Accident and Health

An insurer must notify its current customers of its privacy policies or practices at least once every how often? -6 months -12 months -18 months -24 months

-12 months Explanation: An insurer or agent must notify its current customers of its privacy policies or practices at least once every year.

Anthony becomes an agent for Acme Insurance Company. Acme has not filed the notice of appointment with the Commissioner. It must do so within how many days? -10 -15 -30 -31

-15 Explanation: An insurer must file a notice of appointment with the Commissioner within 15 days of receiving the first insurance application from the agent.

What is the most common elimination period used in disability income policies that are purchased by a company for disability buy-out purposes? -18 to 24 months -6 to 12 months -180 days -0 days

-18 to 24 months Explanation: To ensure that the insured owner is indeed permanently disabled and his interest in the business is not bought out too early, the elimination period in a disability buy-out policy is much longer than the 90 days usually found in individual (personal) DI policies.

A claimant on a health insurance policy must give written notice of the claim to the insurer within how many days following a loss? -7 -10 -14 -20

-20 Explanation: A claimant on a health insurance policy must give written notice of the claim to the insurer within 20 days after a loss or as soon thereafter as reasonably possible.

Terry is licensed in North Carolina as a life and health insurance agent. To maintain his license, how many hours of continuing education must he complete every two years? -12 -24 -30 -40 Explanation: In every two-year license renewal period, licensees are required to complete at least 24 hours of continuing education. At least three hours must be in ethics.

-24 Explanation: In every two-year license renewal period, licensees are required to complete at least 24 hours of continuing education. At least three hours must be in ethics.

Liam's group health insurance policy terminated on February 1. Within how many days must he apply for a conversion policy and pay the first premium? -15 -31 -60 -90

-31 Explanation: A person must apply for an individual policy and pay the initial premium within 31 days of leaving the group plan.

Eric fails to pay the annual premium on his major medical insurance policy. The grace period provision allows him to pay the premium within how many days after the due date? -7 -14 -21 -31

-31 Explanation: A policyholder is entitled to a 31-day grace period in which to pay the premium due on an annually renewable health insurance policy.

Which statement about the coverage of chemical dependency under a group health insurance policy is CORRECT? -A group health insurance policy is required to cover treatment for chemical dependency. -A group health insurance policy can provide different benefits for chemical dependency than for other illnesses. -A group health insurance policy cannot set limits on the amount of benefits payable for chemical dependency. -A group policyholder must have the option to purchase coverage for chemical dependency treatment.

-A group policyholder must have the option to purchase coverage for chemical dependency treatment. Explanation: Group accident and health insurance policies must contain an optional rider allowing certificate holders to obtain coverage for chemical dependency. Benefits for chemical dependency must be subject to the same durational limits, dollar limits, deductibles, and coinsurance factors that apply to benefits for physical illness generally.

Which of the following statements about the conversion provision in group health insurance policies is correct? -An employee must provide evidence of insurability to convert to an individual policy. -An employee must complete an application and pay the first premium within six months after coverage terminates. -A person will not have the right to convert a policy if it was terminated due to nonpayment of premium. -A person must prove that he or she is uninsurable to convert to an individual policy.

-A person will not have the right to convert a policy if it was terminated due to nonpayment of premium. Explanation: A person does not have a conversion right if a group policy was terminated due to nonpayment of premium or is replaced by similar coverage under another group policy within 31 days. A person also cannot convert to an individual policy if he or she did not continue coverage for the entire 18-month continuation period after the group policy terminated.

Jake borrowed $300,000 from ABC Capital Company and bought a credit disability insurance policy. Soon afterward, he is injured and unable to work or pay back the loan. Who will receive the policy's benefit payment? -Jake -ABC Capital Company only -Jake's dependents -Jake and ABC Capital Company in equal amounts

-ABC Capital Company only Explanation: Jake's family will not receive any benefits if he becomes disabled during the credit disability insurance policy's benefit period. Instead, the policy will pay off the balance of Jake's loan directly to ABC Capital Company.

Agent Smith knows that his best friend, Agent Thomas, is embezzling money from clients. However, Agent Smith does not notify the Commissioner in order to protect his friend. What is the result? -Agent Smith's license will be revoked. -Agent Smith's license may be suspended for up to two years. -Agent Smith can be sanctioned but not disciplined. -Agent Smith will not be punished because he does not have a fiduciary duty to report the crime.

-Agent Smith's license will be revoked. Explanation: Anyone who believes that insurance fraud, embezzlement, or a violation of the insurance laws is being or has been committed is required to notify the Commissioner. A person's license will be revoked or not renewed if he or she willfully fails to comply with this requirement.

