North Carolina Life & Health Insurance License, Practice Exams

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.

Sharing or paying a commission to an unlicensed individual is generally:

1. Required by most state laws
2. Permitted for referrals only
3. Prohibited ✓
4. Allowed if the amount is small

Why: Commissions may be paid only to properly licensed persons; paying an unlicensed individual is prohibited (limited nominal referral fees aside).

Annuitization differs from a systematic withdrawal because annuitization:

1. Always returns the full account value in one immediate lump sum
2. Lets the owner take any amount at any time with no schedule at all
3. Permanently freezes the account so no further access is possible
4. Converts the account into a guaranteed stream of income payments ✓

Why: Annuitization exchanges the accumulated value for a guaranteed income stream; systematic withdrawal keeps the account and takes flexible amounts.

Concurrent utilization review in a managed-care plan assesses:

1. Whether the group's premium rate should be adjusted at renewal
2. The commission owed to the producer on each enrolled member
3. Whether continued care is necessary while a patient is being treated ✓
4. Which providers will accept a capitation payment before joining the network

Why: Concurrent review evaluates the necessity and appropriateness of care during treatment (e.g., an ongoing hospital stay); prospective review occurs before, retrospective after.

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.

An insured with a $4,000 monthly benefit suffers a residual disability causing a 50% loss of income. The residual benefit is about:

1. $2,000 ✓
2. $4,000
3. $1,000
4. $0

Why: Residual benefits are proportional to income lost: 50% income loss × $4,000 = $2,000.

Under North Carolina's group conversion right, the converted individual policy must be issued by the insurer in what manner?

1. Without evidence of insurability ✓
2. Only at standard rates approved by the employer
3. Subject to a new 12-month preexisting condition exclusion
4. After a satisfactory paramedical exam

Why: G.S. 58-53-45 entitles a terminated employee or member to have a converted policy issued by the insurer under whose group policy he was last insured, without evidence of insurability.

Three children are named beneficiaries 'per stirpes.' One child predeceases the insured, leaving two children of their own. At the insured's death, the deceased child's share passes to:

1. That deceased child's own two children ✓
2. The policyowner's estate for probate
3. The two surviving named children equally, the deceased child's line taking nothing
4. The insurer as an unclaimed amount

Why: Per stirpes directs a deceased beneficiary's share down to that person's descendants — here, the deceased child's two children.

When personal information is collected from a source OTHER than the applicant or public records, the notice of information practices must be provided no later than:

1. The time the individual files a claim under the policy or contract
2. The time the collection of personal information is initiated ✓
3. The first renewal date following the collection of the information
4. Thirty days after the policy is issued or the first claim is paid

Why: G.S. 58-39-25(a)(1)b. requires the notice no later than the time collection is initiated when personal information is collected from a source other than the applicant or public records.

An insured dies with a $20,000 policy loan outstanding. The beneficiary receives:

1. Nothing, because the loan voids the coverage
2. The full death benefit, with the loan forgiven entirely
3. Only the policy's remaining cash value
4. The death benefit minus the outstanding loan and any interest ✓

Why: An outstanding loan plus interest is deducted from the death benefit paid to the beneficiary.

Which entity type is specifically listed within the Article 63 definition of "person"?

1. A registered investment adviser
2. A state-chartered credit union
3. A federal savings and loan association
4. A multiple employer welfare arrangement ✓

Why: G.S. 58-63-5(2) lists a multiple employer welfare arrangement among the legal entities included in the definition of "person."

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.

In which annuity does the owner bear the investment risk, with values held in separate accounts?

1. Single-premium deferred fixed annuity
2. Fixed annuity
3. Immediate fixed annuity
4. Variable annuity ✓

Why: A variable annuity's value depends on separate-account performance; the owner bears investment risk, and a securities license is required to sell it.

Under N.C. Gen. Stat. § 58-53-1 (Group Health Continuation and Conversion definitions), 'Insurance' and 'insured' refer to coverage on a premium-paying basis and specifically do NOT include:

1. Coverage under a group contract issued by an HMO
2. Coverage of a dependent spouse
3. Coverage provided by reason of a disability extension ✓
4. Coverage under any converted policy

Why: Section 58-53-1(3) defines 'insurance' and 'insured' as coverage under a group, individual, or converted policy on a premium-paying basis, and expressly excludes coverage provided by reason of a disability extension.

