Life Insurance Types
15%of exam
Annuities
5%of exam
Annuity BasicsPayout OptionsFixed vs VariableDeferred vs Immediate
Life Provisions & Options
10%of exam
Other Life Topics
7%of exam
Health Insurance Policies
20%of exam
Health Policy Provisions
10%of exam
Mandatory ProvisionsOptional ProvisionsRenewabilityClaims
Other Health Topics
7%of exam
Group HealthLTC & MedicareAD&DBusiness Health Coverage
NC Statutes & Regulations
25%of exam
Producer LicensingUnfair Trade PracticesPrivacy ActLife & Health Statutes
Quick Facts
- Exam Codes
- 01 Life / 02 A&H
- Scored Questions
- 55 per exam
- Time Limit
- 75 min per exam
- Pass Score
- Scaled score of 70
- Exam Fee
- $45 each, $90 both
- Format
- 4-option multiple choice
- Level
- State producer license
- Blueprint
- Effective March 2, 2026
Term vs Whole Life
Term
- Temporary coverage
- No cash value
- Lowest initial premium
Whole life
- Permanent coverage
- Builds cash value
- Higher premium
Temporary vs permanent
Which Life Policy Fits
- Cheapest temporary coverage needed→Term insurance
- Lifetime coverage, fixed premium→Whole life
- Flexible premium and death benefit→Universal life
- Investment control, higher risk→Variable life
- Covering an outstanding loan→Credit life
- Insuring a child inexpensively→Juvenile policy
- Need pension-like guaranteed income→Annuity
Term & Whole Life
- Level term
- Same premium, same coverage
- Decreasing term
- Coverage falls, premium level
- Convertible term
- Switch to permanent, no proof
- Whole life
- Level premium, lifetime coverage
- Endowment
- Pays at maturity or death
- Limited-pay whole life
- Paid up in set years
Whole Life vs Universal Life
Whole life
- Fixed premium
- Guaranteed cash value
- Guaranteed death benefit
Universal life
- Flexible premium
- Adjustable death benefit
- Transparent cost breakdown
Fixed vs flexible design
Non-Traditional Life
- Universal life
- Flexible premium and death benefit
- Target premium
- Suggested UL funding level
- Death benefit option A
- Level total death benefit
- Death benefit option B
- Face amount plus cash value
- Variable life
- Cash value in separate accounts
- VUL
- Flexible premium plus investment choice
Annuity Types & Payout Options
- Single premium
- One lump-sum payment
- Flexible premium
- Variable payment amounts allowed
- Immediate annuity
- Income starts within a year
- Deferred annuity
- Accumulates before payout starts
- Equity index annuity
- Tied to a market index
- Straight life annuity
- Highest payout, no refund
- Life with period certain
- Pays heirs if early death
- Joint and survivor
- Continues for second annuitant
Dividend Options
Cash, Reduce Premium, Accumulate, PUA, or One-Year Term
Cash: paid directlyReduce premium: lowers billAccumulate: earns interestPUA: buys paid-up coverageOYT: buys term coverage
Settlement Option Picker
- Want steady lifetime income→Life income option
- Want payout over set years→Fixed period option
- Want a fixed dollar payout→Fixed amount option
- Want principal held, interest paid→Interest only option
Life Policy Provisions
- Incontestable clause
- Insurer can't contest after 2 years
- Grace period
- Time to pay late premium
- Reinstatement
- Restores lapsed policy with proof
- Misstatement of age
- Benefit adjusted to true age
- Free look
- Return policy for full refund
- Suicide clause
- Limits payout in first 2 years
Nonforfeiture Options
Cash Surrender, Extended Term, or Reduced Paid-Up
CSV: lump sum nowETI: same benefit, less timeRPU: lower benefit, no premium
Nonforfeiture & Dividend Options
- Cash surrender value
- Lump-sum cash-out
- Extended term insurance
- Same face, limited time
- Reduced paid-up
- Lower face, no more premium
- Automatic premium loan
- Loan pays overdue premium
- Paid-up additions
- Dividend buys more coverage
- One-year term dividend
- Dividend buys term coverage
Settlement Options