Bob applies for an individual disability income policy. He cannot substantiate his income to the underwriter's satisfaction of the underwriter. What might this suggest to the underwriter? -Bob is a poor record-keeper. -Bob is disabled. -Bob may be unable to afford the premium. -Bob may commit insurance fraud.

-Bob may be unable to afford the premium. Explanation: Not being able to substantiate income may suggest that Bob doesn't have recent income and is not a candidate for a disability income policy.

For taxation purposes, the term "self-employed person" includes all of the following EXCEPT: -sole proprietors -C corporation stockholders -partners -S corporation owners

-C corporation stockholders Explanation: The term "self-employed person" for taxation purposes includes sole proprietors, partners, and S corporation owners.

All of the following statements about health insurance reinstatement provisions are correct, EXCEPT: -Reinstatement is normally effective when the insurer notifies the insured. -If the insurer does not notify the insured within 45 days of the date of application for reinstatement, the policy is automatically reinstated. -Under reinstated health insurance policies, accidents are covered immediately. -Claims resulting from sickness are covered immediately upon policy reinstatement

-Claims resulting from sickness are covered immediately upon policy reinstatement Explanation: The insurer has no more than 45 days to reject the reinstatement. If the insurer does not notify the insured within 45 days of the date of application for reinstatement, the policy is automatically reinstated.

Which statement is correct about the types of insurance sales systems? -Captive agents may represent any number of insurance companies. -Direct response companies sell insurance to consumers without the use of a licensed producer. -General agencies sell insurance only through independent brokers. -To sell for another insurer, independent brokers must get permission from the primary company they represent.

-Direct response companies sell insurance to consumers without the use of a licensed producer. Explanation: Insurers sell policies through one of three methods: through the managerial system, the general agency system, or direct response mass marketing. Direct response companies sell insurance directly to consumers through the mail or television advertising, without the use of a licensed producer.

Fran applied for an individual health insurance policy on July 1 and was issued a binding receipt. If she injured her back on July 4 before the policy was issued, what will happen? -The insurer can reject her claim because the underwriting process was not yet completed. -The premium will be returned to Fran because the policy had not been issued. -Fran's medical claims for her injury will be covered by the policy. -The insurer will only be liable for coverage beginning on the date the policy was issued.

-Fran's medical claims for her injury will be covered by the policy. Explanation: If Fran received a binding receipt after submitting her application, the insurer is held to all of the policy's terms until it formally rejects the application. If Fran is insurable, she has coverage from the date of application. If she is uninsurable, she would still have coverage during the interim period until she is found uninsurable and the application is formally rejected.

Which will not be a significant factor when the underwriter is reviews an application for individual health insurance? -Frank's slow completion of the application -Fred's red face and profuse sweating -Felton's chain smoking -Foster's reports about depression and prior suicide attempts

-Frank's slow completion of the application Explanation: A producer's observations of an applicant may offer insight as to whether the insurance company is willing to accept a risk. This information will be used in conjunction with reports and possibly a physical examination and other underwriting criteria. Taking one's time to complete the application is not indicative of an underwriting concern.

Which provision is NOT optional in a health insurance policy? -Change of occupation -Unpaid premium -Misstatement of age -Grace period

-Grace period Explanation: Optional health insurance policy provisions generally exist for the benefit of the insurer, whereas mandatory provisions generally exist for the benefit of the policyowner. Because it benefits the policy owner, the grace period provision is mandatory in all health insurance policies.

What is one difference between individual disability income policies and group disability income policies? -Group plans are underwritten as a whole while individual policies consider the insurability of the applicant. -Group policies are portable while individual plans are not. -Individual disability insurance is easier to obtain than group coverage. -Individual disability insurance is less expensive than group coverage.

-Group plans are underwritten as a whole while individual policies consider the insurability of the applicant. Explanation: In a group disability income plan, the group is underwritten as a whole and the insurability of each member of the group is not considered.

Jason has a group point-of-service (POS) plan and wants to use an out-of-network provider. Which statement is correct? -He cannot use an out-of-network provider. -He must pay a higher co-payment and deductible. -He must pay the cost for any out-of-network providers that he uses. -The POS plan will pay the cost for any out-of-network providers if Jason has met his deductible.

-He must pay a higher co-payment and deductible. Explanation: When members select a health-care provider within the POS network system, they typically do not have to pay a deductible, and the co-payment will be minimal. For service provided outside the network, POS members must pay higher deductibles and co-payments. POS plans therefore use financial incentives to encourage members to choose network physicians.

Mark seeks to reinstate a lapsed health insurance policy two years after its lapse. Which of the following correctly describes what he must do to achieve this? -For Mark's policy to be reinstated, he must pay all unpaid premiums, plus interest. -Mark will have to pledge to pay the remaining premiums in a timely manner and provide proof of insurability. -He must pay all unpaid premiums, plus interest, and present proof of insurability. -Mark will have to set up a repayment schedule that will repay the missed premiums, plus interest, within three years.

