Free North Carolina Life & Health Insurance License Exam Practice Test

Sample NC L&H practice questions

Try a few representative questions below. Each includes the correct answer and a short explanation — the same style you'll see in the full practice test.

1. Question 1Life Insurance Policy Provisions

   A North Carolina resident applies for a life insurance policy. The policy is issued on June 1st, and the first premium is paid on June 15th. The applicant dies on July 10th, before receiving the policy. The insurer discovers a material misrepresentation in the application. What is the insurer's most likely course of action regarding the death claim, considering the free look period and incontestability clause?

   • A.Pay the full death benefit as the policy was in force and the free look period had expired.
   • B.Pay a reduced death benefit equal to the premiums paid, as the policy was issued but not delivered.
   • C.Deny the claim, citing the material misrepresentation and the fact that the policy is still within the contestability period.(Correct)
   • D.Deny the claim because of the material misrepresentation, as the policy was not yet delivered.

   Explanation

   The policy is generally considered contestable for a period, typically two years, during which the insurer can deny a claim due to material misrepresentations. While the free look period is relevant for policy surrender, it does not prevent denial for misrepresentation during the contestability period. Delivery of the policy is less critical than the policy being in force and within the contestability period.

2. Question 2Life Insurance Policy Types

   A client is purchasing a $500,000 term life insurance policy with a 20-year term. They are 40 years old and in good health. The annual premium is $1,200. If they die in year 18, how much will their beneficiary receive?

   • A.$480,000
   • B.$500,000(Correct)
   • C.$1,200
   • D.$10,800

   Explanation

   In a term life insurance policy, the death benefit is the face amount of the policy, provided the insured dies while the policy is in force and within the term period. In this case, the death occurs in year 18, which is within the 20-year term, so the beneficiary receives the full $500,000 face amount.

3. Question 3Health Insurance Principles

   An agent is explaining the concept of 'adverse selection' to a prospective client. Which of the following scenarios best illustrates adverse selection in health insurance?

   • A.A young, healthy individual purchases a comprehensive health insurance plan with a low deductible.
   • B.An individual with a pre-existing chronic condition actively seeks out and purchases a high-premium health insurance policy with extensive coverage.(Correct)
   • C.A group of employees at a stable company all enroll in the employer-sponsored health insurance plan.
   • D.An insurance company offers a discount on premiums for policyholders who maintain a healthy lifestyle.

   Explanation

   Adverse selection occurs when individuals with a higher risk of needing insurance are more likely to purchase it. In this scenario, the individual with a pre-existing condition has a known higher risk, making them more inclined to seek comprehensive coverage, thus increasing the insurer's risk pool and potential claims.

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