NORTH CAROLINA (NC) LIFE INSURANCE LICENSING
EXAM | ALL PRACTICE QUESTIONS AND ANSWERS |
COMPLETE SSTUDYGUIDE 2026/2027
1. Which statement best describes the primary purpose of life insurance?
A. To create guaranteed investment returns
B. To provide financial protection against premature death
C. To eliminate all personal taxes
D. To guarantee retirement income
Answer: B
Life insurance primarily provides financial protection by transferring the economic risk of
premature death from the insured to the insurer.
2. A client wants coverage specifically to replace income for dependents if the client dies
during working years. Which type of insurance is generally most appropriate?
A. Term life insurance
B. Credit life insurance
C. Whole life insurance
D. Industrial life insurance
Answer: A
Term life insurance is designed to provide death protection for a specified period and is
commonly used for income replacement during working years.
3. Which characteristic is most closely associated with whole life insurance?
A. Coverage automatically expires at age 65
B. Premiums change every month
C. Permanent protection with cash value accumulation
D. Benefits are payable only for accidental death
Answer: C
Whole life provides permanent life insurance protection and generally accumulates cash
value according to the policy provisions.
4. An applicant wants permanent coverage but also wants premiums to remain level for the
life of the policy. Which policy best fits this need?
A. Decreasing term
B. Annual renewable term
C. Increasing term
D. Whole life
,Answer: D
Whole life is designed to provide permanent protection with premiums that are generally
level according to the policy contract.
5. A business owner wants coverage on a key employee because the employee's death could
cause a significant financial loss to the business. What concept is most directly involved?
A. Insurable interest
B. Coinsurance
C. Indemnity
D. Subrogation
Answer: A
The business has a legitimate financial interest in the continued life of a key employee,
creating an insurable interest.
6. Which party makes the application for a life insurance policy?
A. Beneficiary
B. Applicant
C. Insurer
D. Underwriter
Answer: B
The applicant is the person or entity applying for insurance and completing the application.
7. A person purchases a life insurance policy on another individual's life. What must
generally exist at the time of application?
A. A guaranteed cash value
B. An insurable interest
C. A surrender charge
D. A policy loan
Answer: B
Insurable interest must generally exist when life insurance is purchased on another person's
life.
8. Which party assumes the risk under a life insurance contract?
A. Beneficiary
B. Producer
C. Insurer
D. Policyowner
Answer: C
,The insurer assumes the contractual risk in exchange for the premium paid by the
policyowner.
9. What is the primary purpose of underwriting?
A. To determine whether the applicant presents an acceptable risk
B. To determine the beneficiary
C. To collect renewal commissions
D. To establish the policyowner's estate
Answer: A
Underwriting evaluates the applicant's risk characteristics to determine whether and on what
terms the insurer will provide coverage.
10. Which factor would an underwriter most likely consider when evaluating a life
insurance application?
A. Favorite investment
B. Medical history
C. Preferred beneficiary's occupation
D. Color of the applicant's vehicle
Answer: B
Medical history is an important underwriting consideration because it can affect mortality
risk.
11. An applicant intentionally omits a serious medical condition from an insurance
application. This action is most likely an example of:
A. Waiver
B. Concealment or misrepresentation
C. Assignment
D. Reinstatement
Answer: B
Knowingly withholding or misstating material information can constitute misrepresentation
or concealment and may affect policy enforceability.
12. Which term describes the amount paid by the policyowner to the insurer for coverage?
A. Premium
B. Dividend
C. Benefit
D. Reserve
Answer: A
, A premium is the amount paid to an insurer in exchange for insurance coverage.
13. A policyowner stops paying premiums on a permanent policy but has accumulated
sufficient cash value to support an automatic policy feature. Which provision may prevent
immediate termination?
A. Assignment provision
B. Automatic premium loan provision
C. Beneficiary provision
D. Entire contract provision
Answer: B
An automatic premium loan provision can use available cash value to pay an overdue
premium, subject to the policy terms.
14. Which life insurance policy generally provides the greatest flexibility in premium
payments and death benefit selection?
A. Ordinary whole life
B. Universal life
C. Straight term
D. Decreasing term
Answer: B
Universal life generally provides flexibility in premium payments and death benefit options,
subject to policy requirements.
15. A client wants life insurance protection for only the period during which a mortgage is
expected to be outstanding. Which policy could be appropriate?
A. Decreasing term
B. Whole life
C. Endowment
D. Fixed annuity
Answer: A
Decreasing term insurance can be structured so that the death benefit declines over time,
making it suitable for certain debt-protection needs.
16. Which type of term policy normally provides coverage for a specified period with no
cash value accumulation?