-He must pay all unpaid premiums, plus interest, and present proof of insurability. Explanation: For Mark's policy to be reinstated, he must repay all unpaid premiums plus interest. In addition, Mark must present proof of insurability.

Which of the following statements about the underwriting of group health insurance policies or plans is correct? -Insurers must account for the possibility of adverse selection. -Insurers must consider the risk characteristics of each member in the group. -Insurers can generally exclude certain members of the group who have lower than average health. -Insurers must consider the risk characteristics of the group as a whole.

-Insurers must consider the risk characteristics of the group as a whole. Explanation: When insurers underwrite group health insurance policies or plans, they examine the risk characteristics of the group as a whole.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance? -It is recommended when selling health insurance. -It is prohibited at all times. -It is required when selling to Medicare-eligible individuals. -It is highly regulated by the Insurance Department.

-It is prohibited at all times. Explanation: It is an unfair trade practice to use the existence of the North Carolina Life and Health Insurance Guaranty Association, or the protections the association offers, for the purpose of selling insurance.

How does a health insurance policy's illegal occupation provision protect the insurer? -It allows the insurer to cancel the policy if it learns that the insured was engaged in an illegal activity. -It lets the insurer deny liability when the insured's claim arises from an illegal activity in which he or she participated. -It lets the insurer cancel the policy and sue the policyowner for a fraud if it learns that the insured was engaged in an illegal activity. -It lets the insurer reduce the claim payment by the amount of the ill-gotten gains derived by the insured through engagement in an illegal activity.

-It lets the insurer deny liability when the insured's claim arises from an illegal activity in which he or she participated. Explanation: The illegal occupation provision lets the insurer deny a claim that arises from the insured's participation in an illegal activity.

Nora has a point-of-service PPO plan and receives a second opinion from an out-of-network specialist. How will her plan cover the cost of this consultation? -It will not be covered. -It will be covered at a higher percentage than if Nora had consulted an in-network provider. -It will be covered if she received a referral to see the specialist. -It will be covered at a lower percentage than if Nora had consulted an in-network provider.

-It will be covered at a lower percentage than if Nora had consulted an in-network provider. Explanation: PPOs that operate with a point-of-service option give members the option of using services from providers outside the network. However, the out-of-network services are covered at a lower rate or lower percentage, so members must pay more for deductibles and co-payments.

Which is a database of confidential underwriting information obtained by insurers for the purpose of underwriting disability income policies? -National Insurance Producer Registry -MIB (Medical Information Bureau) -National Association of Insurance Commissioners -State insurance department or division

-MIB (Medical Information Bureau) Explanation: The Medical Information Bureau (MIB) is a nonprofit clearinghouse that maintains a database of confidential medical information on applicants for life and health insurance.

Mark has satisfied the requirements to reinstate his lapsed health insurance policy, but after 45 days has still not heard from his insurer about his reinstatement request. Which of the following will happen? -Mark can assume the reinstatement has not been accepted, and he can get his money back. -Mark must contact the insurer to determine its decision. -Mark's policy is automatically reinstated. -Mark's policy automatically lapses.

-Mark's policy is automatically reinstated. Explanation: If no notice is given during that period, the policy is automatically reinstated.

Emil, an agent licensed in North Carolina, moves to a new home on April 30. He is required to notify the North Carolina Department of Insurance by what date? -May 7 -May 10 -May 30 -October 31

-May 10 Explanation: An agent who changes his or her residential or e-mail address must notify the Insurance Department within ten days of the change.

Which of the following is not considered a health benefit plan? -HMO contract -accident and health insurance certificate -multiple employer welfare arrangement plan -Medicare supplement policy

-Medicare supplement policy Explanation: HMO contracts, accident and health insurance policies or certificates, and multiple employer welfare arrangement plans are considered health benefit plans. A Medicare supplement policy is not a health benefit plan.

All of the following statements regarding health care flexible spending accounts (FSAs) are correct, EXCEPT: -Participants may make claims against their accounts for up to six months after the end of their benefit year. -FSAs are funded solely by employee contributions. -Maximum annual contribution levels to an FSA for medical expense reimbursements are set by individual employers but are subject to federal limits. -An FSA is not tied to a high-deductible health plan.

