exam simulator texas life and health
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of
$10,000
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
$25,000
Under the Texas code, the MAXIMUM for which a spouse may be insured in a company group life program with a $50,000 death benefit is:
$25,000
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a
$25,000 individual whole life policy
J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay
$3,600 ($2,000 + 20% of the remaining bill = $3,600)
C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?
$720
What percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
A Long-Term Care policy must offer a MINIMUM benefit period of how many months?
12
What year was the McCarran-Ferguson Act enacted? 1944 1945 1946 1947
1945
What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?
2
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of
2 years
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
The USA Patriot Act was enacted in
2001
A newly licensed General Lines agent must complete a MINIMUM of how many hours of continuing education within 24 months after initial license?
24
An individual life insurance policy issued in Texas MUST have a grace period for premium payment of how many days?
31
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
What percentage of continuing education instruction MUST be completed in the classroom or classroom equivalent?
50%
Under the Nonforfeiture Law, a cash surrender value payment may be deferred by the insurance company for NO LONGER than how many months?
6
Which of these is an element of a Variable Life policy? - A fixed, level premium - Insurer assumes the investment risk -No investment risk to the policyowner -Rate of returns are guaranteed
A fixed, level premium
C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
ABC is the policyowner, C is the insured, and ABC is the beneficiary
Which of the following Dividend options results in taxable income to the policyowner?
Accumulation at Interest
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
All of the following statements regarding group health insurance is true EXCEPT
An individual policy is given to each member
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
Who can purchase a plan through the Marketplace?
Any legal resident except those incarcerated
Any changes made on an insurance application requires the initials of whom?
Applicant
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent
Traditional individual retirement annuity (IRA) distributions must start by
April 1st of the year following the year the participant attains age 70 1/2
Which of the following medical expenses does Cancer insurance NOT cover?
Arthritis
When does a Probationary Period provision become effective in a health insurance contract?
At the policy's inception
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion
An applicant for an agent's license must meet which of the following requirements?
Be honest, trustworthy, and reliable
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is
Business Overhead Expense
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the sale of a business?
Business owner becoming disabled
A Whole Life Insurance Policy endows when the
Cash value equals the death benefit
What is issued to each employee of an employer health plan?
Certificate
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates?
Change of occupation provision
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the
Commissioner of Insurance
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? - Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company -Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company -Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company - Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Contributory
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the 0
Cost of insurance
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it? Modified Whole Life 20-Pay Life Decreasing Term Endowment
Decreasing Term
A Family Income Policy is a combination of Whole Life and
Decreasing Term insurance
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell
A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant?
Disability Income
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?
Discourages overutilization of the insurance coverage
What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?
Dread disease insurance
In a Disability Income policy, which of these clauses acts as a deductible?
Elimination Period
The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as
Employee's premiums paid by the employer is tax-deductible to the employer as a business expenditure
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
Entire Contract
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?
Entire Contract
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase? - Equity index insurance - Endowment - Graded whole life policy -Return of premium policy
Equity index insurance
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion
All of the following provisions must be included in life insurance policies EXCEPT
Extended Term
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for which of the following reasons?
Failure to pay for coverage
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors? -Hobbies -Weight -Gender -Medical history
Gender
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is NOT a reason for purchasing life insurance on the life of a minor? -If both parents were to die, it would provide death benefits to the child - Provides funds for final expenses if the child were to die - Provides living benefits for the child's college education -Provides child with insurance now, in case the child becomes uninsurable later
If both parents were to die, it would provide death benefits to the child
In regards to representations or warranties, which of these statements is TRUE? - Warranties are statements considered to be true to the best of the applicant's belief -If material to the risk, false representations will void a policy -Representations are statements guaranteed to be true in every respect -If material to the risk, false representations will NOT void a policy
If material to the risk, false representations will void a policy
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?
If the employee paid for qualified medical expenses, the reimbursements may be tax-free
The type of annuity that can be purchased with one monetary deposit is called a(n)
Immediate annuity
An agent MUST do which of the following during a sales presentation for a participating life insurance policy?
Include a statement that dividends are NOT guaranteed
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Who makes the legally enforceable promises in unilateral insurance policy? - Beneficiary -Insurance company -Insured -Applicant
Insurance company
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
Which of the following claims are typically excluded from Medical expense policies?
Intentionally self-inflicted injuries
A policyowner would like to change the beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy and make the change permanent. Which type of designation would fulfill this need?
Irrevocable
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
What MUST an insurance company use in its advertising?
Its true corporate name
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan
Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
Less restrictive
Which of the following situations does a Critical Illness plan cover?
Leukemia
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
Living Benefit
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
Which of these is an element of a Single Premium annuity?
Lump-sum payment
Comprehensive Major Medical policies usually combine
Major Medical with Basic Hospital/Surgical coverage
Which of these factors do NOT play a role in the underwriting of a life insurance policy? Avocations Credit status Marital status Occupation
Marital status
An agent MUST give a prospective insured an Outline of Coverage when taking an application for a
Medicare Supplement policy
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
Modified Whole Life
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
Monthly
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Ordinary income tax and a 10% tax penalty for early withdrawal
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
A certificate of authority does which of the following?
