NC LIFE EXAM SIMULATION QUESTIONS & ANSWERS
Which of the following actions require a policyowner to provide proof of insurability in an
Adjustable Life policy? - Answers - ANSWER: increase face amount
2. If the Commissioner of insurance finds that a licensed person has used fraudulent,
coercive, or dishonest practices or has proved to be incompetent, untrustworthy, or
financially irresponsible, the law allows the Commissioner to - Answers - ANSWER:
suspend, revoke, or refuse to renew the agent's license
3. A Whole Life Insurance Policy endows when the: - Answers - ANSWER: Cash value
equals the death benefit
4. A provision in a life insurance policy that pays the policyowner an amount that does
not surpass the guaranteed cash value is called the: - Answers - ANSWER: Policy
Loan provision
5. The Life and Health Insurance Guaranty Association becomes involved in an
insurance company's affairs when the company - Answers - ANSWER: becomes
insolvent
6. If a contract of adhesion contains complicated language, to whom would the
interpretation be in favor of? - Answers - ANSWER: Insured
7. M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year
for the first 5 years. At the beginning of the sixth year, the premium will increase to $800
per year but will remain level thereafter. The face amount will remain at $70,000
throughout the life of the policy. The type of policy that M has purchased is: - Answers
- ANSWER: Adjustable Life
8. Which parts of a life insurance policy are guaranteed to be true? - Answers -
ANSWER: Warranty
9. Q applied for life insurance and submitted the initial premium on January 1. The
policy was issued February 1, but it was not delivered by the agent until February 7. Q
is dissatisfied and returns the policy February 13. How will the insurer handle this
situation? - Answers - ANSWER: Policy was returned within the free-look period,
premium will be fully refunded
10. Which of these types of policies may NOT have the Automatic Premium Loan
provision attached to it? - Answers - ANSWER: Decreasing Term
11. Which of the following consists of an offer, acceptance, and consideration? -
Answers - ANSWER: Contract
,12. According to North Carolina's rules on disclosure, a life insurance applicant is
expected to be provided with - Answers - ANSWER: a Buyer's Guide and Policy
Summary
13. Which of the following statements about noncontributory employee group life
insurance is FALSE? - Answers - ANSWER: A minimum number of employees is
required to participate
14. The automatic premium loan provision is designed to: - Answers - ANSWER: avoid
a policy lapse
15. The amount received for a life insurance policy in a viatical settlement is - Answers
- ANSWER: Less than the death benefit
16. If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds,
the insurer must pay interest on the proceeds after how many days? - Answers -
ANSWER: 30
17. When a life insurance policy exceeds certain IRS table values, the result would
create which of the following? - Answers - ANSWER: Modified Endowment Contract
(MEC)
18. A written agreement to provide a Life Insurance Policy holder immediate cash in
exchange for the sale and transfer of a Life Insurance Policy is a - Answers -
ANSWER: Viatical Settlement
19. The annuity that represents the largest possible monthly payment to an individual
annuitant is a(n): - Answers - ANSWER: Straight Life annuity
20. The fund that assures policyholders payment of death benefits on Life Policies, if the
company is insolvent at the time of the claim, is called the - Answers - ANSWER: Life
and Health Insurance Guaranty Association
21. The most important factor to consider when determining whether to convert term
insurance at the insured's attained age or the insured's original age is: - Answers -
ANSWER: the cost
22. Which of these is NOT considered to be an element of an insurance contract? -
Answers - ANSWER: negotiating
23. J is 35-years old and looking to purchase a whole life insurance policy. Which of the
following types of policies will provide the most rapid growth of cash value? - Answers
- ANSWER: 20-pay Life
, 24. A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant
to avoid: - Answers - ANSWER: mandatory income tax withholding on the transfer
amount
25. A policyowner is allowed to pay premiums more than once a year under which
provision? - Answers - ANSWER: Mode of Premium
26. Which type of life policy contains a monthly mortality charge as well as self-directed
investment choices? - Answers - ANSWER: Variable Universal Life
27. Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - Answers - ANSWER: Variable Life
28. What does a 401(k) plan generally provide its participants? - Answers - ANSWER:
Salary-deferral contributions
29. Which of the following statements regarding a Tax Sheltered Annuity (TSA) is
INCORRECT? - Answers - ANSWER: The income from the TSA is received income
tax-free
30. An insurance company MUST clearly specify questions designed to obtain
information solely for marketing research - Answers - ANSWER: in any insurance
transaction
31. Proceeds of the viatical settlement contract could be subject to the claims of -
Answers - ANSWER: Creditors
32. M had an annual life insurance premium payment due January 1. She died January
10 without making the premium payment. What action will the insurer take? - Answers
- ANSWER: Pay face amount minus the past due premium
33. Which of these statements concerning an Individual Straight Life annuity is
accurate? - Answers - ANSWER: Payments are made to an annuitant for life
34. What type of life policy covers two people and pays upon the death of the last
insured? - Answers - ANSWER: Survivorship
35. L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They
purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be
paid in which of the following circumstances? - Answers - ANSWER: L's spouse dies
at age 66.
