EXAM Review

Every licensed person in this state must reply to an inquiry by the Commissioner regarding the business of insurance within what time period? 15 business days 48 hours Immediately 3 business day

15 business days Every person licensed under this chapter must reply within 15 business days to an inquiry of the Commissioner regarding the business of insurance.

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following? Cancel the policy Increase the premium Exclude coverage for on-the-job injury Adjust the benefit in accordance with the increased risk

Adjust the benefit in accordance with the increased risk A part of the premium rating concerns the hazard of occupation.

A producer who fails to separate premium monies from his own personal funds is guilty of Larceny. Embezzlement. Theft. Commingling.

Commingling It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

The act of trying to discourage a policyholder from dropping his/her existing policy is called Baiting. Bargaining. Conservation effort. Dissuasive effort.

Conservation effort. The act of trying to discourage a policyholder from dropping his/her existing policy is called "conservation effort".

Why is it essential for an insurer to document all correspondence with an insured? Federal law Errors and omissions Statistics gathering State law

Errors and omissions

Items stipulated in the contract that the insurer will not provide coverage for are found in the Benefit Payment clause. Consideration clause. Exclusions clause. Insuring clause.

Exclusions clause. Exclusions are restrictions of coverage as stated in the policy.

What does "level" refer to in level term insurance? Cash value Interest rate Face amount Premium

Face Amount Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.

Which type of a hospital policy pays a fixed amount each day that the insured is in a hospital? Surgical Blanket Medigap Indemnity

Indemnity pays a fixed amount

In the event of a loss, business overhead insurance will pay for Medical bills of the business owner. Rent. Loss of profits. Salary of the business owner.

Rent Business Overhead Insurance is designed to pay the ongoing business expenses of a small business owner while they are disabled and unable to work

What happens if a non-member physician is utilized under the Point-Of-Service plan? The member patient will have to pay all costs out-of-pocket. The attending physician will be paid a fee for service, but the member patient will have to pay a higher coinsurance amount. The non-member physician will be paid a fee for service. The non-member physician will be paid a fee for service, but the member patient will be penalized per visit on his/her monthly premium.

The attending physician will be paid a fee for service, but the member patient will have to pay a higher coinsurance amount.

Which of the following is correct regarding selecting a primary care physician in a PPO plan? Out-of-network providers may be used for an additional premium. The insured may choose medical providers not found on the preferred list. An insured must receive pre-certification prior to visiting a preferred provider. Insureds typically pay lower out-of-pocket costs for out-of-network providers.

The insured may choose medical providers not found on the preferred list. However, out of pocket costs may be higher

An application for life insurance usually requires the agent to ask if the proposed insurance will replace an existing life insurance policy. All of the following are purposes for obtaining this information EXCEPT a)To make available full and clear information to the applicant. b)To reduce the opportunity for misrepresentation and incomplete comparisons. c)To establish minimum standards of conduct involving replacement. d)To ensure that at least three companies are involved so the policyowner gets competitive prices.

To ensure that at least three companies are involved so the policyowner gets competitive prices. On types of insurance, other than group, credit, or industrial; the agent must determine whether the proposed insurance will replace existing insurance. If the insurance is to replace existing insurance, the regulations regarding replacement must be strictly followed.

CAN-SPAM legislation requires that any commercial e-mail must contain an opt-out mechanism. How many days does a commercial e-mailer have to cease their distribution?

All opt-out requests must be honored within 10 business days.

Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination? An applicant who has been a victim of domestic abuse An applicant who is a smoker An applicant who was born in another country An applicant who is legally blind

An applicant who is a smoker Smoking or not smoking is a rating factor.

#24. Under HIPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy? a) An individual who was previously covered by group health insurance for 6 months is eligible. b) An individual who has used up COBRA continuation coverage is eligible. c) An individual who doesn't qualify for Medicare may be eligible. d) The gap of coverage for eligibility is a period of 63 or less days.

