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Life Insurance Exam Simulation North
Carolina/LATEST UPDATE 2025 with VERIFIED
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Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy? - ✔✔ANSWER: increase face amount If the Commissioner of insurance finds that a licensed person has used fraudulent, coercive, or dishonest practices or has proved to be incompetent, untrustworthy, or financially irresponsible, the law allows the Commissioner to - ✔✔ANSWER: suspend, revoke, or refuse to renew the agent's license A Whole Life Insurance Policy endows when the: - ✔✔ANSWER: Cash value equals the death benefit A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the: - ✔✔ANSWER: Policy Loan provision The Life and Health Insurance Guaranty Association becomes involved in an insurance company's affairs when the company - ✔✔ANSWER: becomes insolvent If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? - ✔✔ANSWER: Insured M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is: - ✔✔ANSWER: Adjustable Life Which parts of a life insurance policy are guaranteed to be true? - ✔✔ANSWER: Warranty Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but
it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy
The fund that assures policyholders payment of death benefits on Life Policies, if the company is insolvent at the time of the claim, is called the - ✔✔ANSWER: Life and Health Insurance Guaranty Association The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is: - ✔✔ANSWER: the cost Which of these is NOT considered to be an element of an insurance contract? - ✔✔ANSWER: negotiating J is 35 - years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value? - ✔✔ANSWER: 20-pay Life A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid: - ✔✔ANSWER: mandatory income tax withholding on the transfer amount A policyowner is allowed to pay premiums more than once a year under which provision? - ✔✔ANSWER: Mode of Premium Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? - ✔✔ANSWER: Variable Universal Life Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? - ✔✔ANSWER: Variable Life What does a 401(k) plan generally provide its participants? - ✔✔ANSWER: Salary-deferral contributions Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? - ✔✔ANSWER: The income from the TSA is received income tax-free
An insurance company MUST clearly specify questions designed to obtain information solely for marketing research - ✔✔ANSWER: in any insurance transaction Proceeds of the viatical settlement contract could be subject to the claims of - ✔✔ANSWER: Creditors M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take? - ✔✔ANSWER: Pay face amount minus the past due premium Which of these statements concerning an Individual Straight Life annuity is accurate? - ✔✔ANSWER: Payments are made to an annuitant for life What type of life policy covers two people and pays upon the death of the last insured? - ✔✔ANSWER: Survivorship L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances? - ✔✔ANSWER: L's spouse dies at age 66. P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take? - ✔✔ANSWER: Beneficiary will be paid the Death Benefit How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? - ✔✔ANSWER: If the primary beneficiary dies before the insured When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n): - ✔✔ANSWER: Anti-Money Laundering violation T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? - ✔✔ANSWER: Renewable
What benefit does the Payor clause on a Juvenile Life policy provide? - ✔✔ANSWER: Premiums are waived if payor becomes disabled J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used? - ✔✔ANSWER: Revocable Lapsed individual life insurance may be reinstated at any time within - ✔✔ANSWER: 5 years What is considered a valid reason for small businesses to insure the lives of its major shareholders? - ✔✔ANSWER: Fund a buy-sell agreement An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors? - ✔✔ANSWER: Gender Which statement regarding third-party ownership of a life insurance policy is true? - ✔✔ANSWER: It is used extensively in estate-planning as well as business circumstances A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
- ✔✔ANSWER: 20 - Pay Life accumulates cash value faster than Straight Life A policy of adhesion can only be modified by whom? - ✔✔ANSWER: The insurance company Which of these would be considered a Limited-Pay Life policy? - ✔✔ANSWER: Life Paid-Up at Age 70 When can a policyowner change a revocable beneficiary? - ✔✔ANSWER: Anytime What is the consideration given by an insurer in the Consideration clause of a life policy? - ✔✔ANSWER: Promise to pay a death benefit to a named beneficiary