Under the unfair claim settlement practices subsection, a violation of itself creates a cause of action in favor of whom?

1. The insured claimant
2. No person other than the Commissioner ✓
3. The insured's attorney
4. Any third-party beneficiary of the policy

Why: G.S. 58-63-15(11) provides that no violation of the subsection shall of itself create any cause of action in favor of any person other than the Commissioner.

A Medicare Advantage plan (Part C):

1. Is a government-run supplement plan that fills the gaps left by Original Medicare coverage
2. Replaces Medicaid for people who have very limited financial means
3. Provides only prescription drug coverage and nothing else at all
4. Is offered by private insurers and bundles Part A and B benefits, often with drugs ✓

Why: Part C (Medicare Advantage) plans are offered by private insurers approved by Medicare and combine Part A and B (usually Part D) coverage.

The 'insuring clause' of a health or life policy is the part that:

1. Permits the insurer to raise premiums for the entire class of insureds
2. Lists every condition and circumstance the policy will not cover
3. Allows the policyowner to examine and return the policy for a refund
4. States the insurer's basic promise to pay benefits ✓

Why: The insuring clause (insuring agreement) sets out the insurer's fundamental promise to pay covered benefits.

An individual whose license is revoked under Article 33 shall be issued another license:

1. Automatically after a two-year waiting period measured from the effective date of the revocation
2. Only with the prior insurer's consent
3. Never; a revocation is permanent
4. Only after first complying with all requirements of the Article ✓

Why: G.S. 58-33-46(d) provides that no individual whose license is revoked shall be issued another license without first complying with all requirements of the Article.

In group underwriting, a 'guaranteed issue' limit is the amount of coverage that:

1. Members can obtain without providing individual evidence of insurability ✓
2. Is automatically doubled for any employee who enrolls one or more dependents in the plan
3. The employer is required to buy for every eligible employee, whatever the resulting rate
4. Each member must pay for entirely out of pocket

Why: Up to the guaranteed issue limit, members are covered without individual medical evidence; amounts above it require proof of insurability.

The criminal history record check (fingerprinting) requirement of G.S. 58-33-48 does NOT apply to:

1. An applicant who has never before held an insurance license in any state
2. An initial applicant for a resident license with a casualty line of authority
3. A person seeking an initial limited representative license
4. A person applying for renewal or continuation of a home state producer license ✓

Why: G.S. 58-33-48(c)(1) exempts a person applying for renewal or continuation of a home state producer license (or a nonresident license), and (c)(2) exempts limited line credit insurance producer applicants.

An insurer, to avoid paying, repeatedly offers far less than what claims are worth so that insureds must sue, and the insureds ultimately recover much more in court. This is which listed practice?

1. Refusing to pay a claim without conducting a reasonable investigation
2. Attempting to settle a claim for less than the amount to which a reasonable person would have believed entitled by reference to written advertising material accompanying the application
3. Failing to acknowledge and act reasonably promptly upon claim communications
4. Compelling the insured to institute litigation by offering substantially less than the amounts ultimately recovered ✓

Why: G.S. 58-63-15(11)g lists compelling the insured to institute litigation to recover amounts due by offering substantially less than the amounts ultimately recovered in actions brought by the insured.

In a disability income policy, the 'benefit period' is:

1. The waiting time after a disability before any benefit is payable
2. The maximum length of time benefits will be paid for a disability ✓
3. The number of days the insured has to file written proof of loss
4. The period after issue during which sickness claims are excluded

Why: The benefit period is the maximum duration benefits are paid (e.g., 2 years, 5 years, to age 65); the elimination period is the waiting time before they start.

Under the required MGA contract provisions, the MGA may not, without the insurer's prior approval, pay or commit the insurer to pay a single claim (net of reinsurance) exceeding what percentage of the insurer's policyholder surplus?

1. 1% ✓
2. 3%
3. 5%
4. 10%

Why: G.S. 58-34-2(d)(10)d. prohibits the MGA from paying or committing the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent (1%) of the insurer's policyholder surplus, without prior approval.

