Final Exam

Mr Johns has a major medical insurance policy with a $1,000 deductible and an 80% coninsurance clause. He becomes ill and is admitted to the hospital for several days. When he is discharged, his hospital bill is $5,000 and his doctor bills are 2,500. what is the amount that his insurance co-pay will pay? A) $5,200 B) $6,000 C) $6,500 D) $7,500

A) $5,200

Betty owns a $150,000 whole life participating insurance policy that she purchased ten years ago. She has paid premiums of $4,000 each year since she bought the policy, and the current cash surrender value is $60,000. Betty has received $10,000 in paid dividends since the policy inception. Which of the following statements is/are correct regarding Betty's policy? A. If Betty surrenders the policy now, she will have a taxable gain of $30,000 taxed as ordinary income B. The dividends that were paid on Betty's policy were subject to ordinary income tax treatment A) 1 only B) 2 only C) Both 1 and 2 D) Neither 1 nor 2

A) 1 only

How long would someone wait to receive Social Security disability benefits if they qualify? A) 5 months B) 6 months C) 12 months D) Benefits are paid immediately if eligible

A) 5 months

Harry, age 63 purchased an immediate annuity. The annuity will provide monthly payments to Harry for as long as he lives. If he dies before receiving payments for 20 years, the remaining payments will go to his beneficiary. What type of annuity did Harry purchase? A) A life annuity with a term-certain guarantee B) An installment refund annuity C) A straight-life annuity D) A joint and survivor annuity

A) A life annuity with a term-certain guarantee

The principle of indemnity requires that: A) a person is entitled to compensation only to the extent that financial loss has been suffered B) insured cannot indemnify himself from both the insurance company and a negligent third part for the same claim C) The insured must be subject to emotional or financial hardship resulting from the loss D) The insured and insurer must both be forthcoming will all relevant facts about the insured risk and coverage provided for that risk

A) a person is entitled to compensation only to the extent that financial loss has been suffered

Harold wants to participate in the stock market by purchasing a deferred annuity but wants protection against the loss of his principal. What annuity is best suited for Harold? A) an equity indexed annuity B) a variable annuity C) a fixed annuity D) a single-premium, variable annuity

A) an equity indexed annuity

When must an insurable interest exist for a property insurance claim? A) at the policy inception and time of loss B) at the policy inception only C) at the time of loss D) Either at the policy inception or at the time of the loss

A) at the policy inception and time of loss

Medical insurance is commonly known as health insurance and can be purchased from private insurance companies. Which of the following best describes the classes of medical insurance? A) coverage for hospital expense, surgical expense, physician expense, and major medical expense B) coverage for hospital expense, non-major medical expense, surgical expense, and physician expense C) coverage for hospital expense, comprehensive major medical expense, non-major medical expense, and physician expense D) coverage for comprehensive major medical expense, non-major medical expense, surgical expense, and physician expense

A) coverage for hospital expense, surgical expense, physician expense, and major medical expense

Which of the following is incorrect? A) long-term care insurance is needed for everyone B) many people do not need long-term care insurance C) those with millions in net worth do not need long-term care insurance D) many people who need long-term care insurance do not have it

A) long-term care insurance is needed for everyone

Disability policies have many characteristics and provisions. Which of the following is correct regarding policies that are guaranteed renewable versus non-cancelable? A)Non-cancelable prevent the insurance company from canceling the policy as long as the premiums are paid B) Guaranteed renewable and non-cancelable disability policies often have policy increases C) Guaranteed renewable and non-cancelable disability policies always provide protection for the insured until age 65 D) Guaranteed renewable policies can experience premium increases based on the health conditions of the insured

A)Non-cancelable prevent the insurance company from canceling the policy as long as the premiums are paid

Fred is 30 years old and recently began a job with a salary of $60,000. He is single but has been dating Lisa for 3 years. He expects to marry her within the next 5 years. Fred lives with his parents. What is the amount of life insurance that Fred currently needs? A. $0 B. $100,000 C. $60,000x6 = $360,000 D. $60,000x10 = $600,000

A. $0

Marsha, age 35 is a single mother of one daughter, skyler, age 9. marsha is a secretary with annual income of $35,000 and a negative net worth. Marsha has two objectives (1) to protect skyler in the event of her untimely death and (2) to save for her own retirement. Which of the following life insurance policies should she buy? A. A 20-year term insurance policy B. An ordinary whole life insurance policy C. A variable universale policy D. A universal policy

A. A 20-year term insurance policy

Which of the following life insurance policies provides the highest benefit for the lowest premium and is simply a pure death benefit policy? A. term B. Whole life C. Universal life D. All of the above

