NC Life insurance state exam study
guideline 2026 Questions and Answers
"Ordinary (Straight) Life"
(Fixed Premiums) - Correct Answer -Permanent protection (matures at age 100)
Guaranteed Tax deferred Interest rate on Cash Value. Cash Value builds slowly for
the first 3 years. Premiums are level, since the company risks goes down as Cash
Value goes up. If you die the insurer keeps the Cash Value to offset their risks.
Insureds has access to Cash through Cash Surrender or a policy loan. "Rates are
per unit of protection" ($1,000 is 1 unit) C/V is guaranteed to be a certain amount
per $1,000 (in the future). C/V will equal F/A at policy maturity (age 100).
401k - Correct Answer -To provide employee for retirement plans. As means of
distributing company stock to employees. Is an arrangement that allows an
employee to choose between taking compensation in cash or deferring a percentage
of it to an account under the plan. The amount deferred is usually not taxable to the
employee.
A policy surrendered for cash - Correct Answer ->May NOT be in reinstated
©COPYRIGHT 2025 ALL RIGHTS RESERVED 1
,Do not need to re-establish insurable interest in order to reinstate
> only at time of application
Incontestability clause and Suicide Clause state over.
Absolute assignment - Correct Answer -Is permanent change of ownership. Child
policy may be assigned to the child at age 18. Old owner is known as the Assignor
of the policy.
The New owner is known as the Assignee of the policy. Assignments are not
effective until countersigned by insurer.
Accelerated Death benefit - Correct Answer -Apply when insured gets a terminal
illness. Insurers will pay out a portion of the death benefit to insured. Face Amount
paid to the beneficiary at death is reduced, by the amount paid out to the insured
while living. Amounts paid are NOT TAXABLE.
Accidental Death Benefit rider - Correct Answer -A type of accident insurance
added to a life policy.
Sometimes called (multiple indemnity rider). Pays double the Face Amount
(sometimes Triple) if the insured dies as a result of an accident. Death must occur
within 90 days of the accident, or it is assumed to be from natural causes.
DOES NOT cover death due to sickness, only accidents
©COPYRIGHT 2025 ALL RIGHTS RESERVED 2
,Pays a stated amount if the insured is blinded in an accident (AD&D Rider)
Adjustable Whole life
( Flexible Premium) - Correct Answer -Is a combination of Term and Whole Life!
Still cover you until you die or age 100 (matures) Insureds can adjust Face
Amount, Premiums or Term of Protection. Sold to Clients with Fluctuating income
( real estate brokers) Coverage may not be increased beyond the original amount
without an physical.
Adjustable/Flexible - Correct Answer -Adjustable: Adjust Face Amount, Premiums
or Term of protection
Flexible: Fluctating incomes
Annuities - Correct Answer -Are perfect for a client who is worried that they are
going to live too long since the payments payout for life.
Has a 30 day grace period.
Annuity option - Correct Answer -Beneficiary selects a lifetime payout. Proceeds
cannot be exhausted. Payments are made for the life time of the beneficiary.
Monthly payments depend upon the age of the beneficiary, the amount of the
proceeds and the annuity option selected.
©COPYRIGHT 2025 ALL RIGHTS RESERVED 3
, Annuity pay out options - Correct Answer -Contractual in nature cannot be
changed once selected.
Selected by annuitant upon annuitization. Amounts received in excess of the cost
basis are taxable as ordinary income. All payouts options will pay annuitant for
life.
Annuitization is not required, annuitant may remain in pay-in period indefinitely.
Cash surrender under 59 1/2 are subject to an IRS 10% penatly.
Most are Nonqualified (funded with after tax dollars)
Apply to premium when due - Correct Answer -Dividend offsets amount of
premium due. Insured just pays the difference
Are Annuities Tax-deferred? - Correct Answer -Yes, during the pay-in or
accumulation period
Assignments - Correct Answer -Allows owner to permanently or temporarily
assign owner's rights.
Automatic Premium Rider - Correct Answer -A rider in a life policy authorizing
the insurance company to use the Cash Value to pay premiums not paid by the end
of the Grace period. This rider is FREE, but must be selected by the policy owner.
