New Jersey Life Producer
NEW JERSEY LIFE PRODUCER – STATE LICENSING EXAM |
EXAM QUESTIONS AND CORRECT ANSWERS | VERIFIED
LIFE INSURANCE LICENSING 2026/2027
NEW JERSEY LIFE PRODUCER
State Licensing
1. Which term best describes the uncertainty or chance of a financial
loss?
A. Exposure unit
B. Risk
C. Hazard
D. Peril
B. Risk
Risk is the uncertainty of loss; a peril is the cause of loss and a hazard
increases its likelihood.
2. Which type of risk is generally insurable?
A. Speculative risk
B. Gambling risk
C. Pure risk
D. Investment risk
C. Pure risk
Only pure risk, where the outcome is loss or no loss, can be insured;
speculative risk includes a chance of gain.
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, New Jersey Life Producer
3. A person who refuses to ride motorcycles because of the danger
involved is practicing which risk management technique?
A. Retention
B. Avoidance
C. Sharing
D. Reduction
B. Avoidance
Avoidance eliminates exposure to the risk entirely by not engaging in the
activity.
4. Purchasing a life insurance policy is an example of which method of
handling risk?
A. Avoidance
B. Transfer
C. Retention
D. Reduction
B. Transfer
The financial consequence of premature death is shifted to the insurer in
exchange for premium.
5. The law of large numbers allows an insurer to:
A. Guarantee an underwriting profit every year
B. Eliminate the possibility of loss for each insured
C. Predict losses more accurately as the number of similar exposure units
increases
D. Avoid the need for underwriting
C. Predict losses more accurately as the number of similar exposure
units increases
The larger the group of similar risks, the more closely actual losses match
expected losses.
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, New Jersey Life Producer
6. In life insurance, insurable interest must exist:
A. At every policy anniversary
B. At the time of application
C. Both at application and at death
D. At the time of the insured's death
B. At the time of application
Insurable interest is required only when the policy is applied for, not at
the time of claim.
7. An insurance company owned by its policyholders, which may return
surplus as dividends, is a:
A. Reciprocal exchange
B. Mutual insurer
C. Risk retention group
D. Stock insurer
B. Mutual insurer
Mutual insurers are policyholder-owned and typically issue participating
policies.
8. An insurer incorporated in Pennsylvania and licensed to transact
business in New Jersey is considered in New Jersey to be a(n):
A. Domestic insurer
B. Unauthorized insurer
C. Alien insurer
D. Foreign insurer
D. Foreign insurer
A foreign insurer is formed under the laws of another U.S. state.
9. An insurer incorporated under the laws of Canada and doing
business in New Jersey is a(n):
A. Foreign insurer
B. Fraternal insurer
C. Domestic insurer
D. Alien insurer
D. Alien insurer
Alien insurers are organized under the laws of another country.
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, New Jersey Life Producer
10. Which situation is an example of moral hazard?
A. An insured who is careless because coverage exists
B. An applicant with high blood pressure
C. An applicant who intentionally lies on an application to obtain coverage
D. A tornado that destroys a home
C. An applicant who intentionally lies on an application to obtain
coverage
Moral hazard involves dishonesty or character flaws that increase the
chance of loss.
SECTION 2: INSURANCE CONTRACT LAW
11. Which of the following are the four essential elements of a legal
insurance contract?
A. Insurable interest, utmost good faith, indemnity, and subrogation
B. Offer and acceptance, consideration, competent parties, and legal
purpose
C. Application, premium, delivery, and signature
D. Agreement, notice, proof of loss, and payment
B. Offer and acceptance, consideration, competent parties, and legal
purpose
All four elements must be present for any contract to be legally
enforceable.
12. In a life insurance contract, the applicant's consideration consists
of:
A. The agent's commission
B. The statements made in the application and payment of the initial
premium
C. The policy's cash value
D. The insurer's promise to pay a death claim
B. The statements made in the application and payment of the initial
premium
The applicant gives value through truthful statements and the first
premium.