An individual who was previously covered by group health insurance for 6 months is eligible. All of these eligibility requirements are correct, except an individual who was previously covered for at least 6 months. HIPAA requires that the individual have a previous continuous creditable health coverage for at least 18 months.

Health coverage becomes effective when the Medical examination has been completed and the premium paid. First premium has been received in the insurance company's home office. First premium has been paid and the application has been approved. Producer delivers the policy to the insured.

First premium has been paid and the application has been approved.

An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen? The PPO will not pay any benefits at all. The insured will be required to pay a higher deductible. The PPO will pay the same benefits as if the insured had seen a PPO physician. The PPO will pay reduced benefits.

The PPO will pay reduced benefits The group health plan will not pay the full amount charged by the non-PPO doctor.

When is the insurability conditional receipt given? When an insured individual needs to obtain an insurability receipt for tax purposes. If the application is approved before the premium is paid When the premium is paid at the time of application After the application has been approved and the premium has been paid

When the premium is paid at the time of application

Within how many days of receipt of proof of death must the insurer pay the death benefit to the beneficiary to avoid paying an interest penalty? a)15 days b)30 daysc) c) 60 days d)90 days

d)90 days Benefits payable that have not been paid to the beneficiary within 90 days of the receipt of proof of death will accrue interest, starting on the 91st day, at the stated rate (8% minimum) plus 3%.

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must a)Defend the report if the agency feels it is accurate b)Change the report. c)Send an actual certified copy of the entire report to the consumer d)Respond to the consumer's complaint.

d)Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.

All the following are examples of violations of replacement EXCEPT Intentionally answering a question incorrectly. Advising an applicant to answer questions correctly. Any deceptive or misleading information. Failing to ask the applicant questions regarding replacement.

Advising an applicant to answer questions correctly. An applicant must be advised to answer questions correctly.

What type of premium do both Universal Life and Variable Universal Life policies have? a)Increasing b)Flexible c)Level fixed d)Decreasing

Flexible Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit Universal=FLEXIBLE

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? Defamation Unfair discrimination Errors and omissions Fraud

Fraud According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer.

Social Security Requirements:

Fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

When would a misrepresentation on the insurance application be considered fraud? Never: statements by the applicant are only representations. When the application is incomplete Any misrepresentation is considered fraud. If it is intentional and material

If it is intentional and material fraud=intentional A misrepresentation would be considered fraud if it is intentional and material. Fraud would be grounds for voiding the contract.

Which of the following statements is TRUE concerning the Accidental Death Rider? It is also known as a triple indemnity rider. This rider is only available to insureds over the age of 65. It is only available in group insurance. It will pay double or triple the face amount.

It will pay double or triple the face amount. The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.

Which two terms are associated directly with the premium? a)Term or permanent b)Renewable or convertible c)Level or flexible d)Fixed or variable

Level or flexible A level premium is one in which the premium payment never changes. A flexible premium is found in Universal life policies where the insured changes their premium payment.

The Insurance Commissioner is empowered by the Washington Insurance Code to perform all of the following duties EXCEPT Revoke the appointment of a deputy. Make revisions to the Insurance Code. Investigate the business practices of insurers. Levy fines against insurers found in violation of the Insurance Code.

Make revisions to the Insurance Code. Commissioner is not empowered to make revisions to the Insurance Code.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a)Insured's annual expenses. b)Effect of inflation on income over time c)Predicted needs of the family after the insured's death d)Insured's current and future income.

Predicted needs of the family after the insured's death. The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

Chance of a windstorm causing a loss to one's property is: A. risk B. uninsurable C. hazard D. peril

Risk Peril: Cause of loss. Risk: Uncertainty arising from the possible occurrence of given events that would result in loss with no opportunity for gain. Hazard: Condition that increases the probability of loss

Which type of life insurance policy generates immediate cash value? Decreasing Term Continuous Premium Single Premium Level Term

Single Premium Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

Under the fixed period option, the age is irrelevant

TRUE

Which of the following statements is correct regarding the separate account for collected premiums established and maintained by a producer? Personal funds may be commingled with premium funds. Separate accounts are not allowed. The account must include producer's commissions. The account may be interest bearing.

