NC L&H Exam Flashcards

Q: Is North Carolina Life and Health one combined exam or two separate exams?

Two separate exams - Life Agent (01) and Accident and Health or Sickness Agent (02). Each is scheduled, timed, and scored independently; passing one does not require passing the other, and a candidate can test for either line alone or both on the same day.

Q: What is the passing score on the NC Life and A&H exams?

A scaled score of 70 on a 0-100 scale, set separately for each exam. The scaled score does not directly translate to raw questions answered correctly or a simple percentage - NCDOI and Pearson VUE convert raw scores through an equating process, and detailed numeric score information is only shown to candidates who fail.

Q: How long must I wait to retake the NC Life or A&H exam after failing?

24 hours before scheduling a new attempt, per the Pearson VUE North Carolina candidate handbook. Unlike some other states, North Carolina's current handbook does not impose a longer escalated wait after a third failure - the same 24-hour rule applies to every retake attempt.

Q: Is prelicensing education still required before taking the NC Life or A&H exam?

No. As of October 1, 2025, North Carolina eliminated the prelicensing education requirement (previously 20 hours per line, 40 hours for both lines combined). A prep course is still strongly recommended by NCDOI, but candidates can now schedule the state exam directly.

Q: Which North Carolina statute articles matter most for the exam?

Article 33 (producer licensing), Article 63 (unfair trade practices, including twisting and rebating), and Article 39 (privacy protection) apply to both lines. Life-specific law falls under Article 58-58 and Article 60; Accident and Health-specific law falls under Articles 50, 51, and 53.

Question 1

What happens to the premium and death benefit on a level term life policy over its level period?

Accepted Answer

Both stay level (unchanged) for the entire level term period - unlike decreasing term, where the death benefit declines while the premium stays level.

Question 2

Decreasing term insurance

Accepted Answer

Premium remains level while the death benefit steadily declines over the policy term - commonly used to cover a shrinking debt, such as a mortgage.

Question 3

What right does a convertible term rider give the policyowner?

Accepted Answer

The right to convert the term policy to a permanent (cash-value) policy without new evidence of insurability, usually within a specified conversion period.

Question 4

Whole life insurance

Accepted Answer

Permanent coverage with a level premium for life, a guaranteed cash value that grows on a fixed schedule, and a guaranteed level death benefit.

Question 5

How does limited-pay whole life differ from straight (continuous-pay) whole life?

Accepted Answer

Limited-pay whole life is paid up after a set number of years (e.g., 20-pay life) while coverage continues for life; straight whole life requires premiums for as long as the insured lives.

Question 6

Universal life insurance

Accepted Answer

Permanent coverage with flexible premiums and an adjustable death benefit; the policy separately discloses the mortality charge, expense charge, and interest credited to cash value.

Question 7

Universal life Death Benefit Option A vs Option B

Accepted Answer

Option A pays a level total death benefit (face amount only - cash value reduces the net amount at risk). Option B pays the face amount PLUS the accumulated cash value, so the total benefit grows as cash value grows.

Question 8

Variable life and variable universal life (VUL)

Accepted Answer

Cash value is invested in separate accounts chosen by the policyowner, so cash value (and for variable life, the death benefit) can fluctuate with investment performance; VUL adds universal life's flexible premium on top.

Question 9

Immediate annuity vs deferred annuity

Accepted Answer

An immediate annuity begins income payments within about a year of purchase and is funded with a single premium. A deferred annuity accumulates funds during an accumulation period before payments start later.

Question 10

Why does a straight life (life-only) annuity payout option pay the highest periodic income among the life-contingent options?

Accepted Answer

Because payments stop entirely at the annuitant's death with no refund or continuation to a beneficiary - the insurer keeps any remaining value, which funds the higher payout.

Question 11

Incontestable clause

Accepted Answer

After the policy has been in force for a specified period (typically 2 years), the insurer can no longer contest or void the policy for misstatements in the application, except for nonpayment of premium (and often fraud).

Question 12

Grace period vs reinstatement - what's the difference?

Accepted Answer

The grace period (typically 30-31 days) lets the owner pay an overdue premium without the policy lapsing. Reinstatement restores a policy that has already lapsed beyond the grace period, requiring an application, proof of insurability, and payment of back premiums with interest.

Question 13

Misstatement of age or sex provision

Accepted Answer

If the insured's age (or sex) was misstated on the application, the death benefit is adjusted to what the premium paid would have purchased at the correct age - the policy is not voided.

