 & 20 yrs)
Capital Stock ("Stock")
Ins. Co. owned by stockholders. Ex) Lincoln Financial
Mutual Insurance Company
Ins. Co. owned by the policyholders. Ex) State Farm, NW Mutual
Fraternal Benefit Societies
Under jurisdiction of Dept. of Ins.
-nonprofit org.
-a society, voluntary assoc. or corp.
-cannot issue capital stock
, -org. solely for mutual benefit of members & their families
-must have lodge system w/ ritualistic form of work
-do not issue any prop/liability pol. (No homeowners/auto ins)
-agents who sell to captive audience must be licensed by NCDOI
Ex) International Order if the Forester, Woodland of the World
Health Maintenance Organization (HMO)
Form of Ins. Co. Ownership
Commissioner of Insurance
Elected by the ppl for period of 4 yrs. Oversees state's dept. of ins. Approves rates, but
does not set them. Authority to give notice of hearing regarding violation, notice must
specify time & place of hearing & take place no less than 10 days after notice served.
Keep on file list of rates & explanations of coverages. Examine each annual statement,
reports all violations to attorney general. May petition court for restraining order if public
is in danger. If unable to fulfill term = governor appoints someone else.
Dept of Insurance
Agent qualification & licensing & ensuring all laws directly relating to matters of ins. are
executed and enforced. Main purpose of ins. reg. = promote public welfare.
Domestic Insurance Company
Incorporated or organized in NC. Ex) Durham Life
Foreign Insurance Co
Incorporated or organized under laws of a state other than NC. Ex) MetLife
Alien Insurance Company
Incorporated or organized under laws of any jurisdiction outside the U.S. Ex) Canada
Life
Prearrangement (Funeral) Ins. Policy
Funeral is prefunded with life ins. At time of app, prior to acceptance of initial premium,
must disclose policy is being used to fund prearrangement and effect on
prearrangement in event of changes, bene designation, or any penalties due to failure
to pay premium or surrendering policy.
Contract of Insurance
Agreement where insurer is bound to pay $ or its equivalent or some act of value to the
insured, upon indemnity or reimbursement for the destruction, loss or injury of
something in which insured has interest. Insurance is transfer of risk from an
individual/business to an Ins. Co. .. insured pays premium to co. in exchange for
accepting the risk.
Social Security
-Retirement
-Disability
-Survivor (death benefit $255)
-Medical (Medicare/Medicaid)
**unemployment not covered!!
-By law employer must contribute matching amount.
-PMI Primary Ins. Amount = equal to person's full retirement benefit at age 65 or for
disability
-Most begin retirement benefits at 65, but can slightly reduced at age 62.