The account may be interest bearing. The separate account may be interest-bearing, and interest earned on the deposits held in the separate account may be retained by the producer and used to offset bank charges, establish reserves, pay return premiums, or for any of the purposes permitted by the Insurance Code.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a)The death benefit can be increased only by exchanging the existing policy for a new one. b)The death benefit can be increased by providing evidence of insurability. c)The death benefit cannot be increased. d)The death benefit can be increased only when the policy has developed a cash value.

The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.

All of the following are requirements for life insurance illustrations EXCEPT They may only be used as approved. They must identify nonguaranteed values. They must differentiate between guaranteed and projected amounts. They must be part of the contract.

They must be part of the contract.

All of the following are duties and responsibilities of producers at the time of application EXCEPT a)Change any incorrect statement on the application by personally initialing next to the corrected statement. b)Explain the nature and type of any receipt the producer is giving to the applicant. c)Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. d)Check to make sure that there are no unanswered questions on the application.

a)Change any incorrect statement on the application by personally initialing next to the corrected statement. Any changes to information on an application must be initialed by the applicant.

#1. All of the following types of term policies have face amounts that change during the policy term EXCEPT a)Increasing b)Renewable. c)Decreasing d)Level.

b)Renewable. There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy. Only the amount of the death benefit may fluctuate.

Which of the following qualifications is required for producers who want to sell annuities in this state? a)An annuities license and continuing education hours related to annuities every 2 years b)A life insurance license only c)An annuities license d)A life insurance license and a 4-hour training course

d)A life insurance license and a 4-hour training course A producer may sell, solicit, or negotiate the sale of annuity contracts only if appropriately licensed as an insurance producer and has successfully completed a one-time, 4-hour annuity suitability training.

A life insurance policy was issued with a face amount of $100,000. The policy's cash value is $50,000. If the insurer becomes insolvent, and the beneficiary submits a death benefit claim, what will the Insurance Guaranty Association pay to the policy claimant? $50,000 $100,000 $150,000 $500,000

$100,000 The benefits that the Association may become obligated to cover cannot exceed the lesser of the amount the insurer would have been liable for if it had not become impaired, or $500,000.

The Other Insurance Clause A. prohibits other insurance on the same property. B. upholds the principle of indemnity C allows coverage for catastrophic losses. D. allows more than one person to be insured under the policy.

B. upholds the principle of indemnity.

An applicant for an individual health policy failed to complete the application properly. Before being able to complete the application and pay the initial premium, she is confined to a hospital. This will not be covered by insurance because she has not met the conditions specified in the Insuring Clause. Pre-existing Conditions Clause. Eligibility Clause. Consideration Clause.

Consideration clause Both parties brining value to the contract

A policy which covers medical costs related to a specific condition is called a Specific Condition Policy. Limited Coverage Policy. Dread Disease Policy. Condition-Specific Policy.

Dread Disease Policy Dread Disease policies cover medical expenses for a particular medical condition, such as cancer or heart disease.

A producer did not do his research and placed insurance coverage through an unauthorized insurer. When this becomes known, what may the Commissioner do? a)Order a policy replacement b)Cancel the policy c)Allow the policy in force, but fine the producer d)Issue a certificate of authority for that insurer

Order a policy replacement The Commissioner may order replacement of policies improperly placed with an unauthorized insurer with policies issued by an authorized insurer.

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? Proof of insurability is not required. Medical exam Her parents' federal income tax receipts Medical exam and parents' medical history

Proof of insurability is not required. If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.