©COPYRIGHT 2025 ALL RIGHTS RESERVED 4
guideline 2026 Questions and Answers
"Ordinary (Straight) Life"
(Fixed Premiums) - Correct Answer -Permanent protection (matures at age 100)
Guaranteed Tax deferred Interest rate on Cash Value. Cash Value builds slowly for
the first 3 years. Premiums are level, since the company risks goes down as Cash
Value goes up. If you die the insurer keeps the Cash Value to offset their risks.
Insureds has access to Cash through Cash Surrender or a policy loan. "Rates are
per unit of protection" ($1,000 is 1 unit) C/V is guaranteed to be a certain amount
per $1,000 (in the future). C/V will equal F/A at policy maturity (age 100).
401k - Correct Answer -To provide employee for retirement plans. As means of
distributing company stock to employees. Is an arrangement that allows an
employee to choose between taking compensation in cash or deferring a percentage
of it to an account under the plan. The amount deferred is usually not taxable to the
employee.
A policy surrendered for cash - Correct Answer ->May NOT be in reinstated
©COPYRIGHT 2025 ALL RIGHTS RESERVED 1
,Do not need to re-establish insurable interest in order to reinstate
> only at time of application
Incontestability clause and Suicide Clause state over.
Absolute assignment - Correct Answer -Is permanent change of ownership. Child
policy may be assigned to the child at age 18. Old owner is known as the Assignor
of the policy.
The New owner is known as the Assignee of the policy. Assignments are not
effective until countersigned by insurer.
Accelerated Death benefit - Correct Answer -Apply when insured gets a terminal
illness. Insurers will pay out a portion of the death benefit to insured. Face Amount
paid to the beneficiary at death is reduced, by the amount paid out to the insured
while living. Amounts paid are NOT TAXABLE.
Accidental Death Benefit rider - Correct Answer -A type of accident insurance
added to a life policy.
Sometimes called (multiple indemnity rider). Pays double the Face Amount
(sometimes Triple) if the insured dies as a result of an accident. Death must occur
within 90 days of the accident, or it is assumed to be from natural causes.
DOES NOT cover death due to sickness, only accidents
©COPYRIGHT 2025 ALL RIGHTS RESERVED 2
,Pays a stated amount if the insured is blinded in an accident (AD&D Rider)
Adjustable Whole life
( Flexible Premium) - Correct Answer -Is a combination of Term and Whole Life!
Still cover you until you die or age 100 (matures) Insureds can adjust Face
Amount, Premiums or Term of Protection. Sold to Clients with Fluctuating income
( real estate brokers) Coverage may not be increased beyond the original amount
without an physical.
Adjustable/Flexible - Correct Answer -Adjustable: Adjust Face Amount, Premiums
or Term of protection
Flexible: Fluctating incomes
Annuities - Correct Answer -Are perfect for a client who is worried that they are
going to live too long since the payments payout for life.
Has a 30 day grace period.
Annuity option - Correct Answer -Beneficiary selects a lifetime payout. Proceeds
cannot be exhausted. Payments are made for the life time of the beneficiary.
Monthly payments depend upon the age of the beneficiary, the amount of the
proceeds and the annuity option selected.
©COPYRIGHT 2025 ALL RIGHTS RESERVED 3
, Annuity pay out options - Correct Answer -Contractual in nature cannot be
changed once selected.
Selected by annuitant upon annuitization. Amounts received in excess of the cost
basis are taxable as ordinary income. All payouts options will pay annuitant for
life.
Annuitization is not required, annuitant may remain in pay-in period indefinitely.
Cash surrender under 59 1/2 are subject to an IRS 10% penatly.
Most are Nonqualified (funded with after tax dollars)
Apply to premium when due - Correct Answer -Dividend offsets amount of
premium due. Insured just pays the difference
Are Annuities Tax-deferred? - Correct Answer -Yes, during the pay-in or
accumulation period
Assignments - Correct Answer -Allows owner to permanently or temporarily
assign owner's rights.
Automatic Premium Rider - Correct Answer -A rider in a life policy authorizing
the insurance company to use the Cash Value to pay premiums not paid by the end
of the Grace period. This rider is FREE, but must be selected by the policy owner.
©COPYRIGHT 2025 ALL RIGHTS RESERVED 4
