NC LIFE INSURANCE FINAL PAPER 2026
QUESTIONS AND UPDATED SOLUTIONS
100% CORRECT
⩥ Law of Large Number. Answer: The greater the number of exposures,
the more accurate the prediction.
⩥ Insurable Risk Criteria. Answer: (1) Low probability of loss occurring
(2) Less than catastrophic results
(3) Measurable loss
(4) Financially significant loss
(5) Loss must be accidental and unintended
⩥ Probability and the law of large numbers helps predict claims by....
Answer: looking at past loss experience of a large number of similar
"units" over time.
⩥ Accurate prediction of loss payments is necessary to establish the....
Answer: rates (cost/unit) that are to be changed for coverage.
⩥ Adverse Selection. Answer: High risk people tend to apply for
insurance; concept removes randomness from probability and increases
claims potentially paid out by insurer.
,⩥ With which type of risk does insurance assist?. Answer: Pure risk
⩥ Underwriting is the _____ _____ of the insurer.. Answer: quality
control
⩥ Underwriting. Answer: Underwriter uses a specific set of criteria to
select insurable applicants and guard against adverse selection.
⩥ Underwriting decisions are determined by.... Answer: reviewing the
applicant's answers to medical statements and demographics on the
initial application.
⩥ Representations. Answer: Statements made by the applicant on the
insurance application that are believed to be true, but are not guaranteed
to be true.
⩥ Loss Ratios. Answer: Dividing losses (claims) of insurer by premiums
collected.
⩥ _____ _____ and _____ _____ determine if an insurer has an
underwriting profit or loss.. Answer: Loss ratios and expense ratios
⩥ Rate Factors. Answer: Gender
,Age
Health Status
Occupation
Avocations/Hobbies
Family Health History
Type of Insurance
Face Amount of Insurance
⩥ _____ factors such as marital status, sexual orientation, etc., do not
determine rates.. Answer: Protected
⩥ Sources of Underwriting Information. Answer: Application
Physician Records
Medical Information Bureau Report (MIB)
Paramedical Examination
Credit Report
Motor Vehicle Report
Consumer Investigative Report
Employer
Life Insurance Agent
, ⩥ Principle of Indemnity. Answer: Restoring the insured to the original
financial position that was enjoyed prior to a loss, but without gain.
⩥ Life insurance involves an insurer providing coverage for premium
for a policy period; the insurer will pay out the beneficiary known as the
_____ _____ in the event of the insured's death.. Answer: face amount
⩥ Valued Contract. Answer: A contract that pays a stated amount in the
event of a loss; like life insurance.
⩥ Insurable Interest. Answer: Establishes the privilege to purchase
insurance through love and affection (ex - immediate family) or financial
loss (ex - business partners).
⩥ Insurable interest is only required at the _____ _____ _____.. Answer:
time of application.
⩥ Immediate family members for insurable interest includes...... Answer:
Parents
Children
Grandparents
Siblings
Self - unlimited insurable interest on own life.
QUESTIONS AND UPDATED SOLUTIONS
100% CORRECT
⩥ Law of Large Number. Answer: The greater the number of exposures,
the more accurate the prediction.
⩥ Insurable Risk Criteria. Answer: (1) Low probability of loss occurring
(2) Less than catastrophic results
(3) Measurable loss
(4) Financially significant loss
(5) Loss must be accidental and unintended
⩥ Probability and the law of large numbers helps predict claims by....
Answer: looking at past loss experience of a large number of similar
"units" over time.
⩥ Accurate prediction of loss payments is necessary to establish the....
Answer: rates (cost/unit) that are to be changed for coverage.
⩥ Adverse Selection. Answer: High risk people tend to apply for
insurance; concept removes randomness from probability and increases
claims potentially paid out by insurer.
,⩥ With which type of risk does insurance assist?. Answer: Pure risk
⩥ Underwriting is the _____ _____ of the insurer.. Answer: quality
control
⩥ Underwriting. Answer: Underwriter uses a specific set of criteria to
select insurable applicants and guard against adverse selection.
⩥ Underwriting decisions are determined by.... Answer: reviewing the
applicant's answers to medical statements and demographics on the
initial application.
⩥ Representations. Answer: Statements made by the applicant on the
insurance application that are believed to be true, but are not guaranteed
to be true.
⩥ Loss Ratios. Answer: Dividing losses (claims) of insurer by premiums
collected.
⩥ _____ _____ and _____ _____ determine if an insurer has an
underwriting profit or loss.. Answer: Loss ratios and expense ratios
⩥ Rate Factors. Answer: Gender
,Age
Health Status
Occupation
Avocations/Hobbies
Family Health History
Type of Insurance
Face Amount of Insurance
⩥ _____ factors such as marital status, sexual orientation, etc., do not
determine rates.. Answer: Protected
⩥ Sources of Underwriting Information. Answer: Application
Physician Records
Medical Information Bureau Report (MIB)
Paramedical Examination
Credit Report
Motor Vehicle Report
Consumer Investigative Report
Employer
Life Insurance Agent
, ⩥ Principle of Indemnity. Answer: Restoring the insured to the original
financial position that was enjoyed prior to a loss, but without gain.
⩥ Life insurance involves an insurer providing coverage for premium
for a policy period; the insurer will pay out the beneficiary known as the
_____ _____ in the event of the insured's death.. Answer: face amount
⩥ Valued Contract. Answer: A contract that pays a stated amount in the
event of a loss; like life insurance.
⩥ Insurable Interest. Answer: Establishes the privilege to purchase
insurance through love and affection (ex - immediate family) or financial
loss (ex - business partners).
⩥ Insurable interest is only required at the _____ _____ _____.. Answer:
time of application.
⩥ Immediate family members for insurable interest includes...... Answer:
Parents
Children
Grandparents
Siblings
Self - unlimited insurable interest on own life.
