Final Exam for life and health

Which of the following terms means that the policyowner can change the beneficiary designation at any time and for any reason? A Revocable B Irrevocable C Per capita D Per stirpes

A Beneficiary designations are presumed to be revocable and subject to change at any time and for any reason by the policyowner unless specified as irrevocable, in which case the irrevocable beneficiary would need to consent to any change.

Joe has a policy with a face amount of $50,000 and a policy loan of $2,000. He is also a week late on his $500 premium payment. Joe decides he can no longer make monthly payments, so he chooses the extended term nonforfeiture option. What is the face value on the new policy? A $50,000 B $50,000 less the $500 premium and the $2,000 loan balance C $50,000 less the $2,000 loan balance D $50,000 minus the $500 premium

A $50,000 When exercising the Extended Term Option, the Face Amount Always remains the same. The insurer takes the Net cash value and applies it to maintain the same face amount for as much extended time that it will purchase. The loan amount is applied before the extended term is determined. The past due premium is not a consideration.

Generally, Universal Life has how many death benefit options to choose from? A 2 B 3 C 1 D 4

A 2 Universal Life allows you to choose from two death benefit options, Option A or Option B.

If a father were to add a Child Rider to a policy to cover his children, when would coverage become effective for a newborn? A At 14 or 15 days of age B At 14 or 15 weeks of age C At 1 year of age D At birth

A At 14 or 15 days of age Children born after the rider is issued are covered automatically after 14 or 15 days, depending on the insurer, at no additional premium.

Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which Nonforfeiture Option provides this protection? A Extended Term B Reduced Paid-Up C Fixed Amount D Paid-Up Option

A Extended Term Extended Term would allow the present cash value of the policy to buy a single premium term policy of the same face amount for the time period stated in the policy's nonforfeiture table. Fixed Amount is a Settlement Option, and Paid-Up Option is a Dividend Option.

The current rate of interest paid to the cash value account of a universal life policy consists of: A Guaranteed interest plus excess interest B Excess interest plus equity earnings C None of the answers listed D Guaranteed interest plus equity earnings

A Guaranteed interest plus excess interest The 'current interest' in a universal life policy is simply the guaranteed interest plus all excess interest earnings that the insurance company is earning at that time.

Which statement best describes the provisions of the Uniform Simultaneous Death Act? A If the insured and the primary beneficiary should die immediately in the same accident, the proceeds are paid as if the primary beneficiary had died first B It permits all of the immediate family members to share the proceeds equally C If the insured and the primary beneficiary should die immediately in the same accident, it requires an autopsy be performed to determine which one outlive the other and will pay the proceeds according to the beneficiary designations D If both the insured and primary beneficiary should die immediately in the same accident, the proceeds are paid directly to the insured's estate

A If the insured and the primary beneficiary should die immediately in the same accident, the proceeds are paid as if the primary beneficiary had died first The Uniform Simultaneous Death Act allows life insurance proceeds to be paid to contingent beneficiaries by assuming the primary beneficiary died first if the insured and the primary beneficiary die together in the same accident.

Annuities are classified in all of the following ways, except: A Issuer of the annuity B Payout option selected C When income benefits become payable D Method of funding

A Issuer of the annuity Annuity classifications are based on: method of premium payment (single, flexible, and periodic), funding (fixed vs. variable), when income benefits are payable (immediate vs. deferred), and the payout option selected (life only vs. annuity certain).

Accident and Health insurers would use which of the following formulas in determining premium rates? A Morbidity - Interest + Expenses B Mortality - Interest + Expenses C Morbidity + Interest - Expenses D Mortality + Interest - Expenses

A Morbidity - Interest + Expenses

Which of the following Whole Life insurance policies has the lowest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal? A Ordinary Straight Whole Life B 30-Pay Ordinary Life C 20-Pay Ordinary Life D Limited Pay Ordinary Whole to age 85

A Ordinary Straight Whole Life The longer the premium-paying period, the lower the annual premium. A $100,000 Ordinary Straight Whole Life Policy spreads the payments out over a longer period of time than a limited premium payment policy.

The __________ provision specifies what an insured must do, if a policy has lapsed, in order to put it back in force? A Reinstatement B Renewal C Reconsideration D Reissuance

A Reinstatement A policy lapse occurs at the expiration of the grace period. The Reinstatement Provision permits the policy to be put back into force if proof of insurability can be provided and all past due premiums and interest are paid. Any outstanding policy loan may also have to be paid or reassumed.

Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be: lapsed, forfeited, surrendered, terminated, reduced in value, amended with a reduction in benefit or term, have a reduced cash value, or is subjected to borrowing, is best known as a __________. A Replacement B Re-entry C Reissuance D Conversion

A Replacement This is the definition of a replacement.

A whole life policy: A Requires the insured to pay premiums for life and endows at age 100 B Requires the insured to pay premiums to age 90 and endows at age 100 C Is a single premium policy that endows at a specific age specified in the contract D Requires the insured to pay premiums to age 65 and endows at age 120

A Requires the insured to pay premiums for life and endows at age 100 The whole life policy gets its name from the fact that the insured policyowner must pay premiums through his or her entire life and endow at age 100, whichever comes first.

In Alabama, what happens to an insured's Medicare Supplement policy if they become eligible for Social Security disability benefits? A The insurer must suspend the policy's benefits and premiums for up to 24 months B The policy's premiums must be reduced until the insured no longer requires Social Security assistance C The insurer must void the policy completely D Nothing. The policy remains in force while the insured receives Social Security assistance

A The insurer must suspend the policy's benefits and premiums for up to 24 months An insurer may suspend the benefits and premiums under the Medicare Supplement policy for up to 24 months.

The XYZ Company, which employs 800 workers, provides group disability insurance for the 400 employees who work 30 hours or more. If this group disability coverage is offered on a noncontributory basis, how many employees are participating? A 400 B 300 C 600 D 800

A 400 Noncontributory plans requires 100% participation by eligible employees. In this example, only 400 employees qualify as eligible.

All of the following are characteristics of a 403(b) plan, EXCEPT: A Employees of corporations participate B Contributions are pre-tax C The account is owned by the employee D Earnings grow tax-deferred

A. A Tax-Sheltered Annuity (TSA) plan is established for public school systems and nonprofit organizations, not corporations. Teachers participate through a deduction from their pay before taxes. Earnings grow tax-deferred. The account is owned by the employees

Which of the following statements regarding dividends is a prohibited advertisement in Alabama? A Dividend payments are guaranteed B Dividends are a refund of part of the premiums paid C Dividend payments are not guaranteed D Illustrated dividends will not be enough to fully pay the policy

A. An advertisement may never state that dividends are guaranteed.

A company that is licensed to sell insurance in a particular state is: A An authorized company B A foreign company C A nonadmitted company D A domiciled company

A. An authorized company is one that is licensed to sell insurance in a particular state. It is also considered to be an admitted company.

Altering health insurance rates based on which of the following characteristics would be considered unfair discrimination? A National origin B Sex/gender C Occupation D Age

A. An insurer or producer may not unfairly discriminate the rates, benefits, or terms of a health insurance based on national origin, race, or creed.

An agent holds a property and casualty license in Alabama and sells insurance for several companies, but is not appointed with Company XYZ. If the agent writes a life insurance policy for Company XYZ, which of the following would apply? A Company XYZ will be fined up to 3 times the premium received B The agent will be fined up to 5 times the commission earned C The agent will be held liable for the policy D Company XYZ must appoint the producer within 30 days

A. An insurer that accepts business from someone who is not properly appointed and not property licensed is subject to a fine, equal to an amount up to 3 times the premium received on that business. If commission was provided for the sale, the producer or company giving commission to the unlicensed person would be subject to a fine equal to an amount up to 3 times the commission paid.

Which Settlement Option pays for a specified period, regardless of who may receive the payments? A Fixed Period B Life Income with Period Certain C Paid-Up Additions D Fixed Amount

A. As the name implies, Fixed Period establishes that the policy proceeds are guaranteed to be paid over a set period (i.e., 30 years) regardless of who may receive the payments.

Which statement is true for BOTH Universal Life and Whole Life? A The policy is supported by the insurer's general account B Policy loans and partial withdrawals are allowed C A guaranteed minimum interest rate is determined at policy issuance D The death benefit is adjustable

A. Both are supported by the insurer's general account--in other words, neither uses a separate account. The other answer options are only true for Universal Life, not Whole Life.

In Alabama, which of the following statements about business entities is true? A Business entities may be licensed as producers B A producer employed by a business entity may transact any line of insurance C All employees of business entities must be licensed D The Commissioner is responsible for a business entity's complicance with state law

A. Business entities may be licensed and act as insurance producers, provided they meet all of the licensing requirements. A business entity license is required when an insurance agency either enters into an agency agreement with an insurance company or receives commissions on business written in the state. Individual producers within the agency still need individual licenses, and one of those licensed individuals is responsible for the entity's compliance with state law.

Why should a producer collect a premium at the time the application is completed? A Without it, coverage cannot go into effect, as there would be a lack of consideration B It allows the insurer to afford to pay for any required medical records or tests C It allows the producer to get paid faster D It helps the home office with its cash flow

A. Collecting the premium at the time of application allows the producer to issue a conditional coverage receipt, which can bring coverage into effect as early as the date of the application, provided all the conditions have been satisfied.

Dental plans are normally written with a stated annual maximum on the number of: A Benefit dollars that will be paid B Cavities that will be filled C Appointments that will be covered D Teeth that will treated

A. Dental plans normally state an annual maximum dollar benefit.

Which of the following products replaces lost income when one is unable to work due to a condition for which therapeutic and rehabilitative care services is often necessary? A Disability Insurance B Accidental Death and Dismemberment Insurance C Long-Term Care Insurance D Medical Expense Insurance

A. Disability insurance covers replaces lost income.

What is a postmortem dividend? A A dividend earned, but not yet paid, in the year of the insured's death and paid with the death claim B A dividend declared and paid out at least one year after an insured's death C A second dividend declared after the initial dividend had been paid out D A dividend declared but held for future payout

A. Dividends earned during the year of the insured's death are called postmortem dividends and are paid as part of the death claim addition to the policy's face amount.

The type of insurance that provides life insurance automatically for federal employees unless they choose not to be included in the plan is: A FEGLI B The uniformed services health program C CDHP D Servicemen's group life insurance

A. FEGLI, Federal Employees' Group Life Insurance, provides group life insurance automatically for federal employees unless they choose not to be included in the plan. FEGLI policies are underwritten by private insurers in very large group life insurance contracts.

For which of the following may any funds remaining at year-end not be rolled over to the next year? A Flexible Spending Account B Medical Savings Account C Health Savings Account D Individual Retirement Account

A. FSAs are a 'use it or lose it' type of an account.

For nonroutine treatments, a comprehensive policy generally pays: A A specified percentage of the reasonable and customary charges B For catastrophic health losses only C 100% of the medical expenses D For inpatient hospital treatment only

A. For nonroutine treatment, a comprehensive policy pays a percentage, such as 75% or 80%, of the reasonable and customary charges. The patient pays an annual deductible and whatever expense remains.

Q has a traditional whole life policy with a $10,000 face amount, a $5,000 cash value, and a $4,999 policy loan and loan interest outstanding. Q will forfeit the policy when the policy loan reaches ________ for failing to pay loan interest on a timely basis. A $5,000 B $2,500 C $4,999 D $4,000

A. Generally, as long as the total indebtedness is less than the cash value of the policy, insurance contracts cannot compel forfeiture for failure to repay a policy loan/pay loan interest.

A Health Maintenance Organization (HMO) must submit which of the following reports to the Commissioner each year? A A report regarding their complaint system and number of complaints handled B A report regarding the amount of hospitals purchased and leased C A report regarding the number of contracts the HMO has with providers D A report regarding the total amount of enrollees and newly enrolled individuals

A. HMOs must submit an annual report to the Commissioner regarding their complaint system's procedures, the total number of complaints handled, and the number of claims relating to the HMO's service or care.

All of the following statements regarding an insurance application are correct, except: A It is not included as part of the contract B It must be signed by at least the applicant and producer C It is a formal written request by an applicant to an insurer requesting a policy D It is the primary source of information for underwriting purposes

A. If attached to the policy, a copy of the application becomes part of the entire contract.

K owns a variable annuity with an assumed interest rate of 4%. If the actual performance of the separate account(s) is 5%, the effect on this month's income benefit check will be such that it: A Becomes Higher B Remains the Same C All Depends on the Separate Account(s) Selected D Becomes Lower

A. If the actual return is lower than the AIR, the monthly annuity payment will be reduced. If the actual return is equal to the AIR, the monthly annuity payment will remain the same as the previous month. If the actual return is greater than the AIR, the monthly annuity payment will increase from the previous month.

If an applicant is a minor, who signs the application? A Their guardian B The producer C Any adult D A probate court judge

A. If the applicant is a minor, a guardian must sign the application.

A producer who violates the Alabama long-term care insurance regulation may be fined up to 3 times the amount of any commissions paid for each policy involved or up to ________, whichever is greater. A $10,000 B $15,000 C $5,000 D $25,000

A. In addition to any other penalties, a producer that has violated any state LTC requirement may be fined up to 3 times the amount of any commissions paid for each policy, or up to $10,000, whichever is greater.

Permanent insurance differs from term insurance with regard to: A Death benefit protection B Taxation of death benefits C Cash value accumulation D Mode of premium payments available

C. Cash value accumulation in a policy is what distinguishes permanent insurance from term insurance.

Which of the following types of policies is eligible for policy dividends? A Participating B Nonparticipating C Variable D Fixed

A. Insurance is either permanent or temporary. Examples of permanent insurance are Whole Life and Endowments, etc. Term is temporary insurance. Participating policies are issued by mutual companies and are eligible for policy dividends if and when declared by the company's board of directors.

All of the following are true regarding disclosures at the point of sale and issues relating to AIDS, except: A Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV B Insurance companies may refuse to issue a policy to individuals based on positive HIV test results C Insurers must avoid unfair discrimination between those in the same underwriting class for the risks of AIDS D Insurers must require the maintenance of strict confidentiality of personal information obtained through testing

A. Insurers must require informed consent before testing for HIV.

Which of the following licensing candidates is not required to take a state licensing exam in Alabama? A An applicant for limited lines insurance B An applicant for variable products C An applicant for health insurance D An applicant for property insurance

A. Limited lines producers are not required to take an exam to qualify for licensure.

Which reference to Medicaid is true? A Administered by the state using federal guidelines; funded federally and by states for poor persons of all ages; for poor persons 65+, disabled, or blind, may qualify for nursing home benefits B None of the answers listed C Provides a death benefit to surviving family members D Private insurance purchased by persons over age 65 to supplement Medicare

A. Medicaid is a state medical benefit program for persons whose incomes and resources are insufficient to pay for health care, regardless of age.

Mortality cost ______ interest (investment earnings) = equals the net premium. A Minus B Divided by C Multiplied by D Plus

A. Mortality cost minus interest (investment return) = net premium (pure rate).

In Alabama all of the following are true regarding life insurance advertisements, except: A Premiums cannot be mentioned in an advertisement at all B Any reference to policy dividends must state that they are not guaranteed C Premiums cannot be referred to as deposits or investments D An advertisement must have the life insurance in the policy name

A. Premiums may be mentioned; however, premiums may not be called deposits, investments, or any other term besides premiums.

A group of individuals comes together with the objective of obtaining a lower collective insurance premium. This would: A Be disallowed. Group formation must be for a reason other than reducing the cost of insurance. B Require 100% participation C Require a 90-day waiting period D Be rated due to potential adverse selection

A. State insurance laws prohibit the issuance of group policies to groups formed primarily for the purpose of obtaining insurance.

Payment of the first premium and an application must be submitted to an insurer for individual coverage within how many days to convert group coverage to an individual policy not requiring proof of insurability? A 31 days B 7 days C 10 days D 45 days

A. State insurance laws require a 30- or 31-day Conversion Period in group insurance policies.

Dividends issued by stock insurers are paid to: A Stockholders B Directors C Members D Policyholders

A. Stock insurers issue taxable corporate dividends to stockholders, but not policyholders. Mutual insurers may issue dividends to policyholders.

Term Life insurance is designed to provide coverage for ___________. A A specified period of time B To age 65 C An entire lifetime D For one year

A. Term Life Insurance is designed to provide coverage for a temporary period of time. The amount of time is specified in the policy acquired, for example, 10 year, 20 year, or 30 year term.

The_______ department of an insurance company is responsible for providing service to policyholders at the time of a loss. A Claims B Underwriting C Executive D Actuarial

A. The Claims division provides service to the policyholders in the event of a loss.

When an individual is covered by more than one health plan and is injured, what provision determines which plan is that person's primary coverage? A Coordination of Benefits B Continuation of Coverage C Extension of Benefits D Conversion Privilege

A. The Coordination of Benefits provision determines that a person's own employer-sponsored health plan is his/her primary coverage. However, if any plan fails to include a coordination of benefits provision, that plan would automatically be primary.

The Medical Information Bureau provides information to the insurer regarding the individual risk of an applicant and does not include: A Credit score B Hazardous hobbies C Pre-existing conditions D General medical information

A. The MIB is used to alert underwriters if there is an inconsistency in the applicant's information provided on the application based on previous underwriting. It does not include financial information or credit scores.

K has a $10,000 traditional whole life policy with a loan outstanding of $1,000 and a 5% interest charge. At the end of the first year of the loan, K did not pay the loan interest. What is the result of K's inaction? A K's new loan balance is $1,050 B K's new loan balance is $10,500 C K's new loan balance is $950 D K's loan balance remains at $1,000

A. The cash value is used as collateral against the loan. Interest will be charged annually, and if unpaid, will be added to the balance of the unpaid loan. $1,000 x 5% = $1,050.

If an insured has a Life Paid-Up at 75 Policy (a limited-pay life paid-up at age 75), what would the beneficiary receive if the insured died at age 68? A The face amount B The face amount minus the cash value C The face amount plus the cash value D The cash value

A. The full-face amount (death benefit) is payable to the beneficiary any time death occurs while the policy is in force.

Under the Do Not Call Registry, telephone solicitation calls before _____ or after _____ are prohibited. A 8:00 a.m. / 9:00 p.m. B 9:00 a.m. / 8:00 p.m. C 7:00 a.m. / 10:00 p.m. D 10:00 a.m. / 7:00 p.m.

A. The hours during which calling is prohibited are before 8 a.m. and after 9 p.m.

The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ____________ clause. A Incontestability B Insuring C Entire Contract D Consideration

A. The incontestability clause limits the period of time during which the insurer has the right to contest a claim and void the contract upon proof of a material misstatement.

The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party. A FCRA B SEC C NAIC D FINRA

A. The insurance company must meet requirements under the FCRA when gathering information about an applicant from a third party.

When an insured holds more than one occupation, and occupation is used to classify the risk, the insurer will generally classify the insured according to the occupation: A That is most hazardous B That the insured is expected to retire from at normal retirement age C That is considered to be the insured's primary occupation D That is least hazardous

A. The insurer will rate the risk according the occupation that poses the most hazards and/or risk.

The _________ settlement industry has increased awareness of STOLI/IOLI. A Life B Viatical C Financial D Mortality

A. The life settlement industry has increased awareness of these terms.

The mathematical probability table used by insurance companies to determine loss due to sickness or injury is the: A Morbidity Table B Claims Table C Rate Table D Mortality Table

A. The morbidity Table is used by Insurance companies to determine premiums for Accident and Health Insurance.

Collateral for a policy loan is: A The cash value of the policy itself B The premiums applied to the cash value account minus the load C Not required at all D Provided by the policy's death benefit

A. The policyowner may obtain a loan once there is sufficient cash value in the policy. This serves as the policy's collateral.

Harry and Sally were equal partners in a catering business worth $400,000. They entered into a buy-sell agreement that provided funding whether one of them died or was disabled. The annual premium for each of the disability insurance policies was $2,000. All of the following statements are correct, except: A The premiums are tax deductible B Harry and Sally each own the policy on the other partner C Harry and Sally would receive the policy benefit, which each would use to buy out the disabled partner, on an income tax free basis D Harry and Sally are each respectively named as the beneficiary on the policy which each of them owns

A. The premiums would not be deductible since the non-disabled partner would individually receive the benefit from a disability policy that he or she individually owns.

Barry has just been hired by OPQ Corporation and finds that he cannot enroll for coverage under OPQ's group health insurance plan for 30 days. This 30-day period is known as a: A Probationary Period B Policy Period C Elimination Period D Deductible

A. The specified period of time set by the employer before an employee is eligible to enroll for group benefits is known as a Probationary Period. It usually is 30 days in length but could be up to 90 days.

Which statement is false? A Mandatory Second Surgical Opinion is when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered B When an insured owes back premiums but is still within the grace period, the Unpaid Premium Provision is operative for any claims submitted C A nonoccupational policy pays for injury or illness off the job D Changes in an Accident and Health contract may be completed only with the written consent of the insurer

A. This describes Precertification, not Mandatory Second Surgical Opinion.

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits. A Fraternal Benefit Societies B Domestic Insurance Companies C Mutual Insurance Companies D Stock Insurance Companies

A. This question describes a Fraternal Benefit Society.

Curtis names his wife, Amanda, as the primary beneficiary of a $100,000 whole life policy with a common disaster provision. Their son, John is the contingent beneficiary. Curtis and Amanda are involved in a serious private airplane accident. Curtis is killed immediately but Amanda lives for another two months before she, too dies. Which of the following is likely to occur? A Amanda receives the proceeds of the policy, which in turn are paid to her estate upon her death B The proceeds are paid out to all beneficiaries per stirpes C The proceeds are automatically paid to the contingent beneficiary, John D The proceeds are paid to John's estate

A. Under a common disaster provision, the primary beneficiary must outlive the insured by a stated period of usually 10, 15, or 30 days, then the proceeds are paid to the primary beneficiary. Amanda outlived the required stated period.

The bank may require its borrowers to have a life insurance policy to secure a loan in the event of the borrower's death. Which provision gives the bank proportional protection but not control of the policy? A Collateral Assignment B Entire Contract Clause C Policy Loan Provision D Consideration Clause

A. Under the law, an assignment is a transfer of a right to another person or entity of rights by the owner of such rights. Collateral Assignment simply creates a lien against the death benefit but does not affect the owner's rights.

All of the following are sources that insurers may look at for information regarding the insurability of a prospective insured, except: A College Degree B APS (Attending Physician Statement) C MIB (Medical Information Bureau) D Inspection Report

A. Underwriters look at the application, credit and inspection reports, MIB data, APS, medical exams and test results, and supplemental questionnaires.