-Participants may make claims against their accounts for up to six months after the end of their benefit year. Explanation: The maximum annual contribution limit to an FSA is set by the sponsor, though it cannot exceed a federal maximum limit

The Pregnancy Discrimination Act makes discrimination on the basis of pregnancy, childbirth, or related medical conditions unlawful sexual discrimination, meaning that: -Pregnant women must be treated with deference by employers and offered additional fringe benefits. -Pregnant women will be treated the same at work as non-pregnant women, and all will be offered the same fringe benefit programs. -Female employees cannot be treated differently with respect to fringe benefit programs during pregnancy. -Pregnant women must receive preferential treatment but no fringe benefits beyond those offered to other employees.

-Pregnant women will be treated the same at work as non-pregnant women, and all will be offered the same fringe benefit programs. Explanation: Pregnant women will be treated the same at work as non-pregnant women, and all will be offered the same fringe benefit programs.

Ed, Myrna, Jane, and Ravi were each covered by different group health insurance policies that just terminated. Which person will be eligible to convert to an individual health insurance policy? -Ed, who had been working at RJ Industries for one month before his coverage terminated -Myrna, whose coverage terminated due to nonpayment of premium -Jane, whose former policy was replaced by another group policy two weeks after it terminated -Ravi, who had been working at ABC Corporation for six years when the plan terminated because the insurer stopped offering plans in the state

-Ravi, who had been working at ABC Corporation for six years when the plan terminated because the insurer stopped offering plans in the state Explanation: Group health insurance policies must give each insured the option to convert to an individual policy without providing evidence of insurability if group coverage terminates. The option is available to anyone who has been insured under the group plan for at least three months.

Sally is covered by a PPO. Stanley is covered by a traditional indemnity plan. Which statement is correct? -Neither Sally nor Stanley are required use in-network providers to get the lowest costs. -Sally can never use an out-of-network provider, but Stanley can select any provider. -Sally and Stanley pay deductibles and coinsurance amounts under their plans. -Sally will not pay a deductible, but Stanley will pay an annual deductible.

-Sally and Stanley pay deductibles and coinsurance amounts under their plans. Explanation: Most PPOs, like traditional indemnity plans, charge deductibles and coinsurance amounts. However, these amounts are applied to the lower, negotiated rates. As a result, PPO members who use PPO-contracted providers have lower out-of-pocket costs.

Josephson Corporation will be offering a group health insurance policy this year to its employees. Which employee will not be eligible for coverage? -Frank, who owns 50 percent of the company and works full-time -Rachel, who works 30 hours per week in the accounting department -Sebastian, who works part-time for the company during the fall and winter -Anna, who is a vice president in the company and works 40 hours per week

-Sebastian, who works part-time for the company during the fall and winter Explanation: Owners, proprietors, and partners are considered eligible employees along with individuals who work on a full-time, nonseasonal basis, with a normal work week of 30 or more hours. Those who work on a part-time, temporary, or substitute basis are not eligible to participate in an employer-sponsored group health plan.

All of the following statements about the recurrent disability provision of a disability income policy are correct EXCEPT: -A new elimination period is not required for a recurrent disability. -A recurrent disability does not begin a new maximum benefit period. -The disability income benefits paid are typically lower for a recurrent disability. -A recurrent disability is considered a continuation of the previous disability.

-The disability income benefits paid are typically lower for a recurrent disability. Explanation: If a recurrent disability occurs, the benefits paid will not be reduced due to the recurrence.

Abby, age 66, just purchased an individual health insurance policy. On what basis can the insurer exclude coverage for diabetes, a condition that Abby was diagnosed with one year ago? -The insurer can exclude coverage for up to six months. -The insurer can exclude coverage for up to one year. -The insurer may not exclude coverage for Abby's pre-existing condition. -The insurer may limit coverage only if Abby's pre-existing condition was specifically defined in the policy.

-The insurer may limit coverage only if Abby's pre-existing condition was specifically defined in the policy. Explanation: Individual or family health insurance policies issued to individuals over age 65 may limit coverage only for pre-existing conditions that are defined in the policy.

Which of the following is an exception to the rule that a health insurer may deny a claim arising from the use of narcotics under a health insurance policy's intoxicants and narcotics provision? -The policyowner did not realize he or she was intoxicated at the time of the covered loss. -This provision allows no exceptions. -The intoxicating substance is legal in the insured's state of record. -The loss was sustained because the insured was under the influence of a narcotic administered on the advice of a physician.

-The loss was sustained because the insured was under the influence of a narcotic administered on the advice of a physician. Explanation: The insurer is not liable for a loss sustained or contracted while the insured was intoxicated or under the influence of a narcotic unless it was administered on the advice of a physician.

Anne lives in State A and buys a health insurance policy issued by an insurer domiciled in State B. How does the conformity with state statutes provision resolve provisions in the policy that conflict with the laws of State A? -The insurer will eventually have to change the policy to conform to the laws of State A. -The policy can remain unchanged until a claim is filed, at which time the insurer will address the matter. -The policy will automatically be amended to meet the minimum legal requirements of State A. -State law of the state in which the insurer is domiciled-State B, in this case-will prevail.

