NC Life Insurance Exam
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1. Fraternal Benefit Society: An organization of people who share a month ethnic, religious or vocational
affiliation. They are entities they have no capital stock, have a representative form of government. They exist not for
profit but solely for the benefit of their members and their beneficiaries and operate on a lodge system.
2. Fraternal Benefit Societies: Agents of these societies must comply with the SAME general laws govern-
ing licensing that apply to resident and nonresident agents.
3. Graded Premium Whole Life: Has premiums they start very low then increase annually for a long period
and stay level for the rest of the life of the policy.
4. Death Benefit Option 1 of a universal life policy: the benefit payable when the insured dies
stays level and equal to the initial specified amount.
5. Death Benefit Option 2 of a universal life policy: this benefit is generally increasing. This
benefit equals the policy's specified amount plus the cash value.
6. Variable Universal Life insurance: Combines the features of universal life insurane with the ability
to allocate premiums to a seperate account. THIS MEANS the growth of the contract's cash value is based on the
performance of the underlying investment.
7. Straight Life Income: provides the largest monthly income payment for a given amount o annualized funds.
Also called pure life option, income payments are made for the annuitants lifetime, regardless of how long that may
be.
8. In regards to the Section 1035 tax code, which exchanges is permitted on a
tax-free basis?: 1. life insurance for life insurance
2. Life insurance for an endowment
3.Endowment for an Endowment
4.Life insurance for an Annuity
5. Annuity for an Annuity
9. Modified Endowment Contract (MEC): Tax law considers a single premium life insurance policy to
be what?
10. Anthony becomes an agent for Acme Insurance Company. Acme has not filed
the Notice of appointment with the commissioner. It must do so within how
many days?: 15 Days
11. Spendthrift Clause: A clause that prevents the debtors of a beneficiary from collecting the benefits before
he/she receives them.
12. Annuity death benefits: are not tax deductible or tax free
, NC Life Insurance Exam
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13. A couple makes a combined income for $175,000 annually.Will their Individ-
ual Retirement Plan (IRA) be tax deductible?: No. If it is joint an dover $123,000 there is no
deduction.
14. What is the cap on an IRA tax deduction that will provide NO DEDUCTION for
a single person?: $74000 or more.
15. Prepaid Tuition Plans: College saving plan that allows for the purchase of units or credits at participating
colleges and universities for future tuition. Limited to instate tuition only. NOT SUBJECT TO FEDERAL TAX. Parents are
able to lock in the price of tuition at that time.
16. risk sharing: Allocating ownership of a risk to another party
17. Risk Transfer: A pure risk is transferred from the insured to the insurer, who typically is in a stronger financia
position
18. Which is a characteristic of industrial life Insurance?: Premiums are payable monthly or
weekly.
19. Industrial Life Insurance: These policies generally do not require a medical exam to qualify. They offer
individual coverage in small face amounts usually less than $10,000.
20. Reinsurance: an arrangement by which the primary insurer that initially writes the insurance transfers to
another insurer part or all of the potential losses associated with such insurance
21. How long do insurers allow backdating a policy in order to receive lower
rates?: 6 Months
22. What are the differences between mutual insurance companies and stock
insurance companies?: Mutual insurance companies are owned by its policy holders while stock insurance
companies are owned by stockholders who may or may not be policy holders. Mutual Insurance companies sell
participating policies which distributes policy dividends that are NONTAXABLE while Stock companies distribute profit
in the form of taxable stock dividends.
23. Which of the following individuals would be most likely to enter into a viatical
settlement?: Ben, who is terminally ill and needs money to pay his medical bills
24. Agent Smith represents Gretchen and is negotiating the viatical settlement
agreement in which she will sell her life insurance policy to BBC Corporation.
In this transaction, what is Agent Smith considered?: a viatical settlement broker
25. Which of the following individuals represents a viator and negotiates viatical
settlement contracts?: viatical broker
, NC Life Insurance Exam
Study online at https://quizlet.com/_hutzrl
26. about 2 percent: Insurers will decline applicants with very high substandard risk ratings. What percentage
of applicants do insurers reject?