If the insured has not elected another option, what is the nonforfeiture benefit a life insurer in Alabama must provide within 60 days after an insured has defaulted on the premium? A Reduced paid-up B Automatic premium loan C Cash value D Extended term

A. Unless another option has been elected, an insurer must provide a paid-up nonforfeiture benefit within 60 days after premium default.

The nonforfeiture option that, if exercised, terminates all coverage is: A Cash Surrender B Paid-up Additions C Extended Term D Reduced Paid-Up

A. Upon surrendering the policy back to the insurer, the policyowner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest. The insured no longer has insurance coverage if this option is selected.

Tom owns a life insurance policy and is concerned about both running out of money during his lifetime and at the same time leaving funds behind to the beneficiary. Looking for some time period guarantee, Tom should consider the _________ settlement option. A Life with Period Certain B Life Only C Joint and Survivor Life D Life with Refund

A. With Life Income Period Certain, payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. If the recipient dies prior to the end of the period certain, the payments continue to another person until the end of the period certain.

All of the following are TRUE regarding a Variable Annuity, except: A The number of annuity units received upon annuitization, and the unit value, remain level B Upon annuitization, accumulation units are converted into annuity units, which generate income based on the value of the units C The contract owner bears the investment risk and receives the return actually earned on invested assets, less any charges assessed by the insurer and investment managers D Premiums paid during the accumulation period are invested into a separate account(s)

A. With Variable Annuities, upon annuitization, the number of units remains level, but the unit values fluctuate based upon the separate account(s) selected.

A health insurance policy that the insurer may choose not to renew only on the premium due date is called: A An optionally renewable policy B A guaranteed renewable policy C A period of time non-renewable policy D A non-cancellable policy

A. With an optionally renewable policy the insurer may decide, at their option, not to renew the policy for any reason they decide, but only on the policy anniversary or premium due date.

All of the following are TRUE about the Automatic Premium Loan (APL) Provision, except: A It is available on any type of life insurance policy B It becomes effective, if elected, at the end of the grace period C It must be elected by the policyowner D It can be cancelled at any time by the policyowner

A. The Automatic Premium Loan Provision is available on cash value policies only.

The Fair Credit Reporting Act gives which of the following the legal right to review a consumer report used to underwrite an applicant? A The applicant B The producer C The applicant's spouse D The applicant's intended beneficiary

A. The applicant has the right to review the report.

If Jose names his estate as the beneficiary of his life insurance policy and dies without a will: A A court will distribute the proceeds strictly according to state law B His immediate family members get to decide how the proceeds are to be received C The proceeds will not go through the probate process D It will eliminate estate taxes totally

A. When there is no will, the assets in an estate, including life insurance proceeds, must be distributed according to state law since the wishes of the deceased are not known. This is referred to as: The insured has died Intestate.

An indeterminate premium whole life policy has _______ premiums. A Adjustable B Increasing C Inflexible D Decreasing

A. Adjustable Indeterminate premium whole life has premiums that can be adjusted by the insurer based on investment earnings, mortality, and expenses of the insurer.

Which Act was implemented in order to protect consumers from questionable Medicare Supplement Policy marketing practices? A NAIC Model Law B OASDHI C COBRA D HIPAA

A. NAIC Model Law NAIC Model Law requires all Medicare Supplement policies to be standardized.

K has a $100,000 traditional whole life policy with $30,000 of cash values and a $10,000 loan outstanding. What is the maximum additional amount she could borrow from the policy at this time? A $40,000 B $20,000 C $60,000 D $30,000

B $20,000 She can borrow up to the policy's cash value. She already has a loan of $10,000, so she could borrow another $20,000 at this time.

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it has $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be: A $35,000 B $50,000 C $15,000 D $65,000

B $50,000 The Extended Term Option uses the present cash value of the policy, upon its lapse, to automatically buy a single premium term policy of the same face amount for a specified number of years and days as listed in the policy's nonforfeiture table.

What is the minimum free look period for replacement policies in Alabama? A 60 days B 30 days C 10 days D 20 days

B 30 days When a policy has been purchased through a replacement transaction, Alabama requires a minimum free look period of 30 days.

The Commissioner may grant or deny an agent's request for an extension to comply with the continuing education requirements. Which of the following correctly describes the time required to comply? A 60 days if granted, 30 days if denied B 90 days if granted, 30 days if denied C 60 days if granted, 10 days if denied D 30 days if granted, 10 days if denied

B 90 days if granted, 30 days if denied CE extensions may be granted for up to 90 days by the Commissioner. If denied, the producer has 30 days to become compliant.

A Health Maintenance Organization (HMO) must submit which of the following reports to the Commissioner each year? A A report regarding the number of contracts the HMO has with providers B A report regarding their complaint system and number of complaints handled C A report regarding the amount of hospitals purchased and leased D A report regarding the total amount of enrollees and newly enrolled individuals

B A report regarding their complaint system and number of complaints handled HMOs must submit an annual report to the Commissioner regarding their complaint system's procedures, the total number of complaints handled, and the number of claims relating to the HMO's service or care.

Term Life insurance is designed to provide coverage for ___________. A For one year B A specified period of time C An entire lifetime D To age 65

B A specified period of time Term Life Insurance is designed to provide coverage for a temporary period of time. The amount of time is specified in the policy acquired, for example, 10 year, 20 year, or 30 year term.

All of the following transactions are considered life insurance replacements and are subject to Alabama's replacement guidelines, except: A A policy that will be lapsed or surrendered in order to purchase a new policy B A term policy converted to whole life insurance C A policy that has been converted to reduced paid up or extended term insurance to purchase a new policy D A policy amended with reduced benefits to purchase a new policy

B A term policy converted to whole life insurance Converting a term plan to a permanent plan is not a replacement.

Which of the following insurers may not be authorized to transact insurance in Alabama? A An insurer in Florida that meets the eligibility requirements B Any insurer that fails to pay the renewal fee C An insurer domiciled in Alabama that has received its charter D An insurer domiciled in Spain that seeks admission

B Any insurer that fails to pay the renewal fee To maintain its certificate of authority in Alabama, an insurer must pay the renewal fees to maintain eligibility. If renewal fees are not paid, the insurer's certificate of authority will be suspended or revoked. Alien and foreign insurers may be authorized to transact insurance in Alabama as long as they meet the same requirements as domestic insurers and seek admission.

Which of the following statements about business entities is true? A A producer employed by a business entity may transact any line of insurance B Business entities be licensed as producers C All employees of business entities must be licensed D The Commissioner is responsible for a business entity's complicance with state law

B Business entities be licensed as producers Business entities may be licensed and act as insurance producers, provided they meet all of the licensing requirements.

Which individual policy standard provision stipulates the conditions under which the insurer will not pay a claim while the policy was in force at the time of death of the insured? A Free Look B Exclusions C Misstatement of Age or Gender D Consideration Clause

B Exclusions The exclusions provision specifies the conditions under which the insurer will not pay out a death claim if the insured dies while the policy is in force.

Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. In November of 1994, Wilma is laid off work. With Christmas approaching, Wilma wants to withdraw $1,500 from the insurance company to cover holiday expenses. Wilma: A May withdraw as much as she desires B Must look elsewhere for her holiday money C May only withdraw $500 D May withdraw the $1,500 in Pebbles' name

B Must look elsewhere for her holiday money Since the stipulated time when withdrawals can be made (after 5 years) has not yet arrived, no withdrawals can be made form the proceeds held by the insurer.

If the insured has not elected another option, what is the nonforfeiture benefit a life insurer in Alabama must provide within 60 days after an insured has defaulted on the premium? A Automatic premium loan B Reduced paid-up C Cash value D Extended term

B Reduced paid-up Unless another option has been elected, an insurer must provide a paid-up nonforfeiture benefit within 60 days after premium default.

Which of the following is not a factor in premium determination? A Expenses B Reserves C Mortality D Interest

B Reserves Premiums are based on expected mortality, interest, and expenses.

What type of disability income policies are most likely used to cover only nonoccupational disability as opposed to both occupational and nonoccupational? A Disability income rider to an individual life policy B Short-term disability policies C Long-term disability policies D Workers' Compensation

B Short-term disability policies Short-term disability policies often exclude occupational disability because Workers' Compensation provides for occupational disabilities and they only provide income for a maximum of 2 years, while long-term disability policies generally cover both occupational and non-occupational disability.

Controlled business may be defined as insurance sold: A To anyone willing to buy B To the producer, the producer's family and friends, and the producer's business associates C To individuals needing an increased amount of term insurance D To existing clients only

B To the producer, the producer's family and friends, and the producer's business associates Controlled business is possessing a license solely for the purpose of writing business on one's own self, immediate family, relatives, employer and employees.

What is the purpose of nonforfeiture values? A It is a way for the insurance company to charge extra for this optional benefit B Without them, any cash values would be retained by the insurer when the policy lapses due to non-payment of premium C Federal insurance law requires them D The NAIC mandates nonforfeiture values

B Without them, any cash values would be retained by the insurer when the policy lapses due to non-payment of premium Nonforfeiture Options (Guaranteed Values) are found in policies that accumulate cash values and protect the policyowner against total loss of benefits if the policy should lapse due to nonpayment of premium.

An agent holds a license in Alabama and sells insurance for several companies, but is not appointed with company XYZ. If the agent writes a policy for XYZ, which of the following would apply? A XYZ must appoint the producer within 30 days B XYZ will be fined up to 3 times the premium received C The agent will be held liable for the policy D The agent will be fined up to 3 times the commission earned

B XYZ will be fined up to 3 times the premium received An insurer accepting and issuing business from an agent not appointed with the company would be fined up to 3 times the premiums received.

In Alabama, how many total hours of continuing education are required each renewal period? A 27 B 24 C 12 D 6

B. 24 credit hours are required on a biannual reporting basis unless exempt, 3 of which must be in ethics or business practices.

Which of the following accurately describes the 'free look' provision? A Allows the proposed insured to look over a sample policy prior to completing the initial application for insurance B Allows the insured to look over the issued policy for a specific number of days and return it for a premium refund if desired C All of the answers listed D Allows the insured to look over the issued policy for a specific number of days and return it for a partial refund of premiums paid if desired

B. A 'free look' provision allows the insured to review the issued policy for a specified period, usually 10 days. It requires the insurance company to provide a full refund of premiums paid if the insured is not totally satisfied.

In Alabama, an insurer may terminate a Medicare Supplement policy for which of the following reasons? A The insured's rapid deteroriation of health B The insured's application included material misrepresentations C The insured receives benefits from Original Medicare D The insured is placed in an assisted living facility

B. A Medicare Supplement policy may be terminated by the insurer for nonpayment of premium, material misrepresentation, or fraud.

A trust is established where the grantor can change the trustees whenever they want. Which of the following would best describe the type of trust that was set up? A Admonishable Trust B Revocable Trust C Imperishable Trust D Irrevocable Trust

B. A revocable trust will allow the grantor to retain control over the assets in the trust and change beneficiaries and trustees; an irrevocable trust is one in which the terms cannot be changed.

Of the following, which best describes a Straight Whole Life Policy? A Increasing premium and level death benefit for the life of the insured B Level guaranteed premium and face value for the life of the insured C Increasing cash value and decreasing premiums D Decreasing face amount and level premiums

B. A traditional Straight Whole Life Policy has as its primary characteristic, fixed (i.e. guaranteed) premiums and death benefit over the life of the policy. It has substantial guarantees, but virtually no flexibility.

A typical life insurance application contains how many parts? A 1 B 2 C 4 D 3

B. A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information.

In Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's: A Health B Occupation C Gender D Finances

B. Although many factors are considered in the underwriting process, the applicant's occupation is the single most important.

Which of the following statements is true regarding the credentials of a caretaker providing home health services to an individual insured under a Long-Term Care policy? A They must be a licensed physician B They are not required to be licensed if services can be covered by a home health aid C They must be a registered nurse D They must an employee of a skilled nursing facility

B. An LTC policy cannot require a professionally licensed individual for services that may be performed by a home health aid.

After failing the Alabama licensing exam twice, how long must an applicant wait before retaking the exam? A 2 years B 3 months C 1 year D 6 months

B. An individual failing the exam the second time must wait 3 months before retaking the exam.

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted? A Reduced Paid-Up B Extended Term C Premium Reduction D Cash Surrender

B. Cash Surrender is a Nonforfeiture Option that terminates the policy. Extended Term continues the same coverage until the cash value from which the premium is paid is exhausted.

What type of policy pays weekly or monthly benefits for loss of income due to sickness or injury? A Subcontractors Income B Disability Income C Medical Income D Death Benefit

B. Disability income pays benefits either weekly or monthly when an insured becomes disabled and unable to perform some or all of their job duties, due to a sickness or injury.

Distributions from a Modified Endowment Contract (MEC) made on or after age _____ are not subject to any tax penalties. A 62 B 59 1/2 C 70 1/2 D 65

B. For withdrawals of any gains from a MEC prior to age 59 1/2 there is a 10% tax penalty that applies.

All of the following are ways in which an employee will lose their employer sponsored group health insurance, except: A No longer meeting eligibility requirements B Becoming too old while still on the job C Employment is terminated D Group contract is terminated

B. Group coverage may be terminated for an employee if employment is terminated, the employee no longer meets eligibility requirements (becomes part-time), or if the group contract is terminated.

In the event there is a policy issued and there are questions on the insurance application that went unanswered: A The insurer will cancel the policy B It will be assumed that the insurer waived their right to have answers to those questions C The agent will fill in the answers after the fact D A new application must be filed

B. If a policy is issued with application questions unanswered, the contract will be interpreted as if the question had not been asked and is therefore waived by the insurer.

The settlement option under which the principal never decreases unless the beneficiary withdraws it is the: A Fixed period option B Interest option C Life income option D Fixed amount option

B. In the fixed period, fixed amount and life income options, the principal and interest are both used to make payments to the beneficiary so the principal decreases throughout the payout period.

Pete is a valuable veteran of 21 years at Joe's Garage working with 24 people and filling in for Joe when he is not in. Joe wants to insure Pete to offset any losses and the costs of trying to find, recruit and train a replacement, should Pete become disabled. What type of policy should Joe purchase? A Business Overhead Insurance B Key Employee Insurance C Employee Impairment Insurance D Special Insurance Supplement

B. Joe is after a policy that will pay the business a benefit to help pay for hiring a replacement, loss of revenue, etc., when a key employee (Pete) becomes disabled.

Which of the following exclusions applies to Long-Term Care coverage? A Adult day care B Rest Cures C Respite care D Home care

B. Long-term care exclusions include: acute care (hospitalization), rest cures, nervous or mental disorders, war or any act of war, self-inflicted injuries, chemical dependency, conditions covered under Workers' Compensation, injury arising out of committing a felony, and services provided outside the United States.

Managed care plans include all the following, except: A Point of Service Plans B Indemnity Plans C Exclusive Provider Organizations D Preferred Provider Organizations

B. Managed care includes POS, PPO, EPO and other plans. Indemnity plans are a type of traditional indemnity/reimbursement insurance and are not considered managed care.

The chart that shows the chance of a disability at any given age is called a: A Chance of Loss Table B Morbidity Table C Mortality Table D Disability Table

B. Morbidity Tables reflect the likelihood of disability. Mortality Tables reflect the likelihood of death.

The process of calculating life insurance net premium requires consideration of all of the following, except: A The insured's age B The morbidity rates to be used C The rate of interest assumed D The insured's gender

B. Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors.

Which of the following is considered not to be an Essential Health Benefit? A Ambulatory patient services B Personal care C Behavioral health treatment D Mental health services

B. Personal care is not considered an essential benefit.

Each of the following statements about policy loans is correct, except: A A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value B Policy loans may be made on any type of policy C If a policy has cash value, the insurance company cannot refuse to lend the policyowner money D The loan value of a policy cannot exceed the current cash value

B. Policy loans, made from policy cash values, can only be made from permanent policies that accumulate cash value. They are not available on term policies.

The cash received by the policyowner when he/she terminates a policy is known as what? A Accrued Premium Value B Cash Surrender Value C Loan Value D Paid-Up Insurance Value

B. The Cash Surrender Value is the Nonforfeiture Option that allows the owner to withdraw the cash value upon the surrender of the policy.

What rider is designed to help the insured offset the effects of future inflation on the policy's face amount? A Living Needs B Cost of Living C Decreasing Term D Accelerating Benefits

B. The Cost of Living Rider allows for the policy's death benefit to keep up with inflation without having to prove insurability but with an increase in premium to reflect the added risk to the insurer.

The HIV Consent Form specifies which types of individuals may receive __________. A The underwriter's decision B The test results C The amount and type of policy applied for D The name of the medical lab used and lab work

B. The HIV Consent Form specifically addresses who may receive test results, most often it is the insured's doctor.

J has an event that could be subject to a claim. This event occurs on April 1 of this year. How long does J have to bring legal action against the insurer? A July 1 of this year B April 1 of next year C October 1 of this year D June 1 of this year

B. The claimant has 1 year from the date of the event to bring legal action against the insurer.

A premium is paid at the time of application and a conditional receipt is issued. If the policy is issued as applied for, coverage becomes effective: A Upon policy delivery B The date of the conditional receipt C After the free look expires D At the time the policy is issued

B. The conditional receipt is issued upon the premium being paid at the time of application. If the policy is issued as applied for, coverage is effective as of the date of the conditional receipt.

The portion of the premium that is based only on mortality rates and assumed interest is called the: A Gross premium B Net premium C AIR premium D Unearned premium

B. The net premium is the mortality risk discounted for interest, without any expense adjustment.

Cranston wants a Settlement Option for his beneficiary that will guarantee the beneficiary an income as long as the beneficiary lives. Cranston should choose: A Interest B Life Income Only C Fixed Amount D Fixed Period

B. The option that will guarantee the beneficiary an income as long as she/he lives is Life Income Only.

In a legal sense, an insurance premium is the insured's _______. A Credit B Consideration C Fee D Tender

B. The premium paid by the insured represents their consideration. Consideration is something of value exchanged under the terms of a contract and is a required element of a legal contract.

Generally, what are the applicant's statements and descriptions in an application for a life insurance policy or annuity considered? A Warranties B Representations C Misrepresentations D Guaranteed to be true

B. The statements on the application are considered representations that the applicant believes to be true to the best of their knowledge.

What are the two types of risk? A Calculable and accidental B Speculative and pure C Standard and substandard D Physical and moral

B. The two types of risk are speculative and pure.

Which of the following annuities typically offers no guarantees? A Indexed B Variable C Bonus Interest Rate Annuities D Fixed

B. The variable annuity holder assumes all investment risk.

Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized? A 50 year old male B 50 year old female C 65 year old female D 65 year old male

B. The younger ages receive the smaller payments because they can be paid out for a longer period of time. Females also receive smaller income checks due to a longer life expectancy.

Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be: lapsed, forfeited, surrendered, terminated, reduced in value, amended with a reduction in benefit or term, have a reduced cash value, or is subjected to borrowing, is best known as a __________. A Re-entry B Replacement C Reissuance D Conversion

B. This is the definition of a replacement.

Health policies are considered incontestable after: A 3 years B 2 years C 5 Years D 1 year

B. Time Limit on Certain Defenses, Aka: Incontestability is 2 years for Health Policies.

Which of the following insurers may not be authorized to transact insurance in Alabama? A An insurer domiciled in Spain that seeks admission B Any insurer that fails to pay the renewal fee C An insurer in Florida that meets the eligibility requirements D An insurer domiciled in Alabama that has received its charter

B. To maintain its certificate of authority in Alabama, an insurer must pay the renewal fees to maintain eligibility. If renewal fees are not paid, the insurer's certificate of authority will be suspended or revoked. Alien and foreign insurers may be authorized to transact insurance in Alabama as long as they meet the same requirements as domestic insurers and seek admission.

J buys a life insurance policy specifically intending for the death benefit to be used to cover estate taxes. What is the correct term for using life insurance in this way? A Estate creation B Estate conservation C Preneed planning D Survivor protection

B. Using life insurance proceeds to pay estate taxes is a means of "conserving" the estate for the heirs.

Which statement is true regarding taxation of health insurance? A The benefits received from a Major Medical Insurance Policy are usually subject to federal income tax B The benefits received from a group Disability Income Policy paid entirely by the employer are fully taxable as income to the employee C The benefits received from a group Accidental Death and Dismemberment Policy are taxable to the recipient D The benefits received from a personally owned Disability Income Policy are subject to federal income taxes

B. When an employer pays the full cost of disability income insurance for the employee, any benefit received is fully taxable to the employee.

Which of the following best describes an Annual Renewable Term Policy? A A policy with decreasing premium at each renewal B A policy with a level death benefit, but with increased premium at each renewal C A policy with increasing cash value at each renewal D A policy with an increased face value at each renewal

B. Whether the policy period is 1 year, 5 years, 10 years, etc., the premium will increase at each renewal to sustain the same specified death benefit that was purchased when the policy was written. At renewal the premium is based upon attained age.

Permanent insurance is designed to provide coverage ___________. A For a temporary period of time B For an entire lifetime C To age 65 D For a specified period of time

B. While term insurance is designed to provide protection for a specified time period, permanent insurance is designed to provide coverage for an entire lifetime.

All of the following are considered specialized policies, except: A Juvenile Life B Whole Life C Joint Survivorship D Joint Life

B. Whole Life is considered an ordinary, not a specialized, policy.

Which of the following describes the possibility of someone becoming disabled at any given age? A Mortality B Morbidity C Morbid D Morality

B. A Morbidity Rate is used in Disability Insurance and is calculated by determining the chances of someone becoming disabled at a given age. Mortality deals with life expectancy.

The portion of the premium that is based only on mortality rates and assumed interest is called the: A AIR premium B Net premium C Unearned premium D Gross premium

B. The net premium is the mortality risk discounted for interest, without any expense adjustment.

Which of the following is NOT a type of Term Life Insurance Policy? A Decreasing B Variable C Level D Increasing

B. The question is asking about types of Term Policies which are: Level, Increasing, and Decreasing.

To waive an insured's premium, most companies require an individual's disability to be: A A partial disability and still able to perform some type of work B Total and permanent C A disability expected to last less than 6 months D A temporary total disability expected to last 6 months but no longer than one year

B. Disability must be total and permanent before waiver of premium can be activated.

The nonforfeiture option that provides the most AMOUNT of coverage for the least duration is: A Automatic Premium Loan B Extended Term C Cash surrender value D Reduced Paid-Up

B. Extended term provides the most amount of coverage for the least duration, whereas reduced paid-up provides the least amount of coverage for the longest period of time.