To whom does a person apply for a license to establish and operate an HMO in North Carolina?

1. The Department of Health and Human Services
2. The Attorney General
3. The Secretary of State
4. The Commissioner of Insurance ✓

Why: G.S. 58-67-10(a) provides that any person may apply to the Commissioner for a license to establish and operate an HMO in compliance with the Article.

Under the reciprocity provision, a federally qualified HMO from a bordering state may be admitted to do business in North Carolina only if the bordering state has what?

1. A law or regulation substantially similar to the reciprocity section ✓
2. No HMO licensing requirement of any kind
3. A minimum net worth requirement higher than $1,000,000
4. A reciprocal reinsurance pool shared with North Carolina insurers

Why: G.S. 58-67-15 allows a federally qualified HMO of a bordering state to be admitted if it satisfies the Commissioner it is fully organized under that state's laws and complies with NC requirements, provided the bordering state has a law or regulation substantially similar to this section.

A contributory group life plan, in which employees pay part of the premium, generally requires:

1. 100% of all eligible employees to enroll in the plan
2. Only the highly compensated employees to participate
3. No minimum level of employee participation at all
4. At least 75% of eligible employees to participate ✓

Why: Contributory plans typically require at least 75% participation, while noncontributory (employer-paid) plans require 100%.

Under the CHANGE OF BENEFICIARY provision of N.C. Gen. Stat. § 58-51-15, unless the insured made an irrevocable designation, the right to change the beneficiary:

1. Belongs to the named beneficiary, whose written release is required for any change, assignment, or surrender
2. Is fixed permanently once the policy issues
3. Requires the insurer's written approval
4. Is reserved to the insured, without the beneficiary's consent ✓

Why: Section 58-51-15(a)(12) reserves the right to change the beneficiary to the insured and provides the beneficiary's consent is not required for surrender, assignment, or change, unless the insured made an irrevocable designation.

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.

On an intervenor's appeal under G.S. 58-63-45, the court may enjoin a practice if it finds, notwithstanding the Commissioner's report, that the practice constitutes a violation and that doing so is:

1. Demanded by the insurer
2. Required by federal law
3. Agreed to by the Commissioner
4. In the interest of the public ✓

Why: G.S. 58-63-45 authorizes the court, if it finds it is to the interest of the public, to enter orders enjoining a practice that it finds constitutes a violation notwithstanding the Commissioner's report.

Under the ACA, in-network preventive services such as immunizations and screenings must be covered:

1. Only after the deductible is fully met
2. With no cost-sharing to the insured ✓
3. At 50% coinsurance in every plan
4. Only for insureds under age 40

Why: ACA-compliant plans must cover specified preventive services in-network with no copay, coinsurance, or deductible.

In a fixed annuity, the investment risk is borne by:

1. The annuitant, whose sub-accounts rise and fall with the market
2. The insurer, which guarantees a minimum interest rate ✓
3. A federal guaranty fund backing annuity values
4. The selling producer, under the agency contract

Why: A fixed annuity guarantees principal and a minimum interest rate, so the insurer bears the investment risk.

If an annuitant dies during the accumulation phase of a deferred annuity, the contract typically pays the beneficiary:

1. Nothing, because annuities have no death benefit before payout
2. At least the premiums paid (or current value, if greater) ✓
3. Triple the account value as a guaranteed accidental death bonus
4. Only the surrender value after deducting all future charges

Why: Most deferred annuities guarantee the beneficiary the greater of premiums paid or current account value if the owner dies before annuitization.

Under N.C. Gen. Stat. § 58-51-5, exceptions and reductions of indemnity (other than those set forth in § 58-51-15) must be:

1. Kept in the insurer's application file and produced only if the insured requests a copy
2. Set forth in the policy, either with the benefit they affect or under a caption such as 'exceptions' ✓
3. Disclosed on request after a claim is denied, rather than in the policy
4. Listed on the premium notice sent to the insured each time a renewal premium falls due, not in the policy

Why: Section 58-51-5(a)(5) requires exceptions and reductions to be set forth in the policy, either included with the benefit provision they apply to or under an appropriate caption such as 'EXCEPTIONS' or 'EXCEPTIONS AND REDUCTIONS.'