Question 14

A policyowner wants a lump-sum cash payout after surrendering a whole life policy - which nonforfeiture option fits?

Accepted Answer

Cash surrender value - the owner receives the accumulated cash value in a lump sum and coverage ends, unlike extended term insurance (same face amount for a limited time) or reduced paid-up insurance (lower face amount, no more premiums).

Question 15

Which settlement option pays a beneficiary a guaranteed income for as long as they live?

Accepted Answer

The life income option - unlike the fixed period option (pays over a chosen number of years) or fixed amount option (pays a set dollar amount until funds are exhausted), both of which can end before the beneficiary dies.

Question 16

What test determines whether a life policy becomes a Modified Endowment Contract (MEC)?

Accepted Answer

The 7-pay test - if cumulative premiums paid in the first 7 years exceed the amount needed to pay up the policy in 7 level annual payments, it becomes a MEC and loses favorable tax treatment on withdrawals.

Question 17

How are withdrawals from a MEC taxed differently than withdrawals from a non-MEC cash-value policy?

Accepted Answer

MEC withdrawals are taxed LIFO (gain comes out first) and may incur a 10% penalty before age 59 1/2. Non-MEC policy withdrawals are treated as basis-first, so return of premium is generally tax-free.

Question 18

Section 1035 exchange

Accepted Answer

Allows a tax-free transfer of cash value between like-kind life insurance or annuity contracts (same owner, same insured) - contrasts with a taxable surrender, where any gain over basis is taxed as income immediately.

Question 19

Cross-purchase plan vs entity (stock redemption) plan for business life insurance

Accepted Answer

In a cross-purchase plan, each business owner personally buys and owns a policy on each other owner. In an entity plan, the business itself owns the policies on each owner and uses the proceeds to buy out a deceased owner's share.

Question 20

Own occupation vs any occupation disability definition

Accepted Answer

Own occupation pays benefits if the insured can't perform the material duties of their own specific job (broader definition, costs more). Any occupation pays only if the insured can't work at any job suited to their training and experience (narrower, costs less).

Question 21

Residual disability benefit

Accepted Answer

Pays a partial benefit proportional to actual income loss when a disabled insured returns to work part-time or at reduced income, rather than requiring total disability to collect anything.

Question 22

Presumptive disability

Accepted Answer

Automatically qualifies the insured for full disability benefits for specific losses (such as total blindness, or loss of both hands, feet, or hearing/speech) even if the insured could theoretically still work.

Question 23

Elimination period

Accepted Answer

A waiting period (like a deductible measured in time) between the onset of disability and when benefit payments begin; a longer elimination period generally lowers the premium.

Question 24

Recurrent disability provision

Accepted Answer

Treats a second disability from the same or related cause as a continuation of the first (no new elimination period) if it recurs within a specified short period after returning to work; otherwise it's treated as a new, separate claim.

Question 25

Basic medical expense vs major medical vs comprehensive major medical

Accepted Answer

Basic medical expense covers specific costs (hospital, surgical, medical) with low internal limits and usually no deductible. Major medical covers broad losses with high limits, a deductible, and coinsurance. Comprehensive major medical combines both into one policy.

Question 26

How does coinsurance work in a major medical policy?

Accepted Answer

After the insured meets the deductible, the insurer and insured split covered expenses by a set percentage (e.g., 80/20) until an out-of-pocket maximum is reached, after which the insurer pays 100%.

Question 27

HMO vs PPO

Accepted Answer

An HMO requires a primary care gatekeeper for referrals and only covers in-network care (lower cost). A PPO needs no gatekeeper and covers both in-network and out-of-network care, usually at a higher cost with more provider choice.

Question 28

How does the ACA restrict preexisting condition exclusions?

Accepted Answer

Under the ACA, health plans cannot deny coverage, exclude benefits, or charge higher premiums based on a preexisting condition - a major change from pre-ACA underwriting practices.

Question 29

ACA dependent coverage age rule

Accepted Answer

The ACA requires that dependent children be allowed to remain on a parent's health plan until age 26, regardless of marital status, student status, or financial dependency.

Question 30

Entire contract provision

Accepted Answer

States that the policy and attached application (plus any riders/endorsements) make up the whole contract; the insurer cannot later rely on outside statements or materials not included in the policy to deny a claim.