When an underwriter evaluates the risks presented with a particular group life application, which of the following is considered the most important? A The plan sponsor's credit rating B Group size, turnover, average age and purpose of the group C The overall health of the group D The sales volume of the employer

B. The cost of a typical group plan is a function of a number of variables, most notably average age and size of the group, industrial classification, financial stability of the sponsor, and claims experience if the group is of sufficient size.

A long-term care policy can exclude from coverage all of the following, except: A Hospitalization (acute care) B Alzheimer's disease C Intentionally self-inflicted injuries D Rest cures

B. Alzheimer's disease Alzheimer's disease cannot be excluded from long-term care coverage.

If a premium was not submitted with the application, the producer must deliver the policy and explain the benefits and collect the premium. The policy then becomes the Offer and the premium is the: A Delivery B Trial C Acceptance D Evidence

C Acceptance The policy is the offer from the insurer to the individual who accepts the policy by paying the premium.

Under which of the following business-related plans are benefits taxable as income to the owner? A Both Business Overhead Expense and Disability Buy-Sell Agreement B Neither Business Overhead Expense nor Disability Buy-Sell Agreement C Business Overhead Expense D Disability Buy-Sell Agreement

C Business Overhead Expense Since the premium is deductible, the benefits received are taxable.

Mona let her permanent policy lapse. She discovered there was $2,498 in cash value remaining in the policy and decided to pay off some of her credit card debt. She exercised which Nonforfeiture Option? A Extended Term B Fixed Amount C Cash Surrender D Reduced Paid-Up

C Cash Surrender Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.

The nonforfeiture option that, if exercised, terminates all coverage is: A Paid-up Additions B Extended Term C Cash Surrender D Reduced Paid-Up

C Cash Surrender Upon surrendering the policy back to the insurer, the policyowner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest. The insured no longer has insurance coverage if this option is selected.

Which of the following is not a major source of underwriting information? A The application B Medical exams C Past life insurance owned D Attending Physician's Statement

C. The sources of underwriting include the application, medical exams, an attending physician's statement, the medical information bureau, an inspection report, and the agent's report.

The nonforfeiture option that provides coverage for the shortest duration is: A Reduced Paid-Up B Convertible Term C Extended Term D Automatic Premium Loan

C Extended Term Extended Term provides the most amount of coverage for the least amount of time. Reduced Paid-Up provides the least amount of coverage for the longest period of time. Convertible Term and Automatic Premium Loan are not nonforfeiture options.

A producer is rebating if they perform which of the following actions? A Fail to provide a conditional receipt upon receiving a signed application with payment of premium B Use pressure tactics to convince the applicant to replace an existing policy with a new one C Give a prospect a discount or kickback in order to induce a sale D Make derogatory remarks regarding another insurance company to the applicant

C Give a prospect a discount or kickback in order to induce a sale Rebating is the practice of providing something of value not stated in the policy to an applicant as an inducement to purchase insurance.

What should a producer do if the policy applied for is issued at a higher rate than was expected? A Have the home office re-issue the policy for a reduced amount of coverage for the original premium quoted so that it will be easier to explain at time of delivery B Immediately return the policy to the home office because the applicant will never accept it C Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium D Deliver the policy to the applicant and have the home office reduce the commission payout to cover the higher premium

C Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium By personally delivering the policy the producer can explain the rating, reinforce the value of the policy and obtain any home office requirements such as signatures and additional premium in order to put the policy in force.

In Alabama, an advertisement for a life insurance policy may use which of the following terms to describe premiums? A Deposit B Guaranteed investment C Premium D Premium deposit

C Premium An advertisement for life insurance may only refer to the premiums paid into the policy as premiums. Any other description is considered a misrepresentation.

Which of the following is NOT true regarding a group insurance plan? A Premiums are determined based on the underwriting of the group as a whole B Group coverage is often available for dependents and eligible employees C Proof of insurability is required to be eligible D The employer chooses the coverages

C. Proof of insurability is usually not required under a group plan.

Linda wants her husband to be the beneficiary of her life policy but also wants to retain all rights of ownership. Which of the following types of beneficiary designations should she use? A Contingent beneficiary B Tertiary beneficiary C Revocable beneficiary D Irrevocable beneficiary

C Revocable beneficiary By naming her husband as a revocable beneficiary, Linda would retain all rights of ownership. To name her husband irrevocably would give her husband a vested interest in policy benefits.

After passing the Alabama state licensing exam, a license candidate must complete which of the following actions to receive their license? A Be interviewed by the Commissioner B Be appointed by an insurer C Submit a uniform application for licensure with the Commissioner D Pay an appointment fee

C Submit a uniform application for licensure with the Commissioner After passing the state exam, a license candidate must submit a uniform application to the Commissioner and pay any required licensing fees.

Producer X regularly places insurance with Company XYZ without being appointed by XYZ. What is the consequence of this action? A The company's certificate of authority will be suspended B The company will be required to void all policies placed by Producer X C The producer's license will be suspended for at least 1 year D The producer will be required to pay restitution

C The producer's license will be suspended for at least 1 year If the producer is not appointed by XYZ, their license will be suspended or revoked for regularly placing insurance with the company. They may not have their license reinstated for at least 1 year.

Which measure could an underwriter use to reduce the risk when underwriting a Disability Income Policy? A Shorten the elimination period and increase the amount of the benefit B Increase the benefit period and increase the amount of the benefit C Shorten the benefit period and increase the elimination period D Increase the benefit period and shorten the elimination period

C. By making the benefit period shorter and the elimination period longer, total claims exposure is reduced. Each of the other choices includes actions that would expose the insurer to more claims payments.

There are ______ methods available to determine the income objective after the death of the client for planning purposes. A 4 B 3 C 2 D 5

C.

If Mary is 30 years old and buys a 15 Pay Life policy, how old will Mary be when she stops paying premiums? A 100 B 60 C 45 D 50

C. 15 Pay means that the policy is guaranteed to be paid up in 15 years. The policy still endows at age 100.

How long is the free look period for a Medicare Supplement policy? A 20 days B 10 days C 30 days D 15 days

C. A Medicare Supplement policy must contain a 30-day free look provision on the first page in bold print.

Which of the following is a true characteristic of a variable universal life policy? A The policy requires only a life license to sell B The policy has a fixed premium schedule C As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium D The insurer bears all risks in accumulating cash value

C. A characteristic of universal life insurance is that there is no requirement to pay any premium other than the first. As long as there is sufficient cash value to pay policy expenses (cost of insurance, riders, and other fees) when due, the policy remains in force.

What is a material misstatement? A One that is beyond the applicant's knowledge and belief B Responding to a height and weight question with measurements 1 inch taller and 5 pounds lighter than is actually the case C One which would have caused the insurer to not issue the policy had it been known D Stating that the proposed insured is 34 when in fact he or she is 35

C. A material misstatement is one which would have caused the insurer to not issue the policy had it been known.

Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes? A An amendment B A receipt C An application D A rider

C. A producer collects field underwriting information from the applicant/insured on an insurance application.

A typical life insurance application contains how many parts? A 4 B 1 C 2 D 3

C. A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information.

Which of the following is not a form of permanent life insurance coverage? A Indeterminate premium whole life B Adjustable life C Term to age 70 D Ordinary straight whole life

C. Adjustable Life is a type of permanent life insurance that combines features of term and whole life coverage, giving policyowners the option to change the characteristics of their policies as their needs change over time. Term is not a permanent form of coverage.

In Alabama, how many activities of daily living (ADLs) must an insured be unable to perform to trigger LTC benefits? A 5 B 1 C 3 D 4

C. An LTC policy's benefits are triggered once the insure is unable to perform 3 ADLs. An LTC policy may not include a provision more restrictive than this.

All of the following are true about indeterminate premium whole life policies, except: A There is a maximum guaranteed premium stated in the policy B The company charges a current premium based on current estimates C They are like participating whole life D The policy has adjustable premiums

C. An indeterminate premium whole life policy is like a nonparticipating whole life plan of insurance, except that it provides for adjustable premiums. The company will charge a 'current' premium based on its current estimate of investment earnings, mortality, and expense costs, but never above the maximum guaranteed premium stated in the policy.

A producer may have their license revoked or suspended for all of the following reasons, except: A Forging another's name on an insurance document B Failure to pay state income tax C Failing to pay a traffic ticket on time D Providing incorrect, misleading, incomplete information to the Commissioner

C. An overdue traffic ticket is not grounds for license suspension or revocation.

Martin is age 30 when he applies for life insurance. The underwriter classifies him the same as a person age 40 and his policy is issued with a premium for a person age 40. What substandard rating has been applied to Martin's policy? A Tabular B Flat C Rated-up Age D Graded

C. As the name implies, Rated-up Age is a substandard rating assigned to the insured whose insurable characteristics appear to be the same as those for someone much older, resulting in a higher premium than anticipated.

T owns their own insurance agency and is authorized to represent 12 different insurers. T must be: A A broker B A direct writer C An independent agent D A captive agent

C. Because T is in the agency system but is not limited as to the number of insurers they may represent, T must be an independent agent. T could not be a broker because brokers represent consumers, not insurers.

All of the following transactions are considered life insurance replacements and are subject to Alabama's replacement guidelines, except: A A policy amended with reduced benefits to purchase a new policy B A policy that has been converted to reduced paid up or extended term insurance to purchase a new policy C A term policy converted to whole life insurance D A policy that will be lapsed or surrendered in order to purchase a new policy

C. Converting a term plan to a permanent plan is not a replacement.

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except: A Substandard B Standard C Declined D Preferred

C. Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.

All of the following are true regarding Current Assumption Whole Life, except: A Interest rate changes affect policy premiums B The insurer may have to add a corridor of insurance protection to keep the policy from endowing C If current rates decrease, the policyowner pays reduced premiums, or the cash values will grow faster D The policy has a guaranteed minimum death benefit

C. If current rates increase (not decrease), either the policyowner pays a reduced premium, or the cash value will increase at a faster rate.

In order to convert a term policy to a permanent policy as of the original issue age, all of the following must occur, except: A Interest will be charged and have to be paid at the time of conversion B Back premiums will have to be paid at the time of conversion C The cash values will have to be paid out first before the conversion can be effected D The request for conversion must be made on a timely basis

C. If the conversion is as of the issue or original age, back premiums plus interest will be required to be paid at the time of conversion.

Burt named Liz as his beneficiary; however, he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits? A Burt's estate, since no Settlement Option was chosen B Lump sum is the automatic option when no option was preselected prior to death of the insured C Liz the beneficiary determines which option she would like to have D The insurer decides when the election is not made by the policyowner prior to death

C. If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.

Which of the following best describes 'Capital Retention/Conservation' in an effort to meet an income objective? A Principal is paid out but investment earnings are reinvested B Principal and investment earnings are paid out C Investment earnings are paid out D Principal is paid out

C. In a capital retention/conservation strategy only the investment earnings are paid out the principal is retained or conserved for future purposes. Each payment would fluctuate as it would be based on the earnings and no principal would be used to make up for any shortfalls.

The purchase of a policy from a terminally ill insured by a third party who becomes the new owner is considered a ___________. A Transfer for value B 1035 exchange C Viatical settlement D Senior settlement

C. In a viatical settlement, the insured is terminally ill and money is paid to the policyowner in exchange for making an absolute assignment of the policy to the purchaser.

Which of the following manufactures and issues insurance policies and contracts? A Insurance agents B Applicants/insureds C Insurance companies D Insurance agencies

C. Insurers issue insurance policies or contracts.

Which of the following terms and definitions do not match? A Medical Expense - Cost incurred by an insured due to accident or sickness B Sickness - Illness or disease C Long-Term Care - Contract that pays weekly or monthly benefits if an insured is unable to perform the duties of their job D Field Underwriting - the agent's personal contact with the applicant

C. Long-Term Care Expense - Product designed to provide coverage for personal care services in a setting other than an acute care unit of a hospital, such as a nursing home or even one's own home.

The term 'mode' refers to the: A Rate the underwriters apply to the policy B Method used in policy delivery C Frequency of premium payments D Claims process

C. Mode refers to the frequency of premium payment, such as monthly or annually.

Group credit health insurance requires all of the following, except: A A minimum number of debtors B A master policyowner C A copy of the insured's medical records D Premium payment by each debtor

C. No medical records or any proof of insurability is required in group credit health insurance because it is purchased and underwritten as any other group policy.

A partial disability is defined as an individual: A Unable to perform all duties of any occupation for which he/she is qualified based upon education, training, and experience B Unable to perform all duties of his/her occupation C Unable to perform one or more duties of his/her occupation D Presumed to be disabled due to the loss of sight, hearing, speech, or the loss of 2 limbs

C. Partial Disability is a disability resulting in an inability to perform 1 or more of the regular duties of an occupation. The benefit usually pays up to 50% of a total disability benefit for 3 to 6 months.

Each of the following statements about policy loans is correct, except: A A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value B The loan value of a policy cannot exceed the current cash value C Policy loans may be made on any type of policy D If a policy has cash value, the insurance company cannot refuse to lend the policyowner money

C. Policy loans, made from policy cash values, can only be made from permanent policies that accumulate cash value. They are not available on term policies.

On the day a newly-issued policy was to be delivered and the initial premium collected, the producer discovers that the insured is in the hospital with a heart condition pending surgery. What should the producer do? A Hold onto the policy until the insured is discharged from the hospital and then deliver the policy B Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces C Return the policy to the insurer with a letter of explanation D Deliver the policy to an immediate family member and collect any outstanding premium

C. Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application.

Which of the following is not true about a reciprocal insurance company? A If funds are insufficient to pay claims, the subscribers are assessed for additional premium B It allows individuals and corporations to exchange insurance on one another's risks C Reciprocal companies may only transact liability insurance D Each subscriber assumes a share of the risk of all other subscribers

C. Reciprocal insurers are unincorporated, group-owned insurers wherein an aggregation of individuals, firms, businesses, and corporations can exchange insurance on one another's risks. In other words, each subscriber assumes a part of the risk of all other subscribers as a means of risk sharing. Reciprocals are not restricted on the type of insurance they transact, unlike risk retention groups, which may only transact liability insurance.

Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount? A $4,000 B $2,000 C $3,500 D The weighted average of her income levels over the life of the contract

C. Relations of Earnings to Insurance (an Optional Uniform Provision) establishes that disability benefits may not exceed the monthly earnings of an insured at the time the disability commenced, or his/her average earnings for the 2 years immediately preceding the disability, whichever is greater.

A life insurance applicant's answers on the application indicate that they in good health. In fact, the applicant actually has a disease that they are not aware of. The statement on the application is considered: A Fraudulent B A concealment C A representation D A warranty

C. Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements that are guaranteed to be true. Concealment occurs when known information is not communicated.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Alice dies, so who receives the policy proceeds? A Alice's estate B Bill C Claire D The treasury of the state where Alice lives

C. Since Claire outlived Bill and Alice, then Claire is next in line to receive the policy proceeds.

What is one of the main reasons for a Universal Life policy to have a surrender charge? A It motivates the producer to properly sell the policy B It is a way to recoup interest paid, but not earned by the policyholder C This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy D It encourages large additional premium deposits from policyowners

C. Surrender charges provide a means for the insurer to recapture their upfront expenses involved in issuing the policy.

According to Optional Provision 'Cancellation', if the insurance company cancels a policy, on what basis must prepaid premiums be returned to the insured? A Pro rata basis, which means all unearned premium is returned minus administrative fees and additional charges B Pro rata basis, which means the insurer pro rates the amount of premium it would have earned throughout the remaining policy period and returns the balance minus expenses C Pro rata basis, which means all unearned premium is returned to the insured D Short rate basis, which means the insurer retains all premiums paid and the insured receives no refund at all

C. The 'Cancellation' Provision, which addresses cancellation of a policy, stipulates that if the insurance company cancels the policy, ALL unearned premium or unused premiums are returned to the insured on a pro rata basis. If the insured cancels the policy the premiums are refunded on a short rate basis, which is the same as pro rata, except they also withhold administrative fees and charges, thus: short rate.

Other than the applicant, which signature is required on an application? A Insurance commissioner B Executive officer of the insurer C Agent D Beneficiary

C. The applicant and the agent are required to sign and application for insurance. If the insured is not the applicant and is not a minor, a signature is also required.

On a variable universal life policy what is the difference between the cash value and the cash surrender values? A The investment performance B The interest earned C The surrender charge D The amount of any outstanding policy loan

C. The difference between the cash values and the cash surrender values is the surrender charge which provides an incentive for the policyowner to maintain the policy and allows for the insurer to recoup any policy issuance costs.

B was 42 when the life insurance policy was issued. 42 is referred to as the ______ age of the policy. A Attained B Effective C Original D Expired

C. The issue (original) age of the insured is the age on the policy issue date. The attained age is the insured's age at any point in time typically used at renewal or conversion. The effective date is the date when insurance coverage begins, and the expiration date is the date in which insurance coverage ends.

Jack has a variable annuity in a separate account that has a portfolio valued at $5 million. There are 500,000 outstanding accumulation units for the account. What is the value of one unit? A $50 B $25 C $10 D $500

C. The number of accumulation units can be found by dividing the value of the separate account by the number of accumulation units that are outstanding. (Example: $5,000,000 / 500,000 = $10.)

The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the: A Future Earning Value Approach B Needs Analysis Approach C Human Life Value Approach D Family Values Approach

C. The objective of the Human Life Value Approach is to provide the proper amount of coverage as determined by the value of the insured individual to his/her dependents.

What type of disability plan only provides coverage for 2 years or less? A Social Security Disability Income B Long-Term Disability Income C Short-Term Disability Income D Workers' Compensation Disability Income

C. The only plan that provides coverage for 2 years or less is the Short-Term Disability (STD) plan. STD normally provides benefit periods of short term duration such as: 13, 26 or 52 weeks. The benefit plan is always less than 2 years.

When there is enough cash value within a life policy to pay the premium, the Automatic Premium Loan provision prevents the policy from: A Surrendering B Converting C Lapsing D Renewing

C. The owner always has a right to borrow from the cash value. The APL provision gives the insurer the right to invade the policy cash value to prevent a lapse.

An applicant for one line of insurance in Alabama must complete how many hours of prelicensing education? A 40 B 12 C 20 D 10

C. To be permitted to take the state exam, an individual is required to complete a minimum of 20 classroom hours or equivalent of prelicensing individual instruction per line of authority.

How long, typically, is the grace period on a $500,000 level term life insurance policy? A One quarter B One week C One month D One year

C. Typically, the grace period runs one month (30 or 31 days) from the premium due date.

Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options? A Straight Life B Joint Life C Life Income Joint and Survivor D Life Income Period Certain

C. Under Life Income Joint and Survivor, payments would continue until the death of the second person to die.

What is the 'waiver of premium' called on a Universal Life insurance policy? A Waiver of flexible premium B Monthly premium waiver C Waiver of Cost of Insurance D Disability premium income

C. Waiver of Cost of Insurance is a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.

In Alabama, when is a producer required to give an applicant a Notice Regarding Replacement? A Ten days after policy delivery B The policy issue date C At the time of application D When the policy is delivered

C. When replacement is involved, the Notice Regarding Replacement of Life Insurance must be presented at the time the application is taken.

The Commissioner may grant or deny an agent's request for an extension to comply with the continuing education requirements. Which of the following correctly describes the time required to comply? A 60 days if granted, 10 days if denied B 60 days if granted, 30 days if denied C 90 days if granted, 30 days if denied D 30 days if granted, 10 days if denied

C. CE extensions may be granted for up to 90 days by the Commissioner. If denied, the producer has 30 days to become compliant.

The difference between a misrepresentation and a material misrepresentation is: A Material misrepresentations are considered insurance fraud B A material misrepresentation is grounds for criminal charges C Material misrepresentations are issues that affect policy issuance D A material misrepresentation is always intentional

C. A misrepresentation is any false or misleading statement made by the applicant on the application. A material misrepresentation is a false or misleading statement that would have affected whether the policy was issued at all and may void the policy.

Which of the following best describes the consideration on the part of an insurer? A The offer of the contract B The acceptance of the contract C The promise to pay in the event of a covered claim D The purpose of the contract must be legal

C. Consideration is something promised, given, or done that has the effect of making an agreement a legally enforceable contract.

Which type of term protection has an increasing face value as the insured gets older? A Level Term B Convertible Term C Increasing Term D Renewable Term

C. Increasing Term, as its name implies, increases the death benefit on an annual basis. Used primarily as a rider attached to a permanent policy, the annual premium typically stays level.

An insured with a participating life insurance policy receives annual dividends. She has opted for the insurer to use these funds to increase her overall amount of insurance. This would refer to which option: A Premium Reduction B Reduced Paid-Up C Paid-Up Additions D One-Year Term

C. Paid-Up Additions is a Dividend Option that buys small amounts of life insurance with a single premium and increases both the death benefit and cash value of the policy. Each addition's cash value is separate from the cash value of the base policy. Reduced Paid-Up is a Nonforfeiture Option.

When payment under a Medical Expense policy is based on the average fee charged by all doctors in a given geographical area, and the balance of any overcharges or costs of any disallowed services are the insured's responsibility, the payment is known as: A Scheduled payment B Cash payment C Usual, customary, reasonable (UCR) payment D Blanket payment

C. The question defines the (UCR) method of payment.

What is the minimum free look period for replacement policies in Alabama? A 20 days B 60 days C 30 days D 10 days

C. When a policy has been purchased through a replacement transaction, Alabama requires a minimum free look period of 30 days.

G is concerned about the future and living a comfortable retirement. Which of the products listed below is ideally suited to help G prepare for their retirement goal? A A bank certificate of deposit B A U.S. savings bond C An annuity D A variable whole life insurance policy

C. An annuity An annuity is designed to provide a steady stream of income to an individual, typically upon retirement. It protects against outliving one's retirement income by providing an income for life.

All are correct statements concerning noncontributory group life, except: A Only the plan sponsor is responsible for paying premiums B The Conversion Period is 31 days C Premiums are calculated by underwriting each individual in the group D If employer-sponsored, an employee must work a minimum number of hours per week to be eligible

C. Premiums are calculated by underwriting each individual in the group. Since no proof of insurability is required on the part of the plan participants, the insurer looks at the group collectively, factoring a number of variables.

A beneficiary that can be changed is called: A A trust B An irrevocable beneficiary C A tertiary D A revocable beneficiary

D A revocable beneficiary When a revocable beneficiary is named, the policyowner can change the beneficiary as often as desired.