27. Numeric codes that are communicated electronically: In what form does the MIB
present its information to insurers?
28. Insurers cannot rate or decline a life insurance risk based solely on MIB
information.: Which one of the following best describes the restrictions an insurer must operate under when
using information from the Medical Information Bureau (MIB)?
29. using life insurance for wagering or betting: The requirement that an insurable interest must
exist when life insurance is purchased is intended to prevent people from doing which of the following?
30. Insurable interest must exist only at the time the applicant enters into a life
insurance contract.: In life insurance, for how long must insurable interest exist?
31. Describe "insurable interest"?: the relationship between the person applying for life insurance and
the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract.
32. Implied authority: Authority an agent has by virtue of being reasonable necessary to carry out his or her
express authority. When an agent receives premium payments, it is implied that he or she has the authority to do so
by the principal in order to carry out the necessities of performing his or her duties as an agent.
33. Express Authority: an agent has actually been told by the contract that they may act on behalf of the
principal. (the company for whom they work). So, for example, XYZ insurer specifically authorizes an agent to bind
certain risks.
34. Apparent Authority: exists where the principals words or conduct would lead a reasonable person in the
third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had
never discussed such a relationship. An example would be an agent that displayed signs, preprinted company forms
and stationary with the company logo would leas one to believe that that agent had the authority to act for the principa
(the insurer).
35. A third party (such as an irrevocable trust) can apply for and own the policy
from the beginning.: Robert is purchasing a life insurance policy, which he wants to keep out of his taxable
gross estate. Which of the following arrangements would help him meet that goal?
36. The insured has no right to name the beneficiary.: In personal insurance, what is the
disadvantage to third-party ownership?
37. 3 years: Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the
estate if the transfer occurred within how many years before death?
38. the business: Who normally owns life insurance used to meet business insurance needs?
Study online at https://quizlet.com/_hutzrl
1. Fraternal Benefit Society: An organization of people who share a month ethnic, religious or vocational
affiliation. They are entities they have no capital stock, have a representative form of government. They exist not for
profit but solely for the benefit of their members and their beneficiaries and operate on a lodge system.
2. Fraternal Benefit Societies: Agents of these societies must comply with the SAME general laws govern-
ing licensing that apply to resident and nonresident agents.
3. Graded Premium Whole Life: Has premiums they start very low then increase annually for a long period
and stay level for the rest of the life of the policy.
4. Death Benefit Option 1 of a universal life policy: the benefit payable when the insured dies
stays level and equal to the initial specified amount.
5. Death Benefit Option 2 of a universal life policy: this benefit is generally increasing. This
benefit equals the policy's specified amount plus the cash value.
6. Variable Universal Life insurance: Combines the features of universal life insurane with the ability
to allocate premiums to a seperate account. THIS MEANS the growth of the contract's cash value is based on the
performance of the underlying investment.
7. Straight Life Income: provides the largest monthly income payment for a given amount o annualized funds.
Also called pure life option, income payments are made for the annuitants lifetime, regardless of how long that may
be.
8. In regards to the Section 1035 tax code, which exchanges is permitted on a
tax-free basis?: 1. life insurance for life insurance
2. Life insurance for an endowment
3.Endowment for an Endowment
4.Life insurance for an Annuity
5. Annuity for an Annuity
9. Modified Endowment Contract (MEC): Tax law considers a single premium life insurance policy to
be what?
10. Anthony becomes an agent for Acme Insurance Company. Acme has not filed
the Notice of appointment with the commissioner. It must do so within how
many days?: 15 Days
11. Spendthrift Clause: A clause that prevents the debtors of a beneficiary from collecting the benefits before
he/she receives them.
12. Annuity death benefits: are not tax deductible or tax free
, NC Life Insurance Exam
Study online at https://quizlet.com/_hutzrl
13. A couple makes a combined income for $175,000 annually.Will their Individ-
ual Retirement Plan (IRA) be tax deductible?: No. If it is joint an dover $123,000 there is no
deduction.
