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Free North Dakota Life and Annuity Insurance Examination Practice Questions

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Sample Practice Questions

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

  1. 1A first-time North Dakota resident applies for a life producer license. Which minimum-age rule applies?

    1. A. The applicant must be at least 18
    2. B. The applicant must be at least 19
    3. C. The applicant must be at least 21
    4. D. No minimum age applies after passing PSI

    Answer: A

    Explanation: Section 26.1-26-13.3 requires the commissioner to find that the individual “is at least eighteen years of age.” Passing the examination does not replace this eligibility condition.

    Reference: Ndcc 26.1 26 — NDCC 26.1-26-13.3(1)(a)

  2. 2An annuity advertisement omits a material limitation but offers a refund if the buyer is dissatisfied. Does the refund cure the misleading omission?

    1. A. A ten-day refund offer cures the omission
    2. B. A twenty-day refund offer cures the omission
    3. C. No refund offer cures the misleading omission
    4. D. A thirty-day refund offer cures the omission

    Answer: C

    Explanation: NDAC 45-04-10-03 says that making the policy available for inspection or offering to refund the premium “does not remedy misleading statements.”

    Reference: Ndac 45 04 10 — NDAC 45-04-10-03(2)

  3. 3Mira applies for life insurance. The insurer has no separate permission from any report subject. Which proposed use gives the insurer an FCRA permissible purpose to obtain a consumer report for this application?

    1. A. Use Mira's report to underwrite life insurance involving Mira.
    2. B. Use Mira's beneficiary's report to underwrite life insurance involving Mira.
    3. C. Use Mira's premium payer's report to underwrite life insurance involving Mira.
    4. D. Use Mira's business partner's report to underwrite life insurance involving Mira.

    Answer: A

    Explanation: The FTC says a consumer report may be obtained for "the underwriting of insurance involving the consumer or with the consumer’s permission." Mira is the consumer whose own insurance is being underwritten. The beneficiary, premium payer, and business partner are different report subjects; underwriting Mira's coverage without their permission does not establish a purpose for their reports.

    Reference: FTC, Consumer Reports: What Insurers Need to Know — Permissible Purpose, insurance underwriting

  4. 4A business pays premiums for a life policy covering a key employee so the insurer bears a specified covered death-loss cost. Which method of handling that financial risk is the business using?

    1. A. Risk avoidance through ending the exposure altogether.
    2. B. Risk retention through paying any covered loss itself.
    3. C. Risk transfer through the insurer's covered-loss promise.
    4. D. Risk reduction through lowering the chance of death.

    Answer: C

    Explanation: NAIC explains that under insurance "the company agrees to pay its share of the cost for covered losses or events." Paying premiums for that promise transfers the covered financial loss to the insurer; it does not eliminate the event, keep the cost entirely with the business, or reduce mortality.

    Reference: NAIC, How Does Insurance Work? — How insurance works, premium and covered loss

  5. 5A parent estimates $200,000 for survivors' income, $100,000 to retire a mortgage, $50,000 for education, and $20,000 for final expenses. Existing life coverage is $70,000; assume no other resources. How much additional coverage fills this stated needs gap?

    1. A. $300,000.
    2. B. $370,000.
    3. C. $250,000.
    4. D. $200,000.

    Answer: A

    Explanation: The NAIC guide says, "How much life insurance to buy depends on the financial needs that will continue after your death." The stated obligations total $370,000. Subtracting $70,000 existing coverage leaves $300,000 additional need. $370,000 ignores existing coverage; $250,000 omits education; $200,000 omits the mortgage.

    Reference: NAIC Life Insurance Buyer's Guide — How much life insurance do you need?, p. 4

  6. 6A borrower wants a temporary life death benefit that generally declines as the outstanding mortgage declines. Which policy type most closely fits that benefit pattern?

    1. A. Level term life insurance.
    2. B. Decreasing term life insurance.
    3. C. Increasing term life insurance.
    4. D. Ordinary whole life insurance.

    Answer: B

    Explanation: NAIC states, "Decreasing term insurance: Offers a death benefit that decreases over time." It notes declining debts such as mortgages as a typical use. Level and increasing term have different benefit patterns, while ordinary whole life is permanent.

