North Carolina Life & Health Insurance License, Practice Exams

Under the rebate provision, paying or offering a rebate of premiums payable on a life, annuity, or accident and health contract as an inducement to that insurance is prohibited when it is:

1. Paid to a person who is not the named insured
2. Any rebate not plainly expressed in the contract issued ✓
3. Greater than 10% of the first-year premium
4. Given before the policy's free-look period expires

Why: G.S. 58-63-15(8)a prohibits, as an inducement, any rebate of premiums or special favor not plainly expressed in the contract issued; it is the deviation from the contract terms that is prohibited, not a dollar threshold.

The USA PATRIOT Act and related rules require insurers selling cash-value products to:

1. Obtain FBI clearance for each new applicant
2. Report every policy sold directly to the IRS
3. Maintain an anti-money-laundering (AML) program ✓
4. Refuse coverage to anyone who pays by cash

Why: Insurers offering products with cash value or investment features must have AML programs, including customer identification and suspicious-activity reporting.

'Coercion' as an unfair trade practice occurs when someone:

1. Uses physical or economic pressure to force the purchase of insurance ✓
2. Charges two identical risks two different premium amounts
3. Replaces a policy at another insurer through misrepresentation
4. Offers a small gift not specified in the policy to close a sale

Why: Coercion uses force or intimidation (for example, a lender requiring a borrower to buy insurance from a particular insurer) to induce an insurance transaction.

An insurer publishes a pamphlet falsely and maliciously attacking a competitor's financial solvency to drive customers away. Which defined practice does this most directly describe?

1. Boycott, coercion and intimidation
2. False financial statements
3. Misrepresentation of policy contracts
4. Defamation ✓

Why: G.S. 58-63-15(3), Defamation, covers circulating any pamphlet or literature that is false or maliciously critical of an insurer's financial condition and calculated to injure a person in the insurance business.

Which beneficiary designation can the policyowner change at any time without the beneficiary's consent?

1. Revocable ✓
2. Irrevocable contingent
3. Creditor
4. Irrevocable

Why: A revocable beneficiary can be changed at the owner's discretion; an irrevocable beneficiary must consent to changes.

The grace period in a typical life insurance policy is:

1. Only available once during the entire life of the policy
2. Exactly 24 hours from the date the premium first becomes due
3. About 31 days, during which an overdue premium may still be paid ✓
4. A full 12 months following any missed premium payment

Why: The grace period (commonly 31 days) keeps coverage in force after a missed premium; a death during it pays the benefit minus the premium owed.

Under G.S. 58-63-25, the notice of hearing served on a person charged must fix a hearing time that is at least how long after the date of service?

1. Not less than 5 days
2. Not less than 10 days ✓
3. Not less than 20 days
4. Not less than 30 days

Why: G.S. 58-63-25(a) requires that the hearing be held at a time and place fixed in the notice, which shall not be less than 10 days after the date of service of the notice.

HMO premiums must not be excessive, inadequate, or unfairly discriminatory, and must exhibit what relationship to the benefits provided?

1. An inverse relationship
2. A reasonable relationship ✓
3. A fixed two-to-one ratio
4. No required relationship

Why: G.S. 58-67-50(b)(2)-(3) require that premiums not be excessive, inadequate, or unfairly discriminatory, and that they exhibit a reasonable relationship to the benefits provided by the evidence of coverage.

Under the Uniform Simultaneous Death Act, if the insured and the primary beneficiary die together and the order of death is unknown, it is presumed that:

1. Both parties forfeit the proceeds back to the issuing insurance company
2. The beneficiary survived the insured and the proceeds go through that person's estate
3. The proceeds are split equally between both estates by the probate court
4. The insured survived the beneficiary ✓

Why: The Act presumes the insured outlived the beneficiary, so proceeds pass to the contingent beneficiary or the insured's estate, not the deceased beneficiary's estate.

Under N.C. Gen. Stat. § 58-50-80, after receiving a standard external review request the Commissioner must complete the preliminary review steps (including notifying the insurer) within what period?