-The policy will automatically be amended to meet the minimum legal requirements of State A. Explanation: The conformity with state statutes provision reconciles any provisions in the policy that do not comply with the laws of the state where the insured lives and the policy is issued. Non-compliant provisions are automatically changed to meet the state's minimum requirements.

Under the conformity with state statutes provision of a health insurance policy, which of the following will happen if provisions of an insurer's health insurance policies are contrary to state law? -The provisions will automatically be changed to meet the minimum requirements of the law. -The provisions must be dropped from the policy. -The provisions can stay in the policy until a claim is filed that requires adjudication by the state. -The insurer will cancel the policy and offer to issue a new one to the policyowner.

-The provisions will automatically be changed to meet the minimum requirements of the law. Explanation: State law of the state in which the insurer is domiciled does not prevail in these cases. The offending provisions will automatically be changed to meet the minimum requirements of state law.

Fran has an agency contract with ABC Insurance Company to represent the company. The contract gives her express authority to perform certain duties. Which is correct with respect to Fran's actions? -She has unlimited authority to represent the company. -When she acts within her authority, she binds the company by her actions. -Only she is responsible for her actions. -She should not act without first consulting with her supervisor.

-When she acts within her authority, she binds the company by her actions. Explanation: An agent who acts with express authority binds the insurance company by those actions.

Blanket disability policies can be issued to all of the following EXCEPT: -a common carrier, covering all passengers -a school, covering students -an employer, covering employees -a family, covering family members

-a family, covering family members Explanation: Blanket sickness and accident insurance may be issued to common carriers, employers, colleges, volunteer fire departments, and other similar groups.

Under a health insurance policy's intoxicants and narcotics provision, a health insurer may exclude insurer liability if which of the following occurs? -a loss results from intoxication or the use of non-prescribed narcotics -a third party claims the insured was intoxicated or under the influence of non-prescribed narcotics -a covered loss results from inattention or carelessness -the policyowner is stopped by police while driving under the influence

-a loss results from intoxication or the use of non-prescribed narcotics Explanation: Third-party claims that the insured was intoxicated or under the influence of narcotics are not enough. The loss must result from sintoxication or the use of narcotics not prescribed by a physician.

John buys a $1 million life insurance policy. He dies two years later and the insurer pays the $1 million benefit. Even though the premiums never came close to the benefit amount, the insurer pays the full benefit because the insurance policy is type of contract? -an indemnity contract -a valued contract -a reimbursement contract -an indemnification contract

-a valued contract Explanation: Life insurance policies are valued contracts, which means they pay a stated amount in the event of a loss. Life insurance contracts, unlike contracts of indemnity, do not try to judge the actual amount of the loss. Because John bought a life insurance policy insuring his life for $1 million, that is the amount the policy paid when he died, regardless of the amount he paid in premiums. A contract of indemnity, on the other hand, limits the benefit to the amount of the insured's actual loss.

Regardless of unique differences, every state's workers' compensation program offers all of the following, EXCEPT: -compensation to a worker's spouse and dependents if the worker is killed in an industrial accident -employer funding for the plan -employer liability for work-related disabilities a worker may suffer -benefits that are payable even if an injured worker sues for additional compensation

-benefits that are payable even if an injured worker sues for additional compensation Explanation: Each state's workers' compensation program is funded by employer contributions. Workers do not pay.

A health insurance policy's optionally renewable provision lets the insurer do all the following EXCEPT: -cancel the policy on its anniversary date -increase the premium on the policy's anniversary date -cancel the policy any time if the insured becomes uninsurable -continue to renew the policy if it chooses

-cancel the policy any time if the insured becomes uninsurable Explanation: The optionally renewable provision gives the insurer the right to cancel the policy or increase the premium for those in the optionally renewable class on the policy's anniversary date.

A cancelable health insurance policy allows the insurer to do what? -cancel the policy if the insured does not provide new evidence of insurability when requested -cancel the policy at any time after the first policy anniversary -cancel the policy at any time by providing written notice -cancel the policy if the insured fails to pay or is late in paying a premium

-cancel the policy at any time by providing written notice Explanation: A cancelable policy allows the insurer to cancel the policy at any time, not only if the insured fails to pay or is late in paying a premium.

Which indicates that an insured is a participant in a group health insurance plan? -personalized policy -certificate of coverage -personal account with medical checks -quarterly premium statements

-certificate of coverage Explanation: The insurer will issue to the policyholder (the plan sponsor) individual certificates setting forth the policy benefits and exceptions and referring to the master policy under which the coverage is provided, which the policyholder will deliver to the individuals insured under the policy.