To purchase the greatest amount of coverage, for the least amount of initial premium, a client would purchase which of the following? A A variable life policy B An ordinary life policy C A participating policy D A term policy

D A term policy A person at any given age, for a specified dollar amount of premium, can always own more term insurance than any other class of life insurance, because all they are purchasing is a death benefit (protection) for a temporary period of time.

The Alabama Life and Disability Insurance Guaranty Association is obligated to pay the claims of which of the following insurers? A A nonadmitted insurer B A chartered insurer C A reinsurer D An insolvent insurer

D An insolvent insurer The Association is obligated to pay the claims of an insolvent or financially impaired insurer.

The technical name of the person who makes a policy assignment is the: A Old owner B Assignee C New owner D Assignor

D Assignor The original owner (the assignor) will name a new owner of the policy (the assignee).

A life insurance applicant wants a combination of savings and insurance protection with guarantees. If the applicant is willing to pay premiums only until the age of 65, at which time the policy is fully paid-up, which of the following should he/she purchase? A Indeterminate Premium Whole Life B An Ordinary Straight Whole Life policy with a Level Term rider to age 65 C Adjustable Life with a large death benefit and minimal premiums D Limited Pay Whole Life-Age to age 65

D Limited Pay Whole Life-Age to age 65 A life policy payable to age 65 is a limited payment policy. If the insured does not die within the limited premium period, premiums cease because the policy is fully paid up (i.e. no more premiums are due). Death always results in the payment of the policy proceeds as long as the policy is in force. Cash values build as in any other Ordinary Whole Life policy.

Which of the following death benefit settlement options pays out a benefit that is 100% income tax-free to the recipient? A Life Income Only B Fixed Amount C Fixed Period D Lump Sum

D Lump Sum The only settlement option that pays out its benefit 100% income tax-free to the beneficiary is the lump sum option.

What taxes apply to the benefits under an individual Disability Income Policy on which the insured has paid the premiums? A Capital gains tax B FICA tax C Income tax D No tax

D No tax Benefits received from an individual Disability Income Policy are not subject to taxation.

The insuring clause is found: A On the last page of the policy B Right before the copy of the application C In front of a copy of the paramedical exam results D On the first page of the policy

D On the first page of the policy The insuring clause is typically found on the front or first page of the policy.

What should an agent tell the insured when the insured asks when will his health plan take effect? A 30 days after taking the application B Immediately C 30 days after the policy is issued D The effective date indicated on the policy

D The effective date indicated on the policy A policy always takes effect on the 'Effective Date' on the policy. The coverage becomes effective at application approval. The insured may have conditional coverage during the underwriting process depending on how the application was taken, but don't confuse a conditional receipt with when a policy takes effect.

In Alabama, an insurer may terminate a Medicare Supplement policy for which of the following reasons? A The insured is placed in an assisted living facility B The insured receives benefits from Original Medicare C The insured's rapid deteroriation of health D The insured's application included material misrepresentations

D The insured's application included material misrepresentations A Medicare Supplement policy may be terminated by the insurer for nonpayment of premium, material misrepresentation, or fraud.

Which of the following accurately describes the 'free look' provision? A Allows the insured to look over the issued policy for a specific number of days and return it for a partial refund of premiums paid if desired B All of the answers listed C Allows the proposed insured to look over a sample policy prior to completing the initial application for insurance D Allows the insured to look over the issued policy for a specific number of days and return it for a premium refund if desired

D. A 'free look' provision allows the insured to review the issued policy for a specified period, usually 10 days. It requires the insurance company to provide a full refund of premiums paid if the insured is not totally satisfied.

An insurer that is organized in one state and authorized to do business in another state is known as which type of insurer? A Domestic B Alien C Captive D Foreign

D. A foreign insurer is not organized under the laws of this state, but in one of the other states or jurisdictions within the United States, whether or not it is admitted to do business in the state or jurisdiction.

After how much time does a life insurance incontestability period end in Alabama? A 1 year B 3 months C 6 months D 2 years

D. A life insurance policy has a two year incontestability period. The insurer may cancel the policy during this period for material misrepresentations. The insurer cannot cancel the policy after this period has been exhausted, except for nonpayment or fraud.

Under Alabama law, a producer cannot pay any valuable consideration to a person if they are not licensed as a producer. If a producer violates this provision, they are subject to a fine of up to: A 3 times the premium paid B $1,000 C $10,000 D 3 times the commission paid

D. A unlicensed individual may not receive any valuable payment from any person for an insurance sale. Violating this provision will result in a fine up to 3 times the commission paid.

A health insurance policy includes an endorsement indicating the insurer will allow the policy to continue in force without further premiums if the insured is totally and permanently disabled. What endorsement is attached to this policy? A Life Time Benefit Rider B Impairment Rider C Hospital Confinement Rider D Waiver of Premium Rider

D. A waiver of premium rider provision or endorsement means the insurer will waive the future premiums, keeping the policy in force, if the insured is totally disabled. Usually there is a 3 to 6 month elimination period imposed before premiums begin to be waived.

Which of the following statements is incorrect regarding the Alabama Health Insurance Plan (AHIP)? A An applicant must first exhaust any available COBRA coverage before applying for AHIP B AHIP is a high risk pool of coverage C Health insurers in Alabama share the deficits associate with AHIP D AHIP premiums are 75% of standard rates

D. AHIP premiums may be up to 125% of standard health insurance rates.

Which of the following is not a form of permanent life insurance coverage? A Adjustable life B Ordinary straight whole life C Indeterminate premium whole life D Term to age 70

D. Adjustable Life is a type of permanent life insurance that combines features of term and whole life coverage, giving policyowners the option to change the characteristics of their policies as their needs change over time. Term is not a permanent form of coverage.

After passing the Alabama state licensing exam, a license candidate must complete which of the following actions to receive their license? A Be interviewed by the Commissioner B Be appointed by an insurer C Pay an appointment fee D Submit a uniform application for licensure with the Commissioner

D. After passing the state exam, a license candidate must submit a uniform application to the Commissioner and pay any required licensing fees.

An insurance company based out of Europe approved to do business in your state would be considered a/an: A Alien, non admitted B Foreign, nonadmitted C Foreign, admitted D Alien, admitted

D. An insurance company operating out of its home country would be considered to be an Alien company in the other country. A state authorizing any company to do business within its territory would be 'Admitting' the company into the state, Therefore, this company would be considered to be: 'Alien, Admitted'.

Based on the 3-stage incontestability process, an insurer in Alabama can deny a claim under an LTC insurance policy for any misrepresentation: A After the policy has been in force 2 years B At any time C If the policy has been in force more than 6 months, but less than 2 years D If the policy has been in force for less than 6 months

D. An insurer may rescind, or deny a claim under an LTC policy in force for less than 6 months on the basis of material misrepresentation. This is referred to as an Incontestability Clause. The insurer may deny a claim under a policy in force for at least 6 months, but less than 2 years, if the material misrepresentation pertains to a condition for which benefits are payable. In LTC policies, the incontestability operates in a two stage manner.

Altering health insurance rates based on which of the following characteristics would be considered unfair discrimination? A Sex/gender B Age C Occupation D National origin

D. An insurer or producer may not unfairly discriminate the rates, benefits, or terms of a health insurance based on national origin, race, or creed.

Once an Alabama health insurer has received a clean claim in the mail, the insurer must pay for medical or hospital expense benefits within how many days? A 30 B 60 C 90 D 45

D. An insurer providing medical or hospital expense benefits must pay for services rendered within 45 days after receiving a clean claim; within 30 days after receiving a clean claim electronically.

J took out a life policy when he was 35. It had a conversion feature that he exercised at age 45. Age 45 is referred to as his ____ age. A Renewal B Issue C Effective D Attained

D. Attained age is the insured's age at any point in time, typically used at renewal or conversion.

The Unintentional Lapse provision in an LTC policy requires the insurer to contact the designated person how many days before the policy may be terminated? A 20 B 60 C 45 D 30

D. Before an LTC policy may be terminated, the Unintentional Lapse provision requires the insurer to contact a person designated by the insured at least 30 days before terminating this policy.

An evaluation of Simon's past earnings reveals his average earned monthly income to be about $4,000 monthly. The greatest amount of benefit that Simon will likely be able to purchase under a Disability Income Policy, in order to reduce malingering in the event of a claim, is: A $2,000 monthly B $4,000 monthly C $1,000 monthly D $2,500 monthly

D. Benefits are usually determined as a percentage of the insured's current earnings, normally 60 to 70%. Simon would be unlikely to obtain 100% of his income as a disability benefit.

What taxes apply to the benefits under an individual Disability Income Policy on which the insured has paid the premiums? A FICA tax B Capital gains tax C Income tax D No tax

D. Benefits received from an individual Disability Income Policy are not subject to taxation.

If a consumer would like to make sure that survivors are left with a paid-off car, boat, and home, at an affordable price, what type of policy should he or she consider acquiring at the time each one of those items were purchased? A Whole life insurance B Increasing term insurance C Variable life insurance D Credit life insurance

D. Credit life insurance is used to pay off the outstanding balances of loans. The decreasing term protection is closely matched to the amount of the debt outstanding based on the loan repayment schedule.

Help in performing ADLs which can be performed by someone without medical skills or training, but must be based on a doctor's orders is: A Inpatient care B Skilled nursing care C Medicare D Custodial or residential care

D. Custodial or residential care is the type most elderly people will require at some time in their later years, and is also the type that is not covered by Medicare and does not have to be performed by someone with medical skills.

Which of the following is NOT an element of insurability? A Loss must be calculable B Risk of loss must represent a financial hardship C Cost of insurance must be affordable D Risk of loss must be catastrophic

D. Elements of insurability excludes catastrophic perils. It must be predictable, measureable, calculable, accidental, affordable, and must cause financial hardship.

All of the following statements about Group Life Insurance are true, except: A Employees are taxed on any premiums paid on insurance in excess of $50,000 B Employer paid premiums are tax deductible C Employee paid premiums are not tax deductible D Employees receive a tax deduction for employer paid premiums

D. Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income.

Upon receipt of an application, the insurer's underwriter may issue the contract with exclusions or limitations. This means that: A Coverage is issued, but at a higher rate than quoted B Coverage is issued at the rate that was quoted C Coverage is not issued D Coverage is issued, but there are limits on the insurer's obligation to pay

D. Exclusions/limitations may be temporary or permanent, but in any case they limit the insurer's obligation to pay.

Each of the following is a factor in computing the premium for a life insurance policy, except: A The mortality rate B Operating expenses C Investment experience D Cost of living

D. Factors that can affect premiums for life insurance policies can include mortality rate, investment experience, and the insurer's operating expenses and contribution to surplus. Cost of living has no effect in computing premiums.

What will cause the time period of the fixed amount settlement option to be extended? A Lower mortality B A decrease in the insurer's expenses C A stock market rally D An increase in interest credited

D. Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.

If funds are prematurely withdrawn from a Modified Endowment Contract (MEC) they are subject to a _____% penalty on any gains. A 20 B 15 C 6 D 10

D. For withdrawals of any gains from a MEC prior to age 59 1/2 there is a 10% tax penalty that applies.

A(n)________ is an added benefit attached to a life insurance policy for which an additional premium is generally paid. A Extension B Reduction C Exception D Rider

D. Generally, for an additional premium, a rider can be added to a life insurance policy, such as a child rider, spouse rider, or waiver of premium rider.

If the producer discovers that the applicant is not in good health at time of a life insurance policy delivery. If the initial premium has not been paid, it is the producer's responsibility to: A Deliver the policy and collect the premium as planned B Hold onto the policy until the client recovers from their condition, then deliver the policy C Charge a higher premium than what is written in the policy D Return the policy to the insurer for further underwriting

D. If the applicant is not in good health and the initial premium has not been paid, the policy should be returned to the insurer to further underwriting.

Which of the following life insurance policies has a current and guaranteed maximum premium stated in the policy? A Limited Premium Payment Whole Life B Adjustable Life C Ordinary Straight Whole Life D Indeterminate Premium Life

D. Indeterminate Premium Whole life charges a current premium based on its current estimate of investment earnings, mortality, and expense costs. If these change then so too the premium but never beyond the maximum stated in the policy.

All of the following are true of a substandard risk, except: A The insured may have a flat additional premium added to their base premium B The insured may be rated as older than their actual age C The coverage could be reduced for a period of time D The premium would be discounted

D. Individuals whose risk factors do not measure up to underwriting standards are usually issued rated policies.

Which of the following has primary responsibility for ensuring that the application is filled out completely? A Home office underwriter B Actuary C Insurer D Producer

D. It is the agent/producer's responsibility to make certain the application is filled out completely, correctly, and to the best of his/her knowledge.

What type of disability income insurance pays a benefit to a business to help in the search, cost, and hiring of a replacement when an employee becomes disabled and is unable to work for the company? A Business overhead expense B Reducing term C Buy-sell D Key employee

D. Key Employee Insurance pays a benefit to the business when a key employee becomes disabled by helping pay for a replacement, training a new employee, or loss of revenue due to the disabled employee's lack of work.

Jane pulled money out of her Medical Savings Account (MSA) at age 62 to be used for something other than a medical expense. The money she pulls out will: A Will incur a 50% penalty if it is a family plan B Incur a 15% penalty only C Incur a 65% penalty if it is an individual plan D Be taxed as any other income with an additional 15% penalty

D. MSAs allow tax-free withdrawals for qualified medical expenses only. Any other withdrawal is taxed as any other income would be taxed along with a 15% penalty. The penalty does not apply at death or once you have reached Medicare eligibility age 65.

Lucy uses her dividends to purchase single premium additional permanent benefits at her attained age. Which Dividend Option is Lucy exercising? A Reduced Paid-Up B Paid-up Option C One-Year Term D Paid-up Additions

D. Only Paid-up Additions, Paid-up Option and One-Year Term are dividend options. Reduced Paid-Up is a nonforfeiture option. Lucy wanted additional permanent benefits so she should choose Paid-up Additions.

Ed purchased a policy naming his children as per capita beneficiaries. Upon his death the proceeds are paid to: A His wife, then all children or their heirs B All beneficiaries, with any deceased beneficiary's share passed to his/her heirs equally C The estate of the insured, then passed down to the heirs D His surviving children, who will share the proceeds equally

D. Per capita means that surviving beneficiaries share equally in the death benefits. If Ed's policy has a $100,000 death benefit, and if upon his death, there are two surviving children, each gets $50,000.

In Alabama all of the following are true regarding life insurance advertisements, except: A Any reference to policy dividends must state that they are not guaranteed B Premiums cannot be referred to as deposits or investments C An advertisement must have the life insurance in the policy name D Premiums cannot be mentioned in an advertisement at all

D. Premiums may be mentioned; however, premiums may not be called deposits, investments, or any other term besides premiums.

Regarding COBRA, which of the following is not true? A It provides continuation of coverage for 29 months for workers on Social Security Disability B It provides continuation of coverage for 36 months for a surviving spouse C It provides continuation of coverage for 36 months for an individual losing dependent status D It covers participants who have resigned for 36 months following the date of their resignation

D. Termination of employment other than for gross misconduct allows former employees and their dependents a maximum of 18 months of continuation.

The Alabama Life and Disability Insurance Guaranty Association is obligated to pay the claims of which of the following insurers? A A nonadmitted insurer B A reinsurer C A chartered insurer D An insolvent insurer

D. The Association is obligated to pay the claims of an insolvent or financially impaired insurer.

The ___________ clause allows the insurer to pay a relative or anyone deemed entitled to the death proceeds when there are no living beneficiaries, often to reimburse them for the funeral costs. A Spendthrift B Probate C Common Disaster D Facility of Payment

D. The Facility of Payment Clause is typically found in older small face amount policies to expedite the payment of claim where there are no beneficiaries named or none alive at the time the insured dies. The payout typically is used to cover expenses associated with the burial of the deceased insured.

What is the Health Insurance Marketplace? A It is like a stock exchange where insurers can make offers to obtain more business from their competitors B It is a physical location in every major city where consumers can go to shop and compare insurance policies and companies C It is a clearinghouse where consumers are automatically matched with companies and enrolled in their plans D It is a resource where consumers can learn about their health insurance coverage options and compare plans

D. The Health Insurance Marketplace is a resource where individuals, families, and small businesses can learn about their health coverage options, compare health insurance plans, choose a plan, and enroll in coverage.

The factors that determine the amount of each payment under the fixed period settlement option are: A Age of the beneficiary only B Length of the fixed period, face amount of the policy, interest, and age of the beneficiary C Length of the fixed period payout only D Length of the fixed period, face amount of the policy and interest

D. The amount of a fixed period settlement option payment is determined by the face amount of the policy, the interest it can earn, and the length of the fixed period the payments will be made. The age of the beneficiary is not required when determining the fixed period payout amount.

The entire contract typically consists of all of the following, except: A Any riders B A copy of the application C The policy itself D A copy of the cancelled check and receipt

D. The entire contract consists of the policy, riders, amendments, and a copy of the application. Nothing can be incorporated by reference.

An employer group health insurance sponsor does all of the following, except: A Apply for coverage B Provide underwriting information C Pays the premium D Issue the policy

D. The group sponsor applies for coverage, provides information for underwriting, maintains the policy, and makes premium payments. Only insurers issue policies.

An insurable interest must exist between the _______ and the ________ at the time of application for life insurance to be valid. A Applicant/Owner B Owner/Beneficiary C Insured/Beneficiary D Applicant/Insured

D. The insurable interest relationship must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid.

Those powers of an insurance agent included in the agreement between the agent and the company are known as: A Allowed powers B Apparent powers C Admitted powers D Expressed powers

D. The insurance agent's actual powers spelled out in the agency agreement and underwriting instructions are called expressed powers. They are expressed in writing in the agents contract however, at times may also be expressed orally by the insurer.

If the insured's age has been overstated at the time the policy was purchased, and the error is discovered prior to the death of the insured, the company will: A Will increase the face amount of insurance to reflect the face amount that the premiums should have purchased B Always cancel the policy C Increase future premium payments D Reduce future premium payments

D. The misstatement of age clause states that when there is a discrepancy between stated age and true age, future policy premiums must be adjusted when discovered, unless death occurs at which point the death benefits will be adjusted to that which premiums collected would have purchased.

Which provision is a Mandatory Uniform Provision? A Illegal Occupation B Misstatement of Age C Conformity with State Statutes D Legal Actions

D. The only response that is a Mandatory Uniform Provision is Legal Actions. All of the other responses are Optional Uniform Provisions.

Eva dies without having paid the $500 premium on her $50,000 policy that was due a week before her death. With no outstanding policy loans, Eva's beneficiary can expect to receive: A The cash value of the policy only B $50,000 C None of the policy proceeds since her policy was past due D $49,500, which is the face amount less the premium owed

D. The policy is still in force thanks to the grace period, so the beneficiary will receive the face value less the amount of the outstanding premium.

If a premium was not submitted with the application, the producer must deliver the policy and explain the benefits and collect the premium. The policy then becomes the Offer and the premium is the: A Delivery B Trial C Evidence D Acceptance

D. The policy is the offer from the insurer to the individual who accepts the policy by paying the premium.

All of the following can determine the death benefit settlement option, except: A The beneficiary if no option was designated B The policyowner prior to death C The beneficiary if the policyowner directs the insurer to permit him or her to choose D The insurer

D. The policyowner has the right to select the settlement option. If he or she does not, then it is up to the beneficiary to determine how to receive the payment.

A participating policy is likely to have which of the following? A Stockholders B A lower premium than a nonparticipating policy C Up front charges and fees D A higher premium than a nonparticipating policy

D. The premium calculations for participating policies are very conservative and include an allowance for future dividends. Premiums for these policies are slightly higher than they would be otherwise. Stockholders are considered nonparticipating which also have front end or up front loads and charges.

When a producer is made aware of an insured's death, the first task is to: A Send a sympathy card to the family B Contact the funeral home C Contact the family members D Notify the insurance company

D. The producer's first responsibility on learning of the death of an insured is to notify the insurer.

What information must appear on the policy summary provided to a life insurance client? A The producer's name and home address B A copy of the producer's license C The producer's agency's name and address D The producer's name and address

D. The producer's name and address along with the address of the insurance company must appear on the policy summary.

With regard to the waiver of premium rider, after the disability a policyowner normally: A Must reapply for the insurance B Must prove insurability to continue the policy on an annual basis C Must repay the premiums paid by the company during disability D Need not repay the premiums paid by the company during disability

D. The waiver of premium rider exempts the disabled policyowner from paying premiums during the term of disability, so the premiums do not need to be paid back.

Usually, if an HMO is a consumer's cooperative, it is organized as: A Self-insured provider B A fraternal organization C A stockholder owned corporation D A not-for-profit organization

D. Usually an HMO organized as a consumer's cooperative where the doctors are salaried employees of the HMO is organized as a not-for-profit organization.

What is the minimum free look period for replacement policies in Alabama? A 60 days B 20 days C 10 days D 30 days

D. When a policy has been purchased through a replacement transaction, Alabama requires a minimum free look period of 30 days.

Select the correct statement about converting from a family policy to an individual policy. A Conversion may be made as long as the insured does so within 90 days and can prove insurability B The individual has the option to convert to an individual policy provided they can prove insurability, but only after a qualifying event occurs C Family policies do not offer any conversion options at all D Usually, conversion may be made without evidence of insurability if the individual does so within 31 days after the family coverage ends

D. When converting coverage under a family policy, the same rules apply as with group insurance, the person should convert within 31 days after the family coverage ends to avoid having to prove insurability.

Penelope received benefits from her disability policy and went back to work. After 30 days she found she was not able to work and began to immediately receive her disability payments. Which of following provisions made this possible? A Residual Disability Provision B Presumptive Disability Provision C Second Injury Provision D Recurrent Disability Provision

D. The question defines the Recurrent Disability Provision.

In order for the life insurance policy's death benefit to remain income tax free to the beneficiary, the transfer of policy ownership must ____________. A Not involve a MEC B Take place after the policy has been in force at least 2 years C Not involve a policy with a face amount greater than $50,000 D Qualify for one of the exceptions

D. In order for the life insurance policy's death benefit to remain income tax free to the beneficiary, the transfer of policy ownership must qualify for one of the exceptions.