What would a physician utilize if he/she wanted to know if a treatment is covered under an insured's plan and at what rate it will be paid? Supplementary chart Prospective review Concurrent review Comprehensive review

Prospective review Prospect-think of into the future / advance

The Commissioner may disapprove an HMO agreement form under all of the following circumstances EXCEPT The title or heading is misleading. The purchase is solicited by advertising. The benefits provided are unreasonable in relation to the amount charged. The agreement contains unreasonable restrictions on the treatment of patients.

The purchase is solicited by advertising.

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT The amount of insurance. The type of investment. The length of coverage. The premium.

The type of investment. Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.

If a producer has been found guilty of any violations of the provisions of the Insurance Code, in addition to or instead of the suspension, revocation, or refusal to renew a producer's license, the Commissioner may levy a fine upon the licensee, up to a)$1,000 per offense b)$25,000 total. c)$5,000 per offense. d)$5,000 total fine regardless of the number of offenses.

$1,000 per offense If a producer has been found guilty of any violations of the provisions of the Insurance Code that are subject to license suspension, revocation, or nonrenewal, in addition to or instead of the suspension, revocation, or refusal to renew a producer's license, the Commissioner may levy a fine upon the licensee, after a hearing. The fine for each offense may be up to $1,000.

An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay? $10,000 $7,500 $5,000 $0

$5,000 First plan paid 10,000, excess plan covered the last $5000

What is the shortest possible elimination period for group short-term disability benefits provided by an employer?

0 days Eliminations periods are nonexistent in some policies

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to 3 years. 5 years. 10 years. 12 years.

10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.

What is the penalty for the insurer who fails to refund premiums within 30 days after the free-look period? 3% 5% 10% 12%

10% If an insurer does not refund the premium within 30 days of return of the policy, an additional 10% penalty is added to any premium refund due.

How many hours of continuing education is each producer required to complete during each 2-year licensing period? 12 hours 18 hours 24 hours 36 hours

24 hours 24 hours every 2 years 3 of the hours are in Ethics

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a)3 days b)5 days c)10 days d)14 days

3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.

When a policy is replaced, replacing insurers must maintain a replacement register regarding that policy for 5 years. 8 years. 10 years. 3 years.

3 years copies of replacement documents=3 years

How long is an open enrollment period for Medicare supplement policies?

6 months An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B.

When an insured purchased her disability income policy, she misstated her age to the agent. She told the agent that she was 30 years old, when in fact, she was 37. If the policy contains the optional misstatement of age provision Amounts payable under the policy will reflect the insured's correct age. The contract will be deemed void because of the misstatement of age. The elimination period will be extended 6 months for each year of age misstatement. Because the misstatement occurred more than 2 years ago, it has no effect.

Amounts payable under the policy will reflect the insured's correct age. If an insured misstates his or her age upon policy application, the optional misstatement of age provision will change the payable benefit to that which would have been purchased at the insured's actual age.

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

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

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?

Bronze level benefit plans pay 60% of expected health care costs; Silver level plans pay 70%; Gold level plans pay 80%, Platinum level plans pay 90%.

A policy available to business owners that provides payment for normal business expenses in the event that the owner is disabled is called Recurrent Disability Business Overhead Expense. Credit Accident and Health coverage Partial Disability

Business Overhead Expense pays ongoing expenses if the owner becomes diabled (ie. rent, ) Premiums paid are tax deductible as a business expense, but proceeds paid are taxable as income.

Which of the following statements concerning buy-sell agreements is true? Premiums paid are deductible as a business expense. Benefits received are considered income taxable. Buy-sell agreements pay in the event of a medical emergency. Buy-sell agreements are normally funded with a life insurance policy.

Buy-sell agreements are normally funded with a life insurance policy. A buy-sell agreement is simply a contract that establishes what will be done with a business in the event that an owner dies. Buy-sell agreements are normally funded with a life insurance policy.