Which of the following terms is defined as any transaction in which new life insurance or a new annuity is to be purchased and existing life insurance or annuity is to be terminated or discontinued? - ✔✔ANSWER: Replacement What type of policy would offer a 40 - year old the quickest accumulation of cash value? - ✔✔ANSWER: 20 - pay life Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the North Carolina insurance laws covering - ✔✔ANSWER: unfair trade practices What type of group insurance plan involves employees sharing the cost? - ✔✔ANSWER: contributory plan In a life insurance policy, which feature states that the policy will not cover certain risks? - ✔✔ANSWER: Exclusion A person who is insured within a group contract will be given a: - ✔✔ANSWER: certificate N is a 40 - year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase? - ✔✔ANSWER: 30 Pay Life What kind of life insurance product covers children under their parent's policy? - ✔✔ANSWER: Term rider Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? - ✔✔ANSWER: Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
A vacancy that occurs during the North Carolina Commissioner of Insurance's term of office MUST be filled by the - ✔✔ANSWER: Governor When an employee is terminated, which statement about a group term life conversion is true? - ✔✔ANSWER: Policy proceeds will be paid if the employee dies during the conversion period When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: - ✔✔ANSWER: insurable interest in the proposed insured Which premium schedule results in the lowest cost to the policyowner? - ✔✔ANSWER: Annual Under a Renewable Term policy, - ✔✔ANSWER: the renewal premium is calculated on the basis of the insured's attained age How long does the coverage normally remain on a limited-pay life policy? - ✔✔ANSWER: age 100 Which statement about a whole life policy is correct? - ✔✔ANSWER: Cash value may be borrowed against M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the: - ✔✔ANSWER: policy proceeds The amount of coverage on a group credit life policy is limited to: - ✔✔ANSWER: the insured's total loan value What type of life insurance are credit policies issued as? - ✔✔ANSWER: Term T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10, policy should T purchase? - ✔✔ANSWER: Ten-Year Endowment
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the: - ✔✔ANSWER: Insuring clause G purchased a Family Income policy at age 40. The policy has a 20 - year rider period. If G were to die at age 50, how long would G's family receive an income? - ✔✔ANSWER: 10 years Insurance policies are considered aleatory contracts because - ✔✔ANSWER: performance is conditioned upon a future occurrence A variable insurance policy: - ✔✔ANSWER: does not guarantee a return on its investment accounts Which statement regarding a Key Employee Life policy is NOT true? - ✔✔ANSWER: The beneficiary is named by the key employee From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant? - ✔✔ANSWER: Fair Credit Reporting Act The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the: - ✔✔`ANSWER: Cost of insurance N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take? - ✔✔ANSWER: Claim will be denied Premature IRA distributions are assessed a penalty tax of: - ✔✔ANSWER: 10% Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant? - ✔✔ANSWER: Risk classification Equity indexed annuities are invested in which of the following: - ✔✔ANSWER: S&P 500
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application? - ✔✔ANSWER: Risk classification Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? - ✔✔ANSWER: Life Income A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following? - ✔✔ANSWER: Inability of the insured to perform more than 2 Activities of Daily Living (ADL's) An incomplete life insurance application submitted to an insurer will result in which of these actions? - ✔✔ANSWER: Application will be returned to the writing agent C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true? - ✔✔ANSWER: ABC is the policyowner, C is the insured, and ABC is the beneficiary Which of these is NOT a reason for purchasing life insurance on the life of a minor? - ✔✔ANSWER: If both parents were to die, it would provide death benefits to the child The Commissioner of Insurance is empowered to - ✔✔ANSWER: enforce state laws relating to insurance Inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is - ✔✔ANSWER: twisting An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period? - ✔✔ANSWER: Full face amount minus any past due premiums Which statement is TRUE regarding a Variable Whole Life policy? - ✔✔ANSWER: A minimum guaranteed Death benefit is provided Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to
the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE? - ✔✔ANSWER: Each partner owns a $500,000 policy on their partner's life What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? - ✔✔ANSWER: Conversion P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to: - ✔✔ANSWER: P only Which of the following policies combines investment choices with a form of Term coverage? - ✔✔ANSWER: Variable Universal Life The type of annuity that can be purchased with one monetary deposit is called a(n): - ✔✔ANSWER: Immediate annuity Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? - ✔✔ANSWER: Entire cash surrender value is taxable Credit life insurance is typically issued with which of the following types of coverage? - ✔✔ANSWER: Decreasing Term An agent who sells an individual life insurance policy in North Carolina MUST deliver to the policyowner - ✔✔ANSWER: A Policy Summary and Buyer's Guide Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2? - ✔✔ANSWER: Ordinary income tax and a 10% tax penalty for early withdrawal