All of the following are characteristics of Credit Life Insurance, except: A This insurance is normally Decreasing Term and the amount of insurance reduces as the obligation reduces B The insurance is either a form of individual coverage on the life of a debtor, or a form of group insurance issued to a creditor providing coverage for debtors C The amount of the insurance benefit must not exceed the total amount of indebtedness D The debtor generally is both policyowner and beneficiary

D. The creditor (not the debtor) is normally both the policyowner and beneficiary.

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance: A Anytime before the age of 65 B On his own life at specified periods of time at a fixed guaranteed premium C On his own life at specified periods, but must prove insurability D On his own life at certain specified ages without proof of insurability

D. On his own life at certain specified ages without proof of insurability A guaranteed insurability rider guarantees that more permanent insurance can be purchased at specific ages without further proof of insurability at a rate based upon your attained age at the time the increase is purchased.

The nonforfeiture option that provides coverage for the shortest duration is: A Convertible Term B Automatic Premium Loan C Reduced Paid-Up D Extended Term

Extended Term provides the most amount of coverage for the least amount of time. Reduced Paid-Up provides the least amount of coverage for the longest period of time. Convertible Term and Automatic Premium Loan are not nonforfeiture options.

Which of the following is not a true characteristic of permanent protection Whole Life? A Premiums are flexible B The insurer bears all risk C Death benefit typically remains level D Premiums are payable to age 100 in older policies, and to age 121 in newer policies

Flexible premiums are not a characteristic of a Whole Life Insurance Policy.

A producer must include their name and address on which of the following? A A buyer's guide B A policy summary C Any policy amendment or rider D An insurance policy's cover page

Only a policy summary requires that the producer disclose their name and address.

What is the difference between net premium and gross premium? A Expense loading B Interest C Mortality costs D Commissions

The correct answer was A. Net premium plus expense loading equals gross premium.

Which of the following policies is designed to be used in estate planning to pay estate taxes for married couples? A Joint Survivorship Life Policy B Joint Life C Variable Life D Universal Life

The correct answer was A. A Joint Survivorship Life Policy pays the death benefit upon the death of the last insured to die. This policy is often purchased to provide a lump sum benefit to pay estate taxes once the second spouse dies.

Which of the following riders can be used to cover the life of an additional insured who is an unrelated business partner? A Nonfamily rider B Child rider C Spouse rider D Family rider

The correct answer was A. A Nonfamily Rider covers an additional insured with an insurable interest, such as a business partner.

A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal? A The death benefit or cash accumulation will be reduced by the partial withdrawal B The policy will immediately be voided by the insurer C The policy will be used as collateral for a loan from the insurer for which interest will be charged D The policy will become paid up

The correct answer was A. A partial withdrawal also known as a partial surrender will cause the policy to have either the face amount or cash accumulation reduced by the amount of the withdrawal.

Which of the following is TRUE of a term rider when attached to a permanent life policy? A It can provide additional temporary coverage on the insured or family members B It is always in the amount of the base policy C It allows the policy to achieve paid-up status at the end of the term D It only pays out a death benefit in cases of accidental death

The correct answer was A. A term rider provides additional death benefit on the primary insured or other named insureds. At some point, the coverage becomes unaffordable, can be converted, or it expires.

A policyowner has the right to cancel the policy at any time, and for any reason, because insurance contracts are ____________. A Unilateral B Contracts of adhesion C Conditional D Aleatory

The correct answer was A. A unilateral contract is a one-sided contract. Only the insurer is contractually bound. The policyowner can cancel the policy for any reason without legal obligation.

Under the Optional Uniform Provisions, what happens when an individual health policy contains provisions that have gone out of compliance because of changes in state law? A The policy will be construed as if it conformed to the law B The insurer will be fined and the policy reissued C The policy is invalid D The policy may be voided by the insurer

The correct answer was A. According to the Conformity with State Statutes Provision, any provision on the policy that conflicts with state law is automatically amended to conform with state law.

John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John? A John is liable for all expenses B Health covers medical; disability covers income C His health policy pays all expenses D Medicaid pays the medical expenses

The correct answer was A. According to the Intoxicants and Narcotics Provision (an Optional Uniform Provision), the insurer may deny coverage for John's injuries, making John liable for all expenses.

An insured owning an Adjustable Life Policy enjoys a policy that has characteristics of both ______ and _______. A Permanent and Term B Decreasing and Level Term C Increasing and Decreasing Term D Level and Increasing Term

The correct answer was A. Adjustable Life, the precursor to Universal Life, combines the features of term and whole life coverage.

Evelyn paid a $700 annual premium for a business overhead expense policy that paid a monthly benefit of up to $4,000 for a benefit period of 6 months. When Evelyn became disabled she used the entire benefit for 3 months, which covered $8,000 of employee salaries, as well as $3,000 in rent and utilities. This means that the amount of the benefits which was reported as income equaled: A $12,000 B $3,000 C Zero D $8,000

The correct answer was A. All benefits are considered taxable income.

When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders? A Accidental Death Rider B Increased Death Benefit Rider C Enhanced Settlement Rider D Accelerated Benefit Rider

The correct answer was A. Also known as the Double Indemnity Rider, the policy pays the stated multiple of the face amount should the insured die as the result of an accident.

The Attending Physician's Statement (APS) is completed by: A An applicant's physician to provide information about the applicant's medical history B The Medical Information Bureau C The agent after the medical questions are answered by the applicant D A physician providing a required medical exam at the time of application

The correct answer was A. An Attending Physician's Statement (APS) is used in cases where the individual application and/or medical reports reveal conditions for which more information is required. The treating physician will provide information regarding the medical history of the applicant. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.

Which of the following statements regarding dividends is a prohibited advertisement in Alabama? A Dividend payments are guaranteed B Dividends are a refund of part of the premiums paid C Dividend payments are not guaranteed D Illustrated dividends will not be enough to fully pay the policy

The correct answer was A. An advertisement may never state that dividends are guaranteed.

An agent holds a license in Alabama and sells insurance for several companies, but is not appointed with company XYZ. If the agent writes a policy for XYZ, which of the following would apply? A XYZ will be fined up to 3 times the premium received B The agent will be held liable for the policy C The agent will be fined up to 3 times the commission earned D XYZ must appoint the producer within 30 days

The correct answer was A. An insurer accepting and issuing business from an agent not appointed with the company would be fined up to 3 times the premiums received.

Which of the following individuals is not eligible to establish a Health Savings Account? A Anne, who is covered through a traditional HMO B Magdalena, who has access to a consumer driven health plan through her firm C Martha, who also has access to an FSA through her employer D Mary, a self-employed individual who purchase a high deductible policy through her state exchange

The correct answer was A. Because Anne is covered through a traditional HMO, she does not have the required HDHP needed to establish and fund an HSA.

Howard talks to his agent Jane about buying a critical illness policy from the XYZ insurance company to cover his wife Deborah, and naming his daughter Mary as the beneficiary in case of death. Jane told him that she would need signatures from all of the following, except: A Mary B Jane C Howard D Deborah

The correct answer was A. Beneficiaries are not required to sign. The agent must sign on behalf of the company, and the insured, not being a minor, must give consent to being insured. The policy owner, who is also the applicant, must by definition sign the application.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Alice dies, so who receives the policy proceeds? A Bill B Claire C The treasury of the state where Alice lives D Alice's estate

The correct answer was A. Bill is the primary beneficiary and is first in line to receive the policy proceeds if Alice should die first.

If Jon dies with an outstanding policy loan of $10,000 on his $100,000 interest-sensitive whole life policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim? A $90,000 B $105,000 C $115,000 D $100,000

The correct answer was A. Cash values are NOT added onto the death benefit, but outstanding policy loans ARE recovered before the death benefit is paid out. The correct calculation is $100,000 - $10,000 outstanding loan = $90,000.

All of the following are exclusions under an LTC policy, except: A Chemical dependency on one's own prescription drugs B Injury arising due to committing a felony C Nervous or mental disorders that have no demonstrable organic cause D Rest cures

The correct answer was A. Chemical dependency would not be excluded if it results from the administration of drugs under a physician's prescription and direction.

All of the following acts are reasons that the Commissioner may suspend a producer's license, except: A Conviction of any misdemeanor B Failing to pay state income tax C Lying on their application for license D Failing to comply with a child support order

The correct answer was A. Conviction of a misdemeanor is not automatically a reason to suspend or revoke a producer's license. Violations of insurance law may cause the person to be charged with a misdemeanor, according to Alabama's general penalties, and the violation would be cause for license suspension, revocation, or nonrenewal. Misdemeanor offenses not related to the business of insurance would not be grounds for suspension, revocation, or nonrenewal. However, any felony conviction is appropriate grounds.

Which of the following is taxable as income? A Interest paid on policy dividends B Policy dividends paid to a policy owner C Death benefit proceeds paid to a named beneficiary D Cash value accumulating within the life insurance policy

The correct answer was A. Dividends are considered a return of unused premiums to the policyowner and are not taxable, but interest paid on policy dividends are fully taxable.

Upon receipt of an application, the insurer's underwriter may issue the contract with exclusions or limitations. This means that: A Coverage is issued, but there are limits on the insurer's obligation to pay B Coverage is not issued C Coverage is issued at the rate that was quoted D Coverage is issued, but at a higher rate than quoted

The correct answer was A. Exclusions/limitations may be temporary or permanent, but in any case they limit the insurer's obligation to pay.

For which of the following may any funds remaining at year-end not be rolled over to the next year? A Flexible Spending Account B Medical Savings Account C Health Savings Account D Individual Retirement Account

The correct answer was A. FSAs are a 'use it or lose it' type of an account.

Which of the following statements is false regarding health insurance coverage of newborns in Alabama? A New borns will receive coverage once the insured notifes the insurer of their birth B Coverage must be provided for medically necessary care C Treatment of congenital defects must be covered D All health insurance policies covering dependents must cover newborns

The correct answer was A. Health insurance policies in Alabama must cover newborns from the moment of their birth.

If an annuity lifetime benefit is selected, in most cases it is a/an _________ election. A Irrevocable B Excellent C Poor D Revocable

The correct answer was A. If an annuity lifetime benefit is selected, in most cases it is an irrevocable election.

All of the following are risks to the life settlement purchaser, except: A The insured dies sooner than expected B The third party runs out of funds to pay on-going premiums C The insurer becomes insolvent D The insurer will not honor the claim based on lack of insurable interest

The correct answer was A. If the insured dies sooner than expected then the purchaser will achieve a greater return than they had planned on.

Industrial Life Insurance is also referred to as a: A Debit Policy B Nonparticipating Policy C Participating Policy D Group Policy

The correct answer was A. Industrial life policies are also known as home service and debit policies where premiums are collected by a Debit Agent.

What is the correct term for a contract written by one party without input from or negotiation with the other party? A Contract of Adhesion B Conditional Contract C Aleatory Contract D Unilateral Contract

The correct answer was A. Insurance contracts are contracts of adhesion, meaning that one party (the insurer) writes the contract without input from the other party (the insured). The other party must adhere to the contract on a "take-it-or-leave-it" basis.

Jasper owns a policy that combines the best features of Basic Medical Expense Plans and Major Medical Insurance into a single policy to give him the most complete hospital coverage. Jasper owns a: A Comprehensive Major Medical Policy B Combination Major Medical Policy C Supplementary Major Medical Policy D Blanket Major Medical Policy

The correct answer was A. Jasper owns a Comprehensive Major Medical policy. It combines the best features of the Basic Medical Expense Plans and Major Medical insurance into a single policy.

The net amount at risk to the insurance company at the endowment date is: A Zero B The cash values C The total of the premiums paid to date D The face amount

The correct answer was A. Net amount at risk is the difference between the face amount and cash surrender value. Since the policy endows, there is no spread between them. Therefore, there is no net amount at risk to the insurer.

All of the following are characteristics of Franchise Insurance, except: A Certificates of Insurance are issued B The employer handles most of the administrative responsibilities, which makes franchise less expensive than individual insurance C The group must be together for a reason other than purchasing cheaper insurance D Premiums are paid by the employer or shared with the employee

The correct answer was A. No Master Policy or Certificates of Insurance are issued as compared to formal group insurance. Although a group is being written, it is through individual policies.

If an Alabama insurance company requests additional information regarding a pending claim, upon receiving the additional information, how many days does the insurer have to pay or deny the claim? A 21 B 30 C 60 D 10

The correct answer was A. Once the insurer receives the additional information it requested, it must pay or deny the claim within 21 days.

Which of the following is not covered by Medicare Part A? A Outpatient hospital treatment B Post hospital skilled nursing facility care C Hospice care D Hospitalization

The correct answer was A. Part A is Hospital Insurance mainly providing coverage for inpatient services. Outpatient services are covered under Part B.

Which of the following terms and definitions do not match? A Probationary Period - found in disability insurance policies before benefits are payable after a loss occurs B Consideration Clause - states the amount and frequency of the premium C Payment of Claims - paid to the policyowner unless otherwise specified or there is an assignment of benefits D Entire Contract Clause - includes policy, provisions, a copy of the application, and any riders, waivers, or endorsements

The correct answer was A. Probationary Period - specified period of time before coverage goes into effect for pre-existing conditions.

All of the following are producer responsibilities, EXCEPT: A Issue policies B Represent the insurer C Provide quotes and collect premiums D Solicit and accept applications, and forward them to the insurer

The correct answer was A. Producers do not issue policies. Insurers issue policies. Producers represent the insurer in soliciting, receiving, and forwarding applications, providing quotes, and collecting premiums.

Policy replacement is the process of: A Cancelling an existing policy and issuing a new policy B Adding additional coverage C Changing riders and exclusions D Lowering a policy premium

The correct answer was A. Replacement means cancelling an old policy and replacing it with new a new policy.

The Commissioner may do all of the following, except: A Change insurance laws for the good of the general public B Enforce insurance law C Manage and supervise the Department of Insurance D Examine and investigate insurance matters

The correct answer was A. The Commissioner does not change or create insurance law, state law makers do this; however, they do have the authority to supervise the Department, to enforce insurance law, and examine insurance matters.

Which provision requires the application, the contract itself and any riders to be attached to establish a complete contract? A The Entire Contract Provision B The Insuring Clause C The Ownership Provision D The Incontestability Provision

The correct answer was A. The Entire Contract Provision states that the contract consists of the basic policy, a copy of the application, and all riders.

he McCarran-Ferguson Act of 1945: A Gave states the authority to regulate insurance B Established the Interstate Commerce Commission as the primary regulator of insurance C Reinforced violations of the Sherman Antitrust Act D Established the Federal Insurance Office

The correct answer was A. The McCarran-Ferguson Act of 1945 gives states the authority to regulate insurance without interference from federal regulation, unless federal law specifically provides otherwise.

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option? A Extended term B Reduced paid-up C Cash surrender value D Automatic premium loan

The correct answer was A. The automatic nonforfeiture option is extended term. Automatic premium loan is a policy provision which must be elected by the policyowner in advance of the policy lapsing.

Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after five years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. Soon after purchasing her new car, Wilma is involved in a fatal car accident. The remaining proceeds of the insurance policy will be paid to: A Pebbles, in any manner she chooses B Wilma's beneficiaries C Wilma's trust fund D Pebbles' trust fund

The correct answer was A. The contingent beneficiary can receive the funds in any form, since no settlement option was chosen for the contingent beneficiary.

Under the ACA, Stephen purchased a Silver plan that covered him, his wife and his 2 children, ages 17 and 24. Since he is a sole proprietor with no employees, what portion of his premiums is he able to deduct? A All of the premiums paid B Only the premiums paid for his portion of the coverage C Only the premiums paid for the coverage on his children and himself D Those in excess of 10% of his AGI

The correct answer was A. The deduction applies to premiums paid to cover all family members.

The _________ settlement industry has increased awareness of STOLI/IOLI. A Life B Viatical C Mortality D Financial

The correct answer was A. The life settlement industry has increased awareness of these terms

Which of the following is required to sign the application for insurance? A Producer and the applicant B Producer and the insurer C Producer only D Insurer only

The correct answer was A. The producer and the applicant must sign the application. If the applicant and insured are different, then both must sign as well as the producer.

What is the primary incentive for a third party to acquire a life insurance policy from a terminally ill insured? A To profit at the time of claim B To perform an act of charity C To create a secondary market for existing in-force life insurance policies D To help those in desperate need

The correct answer was A. The third party, the viatical settlement provider, is expecting to profit as the new policyowner at the time of claim. The insured is provided with tax-exempt discounted value during the terminal illness, relinquishing all ownership rights to the buyer.

A level premium annuity is one that: A Is purchased over the years prior to the date on which the annuity begins B Requires that payments to the annuitant begin within a year of the issue date of the annuity C Must begin distribution no later than age 59 1/2 or suffer a 10% penalty D Is required to be purchased with a singe level premium payment

The correct answer was A. This is a type of flexible premium annuity which allows level premiums to be paid into the annuity in regular installments for the purpose of accumulating funds to be used at retirement. There is no required distribution on an annuity. Required distribution rules apply only on qualified retirement plans.

An employee is considered full time and eligible for small employer medical expense insurance if he or she works a minimum of ________ hours per week. A 30 B 25 C 40 D 20

The correct answer was A. To be eligible to enroll in a small employer medical expense insurance plan, an individual must work a minimum of 30 hours per week.

Which of the following insurers may not be authorized to transact insurance in Alabama? A Any insurer that fails to pay the renewal fee B An insurer in Florida that meets the eligibility requirements C An insurer domiciled in Alabama that has received its charter D An insurer domiciled in Spain that seeks admission

The correct answer was A. To maintain its certificate of authority in Alabama, an insurer must pay the renewal fees to maintain eligibility. If renewal fees are not paid, the insurer's certificate of authority will be suspended or revoked. Alien and foreign insurers may be authorized to transact insurance in Alabama as long as they meet the same requirements as domestic insurers and seek admission.

A 'SIMPLE' retirement plan: A Can be either a 401(K) plan or an IRA B Can be any type of qualified retirement plan C Requires no matching contributions on the part of the employer D Can be used by a company provided they have over 100 employees

The correct answer was A. To qualify for a Savings Incentive Match Plan for Employees (SIMPLE) a business must employee no more than 100 people who earned more than $5,000 the previous year and employers must match up to 3% of employees elective contributions or 2% of non-elective contributions.

Consumers must be made aware of all of the following in a replacement sale, except: A The financial ratings from each rating service B The new policy may be offered with lower benefits, limitations, or exclusions of coverage C There may be a waiting period for pre-existing conditions D The new policy may have a higher premium

The correct answer was A. Upon issue of a new policy, there may be a new waiting period (probationary period) for pre-existing conditions or the policy may be issued with lower benefits, or with more limitations or exclusions compared to the old policy. Premiums may also be higher in the new policy.

If Martha has been named as the irrevocable beneficiary of a life insurance policy: A She cannot be removed as beneficiary without her consent B She may be replaced as irrevocable beneficiary by any legal authority C She may cash surrender the policy at anytime D She may be replaced as beneficiary anytime the insured desires to do so

The correct answer was A. When an irrevocable beneficiary has been named, the policyowner has given up the right to change the beneficiary without the consent of the named irrevocable beneficiary.

George has named each of his three sons as per capita primary beneficiaries of a $30,000 life insurance policy. If all three sons are living at the time of George's death, which statement best describes the amount each will receive? A Each son receives $10,000 B The proceeds go into George's estate C The proceeds are to be shared equally among all three sons and their children D The proceeds are paid directly to the three sons children only, in equal installments

The correct answer was A. When life insurance proceeds are distributed per capita or 'per person,' each primary beneficiary gets an equal share.

Gloria needs to use her annuity as a long-term savings plan rather than as a short-term tax shelter, otherwise she will incur a ____% penalty tax against any taxable withdrawals prior to age 59 1/2. A 5% B 10% C 15% D 20%

The correct answer was B. A 10% penalty tax is imposed on the taxable portion of any withdrawal taken prior to 59 1/2 years of age.

Which of the following is the best definition of a Limited Accident Policy? A Only covers for a limited time after the accident B Provides specific benefits for specific injuries from specific causes C Limited in geographical scope (i.e. only in the state where written) D All answers are correct

The correct answer was B. A Limited Accident Policy restricts benefits to those injuries and causes of loss named in the policy. For example, a person injured in a car accident, must be a passenger in/on a 'common carrier' not a private passenger vehicle.

A condition or behavior that increases the chance of premature death would be considered a ______. A Peril B Hazard C Speculative risk D Consideration

The correct answer was B. A hazard is anything that increases the chance or possibility of a loss occurring.

A (an)_________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes. A Short form B Nonmedical application C Inspection report D Agent's report

The correct answer was B. A nonmedical application is used when the insured's age, medical history, or amount of coverage does not call for a medical exam.

A specified period that must elapse before new coverage goes into effect for a given condition is known as which of the following? A Exclusion B Probationary period C Waiting period D Benefit period

The correct answer was B. A probationary period is a specified period of time after the effective date of a policy before new coverage goes into effect for specified conditions, such as losses due to a sickness or preexisting conditions.

A change in which the following types of information does not require a producer to notify the Commissioner? A Residental address B Business website C Businss email D Business address

The correct answer was B. A producer is required to notify the Commissioner of any change in residential address, business address, or email address. Failing to do so will result in a $50 penalty

Which Whole Life policy is designed to provide a substantial immediate cash value? A Adjustable B Single Premium Whole Life Policy C Ordinary Straight Life D Indeterminate

The correct answer was B. A single premium policy is paid up (i.e. requires no more premiums due) after only one premium. As a result, it starts with substantial cash value.

Which of the following is true about a stock insurance company? A Policyholders own and control a stock insurance company B A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders C A stock insurance company is one whose home office is in some other state, but does business in this state D A stock insurance company is any insurance company whose home office is in this state and is incorporated in this state

The correct answer was B. A stock insurance company is owned by its stockholders.

Under Alabama law, a producer cannot pay any valuable consideration to a person if they are not licensed as a producer. If a producer violates this provision, they are subject to a fine of up to: A 3 times the premium paid B 3 times the commission paid C $1,000 D $10,000

The correct answer was B. A unlicensed individual may not receive any valuable payment from any person for an insurance sale. Violating this provision will result in a fine up to 3 times the commission paid.

A health insurance policy includes an endorsement indicating the insurer will allow the policy to continue in force without further premiums if the insured is totally and permanently disabled. What endorsement is attached to this policy? A Life Time Benefit Rider B Waiver of Premium Rider C Impairment Rider D Hospital Confinement Rider

The correct answer was B. A waiver of premium rider provision or endorsement means the insurer will waive the future premiums, keeping the policy in force, if the insured is totally disabled. Usually there is a 3 to 6 month elimination period imposed before premiums begin to be waived.

