20 New York State Law (DFS) Practice Questions & Answers

1. 1. Which statement correctly describes how insurance is regulated in New York today?

   • A.New York insurers are regulated directly by the NAIC, which issues the binding regulations codified in the NYCRR.
   • B.Insurance is overseen by an independently elected Insurance Commissioner who reports to the State Legislature.
   • C.The Department of Financial Services regulates insurance under the Financial Services Law, having absorbed the former Insurance Department, and is headed by a Superintendent appointed by the Governor with the consent of the Senate.✓ Answer
   • D.The Insurance Department still regulates insurers, while the Department of Financial Services regulates only banks and credit unions.

   New York folded the separate Insurance and Banking Departments into a single Department of Financial Services, so the Superintendent of Financial Services now holds the Insurance Law powers of examination, hearings, penalties and rulemaking. The office is appointive, not elective, which is why an 'elected Commissioner' answer is always wrong in New York, and the NAIC is only a voluntary standard-setting body with no power to issue NYCRR regulations.

   Source: NY Financial Services Law Art. 2 (§§ 202–203); NY Insurance Law § 301Report a problem with this question

2. 2. A licensee is retained by an applicant to shop the market, is not appointed by any insurer, and legally represents the insured in negotiating the contract. Which New York license does that person hold?

   • A.Insurance consultant
   • B.Independent adjuster
   • C.Insurance broker✓ Answer
   • D.Insurance agent

   Unlike most states, New York kept the agent and broker licenses separate: an agent acts for and is appointed by the insurer, while a broker acts for the insured and needs no appointment. A consultant is licensed to give advice for a fee rather than to place coverage, and an adjuster investigates and settles claims, so neither one describes a person negotiating the purchase of a policy on the buyer's behalf.

   Source: NY Insurance Law §§ 2101(a), 2101(c), 2103, 2104Report a problem with this question

3. 3. A New York insurance consultant wants to charge a client a fee for analyzing the client's existing commercial policies. What must the consultant do?

   • A.Nothing special — an oral fee arrangement is sufficient as long as no commission is also collected.
   • B.Base the fee on a written memorandum signed by the party to be charged that clearly specifies the services and the amount or extent of the compensation, and keep a copy on file.✓ Answer
   • C.File the proposed fee schedule with the Department of Financial Services for prior approval.
   • D.Obtain an appointment from every insurer whose policies will be discussed.

   New York permits fee-based compensation only when it rests on a signed written memorandum defining the services and the fee, so the client knows in advance exactly what is being bought and at what price. The Superintendent does not pre-approve consultants' fees, and a consultant's authority comes from the license rather than from insurer appointments.

   Source: NY Insurance Law §§ 2107, 2119Report a problem with this question

4. 4. An insurer executes an agency contract with a newly licensed producer. Under New York law, when must the insurer file the notice (certificate) of appointment?

   • A.Before the producer may solicit any application on the insurer's behalf.
   • B.Within 15 days from the date the agency contract is executed or the first insurance application is submitted.✓ Answer
   • C.Within 30 days after the agency contract is executed.
   • D.Within 60 days after the producer's license is issued.

   The statute ties the filing to the earlier of the agency contract or the first application and gives the insurer 15 days, which allows an appointed agent to begin producing business immediately while still creating a prompt public record of who represents the insurer. Appointment is therefore a post-transaction filing duty of the insurer, not a condition the producer must satisfy before the first solicitation.

   Source: NY Insurance Law § 2112(a)–(c)Report a problem with this question

5. 5. An insurer terminates an appointed agent for cause after discovering the agent forged a client's signature. What does New York law require of the insurer?

   • A.File the statement of facts only if the Superintendent later opens an investigation.
   • B.File with the Superintendent, within 30 days, a statement of the facts relative to the termination for cause.✓ Answer
   • C.Nothing must be filed with the State; the insurer need only notify the agent in writing.
   • D.Report the termination at the insurer's next annual statement filing.

   New York requires the terminating insurer to report the facts of a for-cause termination to the Superintendent within 30 days precisely so that a producer cannot escape scrutiny by simply moving to another company. The insurer must also send the producer a copy of the statement it filed, and the required report is what triggers any disciplinary review of the license.

   Source: NY Insurance Law § 2112(d)Report a problem with this question

6. 6. A licensed New York producer wants to pay an unlicensed acquaintance a percentage of the premium for every client the acquaintance sends over. Is this permitted?

