NC Life Insurance Practice Exam Questions
and Answers Already Passed
All of the following are included within the Insurance Commissioner's duties EXCEPT
a) Conducting investigation of all domestic insurers.
b) Reviewing the insurers' annual reports.
c) Writing North Carolina insurance laws.
d) Reporting any violations of insurance laws to the Attorney General. Writing insurance law is not the
Insurance Commissioner's responsibility, but enforcing the law is.
c) Writing North Carolina insurance laws.
Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is.
Which of the following insurance providers must be nonprofit and sell insurance only to its members?
a) Reciprocal
b) Fraternal
c) Service
d) Mutual
b) Fraternal
To be characterized as a fraternal benefit society, the organization must be nonprofit, have a lodge
system that includes ritualistic work and maintain a representative form of government with elected
officers. Insurance may only be sold to members of the society.
A married couple owns a permanent policy which covers both of their lives and pays the death benefit
only upon the death of the first insured. Which policy is that?
a)Second-to-Die
b)Family Income Policy
c)Joint Life Policy
d)Survivorship Life Policy
c)Joint Life Policy
Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first
insured, the policy ends.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death
was killed in a car accident. It was determined that the accident was his fault. The triple indemnity
rider in the policy specifies that the death must not be contributed to by the insured in any manner. In
this case, what will the policy beneficiary receive?
a)$0
b)$50,000 (50% of the policy value)
c)$100,000
d)$300,000 (triple the amount of policy value)
c)$100,000
The triple indemnity accidental death rider obligates the company to pay three times the face amount
of the policy if the insured dies as a result of an accident. The death must be accidental and not
contributed to by any other factors and must occur within 90 days of the accident. In this case, since
the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will
still receive the policy's death benefit.
,In term policies, what happens to the premium throughout the term of the policy?
a) Premium gradually increases.
b) Premium gradually decreases.
c) Premium fluctuates.
d) Premium always remains level.
d) Premium always remains level.
There are three basic types of term coverage available, based on how the face amount (death benefit)
changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term
insurance purchased, the premium is often level throughout the term of the policy.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of
the following insurance principles has the insurer violated?
a) Representation
b) Adhesion
c) Consideration
d) Good faith
c) Consideration
The binding force in any contract is consideration. Consideration on the part of the insured is the
payment of premiums and the health representations made in the application. Consideration on the
part of the insurer is the promise to pay in the event of loss.
When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family
members that are covered under the policy?
a) They can convert their coverage to permanent life insurance with evidence of insurability
.b) Family members are not provided any rights.
c) They can surrender the coverage for its cash value.
d) They can convert their coverage to permanent life insurance without evidence of insurability.
d) They can convert their coverage to permanent life insurance without evidence of insurability.
Family members may convert their term coverage to permanent insurance if requested within the
time stated in the policy.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
a) Defamation.
b) Coercion.
c) Rebating.
d) Misleading advertising.
b) Coercion.
These are all considered to be Unfair Trade Practices, which are major violations that can lead to
heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you
agree to buy auto insurance from them.
When an insurer requires a written proof of loss after notice of such loss has been given by the
insured or beneficiary, the company must
,a) Request a police report from the Department of Motor Vehicles.
b) Furnish a blank form to be used for that purpose.
c) Document the request for further investigation.
d) Submit the loss claim to underwriting for premium review and resolution.
b) Furnish a blank form to be used for that purpose.
When any company under any insurance policy requires a written proof of loss after notice of such
loss has been given by the insured or beneficiary, the company or its representative must furnish a
blank form to be used for that purpose.
Insurance companies are required to provide proof of loss forms to the claimant within how many
days after receipt of notice of loss?
a) 15
b) 30
c) 31
d) 45
a) 15
When any company under any insurance policy requires a written proof of loss after notice of the loss
has been given by the insured or beneficiary, the company must furnish a blank form within 15 days.
Which is true about a spouse term rider?
a) The rider is usually level term insurance.
b) Coverage is allowed for an unlimited time.
c) The rider is decreasing term insurance.
d) Coverage is allowed up to age 75.
a) The rider is usually level term insurance.
The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of
time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level
term insurance.
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and
nothing if death occurs after the 20-year period. What type of policy is this?
a)Level term
b)Term to specified age
c)Ordinary life policy
d)Limited pay whole life
a)Level term
A 20-year term policy is written to provide a level death benefit for 20 years.