When an Accelerated Benefits rider is added to an life insurance policy, the producer must disclose: A Accelerated benefits will void the policy B The payment of benefits may be taxable, and the insured should consult a tax professional C Accelerated benefits may not be used toward long-term care claims D Accelerated benefits do not affect the face value of the policy

The correct answer was B. Accelerated Benefits may be taxable as income, and producers are required to disclose this fact to insureds at the time of application.

In Life Insurance, a Children's Rider covers a newborn at 14 days of age. In Health Insurance, a newborn is covered: A 72 hours after birth B From the moment of birth C 3 months after birth D 48 hours after birth

The correct answer was B. All individual and group health policies written on an expense-incurred basis providing coverage for dependents of the insured must provide coverage for a newborn child from the moment of birth.

To be eligible for Social Security disability benefits, an individual must meet all of the following criteria, except: A Being totally and permanently disabled for at least 5 months B Be on Medicare Part B C Expected to be disabled for 12 months or longer, or the disability is expected to end in death D Be 'fully insured' and 'disability insured' as defined under Social Security regulations

The correct answer was B. An individual may qualify for Social Security disability benefits at any age regardless of eligibility for Medicare, as long as he or she meets the other 3 criteria listed. The other answers list the requirements to be eligible for Social Security Disability.

The Unpaid Premiums Optional Uniform Provision allows an insurer to: A Cancel the policy during the grace period B Reduce the amount of a claim payment by the premium due C Charge interest on past due premiums D Charge the insured a credit charge if premiums are not paid

The correct answer was B. An insurer can withhold unpaid premiums, to which it has a legal right, when paying a claim that has occurred during the grace period. Both the insurer and the insured are 'indemnified' in this manner.

Insurers that are incorporated in another state, but doing business in this state, are considered: A Alien B Foreign C Stock D Domestic

The correct answer was B. An insurer operating in this state but incorporated in another state is referred to as foreign.

Basic expense policies typically cover all of the following, except: A Medical expenses B Routine vision (optometry) or dental care expenses C Miscellaneous expenses D Hospital expenses

The correct answer was B. Basic expense policies (basic hospital, surgical and medical expense) typically do not cover routine vision (optometry) or dental care.

Under which business-related use of Disability Income Insurance would the premiums be tax-deductible? A Disability coverage purchased to fund a cross purchase plan B Business Overhead Expense Coverage C Disability coverage purchased to fund an entity purchase plan D Key Person Disability Income

The correct answer was B. Business Overhead Expense Coverage is deductible as an ordinary business expense. Any benefits received would be taxable.

ll of the following transactions are considered life insurance replacements and are subject to Alabama's replacement guidelines, except: A A policy that has been converted to reduced paid up or extended term insurance to purchase a new policy B A term policy converted to whole life insurance C A policy amended with reduced benefits to purchase a new policy D A policy that will be lapsed or surrendered in order to purchase a new policy

The correct answer was B. Converting a term plan to a permanent plan is not a replacement.

This type of policy covers the treatment and care of the insured's teeth. A Long-term care B Dental expense C Medical expense D Disability income

The correct answer was B. Dental Expense is a form of Medical Expense health insurance covering the treatment and care of dental disease and injury affecting the insured's teeth.

Which of the following renewal provisions may be contained in a long-term care policy? A Optionally renewable B Guaranteed renewable or noncancellable C Noncancellable D Guaranteed renewable

The correct answer was B. Every long-term care policy must contain a renewal provision that is no less favorable to the insured than Guaranteed Renewable. The only renewal provision that is more favorable than guaranteed renewable is the noncancellable provision.

Failure to repay a loan or loan interest will void a life insurance policy: A After the loan has been outstanding for more than 5 years B If the total amount due equals or exceeds the policy's cash values C If interest rates increase by more than 3% in any 1 year D After the insurer calls in the loan with 30 days advance notice

The correct answer was B. Failing to repay a loan or loan interest will not void a policy until the total amount due becomes greater than the policy's cash value.

Health Savings Accounts (HSAs) must be accompanied by a: A Health Reimbursement Arrangement (HRA) B High Deductible Health Plan (HDHP) C Medical Savings Account (MSA) D Flexible Spending Account (FSA)

The correct answer was B. HSAs MUST be accompanied by a High Deductible Health Plan (HDHP). You may not purchase one by itself.

Which of the following statements is false regarding health insurance coverage of newborns in Alabama? A Coverage must be provided for medically necessary care B New borns will receive coverage once the insured notifes the insurer of their birth C Treatment of congenital defects must be covered D All health insurance policies covering dependents must cover newborns

The correct answer was B. Health insurance policies in Alabama must cover newborns from the moment of their birth.

Which of the following riders is used to increase the death benefit if death is the result of an unintended fatal injury, paying a multiple of the face amount? A Disability Benefit B Accidental Death C Accelerated Death Benefits D Payor Benefit

The correct answer was B. If death is ruled to be accidental, the Accidental Death Rider pays a multiple (usually double) of the death benefit of the underlying policy.

The provision which states that a policy will stay in force a certain period of time after the premium due is the: A Incontestability provision B Grace period provision C Free look provision D Reinstatement provision

The correct answer was B. If the policyholder fails to pay the life policy premium the insurer does not immediately cancel the policy. A specified amount of time is allowed for the overdue premium to be paid. This is called the grace period.

Which type of producer authority is not spelled out in the contract, but is necessary for carrying out the producer's duties? A Assumed B Implied C Express D Admitted

The correct answer was B. Implied authority is not specifically listed in the contract, but is considered necessary, reasonable, and usual for the producer to carry out their duties. For example, a producer has the express authority to transact insurance business, which implies the authority to provide quotes and collect premiums.

In Health Maintenance Organizations, the use of a primary care physician or PCP is common as part of: A The indemnity model B The gatekeeper system C A producer cooperative agreement D The reimbursement model

The correct answer was B. In a HMOs gatekeeper system, the primary care physician provides care and authorizes referrals to specialists. The purpose of the Gatekeeper is to monitor health care needs and help control costs by not recommending unnecessary services.

Which of the following is a policy not issued with a rating? A Lien Plan B Preferred Rate C Tabular Rate D Flat Rate

The correct answer was B. Individuals who meet certain requirements and qualify for lower premiums, such as ideal health, height, and weight, are issued at preferred rates. Substandard Risks (Higher Risk Exposure) Individuals who are not acceptable at standard or preferred rates because of health, habits, or occupation, and are issued 'rated policies.'

A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal? A Buy two separate Whole Life policies B Purchase a Joint life policy C Buy two separate Limited payment life policies D Buy a Joint Survivorship Life Policy

The correct answer was B. Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies.

All of the following are Optional Provisions, except: A Misstatement of Age B Legal Actions C Change of Occupation D Illegal Occupation

The correct answer was B. Legal Actions is a Mandatory Uniform Provision. All of the other responses are Optional Uniform Provisions.

How are benefits for miscellaneous medical expenses generally expressed? A As a stated dollar amount per policy period B As a multiple of the per-day room and board limit C There are no limits D As a stop loss limit

The correct answer was B. Listing the benefit limits for miscellaneous medical expenses as a multiple of the per-day room and board limit (i.e. 10 times the room and board limit) allows the policy to keep up with increased hospital costs without changing benefit limits. As miscellaneous costs rise, the standard daily rate for a semiprivate room will generally increase, increasing the benefit limit available to pay those charges

When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company will: A Pay the policy proceeds in full because the policy is considered incontestable after two years B Pay only the amount of insurance that Jonas' premiums would have purchased at his correct age C Consider this fraud, and will void the policy with no death benefits paid to anyone D Void the policy and only pay the beneficiary the amount of premiums paid into the policy to date

The correct answer was B. Misstatement of age or gender provision states that when the age or gender is misstated at application, the insurer will, at death, adjust the death benefit to that which the premiums collected would have purchased had the insurer known the correct age or gender at application. If discovered before death, the premiums are simply adjusted accordingly. This provision is not subject to the two-year incontestability provision.

Which of the following products provides an immediate lump sum in the event of premature death? A Social Security B Life insurance C Annuity D Disability Insurance

The correct answer was B. Of these options, only life insurance provides an immediate lump sum upon death.

Part 1 of the application consists of all of the following information, except: A Occupation B Medical status of immediate family members, their ages and causes of death C Gender D Place of residence

The correct answer was B. Part 1 of the application consists of general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life insurance.

A disability that is presumed to be total and permanent due to the loss of sight, hearing, speech or the loss of two limbs is: A Recurrent B Presumptive C Partial D Residual

The correct answer was B. Presumptive Disability is a loss that is presumed to be total and permanent due to the loss of sight, hearing, speech, or the loss of 2 limbs.

Which of the following statements regarding TRICARE is correct? A TRICARE Life is mandatory for active duty members and their dependents B TRICARE Prime is mandatory for active duty members C TRICARE standard is an optional coverage for service members on active duty D TRICARE Standard has requires a primary care manager or approved referrals

The correct answer was B. Prime is required for activity duty service members, and is available but not mandatory for dependents. Prime also requires referrals or a primary care manager in order to benefit from its low co-pay formula. TRICARE Standard does not.

A is the insured under a $100,000 10 year term life insurance policy with her spouse named as her beneficiary. If she dies in year 9, what will her spouse receive? A Nothing since this is term insurance B The face amount of the policy C A refund of all premiums paid D The policy's cash values

The correct answer was B. Since the policy was in force when Angie died, Richard will receive a claim payment equal to the face amount of the policy.

If you have a map to find the exact location of a treasure, what type of risk would this be? A Pure risk B Speculative risk C Assumed risk D Possible risk

The correct answer was B. Speculative Risk is a Chance of Loss or Gain Exists. Examples: Gambling, Casinos, Lottery, Stock market. A Treasure Map may or may not produce a gain. Pure risk is the only other risk described in this book which is the Chance of Loss or No Loss, No Chance of Gain.

Taxation applies to any ________ on the cash value paid out as a withdrawal of a Universal Life policy. A Capital gain B Interest C Dividend D Refund of premium

The correct answer was B. Taxation applies to any interest on the cash value paid out as a withdrawal. In other words, any amount paid in excess of the premium is subject to taxation.

The Bronze plan covers _______ of medical expenses. A 80% B 60% C 70% D 50%

The correct answer was B. The Bronze plan covers 60%. A catastrophic plan covers 50%; and a silver plan covers 70%.

Which of the following IS true about an HMO under Alabama Law? A The Commissioner cannot suspend an HMO's certificate of authority B The Commissioner of insurance can regulate them and impose a fine C The Commissioner of insurance can regulate them but cannot impose a fine D The Commissioner of insurance may not accept an examination report made by an HMO's home state

The correct answer was B. The Commissioner may regulate HMOs and impose a penalty if the HMO is not compliant with Alabama laws.

Which of the following allows the insured to change an existing policy to any other policy of any type as long as the new policy has a higher premium, without any proof of insurability? A Spendthrift clause B Privilege of change clause C Results clause D Insuring clause

The correct answer was B. The Privilege of Change Clause allows the insurance company to change any policy to another policy of any type as long as the new policy has a higher premium. Exercising this provision does not require any proof of insurability.

Proof of loss is required within _____ days of loss. A 60 B 90 C 180 D 45

The correct answer was B. The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must generally provide proof of the loss within 90 days of the loss, or within the shortest time possible, but not exceeding 1 year unless the insured suffers legal incapacity.

Victoria's adjusted gross income was $60,000. The total cost of her individual medical insurance, LTC insurance, and out-of-pocket medical expenses was $7,500. Victoria may qualify for a deduction in the amount of ______. A $7,500 B $3,000 C $6,000 D $1,500

The correct answer was B. The amount of qualified expenses that exceeds 7.5% of AGI may be deducted. In this case, $3,000 is the excess over 7.5% of AGI. The other options misunderstand the nature of the threshold.

In those instances in which the death of a valued employee could cause financial hardship for a company, the company might acquire additional funds through which type of coverage? A Business Reimbursement B Key Person C Preferred Insured D Employer-Employee Cross Purchase

The correct answer was B. The business would likely purchase a Key Person (Key Employee) Policy on the life of the valued employee to offset the expenses and financial losses due to the death of that employee.

In a universal life policy, the amount of the death benefit can equal the policy's cash value: A When the insured reaches age 75 B When the insured reaches age 95 C When the insured reaches age 65 D None of the answers listed

The correct answer was B. The cash value in a permanent policy equals the death benefit when the policy endows. With universal life, that age is normally age 95. According to federal law, to be considered an insurance contract for tax purposes, cash value policies must contain an amount at risk until a specified age, which is referred to as the endowment age.

What is the result of an insured not receiving a claim form within the time period allotted after submitting a notice of claim? A The claim is automatically accepted B The insured can submit written proof of the loss C The insurer must add a 10% penalty to any amount eventually paid D The claim is automatically denied

The correct answer was B. The claim form must be received by the insured from the company within 15 days after notice of claim. If forms are not furnished, the insured may submit written proof of occurrence, character, and extent of loss.

The ______________ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force. A Consideration B Insuring C Incontestability D Entire Contract

The correct answer was B. The insuring clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.

The company will normally pay the face amount of the policy to the beneficiary of an insured who commits suicide after the policy has been in effect for: A 90 days B 2 years C 3 years D 1 year

The correct answer was B. The period of time specified in the suicide clause is usually the same as the policy's incontestable clause time limit, which is generally 2 years.

Which policy utilizes a Corridor Deductible after Basic Medical Expense Coverage benefits have been exhausted and before Major Medical benefits begin? A Comprehensive Major Medical B Supplementary Major Medical C Hospital Expense D Surgical Expense

The correct answer was B. The question describes the characteristics of a Supplemental Major Medical Policy.

When a group is covered by a MET, who is issued the Master Policy? A The sponsor B The trust C A representative for the insureds D The insurer

The correct answer was B. The sponsor develops the plan, sets the underwriting rules, and administers the plan, but the trust is the Master Policyowner.

Which statement regarding Social Security benefits is FALSE? A Fully insured workers can receive benefits as early as age 62 B A surviving spouse cannot receive survivor's benefits before age 62 C Spouses of fully insured workers can receive benefits as early as age 62 D Dependent children of a deceased worker can receive survivor's benefits until age 18 (19 if still in school)

The correct answer was B. The surviving spouse of a fully insured deceased worker may begin receiving benefits at age 60.

If a life insurance policy lapses due to nonpayment of premium, then reinstatement requires: A Proof of insurability only B The payment of back premiums, plus interest, and proof of insurability C The payment of back premiums only D The payment of the next annual premium in full and in advance

The correct answer was B. To reinstate a lapsed policy, the insured must provide evidence of insurability and all back premiums plus interest must be paid.

Many insurers pay benefits based on the average fee charged in a geographical area. This is referred to as: A Reimbursement B Usual, Customary, and Reasonable C Cash D Scheduled

The correct answer was B. UCR is not scheduled, but is based on the average fee charged by all doctors in a given geographical area.

Once an insurance company in Alabama receives proof of death, it must pay the death claim within what length of time? A 6 months B 2 months C 1 month D 3 months

The correct answer was B. Upon receiving proof of death, an insurer may not delay a death claim settlement beyond 2 months or 60 days.

Variable Universal Life should only be sold to those clients who are: A Looking for guarantees B More investment savvy C Very conservative D First time investors

The correct answer was B. VUL is appropriate for those who are seasoned investors who understand investment risk and are willing and can afford to take it.

During the accumulation phase of a(n) ____________ annuity, premium dollars buy more accumulation units. A Indexed B Variable C Market Value Adjustment D Fixed

The correct answer was B. Variable Annuities are valued in terms of units, rather than dollars. The more dollars deposited the more units acquired. Upon annuitization, accumulation units are converted to annuity units, and the income paid is based on the value of the annuity units.

When an annuity application is taken over the phone, when must the producer provide the required documents to the applicant? A Within 15 days after the application is received B Within 5 days after the application is received C By the delivery of the annuity contract D Before the time of application

The correct answer was B. When an application is taken over the phone, or any other means besides a face-to-face meeting, the applicant must receive the Buyer's Guide and disclosure statement no later than 5 days after the insurer receives the completed application.

Group long-term disability benefits are paid for: A 5 years B As long as the policy specifies C Up to age 65 D 2 years

The correct answer was B. While this coverage is often characterized by benefit periods of 2 years, 5 years, to age 65, or lifetime, the best answer to this question is based on the specifications of the policy.

The nonforfeiture option that provides protection to age 100 is: A Extended Term B Reduced Paid-Up C Cash Surrender D Paid-up Additions

The correct answer was B. With Reduced Paid-Up, the Present cash value is used to buy a single premium, permanent paid-up policy of a reduced face amount. Coverage will continue to age 100.

A generic brochure was developed by the ________ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs. A FINRA B SEC C NAIC D FIO

The correct answer was C. A buyer's guide is a generic brochure developed by the NAIC to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance, as well as comparative costs of each type of plan.

A group plan is normally owned by any one of the following, except: A Employers B Associations C Debtors D Creditors

The correct answer was C. A group insurance plan is normally owned by an employer, creditor, or association.

A group plan is designed to insure all of the following, except: A Members B Debtors C Creditors D Employees

The correct answer was C. A group plan can cover employees, debtors, and members. Creditors may be the owner of the plan, but not the insured.

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if: A The insured is under the age of 65 B Past due premiums have been paid within 5 years C All back premiums due plus interest have been repaid and less than 3 years have elapsed D Past due premiums plus interest have been repaid and less than 1 year has elapsed

The correct answer was C. A lapsed policy can be reinstated if the insured applies for reinstatement within 3 years, is considered insurable and all back premiums plus interest have been repaid.

What is the main purpose of backdating a policy? A To gather more premium from the customer B To build more equity in the policy C To save age D To provide the agent with more up-front commissions

The correct answer was C. A policy can be backdated no more than 6 months to save age. This will require back premiums to be paid as well.

Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes? A A rider B A receipt C An application D An amendment

The correct answer was C. A producer collects field underwriting information from the applicant/insured on an insurance application.

A rider is usually requested at the time of ____________. A Conversion B First policy renewal C Policy Purchase D Claim

The correct answer was C. A rider is usually requested at the time the policy is purchased, but in certain instances one can be applied for while the policy is in force. Some riders require proof of insurability such as disability waiver of premium.

When an insured decides to change her mode of premium payment from annually to monthly, the total premium due would: A Fluctuate B Decrease C Increase D Remains the same

The correct answer was C. Additional charges are included in modes other than annual to offset the lost interest earnings and increased administration costs.

The payment of the proceeds of a policy in other than a lump-sum cash payment is called a: A Dividend B Refund C Settlement option D Collateral assignment

The correct answer was C. Although most policy proceeds are still paid as a lump sum, other payment methods for life policy proceeds are called settlement options or payment options.

After failing the Alabama licensing exam twice, how long must an applicant wait before retaking the exam? A 6 months B 2 years C 3 months D 1 year

The correct answer was C. An individual failing the exam the second time must wait 3 months before retaking the exam.

Taxes are deferred on cash accumulations in all of the following, except: A A deferred annuity B A universal life policy C A savings account at a local bank D A Keogh plan

The correct answer was C. Any product that a life insurance company offers which accumulates cash values will grow tax deferred. Bank savings accounts earn interest which is always considered taxable in the year in which the interest is applied.

Apparent authority is: A Specifically written into the producer's contract B Granted by a producer's insurance license C The demonstrated general appearance that authority exist D Created when the producer acts independent of the insurer

The correct answer was C. Apparent authority is the demonstrated appearance that authority exists, even when it does not.

Which of the following types of policies would a sports team purchase to obtain coverage for a season? A Limited Accident B Limited Sickness C Blanket D AD&D

The correct answer was C. Athletic teams, schools, common carriers and the like typically purchase Blanket contracts as their membership tends to fluctuate. Members are not individually underwritten and do not receive a policy or Certificate of Insurance.

Blue Cross and Blue Shield are considered: A Self-funded plans B Reimbursement plans C Fee-for-service plans D Indemnity plans

The correct answer was C. Blue Cross and Blue Shield are prepaid plans, with plan subscribers paying a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price (negotiated fee).

What type of disability income insurance pays a lump sum enabling certain businesses to cover the cost of purchasing a disabled business owner's interest in the business? A Reducing term B Business overhead expense C Business disability buyout D Key employee

The correct answer was C. Business Disability Buyout insurance pays a lump sum benefit that enables the insured's business partners to buy out his or her interest in the business.

Capital liquidation assumes: A The balance of the account will increase over time once payout begins B Only the amount invested will be liquidated C The balance of the account will reduce over a period of time once payout begins D The payout will only include interest and the balance remains the same

The correct answer was C. Capital liquidation assumes both principal (capital) and interest are liquidated over the relevant time period to provide the required income for the dependents. This will cause the balance to decrease and benefits are paid.

If Charlotte wishes to cash out her annuity at age 58 after having it for over 20 years, what should she know about prior to doing it? A She will pay surrender charges for failing to annuitize B She will have to pay income taxes C She will face income tax consequences and tax penalties D She will have to pay tax penalties

The correct answer was C. Due to her age, she will face both income taxes and tax penalties.

Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider: A No benefits would be available due to the 6 month elimination period usually required, which would exceed the 2 months remaining on the rider B The waiver of premium will only continue for the remaining two months C The insured remains eligible for all provisions D All provisions in the policy are now voided

The correct answer was C. Even if the waiting period for a disability extends past the normal cutoff date, the insured is still eligible for all provisions in the policy.

Generally, the ________ is the amount of premiums paid into the policy less any dividends or withdrawals previously taken. A Cash value B Loan amount C Cost basis D Net premium

The correct answer was C. Generally, the cost basis is the amount of premiums paid into the policy, less any dividends or withdrawals previously taken.

A Health Maintenance Organization (HMO) must submit which of the following reports to the Commissioner each year? A A report regarding the amount of hospitals purchased and leased B A report regarding the total amount of enrollees and newly enrolled individuals C A report regarding their complaint system and number of complaints handled D A report regarding the number of contracts the HMO has with providers

The correct answer was C. HMOs must submit an annual report to the Commissioner regarding their complaint system's procedures, the total number of complaints handled, and the number of claims relating to the HMO's service or care.

Producer X regularly places insurance with Company XYZ without being appointed by XYZ. What is the consequence of this action? A The company's certificate of authority will be suspended B The producer will be required to pay restitution C The producer's license will be suspended for at least 1 year D The company will be required to void all policies placed by Producer X

The correct answer was C. If the producer is not appointed by XYZ, their license will be suspended or revoked for regularly placing insurance with the company. They may not have their license reinstated for at least 1 year.

Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax? A $10,000 B $2,500 C $7,500 D None

The correct answer was C. Jay is covered under a contributory plan in which the employer is contributing 75% of the premium, so 75% of the $10,000 benefit ($7,500) is subject to income tax.

If an annuity policyowner stops putting money into their periodic or flexible premium annuity what happens to the policy values? A They are refunded to the policyowner in a lump sum B They automatically purchase an immediate payout option C They are protected by the nonforfeiture provision D They are forfeited to the insurer for breach of contract

The correct answer was C. Just like with life insurance any policy values contained in the contract are nonforfeitable for nonpayment of premium. They can be used for surrender or buying a paid up annuity.

Generally, an individual is eligible to enroll in Medicare at age: A 62 B 67 C 65 D 59 1/2

The correct answer was C. Medicare is available to individuals at age 65 as a general rule.

No assignment of a policy will be binding on the insurer, unless: A Sworn affidavits accompany the request B It is determined to be valid by the insurer C It is in writing and received at the insurer's home office D It is accompanied by supporting legal documentation

The correct answer was C. No assignment of the policy will be binding on the insurer unless it is in writing and received at the insurer's home office. The insurer is not responsible for determining the validity of the assignment.

In a replacement transaction, what is the document the producer and applicant required to sign? A Notice Regarding Policy Lapse B Hold Harmless Agreement C Notice Regarding Replacement D Acknowledgement of Replacement

The correct answer was C. Once a producer becomes aware a transaction involves replacement, a Notice Regarding Replacement must be presented to the applicant and signed by both the applicant and producer.

Which of the following is FALSE regarding Settlement Options? A If the policyowner has chosen an option prior to death, the beneficiary cannot change it at time of claim B A policyowner may change a previously chosen settlement option before the insured dies C Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary, as received D Settlement Options are used when the owner wants to convert a lump sum death benefit to an income stream for the beneficiary

The correct answer was C. Only the interest would be taxed to the beneficiary, not the principal.

With regard to life insurance policies, loading refers to: A The amount of money the insurance company reserves for expected mortality costs B The amount the company anticipates for dividend payout C Assignment of the appropriate share of the company's operating expenses to each policy D Surrender charges applied to the cash surrender of the policy

The correct answer was C. Operating expenses such as salaries, rent, taxes, etc., must be 'loaded' onto each policy in an appropriate share by insurers.

Loss of the use of two limbs is one condition that generally will automatically qualify the victim for what type of total disability? A Assertive disability B Probable disability C Presumptive disability D Short term disability

The correct answer was C. Presumptive disability is when the insurer assumes that such a loss will leave the insured totally disabled, and requires no further proof before issuing benefits. Other qualifiers for presumptive disability include loss of sight in both eyes, and loss of speech and hearing.

Which of the following term life insurance policies would have the highest 1st-year annual premium, all other factors being equal? A 5-year B 10-year C 15-year D 1-year

The correct answer was C. The 15-year term life insurance policy would have the highest first-year premium of the choices provided. In essence, there is a slight overcharge in the early years, to be able to level out the premium for the balance of the years.

In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: A The paying off of personal debts, medical bills, and final expenses B The payoff of any outstanding mortgage balance C The projected future value of services provided by the insured D The creation of college funds for surviving children

The correct answer was C. The Needs Analysis Approach factors in paying off all bills, creating a lifetime stream of income for the surviving spouse, creating a college fund for surviving children, and paying off the mortgage. Once totaled, this amount is reduced by financial assets already in place.

Which of the following must be given to consumers under the provisions of the Fair Credit Reporting Act (FCRA)? A Outline of Coverage B Application Receipts C Notice of Information Practices D Disclosure at the Point of Sale

The correct answer was C. The Notice of Information Practices describes the insurer's policy and practice when it comes to handling consumer information, which is the topic governed by the FCRA

The Social Security Death Benefit is payable to the ____________. A Named beneficiary B Next of kin C Surviving spouse D Estate of the insured

The correct answer was C. The Social Security Death Benefit is payable to the surviving spouse or minor children if they meet certain requirements.

All of the following are reasons an application is important, except: A The application becomes part of the policy when attached to the policy B Statements made in the application become the basis for issuing the policy C Statements made on the application are considered to be warranteed statements, guaranteed to be true in all respects D The application helps to more fully identify the applicant

The correct answer was C. The application does become part of the entire contract and is attached to the policy, it certainly helps identify the applicant and the statements on the application serve as a basis for issuing the policy, however, statements on the application are considered to be representations, and not warranties.

K has a $10,000 traditional whole life policy with a loan outstanding of $1,000 and a 5% interest charge. At the end of the first year of the loan, K did not pay the loan interest. What is the result of K's inaction? A K's new loan balance is $950 B K's new loan balance is $10,500 C K's new loan balance is $1,050 D K's loan balance remains at $1,000

The correct answer was C. The cash value is used as collateral against the loan. Interest will be charged annually, and if unpaid, will be added to the balance of the unpaid loan. $1,000 x 5% = $1,050.

When an annuitant annuitizes their annuity that has a cost basis in it, the amount of the income benefit payment subject to tax is determined by using the: A Superannuation ratio B Annuity rule C Exclusion ratio D Exception rule

The correct answer was C. The exclusion ratio allows the annuitant to account for the cost basis overtime so that the initial payments are not 100% taxable until all cost basis has been fully accounted for.

The Initial Enrollment Period for Medicare is 7 months in length. Which of the following are the start and stop dates for this period? A 7 months after his/her 65th birthday B January 1 to July 31 in the year of his/her 65th birthday C The 1st day of the 3rd month before the individual turns age 65 and the last day of the 3rd month after the month the individual turns age 65 D The 1st day of the month before the individual turns age 65 and the last day of the 5th month after the month the individual turns age 65

The correct answer was C. The initial enrollment window spans the entire 3 months before and after the month in which a person turns age 65.

The name used to indicate the insured's age at time of policy renewal is the ________ age. A Issue B Effective C Attained D Legal

The correct answer was C. The insured's age at time of policy renewal is referred to as the insured's attained age.

Edward applies for a disability insurance policy. He pays the initial premium at the time of application and receives a conditional receipt. Three days after the insurance company conducts a medical examination, but before it issues a policy, Edward suffers a stroke. Upon reviewing the results of his medical exam, the company discovers that Edward has been diagnosed with high blood pressure and atherosclerosis. Under the terms of the conditional receipt, the insurance company: A Pays the claim because a receipt has been provided B Pays a reduced benefit since the results of the medical exam show a pre-existing condition C Denies the claim because the insurer would not have issued the policy as applied for as standard or better D Delays the effective date of the policy

The correct answer was C. The insurer will deny the claim because they cannot issue the policy as written. If the insurer chooses to issue a policy, it will either be a rated/substandard policy or a standard policy with an exclusion for Edward's medical condition.

A participating policy is likely to have which of the following? A Up front charges and fees B Stockholders C A higher premium than a nonparticipating policy D A lower premium than a nonparticipating policy

The correct answer was C. The premium calculations for participating policies are very conservative and include an allowance for future dividends. Premiums for these policies are slightly higher than they would be otherwise. Stockholders are considered nonparticipating which also have front end or up front loads and charges.

Barry has just been hired by OPQ Corporation and finds that he cannot enroll for coverage under OPQ's group health insurance plan for 30 days. This 30-day period is known as a: A Deductible B Policy Period C Probationary Period D Elimination Period

The correct answer was C. The specified period of time set by the employer before an employee is eligible to enroll for group benefits is known as a Probationary Period. It usually is 30 days in length but could be up to 90 days.

When a group is covered by a MET, who is issued the Master Policy? A The sponsor B A representative for the insureds C The trust D The insurer

The correct answer was C. The sponsor develops the plan, sets the underwriting rules, and administers the plan, but the trust is the Master Policyowner.

In Alabama, the standard grace period for a life insurance policy is: A 21 days B 45 days C 30 days D 15 days

The correct answer was C. The standard grace period for an individual life insurance policy is 30 days.

All of the following are false statements regarding group disability plans, except: A Benefits are not available to individuals employed beyond age 65 B There is individual medical underwriting C The plans are typically written on a non-occupational basis D The plans usually cover work-related disabilities

The correct answer was C. There is no individual underwriting, plans usually don't cover work-related disabilities, and those employed beyond 65 are protected under The Age Discrimination in Employment Act. The plans are written on a nonoccupational basis.

P is an agent for ABC Insurer, which has just issued an insurance policy to M. In this transaction, who is known as the principal? A M's beneficiary B P, the agent C ABC Insurer D M, the insured

The correct answer was C. This is referring to the Law of Agency, which is about the relationship between two parties: the principal and the agent. The agent, also referred to as the producer, represents and acts on behalf of the principal, which is the insurance company. The insured is not part of the Law of Agency.

The reinsurance agreement that automatically accepts all new risks presented by the company seeking or requesting reinsurance from the reinsurer is known as a ____________ agreement. A Facultative B Reciprocal C Treaty D Residual

The correct answer was C. Treaty is one of the two types of reinsurance agreements which automatically accepts all new risks presented by the ceding company.

Dominic is a physician associated with a closed panel HMO. This means that Dominic can work with: A Only his own private patients B Subscribers of any HMO operating in the area C Only that HMO's subscribers D Both that HMO's subscribers and his own private patients

The correct answer was C. Under closed panel HMOs, the physician can only see that HMO's subscribers.

The Health Maintenance Organization concept that service providers are paid a fixed monthly fee for each member is called: A Closed panel B Open panel C Capitation D Fee for service

The correct answer was C. When an HMO pays a capitation fee for each member, a member being the medical group or physicians, the members are actually paid a fixed amount of all premiums being paid into the assigned geographical area that the medical practitioner is assigned to operate in. It is like being paid a salary, and the salary is based on all subscribers paying monthly premiums whether they see the doctor or not.

Which of the following statements is NOT true concerning a coordination of benefits situation? A The group insurer for the spouse of the person with the claim is secondary B Where children are involved, the primary group insurer is the insurer for the parent whose birthday comes first in the year C Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of claim D The group insurer for the person with the claim is primary

The correct answer was C. When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most possible coverage without allowing any over insurance from occurring.

Dividends left to accumulate at interest: A Are only available to the policy beneficiaries B Always accumulate tax deferred C Will decrease the face value of the certificate at death D Can be withdrawn without affecting the cash value of the policy

The correct answer was D. Dividends that accumulate at interest can be withdrawn without affecting the cash value of the life policy. All interest earnings are taxable.

A married couple purchases a $250,000 Joint Life Policy. When the older of the two dies, what is the amount payable to the survivor? A $125,000 B $500,000 C Zero D $250,000

The correct answer was D. A Joint Life Policy insures two lives. It is the order of death that is significant in a Joint Life Policy. The entire death benefit is paid at the death of the first insured, regardless of age.

A certain health insurance policy states that the insurer will not refuse to renew the policy and furthermore, the insurer may not cancel the policy. However, the insurer may change the premium by classes of insureds. This policy is: A An optionally renewable policy B A noncancellable policy C A nonrenewable policy D A guaranteed renewable policy

The correct answer was D. A guaranteed renewable policy cannot be canceled or non-renewed, and premiums cannot be increased on an individual basis. Premiums may only be changed by classes of insured's. The insurer cannot single you out and raise only your premiums, they must raise everyone's premiums by classification.

Under what conditions can a producer alter, change, modify or waive any policy provisions? A With home office approval B With local agency management approval C If the policyowner consents D Never

The correct answer was D. A producer cannot alter, change, modify or waive any policy provisions.

Which of the following individuals would probably NOT be a qualified beneficiary under COBRA? A The employee B The employee's dependent child born during the 18 month coverage period C The employee's spouse D Any dependent not covered under the employee's health coverage prior to a qualifying event

The correct answer was D. A qualified beneficiary includes any individual covered under an employer maintained group health plan on the day before a qualifying event, this includes: the employee, spouse and dependent children including children born or adopted during the coverage period. Does not include dependents that were not covered on the employees plan prior to a qualifying event.

If an insurer makes a payment for a claim but the insured is dissatisfied with it, he/she must wait _____ days after proof of loss before he/she might take any legal action. A 45 B 20 C 90 D 60

The correct answer was D. According to the Legal Actions Provision (a Mandatory Uniform Provision), the insured must wait at least 60 days after proof of loss before legal action can be brought against the insurer.

How often must the Commissioner examine an HMO? A 2 years B 4 years C 5 years D 3 years

The correct answer was D. An HMO must be examined by the Commissioner at least once every 3 years. The Commissioner may examine an HMO more frequently if they deem it necessary.

Field underwriting is very important: A Due to the risk of morale hazard B For policies that do not require home office underwriting C For individual insurance only D Due to the risk of a moral hazard

The correct answer was D. An agent's personal contact and assessment of an individual or helps to confirm whether the information provided on an application is accurate. The possibility that an applicant might, for his or her own benefit, provide information that does not accurately reflect the level of risk, is considered a moral hazard. A morale hazard refers to an indifferent attitude toward being involved in risky behavior while coverage is in force.

All of the following practices may never be used when advertising health insurance, except: A Using words like 'only' or 'merely,' minimize the perception of policy restrictions B Implying that an insurer's claim settlements are generous or liberal C Describing hospital indemnity benefits calculated and prorated daily, on a weekly or monthly basis D Advertising a group's product endorsement, if the insurer has any control over the group

The correct answer was D. An insurer may use the endorsement of a group over which it has some control, as long as it discloses that control in its advertising.

The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy. A Remains the same B Increases C Varies D Decreases

The correct answer was D. As the cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon the death of the insured. It is a way to keep the premiums affordable as the insured ages and the risk of death increases.

Which of the following IS true regarding COBRA coverage? A Employees must be notified of their right to continue coverage immediately upon termination B If an employee carried dependent coverage on the group plan, dependent coverage must be made available on the COBRA continuation policy C An insured must be notified under COBRA when a qualifying event occurs D All of the answers listed

The correct answer was D. COBRA requires among other things, notification of rights to continue coverage at termination and when a qualifying event occurs. It also provides dependent coverages for dependents that were on the original plan.

The death benefit of a variable life policy: A Always remains level B Is totally at risk C Is never guaranteed D May go up or down but will never fall below the face amount of the policy

The correct answer was D. Changes in investment results can cause changes in the amount of death benefit as well as cash values of a variable life policy, but the death benefit amount will never fall below the guaranteed minimum, which is equal to the policy's initial face amount.

John is the insured. His wife Mary is the primary beneficiary. Their three children are the contingent beneficiaries. John and Mary are killed in a common accident. The proceeds of John's policy would be paid to: A John's parents B Mary's estate C John's estate D The children

The correct answer was D. Contingent beneficiaries receive the policy proceeds in the absence of the primary beneficiary. The common disaster clause assumes the primary beneficiary died before the insured if both are killed in the same accident.

All of the following are classifications of substandard risks, EXCEPT: A Rated-up Age B Tabular C Graded D Declined

The correct answer was D. Declined is an underwriting decision, not a classification. Special restrictions and higher premiums apply to these substandard risks.

If an insured suffers a dismemberment under the AD&D policy, which of the following will provide benefit payouts to the beneficiary? A Capital funds B Principal sum C Principal investments D Capital sum

The correct answer was D. Dismemberment benefits payable under an AD&D policy are referred to as the capital sum.

If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force. A Premium payor benefit B Paid up provision C Disability rider D Waiver of premium rider

The correct answer was D. If a client has a Waiver of Premium rider in effect, and if the insured becomes totally disabled, the company waives premiums for the duration of the disability. Therefore the policy remains in force.

An 18-year-old is the beneficiary to a life insurance policy issued in Alabama. If there is no guardian, how much may they receive annually from the policy? A $6,000 B $4,000 C $5,000 D $3,000

The correct answer was D. If no guardian has been appointed for the minor's property, an 18-year-old may receive up to $3,000 in annual payments from a life insurance policy or annuity contract.

An agent in Alabama must follow illustration regulations on which of the following contracts? A Variable life insurance B Credit life insurance C Fixed annuity D Whole life insurance

The correct answer was D. In Alabama, illustration regulations apply to all individual and group insurance contracts, except Variable life, Credit life, annuity contracts, and life insurance policies with a face value less than $10,000.

B's policy had a $1,000 annual premium. B has not paid it for 2 years and wants to put the policy back in force. The insurer charges 10% interest on overdue premiums. What does B have to pay in order to reinstate their policy? A 2 years of premiums, a reinstatement fee, and interest B One month's premium, plus a reinstatement fee specified in the policy C 2 years of premiums D 2 years of premiums, plus interest due on overdue premiums amounts

The correct answer was D. In order to reinstate the policy, the insured must provide evidence of insurability and the owner must pay all back premiums from the date of lapse plus interest. This means B needs to pay 2 years of unpaid premiums, plus the interest charged for overdue premiums. There is no additional reinstatement fee needed.

The purpose of insurance is to: A Provide protection against speculative risks B Eliminating the risk entirely by engaging in reinsurance C Protect the insured against the certainty of a future loss D Transfer risk from a person, business, or organization to an insurance company that agrees to pay for losses in exchange for a premium

The correct answer was D. Insurance is a means of risk transfer. It protects against uncertainty, shares the loss, and reduces anxiety. The principle of insurance is the substitution of a small certain expense (premium) for a large uncertain loss (claim payment).

What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS? A The insurer can share information discovered during the underwriting process with the Center for Disease Control as well as state and local health authorities B Insurers can share the test results with the insured's immediate family members and any health professionals listed on the application C Insurers can discriminate between individuals of the same class in underwriting for the risk of AIDS D Insurers may refuse to issue a policy to individuals based on positive HIV test results

The correct answer was D. Insurers are required to maintain strict confidentiality of personal information obtained through testing and to obtain informed consent before testing for HIV. Unfair discrimination is never permitted.

An individual owns a variable annuity. Upon annuitization, the number of Annuity Units on which the benefit amount is based will __________ from month to month. A Increase B Decrease C Vary D Remain the same

The correct answer was D. It is important that the individual understand that upon annuitization, the number of units used to calculate the benefit amount will always be the same. It will be the unit value that fluctuates according to the performance of the separate account(s).

Which of the following licensing candidates is not required to take a state licensing exam in Alabama? A An applicant for variable products B An applicant for health insurance C An applicant for property insurance D An applicant for limited lines insurance

The correct answer was D. Limited lines producers are not required to take an exam to qualify for licensure.

Legislation that requires that when health insurance is replaced, ongoing claims under the former policy must continue to be paid under the new policy is known as: A Prior condition legislation B Coverage continuation legislation C A 1035 exchange D No loss-no gain legislation

The correct answer was D. No loss-no gain legislation requires that when health insurance is replaced, ongoing claims under the former policy must continue to be paid under the new policy, overriding any preexisting conditions exclusion. Also known as a hold harmless agreement.

All of the following could potentially be tax-deductible, EXCEPT: A Out-of-pocket medical expenses B LTC insurance premiums C Medical expense insurance premiums D Disability insurance premiums

The correct answer was D. Premiums paid for personally owned disability insurance are never deductible. The other items may be deductible, depending on a variety of related factors

Under an individual disability insurance policy, written proof of loss must normally be furnished to the insured within _____ days after the date of the loss. A 30 B 60 C 45 D 90

The correct answer was D. Proof of loss is required within 90 days of loss or in the shortest period of time possible not to exceed 1 year unless the insured suffers legal incapacity.

Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be: A Paid-Up Additions B Extended Term C Paid-Up Option D Reduced Paid-Up

The correct answer was D. Reduced Paid-Up provides the longest period of coverage. Extended Term would provide the most protection. The other two answers are not Nonforfeiture Options, rather they are dividend options.

Joe suffers a broken leg while on vacation. With Joe's HMO, he may seek medical care at which of the following? A A military hospital B A facility near his home, where he must return for treatment C An approved HMO facility D The nearest emergency room

The correct answer was D. Since Joe's broken leg would qualify as an emergency, his HMO would pay for necessary services at the nearest emergency room.

If an individual starts receiving Social Security retirement benefits at age 62, when will they be eligible for Medicare Part A? A 24 months after receiving Social Security retirement benefits B An individual is not eligible for Part A if they receive Social Security retirement benefits C At age 62 D At age 65

The correct answer was D. Taking Social Security retirement benefits does not result in early eligibility for Medicare Part A. However, an individual can become eligible for Medicare Part A after receiving Social Security disability benefits for 24 months. (It is important to distinguish between Social Security retirement and Social Security disability.)

Term insurance differs from permanent insurance in that term: A Builds cash value and provides limited death benefit options only B Provides a variety of living benefits C Costs more than permanent insurance D Builds no cash value, pays a death benefit only

The correct answer was D. Term insurance provides death benefits only, at lower premiums, with no cash value accumulation or living benefits.

hich of the following term life insurance policies would have the lowest 1st-year annual premium, all other factors being equal? A 15-year B 10-year C 5-year D 1-year

The correct answer was D. The 1-year term life insurance policy would have the lowest first-year premium of the choices provided. In essence, one year of coverage is less risky to the insurer than being locked in to more years.

The National Do Not Call Registry requires companies to update their list at least once every ______ days. A 45 B 15 C 10 D 31

The correct answer was D. The National Do Not Call Registry requires companies to update their list at least once every 31 days.

A mother with a teenage son purchases a life policy on his life. The policy includes an optional rider called the Payor Benefit. What will happen to the policy if the mother dies or is disabled before her son reaches age of majority? A The premiums would be suspended and later paid back by the son B The policy would pay out a modest lump sum to the beneficiary C The amount of coverage is reduced as the policy is paid up D The premiums on the son's policy would be waived until the son reaches a specified age

The correct answer was D. The Payor Benefit Rider is used in third-party policies in which the insured and owner are not the same. The insurer continues the policy as if the owner were still making premium payments.

Joe has a policy with a face amount of $50,000 and a policy loan of $2,000. He is also a week late on his $500 premium payment. Joe decides he can no longer make monthly payments, so he chooses the reduced paid up nonforfeiture option. What is the face value on the new policy? A A reduced amount minus the $500 premium B $50,000 C A reduced amount minus the $2,000 loan balance D The amount that the reduced paid up option purchased

The correct answer was D. The Reduced Face amount is always determined by the Net amount of cash value at the time the option is exercised, therefore, the loan would already be considered into this equation. A past due premium simply means that you are in the grace period. Premiums are paid at least a month in advance, therefore, you have already paid for the period of time in the grace period. The past due premium is not a consideration.