The Medicare Part D Low-Income Subsidy ('Extra Help') assists eligible beneficiaries with:

1. Premiums for a private Medicare Supplement policy
2. Prescription drug costs such as premiums and copays ✓
3. The cost of long-term custodial nursing-home care
4. Hospital room-and-board charges under Part A

Why: Extra Help (LIS) lowers Part D premiums, deductibles, and copays for beneficiaries with limited income and resources.

A home health care benefit generally provides:

1. A cash payment regardless of whether any care is received
2. Coverage only for care delivered inside a hospital
3. Part-time skilled nursing or therapy in the insured's home ✓
4. Round-the-clock custodial help for an indefinite period

Why: Home health care covers intermittent skilled services (nursing, physical therapy) delivered at home, usually following an illness or injury.

Which of the following is exempt from the life insurance solicitation disclosure requirements of Article 60, Part 1?

1. Decreasing term insurance
2. Credit life insurance ✓
3. Limited-pay whole life
4. Ordinary endowment insurance

Why: G.S. 58-60-5(b)(2) lists credit life insurance among the exemptions from the Part.

An applicant classified as a 'preferred' risk:

1. Is declined for individual coverage and steered to a guaranteed-issue plan
2. Must buy through an employer group plan, because individual underwriting is closed
3. Pays the lowest premium because of better-than-average risk factors ✓
4. Pays a rated premium reflecting poor health or hazardous habits

Why: Preferred risks (e.g., ideal build, nonsmoker) present lower-than-average mortality and qualify for the lowest premiums; standard and substandard pay more.

Annuity suitability rules require a producer recommending an annuity to:

1. Recommend whichever annuity product happens to pay the producer the highest available commission
2. Have reasonable grounds that it fits the consumer's financial needs and situation ✓
3. Sell only immediate annuities to consumers over the age of sixty
4. Guarantee the annuity will outperform every available alternative

Why: Suitability standards require the recommendation be appropriate based on the consumer's financial situation, needs, and objectives.

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 annuitant has a $60,000 cost basis and a $120,000 expected return. Of each $12,000 annual payment, the taxable portion is:

1. $6,000 ✓
2. $3,000
3. $12,000
4. $0

Why: Exclusion ratio = 60,000/120,000 = 50%; $6,000 of each $12,000 payment is excluded and $6,000 is taxable.

Group long-term disability policies often define total disability as inability to perform one's 'own occupation' for an initial period, after which the definition changes to:

1. No definition at all, ending the benefit automatically
2. 'Any occupation' the insured is suited for by education and experience ✓
3. 'Own occupation' permanently for the entire length of the claim
4. Whatever occupation the insured personally prefers to pursue next

Why: Many LTD plans use own-occupation for an initial period (e.g., 24 months) then shift to an any-occupation standard for continued benefits.

Survivorship (second-to-die) life insurance is most commonly used to:

1. Fund a child's future college costs through the policy's accumulated cash value
2. Provide estate liquidity after the second insured dies ✓
3. Replace the income of a sole wage earner who has several young children at home
4. Cover a short-term business loan that must be fully repaid within five years

Why: It pays at the second death and is widely used to fund estate taxes and costs.

If an insured dies by suicide within the policy's stated suicide period, the insurer will generally:

1. Pay half the face amount
2. Pay the full death benefit
3. Deny liability and keep the premiums
4. Refund the premiums paid ✓

Why: During the suicide period (commonly 2 years), the insurer refunds premiums rather than paying the face amount.

A dread disease (specified disease) policy provides benefits:

1. Only for the specific disease or diseases named in the policy, such as cancer ✓
2. As a full replacement for comprehensive major medical coverage
3. For any illness or injury the insured experiences during the year
4. In the form of a guaranteed lifetime monthly income beginning once the insured retires from work

Why: A specified/dread disease policy is a limited policy covering only the named condition(s); it is supplemental, not comprehensive coverage.

A resident producer wants to add the property line of authority to an existing license. Under G.S. 58-33-125(c), the fee due upon application for that additional kind of insurance is:

1. $50.00 ✓
2. $100.00
3. $11.00
4. $20.00

Why: G.S. 58-33-125(c) requires a fee of fifty dollars ($50.00) for each additional kind of insurance requested.