14. What is the cap on an IRA tax deduction that will provide NO DEDUCTION for
a single person?: $74000 or more.
15. Prepaid Tuition Plans: College saving plan that allows for the purchase of units or credits at participating
colleges and universities for future tuition. Limited to instate tuition only. NOT SUBJECT TO FEDERAL TAX. Parents are
able to lock in the price of tuition at that time.
16. risk sharing: Allocating ownership of a risk to another party
17. Risk Transfer: A pure risk is transferred from the insured to the insurer, who typically is in a stronger financia
position
18. Which is a characteristic of industrial life Insurance?: Premiums are payable monthly or
weekly.
19. Industrial Life Insurance: These policies generally do not require a medical exam to qualify. They offer
individual coverage in small face amounts usually less than $10,000.
20. Reinsurance: an arrangement by which the primary insurer that initially writes the insurance transfers to
another insurer part or all of the potential losses associated with such insurance
21. How long do insurers allow backdating a policy in order to receive lower
rates?: 6 Months
22. What are the differences between mutual insurance companies and stock
insurance companies?: Mutual insurance companies are owned by its policy holders while stock insurance
companies are owned by stockholders who may or may not be policy holders. Mutual Insurance companies sell
participating policies which distributes policy dividends that are NONTAXABLE while Stock companies distribute profit
in the form of taxable stock dividends.
23. Which of the following individuals would be most likely to enter into a viatical
settlement?: Ben, who is terminally ill and needs money to pay his medical bills
24. Agent Smith represents Gretchen and is negotiating the viatical settlement
agreement in which she will sell her life insurance policy to BBC Corporation.
In this transaction, what is Agent Smith considered?: a viatical settlement broker
25. Which of the following individuals represents a viator and negotiates viatical
settlement contracts?: viatical broker
, NC Life Insurance Exam
Study online at https://quizlet.com/_hutzrl
26. about 2 percent: Insurers will decline applicants with very high substandard risk ratings. What percentage
of applicants do insurers reject?
27. Numeric codes that are communicated electronically: In what form does the MIB
present its information to insurers?
28. Insurers cannot rate or decline a life insurance risk based solely on MIB
information.: Which one of the following best describes the restrictions an insurer must operate under when
using information from the Medical Information Bureau (MIB)?
29. using life insurance for wagering or betting: The requirement that an insurable interest must
exist when life insurance is purchased is intended to prevent people from doing which of the following?
30. Insurable interest must exist only at the time the applicant enters into a life
insurance contract.: In life insurance, for how long must insurable interest exist?
31. Describe "insurable interest"?: the relationship between the person applying for life insurance and
the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract.
32. Implied authority: Authority an agent has by virtue of being reasonable necessary to carry out his or her
express authority. When an agent receives premium payments, it is implied that he or she has the authority to do so
by the principal in order to carry out the necessities of performing his or her duties as an agent.
33. Express Authority: an agent has actually been told by the contract that they may act on behalf of the
principal. (the company for whom they work). So, for example, XYZ insurer specifically authorizes an agent to bind
certain risks.
34. Apparent Authority: exists where the principals words or conduct would lead a reasonable person in the
third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had
never discussed such a relationship. An example would be an agent that displayed signs, preprinted company forms
and stationary with the company logo would leas one to believe that that agent had the authority to act for the principa
(the insurer).
35. A third party (such as an irrevocable trust) can apply for and own the policy
from the beginning.: Robert is purchasing a life insurance policy, which he wants to keep out of his taxable
gross estate. Which of the following arrangements would help him meet that goal?
36. The insured has no right to name the beneficiary.: In personal insurance, what is the
disadvantage to third-party ownership?
37. 3 years: Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the
estate if the transfer occurred within how many years before death?
38. the business: Who normally owns life insurance used to meet business insurance needs?