A. term

Which of the following is a characteristic of guaranteed renewability? 1. the insurer guarantees to renew the policy to a stated age 2. the policy is non-cancelable and the premium may not be increased 3. renewal is solely at insurer'a discretion 4. the insurer has the right to increase the premium rates for the underlying class in which the insured is placed A) 1 only B) 1 and 4 C) 1,2, and 4 D) 1,2,3, and 4

B) 1 and 4

Donna owns a house with a replacement cost of 500,000 she purchases 300,000 of insurance with a coinsurance requirement of 80% and a 500 deductible. if donna's house is hit by a hurricane and she suffers a 150,000 loss, what will the insurer pay? A) 74,500 B) 112,000 C) 119,500 D) 149,500

B) 112,000

A subrogation clause means that: A) a person is entitled to compensation only to the extent that financial loss has been suffered B) Insured cannot indemnify himself from both the insurance company and a negligent third part for the same claim C) The insured must be subject to emotional or financial hardship resulting from the loss D) the insured and insurer must both be forthcoming with all relevant facts about the insured risk and coverage provided for that risk

B) Insured cannot indemnify himself from both the insurance company and a negligent third part for the same claim

Which of the following is correct regarding a peril and hazard? A) a hazard is the proximate or actual cause of a loss B) a peril is the proximate or actual cause of a loss C) a peril is the condition that creates or increases the likelihood of a loss occurring D) none of the above

B) a peril is the proximate or actual cause of a loss

Custodial or personal care is? A) skilled nursing care provided B) assistance with daily living tasks C) making the terminally ill comfortable D) individualized care

B) assistance with daily living tasks

When must an insurable interest exist for a life insurance claim? A) at the policy inception and time of loss B) at the policy inception only C) at the time of loss D) either at the policy inception or at the time of the loss

B) at the policy inception only

Joe walks into his insurance agent's office and notices his agent's name on a business card and the insurer's name on letterhead. if an agency agreement exists, what type of authority does joe believe his agent has to enter into an insurance contract? A) express authority B) implied authority C) apparent authority D) none of the above

B) implied authority

Joe, age 33, is married and has a newborn son. Joe is concerned about providing for his family in the event of his premature death. He is concerned about the long-term affordability of life insurance but is able to budget a fixed amount for a period of time. Which of the following policies would you recommend? A. Annually renewable term B. Level-premium term C. Whole life insurance D. Single-premium annuity

B. Level-premium term

Ryan and Jody are age 68 and 72, respectively, and are married. They have significant assets that will be subject to estate taxes upon the second spouse's death. Which of the following life insurance policies would you recommend? A. Annually renewable term B. Second-to-die whole life policy C. First-to-die whole life policy D. First to die whole life policy

B. Second-to-die whole life policy

Which of the following life insurance policies contains a cash-value savings component that reaches the face value of the policy at age 100-120? A. Term B. Whole Life C. Universal Life D. Lifetime Annuity

B. Whole Life

Lucy, an ER surgeon, buys a disability policy with a base benefit of $6,000 and as SIS offset benefit of $1,200. Diane becomes disabled and eventually receives $1,000 in Social Security disability benefits. How much will she receive from the insurance company after Social Security benefits begin? A) $4,800 B) $6,000 C) $6,200 D) $7,200

C) $6,200

The Watson family has a family medical policy that provides the following coverage: - $250/ person deductible (3 person max) - $1,000 out-of-pocket limit - 80/20 coinsurance provision On a family trip, the watson's were involved in a car accident. four family members were hurt. each person incurred medical expenses for $7,500 how much will the insurance company pay? A) 23,400 B) 28,250 C) 29,000 D) 29,250

C) 29,000

Approximately, what percent of persons over the age of 65 will require some long-term care services at some point in their lives? A) 50% B) 60% C) 70% D) 90%

C) 70%

Patrick is age 67 and receives Social Security retirement income that covers 60 percent of his monthly expenses. He has no dependents. He would like to invest $200,000 in an annuity that will mitigate inflation and provide him with the highest monthly income. Although he has a 20-year table life expectancy, he thinks he has a much longer life expectancy. Which annuity is most suitable for Patrick? A) Single premium annuity B) A deferred, fixed annuity C) A single-premium, variable annuity D) A single-premium, variable annuity with a guaranteed term equal to his table life expectancy