When recorded personal information is kept in coded form, in responding to an access request the insurer must:

1. Refuse the request, because coded information is exempt from access
2. Provide an accurate translation in plain language in writing ✓
3. Provide a summary prepared by the insurer's medical director
4. Require the individual to obtain the decoding key from the source institution

Why: G.S. 58-39-45(a)(2) requires that coded recorded personal information be provided as an accurate plain-language translation in writing.

Which of these is NOT among the listed exceptions permitting a viatical settlement within the two-year period under G.S. 58-58-255?

1. The viator simply changes their mind about keeping the policy ✓
2. The viator becomes disabled and a physician determines the disability prevents full-time employment
3. The viator's spouse dies during the two-year period
4. The viator retires from his or her full-time employment

Why: G.S. 58-58-255(a)(4) lists death of spouse, divorce, retirement, disability, employer-relationship termination, bankruptcy/insolvency, unexpected income decrease, and disposal of closely held corporation interests but not a mere change of mind.

A withdrawal from a nonqualified deferred annuity is taxed:

1. Principal first, with no tax until basis is gone
2. Gain first (LIFO), as ordinary income ✓
3. Only when the contract is fully surrendered
4. At long-term capital-gains rates entirely

Why: Nonqualified annuity withdrawals come out earnings-first (LIFO) and are taxed as ordinary income (plus a possible penalty before 59½).

A 'stock' insurance company is:

1. Owned by its policyholders, who receive policy dividends
2. A nonprofit organized under the lodge system
3. Owned by stockholders and may pay them dividends ✓
4. An unincorporated group of subscribers

Why: A stock insurer is owned by shareholders (dividends are taxable shareholder dividends); a mutual insurer is owned by policyholders.

How frequently, at a minimum, may the Commissioner examine the affairs of an HMO?

1. Not less frequently than once every five years ✓
2. Not less frequently than once a year
3. Only upon receiving a complaint
4. Once every ten years

Why: G.S. 58-67-100(a) authorizes examinations as often as the Commissioner deems necessary, but not less frequently than once every five years.

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.

An unlicensed travel retailer employee is helping a customer buy travel insurance. Under G.S. 58-33-19, that employee may NOT:

1. Provide the customer with a general description of the coverage offered and the price of the plan
2. Process the customer's application and the related documentation for the travel insurance offered
3. Evaluate or interpret the technical terms, benefits, and conditions of the offered coverage ✓
4. Collect the premium for the travel insurance and remit it to the licensed travel insurance producer

Why: G.S. 58-33-19(e)(1) prohibits an unlicensed travel retailer employee from evaluating or interpreting the technical terms, benefits, and conditions of the offered travel insurance coverage (general info and processing are permitted).

Under a presumptive disability provision, certain severe losses are:

1. Paid at half the normal monthly disability benefit amount
2. Excluded from coverage because they are considered partial
3. Presumed to be total disability, paying full benefits ✓
4. Covered only after a 90-day elimination period has passed

Why: Presumptive disability treats losses such as sight, hearing, speech, or two limbs as total disability, paying full benefits, often without the usual elimination period.

An HMO must report material changes in its provider network and the addition or deletion of large employer groups to the Commissioner within how many days after implementation?

1. 15 days ✓
2. 30 days
3. 45 days
4. 60 days

Why: G.S. 58-67-10(d)(1) requires that such reported changes be filed with the Commissioner within 15 days after implementation of the reported changes.

Adverse selection refers to the tendency of:

1. Agents to recommend only the most expensive available policies
2. Policyowners to let their coverage lapse during economic downturns
3. Higher-than-average risks to seek or keep insurance more than others ✓
4. Insurers to decline every applicant who has any health condition

Why: Adverse selection is the inclination of poorer-than-average risks to apply for and retain coverage, which insurers manage through underwriting.

Under G.S. 58-63-50, the clear proceeds of the forfeitures are remitted to which fund?

1. The State General Fund
2. The Insurance Guaranty Association Fund
3. The Insurance Regulatory Fund
4. The Civil Penalty and Forfeiture Fund ✓

Why: G.S. 58-63-50 directs that the clear proceeds of forfeitures be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2.

North Carolina law prohibits a long-term care policy from conditioning eligibility for any benefits on which of the following?