Interest Only, Fixed Period, Fixed Amount, or Life Income
Interest only: principal heldFixed period: paid over timeFixed amount: paid in dollarsLife income: paid for life
Riders & Settlement Options
- Waiver of premium
- Waives premium if disabled
- Guaranteed insurability
- Buy more, no new proof
- Accidental death benefit
- Extra payout for accidents
- Cost of living rider
- Death benefit rises with inflation
- Interest-only option
- Insurer holds proceeds, pays interest
- Fixed period option
- Pays over a chosen time
- Fixed amount option
- Pays a set amount
- Life income option
- Pays for beneficiary's life
MEC vs Non-MEC Policy
MEC
- Fails 7-pay premium test
- Withdrawals taxed first (LIFO)
- 10% penalty before 59.5
Non-MEC
- Passes 7-pay premium test
- Withdrawals treated as basis first
- No early withdrawal penalty
7-pay test result
Group Life, Business Uses & Tax
- Group term life
- Employer master policy coverage
- Credit life
- Covers outstanding loan balance
- Cross-purchase plan
- Owners insure each other
- Entity plan
- Business insures each owner
- Key person insurance
- Business owns, insures key employee
- MEC
- Fails the 7-pay premium test
- 1035 exchange
- Tax-free like-kind policy swap
- Death benefit
- Income tax-free to beneficiary
1035 Exchange vs Surrender
1035 exchange
- Tax-free policy transfer
- Same owner required
- Like-kind life or annuity
Surrender
- Cash out the policy
- Gain taxed as income
- Coverage ends
Tax-free swap vs taxable cash-out
Legal Concepts
- Insurable interest
- Loss if insured dies or suffers
- Adhesion contract
- Insurer writes, insured accepts
- Aleatory contract
- Unequal value exchanged
- Unilateral contract
- Only insurer makes a promise
- Conditional contract
- Payment depends on conditions
- Concealment
- Hiding a material fact
Own Occupation vs Any Occupation
Own occupation
- Broader definition
- Pays if can't do own job
- Costs more
Any occupation
- Narrower definition
- Pays for total incapacity only
- Costs less
Broad vs strict disability test
Which Disability Definition Applies
- Can't perform own job duties→Own occupation
- Can't work any suited job→Any occupation
- Partial income loss remains working→Residual disability
- Blind or lost limbs→Presumptive disability
- Same illness returns quickly→Recurrent disability
- Waiting before benefits begin→Elimination period
Disability Income
- Own occupation
- Can't do own job duties
- Any occupation
- Can't work any suited job
- Residual disability
- Partial income loss benefit
- Presumptive disability
- Total loss of sight or limbs
- Elimination period
- Waiting period before benefits start
- Recurrent disability
- Same cause, short time gap
HMO vs PPO
HMO
- Gatekeeper required
- In-network only
- Lower cost
PPO
- No gatekeeper needed
- In and out-network
- Higher cost, more choice
Closed vs open network
Medical Expense & Managed Care
- Basic medical expense
- Covers hospital, surgical, medical bills
- Major medical
- Broad coverage, high limits
- Comprehensive major medical
- Basic plus major medical combined
- Coinsurance
- Shared percentage after deductible
- HMO
- Gatekeeper, in-network only
- PPO
- No gatekeeper, in and out-network
- ACA preexisting conditions
- Cannot be excluded or rated
- ACA dependent coverage
- Children covered to age 26
Renewability Ladder
Optional, Conditional, Guaranteed, then Noncancelable
Optional: insurer cancels anytimeConditional: class-based nonrenewalGuaranteed: renews, rate may riseNoncancelable: renews, rate locked
Guaranteed Renewable vs Noncancelable
Guaranteed renewable
- Insurer can't cancel
- Rates may rise by class
Noncancelable
- Insurer can't cancel
- Rate locked at issue
Rate change allowed or not
Renewability Selector
- Insurer can cancel anytime→Optionally renewable
- Insurer declines by class only→Conditionally renewable