C) A single-premium, variable annuity

Arline is a 70-year-old widow with no dependents. She wants to invest in an annuity that will produce income now. She has $100,000 to invest and wants to receive the most she can in monthly income. Which of the following is the most suitable annuity for Arline based on her objectives? A) A longevity annuity B_ A 20-year term certain, fixed annuity C) An immediate, single premium life annuity D) A deferred, fixed annuity

C) An immediate, single premium life annuity

Due to a recession, Pat has voluntarily changed her status from full-time to part-time with her employer. Prior to the change, she and her husband were covered under the company health plan, Which statement regarding COBRA is correct A) Because her change is voluntary, COBRA rules do not apply B) COBRA rules allow continuation of health coverage in this situation for up to 36 months C) COBRA rules allow continuation of health coverage in this situation for up to 18 months D) COBRA rules allow continuation of health coverage in this situation for up to 29 months

C) COBRA rules allow continuation of health coverage in this situation for up to 18 months

When the insured is silent to a fact that is material to the risk being insured, what has occurred? A) Breach of Warranty B) Misrepresentation C) Concealment D) Breach of indemnity

C) Concealment

what is.are the goals of long term care? A) return the recipient to independent living B) cure multiple chronic conditions C) Promote function independence D) Make a terminal person comfortable

C) Promote function independence

Non-cancelable health insurance contracts are different from guaranteed renewable contracts because: A) non cancelable policies are not guaranteed renewable B) non-cancelable policies cannot be canceled in mid-term C) non-cancelable policies cannot have a premium change D) non-cancelable policies cannot have more liberal disability benefits

C) non-cancelable policies cannot have a premium change

Jennifer is applying for life insurance, with her two children as the beneficiary. jennifer has always been told she looks young for her age and although she is 58, she statess that she is 28 on her life insurance application. what would the insurer be most likely to do if jennifer's beneficiaries attempt to collect on the life insurance policy? A) void the policy B) require payment on premiums for a 58 year old insured C) recalculate the face value of the policy based on actual premiums paid D) bring a lawsuit against the state

C) recalculate the face value of the policy based on actual premiums paid

Which of the following risks can an annuity mitigate? A) superannuation B) mortality C) superannuation and purchasing power D) mortality and purchasing power

C) superannuation and purchasing power

Terry has been advised by his insurance agent to purchase a variable universal life insurance policy. He has sought your advice regarding this purchase. All of the following are characteristics of a variable universal policy, except: A. The policy features increasing or decreasing death benefits and flexibility of variable premium payments B. The policy owner has exclusive investment control over the cash value of the policy C. The death benefit is guaranteed to be equal to the face value D. The cash value of a variable universal life policy is dependent on premiums and investment returns

C. The death benefit is guaranteed to be equal to the face value

Which of the following life insurance policies has a fixed premium, a cash value and a death benefit that can fluctuate based on investment performance A. Annually renewable term B. Variable renewable term C. Variable whole life D. Variable lifetime annuity

C. Variable whole life

Which one of the following statements concerning whole life insurance is false? A. Level-premium whole life insurance accumulates a cash value that eventually reaches the face value of the policy at age 100-120 B. Whole life insurance offers permanent protection throughout the insured's lifetime C. Whole life insurance can be participating, which means the insured must participate in self-directed investments for the cash value D. Whole life insurance premiums paid throughout the insured's lifetime are ordinary life policies

C. Whole life insurance can be participating, which means the insured must participate in self-directed investments for the cash value

Diane, an ER surgeon, buys a disability policy with a base benefit of $6,000 and as SIS offset benefit of $1,200. Diane becomes disabled and eventually receives $1,000 in Social Security disability benefits. How much will she receive from the insurance company initially? A) $4,800 B) $6,000 C) $6,200 D) $7,200

D) $7,200

COBRA coverage is available for which of the following persons? 1. A retiring employee 2. An employee who is terminated 3. Spouses and dependents of a deceased employee 4. An employee no longer able to work due to disability A) 3 only B) 3 and 4 C) 1,2, and 3 D) 1,2,3, and 4

D) 1,2,3, and 4

In which of the following events would COBRA rules apply for the benefit of the covered employee, employee's spouse, or dependent child? 1. The death of the covered employee 2. The covered employee is fired for incompetence 3. The employee changes status from full-time to part-time and, as a result, loses coverage 4. the covered employee gets a divorce A) 1 only B) 1 and 4 C) 2,3, and 4 D) 1,2,3, and 4

D) 1,2,3, and 4

When utilizing the needs approach in the determination of the amount of life insurance, which factors should be considered? 1. The family expense that will remain after the wage earner dies 2. The value of the wage earner's life in the event he or she dies 3.The income that can be generated by the surviving spouse 4. the number of dependents

