Free North Carolina Life Agent Practice Questions

Sample Practice Questions

Try these 10 sample questions from the North Carolina Life Agent practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A client wants life coverage that is designed to last only until a 15-year loan is repaid. Which policy type most directly fits that time-limited need?

   1. A. Term life insurance
   2. B. Whole life insurance
   3. C. Universal life insurance
   4. D. Single-premium whole life insurance

   Answer: A

   Explanation: The NAIC states, "Term life insurance offers coverage for a set period of time." The loan has a fixed 15-year duration, so term coverage most directly matches it. The other listed forms are permanent coverage.

   Reference: NAIC Life Insurance Topics — Background, Term Life Insurance

2. 2A retired client wants an insurer to provide regular income for as long as the client lives. Which contract type is designed around that promise?

   1. A. Term life insurance
   2. B. Whole life insurance
   3. C. Endowment insurance
   4. D. Annuity insurance

   Answer: D

   Explanation: "income on a regular basis for a period of time you choose—including the rest of your life." The annuity's defining promise is an income stream for a chosen period, including life; the other contracts primarily insure a death or maturity event.

   Reference: NAIC Buyer's Guide for Deferred Annuities — Page 1, What Is an Annuity?

3. 3A North Carolina ordinary whole-life policy has had premiums paid for one full year. After the next premium defaults, the owner makes a proper request within 60 days. Which value-based benefit must the policy make available?

   1. A. A paid-up nonforfeiture benefit under the policy
   2. B. An immediate cash surrender value under the policy
   3. C. An automatic premium loan without prior election
   4. D. A reinstated original policy without conditions

   Answer: A

   Explanation: "after premiums have been paid for at least one full year in the case of ordinary insurance" G.S. 58-58-55(b)(1) requires the paid-up nonforfeiture benefit on a timely request after one full ordinary-insurance year. Cash surrender has a longer three-year prerequisite; the other mechanisms are different.

   Reference: North Carolina General Statutes, Chapter 58 Article 58 — G.S. 58-58-55(b)(1)

4. 4An employer pays the entire premium for a North Carolina employer group-life policy, so no employee contributes. Which participation approach does the statute require?

   1. A. All eligible employees except those with unsatisfactory insurability evidence
   2. B. Only employees who agree to fund part of their own coverage
   3. C. Only new entrants whose enrollment reaches a specified percentage
   4. D. Only employees who make an affirmative individual election

   Answer: A

   Explanation: "must insure all eligible employees, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer." With no employee premiums, the statute generally includes every eligible employee except the stated evidence case. Contribution, new-entrant percentage, and voluntary election are neighboring enrollment conditions.

   Reference: North Carolina General Statutes, Chapter 58 Article 58 — G.S. 58-58-135(1)b

5. 5A North Carolina client asks what makes an arrangement a contract of insurance under state law. Which feature is essential?

   1. A. The insurer is bound to provide money, its equivalent, or an act of value as indemnity or reimbursement for a covered loss
   2. B. The insurer merely promises to introduce the client to a licensed producer
   3. C. The client pays a membership fee for access to general financial education
   4. D. The parties agree only to discuss possible coverage at a later date

   Answer: A

   Explanation: G.S. 58-1-10 states: "A contract of insurance is an agreement by which the insurer is bound to pay money or its equivalent or to do some act of value to the insured upon, and as an indemnity or reimbursement for the destruction, loss, or injury of something in which the other party has an interest." The binding indemnity or reimbursement obligation makes the arrangement an insurance contract.

   Reference: Article 01 — G.S. 58-1-10

6. 6A client has a mortgage balance that will decline over 20 years and wants a term death benefit designed to decline with that obligation. Which benefit design fits?

   1. A. A death benefit that declines during the term
   2. B. A death benefit that stays level during the term
   3. C. A death benefit that rises during the term
   4. D. A death benefit that resets upward at renewal

   Answer: A

   Explanation: "Decreasing term insurance: Offers a death benefit that decreases over time." The declining benefit follows the debt; the other schedules do not describe decreasing term insurance.

   Reference: NAIC Life Insurance Topics — Background, Term Life Insurance, Decreasing term insurance

7. 7A client plans to fund a deferred annuity with contributions of varying amounts whenever surplus income is available. Which premium method fits?

   1. A. One-time single premium funding
   2. B. Fixed annual installment funding
   3. C. Flexible installment premium funding
   4. D. Immediate lump-sum annuity funding

   Answer: C

   Explanation: "flexible contribution policies are most suitable to consumers who want to accumulate retirement funds over time." Flexible installments accommodate changing amounts and timing; the other methods require one lump sum or scheduled fixed payments.

   Reference: NAIC Annuities Topics — Overview, annuity premium contributions

8. 8After three full years of premiums on a North Carolina ordinary life policy, its owner surrenders it within 60 days after a missed premium is due. Which value use is available in lieu of continuing paid-up coverage?

   1. A. Take reduced paid-up insurance from the value
   2. B. Use the value for extended term insurance
   3. C. Receive the policy's cash surrender value
   4. D. Borrow value to pay the missed premium

   Answer: C

   Explanation: "the company will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value" upon timely surrender after three full ordinary-insurance years. The other options use value to keep insurance or fund a premium, contrary to the stated surrender for cash.

   Reference: North Carolina General Statutes, Chapter 58 Article 58 — G.S. 58-58-55(b)(2)

9. 9An employer holds a North Carolina group-life master policy. What document must the insurer issue through the policyholder for each insured employee?

   1. A. An individual certificate stating coverage, payee and conversion rights
   2. B. A group master policy stating the employer's contract duties
   3. C. A policy summary illustrating the contract's projected values
   4. D. A buyer's guide describing life policy types and costs

   Answer: A

   Explanation: "an individual certificate setting forth a statement as to the insurance protection to which the person is entitled" is issued to the group holder for delivery to each insured. The master policy belongs to the holder; a policy summary and buyer guide are different disclosure documents.

   Reference: North Carolina General Statutes, Chapter 58 Article 58 — G.S. 58-58-140(7)

10. 10An insurer was organized under North Carolina law. How does Chapter 58 classify that insurer?

    1. A. Alien company
    2. B. Domestic company
    3. C. Foreign company
    4. D. Reciprocal company

    Answer: B

    Explanation: G.S. 58-1-5 provides: "Domestic company" means a company incorporated or organized under the laws of this State. Because the insurer was organized in North Carolina, it is domestic.

    Reference: Chapter 58 - Article 58 — G.S. 58-1-5(5)