Free North Dakota life insurance practice test.

Answer D. Notify the Commissioner of the termination

The insurer must notify the Commissioner when it terminates a producer's appointment so the state's records stay accurate. Doing nothing is wrong because the state relies on that notice. Paying a severance fee is not an insurance law requirement. Surrendering the producer's license is wrong because ending an appointment does not cancel the producer's license; the producer keeps the license and may represent other insurers.

NDCC 26.1-26 (termination of appointment)

Answer C. No later than at the time the policy is delivered

The Buyer's Guide and policy summary must be provided no later than at the time of policy delivery so the buyer can understand the product. Waiting for the applicant to ask is wrong because delivery is required by rule, not by request. A 30 day window after premium payment is not the standard; delivery timing is tied to policy delivery. Requiring them only for replacements is wrong because they are required for ordinary life sales generally.

Answer C. To prevent the use of insurance as a wager or gambling on human lives

The public policy reason for insurable interest is to stop people from betting on the deaths of others and to remove the temptation to cause harm. It is not about guaranteeing insurer profits. Beneficiaries do not have to be family members. There is no general cap on the number of policies a person may own.

Answer C. The guaranty association disclaimer notice

The guaranty association disclaimer notice addresses the limited protection available if an insurer becomes insolvent. The replacement comparison form deals with switching policies. The free look provision gives the buyer time to review and return the policy for a refund. The insurable interest statement concerns whether a valid relationship supports the policy, not insolvency protection.

Answer B. Suicide is no longer a defense and the death is treated as a covered claim

After the suicide exclusion period expires, suicide is no defense and the claim is paid like any other death. The first choice is wrong because after the period suicide is covered. The third describes what happens during the exclusion period, not after. The fourth is wrong because the policy stays in force.

N.D.C.C. 26.1-33-05 (suicide no defense)

Answer B. The certificate summarizes the coverage and states the insured's conversion rights

A group certificate describes the coverage provided under the master policy and informs the insured of rights such as conversion. The first choice is wrong because the master policy, not the certificate, is the actual contract. The third choice is wrong because a master policy still exists between insurer and policyholder. The fourth choice is wrong because a certificate cannot take away conversion rights guaranteed by law and the master policy.

N.D.C.C. 26.1-33-11 (standard provisions)

Answer C. Return the contract to the insurer during the free look period

To use the free look, the owner returns the contract to the insurer within the stated period and gets a refund. Waiting until an anniversary defeats the purpose of the free look. The guaranty association handles insurer insolvency, not buyer's remorse. No surrender charge applies during the free look.

N.D.C.C. 26.1-34-01.1

Answer B. To promote accuracy, fairness, and privacy of information in consumer reporting agency files

The FCRA's core purpose is to protect consumers by promoting the accuracy, fairness, and privacy of the information collected and used by consumer reporting agencies. Setting premium limits is a state rating matter, not an FCRA function. Producer appointment timelines are state license law. Guaranteeing claims on insolvency is the job of the state guaranty association, not the FCRA.

Fair Credit Reporting Act (15 U.S.C. 1681), purpose

Answer D. 8 a.m. to 9 p.m.

Telemarketing calls are generally permitted only between 8 a.m. and 9 p.m. in the consumer's local time. The 8 to 5 and 9 to 9 windows are close but wrong. Calls are clearly not allowed around the clock.

Telemarketing Sales Rule, calling time restrictions, 16 CFR 310

Answer A. A customer has an ongoing relationship with the institution, while a consumer may have only a one-time interaction

Under GLBA a customer has an ongoing relationship with the financial institution and must receive an initial and annual privacy notice, while a consumer has only an isolated transaction or inquiry and gets notice only if information will be shared. The other choices misstate these definitions.

Gramm-Leach-Bliley Act privacy rule (definitions of consumer and customer)

Answer D. Risk reduction

Reduction lowers the frequency or severity of a possible loss, which is exactly what safety devices do. Avoidance would mean not owning a home at all. Retention means paying for the loss yourself. Transfer means buying insurance to move the financial risk to someone else.

Answer B. Moral hazard

A moral hazard exists when a person's dishonesty or intent to defraud increases the chance of loss, such as lying to gain an advantage. A physical hazard is a tangible condition. A morale hazard is carelessness or indifference, not intentional dishonesty. Legal hazard is not one of the standard hazard categories.

Answer A. A stock insurer is owned by shareholders, while a mutual insurer is owned by its policyholders

The key difference is ownership: a stock insurer is owned by its stockholders, and a mutual insurer is owned by its policyholders. The second choice reverses those facts. Neither type is owned by government. The last choice is wrong because stock insurers are typically for profit and this profit versus nonprofit framing is not the defining distinction.

Answer B. The payment of the premium and the statements made in the application

Consideration is what each party gives. The applicant's consideration is the premium plus the truthful statements in the application. The insurer's consideration is the promise to pay covered claims, so that is what the insurer gives, not the applicant. The insurer's license and the agent's commission are not consideration given by the applicant.

Answer B. Implied authority

Implied authority is the power not spelled out in the contract but reasonably necessary and customary to carry out the producer's express duties. Apparent authority is based on outward appearances to the client. Express authority would require the power be written in the contract. Statutory authority is not one of the three standard agency authority types.

Answer A. A statement believed to be true to the best of the applicant's knowledge

A representation is a statement the applicant believes to be true to the best of their knowledge; it must be substantially true, not perfect. A statement guaranteed absolutely true describes a warranty, which is a higher standard rarely used in modern life insurance. A promise about the insurer's future conduct is not a representation by the applicant. A clause that automatically voids coverage is not the definition of a representation.

Answer B. Survivor protection replaces ongoing lost income while liquidity provides quick cash for immediate costs

Survivor protection focuses on replacing the income the family relied on over time, while liquidity is about having cash available quickly for immediate expenses like debts and final costs. Both uses exist on term and whole life, so the policy-type claim is wrong. Both are personal, family-focused uses, not business versus family. Neither is defined as a rider versus a base policy.

Answer D. 1,500,000 dollars

A basic human life value estimate multiplies annual income by remaining working years: 60,000 times 25 equals 1,500,000 dollars. 60,000 is just one year. 300,000 would be only 5 years. 2,500,000 overstates the figure and matches no correct multiplication of these numbers.

Answer B. A civil monetary penalty (fine)

The Commissioner may impose a civil monetary penalty, or fine, in addition to suspending or revoking a license. Automatic imprisonment with no hearing is wrong because administrative penalties follow due process and jail is not imposed by the Commissioner without a criminal proceeding. Loss of all lawfully earned past commissions is not the standard penalty. Retaking the exam every month is not a real requirement.

NDCC 26.1-26 (penalties for violations)

Answer D. A misrepresentation of the policy

Describing a life insurance policy in a way that hides its true nature is a misrepresentation, which is prohibited in solicitation and sales. It is not a permitted simplification because it misleads the buyer about what the product is. It is not acceptable advertising; misleading statements violate the rules. It is the opposite of required disclosure, which demands accurate description.