   • A.Yes, because making a referral is not the same as selling insurance.
   • B.Yes, if the acquaintance is registered with the insurer as the producer's sub-producer.
   • C.No — compensation contingent on the sale of insurance may be paid only to a person who was licensed at the time of the transaction.✓ Answer
   • D.Yes, if the arrangement is disclosed in writing to each referred client.

   New York bars paying commissions or any sale-contingent compensation to unlicensed persons because tying pay to the sale is what turns a referral into unlicensed soliciting, which the licensing statutes exist to prevent. Disclosure to the client does not cure it, although an unlicensed employee may generally be paid a flat amount that does not depend on whether a policy is purchased.

   Source: NY Insurance Law §§ 2102(a), 2102(e), 2114–2116Report a problem with this question

7. 7. A broker collects premium from an insured that is due to the insurer. Under New York law, how must the broker treat those funds?

   • A.They are held in a fiduciary capacity, must not be commingled with the broker's own funds, and must be accounted for and paid over promptly.✓ Answer
   • B.They become the broker's property on receipt and may be used for operating expenses so long as the insurer is eventually paid.
   • C.They may be commingled with personal funds provided the broker keeps an accurate ledger.
   • D.They must be deposited with the Department of Financial Services until the policy is issued.

   Premiums collected by a producer belong to the insurer (or, for return premiums, to the insured), so the Insurance Law treats the producer as a fiduciary and forbids commingling — the money is not the producer's to lend to the business even temporarily. Keeping a good ledger is not a substitute, because the segregation requirement protects the funds from the producer's own creditors and from cash-flow failures.

   Source: NY Insurance Law § 2120; 11 NYCRR 20.3–20.4 (Regs. 9, 18, 29)Report a problem with this question

8. 8. Which statement about maintaining a New York insurance producer license is correct?

   • A.Continuing education may be satisfied entirely with an insurer's own product and sales training.
   • B.Licenses are renewed annually, and continuing education is required only for the first two renewals.
   • C.Licenses are renewed on a biennial (two-year) cycle, and the continuing education completed for each licensing period must include instruction in ethics and professionalism.✓ Answer
   • D.Renewal is automatic on payment of the fee, and continuing education applies only to brokers.

   New York issues producer licenses for a two-year term and conditions renewal on completing approved continuing education for that licensing period, which must include a mandated ethics and professionalism component in addition to technical subjects. Because the requirement is meant to be independent of any one company's sales agenda, an insurer's internal product training does not by itself satisfy it.

   Source: NY Insurance Law §§ 2103(j), 2132; 11 NYCRR Part 21 (Reg. 5)Report a problem with this question

9. 9. To win a sale, a producer offers to pay the applicant's first month of premium out of the producer's own commission. Under New York law, this offer is:

   • A.Permitted, as long as the same offer is made uniformly to every applicant in the same class.
   • B.Permitted for property/casualty business but prohibited for life insurance.
   • C.A prohibited rebate, because it gives the applicant a valuable inducement to buy that is not specified in the policy.✓ Answer
   • D.Permitted, provided the arrangement is disclosed on the application.

   New York's anti-rebating rule reaches any valuable consideration or inducement given to obtain a sale that is not set out in the policy itself, because rating and terms are supposed to be uniform for the whole class rather than negotiable applicant by applicant. Offering the benefit to everyone, disclosing it, or splitting one's own commission does not make it lawful, and the prohibition applies across lines of insurance.

   Source: NY Insurance Law § 2324 (and § 4224 for life/accident and health)Report a problem with this question

10. 10. A producer shows a client a deliberately incomplete comparison of the client's existing life policy in order to persuade the client to surrender it and buy a new one. This conduct is best identified as:

    • A.Twisting✓ Answer
    • B.Rebating
    • C.Defamation of an insurer
    • D.Coercion

    Twisting is a misrepresentation or incomplete comparison of policies made specifically to induce an insured to lapse, surrender, or replace existing coverage, and the harm is that the client loses acquired incontestability, suicide-clause and rate-age advantages. Defamation involves false statements about an insurer's financial condition, and rebating and coercion involve inducements and pressure rather than misleading comparisons.

    Source: NY Insurance Law § 2123; see also 11 NYCRR Part 51 (Reg. 60) on replacementReport a problem with this question

11. 11. Under New York's unfair claim settlement practices regulation, within what time must an insurer acknowledge receipt of a notice of claim and begin its investigation?

