North Carolina Health Insurance License Test Newest
2026 Actual Exam Test Bank With 200 Questions and
Correct Answers (Verified Answers) Already Graded
A+|| New!!
1. Which of the following best defines a "moral hazard" in
insurance?
A) A slippery floor that causes a fall
B) A person’s tendency to be careless because they have
insurance
C) A person’s dishonest character that leads to filing a false
claim
D) The statistical calculation of potential losses
Correct Answer: C
Rationale: Hazards are conditions that increase the likelihood or
severity of a loss. A "moral hazard" specifically involves a change
in behavior based on dishonesty or intent to cause a loss for
1
,financial gain. Carelessness is a "morale hazard" (attitudinal), while
slippery floors are "physical hazards".
2. When a company is authorized and licensed to transact
insurance in a state (e.g., North Carolina), it is considered
a(n):
A) Non-admitted carrier
B) Surplus lines carrier
C) Admitted (authorized) insurer
D) Foreign insurer
Correct Answer: C
Rationale: An "admitted" insurer has received a Certificate of
Authority from the state Department of Insurance, allowing them to
conduct business. Surplus lines carriers are non-admitted for risks
that standard carriers won't cover.
3. Using the "CANHAM" acronym, which characteristic
requires that losses must be predictable enough for an insurer
2
,to calculate premiums?
A) Calculable
B) Affordable
C) Homogeneous
D) Accidental
Correct Answer: A
Rationale: For a risk to be insurable, the chance of loss must be
"calculable." The insurer must be able to estimate the average
frequency and severity of future losses to set adequate premium
rates.
4. An insurance broker generally represents which party in a
transaction?
A) The insurer (company)
B) The insured (customer)
C) The NAIC
D) The State Commissioner
3
, Correct Answer: B
Rationale: While agents typically represent the insurer and act on
their behalf, a broker legally represents the insured, helping them
find coverage and placing the risk with an insurer.
5. The risk management technique of "transfer" means:
A) Avoiding the activity that causes risk
B) Reducing the severity of a loss
C) Shifting the financial consequence of a loss to an insurer
D) Accepting the potential for loss
Correct Answer: C
Rationale: Insurance is the primary method of transferring risk. The
individual (insured) transfers the financial risk of loss to the
insurance company in exchange for a premium.
6. What is the "cause" of a loss, such as a fire, windstorm, or
heart attack?
A) Hazard
4
2026 Actual Exam Test Bank With 200 Questions and
Correct Answers (Verified Answers) Already Graded
A+|| New!!
1. Which of the following best defines a "moral hazard" in
insurance?
A) A slippery floor that causes a fall
B) A person’s tendency to be careless because they have
insurance
C) A person’s dishonest character that leads to filing a false
claim
D) The statistical calculation of potential losses
Correct Answer: C
Rationale: Hazards are conditions that increase the likelihood or
severity of a loss. A "moral hazard" specifically involves a change
in behavior based on dishonesty or intent to cause a loss for
1
,financial gain. Carelessness is a "morale hazard" (attitudinal), while
slippery floors are "physical hazards".
2. When a company is authorized and licensed to transact
insurance in a state (e.g., North Carolina), it is considered
a(n):
A) Non-admitted carrier
B) Surplus lines carrier
C) Admitted (authorized) insurer
D) Foreign insurer
Correct Answer: C
Rationale: An "admitted" insurer has received a Certificate of
Authority from the state Department of Insurance, allowing them to
conduct business. Surplus lines carriers are non-admitted for risks
that standard carriers won't cover.
3. Using the "CANHAM" acronym, which characteristic
requires that losses must be predictable enough for an insurer
2
,to calculate premiums?
A) Calculable
B) Affordable
C) Homogeneous
D) Accidental
Correct Answer: A
Rationale: For a risk to be insurable, the chance of loss must be
"calculable." The insurer must be able to estimate the average
frequency and severity of future losses to set adequate premium
rates.
4. An insurance broker generally represents which party in a
transaction?
A) The insurer (company)
B) The insured (customer)
C) The NAIC
D) The State Commissioner
3
, Correct Answer: B
Rationale: While agents typically represent the insurer and act on
their behalf, a broker legally represents the insured, helping them
find coverage and placing the risk with an insurer.
5. The risk management technique of "transfer" means:
A) Avoiding the activity that causes risk
B) Reducing the severity of a loss
C) Shifting the financial consequence of a loss to an insurer
D) Accepting the potential for loss
Correct Answer: C
Rationale: Insurance is the primary method of transferring risk. The
individual (insured) transfers the financial risk of loss to the
insurance company in exchange for a premium.
6. What is the "cause" of a loss, such as a fire, windstorm, or
heart attack?
A) Hazard
4
