NC Life Insurance License Exam Questions and Answers |Fall
2025/2026 Update | 100% Correct Latest
QUESTION 1
Which of the following best describes the purpose of life insurance?
A. To eliminate all financial risks of an individual’s life
B. To provide financial protection against the loss of income due to death
C. To increase the insured’s taxable income
D. To provide investment returns only
CORRECT ANSWER: B
RATIONALE: Life insurance’s fundamental purpose is to protect beneficiaries from financial loss
resulting from the insured’s death. It provides income replacement, rather than serving solely as
an investment or income source for the insured while alive.
QUESTION 2
A life insurance policy’s “face amount” refers to:
A. The cash value minus any outstanding loans
B. The total premiums paid over the policy’s life
C. The initial death benefit stated in the policy
D. The insurer’s net profit on the policy
CORRECT ANSWER: C
RATIONALE: The face amount is the original death benefit specified in the policy when issued,
prior to any adjustments for loans or dividends.
QUESTION 3
Which of the following is true regarding term life insurance?
A. It builds cash value over time
B. It is permanent coverage with guaranteed premiums
C. It provides coverage for a specific period only
D. It has level premiums for the life of the insured
CORRECT ANSWER: C
RATIONALE: Term life insurance is temporary, offering protection for a defined term (e.g., 10, 20,
or 30 years) and paying a benefit only if the insured dies during that period.
QUESTION 4
,What happens to the cash value in a whole life insurance policy if the policy is surrendered?
A. It is forfeited to the insurer
B. It is paid to the policyowner minus any surrender charges or loans
C. It remains with the insurer but continues to grow
D. It converts automatically to term coverage
CORRECT ANSWER: B
RATIONALE: When a whole life policy is surrendered, the insurer pays the policyowner the
accumulated cash value minus any applicable fees or outstanding loans.
QUESTION 5
Which rider allows a policyowner to temporarily suspend premium payments during a
disability?
A. Accidental Death Benefit Rider
B. Waiver of Premium Rider
C. Disability Income Rider
D. Guaranteed Insurability Rider
CORRECT ANSWER: B
RATIONALE: The waiver of premium rider ensures the insured’s coverage remains in force
without premium payments while the insured is totally disabled, as defined by the policy.
QUESTION 6
In North Carolina, a life insurance agent must do which of the following before selling a policy?
A. Complete at least 12 hours of ethics training
B. Obtain a certificate of appointment from the insurer
C. Hold a property and casualty license
D. Be employed by the Department of Insurance
CORRECT ANSWER: B
RATIONALE: Before an agent can solicit life insurance, the insurer must appoint the individual —
confirming a contractual relationship and authority to act on the insurer’s behalf.
QUESTION 7
,Which of the following describes the Incontestability Clause in a life insurance policy?
A. It prevents denial of a claim for suicide within the first two years
B. It allows the insurer to void a policy at any time
C. It limits the time the insurer has to challenge misstatements on the application
D. It guarantees the policyowner a refund of premiums if a claim is denied
CORRECT ANSWER: C
RATIONALE: The incontestability clause prevents the insurer from voiding coverage due to
misrepresentation after the policy has been in force, typically for two years, except for fraud.
QUESTION 8
A key feature of Universal Life insurance that distinguishes it from Whole Life is:
A. The death benefit is fixed and unchangeable
B. Premiums are fixed for the life of the policy
C. The flexibility of premium payments and death benefits
D. It has no investment component
CORRECT ANSWER: C
RATIONALE: Universal Life allows the policyowner to adjust both the premium schedule and
death benefit within certain policy limits, offering more flexibility than Whole Life.
QUESTION 9
Which of the following best describes the beneficiary designation “per stirpes”?
A. Benefits are paid equally among all surviving beneficiaries only
B. Benefits are distributed only to the spouse
C. A deceased beneficiary’s share passes to his or her heirs
D. Benefits revert to the insurer if the primary beneficiary dies
CORRECT ANSWER: C
RATIONALE: "Per stirpes" ensures that a beneficiary’s heirs receive that beneficiary’s share if the
beneficiary predeceases the insured.
QUESTION 10
In North Carolina, a “free look” period for individual life insurance policies must be at least:
A. 5 days
, B. 10 days
C. 15 days
D. 30 days
CORRECT ANSWER: B
RATIONALE: North Carolina mandates a minimum 10-day free look period, allowing
policyowners to review and cancel a policy for a full refund without penalty.
QUESTION 11
What document must an agent deliver to a policyowner at the time the policy is issued if the
initial premium was not paid with the application?
A. Policy summary
B. Conditional receipt
C. Statement of continued good health
D. Illustration
CORRECT ANSWER: C
RATIONALE: If no premium accompanies the application, the insurer often requires a statement
confirming the insured’s health is unchanged before policy delivery, ensuring underwriting
accuracy.
QUESTION 12
Which of the following life insurance settlement options provides the beneficiary with a lifetime
income that ceases upon death?
A. Life income option
B. Interest-only option
C. Fixed period option
D. Joint and survivor option
CORRECT ANSWER: A
RATIONALE: The life income option provides guaranteed payments to the beneficiary for life,
regardless of how long they live, but payments stop upon death.