1. Delivery of the outline of coverage
2. Payment of the first premium
3. Completion of a personal worksheet
4. A prior hospitalization requirement ✓

Why: G.S. 58-55-30(d) bars a long-term care policy from conditioning eligibility for any benefits on a prior hospitalization requirement, or conditioning institutional-care benefits on receipt of a higher level of institutional care.

Under a 'guaranteed renewable' health policy, the insurer must renew the coverage but:

1. May refuse renewal on any individual policy anniversary date
2. Can cancel mid-term whenever the insured files a large claim
3. Must keep the premium the same for the life of the contract
4. May increase the premium for an entire class of insureds ✓

Why: Guaranteed renewable guarantees renewal to a stated age but permits premium increases applied to a whole class, not to one insured.

Medicare Part D provides coverage for:

1. Inpatient hospital, skilled nursing facility, and hospice care
2. Routine dental, vision, and hearing-aid services for enrollees
3. Long-term custodial care provided in a nursing facility
4. Outpatient prescription drugs ✓

Why: Part D covers outpatient prescription drugs, offered through private plans.

Under the ACA, a 24-year-old who is employed and not a student may remain on a parent's health plan:

1. No, past age 19 only a child enrolled full time in school may stay covered
2. Yes, until age 26 regardless of student or marital status ✓
3. Yes, but only while the adult child still lives in the parent's household
4. No, dependent eligibility ends at age 19 for any child who is employed

Why: ACA requires plans offering dependent coverage to cover adult children to age 26 regardless of student, residency, or marital status.

The common disaster provision is designed to address a situation in which:

1. A natural disaster damages the insurer's ability to pay claims
2. The insured and the primary beneficiary die in the same event ✓
3. Several insureds under one group policy die within the same year
4. The insured dies before the contestable period has expired

Why: The common disaster (simultaneous death) provision presumes the beneficiary died first so proceeds pass to the contingent beneficiary or as the insured intended.

Policy dividends paid on a participating life policy are best described as:

1. A penalty the insurer pays for poor investment performance during the year
2. Taxable investment income that the insurer guarantees every single year
3. A return of premium that was overcharged ✓
4. Interest credited at a rate set by the state insurance department

Why: Dividends are a non-guaranteed return of overpaid premium and are generally not taxable until they exceed the total premiums paid.

The Health Insurance Portability and Accountability Act (HIPAA) primarily:

1. Limits pre-existing condition exclusions and protects coverage portability ✓
2. Sets the exact premium rates insurers may charge in each state
3. Eliminates the need for any individual health underwriting nationwide
4. Requires every employer to fully pay all employee health premiums

Why: HIPAA limited pre-existing condition exclusions, gave credit for prior creditable coverage, and protects the privacy of health information.

Structured settlement annuity benefits to which a payee has transferred rights in a structured settlement factoring transaction are:

1. Covered up to $300,000
2. Covered up to $1,000,000
3. Excluded from Guaranty Association coverage ✓
4. Covered if the transfer occurred before the insurer's insolvency

Why: G.S. 58-62-21(c)(12) excludes structured settlement annuity benefits transferred through a factoring transaction as defined in 26 U.S.C. § 5891(c)(3)(A).

In an equity-indexed annuity, the 'participation rate' determines:

1. The fixed monthly income the annuitant will receive after annuitizing
2. The percentage surrender charge applied during the first contract year
3. The minimum guaranteed interest rate paid in a year of market losses
4. How much of the index's gain is credited to the contract ✓

Why: The participation rate sets the share of the index increase credited; a cap may further limit it, and a floor (often 0%) prevents loss.

'Twisting' is an unfair trade practice defined as:

1. Using misrepresentation to induce a client to replace an existing policy ✓
2. Charging two clients different premiums for identical coverage by mistake
3. Sharing a small portion of one's commission with a licensed co-agent
4. Recommending the lowest-cost policy a client genuinely qualifies for

Why: Twisting is inducing a policy replacement through misrepresentation or incomplete comparisons; doing so within the same insurer is called churning.