Page 4 of 55
NEW JERSEY LIFE PRODUCER – STATE LICENSING EXAM |
EXAM QUESTIONS AND CORRECT ANSWERS | VERIFIED
LIFE INSURANCE LICENSING 2026/2027
NEW JERSEY LIFE PRODUCER
State Licensing
1. Which term best describes the uncertainty or chance of a financial
loss?
A. Exposure unit
B. Risk
C. Hazard
D. Peril
B. Risk
Risk is the uncertainty of loss; a peril is the cause of loss and a hazard
increases its likelihood.
2. Which type of risk is generally insurable?
A. Speculative risk
B. Gambling risk
C. Pure risk
D. Investment risk
C. Pure risk
Only pure risk, where the outcome is loss or no loss, can be insured;
speculative risk includes a chance of gain.
Page 1 of 55
, New Jersey Life Producer
3. A person who refuses to ride motorcycles because of the danger
involved is practicing which risk management technique?
A. Retention
B. Avoidance
C. Sharing
D. Reduction
B. Avoidance
Avoidance eliminates exposure to the risk entirely by not engaging in the
activity.
4. Purchasing a life insurance policy is an example of which method of
handling risk?
A. Avoidance
B. Transfer
C. Retention
D. Reduction
B. Transfer
The financial consequence of premature death is shifted to the insurer in
exchange for premium.
5. The law of large numbers allows an insurer to:
A. Guarantee an underwriting profit every year
B. Eliminate the possibility of loss for each insured
C. Predict losses more accurately as the number of similar exposure units
increases
D. Avoid the need for underwriting
C. Predict losses more accurately as the number of similar exposure
units increases
The larger the group of similar risks, the more closely actual losses match
expected losses.
Page 2 of 55
, New Jersey Life Producer
6. In life insurance, insurable interest must exist:
A. At every policy anniversary
B. At the time of application
C. Both at application and at death
D. At the time of the insured's death
B. At the time of application
Insurable interest is required only when the policy is applied for, not at
the time of claim.
7. An insurance company owned by its policyholders, which may return
surplus as dividends, is a:
A. Reciprocal exchange
B. Mutual insurer
C. Risk retention group
D. Stock insurer
B. Mutual insurer
Mutual insurers are policyholder-owned and typically issue participating
policies.
8. An insurer incorporated in Pennsylvania and licensed to transact
business in New Jersey is considered in New Jersey to be a(n):
A. Domestic insurer
B. Unauthorized insurer
C. Alien insurer
D. Foreign insurer
D. Foreign insurer
A foreign insurer is formed under the laws of another U.S. state.
9. An insurer incorporated under the laws of Canada and doing
business in New Jersey is a(n):
A. Foreign insurer
B. Fraternal insurer
C. Domestic insurer
D. Alien insurer
D. Alien insurer
Alien insurers are organized under the laws of another country.
Page 3 of 55
, New Jersey Life Producer
10. Which situation is an example of moral hazard?
A. An insured who is careless because coverage exists
B. An applicant with high blood pressure
C. An applicant who intentionally lies on an application to obtain coverage
D. A tornado that destroys a home
C. An applicant who intentionally lies on an application to obtain
coverage
Moral hazard involves dishonesty or character flaws that increase the
chance of loss.
SECTION 2: INSURANCE CONTRACT LAW
11. Which of the following are the four essential elements of a legal
insurance contract?
A. Insurable interest, utmost good faith, indemnity, and subrogation
B. Offer and acceptance, consideration, competent parties, and legal
purpose
C. Application, premium, delivery, and signature
D. Agreement, notice, proof of loss, and payment
B. Offer and acceptance, consideration, competent parties, and legal
purpose
All four elements must be present for any contract to be legally
enforceable.
12. In a life insurance contract, the applicant's consideration consists
of:
A. The agent's commission
B. The statements made in the application and payment of the initial
premium
C. The policy's cash value
D. The insurer's promise to pay a death claim
B. The statements made in the application and payment of the initial
premium
The applicant gives value through truthful statements and the first
premium.
Page 4 of 55