    Reference: NAIC, Life Insurance — Types of life insurance, decreasing term

  7. 7A policy owner names a primary beneficiary irrevocably and a separate contingent beneficiary. The owner later wants to replace the primary beneficiary. Whose consent is required for that change?

    1. A. The existing irrevocable primary beneficiary's consent.
    2. B. The new proposed primary beneficiary's consent.
    3. C. The contingent beneficiary's consent.
    4. D. The insured person's consent alone.

    Answer: A

    Explanation: The NAIC glossary says the owner can change an irrevocable designation "only after obtaining the beneficiary's consent." That refers to the existing irrevocable primary beneficiary whose designation is being changed; a proposed replacement, contingent beneficiary, or insured person alone cannot substitute for that consent.

    Reference: NAIC Glossary of Insurance Terms — Irrevocable Beneficiary definition

  8. 8A buyer compares one annuity that begins income soon after purchase with another that begins income at a later chosen date. Which classification pair correctly follows payment start time?

    1. A. First immediate; second deferred.
    2. B. First deferred; second immediate.
    3. C. First immediate; second immediate.
    4. D. First deferred; second deferred.

    Answer: A

    Explanation: NAIC states, "Some annuities begin paying income to you soon after you buy it (an immediate annuity). Others begin at some later date you choose (a deferred annuity)." The first contract is immediate and the second deferred; the other pairs misclassify one or both start times.

    Reference: NAIC Annuities Buyer's Guide — Types of annuities, immediate and deferred

  9. 9An individual pays premiums on a personally owned policy insuring that individual's own life. Which federal income-tax treatment applies to those premiums?

    1. A. They remain nondeductible personal life-insurance costs.
    2. B. They qualify as itemized medical-insurance premiums.
    3. C. They qualify as itemized long-term-care premiums.
    4. D. They qualify as self-employed health-insurance premiums.

    Answer: A

    Explanation: IRS Publication 529 states, "You can't deduct premiums you pay on your life insurance." IRS Schedule A instructions allow certain medical and qualified long-term-care insurance premiums in calculating medical expenses, but personal life coverage is neither of those nor self-employed health coverage. The tax categories in B–D apply to different insurance.

    Reference: IRS Publication 529, Miscellaneous Deductions — Nondeductible Expenses, life insurance premiums

  10. 10Which statutory role is a person required to be licensed to sell, solicit, or negotiate insurance in North Dakota?

    1. A. Insurance consultant
    2. B. Insurance producer
    3. C. Insurance adjuster
    4. D. Insurance company

    Answer: B

    Explanation: Section 26.1-26-02 defines an insurance producer as “a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.”

    Reference: Ndcc 26.1 26 — NDCC 26.1-26-02(6)

Topics in this practice bank

These topics describe the available practice for North Dakota Life and Annuity Insurance Examination. Review the examination outline and its sources for scope and allocation details.

