CH 9 VA State Health and Insurance Exam

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? A) Arbitration B) Salvage C) Appraisal D) Subrogation

D) Subrogation After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss.

Which of the following premium modes would result in the highest annual cost for a Life Insurance Policy? A) Monthly B) Quarterly C) Semi-annual D) Annual

A) Monthly If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have the additional expenses in billing the premium.

A man works for company A and his wife works for Company B. The spouses are covererd by health plans through their respective companies that also cover the other spouse. If the husband files a claim, A) The insurance through his company is primary. B) The insurance through his wife's company is primary C) The insurance plans will split the coverage evenly D) Both plans will pay the full amount of the claim.

A) The insurance through his company is primary.

Workers Compensation benefits are regulated by which entity? A) Federal Government B) State Government C) Employer D) Insurer

B) State Government

The Patient Protection and Affordable Care Act mandates that insurers provide coverage for adult children of the insured up to the age of A) 19 B) 21 C) 26 D) 30

C) 26 The laws extends coverage for children to age 26 if the child is not eligible for other group coverage.

Which of the following is not true of Disability Buy-Sell Coverage? A) Premium payments are not deductible to the business B) The policies provide funds for the business organization to purchase the business interest of a disabled partner. C) Benefits are considered taxable income to business. D) It is typically written to cover partners or corporate officers of a closely held business

C) Benefits are considered taxable income to business. The buy-sell coverage benefits are tax free.

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? A) 50% B) 60% C) 90% D) 100%

D) 100% For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense.

All of the following statements concerning workers compensation are correct EXCEPT A) Workers compensation laws are establish by each state. B) All states have workers compensation. C) Benefits include medical, disability income, and rehabilitation coverage. D) A worker receives benefits only if the work related injury was not his/her fault.

D) A worker receives benefits only if the work related injury was not his/her fault. Workers Compensation benefits are payable when a worker is injured by a work-related injury, regardless of fault or negligence.

The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT A) No lifetime dollar limits B) Coverage for preventive benefits C) Individual tax deductions for premiums paid. D) Right to appeal.

C) Individual tax deductions for premiums paid. The act does not offer tax deductions for health insurance premiums. The Act does offer a tax credit, which is different from a tax deduction. All the other provisions are included in the Act.

A husband and wife are insured under group health insurance plans at their places of employment. Because their employers pay for their plans, each is covered as a dependent under their spouse's coverage. If the husband is hospitalized, how are medical expenses likely paid? A) The husband can collect from each plan B) The husband will have to select a plan from which he wants to collect benefits C) The benefits will be coordinated. D) Neither plan would pay.

C) The benefits will be coordinated. Benefits will be coordinated when individuals are covered under two or more health plans.

Workers compensation insurance covers a worker's medical expenses resulting from work related sickness or injuries and covers loss of income from A) Work-related disabilities B) Job termination C) Plant or office closings D) Temporary job layoffs

A) Work-related disabilities All states have workers compensation laws, which were enacted to provide mandatory benefits for employee's work related injuries, illnesses, or death

Which of the following is INCORRECT concerning taxation of disability income benefits? A) If the benefits are for a permanent loss, the benefits paid to the employee are not taxable. B) If paid by the individual, the premium are tax deductible. C) If the employer paid the premiums, income benefits are taxable to the insured as ordinary income. D) If the insured paid the premiums, any disability income benefits are tax-free

B) If paid by the individual, the premium are tax deductible. If an individual purchases his or her own disability insurance with before-tax dollars, any benefits paid are tax free, but the premium is not tax deductible. If an employer pays the premium, the employer may deduct the premium as a business expense. Any benefits paid to an employee are taxable, unless it is for the permanent loss of a body part, or loss of use of a body part.

When a disabled dependent child reaches the age limit for coverage, how long does the policyowner have to provide prrof of dependency in order for the dependent to remain covered under the policy? A) 10 days B) 15 days C) 31 days D) 60 days

C) 31 days

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? A) "Own occupation" - less restrictive than other definitions B) "Own occupation" - more restrictive than other definitions C) "Any occupation" - less restrictive than other definitions D) "Any occupation" - more restrictive than other defnitions

A) "Own occupation" - less restrictive than other definitions In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered.

Which of the following would best describe total disability? A) A person's ability to work is significantly reduce or eliminated for the rest of his/her life. B) A person's inability to perform one of the regular duties of his/ her occupation C) A person's total loss of income. D) A person's inability to qualify for insurance coverage.

A) A person's ability to work is significantly reduce or eliminated for the rest of his/her life. While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduce or eliminated for the rest of his/her life.

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as A) Principle of Indemnity. B) Subrogation. C) Adverse Selection. D) Right of Rescission

B) Subrogation. Subrogation is a provision found in most insurance policies that gives the insurer, after payment of a loss cause by a third party, the insured's rights to recovery against that third party. The insurer's rights are only to the extent of the loss payment.