A. Universal life
B. Whole life
C. Term life
D. Variable life
EXAM | ALL PRACTICE QUESTIONS AND ANSWERS |
COMPLETE SSTUDYGUIDE 2026/2027
1. Which statement best describes the primary purpose of life insurance?
A. To create guaranteed investment returns
B. To provide financial protection against premature death
C. To eliminate all personal taxes
D. To guarantee retirement income
Answer: B
Life insurance primarily provides financial protection by transferring the economic risk of
premature death from the insured to the insurer.
2. A client wants coverage specifically to replace income for dependents if the client dies
during working years. Which type of insurance is generally most appropriate?
A. Term life insurance
B. Credit life insurance
C. Whole life insurance
D. Industrial life insurance
Answer: A
Term life insurance is designed to provide death protection for a specified period and is
commonly used for income replacement during working years.
3. Which characteristic is most closely associated with whole life insurance?
A. Coverage automatically expires at age 65
B. Premiums change every month
C. Permanent protection with cash value accumulation
D. Benefits are payable only for accidental death
Answer: C
Whole life provides permanent life insurance protection and generally accumulates cash
value according to the policy provisions.
4. An applicant wants permanent coverage but also wants premiums to remain level for the
life of the policy. Which policy best fits this need?
A. Decreasing term
B. Annual renewable term
C. Increasing term
D. Whole life
,Answer: D
Whole life is designed to provide permanent protection with premiums that are generally
level according to the policy contract.
5. A business owner wants coverage on a key employee because the employee's death could
cause a significant financial loss to the business. What concept is most directly involved?
A. Insurable interest
B. Coinsurance
C. Indemnity
D. Subrogation
Answer: A
The business has a legitimate financial interest in the continued life of a key employee,
creating an insurable interest.
6. Which party makes the application for a life insurance policy?
A. Beneficiary
B. Applicant
C. Insurer
D. Underwriter
Answer: B
The applicant is the person or entity applying for insurance and completing the application.
7. A person purchases a life insurance policy on another individual's life. What must
generally exist at the time of application?
A. A guaranteed cash value
B. An insurable interest
C. A surrender charge
D. A policy loan
Answer: B
Insurable interest must generally exist when life insurance is purchased on another person's
life.
8. Which party assumes the risk under a life insurance contract?
A. Beneficiary
B. Producer
C. Insurer
D. Policyowner
Answer: C
,The insurer assumes the contractual risk in exchange for the premium paid by the
policyowner.
9. What is the primary purpose of underwriting?
A. To determine whether the applicant presents an acceptable risk
B. To determine the beneficiary
C. To collect renewal commissions
D. To establish the policyowner's estate
Answer: A
Underwriting evaluates the applicant's risk characteristics to determine whether and on what
terms the insurer will provide coverage.
10. Which factor would an underwriter most likely consider when evaluating a life
insurance application?
A. Favorite investment
B. Medical history
C. Preferred beneficiary's occupation
D. Color of the applicant's vehicle
Answer: B
Medical history is an important underwriting consideration because it can affect mortality
risk.
11. An applicant intentionally omits a serious medical condition from an insurance
application. This action is most likely an example of:
A. Waiver
B. Concealment or misrepresentation
C. Assignment
D. Reinstatement
Answer: B
Knowingly withholding or misstating material information can constitute misrepresentation
or concealment and may affect policy enforceability.
12. Which term describes the amount paid by the policyowner to the insurer for coverage?
A. Premium
B. Dividend
C. Benefit
D. Reserve
Answer: A
, A premium is the amount paid to an insurer in exchange for insurance coverage.
13. A policyowner stops paying premiums on a permanent policy but has accumulated
sufficient cash value to support an automatic policy feature. Which provision may prevent
immediate termination?
A. Assignment provision
B. Automatic premium loan provision
C. Beneficiary provision
D. Entire contract provision
Answer: B
An automatic premium loan provision can use available cash value to pay an overdue
premium, subject to the policy terms.
14. Which life insurance policy generally provides the greatest flexibility in premium
payments and death benefit selection?
A. Ordinary whole life
B. Universal life
C. Straight term
D. Decreasing term
Answer: B
Universal life generally provides flexibility in premium payments and death benefit options,
subject to policy requirements.
15. A client wants life insurance protection for only the period during which a mortgage is
expected to be outstanding. Which policy could be appropriate?
A. Decreasing term
B. Whole life
C. Endowment
D. Fixed annuity
Answer: A
Decreasing term insurance can be structured so that the death benefit declines over time,
making it suitable for certain debt-protection needs.
16. Which type of term policy normally provides coverage for a specified period with no
cash value accumulation?
A. Universal life
B. Whole life
C. Term life
D. Variable life