36. P died five years after purchasing a life policy. While investigating the claim, the
insurer discovered material misrepresentations made by P during the application
process. Which of these actions will the insurer take? - Answers - ANSWER:
Beneficiary will be paid the Death Benefit
Which of the following actions require a policyowner to provide proof of insurability in an
Adjustable Life policy? - Answers - ANSWER: increase face amount
2. If the Commissioner of insurance finds that a licensed person has used fraudulent,
coercive, or dishonest practices or has proved to be incompetent, untrustworthy, or
financially irresponsible, the law allows the Commissioner to - Answers - ANSWER:
suspend, revoke, or refuse to renew the agent's license
3. A Whole Life Insurance Policy endows when the: - Answers - ANSWER: Cash value
equals the death benefit
4. A provision in a life insurance policy that pays the policyowner an amount that does
not surpass the guaranteed cash value is called the: - Answers - ANSWER: Policy
Loan provision
5. The Life and Health Insurance Guaranty Association becomes involved in an
insurance company's affairs when the company - Answers - ANSWER: becomes
insolvent
6. If a contract of adhesion contains complicated language, to whom would the
interpretation be in favor of? - Answers - ANSWER: Insured
7. M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year
for the first 5 years. At the beginning of the sixth year, the premium will increase to $800
per year but will remain level thereafter. The face amount will remain at $70,000
throughout the life of the policy. The type of policy that M has purchased is: - Answers
- ANSWER: Adjustable Life
8. Which parts of a life insurance policy are guaranteed to be true? - Answers -
ANSWER: Warranty
9. Q applied for life insurance and submitted the initial premium on January 1. The
policy was issued February 1, but it was not delivered by the agent until February 7. Q
is dissatisfied and returns the policy February 13. How will the insurer handle this
situation? - Answers - ANSWER: Policy was returned within the free-look period,
premium will be fully refunded
10. Which of these types of policies may NOT have the Automatic Premium Loan
provision attached to it? - Answers - ANSWER: Decreasing Term
11. Which of the following consists of an offer, acceptance, and consideration? -
Answers - ANSWER: Contract
,12. According to North Carolina's rules on disclosure, a life insurance applicant is
expected to be provided with - Answers - ANSWER: a Buyer's Guide and Policy
Summary
13. Which of the following statements about noncontributory employee group life
insurance is FALSE? - Answers - ANSWER: A minimum number of employees is
required to participate
14. The automatic premium loan provision is designed to: - Answers - ANSWER: avoid
a policy lapse
15. The amount received for a life insurance policy in a viatical settlement is - Answers
- ANSWER: Less than the death benefit
16. If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds,
the insurer must pay interest on the proceeds after how many days? - Answers -
ANSWER: 30
17. When a life insurance policy exceeds certain IRS table values, the result would
create which of the following? - Answers - ANSWER: Modified Endowment Contract
(MEC)
18. A written agreement to provide a Life Insurance Policy holder immediate cash in
exchange for the sale and transfer of a Life Insurance Policy is a - Answers -
ANSWER: Viatical Settlement
19. The annuity that represents the largest possible monthly payment to an individual
annuitant is a(n): - Answers - ANSWER: Straight Life annuity
20. The fund that assures policyholders payment of death benefits on Life Policies, if the
company is insolvent at the time of the claim, is called the - Answers - ANSWER: Life
and Health Insurance Guaranty Association
21. The most important factor to consider when determining whether to convert term
insurance at the insured's attained age or the insured's original age is: - Answers -
ANSWER: the cost
22. Which of these is NOT considered to be an element of an insurance contract? -
Answers - ANSWER: negotiating
23. J is 35-years old and looking to purchase a whole life insurance policy. Which of the
following types of policies will provide the most rapid growth of cash value? - Answers
- ANSWER: 20-pay Life
, 24. A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant
to avoid: - Answers - ANSWER: mandatory income tax withholding on the transfer
amount
25. A policyowner is allowed to pay premiums more than once a year under which
provision? - Answers - ANSWER: Mode of Premium
26. Which type of life policy contains a monthly mortality charge as well as self-directed
investment choices? - Answers - ANSWER: Variable Universal Life
27. Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - Answers - ANSWER: Variable Life
28. What does a 401(k) plan generally provide its participants? - Answers - ANSWER:
Salary-deferral contributions
29. Which of the following statements regarding a Tax Sheltered Annuity (TSA) is
INCORRECT? - Answers - ANSWER: The income from the TSA is received income
tax-free
30. An insurance company MUST clearly specify questions designed to obtain
information solely for marketing research - Answers - ANSWER: in any insurance
transaction
31. Proceeds of the viatical settlement contract could be subject to the claims of -
Answers - ANSWER: Creditors
32. M had an annual life insurance premium payment due January 1. She died January
10 without making the premium payment. What action will the insurer take? - Answers
- ANSWER: Pay face amount minus the past due premium
33. Which of these statements concerning an Individual Straight Life annuity is
accurate? - Answers - ANSWER: Payments are made to an annuitant for life
34. What type of life policy covers two people and pays upon the death of the last
insured? - Answers - ANSWER: Survivorship
35. L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They
purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be
paid in which of the following circumstances? - Answers - ANSWER: L's spouse dies
at age 66.
36. P died five years after purchasing a life policy. While investigating the claim, the
insurer discovered material misrepresentations made by P during the application
process. Which of these actions will the insurer take? - Answers - ANSWER:
Beneficiary will be paid the Death Benefit