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid? - ✔✔ANSWER: At the time of application F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? - ✔✔ANSWER: Decreasing term policy An insurance agent is guilty of twisting if the agent - ✔✔ANSWER: misrepresents a policy to induce a policyowner to surrender an existing policy A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a: - ✔✔ANSWER: profit-sharing plan T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? - ✔✔ANSWER: $ Insurance policies are offered on a "take it or leave it" basis, which make them: - ✔✔ANSWER: Contracts of Adhesion Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? - ✔✔ANSWER: Evidence of insurability is required when the option is exercised How does an indexed annuity differ from a fixed annuity? - ✔✔ANSWER: Indexed annuity owners receive credited interest tied to the fluctuations of the linked index P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary? - ✔✔ANSWER: $50,000 minus any outstanding policy loans
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase? - ✔✔ANSWER: Deferred A Medical Information Report (MIB) report may disclose which of the following: - ✔✔ANSWER: Prior use of marijuana Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
- ✔✔ANSWER: Inspection report An agent who signs a blank contract application or policy of insurance - ✔✔ANSWER: is guilty of a misdemeanor S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary? - ✔✔ANSWER: $50, The investment gains from a Universal Life Policy usually go toward: - ✔✔ANSWER: the cash value All of these are considered sources of underwriting information about an applicant, EXCEPT: - ✔✔ANSWER: Rating Services Which of the following statements is CORRECT about accelerated death benefits? - ✔✔ANSWER: Must have a terminal illness to qualify When must insurable interest be present in order for a life insurance policy to be valid? - ✔✔ANSWER: When the application is made If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act? - ✔✔ANSWER: Insured's contingent beneficiary
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted? - ✔✔ANSWER:If Tom's employment is terminated, 20% of the funds would be forfeited A life insurance arrangement which circumvents insurable interest statutes is called: - ✔✔ANSWER: Investor- Originated Life Insurance Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees? - ✔✔ANSWER: Portion of the premiums paid for by the employer may be a tax deduction What is the underlying concept regarding level premiums? - ✔✔ANSWER: The early years are charged more than what is needed W is a 39 - year old female who just purchased an annuity to provide income for life starting at age All of these would be acceptable annuity choices, EXCEPT a(n): - ✔✔ANSWER: Immediate annuity What kind of special need would a policyowner require with an Adjustable Life insurance policy? - ✔✔ANSWER: flexible premiums When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve? - ✔✔ANSWER: Establishes the needs of the individual and his dependents What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies? - ✔✔ANSWER: Family Maintenance Policy What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? - ✔✔ANSWER: Family Maintenance Policy S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT - ✔✔ANSWER: beneficiary's age
What is being delivered during a policy delivery? - ✔✔ANSWER: Insurance contract to the proposed insured In North Carolina, which of the following is required in order to continue a resident insurance agent license? - ✔✔ANSWER: Meeting continuing education requirements A policy loan is made possible by which of these life insurance policy features? - ✔✔ANSWER: Cash value provision K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective? - ✔✔ANSWER: The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself? - ✔✔ANSWER: Entire Contract Provision Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE? - ✔✔ANSWER: It is taxed as ordinary income 188.At what point does an informal contract become binding? - ✔✔ANSWER: When one party makes an offer and the other party accepts that offer Which of the following is NOT included in an annuity contract? - ✔✔ANSWER: AD&D rider According to the Information and Privacy Protection Act, when access to recorded personal information is requested following an adverse underwriting decision, the insurer must make the information available within how many business days? - ✔✔ANSWER: 30 Before a life insurance policy is issued, which of these components of the contract is required? - ✔✔ANSWER: Applicant's signature on application
