NC Life Insurance Practice Exam Questions and Answers
Already Passed
Question 1
All of the following are included within the Insurance Commissioner's
duties EXCEPT:
A) Conducting investigation of all domestic insurers
B) Reviewing the insurers' annual reports
C) Writing North Carolina insurance laws
D) Reporting any violations of insurance laws to the Attorney General
Correct Answer: C
Rationale: Writing insurance law is not the Insurance Commissioner's
responsibility; that is the role of the state legislature. The Commissioner's
duty is to enforce the law, not write it. The Commissioner conducts
investigations, reviews annual reports, and reports violations to the
Attorney General.
Question 2
Which of the following insurance providers must be nonprofit and sell
insurance only to its members?
,A) Reciprocal
B) Fraternal
C) Service
D) Mutual
Correct Answer: B
Rationale: To be characterized as a fraternal benefit society, the
organization must be nonprofit, have a lodge system that includes
ritualistic work, and maintain a representative form of government with
elected officers. Insurance may only be sold to members of the society.
Question 3
A married couple owns a permanent policy which covers both of their
lives and pays the death benefit only upon the death of the first insured.
Which policy is that?
A) Second-to-Die
B) Family Income Policy
C) Joint Life Policy
D) Survivorship Life Policy
Correct Answer: C
Rationale: Joint life policies cover the lives of two insureds; rates are
blended. Upon the death of the first insured, the policy ends and pays the
,death benefit. This differs from a Survivorship (Second-to-Die) policy,
which pays upon the death of the second insured.
Question 4
The insured under a $100,000 life insurance policy with a triple indemnity
rider for accidental death was killed in a car accident. It was determined
that the accident was his fault. The triple indemnity rider in the policy
specifies that the death must not be contributed to by the insured in any
manner. In this case, what will the policy beneficiary receive?
A) $0
B) $50,000 (50% of the policy value)
C) $100,000
D) $300,000 (triple the amount of policy value)
Correct Answer: C
Rationale: The triple indemnity accidental death rider obligates the
company to pay three times the face amount of the policy if the insured
dies as a result of an accident. The death must be accidental and not
contributed to by any other factors and must occur within 90 days of the
accident. In this case, since the insured contributed to his own death, the
triple indemnity rider is void, but the beneficiary will still receive the
policy's death benefit of $100,000.
, Question 5
In term policies, what happens to the premium throughout the term of the
policy?
A) Premium gradually increases
B) Premium gradually decreases
C) Premium fluctuates
D) Premium always remains level
Correct Answer: D
Rationale: There are three basic types of term coverage available, based
on how the face amount (death benefit) changes during the policy term:
Level, Increasing, and Decreasing. Regardless of the type of term
insurance purchased, the premium is often level throughout the term of
the policy.
Question 6
An insurer neglects to pay a legitimate claim that is covered under the
terms of the policy. Which of the following insurance principles has the
insurer violated?
A) Representation
B) Adhesion
C) Consideration
D) Good faith
Already Passed
Question 1
All of the following are included within the Insurance Commissioner's
duties EXCEPT:
A) Conducting investigation of all domestic insurers
B) Reviewing the insurers' annual reports
C) Writing North Carolina insurance laws
D) Reporting any violations of insurance laws to the Attorney General
Correct Answer: C
Rationale: Writing insurance law is not the Insurance Commissioner's
responsibility; that is the role of the state legislature. The Commissioner's
duty is to enforce the law, not write it. The Commissioner conducts
investigations, reviews annual reports, and reports violations to the
Attorney General.
Question 2
Which of the following insurance providers must be nonprofit and sell
insurance only to its members?
,A) Reciprocal
B) Fraternal
C) Service
D) Mutual
Correct Answer: B
Rationale: To be characterized as a fraternal benefit society, the
organization must be nonprofit, have a lodge system that includes
ritualistic work, and maintain a representative form of government with
elected officers. Insurance may only be sold to members of the society.
Question 3
A married couple owns a permanent policy which covers both of their
lives and pays the death benefit only upon the death of the first insured.
Which policy is that?
A) Second-to-Die
B) Family Income Policy
C) Joint Life Policy
D) Survivorship Life Policy
Correct Answer: C
Rationale: Joint life policies cover the lives of two insureds; rates are
blended. Upon the death of the first insured, the policy ends and pays the
,death benefit. This differs from a Survivorship (Second-to-Die) policy,
which pays upon the death of the second insured.
Question 4
The insured under a $100,000 life insurance policy with a triple indemnity
rider for accidental death was killed in a car accident. It was determined
that the accident was his fault. The triple indemnity rider in the policy
specifies that the death must not be contributed to by the insured in any
manner. In this case, what will the policy beneficiary receive?
A) $0
B) $50,000 (50% of the policy value)
C) $100,000
D) $300,000 (triple the amount of policy value)
Correct Answer: C
Rationale: The triple indemnity accidental death rider obligates the
company to pay three times the face amount of the policy if the insured
dies as a result of an accident. The death must be accidental and not
contributed to by any other factors and must occur within 90 days of the
accident. In this case, since the insured contributed to his own death, the
triple indemnity rider is void, but the beneficiary will still receive the
policy's death benefit of $100,000.
, Question 5
In term policies, what happens to the premium throughout the term of the
policy?
A) Premium gradually increases
B) Premium gradually decreases
C) Premium fluctuates
D) Premium always remains level
Correct Answer: D
Rationale: There are three basic types of term coverage available, based
on how the face amount (death benefit) changes during the policy term:
Level, Increasing, and Decreasing. Regardless of the type of term
insurance purchased, the premium is often level throughout the term of
the policy.
Question 6
An insurer neglects to pay a legitimate claim that is covered under the
terms of the policy. Which of the following insurance principles has the
insurer violated?
A) Representation
B) Adhesion
C) Consideration
D) Good faith