Permits an insurance company to transact business in Texas
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Premiums may increase at time of renewal
What is the purpose of the Time of Payment of Claims provision?
Prevents delayed claim payments made by the insurer
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary
What must the policyowner provide to the insurer for validation that a loss has occurred?
Proof of Loss
All of these are considered sources of underwriting information about an applicant EXCEPT
Rating Services
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
Reinstatement
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Post-tax dollar contributions are found in
Roth IRA investments
An insurance company must do which of the following to terminate an agent's appointment? - Send notice of the termination to the Texas Department of Insurance - Request that the Texas Department of Insurance cancel the agent's license -Notify the agent of the termination at least 30 days before the effective date of termination -Request a hearing before the Commissioner of Insurance
Send notice of the termination to the Texas Department of Insurance
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
Which mode of payment is NOT used by health insurance policies?
Single premium
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?
Social Security Disability Income
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan
Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party?
Subrogation
Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT?
Suicide may not be a defense against payment after the second year
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
What does a Guaranteed Insurability rider provide a Disability Income policyowner?
The ability to periodically increase the amount of coverage without evidence of insurability
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
If an annuity is terminated prior to beginning of the income payment period, the contract owner receives
The contract surrender value at that time
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually
A policy of adhesion can only be modified by whom? -The agent -The applicant -The primary beneficiary -The insurance company
The insurance company
Which of the following circumstances would cause a Medicare Supplement policy to be cancelled?
The insured fails to pay the premium
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary
What is the elimination period of an individual disability policy?
Time period a disabled person must wait before benefits are paid
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
Life and health insurance policies are
Unilateral contracts
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need? -Endowment at Age 75 -Universal Life -Graded Benefit Whole Life - Modified Whole Life
Universal Life
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal Life
Insurance company agent appointments remain in force for which of the following maximum periods of time, if any?
Until terminated or withdrawn
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
Which of the following BEST describes how pre-admission certifications are used?
Used to prevent nonessential medical costs
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
The provision in a Group Health policy that allows the insurer to postpone coverage for a covered illness 30 days after the policy's effective date is referred to as the
Waiting Period
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
The Commissioner of Insurance has the power and duty to take all of the following actions EXCEPT
activate insurance companies' financial reserves
An insurance company must provide information on fraudulent claims at the request of all of the following entities EXCEPT
an insured
An agent may legally share commissions only with
another agent who is licensed in the same line of insurance
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
Medicare Part C is
available to those who are enrolled in Medicare Part A and Part B
Variable Whole Life Insurance can be described as
both an insurance and securities product
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
conditional
The incontestable clause allows an insurer to
contest a claim during the contestable period
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will
continue coverage but exclude the heart condition
All of the following statements about health coverage for newborns are correct EXCEPT
coverage during the first year is limited to congenital defects
A Business Overhead Expense policy
covers business expenses such as rent and utilities
The Insurance Commissioner may examine the records of an insurance company in order to
determine the solvency of the company
An insurance company may be judged guilty of false advertising if it
exaggerates its dividends in a newspaper advertisement
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
exclusion
A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for
experimental and investigative services
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
An organization that solicits insurance only among its members is known as a
fraternal benefit society
K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered
guaranteed renewable
An insurer receives proof of loss for an acceptable medical expense claim under an Individual Health Insurance Policy. Under the Time of Payment of Claims provision, the insurer MUST pay the benefits
immediately
The phrase "This policy will only pay for a semi-private room" is an example of a(n)
internal limit
A warranty
is a statement guaranteed to be true
The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who
is found guilty of misrepresentation or fraud in obtaining the license
Credit Life insurance is
issued in an amount not to exceed the amount of the loan
All of the following are limited benefit plans EXCEPT
life insurance policies
An agent who tells a client that dividends are guaranteed may be guilty of
misrepresentation
In an individual retirement account (IRA), rollover contributions are
not limited by dollar amount
The Notice of Claims provision requires a policyowner to
notify an insurer of a claim within a specified time
An insurance agent does NOT have fiduciary responsibilities to
other agents
If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely
pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age
Who elects the governing body of a mutual insurance company?
policyholders
Which of the following is an example of rebating?
returning a portion of a premium as inducement to purchase insurance
With Optionally Renewable Health policies, the insurer may
review the policy annually and determine whether or not to renew it
Which of the following services is NOT covered under a hospitalization expense policy?
surgeon's fees
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is
the cost
A disability elimination period is best described as a
time deductible
Benefits for drug and alcohol treatment under a group health policy must include all of the following services EXCEPT -treatment in a certified facility -transportation to and from an outpatient facility -outpatient treatment through a public hospital or clinic - group therapy prescribed by a physician
transportation to and from an outpatient facility
Insurance agent licenses normally must be renewed every
two years
According to the Time Limit of Certain Defenses provision in an Individual Health Insurance Policy, nonfraudulent misstatements first become incontestable
two years from the date of the policy was issued
A foreign insurance company is one that is incorporated
under the laws of another state
Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the Texas Insurance Code covering -rebating -false advertising -discrimination -unfair methods of competition
unfair methods of competition
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
The part of a life insurance policy guaranteed to be true is called a(n)
warranty
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