1. 10 business days ✓
2. 45 calendar days
3. 30 calendar days
4. 3 business days

Why: G.S. 58-50-80(b) requires the Commissioner, upon receipt of a standard external review request, to complete the listed preliminary steps within 10 business days, including notifying the insurer and conducting the preliminary review.

Under N.C. Gen. Stat. § 58-51-5, each policy form, including riders and endorsements, must be identified by a form number located:

1. Anywhere the insurer chooses on the declarations
2. On a separate cover sheet only
3. In the upper right-hand corner of the last page
4. In the lower left-hand corner of the first page ✓

Why: Section 58-51-5(a)(6) requires each form, including riders and endorsements, to be identified by a form number in the lower left-hand corner of the first page.

Compared with a life-only annuity, an installment refund annuity:

1. Stops all payments the moment the annuitant dies, leaving nothing to anyone
2. May be purchased only with a single lump-sum premium paid at retirement
3. Guarantees total payments at least equal to the premium ✓
4. Always pays a higher monthly amount than every other available payout option

Why: A refund annuity guarantees that payments (to the annuitant plus beneficiary) total at least the premium paid; life-only pays the most but stops at death.

An automatic premium loan provision is designed to:

1. Refund all premiums if the insured is never disabled or ill
2. Automatically increase the death benefit each policy anniversary
3. Lend the policyowner the full face amount on demand at any time
4. Pay an overdue premium from the cash value to prevent a lapse ✓

Why: If a premium is unpaid at the end of the grace period, the APL provision automatically borrows from the cash value to keep the policy in force.

Medical-record information requested under the access provision may be supplied:

1. Either directly to the individual or to a medical professional designated by the individual, whichever the insurer prefers ✓
2. Only orally, during a conference between the individual and a licensed medical professional selected by the insurer at its expense
3. Only to an attorney designated in writing by the individual, who may then decide whether to release the records to the individual
4. Only through the Commissioner's office, which must review the records for accuracy before it releases them to the individual

Why: G.S. 58-39-45(c) allows medical-record information to be supplied directly to the individual or to a designated, licensed medical professional, whichever the insurer prefers.

A 'mutual' insurance company is:

1. A producer-owned brokerage firm
2. A government agency that pays claims of insolvent insurers
3. Owned by outside stockholders seeking profit
4. Owned by its policyholders, who may receive policy dividends ✓

Why: A mutual insurer is owned by its policyowners; dividends paid to them are treated as a nontaxable return of premium.

'Defamation' in insurance regulation refers to:

1. Sharing part of a commission with another licensed producer
2. Making false or maligning statements about an insurer's financial condition ✓
3. Filing a consumer complaint with the state insurance department about an unreasonably delayed claim
4. Refusing to renew a policy after a single claim is filed

Why: Defamation is making, publishing, or circulating false statements that are maligning, especially about the financial condition of an insurer.

For purposes of the Guaranty Association limits, benefits provided by a long-term care rider attached to a life insurance policy are treated as:

1. A separate annuity benefit subject to its own $250,000 present-value limit, apart from the cap on the life policy
2. Excluded, as long-term care coverage
3. A separate health benefit with a $500,000 cap
4. The same type of benefits as the base life insurance policy to which the rider relates ✓

Why: G.S. 58-62-21(d)(8) provides that a long-term care rider's benefits are considered the same type of benefit as the base life policy or annuity contract to which it relates.

An Explanation of Benefits (EOB) sent to an insured is:

1. A bill the insured must pay before any care is delivered
2. A government form used to enroll in a new health plan
3. A statement showing what the plan paid and what the insured owes ✓
4. The legally binding insurance contract between the parties

Why: An EOB is not a bill; it itemizes the charge, the plan's allowed amount, what the plan paid, and the patient's remaining responsibility.

A joint and survivor annuity continues payments:

1. To the couple's children after both annuitants die
2. As long as either annuitant is still living ✓
3. Only until the first of the two annuitants dies
4. For a fixed ten-year period regardless of survival

Why: A joint and survivor annuity pays as long as either annuitant lives (often reducing to a percentage for the survivor).