    • A.Within 10 calendar days
    • B.Within 30 calendar days
    • C.Within 5 business days
    • D.Within 15 business days✓ Answer

    Regulation 64 sets a 15-business-day clock for acknowledging a claim and commencing the investigation so that claimants are not left without contact while the file sits idle; the same 15-business-day period governs accepting or denying a claim after a properly executed proof of loss. The 5-business-day figure is the deadline for actually paying once the amount has been agreed, which is why it is a tempting but wrong choice here.

    Source: NY Insurance Law § 2601; 11 NYCRR 216.4 (Reg. 64)Report a problem with this question

12. 12. Under New York's best-interest standard for life insurance and annuity transactions, a producer making a recommendation must:

    • A.Act only in the consumer's interest, base the recommendation on documented suitability information, and disregard the producer's own compensation or other incentives.✓ Answer
    • B.Weigh the producer's own compensation as one factor, provided the amount is disclosed on request.
    • C.Recommend whichever product carries the lowest cost available anywhere in the market.
    • D.Apply the standard only to variable annuities sold by FINRA-registered representatives.

    The New York rule raises the duty above mere suitability: the producer's own compensation and sales incentives may play no part in the recommendation, and the suitability information relied on must be collected and documented. The standard covers both life insurance and annuities, including recommendations to replace or otherwise change an in-force policy, and it does not require finding the cheapest product — only one that serves the consumer's interests based on the facts gathered.

    Source: 11 NYCRR Part 224 (Reg. 187)Report a problem with this question

13. 13. A homeowners policy has been in effect for 40 days as an initial (not renewal) policy. The insurer's underwriters decide they no longer want the risk. Under New York law the insurer may:

    • A.Cancel on 15 days' notice, but only for nonpayment of premium.
    • B.Cancel effective immediately, refunding the unearned premium on a pro rata basis.
    • C.Cancel for any reason, but the cancellation cannot take effect until at least 20 days after written notice is mailed or delivered, and the notice must state the specific reason.✓ Answer
    • D.Not cancel at all; it must wait and issue a nonrenewal at the end of the policy period.

    Section 3425 gives the insurer a 60-day underwriting window at the start of an initial personal lines policy in which it may cancel for any lawful reason, but it must still give 20 days' written notice stating the specific reason so the insured has time to replace the coverage. Once that first 60 days passes — and from day one on a renewal policy — cancellation requires 15 days' notice and is limited to the statutory grounds such as nonpayment, fraud or license revocation.

    Source: NY Insurance Law § 3425(b), (c)Report a problem with this question

14. 14. An insurer will not renew a personal automobile policy. Under New York law, written notice of nonrenewal must be mailed or delivered to the named insured:

    • A.At least 45 but not more than 60 days before the end of the policy period✓ Answer
    • B.At least 30 but not more than 60 days before the end of the policy period
    • C.At least 60 but not more than 120 days before the end of the policy period
    • D.At least 20 but not more than 45 days before the end of the policy period

    For personal lines, section 3425 uses a 45-to-60-day window with the specific reason stated, which is long enough for the insured to shop for replacement coverage but recent enough that the loss and premium information is still current. The 60-to-120-day window belongs to commercial lines under section 3426, and swapping the two windows is the classic error on this topic; a conditional renewal notice follows the same timing as a nonrenewal notice.

    Source: NY Insurance Law § 3425(d); cf. § 3426(e) (commercial lines)Report a problem with this question

15. 15. Which statement about the New York Standard Fire Policy is correct?

    • A.It applies only to commercial fire policies; homeowners policies are exempt from it.
    • B.It must be used word for word, and no additional coverages or endorsements may be attached.
    • C.It is an optional form that insurers may adopt or ignore as they choose.
    • D.It fixes the minimum required provisions: a fire policy covering New York property may broaden the coverage but may not give the insured less protection than the statutory form.✓ Answer

    The statutory fire policy is a floor rather than a ceiling: no fire policy may be issued on New York property unless it conforms to the standard form, but insurers remain free to add broader coverage, endorsements and package forms on top of it. This is why the homeowners and commercial package policies sold in New York still carry the standard fire policy provisions, including its proof-of-loss and suit-limitation terms.

    Source: NY Insurance Law § 3404Report a problem with this question

16. 16. A New York individual life insurance policy must give the owner a right to examine and return the policy for a full refund. That period must be:

    • A.Not less than 10 nor more than 30 days after the policy is delivered✓ Answer
    • B.60 days from delivery for every individual life policy
    • C.Exactly 10 days from delivery, in every case
    • D.Exactly 20 days from delivery, in every case

    New York states the free-look as a range — the policy must allow at least 10 days and may allow up to 30 — so a specific single number is not the rule and candidates trained on the national 10-day default get it wrong. A 60-day free look with a full refund of premium does exist in New York, but only for a policy or annuity issued as a replacement under the replacement regulation.