Which nonforfeiture option provides coverage for the longest period of time?
a)Accumulated at interest
b)Reduced paid-up
c)Extended term
d)Paid-up option
b)Reduced paid-up
, The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but
the face amount is reduced to what the cash would buy.
Which of the following is NOT true regarding the accumulation period of an annuity?
a)It is also known as the pay-in period.
b)It would not occur in a deferred annuity.
c)It is the period during which the annuity payments earn interest.
d)It is the period over which the owner makes payments into an annuity.
b)It would not occur in a deferred annuity.
The "accumulation period" is the period of time over which the annuity owner makes payments
(premiums) into an annuity. This is the period of time during which the payments earn interest and
grow tax deferred (which would be the case in a deferred annuity).
Life insurance death proceeds are
a)Taxed as ordinary income.
b)Generally not taxed as income.
c)Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income.
d)Taxed as a capital gain.
b)Generally not taxed as income.
Life insurance death benefits are generally not taxed as income.
Which of the following is TRUE regarding an indeterminate premium whole life policy?
a) The premium is lower in the first year of the policy; then it is gradually raised every year.
b) The premium is level throughout the life of the policy.
c) The premium is usually higher in the first few years of the policy.
d) The premium can be raised up to a guaranteed maximum rate.
d) The premium can be raised up to a guaranteed maximum rate.
Indeterminate premium whole life policy premium rate may vary from year to year. After the initial
period (usually 2-3 years) when a lower premium is paid, the insurer establishes a new rate which
could be raised up to the guaranteed maximum stated in the policy, kept the same or lowered, based
on the company's expected mortality, expense and investments.
A person who knowingly obtains information about an individual from an agent or the insurer under
false pretenses has committed a(n)
a)Class 1 misdemeanor.
b)Trustworthy act.
c)Unfair trade practice.
d)Felony.
a) Class 1 misdemeanor.
A person who knowingly obtains information about an individual from an insurer or agent under false
pretenses is guilty of a Class 1 misdemeanor.
The initial amount of credit life insurance may NOT exceed
and Answers Already Passed
All of the following are included within the Insurance Commissioner's duties EXCEPT
a) Conducting investigation of all domestic insurers.
b) Reviewing the insurers' annual reports.
c) Writing North Carolina insurance laws.
d) Reporting any violations of insurance laws to the Attorney General. Writing insurance law is not the
Insurance Commissioner's responsibility, but enforcing the law is.
c) Writing North Carolina insurance laws.
Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is.
Which of the following insurance providers must be nonprofit and sell insurance only to its members?
a) Reciprocal
b) Fraternal
c) Service
d) Mutual
b) Fraternal
To be characterized as a fraternal benefit society, the organization must be nonprofit, have a lodge
system that includes ritualistic work and maintain a representative form of government with elected
officers. Insurance may only be sold to members of the society.
A married couple owns a permanent policy which covers both of their lives and pays the death benefit
only upon the death of the first insured. Which policy is that?
a)Second-to-Die
b)Family Income Policy
c)Joint Life Policy
d)Survivorship Life Policy
c)Joint Life Policy
Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first
insured, the policy ends.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death
was killed in a car accident. It was determined that the accident was his fault. The triple indemnity
rider in the policy specifies that the death must not be contributed to by the insured in any manner. In
this case, what will the policy beneficiary receive?
a)$0
b)$50,000 (50% of the policy value)
c)$100,000
d)$300,000 (triple the amount of policy value)
c)$100,000
The triple indemnity accidental death rider obligates the company to pay three times the face amount
of the policy if the insured dies as a result of an accident. The death must be accidental and not
contributed to by any other factors and must occur within 90 days of the accident. In this case, since
the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will
still receive the policy's death benefit.
,In term policies, what happens to the premium throughout the term of the policy?
a) Premium gradually increases.
b) Premium gradually decreases.
c) Premium fluctuates.
d) Premium always remains level.
d) Premium always remains level.
