These twenty questions come from eighteen sections of the official New Hampshire outline. Answer each one in your head first, then reveal the correct choice and the reason behind it.
Question 1 of 20
Licensing
To keep a New Hampshire producer license active, what ongoing requirement must most resident producers satisfy?
- A. Complete required continuing education and renew the license on schedule
- B. File a new full application every year
- C. Post a personal surety bond each renewal period
- D. Retake the licensing exam at each renewal
+Reveal answer
Answer: A. Complete required continuing education and renew the license on schedule
Resident producers must complete continuing education and renew their license on the required schedule to stay active. A brand-new full application is not needed at each renewal; a renewal process applies. There is no standard personal surety bond required simply to renew. Producers do not retake the exam to renew as long as they meet CE and renewal requirements.
NH RSA 402-J:6 and continuing education rules (renewal and CE)
Question 2 of 20
Disciplinary Actions
Which of the following is an action the New Hampshire commissioner may take against a producer's license for a violation?
- A. Suspension of the license
- B. Guaranteed reinstatement without conditions
- C. A permanent ban on ever holding any job
- D. Automatic conversion to a nonresident license
+Reveal answer
Answer: A. Suspension of the license
Suspension is a recognized disciplinary action, along with denial and revocation. Reinstatement is not guaranteed and often carries conditions. A total employment ban is not a licensing penalty. There is no automatic conversion to a nonresident license as a disciplinary result.
NH RSA 402-J:12 (license denial, suspension, revocation, or refusal to renew)
Question 3 of 20
State regulation
What is the main purpose of the Insurance Commissioner's power to examine and investigate insurers and producers in New Hampshire?
- A. To collect premium taxes from policyholders
- B. To protect the public and ensure compliance with insurance laws
- C. To set the rates every insurer must charge
- D. To sell insurance policies on behalf of the state
+Reveal answer
Answer: B. To protect the public and ensure compliance with insurance laws
Investigations and examinations exist to protect the public and confirm that insurers and producers follow the law and remain financially sound. Premium taxes are collected but that is not the purpose of investigations. The Commissioner reviews rates but does not simply set all rates directly, and this is separate from investigative powers. The Commissioner never sells insurance; the department regulates the industry.
NH RSA 400-A (Commissioner's investigation and examination powers)
Question 4 of 20
Company regulation
Before an insurer files an appointment for a producer in New Hampshire, what must the producer already have?
- A. A current, valid producer license
- B. A completed sale to a customer
- C. A surety bond posted with the state
- D. At least one year of experience
+Reveal answer
Answer: A. A current, valid producer license
An insurer can only appoint a person who already holds a valid producer license, because the appointment builds on that license. A completed sale is not required first; appointment can occur before any sales. New Hampshire does not require producers to post a surety bond as a condition of appointment. There is no minimum experience requirement to be appointed.
NH RSA 402-J:12 (producer appointments)
Question 5 of 20
Producer regulation
Marcus collects a premium from a client, then uses that money to pay his office rent before forwarding it to the insurer. What has he most likely committed?
- A. Controlled business
- B. Conversion of funds
- C. A permissible referral
- D. Twisting
+Reveal answer
Answer: B. Conversion of funds
Using client or insurer money that a producer holds in trust for his own purposes is conversion of funds, a serious violation. Controlled business refers to writing insurance mostly on yourself and close associates. A referral is directing a person to a producer, not misusing money. Twisting is convincing someone to replace a policy through misrepresentation, which does not describe misusing premium funds.
NH RSA 402-J:12; concept-based
Question 6 of 20
Unfair insurance trade practices
A group of agents agrees to refuse to place business with a certain insurer to pressure it out of the market. This unfair trade practice is called:
- A. Boycott, coercion, and intimidation
- B. Illegal inducement
- C. Defamation
- D. Unfair claim settlement
+Reveal answer
Answer: A. Boycott, coercion, and intimidation
Refusing to deal with an insurer to restrain trade or force it out of business falls under boycott, coercion, and intimidation. Illegal inducement involves offering something not in the policy to make a sale. Defamation is false statements harming reputation. Unfair claim settlement concerns mishandling of claims, not market pressure.
NH RSA 417:4 (boycott, coercion, intimidation)
Question 7 of 20
Insurance fraud regulation; examination of books and records; consumer privacy regulation
A producer named Karen learns her client submitted a knowingly false statement to inflate a claim; under fraud law, what should she recognize about this act?