Coverage limitations in the Guaranty Act apply to benefits before taking into account the Association's:

1. Tax exemptions
2. Board membership
3. Administrative expenses
4. Subrogation and assignment rights ✓

Why: G.S. 58-62-21(d)(7) states the limits apply before taking into account the Association's subrogation and assignment rights or assets attributable to covered policies.

Under a conditional receipt given with a life application and the initial premium, coverage takes effect:

1. Only after the policy has been in force a full year
2. As of the application/exam date if the applicant is insurable ✓
3. Only when the issued policy is physically delivered
4. At whatever future date the soliciting agent approves it

Why: A conditional receipt provides coverage retroactive to the application/exam date if the applicant proves insurable, provided premium accompanied the application.

The change of beneficiary provision in a health policy allows the policyowner to:

1. Name a beneficiary only once, with no changes ever permitted
2. Change an irrevocable beneficiary at any time without restriction
3. Transfer ownership of the policy to the insurer at will
4. Change a revocable beneficiary without that beneficiary's consent ✓

Why: Unless the beneficiary is irrevocable, the owner may change a revocable beneficiary at any time without the beneficiary's consent.

Stranger-originated life insurance (STOLI) arrangements are prohibited because they lack:

1. Insurable interest ✓
2. A medical exam
3. A free-look period
4. A named beneficiary

Why: STOLI is initiated for investors with no insurable interest in the insured, which is illegal.

For purposes of determining the number of appointments for an insurance producer, there shall be one appointment for:

1. Each individual policy the producer places with the appointing insurer
2. Each county in this State in which the producer writes business during the appointment year
3. Each insurer the producer represents, regardless of the lines of authority
4. Each line of authority for which the appointed producer is licensed, unless specifically limited ✓

Why: G.S. 58-33-40(b) provides that there shall be one appointment for each line of authority for which the appointed producer is licensed, unless specifically limited.

Under 'experience rating' of a group health plan, the premium is based on:

1. The individual medical exam results of each covered member
2. The actual claims history of that particular group ✓
3. A single uniform rate charged to every group in the region
4. The number of years the employer has been in business

Why: Experience rating sets premiums from the group's own claims experience; community rating instead charges all groups in an area the same base rate.

A North Carolina Medicare beneficiary eligible by reason of disability before age 65 whose managed care plan coverage is terminated has a guaranteed right to purchase Medicare Supplement Plans A, D, or G within how many days after the date of termination or disenrollment?

1. 63 days ✓
2. 30 days
3. 45 days
4. 90 days

Why: G.S. 58-54-45(b) grants the guaranteed right to purchase Plans A, D, or G from any insurer within 63 days after the date of termination or disenrollment from the managed care plan.

When a North Carolina independent review organization reverses an insurer's decision in a standard external review, within how long must the insurer reverse its decision and provide coverage or payment?

1. One business day
2. Three business days ✓
3. Ten business days
4. Five business days

Why: G.S. 58-50-80(l) requires the insurer, upon receipt of a notice reversing the decision, to reverse it within three business days and provide coverage or payment.

Most long-term care policies pay benefits when the insured cannot perform a stated number of activities of daily living, commonly:

1. Only 1 of the 6 recognized ADLs
2. 2 of the 6 recognized ADLs ✓
3. All 6 of the recognized ADLs
4. At least 4 of the 6 recognized ADLs

Why: LTC benefits typically trigger when the insured cannot perform 2 of the 6 ADLs (bathing, dressing, eating, toileting, transferring, continence) or has severe cognitive impairment.

An ambulatory surgical center benefit covers:

1. Inpatient psychiatric admission for a mental disorder lasting more than 72 hours
2. Ambulance transportation to the nearest emergency room equipped to treat the injury
3. Outpatient surgery that does not require an overnight hospital stay ✓
4. Long-term custodial care in a skilled nursing facility following a three-day hospital stay

Why: Ambulatory surgical centers perform same-day outpatient procedures; the benefit covers surgery without inpatient admission.

Case management in a managed-care plan involves:

1. Setting the renewal premium charged to an employer group
2. Deciding which providers meet credentialing standards for the network
3. Coordinating cost-effective care for high-cost or complex cases ✓
4. Auditing producer commissions and enrollment records each quarter

Why: Case management coordinates appropriate, cost-effective treatment for seriously ill or injured members, often using alternative care settings.