  • Insurance Regulation (12 items)
    • Licensing
    • Process (26.1-26-13.2, 13.3, 15; Reg 45-02-02-02)
    • Types of licensees (26.1-26-02, 03)
    • Producers (individual and business entity)(26.1-26-02, 05, 06, 07, 11)
    • Producer-agent of insured (26.1-26-07)
    • Producer-agent of insurer (26.1-26-06)
    • Consultants (26.1-26-35, 41; Reg 45-02-02-09, 10)
    • Nonresident producers (26.1-26-20,47.1)
    • Temporary (26.1-26-26)
    • Maintenance and duration
    • Renewal of appointments (26.1-26-32;Reg 45-02-02-07)
    • Termination (26.1-26-31; Reg 45-02-02-12)
    • Change of address (26.1-26-33; Reg 45-02-02-13)
    • Reporting of actions (26.1-26-45.1)
    • Assumed business names (26.1-26-25.1)
    • Continuing education (26.1-26-31.1; Reg45-02-04-03, 08–11, 13)
    • Disciplinary actions
    • Refusal of license (26.1-26-39, 40, 42)
    • Cease and desist order (26.1-01-03.1;26.1-04-13)
    • Suspension, revocation and probation (26.1-26-42–46)
    • Penalties for violations (26.1-01-03.3;26.1-04-13–17; 26.1-26-50, 51)
    • State Regulation
    • Commissioner's general duties and powers (26.1-01-03; 26.1-04-09)
    • Company regulation
    • Certificate of authority (26.1-02-02)
    • Solvency (26.1-02-02, 03; 26.1-05-32)
    • Unfair claims settlement practices (26.1-04-03(9))
    • Producer regulation
    • Sharing commissions (26.1-26-04)
    • Company and agency regulation
    • Examination of books and records (26.1-03-19.2; 26.1-26-48)
    • Producer appointment (26.1-26-13.1; Reg 45-02-02-06)
    • Termination of appointment (26.1-26-34; Reg 45-02-02-06)
    • Unfair practices
    • Misrepresentation (26.1-04-03(1), (12), 07)
    • False advertising (26.1-04-03(1), (2))
    • Defamation (26.1-04-03(3))
    • Boycott, coercion and intimidation (26.1-04-03(4), 04)
    • False financial statements (26.1-04-03(5))
    • Unfair discrimination (26.1-04-03(7), (11), 05)
    • Rebating (26.1-04-03(8), 05, 06)
    • Prohibited inducements (26.1-04-05, 06)
    • Twisting (26.1-04-03(1))
    • Insurance fraud regulation (26.1-02.1-01–11)
  • North Dakota Laws and Regulations Pertaining to Life Insurance and Annuities (28 items)
    • Producer and company responsibilities
    • Solicitation and sales presentations (Ref: Reg 45-04-01-01–07; Reg 45-04-10-01–08))
    • Advertising (Ref: Reg. 45-04-10-01 through 08)
    • Life and Health Insurance Guaranty Association (26.1-38.1-16(1))
    • Illustrations (Ref: Reg. 45-04-05-05(02))
    • Policy summary (Ref: Reg. 45-04-01-03(7), 45-04-05-05-01)
    • Buyer's guide (Ref: Reg. 45-04-01-03(01) Appendix, 04))
    • Field underwriting requirements
    • Insurable interest (Ref: 26.1-29-09.1)
    • Notice, consent and disclosure for lab tests including HIV (Reg 45-03-11-01–05)
    • Company responsibilities
    • Verification of insurable interest (26.1-29-09.1)
    • Life insurance disclosure regulation (26.1-33-02)
    • Guaranty association disclaimer (Ref: 26.1-38.1-16)
    • Individual life insurance
    • Standard provisions (Ref: 26.1-33-05)
    • Entire contract (Ref: 26.1-33-05 (3))
    • Free look provision (Ref: 26.1-33-02.1)
    • Payment of premiums (Ref: 26.1-33-05 (1))
    • Grace period (Ref: 45-04-04-03-03-b-(02))
    • Reinstatement (Ref: 26.1-33-05 (8))
    • Incontestability (Ref: 26.1-33-05 (3))
    • Misstatement of age (Ref: 26.1-33-05 (5))
    • Statements of the insured (Ref: 26.1-33-05 (4))
    • Dividend options (Ref: 26.1-33-05 (6))
    • Loan provisions (Ref: 26.1-33-05 (7))
    • Nonforfeiture provision (Ref: 26.1-33-18)
    • Exclusions (Ref: 26.1-33-12)
    • Suicide no defense (Ref: 26.1-33-37)
    • Payment of claims and interest (Ref: 26.1-33-05(9), 26.1-33-05(13)
    • Assignment (Ref: 26.1-33-33)
    • Prohibited provisions including backdating (Ref: 26.1-33-06)
    • Group life insurance
    • Standard provisions (Ref: 26.1-33-11)
    • Conversion rights (Ref: 26.1-33-12)
    • Annuities
    • Free look provision (26.1-34-01.1)
    • Nonforfeiture provision (26.1-34-02)
    • Death claim settlement and interest (26.1-34-01(5))
  • Federal Laws and Regulations (3 Items)
    • Fair Credit Reporting Act - Purpose
    • National Do Not Call List
  • General Insurance Concepts (8 Items)
    • Risk
    • Methods of Handling Risk (Avoidance, Retention, Sharing, Reduction, Transfer)
    • Elements of Insurable Risks
    • Definitions (Risk, Hazard, Peril, Loss)