    Source: NY Insurance Law § 3203(a)(11); 11 NYCRR Part 51 (Reg. 60) for the 60-day replacement free lookReport a problem with this question

17. 17. How may a producer refer to the New York life insurance guaranty corporation when selling a life policy or annuity?

    • A.The producer may mention it freely so long as every statement made about it is accurate.
    • B.The producer may reference it in written advertising if the insurer has approved the wording.
    • C.The producer must disclose the guaranty corporation's coverage limits at policy delivery.
    • D.Not at all — using the existence of the guaranty corporation to sell, solicit or induce the purchase of insurance is prohibited.✓ Answer

    New York flatly forbids using the guaranty corporation as a selling point, because doing so lets a weaker insurer market the state safety net as if it were its own financial strength and discourages buyers from evaluating the insurer itself. Accuracy, insurer approval and delivery-time disclosure are irrelevant; the only permitted use is furnishing written material prepared by the corporation in a form approved by the Superintendent.

    Source: NY Insurance Law § 7718 (Article 77)Report a problem with this question

18. 18. Under New York's no-fault (Comprehensive Motor Vehicle Insurance Reparations) Act, which of the following is NOT payable as basic economic loss?

    • A.Necessary medical, hospital, surgical and rehabilitation expenses
    • B.Compensation for the injured person's pain and suffering✓ Answer
    • C.Loss of earnings from work, subject to a monthly maximum and a time limit
    • D.Other reasonable and necessary expenses such as household help, subject to a daily cap and a one-year limit

    Basic economic loss is limited to out-of-pocket categories — medical and rehabilitation costs, lost earnings and other necessary expenses — because the whole design of no-fault is to pay measurable economic losses promptly without regard to fault. Pain and suffering is non-economic loss, recoverable only by suing the at-fault driver, and only if the claimant meets the statutory serious injury threshold.

    Source: NY Insurance Law §§ 5102(a), 5102(d), 5104Report a problem with this question

19. 19. Which statement about uninsured motorists (UM) and supplementary uninsured/underinsured motorists (SUM) coverage in New York is correct?

    • A.Both UM and SUM are mandatory, and SUM limits may be written higher than the policy's own liability limits.
    • B.SUM limits from two or more policies covering the same insured may be stacked to increase the recovery.
    • C.UM coverage pays for both bodily injury and property damage caused by an uninsured motorist.
    • D.UM coverage for bodily injury is mandatory in every New York auto policy, while SUM is optional and may not exceed the policy's own bodily injury liability limits.✓ Answer

    New York requires every auto policy to include uninsured motorists coverage for bodily injury only, so that an innocent injured party is protected even when the other driver carries nothing; property damage is left to the insured's own collision coverage. SUM is a separate optional purchase that fills the gap when the at-fault driver's limits are lower than the insured's own, which is why it is capped at the insured's own bodily injury liability limits and is written on a non-stacking basis.

    Source: NY Insurance Law § 3420(f)(1), (f)(2); 11 NYCRR Part 60-2 (Reg. 35-A)Report a problem with this question

20. 20. An employee of a New York private employer injures her back while moving furniture at home on a Saturday and cannot work for several weeks. Which New York coverage is designed to pay her a cash benefit?

    • A.Workers' compensation, because New York coverage is compulsory for all employees
    • B.Statutory disability benefits (DBL), which pay a cash benefit for a non-occupational disability after a 7-day waiting period, for up to 26 weeks in any 52 consecutive weeks✓ Answer
    • C.No coverage applies; she must use accrued sick leave or vacation
    • D.Paid Family Leave (PFL)

    New York's Disability Benefits Law fills the gap workers' compensation leaves open: comp pays only for injury or illness arising out of and in the course of employment, so an off-the-job injury is covered instead by DBL, subject to a 7-day waiting period and a 26-week maximum in 52 consecutive weeks. Paid Family Leave is not an option here because PFL pays for bonding with a new child, caring for a family member with a serious health condition, or a military exigency — never for the employee's own disability.

    Source: NY Workers' Compensation Law §§ 10, 204, 205 (Art. 9, Disability Benefits); PFL, WCL Art. 9 §§ 200–242Report a problem with this question

Practice questions cover general, uniform insurance concepts. State-specific laws and limits vary — study your state's official exam outline before testing. Insurance info (NAIC) →