What is not required to obtain an insurance producer's license? -residency in state -satisfaction of state prelicensing requirements -character assessment -intent to serve the general public

-character assessment Explanation: A prospective insurance agent must meet certain state requirements regarding prelicensing and must intend to actively engage with the general public. The applicant does not undergo an official character assessment.

When underwriting a group health insurance contract, a community rating considers the: -characteristics of the region in which the group operates -combined experience of the group -claims history of the group -neighborhoods in which the group members live

-characteristics of the region in which the group operates Explanation: Community rating examines the community or region in which the group operates. The premium is then based on the larger risk pool of that community or region.

Written rules for how claims and appeals are handled must be fair and timely in accordance with ERISA's requirements for: -information disclosure -accountability -claims procedures and appeals -administration

-claims procedures and appeals Explanation: ERISA's claims procedures and appeals function requires written rules for how claims must be filed and how participants can appeal if they are denied covered services. Claims appeals processes must be fair and timely.

Beatrice is a member of the Supreme Lodge fraternal benefit society. What must Beatrice do before she can sell insurance on its behalf? -obtain a restricted agent's license -obtain a surplus lines license -become a licensed agent with a specialty in fraternal lines insurance -comply with the same general licensing requirements that apply to resident agents

-comply with the same general licensing requirements that apply to resident agents Explanation: Agents of fraternal benefit societies must comply with the same general laws governing licensing that apply to resident and nonresident agents.

Which of the following is NOT characteristic of a major medical plan? -maximum lifetime benefits of up to $1 million or more -coverage of a broad range of medical care and treatment -coverage of cosmetic surgery -unlimited benefits, in some cases

-coverage of cosmetic surgery Explanation: In some cases, major medical plans have no stated benefit limits.

Which type of insurance helps an insured pay off a loan if he or she becomes disabled? -credit accident and health insurance -debtor accident and health insurance -double indemnity insurance -family maintenance insurance

-credit accident and health insurance Explanation: Credit accident and health insurance helps an insured pay off a loan if he or she dies or becomes disabled. In this case, the policy pays monthly benefits equal to the amount of the monthly loan payment due.

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? -defamation -rebating -unfair discrimination -coercion

-defamation Explanation: It is considered defamation to publish or circulate a false, deceptive, or misleading statement about—or a statement that is maliciously critical of or derogatory to—the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business.

Harvey's health insurance policy covers only treatment for cancer. What type of insurance policy does he have? -basic medical expense policy -restricted policy -dread disease policy -major medical policy

-dread disease policy Explanation: Dread disease coverage may be issued as a stand-alone policy or as a rider to a life insurance policy. It pays cash to the insured to be used however he or she sees fit, usually to cover the costs associated with treating the medical condition specified in the policy.

Rob presents an individual health insurance policy to a prospective insured and collects data to help his insurance company decide whether to accept the risk. What role is Rob performing? -offering insurance -field underwriting -prospecting for insurance business -soliciting insurance

-field underwriting Explanation: Field underwriting refers to the activities an agent performs when seeking applications for insurance. This includes requesting information about prospective insureds and helping them complete their applications. An observant agent will collect the right data to help the insurer decide whether to accept the application.

Newborn children are automatically covered under an insured's health insurance policy for how long? -from birth to the first birthday -from birth to 30 days -from birth to the end of the first calendar year -from birth to the policy renewal date

-from birth to 30 days Explanation: Dependent children are covered by their parents' health insurance from the moment of birth. The policyholder must notify the insurer of a child's birth within 30 days and must pay the premium to continue health coverage for the child beyond the 30-day period.

A supplemental major medical plan supplements a basic plan. A comprehensive major medical plan replaces a basic and a supplemental plan. Benefits under a comprehensive major medical plan are typically: -low -about average for health plans -high -varied, depending on the insurer

-high Explanation: The benefit limits are typically high.

A health insurance policy must pay benefits for services provided by all of the following EXCEPT: -optometrists -registered nurses -physician assistants -homeopathic practitioners

-homeopathic practitioners Explanation: Health insurance policies are required to pay benefits for services provided by optometrists, registered nurses, and physician assistants. They are not required to pay for care provided by homeopathic practitioners.

Greg's basic hospital plan pays for hospital room and board for up to 30 days with a maximum benefit of $3,000. If he also had a supplementary major medical policy, what would the supplementary plan cover? -hospital room and board beginning on the 31st day and costs above $3,000 -hospital room and board and costs less than $3,000 -hospital room and board beginning on the 30th day -hospital room and board beginning on the 15th day and costs above $6,000

-hospital room and board beginning on the 31st day and costs above $3,000 Explanation: If Greg supplements his basic hospital plan with a supplementary major medical policy, the supplementary plan would cover hospital room and board beginning on the 31st day and costs above $3,000.