An insured can no longer perform bathing, dressing, and toileting without help. Under a typical LTC policy requiring loss of 2 of 6 ADLs, benefits:

1. Are triggered, because at least two ADLs cannot be performed ✓
2. Are denied unless the insured cannot perform all six of the listed ADLs
3. Begin only after the insured reaches age 80
4. Require a physician to certify severe cognitive impairment as well

Why: Inability to perform 2 of the 6 ADLs (or severe cognitive impairment) triggers LTC benefits; here three ADLs are affected.

A 'bonus' annuity credits an extra percentage to the premium up front but usually comes with:

1. No surrender charges at all
2. Immediate tax-free withdrawals
3. A longer surrender-charge period ✓
4. A guaranteed doubling of the account

Why: Bonus annuities add an upfront credit but typically offset it with longer or higher surrender charges and sometimes lower base rates.

A producer wants to retain part of the premium under an arrangement where a domestic insurer constructively retains a fixed proportion of gross premiums and the producer pays losses and subordinate commissions from the balance. Such a 'retrospective compensation agreement' must:

1. Be recorded as a public document in the county where the insurer keeps its home office
2. Be approved by the insurer's appointed actuary rather than by the Department
3. Be filed with the Commissioner for approval, with standards under G.S. 58-34-2(d)(5) ✓
4. Be filed with the NAIC, which reviews producer compensation agreements for member states

Why: G.S. 58-34-5(a) requires the agreement to be filed for the Commissioner's approval, and 58-34-5(c) ties the approval standards to G.S. 58-34-2(d)(5).

Annuity suitability standards require the producer to:

1. Sell variable annuities only to applicants who are older than sixty-five years
2. Always recommend the annuity that pays the producer the highest available commission
3. Have reasonable grounds to believe the annuity fits the buyer ✓
4. Provide a written guarantee of the annuity's future investment performance

Why: Suitability requires a reasonable basis to believe the recommendation meets the consumer's needs and financial situation.

Under G.S. 58-33-125, the fee for an individual insurance producer appointment is:

1. $20.00
2. $50.00
3. $11.00 ✓
4. $10.00

Why: G.S. 58-33-125(a) sets the individual insurance producer appointment fee at $11.00 (the Medicare supplement/LTC appointment is $10.00).

An alien insurer is one that is:

1. Incorporated in this state
2. Incorporated outside the United States ✓
3. Incorporated in another U.S. state
4. Not licensed in any state

Why: Alien = incorporated in another country; domestic = this state; foreign = another U.S. state.

A 'Social Insurance Supplement' (SIS) rider stops paying once the insured:

1. Recovers fully from the disabling condition
2. Begins receiving the expected Social Security benefit ✓
3. Returns to any form of part-time employment
4. Reaches the policy's stated benefit maximum age

Why: An SIS rider supplements income while Social Security is not yet payable; it reduces or stops once Social Security benefits begin.

Under North Carolina's continuation rules, continuation ends if the employee or member becomes or is eligible to become covered for similar benefits under what?

1. A long-term care insurance policy providing both nursing facility and home health care benefits
2. A health savings account that the former employer continues to fund after the termination date
3. An individual Medicare supplement policy bought during the six-month open enrollment period
4. Any arrangement of coverage for individuals in a group, whether insured or uninsured ✓

Why: G.S. 58-53-35(a)(3) ends continuation on the date the employee or member becomes or is eligible to become covered for similar benefits under any arrangement of coverage for individuals in a group, whether insured or uninsured.

A 'bed reservation' benefit in a long-term care policy:

1. Pays a cash bonus for each claim-free year
2. Continues paying to hold the resident's bed during a hospital stay ✓
3. Reserves a hospital bed in advance of any scheduled surgery or procedure
4. Guarantees a private room in any participating facility

Why: A bed reservation benefit keeps paying the facility (for a limited number of days) to hold the insured's bed while they are temporarily hospitalized.

