North Carolina Life Insurance Practice Exam Free - 2026

• A. Retained asset accounts are prohibited as a settlement mode in North Carolina
• B. The insurer may use the account only if the beneficiary is a minor
• C. The insurer must disclose in writing that one check or draft can be written to access the entire proceeds and that interest earned may be taxable
• D. No disclosure is required as long as the account pays at least the statutory minimum interest rate

Correct answer: C. The insurer must disclose in writing that one check or draft can be written to access the entire proceeds and that interest earned may be taxable

Explanation: North Carolina permits retained asset accounts only if the insurer identifies the account as a settlement option on the claim form, gives the policy owner the contractual right to select from all optional settlement modes before death, and provides the beneficiary written disclosures, including that one check or draft can access the entire proceeds, that other settlement options are preserved until the balance is withdrawn, the fees and services involved, the interest-rate methodology, and that interest earned may be taxable. Option A is wrong because the accounts are allowed with disclosure. Option B invents a minor-beneficiary condition. Option D is wrong because disclosure is mandatory and no minimum interest rate substitutes for it. See 11 NCAC 12 .1602 and .1603.

• A. Notify the Commissioner within 30 days; no fee applies
• B. Give written notification to the Commissioner within 10 business days of each change; failing to do so results in a $50 fee
• C. Notify only her appointing insurers, which then update the Department
• D. No notice is required until her next license renewal

Correct answer: B. Give written notification to the Commissioner within 10 business days of each change; failing to do so results in a $50 fee

Explanation: N.C.G.S. § 58-2-69(b) requires every licensee to give written notification to the Commissioner of any change of residential address within 10 business days after moving, and every licensee must maintain a valid e-mail address and report any change to it within 10 business days. The Department charges a $50.00 fee when a licensee fails to update either within that window. Option A uses the wrong period and ignores the fee. Option C is wrong because the duty runs to the Commissioner, not just to insurers. Option D is wrong because North Carolina producer licenses do not have a renewal cycle and the duty is triggered by the change itself. See N.C.G.S. § 58-2-69(b).

• A. One year
• B. Two years, at any branch office
• C. Five years, filed with the Department
• D. At its home or principal office, for three years or until the next regular examination report is filed, whichever is longer

Correct answer: D. At its home or principal office, for three years or until the next regular examination report is filed, whichever is longer

Explanation: Each life insurer must maintain at its home or principal office a complete file containing a specimen copy of every printed, published, or prepared advertisement of its policies disseminated in North Carolina, noting the manner and extent of distribution and the form number of any policy advertised, and keep each advertisement for three years or until the filing of the next regular report on examination, whichever is longer; the insurer also files an annual certificate of compliance. Options A and B state periods that are too short and the wrong location. Option C is wrong because the file is kept by the insurer for Department inspection, not filed with the Department, and the base period is three years, not five (four years applies to accident and health advertising). See 11 NCAC 12 .0431.

• A. A grace period of 7 days
• B. A grace period of 10 days
• C. A grace period of 60 days
• D. A grace period of 31 days

Correct answer: D. A grace period of 31 days

Explanation: North Carolina requires every individual life policy delivered in the state to grant a 31-day grace period for any premium except the first, and the death benefit stays in force during that time. The 7-day and 10-day figures belong to weekly-premium and monthly-premium accident and health policies, not life, and 60 days is not a statutory life grace period. See N.C.G.S. 58-58-22(1).

• A. It changes the state exam vendor
• B. It guarantees a higher commission
• C. Application accuracy is important to underwriting and contract validity
• D. It makes the policy automatically tax-free

Correct answer: C. Application accuracy is important to underwriting and contract validity

Explanation: Accurate application information is essential because the insurer relies on it for underwriting. Unauthorized changes can create serious compliance and validity issues.

• A. To replace auto liability coverage
• B. To insure a house against fire
• C. To pay a death benefit only after accidental death
• D. To provide income, often during retirement

Correct answer: D. To provide income, often during retirement

Explanation: An annuity is primarily designed to accumulate funds and/or provide income, often for retirement planning.

• A. building value before income payments begin
• B. filing a property claim
• C. changing the insured every month
• D. receiving workers compensation benefits

Correct answer: A. building value before income payments begin

Explanation: The accumulation period is the time when money is paid into the annuity and value builds before the payout phase begins.

• A. The owner continues to make premium deposits that grow tax-deferred
• B. The accumulated value is converted into a stream of income payments
• C. The surrender charge schedule resets and the accumulation period begins again
• D. The full accumulated value is paid to the beneficiary as a death benefit

Correct answer: B. The accumulated value is converted into a stream of income payments

Explanation: During annuitization, the annuity value is converted into scheduled income payments according to the selected payout option.

• A. Refund life option
• B. Fixed-period option
• C. Life-only option
• D. Joint-and-survivor option

Correct answer: C. Life-only option

Explanation: A life-only option usually pays the highest lifetime income because payments stop at the annuitant's death and no refund or survivor payment is guaranteed.

• A. A penalty the IRS assesses on any withdrawal taken before age 59 1/2
• B. A charge deducted from each premium payment to cover the insurer's sales expenses
• C. A fee the insurer charges the beneficiary when the annuitant dies before payout
• D. A fee that may apply when funds are withdrawn during a stated early period

Correct answer: D. A fee that may apply when funds are withdrawn during a stated early period

Explanation: A surrender charge is a contractual charge that may apply if the owner withdraws money or surrenders the annuity during the surrender period.

• A. An immediate annuity generally begins income payments soon after purchase
• B. An immediate annuity may be funded with a series of periodic premium payments
• C. A deferred annuity must begin income payments within one year of purchase
• D. An immediate annuity offers a longer accumulation period than a deferred annuity

Correct answer: A. An immediate annuity generally begins income payments soon after purchase

Explanation: An immediate annuity is designed to start income payments soon after it is purchased. A deferred annuity delays payouts until a later date.

• A. taxed only if the insured was under age 65
• B. received income tax-free
• C. always taxed as ordinary income
• D. paid only after a probate court approves the insurer

Correct answer: B. received income tax-free

Explanation: Life insurance death benefits are generally received income tax-free when paid as a lump sum to a named beneficiary. Interest paid with the proceeds may be taxable.