NC State LIFE Insurance Exam Questions and
Answers Already Graded A+
Insurable Interest
Something of value that, if lost, would cause you financial harm. Must exist upfront at time of
application. Legitimate financial reason for buying insurance.
Impersonation
Wrong person takes medical examination/test in connection with application for insurance. *Can be
contested beyond 2 year incontestable clause*
Adhesion
Ins. Co. designs original contract. Insured has little or no control of content, no room for bargaining,
no negotiations. Insured must take it or leave it.
Indemnity
Person restored to original condition he/she enjoyed prior to loss. Does not profit a gain from the
insurance.
Aleatory
Ins. contract is "out of balance". Insured or bene might receive much more than he she pays into the
policy or may pay premiums for a long time and yet have no loss.
Conditional
Ins. contract is conditional. Both parties must meet conditions. Even when a loss occurs. Ex) Life Ins.
policy only pays on condition that proof of death is provided.
Reinsurance
Ins. between ins. co's. Ins. co's go to each other for help. Ex) A given risk is not acceptable to an ins.
co. due to adverse medical/underwriting considerations or large amt of ins. involved is over co's
retention limit
Misrepresentation/Concealment
Making misleading statements. Intentionally misrepresenting benefits, terms of policy. Concealing
known material facts. Ex) Implying ins. policy equates shares of stock, implying dividends are
guaranteed, overstating future values
Interested Adjusted Cost Comparisons
Similar policies are compared & int. is taken into account. Cost determined by considering int. that
might have been earned on premiums had they been invested. (Surrender Cost Index measured at 10
& 20 years)
Traditional Net Cost Comparisons
Similar policies compared without taking the effect of int. into account. (Net Payment Cost Index
measured at 10 & 20 yrs)
Capital Stock ("Stock")
, Ins. Co. owned by stockholders. Ex) Lincoln Financial
Mutual Insurance Company
Ins. Co. owned by the policyholders. Ex) State Farm, NW Mutual
Fraternal Benefit Societies
Under jurisdiction of Dept. of Ins.
-nonprofit org.
-a society, voluntary assoc. or corp.
-cannot issue capital stock
-org. solely for mutual benefit of members & their families
-must have lodge system w/ ritualistic form of work
-do not issue any prop/liability pol. (No homeowners/auto ins)
-agents who sell to captive audience must be licensed by NCDOI
Ex) International Order if the Forester, Woodland of the World
Health Maintenance Organization (HMO)
Form of Ins. Co. Ownership
Commissioner of Insurance
Elected by the ppl for period of 4 yrs. Oversees state's dept. of ins. Approves rates, but does not set
them. Authority to give notice of hearing regarding violation, notice must specify time & place of
hearing & take place no less than 10 days after notice served.
Keep on file list of rates & explanations of coverages. Examine each annual statement, reports all
violations to attorney general. May petition court for restraining order if public is in danger. If unable
to fulfill term = governor appoints someone else.
Dept of Insurance
Agent qualification & licensing & ensuring all laws directly relating to matters of ins. are executed and
enforced. Main purpose of ins. reg. = promote public welfare.
Domestic Insurance Company
Incorporated or organized in NC. Ex) Durham Life
Foreign Insurance Co
Incorporated or organized under laws of a state other than NC. Ex) MetLife
Alien Insurance Company
Incorporated or organized under laws of any jurisdiction outside the U.S. Ex) Canada Life
Prearrangement (Funeral) Ins. Policy
Funeral is prefunded with life ins. At time of app, prior to acceptance of initial premium, must disclose
policy is being used to fund prearrangement and effect on prearrangement in event of changes, bene
designation, or any penalties due to failure to pay premium or surrendering policy.
Contract of Insurance
Answers Already Graded A+
Insurable Interest
Something of value that, if lost, would cause you financial harm. Must exist upfront at time of
application. Legitimate financial reason for buying insurance.
Impersonation
Wrong person takes medical examination/test in connection with application for insurance. *Can be
contested beyond 2 year incontestable clause*
Adhesion
Ins. Co. designs original contract. Insured has little or no control of content, no room for bargaining,
no negotiations. Insured must take it or leave it.
Indemnity
Person restored to original condition he/she enjoyed prior to loss. Does not profit a gain from the
insurance.
Aleatory
Ins. contract is "out of balance". Insured or bene might receive much more than he she pays into the
policy or may pay premiums for a long time and yet have no loss.
Conditional
Ins. contract is conditional. Both parties must meet conditions. Even when a loss occurs. Ex) Life Ins.
policy only pays on condition that proof of death is provided.
Reinsurance
Ins. between ins. co's. Ins. co's go to each other for help. Ex) A given risk is not acceptable to an ins.
co. due to adverse medical/underwriting considerations or large amt of ins. involved is over co's
retention limit
Misrepresentation/Concealment
Making misleading statements. Intentionally misrepresenting benefits, terms of policy. Concealing
known material facts. Ex) Implying ins. policy equates shares of stock, implying dividends are
guaranteed, overstating future values
Interested Adjusted Cost Comparisons
Similar policies are compared & int. is taken into account. Cost determined by considering int. that
might have been earned on premiums had they been invested. (Surrender Cost Index measured at 10
& 20 years)
Traditional Net Cost Comparisons
Similar policies compared without taking the effect of int. into account. (Net Payment Cost Index
measured at 10 & 20 yrs)
Capital Stock ("Stock")
, Ins. Co. owned by stockholders. Ex) Lincoln Financial
Mutual Insurance Company
Ins. Co. owned by the policyholders. Ex) State Farm, NW Mutual
Fraternal Benefit Societies
Under jurisdiction of Dept. of Ins.
-nonprofit org.
-a society, voluntary assoc. or corp.
-cannot issue capital stock
-org. solely for mutual benefit of members & their families
-must have lodge system w/ ritualistic form of work
-do not issue any prop/liability pol. (No homeowners/auto ins)
-agents who sell to captive audience must be licensed by NCDOI
Ex) International Order if the Forester, Woodland of the World
Health Maintenance Organization (HMO)
Form of Ins. Co. Ownership
Commissioner of Insurance
Elected by the ppl for period of 4 yrs. Oversees state's dept. of ins. Approves rates, but does not set
them. Authority to give notice of hearing regarding violation, notice must specify time & place of
hearing & take place no less than 10 days after notice served.
Keep on file list of rates & explanations of coverages. Examine each annual statement, reports all
violations to attorney general. May petition court for restraining order if public is in danger. If unable
to fulfill term = governor appoints someone else.
Dept of Insurance
Agent qualification & licensing & ensuring all laws directly relating to matters of ins. are executed and
enforced. Main purpose of ins. reg. = promote public welfare.
Domestic Insurance Company
Incorporated or organized in NC. Ex) Durham Life
Foreign Insurance Co
Incorporated or organized under laws of a state other than NC. Ex) MetLife
Alien Insurance Company
Incorporated or organized under laws of any jurisdiction outside the U.S. Ex) Canada Life
Prearrangement (Funeral) Ins. Policy
Funeral is prefunded with life ins. At time of app, prior to acceptance of initial premium, must disclose
policy is being used to fund prearrangement and effect on prearrangement in event of changes, bene
designation, or any penalties due to failure to pay premium or surrendering policy.
Contract of Insurance