A key feature of convertible term insurance is that it can be changed to a permanent policy:

1. Only if the insured becomes totally disabled first
2. Only after a new medical exam confirms insurability
3. Only during the first policy year
4. Without providing evidence of insurability ✓

Why: Convertible term can be converted to permanent coverage without evidence of insurability.

For conduct to constitute an "Unfair Claim Settlement Practice" under the Article, it generally must be committed or performed:

1. With such frequency as to indicate a general business practice ✓
2. On at least one occasion involving a disputed amount of more than $10,000 in claimed benefits
3. With proven intent to defraud the insured, shown by clear and convincing evidence
4. Against a North Carolina resident under a policy delivered in this State

Why: G.S. 58-63-15(11) defines unfair claim settlement practices as committing or performing the listed acts with such frequency as to indicate a general business practice.

An applicant who regularly scuba dives in caves is most likely to be:

1. Declined outright, as no insurer covers a hazardous hobby
2. Charged a higher (rated) premium or have the avocation excluded ✓
3. Required to buy an annuity rather than life insurance
4. Offered the preferred rate class, since diving is a sport

Why: Hazardous avocations increase risk; insurers respond with a rating, an exclusion rider, or a higher premium.

Under the incontestability provision, after how long in force during the insured's lifetime may the insurer generally no longer contest the policy for a misstatement?

1. 6 months
2. 1 year
3. 2 years ✓
4. 5 years

Why: After 2 years in force during the insured's lifetime the insurer cannot contest the policy except for nonpayment of premium.

Under the endorsement method of a split-dollar plan, the policy is:

1. Held in an irrevocable trust outside the reach of both parties
2. Required to lapse automatically when the employee retires
3. Owned by the employee personally, who then assigns the entire policy back to the employer as collateral security for a loan
4. Owned by the employer, which endorses part of the death benefit to the employee's beneficiary ✓

Why: In endorsement split-dollar the employer owns and controls the policy and endorses a portion of the death benefit to the employee's named beneficiary.

To be 'fully insured' for Social Security retirement benefits, a worker generally needs:

1. A minimum of 30 years of continuous full-time employment
2. Only a single quarter of covered earnings at any point in life
3. 20 quarters earned within the most recent five-year period
4. 40 quarters (about 10 years) of covered earnings ✓

Why: Fully insured status requires 40 quarters of coverage (roughly 10 years of work in covered employment).

An 'other-insured' (e.g., spouse) rider on a life policy provides:

1. Automatic conversion of the base policy into a survivorship plan
2. A second death benefit payable only if both spouses die together
3. Waiver of premium whenever the additional insured is hospitalized
4. Term life coverage on a family member other than the base insured ✓

Why: An other-insured rider adds term coverage on a spouse or other family member to the base insured's policy.

Under G.S. 58-63-16(a)(3), free or reduced-fee products or services offered to potential customers are permitted only if which condition is met?

1. Receipt is not contingent on purchasing insurance and the terms are disclosed in writing ✓
2. The offer is limited to commercial-lines prospects and is not extended to personal-lines customers
3. The recipient is already a policyholder of the insurer offering the product or service
4. The value of each item is reported to the Commissioner in a quarterly filing by the insurer

Why: G.S. 58-63-16(a)(3) requires that receipt not be contingent upon purchasing insurance, that services be offered on the same terms to all eligible customers, and that the requirements be conspicuously disclosed in writing.

An owner surrenders a policy with a $22,000 cash value after paying $15,000 in premiums. The taxable gain is:

1. $7,000 ✓
2. $22,000
3. $15,000
4. $0

Why: Gain over basis is taxable: $22,000 − $15,000 = $7,000 of ordinary income.

Under the 'reduction of premium' dividend option, the dividend is:

1. Left with the insurer to accumulate interest over time
2. Applied toward the premium due at the next anniversary ✓
3. Used to buy additional paid-up whole life insurance coverage
4. Paid out to the policyowner directly in cash each year

Why: This option uses the dividend to lower the out-of-pocket premium owed at the next due date.

Making a false entry in an insurer's books with intent to deceive a lawfully appointed examiner falls under which defined practice?