When is a health insurance policy considered to have lapsed? -if the premium is not paid by the end of the grace period -if the carrier no longer wants to insure the policyowner -if the policyowner becomes uninsurable -if the policyowner files for bankruptcy

-if the premium is not paid by the end of the grace period Explanation: A health insurance policy is considered to have lapsed if the premium is not paid by the end of the grace period.

An agent acting on behalf of an insurance company even though these acts are not specified in the agent's contract with the company but are necessary to carry out the company's express authority, exercises what kind of authority? -express -apparent -special -implied

-implied Explanation: The express authority given in the contract implies that the agent is authorized to perform other acts not specifically mentioned. This is the basis of the implied authority of an agent.

If Tim wants to avoid paying taxes on the interest earned on his AD&D benefits, how should he receive the benefits? -in a lump sum -monthly -quarterly -semi-annually

-in a lump sum Explanation: If AD&D benefits are received in a lump sum, any interest earnings paid will not be taxed.

What type of contract are medical expense insurance policies? -presumptive contracts -valued contracts -indemnity contracts -bilateral contracts

-indemnity contracts Explanation: A medical expense insurance contract is a contract of indemnity. This means that the benefit cannot be greater than the contract owner's actual loss or the face amount of the policy, whichever is less. A valued contract, such as a life insurance policy, pays a stated amount regardless of the amount of the loss.

An employer establishes flexible spending accounts for its employees. Which expenses will the accounts NOT cover? -prescription medicines and medical supplies -insurance policy premiums -non-prescription medicines and medical supplies -durable medical equipment

-insurance policy premiums Explanation: A flexible spending account can cover the costs of prescription and non-prescription medicine and medical supplies as well as durable medical equipment.

Experience rating for group health insurance is usually applied to which of the following? -large groups -small groups -sole proprietors -newly-formed businesses

-large groups Explanation: An experience rating means that the premiums are based on the anticipated claims experience just for that group as estimated from past claims experience.

The concept of adverse selection refers to: -applicants' poor credit history -actuary's decision-making process -likelihood of consumers who are in poor health to seek insurance -underwriter's decision to deny a medical claim

-likelihood of consumers who are in poor health to seek insurance Explanation: Insurers must account for the possibility that most applications they receive for individual health insurance represent people who are more at risk. This concept is known as adverse selection.

Which of the following is not required to be covered under a group health insurance policy issued in North Carolina? -mammograms every year beginning at age 30 -medicine and treatment for diabetes -prostate cancer screening tests -cervical cancer screening

-mammograms every year beginning at age 30 Explanation: Health insurance policies must cover one baseline mammogram for women ages 35 through 39. Thereafter, insurers must cover mammograms on a schedule that depends on a woman's age and breast cancer risk.

Which type of health coverage pays benefits for the cost of medical care, providing coverage that ranges from limited to broad for all kinds of medical care? -medical expense -disability income insurance -accidental death and dismemberment insurance -specified disease

-medical expense Explanation: Medical expense insurance provides benefits for the cost of medical care. Depending on the type of policy, coverage can range from limited to quite broad.

Which of the following groups would typically NOT be eligible for group accident and health insurance? -association group -neighborhood group -labor union -employer group

-neighborhood group Explanation: Employer groups, association groups, and labor unions are eligible for group accident and health insurance. Neighborhood groups are not an approved group.

When classifying insurance risks, insurance underwriters most often use the: -numerical rating system -judgment method -adverse selection system -risk assessment scale

-numerical rating system Explanation: Under the numerical rating system, credits are added for favorable risk factors. Debits are subtracted for adverse or unfavorable factors. This system has largely replaced the judgment method.

Which of the following persons would not qualify for a temporary producer's license in North Carolina? -wife of a disabled producer -surviving spouse of a deceased producer -person designated by a producer on active military duty -part-time producer of a licensed agency

-part-time producer of a licensed agency Explanation: Anyone who transacts insurance in North Carolina, even on a part-time basis, must obtain an insurance producer's license.

An insured's major medical expense policy has a deductible under which the insured must pay separate deductibles for each illness and each accident. What type of deductible is this? -separate ailment deductible -per diem deductible -per cause deductible -separate cause deductible

-per cause deductible Explanation: This is a per cause deductible. With a per cause deductible, the insured must pay separate deductibles for each separate illness or each separate accident.

Which would NOT be included in the agent's report to assist the underwriter in determining whether to accept an insurance application? -personal knowledge about the applicant's character -personal observations about the applicant's home -personal observations about the applicant's financial condition -personal opinions about the applicant's family

-personal opinions about the applicant's family Explanation: The agent's report includes information that the agent knows about the client that would be useful to the underwriter' for example, the applicant's finances, personal character, habits, and other policies held. Conjecture is not relevant.