Under what condition are group disability income benefits received by an employee NOT taxable as income? A) When the amount of the benefit is equal or less than the amount of contributed by the employer B) When the benefits received are equal or less than the employee's percentage of the contribution C) When the employer makes all the premium payments D) When the employee is 59.5

B) When the benefits received are equal or less than the employee's percentage of the contribution Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income

Dave is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical cost and income assistance? A) Worker's Injury Insurance B) Workers Compensation C) Employee Disability D) Federal Workers Disability

B) Workers Compensation Workers Compensation provides employees with medical, income, death and rehabilitation benefits in the event of work-related injury.

According to the PPACA rules, what percentage of health care costs will be covered under a bronze plan? A) 10% B) 30% C) 40% D) 60%

D) 60% Under the bronze plan, the health plan is expected to cover 60% of the cost of an average population, and the participants would cover the remaining 40%.

All other factors being equal, which of the following premium modes would result in the lowest overall premium? A) Annual B) Quarterly C) Semi-Annual D) Monthly

A) Annual Paying the premium one time a year would be the least expensive because of fewer billing and loading charges

Medical expense premiums are deductible as medical expenses, provided that when the premiums are added to all of the other unreimbursed medical expenses, the total exceeds what percentage of the adjusted gross income? A) 7.5% B) 8.5% C) 9.5% D) 10.5%

A) 7.5%

An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This results in a long hospitalization period. Which of the following is true? A) The group plan will pay depending on the employee's recovery? B) The group plan will not pay because the employee was injured at work. C) The group plan will pay. D) The group plan will pay a portion of the employee's expenses.

B) The group plan will not pay because the employee was injured at work. Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage.

Which of the following is NOT true regarding Workers Compensation? A) Benefits vary from state to state B) Benefits are regulated by the state government. C) Benefits are offered by the insurer. D) Benefits are not regulated by the federal government

C) Benefits are offered by the insurer. The state government regulates Workers Compensation benefits, which vary slightly from state to state.

A family medical expense policy must generally do all of the following EXCEPT A) Cover any newborn children as long as proper identification has been given. B) Continue to cover any children after age 19 who are still dependent upon their parents because of a mental or physical handicap. C) Continue to cover any children who are remain living at home after they reach the maximum age stipulated by the policy. D) Cover any adopted children on the same basis as a newborn.

C) Continue to cover any children who are remain living at home after they reach the maximum age stipulated by the policy. Once children turn 19 ( 23 for full-time students), those children cannot remain on the family plan, but they do have the right to conver to their own individual plan.

Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? A) Premiums paid by the employer are deductible as a business expense B) Employee paid premiums may be deducted if certain conditions are met C) Employee benefits are tax deductible the year in which they were received. D) Benefits received by the employee are free from federal income tax.

C) Employee benefits are tax deductible the year in which they were received. For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense. However, any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee

A woman's health insurance policy dictates which doctors she is allowed to see. Her health providers share an assumed risk for their patients and encourage preventative care. What best describes the health system that the woman is using? A) Major medical B) Group health C) Managed Care D) Comprehensive health

C) Managed Care There are 5 distinguishing features of manged care: controlled access to providers, comprehensive case management, risk sharing, preventative care, and high-quality care.

In an idividual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received? A) Federal income tax B) State income tax C) No tax D) Policy tax

C) No tax Disability income benefits, including those for medical expense and LTC policies, are received income tax free by the individual.

Premium payments for personally-owned disability income policies are A) Tax deductible B) Tax deductilbe to the extent that they exceed 7.5% of the adjusted gross income of those itemizing deductions. C) Not for tax deductible D) Eligible for tax credits

C) Not for tax deductible

The mode of premium payment A) Is the factor which determines the amount of dividends in a policy. B) Is the method used to compute the cash surrender value of the policy. C) Does not affect the amount of premium paid. D) Is defined as the frequency and the amount of premium payment.

D) Is defined as the frequency and the amount of premium payment. The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly.

Under workers compensation, which of the following benefits are NOT included? A) Medical and rehabilitation benefits B) Income benefits C) Death benefits D) Legal benefits

D) Legal benefits

According to the PPACA Metal Levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that? A) Bronze B) Silver C) Gold D) Platinum

D) Platinum Bronze level benefit plans pay 60% of expected health care costs; silver level plans pay 70%; gold level plans pay 80%; and platinum level plans pay 90%.

A provision found in insurance policies which prevents the insured from collecting twice for the same loss is called A) Consent to settle loss B) Right of Salvage C) Appraisal D) Subrogation

D) Subrogation When the insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company.

Which of the following definitions would make it easier to qualify for total disability benefits? A) The more strict "any occupation" B) The more liberal "any occupation" C) The more strict "own occupation" D) The more liberal "own occupation"

D) The more liberal "own occupation" Total disability is defined differently under some disability income policies. The more liberal "own occupation" definition of disability makes it easier to qualify for benefits.