QUESTION 13
The term “insurable interest” in life insurance refers to:
A. Any financial gain expected from the insured’s death
2025/2026 Update | 100% Correct Latest
QUESTION 1
Which of the following best describes the purpose of life insurance?
A. To eliminate all financial risks of an individual’s life
B. To provide financial protection against the loss of income due to death
C. To increase the insured’s taxable income
D. To provide investment returns only
CORRECT ANSWER: B
RATIONALE: Life insurance’s fundamental purpose is to protect beneficiaries from financial loss
resulting from the insured’s death. It provides income replacement, rather than serving solely as
an investment or income source for the insured while alive.
QUESTION 2
A life insurance policy’s “face amount” refers to:
A. The cash value minus any outstanding loans
B. The total premiums paid over the policy’s life
C. The initial death benefit stated in the policy
D. The insurer’s net profit on the policy
CORRECT ANSWER: C
RATIONALE: The face amount is the original death benefit specified in the policy when issued,
prior to any adjustments for loans or dividends.
QUESTION 3
Which of the following is true regarding term life insurance?
A. It builds cash value over time
B. It is permanent coverage with guaranteed premiums
C. It provides coverage for a specific period only
D. It has level premiums for the life of the insured
CORRECT ANSWER: C
RATIONALE: Term life insurance is temporary, offering protection for a defined term (e.g., 10, 20,
or 30 years) and paying a benefit only if the insured dies during that period.
QUESTION 4
,What happens to the cash value in a whole life insurance policy if the policy is surrendered?
A. It is forfeited to the insurer
B. It is paid to the policyowner minus any surrender charges or loans
C. It remains with the insurer but continues to grow
D. It converts automatically to term coverage
CORRECT ANSWER: B
RATIONALE: When a whole life policy is surrendered, the insurer pays the policyowner the
accumulated cash value minus any applicable fees or outstanding loans.
QUESTION 5
Which rider allows a policyowner to temporarily suspend premium payments during a
disability?
A. Accidental Death Benefit Rider
B. Waiver of Premium Rider
C. Disability Income Rider
D. Guaranteed Insurability Rider
CORRECT ANSWER: B
RATIONALE: The waiver of premium rider ensures the insured’s coverage remains in force
without premium payments while the insured is totally disabled, as defined by the policy.
QUESTION 6
In North Carolina, a life insurance agent must do which of the following before selling a policy?
A. Complete at least 12 hours of ethics training
B. Obtain a certificate of appointment from the insurer
C. Hold a property and casualty license
D. Be employed by the Department of Insurance
CORRECT ANSWER: B
RATIONALE: Before an agent can solicit life insurance, the insurer must appoint the individual —
confirming a contractual relationship and authority to act on the insurer’s behalf.
QUESTION 7
,Which of the following describes the Incontestability Clause in a life insurance policy?
A. It prevents denial of a claim for suicide within the first two years
B. It allows the insurer to void a policy at any time
C. It limits the time the insurer has to challenge misstatements on the application
D. It guarantees the policyowner a refund of premiums if a claim is denied
CORRECT ANSWER: C
RATIONALE: The incontestability clause prevents the insurer from voiding coverage due to
misrepresentation after the policy has been in force, typically for two years, except for fraud.
QUESTION 8
A key feature of Universal Life insurance that distinguishes it from Whole Life is:
A. The death benefit is fixed and unchangeable
B. Premiums are fixed for the life of the policy
C. The flexibility of premium payments and death benefits
D. It has no investment component
CORRECT ANSWER: C
RATIONALE: Universal Life allows the policyowner to adjust both the premium schedule and
death benefit within certain policy limits, offering more flexibility than Whole Life.
QUESTION 9
Which of the following best describes the beneficiary designation “per stirpes”?
A. Benefits are paid equally among all surviving beneficiaries only
B. Benefits are distributed only to the spouse
C. A deceased beneficiary’s share passes to his or her heirs
D. Benefits revert to the insurer if the primary beneficiary dies
CORRECT ANSWER: C
RATIONALE: "Per stirpes" ensures that a beneficiary’s heirs receive that beneficiary’s share if the
beneficiary predeceases the insured.
QUESTION 10
In North Carolina, a “free look” period for individual life insurance policies must be at least:
A. 5 days
, B. 10 days
C. 15 days
D. 30 days
CORRECT ANSWER: B
RATIONALE: North Carolina mandates a minimum 10-day free look period, allowing
policyowners to review and cancel a policy for a full refund without penalty.
QUESTION 11
What document must an agent deliver to a policyowner at the time the policy is issued if the
initial premium was not paid with the application?
A. Policy summary
B. Conditional receipt
C. Statement of continued good health
D. Illustration
CORRECT ANSWER: C
RATIONALE: If no premium accompanies the application, the insurer often requires a statement
confirming the insured’s health is unchanged before policy delivery, ensuring underwriting
accuracy.
QUESTION 12
Which of the following life insurance settlement options provides the beneficiary with a lifetime
income that ceases upon death?
A. Life income option
B. Interest-only option
C. Fixed period option
D. Joint and survivor option
CORRECT ANSWER: A
RATIONALE: The life income option provides guaranteed payments to the beneficiary for life,
regardless of how long they live, but payments stop upon death.
QUESTION 13
The term “insurable interest” in life insurance refers to:
A. Any financial gain expected from the insured’s death