1. False financial statements ✓
2. Boycott, coercion and intimidation
3. Misrepresentation of policy contracts
4. Defamation

Why: G.S. 58-63-15(5) includes making any false entry in any book, report, or statement of an insurer with intent to deceive a lawfully appointed examiner, within False Financial Statements.

A variable life insurance policy typically guarantees:

1. A fixed cash value that can never decline in any market
2. That the policy can never become a modified endowment contract
3. A level premium that is invested entirely in government bonds
4. A minimum death benefit regardless of separate-account performance ✓

Why: Variable life guarantees a minimum death benefit, but the cash value (and any benefit above the minimum) varies with the separate accounts the owner directs.

A nonqualified annuity owner (age 45) surrenders the contract for a $30,000 gain. The tax consequence is:

1. Ordinary income tax on the $30,000 plus a 10% penalty ✓
2. Tax-free treatment, because the entire surrender is a return of premiums already taxed to the owner
3. A 10% penalty but no income tax
4. Capital-gains tax on the $30,000 only

Why: Annuity gain is ordinary income; surrender before 59½ also triggers the 10% premature-distribution penalty.

Respite care, often covered by long-term care policies, is intended to:

1. Pay the insured a cash bonus for staying out of a nursing home
2. Provide permanent placement in a skilled nursing facility
3. Cover the cost of prescription drugs used during a hospital stay
4. Give a temporary break to the insured's regular unpaid caregiver ✓

Why: Respite care provides short-term relief for a family member or other informal caregiver.

Under N.C. Gen. Stat. § 58-51-10, the free-look notice warns the insured that the policy was issued based on the application and that, if there is a misstatement or omitted medical history, the insured should:

1. Cancel the policy and reapply with a different insurer during the free-look period
2. Wait until the first claim is filed to correct the record
3. Advise the company immediately regarding the incorrect or omitted information ✓
4. Notify the Commissioner of Insurance rather than the company that issued the policy

Why: The notice required by § 58-51-10 tells the insured that if there is any misstatement in the application or omitted medical history, the insured should advise the Company immediately, otherwise the policy may not be a valid contract.

A 60-year-old annuity owner withdraws $5,000 of gain. Because the owner is past 59½, the withdrawal is:

1. Ordinary income, with no 10% penalty ✓
2. Tax-free as a return of premium
3. Subject to the 10% penalty anyway
4. Taxed at capital-gains rates

Why: After 59½ the 10% premature-distribution penalty no longer applies; the gain is still ordinary income.

An insured dies by suicide 14 months after issue, within the policy's two-year suicide period. The insurer will:

1. Pays the full face amount, because suicide is never an excluded cause of death
2. Pays half the face amount as a compromise settlement of the exclusion
3. Refunds the premiums paid and pays no death benefit ✓
4. Pays double under the accidental death rider

Why: Suicide within the stated period is excluded; the insurer refunds premiums (or returns the reserve) rather than paying the death benefit.

To enroll in a Medicare Advantage (Part C) plan, a beneficiary must first have:

1. Only a Medicare Part D drug plan
2. Both Medicare Part A and Part B ✓
3. Full Medicaid eligibility in their state
4. An existing Medicare Supplement policy

Why: Medicare Advantage requires the beneficiary to be enrolled in both Part A and Part B; the MA plan then delivers those benefits (usually with Part D).

Under a term insurance 're-entry' option, the insured can obtain lower 'select' renewal rates by:

1. Automatically renewing without any proof of good health
2. Converting the policy to whole life at the original age
3. Paying a single lump-sum premium for the entire new term
4. Providing new evidence of insurability at the end of the term ✓

Why: Re-entry term lets an insured requalify with fresh evidence of insurability for lower select rates; without requalifying, higher rates apply.

Under G.S. 58-50-30, a carrier may not exclude a listed provider acting within scope solely because the provider lacks what, unless use of those services reasonably could be expected?

1. Hospital privileges ✓
2. An exclusive contract with the carrier
3. Board certification
4. Malpractice insurance above $1 million

Why: G.S. 58-50-30(g) prohibits excluding a listed provider solely on the basis that the provider lacks hospital privileges, unless use of hospital services by the provider on behalf of a policyholder reasonably could be expected.

