North Carolina Health Insurance License Test 2025 Preparation Test Bank With
EXAM Questions and Correct Detailed Answers for Actual Exam Practice| NC
Health Insurance Exam Prep Test Bank (Latest)
Question 1
What is the primary purpose of life insurance?
A) To create an estate for retirement.
B) To protect against the risk of outliving one's income.
C) To protect against the financial loss caused by premature or untimely death.
D) To serve as a short-term savings vehicle.
Correct Answer: C) To protect against the financial loss caused by premature or untimely
death.
Rationale: Life insurance is designed to provide a death benefit that replaces the financial
contributions of the deceased, thereby protecting survivors from the financial consequences
of their death.
Question 2
Which of the following is a type of whole life policy?
A) Level term
B) Annually renewable term
C) Decreasing term
D) Limited pay life
Correct Answer: D) Limited pay life
Rationale: The guide lists ordinary life, limited pay life, single premium life, and adjustable
life as types of whole life policies.
,Question 3
Which of the following is considered an interest/market sensitive life insurance policy?
A) Level Term
B) Survivorship Life
C) Universal Life
D) Limited Pay Life
Correct Answer: C) Universal Life
Rationale: The guide lists universal life, variable whole life, variable universal life, interest-
sensitive whole life, and equity indexed life as interest/market sensitive policies because
their cash value growth is tied to current interest rates or market performance.
Question 4
A policy that provides coverage for a specific period and does not build cash value is a:
A) Whole life policy
B) Term life policy
C) Universal life policy
D) Endowment policy
Correct Answer: B) Term life policy
Rationale: Term life is designed for temporary needs, providing "pure protection" for a set
number of years. The guide lists level, decreasing, return of premium, annually renewable,
and increasing as types of term policies.
Question 5
A life insurance policy that covers two individuals and pays the death benefit only after the
second person dies is called:
,A) Joint life
B) Split life
C) Survivorship life
D) Family income life
Correct Answer: C) Survivorship life
Rationale: The guide identifies joint life and survivorship life as combination plans. A
survivorship life policy, also known as a "second-to-die" policy, is structured to pay out
upon the death of the last surviving insured.
Question 6
Which statement is true regarding individual life insurance policies?
A) The employer selects the plan.
B) The policy is subject to group underwriting.
C) They are generally less expensive than group policies.
D) The individual applies for the policy and is subject to individual underwriting.
Correct Answer: D) The individual applies for the policy and is subject to individual
underwriting.
Rationale: The guide notes that with individual policies, the individual selects the plan and
is underwritten on their own merits, which typically makes the policy more expensive and
restrictive than group coverage.
Question 7
In a group life insurance plan, who is issued the master policy?
A) Each individual employee.
B) The insurance company.
, C) The organization or employer.
D) The state insurance department.
Correct Answer: C) The organization or employer.
Rationale: The guide states that for group life insurance, a single master policy is issued to
the group sponsor, such as the employer.
Question 8
What do individual members of a group life insurance plan receive as evidence of their
coverage?
A) An individual policy
B) A copy of the master policy
C) A certificate of insurance
D) A letter of eligibility
Correct Answer: C) A certificate of insurance
Rationale: The guide specifies that while the employer holds the master policy, individual
members receive certificates that outline their coverage and beneficiary information.
Question 9
Life insurance policies that pay dividends to policyholders are known as:
A) Nonparticipating policies
B) Participating policies
C) Stock policies
D) Fixed policies
Correct Answer: B) Participating policies
EXAM Questions and Correct Detailed Answers for Actual Exam Practice| NC
Health Insurance Exam Prep Test Bank (Latest)
Question 1
What is the primary purpose of life insurance?
A) To create an estate for retirement.
B) To protect against the risk of outliving one's income.
C) To protect against the financial loss caused by premature or untimely death.
D) To serve as a short-term savings vehicle.
Correct Answer: C) To protect against the financial loss caused by premature or untimely
death.
Rationale: Life insurance is designed to provide a death benefit that replaces the financial
contributions of the deceased, thereby protecting survivors from the financial consequences
of their death.
Question 2
Which of the following is a type of whole life policy?
A) Level term
B) Annually renewable term
C) Decreasing term
D) Limited pay life
Correct Answer: D) Limited pay life
Rationale: The guide lists ordinary life, limited pay life, single premium life, and adjustable
life as types of whole life policies.
,Question 3
Which of the following is considered an interest/market sensitive life insurance policy?
A) Level Term
B) Survivorship Life
C) Universal Life
D) Limited Pay Life
Correct Answer: C) Universal Life
Rationale: The guide lists universal life, variable whole life, variable universal life, interest-
sensitive whole life, and equity indexed life as interest/market sensitive policies because
their cash value growth is tied to current interest rates or market performance.
Question 4
A policy that provides coverage for a specific period and does not build cash value is a:
A) Whole life policy
B) Term life policy
C) Universal life policy
D) Endowment policy
Correct Answer: B) Term life policy
Rationale: Term life is designed for temporary needs, providing "pure protection" for a set
number of years. The guide lists level, decreasing, return of premium, annually renewable,
and increasing as types of term policies.
Question 5
A life insurance policy that covers two individuals and pays the death benefit only after the
second person dies is called:
,A) Joint life
B) Split life
C) Survivorship life
D) Family income life
Correct Answer: C) Survivorship life
Rationale: The guide identifies joint life and survivorship life as combination plans. A
survivorship life policy, also known as a "second-to-die" policy, is structured to pay out
upon the death of the last surviving insured.
Question 6
Which statement is true regarding individual life insurance policies?
A) The employer selects the plan.
B) The policy is subject to group underwriting.
C) They are generally less expensive than group policies.
D) The individual applies for the policy and is subject to individual underwriting.
Correct Answer: D) The individual applies for the policy and is subject to individual
underwriting.
Rationale: The guide notes that with individual policies, the individual selects the plan and
is underwritten on their own merits, which typically makes the policy more expensive and
restrictive than group coverage.
Question 7
In a group life insurance plan, who is issued the master policy?
A) Each individual employee.
B) The insurance company.
, C) The organization or employer.
D) The state insurance department.
Correct Answer: C) The organization or employer.
Rationale: The guide states that for group life insurance, a single master policy is issued to
the group sponsor, such as the employer.
Question 8
What do individual members of a group life insurance plan receive as evidence of their
coverage?
A) An individual policy
B) A copy of the master policy
C) A certificate of insurance
D) A letter of eligibility
Correct Answer: C) A certificate of insurance
Rationale: The guide specifies that while the employer holds the master policy, individual
members receive certificates that outline their coverage and beneficiary information.
Question 9
Life insurance policies that pay dividends to policyholders are known as:
A) Nonparticipating policies
B) Participating policies
C) Stock policies
D) Fixed policies
Correct Answer: B) Participating policies