Do-Not-Call Registry established by the:

Federal Trade Commission The FTC established the do-not-call list in order to protect consumers against unwanted solicitations.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? Survivor Life Second-to-Die Common Disaster Accidental Death

Common Disaster Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? Cost of Living Rider Value Adjustment Rider Return of Premium Rider Inflation Rider

Cost of Living Rider The Cost of Living rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.

A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? Indemnity Guaranteed Noncancellable Nondiscriminatory

Guaranteed

Which component increases in the increasing term insurance? a)Death benefit b)Cash value c)Interest on the proceeds d)Premium

Death benefit Increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term.

All of the following may be excluded from coverage in a Major Medical Expense policy, EXCEPT Emergency surgery. Custodial care. Cosmetic surgery. Coverage provided under workers compensation.

Emergency surgery is included in Major Medical Policy

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? a)Blackout approach b)Lump-sum approach c)Human life value approach (HLVA) d)Needs approach

Human Life Value Approach (HLVA) Human life value approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit? When the insured dies, the primary and contingent beneficiaries share death benefits equally. With the primary beneficiary's written consent If the insured died from accidental means If the primary beneficiary predeceased the insured

If the primary beneficiary predeceased the insured The daughter, as contingent beneficiary, would need to outlive the insured and primary beneficiary.

The Washington Insurance Code regulation regarding policy replacement applies to which of the following types of transactions? a)Credit life insurance b)Replacement of policies by the same insurer c)Group life insurance d)Immediate annuity contract

Immediate annuity contract Credit life insurance, group contracts, and policies issued and replaced by the same insurer are exempt from replacement regulations. Annuities = need replacement regulations

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

Individual tax deduction for premiums paid.

In which of the following locations would skilled care most likely be provided? In an institutional setting At the patient's home In an outpatient setting At a physician's office

Institutional setting Skilled Nursing or Therapy Care: performed under the direction of a physician

Which of the following best describes a bail-out provision? It allows the owner to receive a higher interest rate at certain timeframe. It decreases the annuity surrender value. It allows the owner to surrender the annuity without a charge. It waives the surrender charge for the annuitants confined to a long-term care facility.

It allows the owner to surrender the annuity without a charge. Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.

Which of the following is NOT true regarding policy loans? Policy loans can be repaid at death. An insurer can charge interest on outstanding policy loans. A policy loan may be repaid after the policy is surrendered. Money borrowed from the cash value is taxable.

Money borrowed from the cash value is taxable. Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans.

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a)Percentage of medical costs paid by the insurer b)Payments for life c)Yearly premium waiver and income d)Monthly premium waiver and monthly income

Monthly premium waiver and monthly income The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.

An applicant for health insurance has not had a medical claim in 5 years. He exercises daily and does not smoke or drink. What classification do you assume the applicant would receive from his insurer? Superior Preferred Low-risk Standard

Preferred The "preferred" status indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify for lower premiums than those who are in the lower categories.

Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to Prevent the insured from obtaining excess insurance. Enable the insurer to provide affordable coverage. Enable the insurer to reduce variable costs. Prevent overutilization and malingering.

Prevent overutilization and malingering. The insurer wants the insured to have a financial incentive to return to work.

If an individual is covered by a policy that includes an Accidental Death & Dismemberment rider, what term describes the maximum benefits he will receive if he loses sight in both eyes as a result of a fire? Reciprocal amount Capital sum Percentage of full amount Principal sum

Principal Sum: Full Amount of benefits Capital Sum: Percentage of the full amount

The Federal Fair Credit Reporting Act Regulates consumer reports. Protects customer privacy. Regulates telemarketing. Prevents money laundering.

Regulates consumer reports

Annuities can be used to fund which of the following? Variable life insurance Group life insurance Estate creation Retirement plans

Retirement plans Since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.

Which is NOT true about beneficiary designations? a)Trusts can be valid beneficiaries. b)The beneficiary must have insurable interest in the insured. c)The beneficiary may be a natural person. d)The policy does not have to have a beneficiary named in order to be valid.