Question 31

Time limit on defenses provision (health insurance's version of an incontestable clause)

Accepted Answer

After the policy has been in force for 2 years (or the state-specified period), the insurer cannot contest a claim or deny coverage based on statements made in the application, except in cases of fraud.

Question 32

Notice of claim and proof of loss timing

Accepted Answer

Standard provisions require the insured to notify the insurer of a claim within 20 days of a loss, and to submit written proof of loss within 90 days, with reasonable extensions if timely filing isn't possible.

Question 33

Rank health policy renewability from LEAST guaranteed to MOST guaranteed for the insured.

Accepted Answer

Optionally renewable (insurer may cancel or refuse renewal on any premium due date) leads to conditionally renewable (insurer may decline renewal only for conditions stated in the policy, such as an entire class), then guaranteed renewable (must renew, but rates can rise by class), then noncancelable (must renew, and the rate is locked at issue).

Question 34

Guaranteed renewable vs noncancelable - what's the key difference?

Accepted Answer

Both guarantee the insurer can't cancel or refuse renewal. But guaranteed renewable allows the insurer to raise premiums for an entire class of insureds, while noncancelable locks the premium rate for the life of the contract.

Question 35

Medicare Supplement (Medigap) insurance

Accepted Answer

A privately sold policy designed to fill the coverage gaps left by Medicare Parts A and B, such as coinsurance, copayments, and deductibles - it does not replace Medicare, it supplements it.

Question 36

Long-term care (LTC) elimination period

Accepted Answer

The number of days the insured must pay for qualifying long-term care out-of-pocket before LTC policy benefits begin - it functions like a waiting-period deductible unique to LTC coverage.

Question 37

A Health Savings Account (HSA) must be paired with what type of health plan?

Accepted Answer

A qualified high-deductible health plan (HDHP). HSA contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free.

Question 38

NC General Statutes Article 33

Accepted Answer

Governs licensing of insurance agents, brokers, and other producers in North Carolina, including qualifications, appointments, and license renewal.

Question 39

NC General Statutes Article 63

Accepted Answer

Defines unfair trade practices and unfair methods of competition in the business of insurance, such as misrepresentation, false advertising, twisting, and rebating.

Question 40

Twisting

Accepted Answer

An unfair trade practice under Article 63 in which a producer misrepresents facts to induce a policyholder to replace or lapse an existing policy from ANOTHER insurer, to the client's disadvantage.

Question 41

Rebating

Accepted Answer

An illegal inducement under Article 63 in which a producer offers something of value beyond what's stated in the contract - such as cash, gifts, or reduced premiums - to persuade someone to buy or keep a policy.

Question 42

NC's insurance information and privacy protection statute (Article 39)

Accepted Answer

Regulates how insurers and producers may collect, use, and disclose personal information gathered about applicants and policyholders during underwriting and claims handling.

Question 43

NC continuing education requirement for licensed producers

Accepted Answer

24 hours of continuing education every 2-year license period, including 3 hours specifically on ethics, are required to keep a resident producer license active.

Question 44

As of what date did North Carolina eliminate its prelicensing education requirement, and is it still recommended?

Accepted Answer

October 1, 2025. Prelicensing education (previously 20 hours per line, 40 hours for both) is no longer mandatory to sit for the state exam, though NCDOI and Pearson VUE still strongly recommend completing a prep course.

Question 45

NC Article 58-58 (life insurance general regulation of business)

Accepted Answer

Sets general regulatory requirements for how life insurance business is written and conducted in North Carolina, distinct from Article 60's solicitation-specific rules.

Question 46

NC Article 60

Accepted Answer

Governs life insurance solicitation, including replacement regulations designed to protect consumers when a producer recommends replacing an existing life policy.

Question 47

NC Article 50

Accepted Answer

Contains North Carolina's general regulations governing accident and health insurance policies.

Question 48

NC Article 51

Accepted Answer

Defines the required nature, form, and mandatory content of accident and health insurance policies issued in North Carolina.

Question 49

NC Article 53

Accepted Answer

Governs group health insurance continuation and conversion rights, allowing covered individuals to continue or convert coverage after events like job loss.

Question 50

NC Article 62 (Life and Health Insurance Guaranty Association)

Accepted Answer

Protects policyholders by covering certain claims, up to statutory limits, if a licensed life or health insurer becomes insolvent.

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