Disability income coverage specifies that the policy covers the insured if he is unable to performany jobs for which he is qualified. In this case, total disability is defined as A) Any occupation- less restrictive than other definitions B) Own occupation- more restrictive than other definitions C) Own occupation- less restrictive than other definitions D) Any occupation- more restrictive than other definitions

D) Any occupation- more restrictive than other definitions If total disability is defined as any occupation, it means the coverage will apply only if the insured cannot find any means of income whatsoever. This is more strict than own occupation, where a person merely have to prove that they cannot perform the job for which they were previously trained.

Which of the following is NOT true of the tax deductibility of medical expense coverage for sole proprietors and partners? A) The deduction is permitted only if the sole proprietor or partner is covered under another medical expense plan B) Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families under a plan carried by the sole proprietor or partnership, up to a specified limit. C) The deduction may not exceed the taxpayer's earned income for the tax year D) The 100% deduction is a deduction in arriving at an individual's adjusted gross income, and as such, may not be used to satisfy the 7.5% threshold for itemized medical expense.

A) The deduction is permitted only if the sole proprietor or partner is covered under another medical expense plan Sole proprietors and partners may decduct 100% of the cost of a medical expense plan, but the plan may not exceed the taxpayers earned income for the year. Coverage under another medical plan is not required.

Which of the following would best describe total disability? A) A person's ability to work is significantly reduced or eliminated for the rest of his/her life. B) A person's inability to perform one of the regular duties of his/her occupation C) A person's total loss of income. D) A person's inability to qualify for insurance coverage.

A) A person's ability to work is significantly reduced or eliminated for the rest of his/her life. While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduce or eliminated for the rest of his/her life.

Which statement accurately describe the Change of Beneficiary provision? A) Changing beneficiaries requires the consent of the original beneficiary? B) Any policy that has a death benefit must also have a Change of Beneficiary provision C) Spouses are automatically irrevocable beneficiaries, with the exception of divorce or death. D) Beneficiaries can only be changed in the event of divorce, death, or severe psychiatric disorders.

B) Any policy that has a death benefit must also have a Change of Beneficiary provision Any policy that has a death benefit must also have a Change of Beneficiary provision. This allows the policyowner to change the beneficiaries without the original beneficiary's consent, unless that person was designated as an irrevocable beneficiary.

Lisa and Lena own a shop together. They are partners in their business of 2 years. Lisa is a designer; Lena is seamstress. Lisa worries that if Lena becomes disabled, that would affect their business. She inquires about purchasing disability buy-sell insurance. What does her agent tell her about that type of policy? A) A disability buy-sell plan protects the insured in case of disability. It allows the policyowner to buy out the partners interest in the business, but when benefits are paid out, taxes must be paid. B) The agent informs the ladies that the premiums aren't deductible, and benefits are not tax free, and that the plan is not a sensible purchase for them at this time C) A disability buy-sell plan protects the insured in case of disability. It allows the policyowner to buy out the partner's interest in the business, and the benefits are tax free. D) The agent suggests a key person disability plan so that Lisa can buy out Lena's portion because a buy-sell policy wont' give Lisa the cash to purchase Lena's portion of the business.

C) A disability buy-sell plan protects the insured in case of disability. It allows the policyowner to buy out the partner's interest in the business, and the benefits are tax free. Disability buy-sell insurance is typically written to cover partners or corporate officers of a closely held business. The policy provides funds for the business organization to purchase the business interest of a disabled partner. In a disability buy-sell policy, whether a cross purchase or entity, the premiums are not deductible to the business, but the benefits are received income tax free by the business.

Under a Key Person disability income policy, premium payments A) Are made by the employee and are tax-free B) Are made by the business and are tax-deductible C) Are made by the business and are not tax-deductible D) Are made by the employee and are not tax-deductible

C) Are made by the business and are not tax-deductible Premiums are nondeductible to the business; however, benefits are received tax-free by the business

If an insured changes his payment plan from monthly to annually, what happens to the total premium? A) Increases B) Decreases C) Stays the same D) Doubles.

B) Decreases Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount.

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? A) Residual disability B) Recurrent disability C) Partial disability D) Income replacement

A) Residual disability A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss.

Which of the following are the main factors taken into account when calculating residual disability benefits? A) Earnings prior to disability and the length of disability. B) Employee's full-time status and length of disability. C) Present earnings and standard cost of living. D) Present earnings and earnings prior to disability.

D) Present earnings and earnings prior to disability. Residual disability will help pay for loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to disability.

Which characteristic does NOT describe managed care? A) High-quality care B) Shared risk C) Preventive care D) Unlimited access to providers

D) Unlimited access to providers

Under which condition would an employee's group medical benefits be exempt from income taxes? A) When the premiums and other unreimbursed medical expenses exceed 6.5% of the employee's adjusted gross income. B) When the premiums and other unreimbursed medical expenses exceed 7.5% of the employee's adjusted gross income C) An employee's group medical benefits are generally exempt from taxation as income D) An employee's group medical benefits are never exempt from taxation as income

C) An employee's group medical benefits are generally exempt from taxation as income Group medical and dental benefits are receive tax-free to employees. Also, premiums paid by the employer are deductible as business expenses.