The beneficiary must have insurable interest in the insured. A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? The insured may choose to convert to term or permanent individual coverage. The insured would not need to prove insurability for a conversion policy. The insured may convert coverage to an individual policy within 31 days. The premium for individual coverage will be based upon the insured's attained age.

The insured may choose to convert to term or permanent individual coverage. Insured cannot choose, the insurer chooses When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.

What is the purpose of coinsurance provisions? To share liability among different insurance companies To help the insurance company to prevent overutilization of the policy To have the insured pay premiums to more than one company To guarantee payment to the doctors and hospitals

To help the insurance company to prevent overutilization of the policy The purpose of the coinsurance provision is for the insurance company to control costs and discourage overutilization of the policy.

Which of the following is NOT a goal of risk retention? To fund losses that cannot be insured To minimize the insured's level of liability in the event of loss To reduce expenses and improve cash flow To increase control of claim reserving and claims settlements

To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

When is the insurability conditional receipt given? When an insured individual needs to obtain an insurability receipt for tax purposes. If the application is approved before the premium is paid When the premium is paid at the time of application After the application has been approved and the premium has been paid

When the premium is paid at the time of application

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce Under any circumstances. Unless they have served an appropriate prison sentence. Without receiving written consent from a Federal Judge. Without receiving written consent from an insurance regulatory authority.

Without receiving written consent from an insurance regulatory authority. Title 18, US Code, sections 1033-1034 makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce without receiving written consent from an insurance regulatory authority.

A tornado that destroys property would be an example of which of the following? a)A peril b)A pure risk c)A loss d)A physical hazard

a)A peril A peril is the cause of loss insured against in an insurance policy.

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined? a)It is a percentage of the cash value and decreases over time. b)It is always 7% of the cash value. c)It is a flat fee determined by the annuity owner when the annuity is purchased. d)It will increase as the accumulation period increases.

a)It is a percentage of the cash value and decreases over time. If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a)Mutual b)Reciprocal c)Nonprofit service organization d)Stock

a)Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.

Which of the following statements is correct regarding a whole life policy? a)The policyowner is entitled to policy loans. b)Cash values are not guaranteed. c)The policy premium is based on the attained age. d)The death benefit may increase or decrease during the policy period.

a)The policyowner is entitled to policy loans. Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans. whole life=policy loans

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as a)Utmost good faith. b)Reasonable expectations c)A warranty. d)Implied warranty

a)Utmost good faith. The insurer must be able to rely on the statements given by the insured in the application. The insured must be able to rely on the insurer's promise to pay covered losses.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a)Withdrawals are not taxable. b)Distributions before age 59 1/2 incur a 10% penalty on policy gains c)Policy loans are taxable distributions d)Accumulations are tax deferred.

a)Withdrawals are not taxable. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true. MEC=TAXABLE

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a)Rollover. b)Settlement option. c)Nontaxable exchange. d)Nonforfeiture option.

b) Settlement option. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

A legally acceptable attempt by an existing insurer to persuade their client to continue an existing life insurance policy in force when a written communication is received from a replacing insurer is called a)Retention. b)Conservation. c)Disclosure. d)Replacement.

b)Conservation. The Insurance Code requires that when a life insurance policy is being replaced by another insurer, the existing (ceding) insurer must be notified and have an opportunity to conserve the business.

If an agent converts premium he collects for his personal use, the agent can be charged with a)Fiduciary liability b)Embezzlement c)Unethical conduct d)Twisting.

b)Embezzlement Embezzlement is the criminal act of taking money belonging to someone else. In addition to revocation of license, criminal penalties will be imposed.