- A. It is legal as long as the insurer approves the claim
- B. It is a form of insurance fraud that may be reported and prosecuted
- C. It is only a civil matter that carries no criminal exposure
- D. It is acceptable if the dollar amount is small
+Reveal answer
Answer: B. It is a form of insurance fraud that may be reported and prosecuted
Knowingly submitting a false statement to obtain a benefit is insurance fraud and can be both reported and prosecuted. Insurer approval does not make a false claim legal. Fraud can carry criminal penalties, not just civil ones. A small dollar amount does not excuse fraud.
NH insurance fraud provisions - tested as a concept
Question 8 of 20
Fair Credit Reporting Act - Purpose
An insurer denies James Carter coverage partly because of information in a consumer report. What does the FCRA require?
- A. The insurer must give James the name and address of the reporting agency
- B. The insurer must approve the policy anyway
- C. The insurer must pay James a penalty
- D. The insurer must delete the report permanently
+Reveal answer
Answer: A. The insurer must give James the name and address of the reporting agency
When adverse action is taken based on a consumer report, the FCRA requires the insurer to tell the consumer and provide the name and address of the agency that supplied it, so the consumer can review and dispute it. The insurer is not forced to approve coverage, pay a penalty, or delete the report.
Fair Credit Reporting Act - Purpose (15 U.S.C. 1681m)
Question 9 of 20
18 USC Sections 1033 and 1034 - Purpose
How does the 18 USC 1033 written consent requirement differ from a routine state background check during licensing?
- A. They are the same process with the same paperwork
- B. The 1033 consent is a specific federal requirement to lift a criminal prohibition, separate from a state's general background review
- C. The 1033 consent replaces the need for any state application
- D. A state background check is only for felonies while 1033 covers minor tickets
+Reveal answer
Answer: B. The 1033 consent is a specific federal requirement to lift a criminal prohibition, separate from a state's general background review
A state background check screens applicants generally, but 1033 consent is a distinct federal step needed to remove the specific federal bar on a disqualified person working in insurance. They are not identical, 1033 does not replace the state application, and 1033 covers disqualifying felonies rather than minor tickets.
18 USC Sections 1033 and 1034
Question 10 of 20
National Do Not Call List
Which federal agency maintains and enforces the National Do Not Call Registry?
- A. The Federal Trade Commission
- B. The Department of Insurance
- C. The National Association of Insurance Commissioners
- D. The Social Security Administration
+Reveal answer
Answer: A. The Federal Trade Commission
The Federal Trade Commission maintains and enforces the National Do Not Call Registry, working together with the Federal Communications Commission. The Department of Insurance regulates insurance at the state level but does not run the registry. The NAIC is an organization of state regulators, not a federal enforcement agency. The Social Security Administration has nothing to do with telemarketing rules.
Federal Laws and Regulations > National Do Not Call List
Which situation is an example of pure risk rather than speculative risk?
- A. Investing money in the stock market
- B. Betting on a horse race
- C. The chance that a person's house may burn down
- D. Starting a new business venture
+Reveal answer
Answer: C. The chance that a person's house may burn down
Pure risk involves only the chance of loss or no loss, such as a house burning down, and it is insurable. Investing, betting, and starting a business all involve a chance of gain or loss, which makes them speculative risk. Speculative risk is not insurable because it includes the possibility of profit.
General Insurance Concepts > Risk (pure vs speculative risk)
Question 12 of 20
Elements of a Contract
Nora applies for life insurance without paying any premium, and the insurer issues the policy back to her. When does acceptance occur in this situation?
- A. When Nora signs the application
- B. When the producer forwards the application
- C. When the insurer issues the policy as applied for
- D. When Nora reads the policy provisions
+Reveal answer
Answer: C. When the insurer issues the policy as applied for
When no premium is submitted with the application, the application is treated as the offer and the insurer accepts by issuing the policy as requested. Nora signing the application is only her offer. The producer forwarding it is just delivery of the offer. Nora reading the policy does not create acceptance.
General Insurance Concepts > Elements of a Contract (acceptance)
Question 13 of 20
Authority and Powers of Producers; The Law of Agency
In the law of agency between a producer and an insurer, which party is considered the principal?
- A. The insurer
- B. The producer
- C. The policyowner
- D. The insurance department
+Reveal answer
Answer: A. The insurer
The insurer is the principal because the producer acts on the insurer's behalf. The producer is the agent, not the principal. The policyowner is a third party the agent deals with, not the principal. The insurance department is the regulator and is never a party to the agency relationship.
General Insurance Concepts > The Law of Agency
Question 14 of 20
Legal Interpretations Affecting Contracts
A statement made by an applicant that is believed to be true to the best of their knowledge is best described as what?
- A. A representation
- B. A warranty
- C. A concealment
- D. A material misstatement of law
+Reveal answer
Answer: A. A representation
A representation is a statement believed true to the best of the applicant's knowledge; it only needs to be substantially true. A warranty is guaranteed to be absolutely true. A concealment is deliberately hiding a known fact. A material misstatement of law is not a standard classification for applicant statements.