D) 1,3,and 4

For medicare beneficiaries, the maximum stay in a skilled nursing facility during a benefit period cannot exceed how many days? A) 20 days B) 60 days C) 90 days D) 100 days

D) 100 days

Many disability policies that are provided on a group basis have a split definition. Which of the following describes such a definition? A) Disability will be defined based on the duties of the insured B) Disability will be defined based on any occupation that the insured is qualified for based on experience or training C) Disability will be defined based on the specific duties of the insured D) Disability will be defined based on the duties of the insured for a period of time and then based on any occupation that the insured is qualified for based on experience or training

D) Disability will be defined based on the duties of the insured for a period of time and then based on any occupation that the insured is qualified for based on experience or training

Bill, age 33, plans to retire at age 67. Bill is a consultant and his income varies widely on a monthly basis. Bill wants to invest in an annuity over his work life expectancy. Which of the following annuities is most suitable for Bill? A) Fixed premium, immediate annuity B) Single premium, immediate annuity C) Fixed premium, deferred annuity D) Flexible premium, deferred annuity

D) Flexible premium, deferred annuity

Roger has a disability policy with a 12-month elimination period. He was in a bizarre accident involving a crane falling on a building causing part of the building's exterior wall to fall on his van. He lost the use of both legs in the accident. If his policy has a presumptive total disability coverage provision, when will he begin receiving benefits? A) Immediately B) After six months as the provision accelerates the waiting period C) After a one month statutory administrative time period D) He will have to wait the 12 months

D) He will have to wait the 12 months

The risk that individuals of higher than average risk will seek out or purchase insurance policies is called? A) peril B) hazard C) law of large numbers D) adverse selection

D) adverse selection

Tax qualified long-term care insurance policies must offer all of the following features, provisions, or option except: A) guaranteed renewable B) option to purchase policy that increases with inflation C) a non-forfeiture option D) an option to purchase skilled nursing care coverage only

D) an option to purchase skilled nursing care coverage only

What is/are the key factors in determining the need for long-term care? A) a disabling accident B) an acute episode C) multiple chronic conditions D) inability to perform activities of daily living

D) inability to perform activities of daily living

What is the primary function of long-term care insurance? A) Pay claims for the insured B) Underwrite long-term care policies C) provide comprehensive coverage D) protect against catastrophic risks

D) protect against catastrophic risks

Which of the following most accurately describes the criteria required for an insured to qualify for long-term care benefits for a qualified plan under the health insurance portability and accountability act? A) the insured is unable to perform two of the six ADLs for 90 days B) the insured has substantial cognitive impairment requiring substantial assistance C) the insured must meet both a and b D) the insured may qualify by meeting either a or b

D) the insured may qualify by meeting either a or b

Watson, inc. has four equal partners. all four partners are interested in entering into a buy-sell arrangement. How many life insurance policies would be purchased to properly fund using a cross purchase agreement A. 4 policies B. 6 policies C. 8 policies D. 12 policies

D. 12 policies

Which of the following methods is/are appropriate to evaluate a person's life insurance needs? 1. The human life approach to evaluate life insurance needs takes into consideration the income replacement needs of a person's survivors including income during the readjustment period, income to widow, and educational funds for dependents 2. The needs approach evaluates the estimated present value of income generated over a person's work-life expectancy that is needed and then adjusts for the expected consumption of the person and for taxes A. 1 only B. 2 only C. 1 and 2 D. None of the above

D. None of the above

Which one of the following statements concerning universal life insurance is false? A. The insured has the flexibility to adjust premiums, face value and cash value of the policy B. The insured has flexibility without the investment responsibility of the cash value C. The cash value of the policy can be used to pay the premiums D. The death benefit of a universal life insurance policy is fixed

D. The death benefit of a universal life insurance policy is fixed

The blackout period is: A. The period of time immediately following the death of the wage earner B. The period of time after the death of a wage earner when the family is adjusting to life without the individual C. The period of time when the widow or widower and dependents receive Social Security benefits D. The period of time when the dependents have reached age 18 and the spouse's Social Security retirement benefits have not started

D. The period of time when the dependents have reached age 18 and the spouse's Social Security retirement benefits have not started

Which of the following is the most favorable definition of total disability in a disability insurance policy? Any Occupation Own Occupation Modified Own Occupation Split Definition

Own Occupation

Jack has a disability income policy that pays a monthly benefit of $2,400. Jack has been disable for 60 days, but he only received $1,200 from his disability insurance. which of the following is the probable reason that he only received $1,200?

The elimination period is 45 days