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? a)Graded Premium Life b)Limited-pay Life c)Variable Life d)Adjustable Life

b)Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

The premium of a survivorship life policy compared with that of a joint life policy would be a)Half the amount. b)Lower c)Higher. d)As high

b)Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life survivorship premium lower than joint life premium

The Commissioner may permit an agent to enter into reasonable arrangements with prospective insureds to charge a reduced fee in situations where services that are charged for are a)Billed in accordance with the Commissioner's fee scale for additional services rendered by agents or brokers. b)Provided beyond the scope of customarily services in connection with the solicitation and procurement of insurance. c)Billed separately from the policy premiums and are maintained in the separate account .d)Identified as such in the policy illustration and can be paid upfront by the policyholder.

b)Provided beyond the scope of customarily services in connection with the solicitation and procurement of insurance. The Commissioner may permit an agent or broker to enter into reasonable arrangements with insureds to charge a reduced fee in situations where services that are charged for are provided beyond the scope of services customarily provided in connection with the solicitation and procurement of insurance.

Equity indexed annuities a)Invest conservatively. b)Seek higher returns c)Are more risky than variable annuities. d)Are security instruments.

b)Seek higher return Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? a)The death benefit will be larger. b)The death benefit will be smaller. c)The death benefit will be forfeited. d)The death benefit will be the same as the original face amount.

b)The death benefit will be smaller. If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.

If a producer has procured insurance coverage for a policyowner through an unauthorized insurer, which of the following could happen? a)The unauthorized insurer is the party solely responsible for the policy claims b)The producer may be held personally liable for policy claims c)The policy is considered void and no benefits will be paid d)The policy main continue in force if the producer did not realize he was in violation.

b)The producer may be held personally liable for policy claims A person who issues insurance contracts in this state on behalf of an unauthorized insurer may be held personally liable.

For how long is an insurance company allowed to defer policy loan requests? a)30 days b)60 days c)6 months d)1 year

c)6 months Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.

Which of the following types of agent authority is also called "perceived authority"? a)Implied b)Fiduciary c)Apparent d)Express

c)Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created Perceived= Apparent

Any person who transacts insurance without a license is punishable with a Class B felony. If the Commissioner has reason to believe that any person has violated this rule, the Commissioner may do any of the following EXCEPT a)Suspend or revoke any licenses. b)Assess a civil penalty up to $25,000 per violation c)Impose a prison sentence of no more than 6 months d)Issue and enforce a cease and desist order.

c)Impose a prison sentence of no more than 6 months Any person who transacts insurance without a license is punishable with a Class B felony. If the Commissioner has reason to believe that any person has violated this rule, the Commissioner may do any of the following: issue and enforce a cease and desist order, suspend or revoke any licenses, and/or assess a civil penalty of no more than $25,000 for each violation. cannot impose a prison sentence

#65. An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a)Pay nothing; there was a misrepresentation on the application b)Pay the full death benefit and refund excess premium c)Pay a reduced death benefit d)Pay the full death benefit

c)Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

Which of the following would help prevent a universal life policy from lapsing? a)Adjustable premium b)Corridor of insurance c)Target premium d)Face amount

c)Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime. think of it as the minimum amount paid to keep policy active

Which of the following is an agreement between an insured and an insurer, where the insurer agrees to indemnify the insured for specific losses in exchange for a premium? a)Reciprocity b)The indemnity clause c)The insurance contract d)The insurance guaranty

c)The insurance contract Insurance contracts are defined as the agreements made between an insured and an insurer, where the insurer promises to indemnify the insured for covered losses, in exchange for a premium. Both parties are bound by the conditions of the contract.

Which of the following determines the cash value of a variable life policy? a)The policy's guarantees. b)The premium mode c)The performance of the policy portfolio d)The company's general account

c)The performance of the policy portfolio The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer. Variable=performance of portfolio

Why should the producer personally deliver the policy when the first premium has already been paid? a)To find out how the family has been doing since the initial presentation b)To make sure the policy is not stolen or lost c)To help the insured understand all aspects of the contract d)To ensure the producer gets paid commission

c)To help the insured understand all aspects of the contract It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.