For an undefined practice under G.S. 58-63-40, the enforcement petition is filed in the superior court of the county where:

1. The claimant harmed by the practice resides
2. The person resides or has a principal place of business ✓
3. The insurance contract at issue was delivered
4. The Commissioner's Raleigh office is located, because the Department brings the action

Why: G.S. 58-63-40(b) directs that the petition be filed in the superior court of the county wherein the person resides or has the principal place of business.

A domestic insurer that amends or cancels a filed management contract or custodial agreement must notify the Commissioner within:

1. 60 days after the amendment or cancellation
2. 10 days after the amendment or cancellation
3. 15 business days after the amendment or cancellation ✓
4. 30 days after the amendment or cancellation

Why: G.S. 58-34-10(c) requires notice to the Commissioner within 15 business days after the amendment or cancellation.

An individual may be licensed by the Commissioner as a foreign military sales agent to represent a life insurance company domiciled in this State, but only if the agent represents the company:

1. In a foreign country or territory and either on a U.S. military installation or with U.S. military personnel ✓
2. Exclusively to active-duty personnel who are legal residents of North Carolina
3. Only while the agent is physically present in this State, with each policy countersigned locally
4. Anywhere in the world, so long as the company holds a certificate of authority in the country where the agent resides

Why: G.S. 58-33-15 limits the overseas military (restricted) license to representing the company in a foreign country or territory and either on a U.S. military installation or with U.S. military personnel.

Under G.S. 58-58-250, viatical settlement proceeds are paid into what kind of account through an independent escrow agent?

1. An FDIC-insured escrow or trust account ✓
2. The insurer's reserve account
3. The provider's general operating account
4. A brokerage margin account

Why: G.S. 58-58-250(i) requires the proceeds be paid, within three business days, into an FDIC-insured escrow/trust account handled by an independent escrow agent.

Under North Carolina's group continuation rules, an employee or member is eligible for continuation only if continuously insured under the group policy (or a replaced one) during what period immediately before termination?

1. One consecutive month
2. Three consecutive months ✓
3. Six consecutive months
4. Twelve consecutive months

Why: G.S. 58-53-10 limits continuation to an employee or member who has been continuously insured under the group policy (or for similar benefits under any group policy it replaced) during the period of three consecutive months immediately before the date of termination.

To avoid duplicate coverage, when a person could be covered by guaranty associations of more than one state, the NC Article is construed so that the person is provided coverage by:

1. Both associations equally
2. Whichever association pays first, with the other reimbursing
3. Only one association ✓
4. The association of the state where the insurer is domiciled only

Why: G.S. 58-62-21(a2) directs that the Article be construed with other state laws to result in coverage by only one association, avoiding duplicate coverage.

An agent binding an insurer to a risk the company did not intend to cover is an example of which type of authority?

1. Express authority granted explicitly in the agency contract
2. Fiduciary authority arising from handling client premium funds
3. Apparent authority ✓
4. Implied authority needed to carry out expressly granted duties

Why: Apparent authority is the appearance of authority a reasonable client perceives; express and implied are actually granted, so the distractors describe legitimate authority.

A '20-pay whole life' policy:

1. Requires premium payments every year for the insured's entire lifetime
2. Is paid up after twenty years of premiums but covers the insured for life ✓
3. Provides level coverage for exactly twenty years, then terminates
4. Builds no cash value at all because the premium period ends early

Why: Limited-pay whole life concentrates premiums into a set period (here 20 years) while coverage lasts for life.

A second surgical opinion provision is a cost-management feature that:

1. Pays for two operations whenever the insured requests them
2. Encourages or requires another opinion before elective surgery ✓
3. Requires the insurer to approve the choice of surgeon
4. Guarantees the insured a second free hospital stay each year

Why: Second surgical opinion programs seek an independent opinion before non-emergency surgery to avoid unnecessary procedures.