There are three basic types of term coverage available, based on how the face amount (death benefit)
changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term
insurance purchased, the premium is often level throughout the term of the policy.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of
the following insurance principles has the insurer violated?
a) Representation
b) Adhesion
c) Consideration
d) Good faith
c) Consideration
The binding force in any contract is consideration. Consideration on the part of the insured is the
payment of premiums and the health representations made in the application. Consideration on the
part of the insurer is the promise to pay in the event of loss.
When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family
members that are covered under the policy?
a) They can convert their coverage to permanent life insurance with evidence of insurability
.b) Family members are not provided any rights.
c) They can surrender the coverage for its cash value.
d) They can convert their coverage to permanent life insurance without evidence of insurability.
d) They can convert their coverage to permanent life insurance without evidence of insurability.
Family members may convert their term coverage to permanent insurance if requested within the
time stated in the policy.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
a) Defamation.
b) Coercion.
c) Rebating.
d) Misleading advertising.
b) Coercion.
These are all considered to be Unfair Trade Practices, which are major violations that can lead to
heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you
agree to buy auto insurance from them.
When an insurer requires a written proof of loss after notice of such loss has been given by the
insured or beneficiary, the company must
,a) Request a police report from the Department of Motor Vehicles.
b) Furnish a blank form to be used for that purpose.
c) Document the request for further investigation.
d) Submit the loss claim to underwriting for premium review and resolution.
b) Furnish a blank form to be used for that purpose.
When any company under any insurance policy requires a written proof of loss after notice of such
loss has been given by the insured or beneficiary, the company or its representative must furnish a
blank form to be used for that purpose.
Insurance companies are required to provide proof of loss forms to the claimant within how many
days after receipt of notice of loss?
a) 15
b) 30
c) 31
d) 45
a) 15
When any company under any insurance policy requires a written proof of loss after notice of the loss
has been given by the insured or beneficiary, the company must furnish a blank form within 15 days.
Which is true about a spouse term rider?
a) The rider is usually level term insurance.
b) Coverage is allowed for an unlimited time.
c) The rider is decreasing term insurance.
d) Coverage is allowed up to age 75.
a) The rider is usually level term insurance.
The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of
time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level
term insurance.
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and
nothing if death occurs after the 20-year period. What type of policy is this?
a)Level term
b)Term to specified age
c)Ordinary life policy
d)Limited pay whole life
a)Level term
A 20-year term policy is written to provide a level death benefit for 20 years.
Which nonforfeiture option provides coverage for the longest period of time?
a)Accumulated at interest
b)Reduced paid-up
c)Extended term
d)Paid-up option
b)Reduced paid-up
, The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but
the face amount is reduced to what the cash would buy.
Which of the following is NOT true regarding the accumulation period of an annuity?
a)It is also known as the pay-in period.
b)It would not occur in a deferred annuity.
c)It is the period during which the annuity payments earn interest.
d)It is the period over which the owner makes payments into an annuity.
b)It would not occur in a deferred annuity.
The "accumulation period" is the period of time over which the annuity owner makes payments
(premiums) into an annuity. This is the period of time during which the payments earn interest and
grow tax deferred (which would be the case in a deferred annuity).
Life insurance death proceeds are
a)Taxed as ordinary income.
b)Generally not taxed as income.
c)Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income.
d)Taxed as a capital gain.
b)Generally not taxed as income.
Life insurance death benefits are generally not taxed as income.
Which of the following is TRUE regarding an indeterminate premium whole life policy?
a) The premium is lower in the first year of the policy; then it is gradually raised every year.
b) The premium is level throughout the life of the policy.
c) The premium is usually higher in the first few years of the policy.
d) The premium can be raised up to a guaranteed maximum rate.
d) The premium can be raised up to a guaranteed maximum rate.
Indeterminate premium whole life policy premium rate may vary from year to year. After the initial
period (usually 2-3 years) when a lower premium is paid, the insurer establishes a new rate which
could be raised up to the guaranteed maximum stated in the policy, kept the same or lowered, based
on the company's expected mortality, expense and investments.
A person who knowingly obtains information about an individual from an agent or the insurer under
false pretenses has committed a(n)
a)Class 1 misdemeanor.
b)Trustworthy act.
c)Unfair trade practice.
d)Felony.
a) Class 1 misdemeanor.
A person who knowingly obtains information about an individual from an insurer or agent under false
pretenses is guilty of a Class 1 misdemeanor.
The initial amount of credit life insurance may NOT exceed