When is the earliest a policy may go into effect? a)When the insurer approves the application b)After the underwriter reviews the policy c)When the application is signed and a check is given to the agent d)When the first premium is paid and the policy has been delivered

c)When the application is signed and a check is given to the agent The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.

If the benefits from a life insurance policy are not paid to the beneficiary within 90 days, what is the minimum interest rate the insurer will have to pay on the 91st day? a) 3% b) 5% c)8% d)11%

d) 11% Benefits payable that have not been paid to the beneficiary within 90 days of the receipt of proof of death will accrue interest, starting on the 91st day, at the stated rate (8% minimum) plus 3%.

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs? a)Single Premium Whole Life b)Interest-sensitive Whole Life c)Decreasing Term d)Adjustable Life

d)Adjustable Life Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. Any increase in face amount requires proof of insurability.

Which of the following is another term for an authorized insurer? a)Certified b)Licensed c)Legal d)Admitted

d)Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer. Admitted=Authorized

Which of the following is TRUE regarding a policy issued to a labor union insuring members of the organization for the benefit of persons other than the union or organization? a)Eligible members must include all members of the labor union b)The policy must cover at least 25 members at date of issue c)Premiums for the policy are paid by the policyholder (labor union) either entirely or in some combination with funds contributed by the insured members d)All of the above are true.

d)All of the above are true. All of the answer choices are true regarding policies issued to labor unions that are insuring members for the benefit of persons other than the union or organization.

A Universal Life Insurance policy is best described as a/an a)Variable Life with a cash value account. b)Whole Life policy with two premiums: target and minimum. c)Flexible Premium Variable Life policy. d)Annually Renewable Term policy with a cash value account.

d)Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

When an annuity is written, whose life expectancy is taken into account? a)Beneficiary b)Life expectancy is not a factor when writing an annuity c)Owner d)Annuitant

d)Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a)Spouse rider b)Children's rider c)Additional insured rider d)Family term rider

d)Family term rider A single rider that provides coverage on every family member is called a "family rider".

Which of the following statements regarding HIV testing for life insurance purposes is NOT true? a)Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant. b)The testing practices must meet the criteria of the U.S. Department of Health and Human Services. c)HIV testing is regulated at the state level. d)Insurers are barred from requesting HIV testing.

d)Insurers are barred from requesting HIV testing. It is common for insurers to require HIV testing when an applicant seeks a policy with a large face amount. The insurer must abide by a variety of rules created by its respective state.

Which of the following best describes annually renewable term insurance? a)It requires proof of insurability at each renewal. b)Neither the premium nor the death benefit is affected by the insured's age. c)It provides an annually increasing death benefit d)It is level term insurance.

d)It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

Which of the following is an example of a limited-pay life policy? a)Renewable Term to Age 70 b)Level Term Life c)Straight Life d)Life Paid-up at Age 65

d)Life Paid-up at Age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

The causes of loss insured against in an insurance policy are known as a)Losses b)Risks c)Hazards d)Perils

d)Perils Perils are the causes of loss insured against in an insurance policy.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT a)FINRA registration. b)A securities license. c)A life insurance license. d)SEC registration.

d)SEC registration. Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents SECurities= not agents

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy? a)Term rider b)Guaranteed insurability rider c)Payor benefit rider d)Substitute insured rider

d)Substitute insured rider The substitute insured rider, or change of insured rider, allows the policyowner to change the insured listed under the policy, subject to insurability. This rider is often used in business life insurance policies.

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a)Adjustable life b)Term life c)Limited pay d)Universal life

d)Universal life Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited. universal life charges to take $$ out

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? a)Limited benefit b)Aviation c)Hazardous occupation d)War or military service

d)War or military service There are two different types of exclusions that may be used by life insurers that limit the death benefit if the insured dies as a result of war or while serving in the military. The status clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war.

Who is required to pay the fee for an insurance producer's appointment? There is no appointment fee. The insurance producer The Commissioner The appointing insurer

the appointing insurer

Paid-Up Additions

used to buy additional amounts of insurance