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Life and Health Insurance Producer Exam

Insurance basics: practice questions

Our Life & Health Insurance bank has 22 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

What is the role of the NAIC?

  1. It insures the policies of failed insurance companies
  2. It develops model laws and promotes uniform regulation among states
  3. It issues insurance licenses directly to all producers and insurers in every state
  4. It sets the premiums that every insurer must charge
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B. It develops model laws and promotes uniform regulation among states — States choose whether to adopt its model laws.

Question 2

What is a morale hazard?

  1. Indifference to loss because one is insured
  2. A physical condition that increases the chance of illness
  3. Intentional dishonesty to obtain a claim payment
  4. A risk that cannot be insured under any policy
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A. Indifference to loss because one is insured — For example, driving carelessly because you have coverage.

Question 3

What does it mean for an insurer to be 'authorized' (admitted) in a state?

  1. It has been in business for at least ten years in the state without any complaints
  2. It is owned by residents of the state where it sells
  3. It sells only policies approved by the federal government
  4. It holds a certificate of authority to transact insurance there
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D. It holds a certificate of authority to transact insurance there — Unauthorized insurers can't generally transact business directly.

Question 4

What is a fraternal benefit society?

  1. A non-profit organization that provides insurance to its members
  2. An insurer that sells policies only to college students and their parents
  3. A government agency that sells life insurance
  4. A for-profit insurer owned by shareholders
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A. A non-profit organization that provides insurance to its members — Fraternals usually have a lodge system and a representative form of government.

Question 5

Which is an example of a moral hazard?

  1. Dishonesty, such as exaggerating a claim
  2. A physical condition, such as high blood pressure
  3. Carelessness, such as leaving doors unlocked
  4. A dangerous hobby, such as skydiving on weekends
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A. Dishonesty, such as exaggerating a claim — Morale hazard is indifference or carelessness because of having insurance.

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