The Medicare Supplement (Medigap) open enrollment period:

1. Occurs every fall and lets enrollees switch among all Medigap plans
2. Is available only to people who also qualify for full Medicaid benefits
3. Is a one-time 30-day window that opens at the person's 70th birthday
4. Lasts six months, starting when the person is 65 and enrolled in Part B ✓

Why: During the 6-month Medigap open enrollment (beginning at 65 and enrolled in Part B), insurers must issue any plan regardless of health (guaranteed issue).

When must a member insurer deliver the Guaranty Association summary document to a policy owner?

1. Before or at the time of delivery of the policy or contract ✓
2. At the first annual renewal of the policy
3. Within 30 days after the policy is issued and delivered
4. Only when the policy owner asks the insurer for it

Why: G.S. 58-62-86(b) provides that the summary document must be delivered before or at the time of delivery of the policy or contract (and is also available on request).

A plan has a $1,500 deductible, 80/20 coinsurance, and a $4,000 out-of-pocket maximum. On a $30,000 bill, the insured pays:

1. $4,000 ✓
2. $7,200
3. $5,700
4. $1,500

Why: Deductible $1,500 + 20% of $28,500 = $7,200, but the $4,000 out-of-pocket maximum caps the insured's cost at $4,000.

It is generally illegal to sell a Medicare Supplement (Medigap) policy to someone who is:

1. Within six months of turning age 65
2. Covered by a former employer's retiree plan
3. Already enrolled in a Medicare Advantage plan ✓
4. Receiving Social Security retirement benefits

Why: Selling a Medigap policy to a Medicare Advantage enrollee is prohibited as duplicative coverage (Medigap works only with Original Medicare).

A 'shared care' rider on long-term care policies allows:

1. Two unrelated insureds to split a single premium payment
2. A child to inherit the parent's unused benefits tax-free
3. The insurer to reduce benefits when both spouses are healthy
4. Spouses to draw from each other's pool of benefits ✓

Why: A shared care rider lets a couple access one another's benefit pool if one spouse exhausts their own coverage.

Medicare Part C (Medicare Advantage) plans:

1. Are available exclusively to people under age 65 with disabilities
2. Replace the need to ever enroll in Original Medicare at all
3. Are private plans that bundle Part A and B coverage, often with drugs ✓
4. Pay only for inpatient hospital stays and nothing else

Why: Medicare Advantage (Part C) is offered by private insurers and combines Part A and B benefits, frequently including Part D drug coverage.

A 401(k) plan is a qualified plan that primarily allows employees to:

1. Withdraw funds before age 59 1/2 with no tax or penalty
2. Contribute after-tax dollars only, with no employer match
3. Defer part of their salary on a pre-tax basis, often with an employer match ✓
4. Receive a guaranteed monthly pension based on years of service, not contributions

Why: A 401(k) is a defined-contribution plan funded by pre-tax salary deferrals (Roth option aside), commonly with an employer match.

Under the viatical disclosure rules, the viator must be told of a right to rescind the contract for how long after receiving the proceeds?

1. 10 business days ✓
2. 30 days
3. 3 business days
4. 15 days

Why: G.S. 58-58-245(a)(5) discloses the right to rescind for 10 business days after the receipt of the viatical settlement proceeds (see also G.S. 58-58-250(h)).

Agreements among insurers to restrain trade or force someone out of business are the unfair practices known as:

1. Defamation of a competitor
2. Boycott, coercion, and intimidation ✓
3. Rebating and commission sharing
4. Twisting and churning of policies

Why: Boycott, coercion, and intimidation are unfair trade practices involving combinations or threats that restrain or monopolize the business of insurance.

The coordination of benefits provision is designed to:

1. To extend the maximum benefit period under each plan
2. To stop an insured collecting more than the expenses incurred ✓
3. To increase the total benefits payable across all plans
4. To eliminate all policy deductibles when two plans apply

Why: COB establishes primary/secondary payer order so total reimbursement does not exceed the expenses incurred.