- Renews but rates may rise→Guaranteed renewable
- Renews with rate locked→Noncancelable
Mandatory & Optional Provisions
- Entire contract
- Policy plus application only
- Time limit on defenses
- Insurer can't contest after 2 years
- Notice of claim
- Notify insurer within 20 days
- Proof of loss
- Submit proof within 90 days
- Optionally renewable
- Insurer cancels on any date
- Conditionally renewable
- Insurer declines by class only
- Guaranteed renewable
- Renews, rates may rise
- Noncancelable
- Renews, rate never changes
Group Health, LTC & Medicare
- Blanket coverage
- Covers a changing group
- MEWA
- Multi-employer welfare arrangement
- Group continuation rights
- NC Article 53 continuation rules
- LTC elimination period
- Days before LTC benefits start
- Medicare Supplement
- Fills Medicare A and B gaps
- HSA
- Pairs with high-deductible health plan
- Principal sum
- Full AD&D benefit amount
- Business overhead expense
- Pays office bills if disabled
NC Statute Quick Map
33 License, 63 Unfair, 39 Privacy, 58-58 Life, 51 Health
Art 33: producer licensingArt 63: unfair trade practicesArt 39: privacy protection actArt 58-58: life general regulationArt 51: health policy nature
Article 33 vs Article 63
Article 33
- Producer licensing rules
- Appointment and renewal
Article 63
- Unfair trade practices
- Twisting and rebating ban
Licensing vs producer conduct
Which NC Statute Article Applies
- Producer licensing question→Article 33
- Unfair trade or twisting→Article 63
- Privacy of customer info→Article 39
- Life general business regulation→Article 58-58
- Life solicitation or replacement→Article 60
- A&H general regulation→Article 50
- A&H mandated policy provisions→Article 51
- Group health continuation rights→Article 53
- Insolvent insurer claim protection→Article 62
- Fraternal benefit society question→Article 24
NC Licensing & Unfair Trade
- Article 33
- Licensing of agents and brokers
- Resident license
- NC home-state producer license
- Continuing education
- 24 hours every 2 years
- Ethics CE
- 3 hours required per cycle
- Article 63
- Unfair trade practices and methods
- Twisting
- Misrepresenting to replace a policy
- Rebating
- Illegal inducement to buy
- Article 39
- Insurance information and privacy act
NC Life & Health Statutes
- Article 58-58
- Life general regulation of business
- Article 60
- Life insurance solicitation regulations
- Article 50
- A&H general regulations
- Article 51
- Nature of A&H policies
- Article 53
- Group health continuation and conversion
- Article 24
- Fraternal benefit societies
- Article 62
- Life and health guaranty association
- Viaticals
- Sale of a terminal policy
Common Traps
Guaranteed renewable ≠ noncancelable
GR: premium can rise ≠ NC: premium locked forever
Own occupation ≠ any occupation
Own occ: broader definition ≠ Any occ: stricter definition
Article 33 ≠ Article 63
33: licensing rules ≠ 63: unfair conduct rules
Twisting ≠ churning
Twisting: misleads across insurers ≠ Churning: replaces within same insurer
MEC ≠ ordinary life policy
MEC: taxed LIFO, early penalty ≠ Ordinary: taxed FIFO, basis first
Fixed period ≠ life income
Fixed period: ends in time ≠ Life income: pays until death
Rebating ≠ policy dividends
Rebating: illegal sales inducement ≠ Dividends: legal return of premium
1035 exchange ≠ policy surrender
1035: tax-free transfer ≠ Surrender: taxable cash-out
Last Minute
- 1.Two exams: Life 01, A&H 02
- 2.55 scored plus 5 pretest each
- 3.75 minutes per exam
- 4.Pass score: scaled 70 (0-100)
- 5.Fee: $45 each, $90 both
- 6.Prelicensing optional since Oct 2025
- 7.CE: 24 hours every 2 years
- 8.Article 33 governs producer licensing
- 9.Article 63 bans unfair trade practices
- 10.Article 39 covers privacy protection
- 11.MEC fails the 7-pay test
- 12.1035 exchange defers tax, no cash
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