    • Classifications of Insurers
    • Mutual, Stock, Fraternals
    • Admitted, Non-Admitted
    • Foreign, Domestic, Alien
    • Elements of a Contract
    • Consideration
    • Competent Parties
    • Legal Purpose
    • Offer
    • Acceptance
    • Authority and Powers of Producers
    • Express
    • Implied
    • Apparent
    • The Law of Agency
    • Legal Interpretations Affecting Contracts
    • Reasonable Expectations - good faith
    • Indemnity
    • Good Faith
    • Fraud
    • Warranties, Representations, Misrepresentations, and Concealment
  • Life Insurance Basics (13 Items)
    • Insurable Interest
    • Personal Uses of Life Insurance
    • Survivor Protection
    • Liquidity
    • Determining Amount of Personal Life Insurance
    • Human Life Value Approach
    • Needs Approach
    • Business Uses of Life Insurance
    • Buy-Sell Funding
    • Key Person
    • Executive Bonuses
    • Factors in Premium Determination
    • Mortality
    • Interest
    • Expense
    • Premium Frequency
    • Field Underwriting
    • Application Procedures
    • Warranties and Representations
    • Policy Delivery
    • Effective Date of Coverage
    • Policy Review
    • Premium Collection
    • Statement of Good Health
    • Company Underwriting
    • Sources of Information
    • Classifications of Risk (Preferred, Standard, Substandard, Declined)
  • Types of Life Insurance Policies (14 Items)
    • Term Life Insurance
    • Level
    • Decreasing
    • Increasing Term
    • Whole (Permanent, Ordinary) Life Insurance
    • Single Premium
    • Continuous Premium
    • Limited Payment
    • Adjustable Life
    • Universal Life
    • Variable Life
    • Variable Universal
    • Indexed Universal Life
    • Specialized Policies
    • Joint Life
    • Survivorship Life
    • Juvenile
    • Group Life Insurance
    • Eligible Groups
    • Characteristics of Group Life Insurance
  • Life Insurance Policy Provisions, Options, and Riders (20 Items)
    • Standard Life Insurance Provisions
    • Ownership
    • Assignment
    • Right to Examine (Free Look)
    • Payment of Premiums
    • Grace Period
    • Misstatement of Age/Sex
    • Incontestability
    • Reinstatement
    • Entire Contract
    • Beneficiary Designation Options
    • Individuals
    • Classes
    • Minors
    • Types of Beneficiaries
    • Primary and Contingent
    • Beneficiary-Related Clauses
    • Common Disaster
    • Settlement Options
    • Cash Payment (Lump Sum)
    • Interest Only
    • Life Income
    • Fixed-Period
    • Fixed-Amount Installments
    • Joint
    • Last Survivor
    • Nonforfeiture Options
    • Cash Surrender Value
    • Extended Term
    • Reduced Paid-Up Insurance
    • Policy Loan and Withdrawal Options
    • Loans
    • Automatic Premium Loans
    • Withdrawals Partial Surrenders
    • Dividend Options
    • Paid-Up Additions
    • Cash Payment (Lump Sum)
    • One Year Term
    • Reduction of Premium
    • Accumulation at Interest
    • Disability Riders
    • Waiver of Premium
    • Disability Income Benefit
    • Payor Benefit Life
    • Riders Covering Additional Insureds
    • Spouse
    • Children
    • Family term rider
    • Riders Affecting Death Benefit Amount
    • Accidental Death
    • Guaranteed Insurability
    • Cost of Living
    • Return of Premium
    • Accelerated (Living) Benefit Provision Rider
    • Long-Term Care Rider
    • Policy Exclusions
  • Annuities (8 Items)
    • Annuity Principles and Concepts
    • Accumulation Period versus Annuity Period
    • Owner, Annuitant, and Beneficiary
    • Immediate versus Deferred Annuities
    • Annuity (Benefit) Payment Options
    • Life Contingency Options
    • Annuities Certain
    • Pure Life versus Life with Guaranteed Minimum
    • Single Life versus Multiple Life
    • Annuity Products
    • Fixed Annuities
    • Equity Indexed Annuities
    • Variable Annuities
    • Uses of Annuities
    • Lump-Sum Settlements
    • Retirement Income
    • Long-Term Care Rider
    • Guaranteed Minimum Withdrawal Benefit (GMWB)
  • Federal Tax Considerations for Life Insurance (4 Items)
    • Taxation of Personal Life Insurance and Annuities
    • Premiums
    • Dividends
    • Settlements
    • Last In First Out (LIFO) and First In First Out (FIFO)
    • Surrenders and Withdrawals
    • Modified Endowment Contracts (MECs)

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