A policy issued in North Carolina by a member insurer at a time when it was NOT licensed to issue that policy in the State is:

1. Covered if the policyholder is a resident
2. Covered up to $300,000 per life
3. Excluded from Guaranty Association coverage ✓
4. Covered only for cash value

Why: G.S. 58-62-21(c)(6) excludes any policy or contract issued in this State by a member insurer at a time when it was not licensed to issue it in this State.

An endowment policy is distinguished by the fact that it:

1. Pays the face amount at a set maturity date if the insured is still living ✓
2. Decreases its face amount steadily over the policy's term
3. Provides only temporary coverage that expires with no value
4. Invests the entire premium in the insurer's separate investment accounts chosen by the owner

Why: An endowment pays the face amount either at the insured's death or upon reaching the maturity date while living; modern tax rules limit their use.

Under North Carolina's utilization review law, prospective and concurrent review determinations must be communicated to the covered person's provider within how long after the insurer obtains all necessary information?

1. Three business days ✓
2. Seven business days
3. Five business days
4. Two business days

Why: G.S. 58-50-61(f) requires prospective and concurrent determinations to be communicated to the covered person's provider within three business days after the insurer obtains all necessary information.

An applicant wants coverage that pays an increasing death benefit to keep pace with inflation. The best choice is a policy or rider providing:

1. A return-of-premium rider refunding paid premiums
2. A cost-of-living (increasing) benefit ✓
3. A level face amount for life
4. Decreasing term matched to a mortgage balance

Why: A cost-of-living/increasing benefit raises the death benefit over time to offset inflation.

If a North Carolina employer replaces the group health policy with another group policy, the continuing employee is entitled to do what?

1. Receive a cash settlement equal to the premiums for the unexpired portion of the continuation period
2. Continue under the successor group policy for any unexpired period of continuation ✓
3. Begin a new 18-month continuation period measured from the effective date of the successor policy
4. Convert immediately to an individual policy

Why: G.S. 58-53-35(b) provides that if the employer replaces the group policy with another group policy, the employee is entitled to continue under the successor group policy for any unexpired period of continuation to which the employee is entitled.

Under G.S. 58-60-15, the insurer must provide a Buyer's Guide and Policy Summary to all prospective purchasers prior to accepting the initial premium deposit, unless the policy contains an unconditional refund provision of at least:

1. 15 days
2. 20 days
3. 30 days
4. 10 days ✓

Why: G.S. 58-60-15(a) excuses pre-deposit delivery if the policy contains an unconditional refund provision of at least 10 days (the 'free look'), in which case the documents may be delivered with the policy.

A client deposits a single $100,000 premium and wants income to start in 15 years. The product is a:

1. Variable life insurance policy
2. Single-premium immediate annuity
3. Flexible-premium deferred annuity
4. Single-premium deferred annuity ✓

Why: One lump sum with income deferred to a future date is a single-premium deferred annuity (SPDA).

A life policy has a war exclusion. The insured, a service member, is killed in combat. The insurer:

1. Does not pay the death benefit (often refunds premiums) ✓
2. Pays twice the face amount under the accidental death benefit rider
3. Pays only the accumulated cash value plus any paid-up additions
4. Pays the full face amount, because federal law voids war exclusions

Why: A war/military exclusion denies the death benefit for deaths resulting from war or military service, typically refunding premiums.

A terminally ill insured accesses the accelerated death benefit for $40,000 on a $100,000 policy. At death, the beneficiary receives:

1. $40,000, matching the amount already advanced
2. $140,000 (the face amount plus the advance)
3. $60,000 (the death benefit reduced by the advance) ✓
4. $100,000, because an accelerated payment is treated as a policy loan

Why: The accelerated benefit advances part of the face amount; the death benefit is reduced accordingly: $100,000 − $40,000 = $60,000.

An employee leaving a group life plan may convert to an individual policy:

1. Only after at least five years of continuous group service
2. At the group's experience-rated premium for the rest of life
3. Without evidence of insurability, generally within thirty-one days ✓
4. Only after passing a new medical exam at the insured's expense

Why: The conversion privilege lets a departing employee convert to individual coverage without evidence of insurability, typically within 31 days.