A person who smokes heavily and drinks alcohol to excess exhibits what kind of an insurance risk? -physical hazard -moral hazard -legal hazard -planned hazard

-physical hazard Explanation: Physical hazards are risks that arise from a person's condition, health, or habits. Moral hazards arise from a person's traits or characteristics that increase the chance of a loss.

Which of the following techniques is not used during the utilization review process? -second opinions -preventive care review -discharge planning -concurrent review

-preventive care review Explanation: Second opinions, discharge planning, and concurrent review are all part of the utilization review process. Preventive care review is not a utilization review technique.

Which of the following is not a power granted to the North Carolina Commissioner of Insurance? -examining insurers' financial statements -enforcing insurance laws -issuing regulations to administer insurance laws -prosecuting individuals for violating insurance laws Explanation: The Commissioner reports violations concerning the insurance business to the state attorney general or other law enforcement officials, who are responsible for prosecuting criminal acts.

-prosecuting individuals for violating insurance laws Explanation: The Commissioner reports violations concerning the insurance business to the state attorney general or other law enforcement officials, who are responsible for prosecuting criminal acts.

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT -notify individuals about the company's privacy practices. -describe conditions under which the company may disclose the information to other parties. -provide methods for individuals to prevent disclosure of the information. -provide individuals with copies of documents disclosed to other parties.

-provide individuals with copies of documents disclosed to other parties. Explanation: When collecting or using nonpublic personal financial or health information, an insurer must notify individuals about the insurer's privacy policies and practices, describe conditions under which the insurer may disclose this information to other parties, and provide methods for individuals to prevent this disclosure.

A disability income insurance policy's conditional renewability provision guarantees that the policyowner can renew coverage: -as long as premiums are paid on time -if evidence of insurability is provided with each renewal -provided certain conditions are met regarding age and occupation -if the insurer approves it

-provided certain conditions are met regarding age and occupation Explanation: A health insurance policy's conditional renewability provision guarantees that the policyowner can renew coverage provided certain conditions related to age and occupation are met.

As part of the field underwriting process for health insurance, producers must provide the following types of information to applicants EXCEPT: -the applicant's MIB report -a buyer's guide -a policy summary -a notice of information practices

-the applicant's MIB report Explanation: A producer must give each applicant a notice of information practices statement, which informs the applicant that in underwriting the policy, the insurer may collect information from sources other than the application. It also states how the insurer may share this information with third parties.

A guaranteed insurability rider guarantees an individual disability income policyowner's right to buy additional coverage even if: -the insured has duplicate coverage from another health insurance provider -the insured cannot provide satisfactory evidence of insurability -the insured cannot afford the additional premium charged -state law prohibits the same coverage to be sold under a separate policy

-the insured cannot provide satisfactory evidence of insurability Explanation: A guaranteed insurability rider guarantees the policyowner's right to buy additional coverage. It does not matter whether the insured can or cannot provide satisfactory evidence of insurability.

Which of the following provisions provides a way for a policyowner to reactivate a health insurance policy that has lapsed? -the payment of claims provision -the reinstatement provision -the incontestable clause -the grace period

-the reinstatement provision Explanation: The reinstatement provision allows a policyowner to reinstate a policy that has lapsed.

Jim owes $10,000 to Acme Corporation, and he pays $500 each month on the loan. If he decides to take out a credit accident and health insurance policy to cover the payments if he dies or becomes disabled, the policy may not exceed what amount? -one-half of Jim's debt -the total amount of Jim's debt -the total amount of Jim's debt plus a premium for extra costs -one-third of Jim's debt

-the total amount of Jim's debt Explanation: A credit accident and health insurance policy cannot exceed the total amount of indebtedness at any given time, nor may the monthly disability benefit exceed the amount of the loan's monthly payment.

What is the normal reinstatement period for health insurance policies? -90 days from the date of lapse -one year from the date of lapse -three years from the date of lapse -five years from the date of lapse

-three years from the date of lapse Explanation: The normal reinstatement period is three years from the date of lapse.

Any provider coverage without regard to a network of providers is typical of what type of plan? -HMO -PPO -traditional indemnity policy -managed care plan

-traditional indemnity policy Explanation: Managed care plans limit their coverage and their benefits to treatment given by approved providers.

An insured's medical expense plan requires him to get medical care from certain providers if the cost of the care is to be covered. What type of insurance does the insured NOT have? -HMO -PPO -traditional medical expense plan -managed care plan

-traditional medical expense plan Explanation: HMOs commonly limit the choice of providers.