General Insurance Concepts > Legal Interpretations Affecting Contracts (warranties/representations)
Question 15 of 20
Insurable Interest
When must insurable interest exist for a life insurance policy to be valid?
- A. Only at the time the policy is issued
- B. At the time of the insured's death
- C. Continuously for the life of the policy
- D. Only when a claim is paid
+Reveal answer
Answer: A. Only at the time the policy is issued
In life insurance, insurable interest must exist at the time the policy is applied for and issued, but it does not have to continue afterward. This differs from property insurance, where interest must exist at the time of loss. Requiring it at death or continuously is incorrect for life insurance. Requiring it only at claim time is also wrong.
Life Insurance Basics > Insurable Interest
Question 16 of 20
Determining Amount of Personal Life Insurance
Which item is typically included as a need when using the needs approach?
- A. Future earnings the insured would have received
- B. The agent's sales commission
- C. Funds to pay off the family mortgage
- D. The insurer's expected profit on the policy
+Reveal answer
Answer: C. Funds to pay off the family mortgage
The needs approach lists specific family needs such as paying off the mortgage, covering final expenses, and funding education. Paying off the mortgage is a classic need item, so that is correct. Future earnings is the basis of the human life value approach, not an itemized need. The agent's commission and the insurer's profit are costs to the company, not needs of the insured's family.
Life Insurance Basics > Determining Amount of Personal Life Insurance (needs approach)
Question 17 of 20
Business Uses of Life Insurance
In a cross-purchase buy-sell arrangement between two business partners, who owns the life insurance policies?
- A. The business entity itself
- B. Each partner owns a policy on the other partner
- C. A neutral third-party trustee only
- D. The estate of the insured partner
+Reveal answer
Answer: B. Each partner owns a policy on the other partner
In a cross-purchase plan, each owner buys and owns a policy on the other owner's life. When one dies, the survivor uses the death benefit to buy the deceased's share. If the business itself owned the policies, that would be an entity (stock redemption) plan, not cross-purchase. A trustee is optional and not required, and the deceased's estate is what gets bought out, not the policy owner.
Life Insurance Basics > Business Uses of Life Insurance (buy-sell funding)
Question 18 of 20
Factors in Premium Determination
A student confuses the interest and expense factors; which statement correctly separates them?
- A. Interest lowers the premium through investment earnings, while expense raises it to cover company costs
- B. Both interest and expense lower the premium equally
- C. Interest raises the premium and expense lowers it
- D. Interest covers claims and expense covers investment losses
+Reveal answer
Answer: A. Interest lowers the premium through investment earnings, while expense raises it to cover company costs
These two factors work in opposite directions. Assumed interest earnings reduce the premium because the insurer expects to make money on invested premiums, while expenses (loading) increase the premium to pay for running the business. They do not both lower the premium, and their roles are not reversed. Claims are covered by the mortality factor, not interest, and expense does not cover investment losses.
Life Insurance Basics > Factors in Premium Determination
Question 19 of 20
Licensing
What is the key difference between a business entity producer license and an individual producer license in New Hampshire?
- A. A business entity license covers a firm and requires a designated licensed individual responsible for compliance, while an individual license covers one person
- B. There is no difference; the terms mean the same thing
- C. A business entity license removes the need for any individual in the firm to be licensed
- D. An individual license may only be used inside a licensed business entity
+Reveal answer
Answer: A. A business entity license covers a firm and requires a designated licensed individual responsible for compliance, while an individual license covers one person
A business entity license authorizes a firm to act as a producer and requires a designated responsible licensed person to oversee compliance, while an individual license covers a single person. The two are not the same. A business entity license does not eliminate the need for licensed individuals; producers acting for the firm must still be licensed. And an individual license is valid on its own and is not limited to use only within a firm.
NH RSA 402-J:7 (business entity licenses and designated responsible producer)
Question 20 of 20
Disciplinary Actions
The commissioner may impose a monetary penalty in addition to suspending or revoking a license; what is the purpose of such a fine?
- A. To penalize the violation and deter future misconduct
- B. To pay the producer's legal fees
- C. To fund the producer's continuing education classes
- D. To reimburse the insurer for lost sales
+Reveal answer
Answer: A. To penalize the violation and deter future misconduct
Administrative fines punish the wrongdoing and discourage repeat behavior. They are not used to cover the violator's legal fees or education costs, and they are not paid to insurers as lost sales reimbursement.
NH RSA 400-A:15 and RSA 402-J:12 (administrative penalties)