A Tertiary Beneficiary is the person who receives a death benefit payment in which of the following scenarios? A If the insured dies before the Primary Beneficiary B If the Contingent Beneficiary dies before the insured C If the Primary Beneficiary dies before the insured D If the primary and contingent beneficiary die prior to the insured

The correct answer was D. The Tertiary Beneficiary is the beneficiary last in order to receive a death benefit, and is sometimes the decedent's estate by default. This 'third beneficiary' is in line behind the primary and contingent beneficiaries.

In many jurisdictions, permanent policies are required to have some cash value by the end of: A The first year B The second year C The fourth year D The third year

The correct answer was D. The cash value amount and its increase varies by policy, but many states require that permanent policies show some cash value by the end of the third policy year.

If a premium is collected at the time of the application, the producer will issue a: A Sales receipt B Contestable receipt C Guaranteed receipt D Conditional receipt

The correct answer was D. The conditional receipt provides coverage at the time of application as long as the coverage is issued. If a loss occurs prior to the issuance of the policy, the insurer would have to prove the policy would not have been issued, or pay the claim.

How are employee FICA taxes collected? A The employee mails it in to the IRS quarterly B The employer makes a one-time payment at the end of the tax year including extensions C The employee mails it in to the Social Security Administration monthly D The employer withholds the employee's tax and pays it along with the employer's portion

The correct answer was D. The employer withholds the employee's tax and pays it along with the employer's portion.

In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer. A Replacing B Conserving C Insolvent D Existing

The correct answer was D. The existing insurer is the insurer who has a policy subject to replacement

Which of the following is the most expensive premium mode overall? A Annually B Quarterly C Semi-annually D Monthly

The correct answer was D. The greater the frequency the higher the overall cost is.

The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the: A Future Earning Value Approach B Family Values Approach C Needs Analysis Approach D Human Life Value Approach

The correct answer was D. The objective of the Human Life Value Approach is to provide the proper amount of coverage as determined by the value of the insured individual to his/her dependents.

In Alabama, which of the following statements is incorrect regarding life insurance illustration standards? A A supplemental illustration may be provided after a basic illustration B The insurer's name, producers name, address, and the policy's generic name must appear on the illustration C The proposed insured's name, age, and sex must appear on the illustration D The policy's name may represent the contact as an investment portfolio

The correct answer was D. The policy must be represented as a life insurance policy. Representing the policy's name as an investment portfolio is misleading.

Why have many states prohibited STOLI/IOLI transactions? A Consumers are not reporting the cash received as taxable income B The amount the policyowner obtains is too little in relationship to the death benefit C Mostly the investors are not licensed to conduct such a transaction D It is a violation of the insurable interest rule

The correct answer was D. The practice of STOLI and IOLI has resulted in fraudulent abuses causing many states to outlaw STOLI and IOLI policies due to a lack of insurable interest.

The MIB obtains its information from which of the following? A Hospitals B Producer's agencies C Physicians D Insurers

The correct answer was D. The primary purpose of the Medical Information Bureau (MIB) is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for coverage.

As a general rule, most insurance companies will allow the insured to change to another type of insurance policy without a medical examination if the: A Original policy had a COLA rider attached B New premium is lower than the original C Changed within the incontestability period D New premium is higher than the original

The correct answer was D. The privilege of change clause will generally allow the insured to change to a policy with a higher premium without proof of insurability.

Tom is the insured/owner of a $500,000 life insurance policy and dies leaving four surviving children, Mary, Carrie, Larry, and Barry, and each child receives $125,000 upon his death. This is an example of what type of distribution? A Per Stirpes B Pro Rata C Pro Forma D Per Capita

The correct answer was D. The question is describing per capita as a class beneficiary designation. In other words, to share equally.

All of the following regarding term life insurance renewability is correct, except: A Premiums increase at the beginning of each renewal period B No evidence of insurability is required C Renewable term costs more than non-renewable term D It is similar to the re-entry provision found in some term policies

The correct answer was D. The renewable feature is a benefit that will renew the contract on the renewal date without evidence of insurability, with premiums increasing at the beginning of each renewal period based upon attained age. The renewal option is offered for an additional premium.

Which of the following is TRUE regarding a Living Need (Accelerated Benefit) Rider? A Neither answer B Reduces the cash value by the amount withdrawn C Both answers D Reduces the death benefit by the amount withdrawn

The correct answer was D. This is an advance of the policy's death benefit, not the cash value--therefore, the amount withdrawn would reduce the death benefit

All of the following policies end when an insured dies, except: A Juvenile Life B Joint Life C Variable Universal Life D Joint Survivorship

The correct answer was D. This policy continues on until the second insured (survivor) dies.

Which statement is false regarding Social Security Disability benefits? A The waiting period is 5 months B To collect disability benefits, an employee must be unable to engage in any kind of gainful work because of a medically determined physical or mental condition that has lasted, or is expected to last, at least 12 months or to result in death C The benefit for a qualifying disabled worker is a percentage of the PIA D Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or her usual job

The correct answer was D. To be 'fully' insured for Social Security Disability benefits, an individual must have 40 quarters of credit and the disability must last 12 months, or be expected to result in death. In addition to satisfying the 5-month waiting period, the person must be unable to perform 'any substantial gainful activity.'

If the insured has not elected another option, what is the nonforfeiture benefit a life insurer in Alabama must provide within 60 days after an insured has defaulted on the premium? A Extended term B Automatic premium loan C Cash value D Reduced paid-up

The correct answer was D. Unless another option has been elected, an insurer must provide a paid-up nonforfeiture benefit within 60 days after premium default.

Upon annuitizing an annuity, all of the following factors help in determining the amount of the income benefit payment, except: A Annuity option B Gender C Age D State of residence

The correct answer was D. Upon a lifetime annuitization, payments will be made to the annuitant based upon the annuitant's age, gender, annuity option selected, and dollar amount used to fund the income benefit payments.

__________ life insurance is when an insured is induced into purchasing life insurance with the sole intent of selling that policy once issued to third party investors for an amount less than the death benefit, but greater than its cash values. A Life settlement B Viatical C Senior D Stranger originated

The correct answer was D. When investors hope to gain off of the insured's induced purchase of a life insurance policy for later sale of their mortality for profit is referred to as Stranger Originated Life Insurance (STOLI).

Tom elects the Life Income with 10-year Period Certain settlement option. Tom dies in year 6. The beneficiary receives payments for _______. A 10 years B Life C 6 years D 4 years

The correct answer was D. With Life Income Period Certain, payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. If the recipient dies prior to the end of the period certain, the payments continue to another beneficiary until the end of the period certain.

The Legal Actions provision preserves the insured's right to bring suit against his/her own insurer, but the insured must wait at least _____ days after filing a proof of loss before pursuing this action. A 45 B 90 C 60 D 30

The insured must wait at least 60 days following the filing of a proof of loss before pursuing any legal action against the insurer.

Which of the following is considered a field underwriter? A Producer B Actuary C Medical doctor D Department examiner

The producer in the field soliciting applications is another pair of eyes and ears for the insurer in helping to issue policies to insurable prospects.

What is the minimum free look period for replacement policies in Alabama? A 30 days B 20 days C 60 days D 10 days

When a policy has been purchased through a replacement transaction, Alabama requires a minimum free look period of 30 days.

n Individual Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's: A Finances B Occupation C Health D Gender

he correct answer was B. Although many factors are considered in the underwriting process, the applicant's occupation is the single most important, because it defines the primary risk.

If an annuity is annuitized, then the _________ investment is recovered income tax-free over the income benefit payment period. A After-tax B Non-guaranteed C Pre-tax D Exclusion

A After-tax Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It represents a return of the cost basis.

In Alabama, an Industrial life insurance policy typically has a face amount of: A $4,500 or less B $3,500 or less C $25,000 or less D $2,500 or less

D $2,500 or less Industrial policies normally have a face amount of $2,500 or less and written to reduce funeral costs.

An _________ assignment is considered permanent. A Collateral B Official C Unilateral D Absolute

D Absolute In an absolute assignment, a new owner is named. This is considered a permanent assignment.

The benefits of an individual disability income policy: A Are fully taxable upon receipt and subject to a 10% penalty if received prior to age 59 1/2 B Are received tax-free and can equal 100% of the individual's normal income C Are never received tax-free under any circumstances D Are received tax-free and generally limited to a percentage of monthly income

D Are received tax-free and generally limited to a percentage of monthly income When an individual buys disability income coverage, the benefits are received tax-free. Benefits are always limited to a percentage of the individuals normal monthly income, usually 60%-70%.

K owns a variable annuity with an assumed interest rate of 4%. If the actual performance of the separate account(s) is 5%, the effect on this month's income benefit check will be such that it: A All Depends on the Separate Account(s) Selected B Becomes Lower C Remains the Same D Becomes Higher

D Becomes Higher If the actual return is lower than the AIR, the monthly annuity payment will be reduced. If the actual return is equal to the AIR, the monthly annuity payment will remain the same as the previous month. If the actual return is greater than the AIR, the monthly annuity payment will increase from the previous month.

Camille purchases an immediate monthly annuity on January 1. She will receive her first annuity payment on: A April 1 B March 1 C May 1 D February 1

D February 1 Immediate annuities start payment after one full payment period from the purchase date has elapsed. This will be based on the mode of payment selected (monthly, quarterly, annually, etc.). This is considered to be a period of time equal to the period of time between payments. Immediate annuities must begin distribution within 1 year of the purchase date.

If Jane has a new baby born under a Medical Expense policy, the baby is covered: A Not covered at all B From the moment of birth only if Jane has maternity coverage C 30 days after birth D From the moment of birth

D From the moment of birth This is called Newborn Infant coverage and must be provided or offered in all Medical Expense policies. Provides coverage for a newborn child from the moment of birth. Notification of the birth and payment of premium for the newborn is required within 31 days after the date of birth, but coverage begins at the moment of birth.

When an insured decides to change her mode of premium payment from annually to monthly, the total premium due would: A Fluctuate B Remains the same C Decrease D Increase

D Increase Additional charges are included in modes other than annual to offset the lost interest earnings and increased administration costs.

Which of the following is the definition of fraud? A Withholding of known facts B False statement on an application C Surrender of rights D Intentional deceit with the intent to gain

D Intentional deceit with the intent to gain Fraud is the intentional misrepresentation, deceit, or concealment of material facts with intent to gain or profit.

Taxation applies to any ________ on the cash value paid out as a withdrawal of a Universal Life policy. A Dividend B Capital gain C Refund of premium D Interest

D Interest Taxation applies to any interest on the cash value paid out as a withdrawal. In other words, any amount paid in excess of the premium is subject to taxation.

All of the following statements regarding an insurance application are correct, except: A It must be signed by at least the applicant and producer B It is the primary source of information for underwriting purposes C It is a formal written request by an applicant to an insurer requesting a policy D It is not included as part of the contract

D It is not included as part of the contract If attached to the policy, a copy of the application becomes part of the entire contract.

Which Payment Option pays an income for the life of the annuitant or for a specified period, whichever is longest? A Period Certain B Life Income with Refund C Life Income D Life Income with Period Certain

D Life Income with Period Certain The question is specifically defining Life Income with Period Certain

Dread disease, travel accident, vision care, and hospital indemnity policies are all examples of: A Cancer policies B Dental policies C Disability policies D Limited policies

D Limited policies A limited policy is one that covers only a specified limited type of risk.

Howard talks to his agent Jane about buying a critical illness policy from the XYZ insurance company to cover his wife Deborah, and naming his daughter Mary as the beneficiary in case of death. Jane told him that she would need signatures from all of the following, except: A Howard B Deborah C Jane D Mary

D Mary Beneficiaries are not required to sign. The agent must sign on behalf of the company, and the insured, not being a minor, must give consent to being insured. The policy owner, who is also the applicant, must by definition sign the application.

A limited pay life policy: A Start off with small premium payments and then they increase, but only up to a specified limit B Can only be purchased by individuals on a specified limited income C Is offered in limited face amounts only D Requires premium payments for a specified number of years or until a specified age is reached

D Requires premium payments for a specified number of years or until a specified age is reached In a limited pay life policy the insured policyowner pays premiums for a specified time period or until a specified age, and the insurance protection continues throughout his or her life or until endowment at age 100, whichever comes first.

What is the correct risk management term for minimizing the chance of a loss? A Risk sharing B Risk avoidance C Risk retention D Risk reduction

D Risk reduction Minimizing the chance of a loss without eliminating the risk altogether is called risk reduction.

Small employer plan preexisting conditions may not be excluded for any longer than _____ months. A 18 B 36 C 29 D 12

D. 12 Preexisting conditions may not be excluded for any longer than 1 year.

In order to be qualified, a long-term care policy must require assistance with how many activities of daily living (ADLs) before benefits may be paid? A 2 B 3 C 1 D 4

A 2 A qualified long-term care policy must stipulate the insured be incapable of performing at least 2 of the activities of daily living for at least 90 days to qualify for benefits.

What type of policy has an endowment date, a face amount, and cash value? A A permanent life insurance policy B A decreasing term life insurance policy C A mortgage life insurance policy D A traditional group life insurance policy

A A permanent life insurance policy Only a permanent life insurance policy would have all three features.

Third-party ownership refers to: A A situation where the applicant is someone other than the payor B A situation where the policyowner is someone other than the insured C A situation where the beneficiary has no insurable interest in the insured D A situation where the beneficiary is irrevocable

B A situation where the policyowner is someone other than the insured The term third-party ownership refers to a situation where the policy is owned by someone other than the insured. For example: a business may own a policy on a key employee or a parent owns a policy on a child.

All of the following statements regarding a group Accidental Death and Dismemberment policy are incorrect, except: A Any benefits received are not taxable to the recipient B Accidental Death and Dismemberment Insurance is not available on a group basis, only on an individual basis C The premiums paid by the employer are not deductible as a business expense to the employer D The premiums paid by the employer are considered part of the employee's income

A Any benefits received are not taxable to the recipient The benefits received are not taxable to the recipient. All of the other answers are false.

Dental plans are normally written with a stated annual maximum on the number of: A Benefit dollars that will be paid B Teeth that will treated C Appointments that will be covered D Cavities that will be filled

A Benefit dollars that will be paid Dental plans normally state an annual maximum dollar benefit.

A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______. A Buyer's Guide B Consumer Information Kit C Sales Illustration D Policy Summary

A Buyer's Guide It is required that prospective life insurance buyers receive the NAIC Buyer's Guide to assist them in their life insurance purchase decision.

What provision establishes that if both the insured and the primary beneficiary die in the same accident, and it cannot be determined who died first, the insured will be presumed to have survived the beneficiary and proceeds will be paid to a named contingent beneficiary of the insured, or to the insured's estate? A Common Disaster Clause B Insuring Clause C Consideration Clause D Spendthrift Clause

A Common Disaster Clause The Common Disaster Clause is designed to rule in such situations. If a contingent beneficiary is named and is alive, he or she receives the proceeds. Otherwise they are paid to the insured's estate.

All of the following are acceptable methods of policy delivery, except: A Delivery to a neighbor with a signed receipt of delivery B Personal delivery with signed receipt of delivery C Registered mail with a signed receipt of delivery D Certified mail with a signed receipt of delivery

A Delivery to a neighbor with a signed receipt of delivery Policy delivery will be accomplished by: personal delivery, with signed receipt of delivery, or registered or certified mail with a signed receipt of delivery, but never being left with a neighbor.

_______________ is the process of selection, classification and rating, and determining if someone is insurable. A Home office underwriting B The agent's report C Field underwriting D Completing the application

A Home office underwriting Home office underwriting is the process of selection, classification and rating, and determining if someone is insurable.

Proceeds from a buy-sell agreement are received ___________. A Income tax free B Only after the deceased's estate is settled and a proper valuation of their share of the business C Taxable as income D Taxed to the extent that the amount exceeds $50,000

A Income tax free The premiums payable for a buy-sell agreement are not tax deductible, therefore the benefit is received income tax free.

The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except: A Job change B Reaching a specified age or date C Birth of a child D Marriage

A Job change The Guaranteed Purchase Option (Guaranteed Insurability, Future Increase) Rider guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc., the insured may purchase additional monthly benefits, if income justifies it, without proof of insurability. Rates are based on attained age.

Which of the following is not an underwriting factor for health insurance: A Place of birth B Physical condition C Occupation and hobbies D Tobacco use

A Place of birth The underwriters do not take into consideration where the applicant was born.

A rider is usually requested at the time of ____________. A Policy Purchase B First policy renewal C Claim D Conversion

A Policy Purchase A rider is usually requested at the time the policy is purchased, but in certain instances one can be applied for while the policy is in force. Some riders require proof of insurability such as disability waiver of premium.

A procedure used by dental insurance carriers to determine the benefit to be paid is known as: A Precertification B Preliminary Evaluation C Pretreatment Examination D Least Coverage Provision

A Precertification Precertification or Predetermination of Benefits, although not always mandatory, allows both the patient and the dentist to know what will be covered before treatment.

Select the correct statement about long-term care policies. A Present policies are more likely to pay benefits regardless of the level of care required by the insured B All LTC policies are required to have a 10 day examination period C Present policies will pay benefits only if the insured has been diagnosed with a cognitive impairment, such as dementia D LTC policies are only available for individuals age 65 and older

A Present policies are more likely to pay benefits regardless of the level of care required by the insured The current generation of long-term care plans is less restrictive than earlier plans. Once a physician has certified that an individual needs assistance with activities of daily living ADLs or has been diagnosed with a cognitive impairment, the insured has triggered the benefits. All LTC policies are required to have at least a 30 day examination period upon policy delivery and can be purchased prior to age 65.

All of the following are TRUE regarding a Waiver of Premium Rider, except: A The insured must repay the unpaid premiums B The insurer foregoes the premium should the insured be disabled C There is usually a 6 month period before premiums are waived D In a Whole Life policy, cash values continue to build

A The insured must repay the unpaid premiums To have to repay the unpaid premiums would defeat the purpose of the rider.

All of the following are reasons why a new policy issued through a term conversion costs more, except: A The insured's health has changed for the worse B The new policy has cash values C The new policy is permanent D The new policy was issued at the attained age

A The insured's health has changed for the worse Conversion is done without proof of insurability.

All of the following statements about noncancellable policies are true, except: A The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date B A noncancellable policy is also called a noncancellable and guaranteed renewable policy C The only right to cancel the noncancellable policy is for nonpayment of premium D The insurer may regain the right to cancel or not to renew when the insured reaches an age specified in the policy

A The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date The only right to cancel a noncancellable policy is nonpayment of premium, because it is guaranteed renewable to age 65. The only type of renewal provision that allows an insurer the right not to renew on the policy anniversary is the optionally renewable option.

If an application is submitted with a question left unanswered, which of the following should occur? A The insurer would require an answer before issuing a policy B The insurer would require an answer when a claim occurred C The insurer would deny the application D The insurer would waive the question

A The insurer would require an answer before issuing a policy Any unanswered questions need to be answered before the policy is issued.

When an Accelerated Benefits rider is added to an life insurance policy, the producer must disclose: A The payment of benefits may be taxable, and the insured should consult a tax professional B Accelerated benefits will void the policy C Accelerated benefits may not be used toward long-term care claims D Accelerated benefits do not affect the face value of the policy

A The payment of benefits may be taxable, and the insured should consult a tax professional Accelerated Benefits may be taxable as income, and producers are required to disclose this fact to insureds at the time of application.

Which of the following is not a function of insurance? A To act as an investment vehicle for the insured B To transfer risk from the insured to the insurer C To protect against uncertainty and reduce anxiety D To exchange a small certain expense for a large uncertain loss

A To act as an investment vehicle for the insured Investment entails speculative risk, which is not insurable.

How would an insurance agent most likely use a financial rating service? A To evaluate the financial stability of an insurance company B To obtain a better commission rate C To determine how much premium to charge a client D To publish the agent's opinion of an insurer

A To evaluate the financial stability of an insurance company Rating services evaluate the financial stability of an insurer. These services are important to insurance agents and producers, as they are responsible for placing business with insurers that are financially sound.

What is the function of disability income insurance? A To replace income when disability prevents a person from working to earn a living B To encourage a person to become disabled so they don't have to work for a living C To increase a persons income by 150% when disabled so they don't feel a need to return to work D To provide hospital inpatient coverage in the event of a lengthy stay in the hospital

A To replace income when disability prevents a person from working to earn a living Disability income insurance protects an insured against the possibility of losing his or her ability to earn a living while still having expenses which need to be covered.

When will a primary care physician referral a HMO member to a specialist? A Usually after all other treatments have been exhausted B If the primary care physician is retiring C When the patient is facing a terminal illness D If the primary care physician is overbooked with appointments

A Usually after all other treatments have been exhausted A Specialist or Referral Physician will treat a HMO member if the Primary Care Physician has made a referral, usually after all other treatments have been exhausted.

After how much time does a life insurance incontestability period end in Alabama? A 6 months B 2 years C 1 year D 3 months

B 2 years A life insurance policy has a two year incontestability period. The insurer may cancel the policy during this period for material misrepresentations. The insurer cannot cancel the policy after this period has been exhausted, except for nonpayment or fraud.

Select the correct statement. A COBRA requires an employee to prove insurability before they can convert to individual coverage B COBRA protects dependents of employees by mandating for them the same extension and conversion privileges available to employees covered by group plans C COBRA provides benefits for employees for up to 36 months D The COBRA ACT requires employers with 10 or more employees to provide a health coverage continuation option to all covered employees when a qualifying event occurs

B COBRA protects dependents of employees by mandating for them the same extension and conversion privileges available to employees covered by group plans COBRA provides extension and conversion privileges to dependents of eligible employees if a qualifying event occurs. Such as: death or divorce of an employee, etc.

Ron owns a $100,000 Whole Life policy and does not want to continue premium payments. He decides to use the policy's cash value for the Reduced Paid-up nonforfeiture option. The cash value of his new policy will: A Decrease with time B Continue to increase C Be forfeited to pay for the reduced paid up coverage D Stay the same

B Continue to increase When exercising the Reduced Paid Up Option, the cash value purchases a paid up amount of WL insurance. The cash value remains within the plan and still grows with interest and may still be surrendered at a later date.

All of the following statements about Group Life Insurance are true, except: A Employee paid premiums are not tax deductible B Employees receive a tax deduction for employer paid premiums C Employees are taxed on any premiums paid on insurance in excess of $50,000 D Employer paid premiums are tax deductible

B Employees receive a tax deduction for employer paid premiums Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income.

Who pays the taxes that finance Social Security benefits? A Employers only B Employers and employees, in equal contributions C Federal and state general tax revenues fund Social Security benefits D Employees only

B Employers and employees, in equal contributions The special payroll tax known as FICA is used to fund Social Security programs. It is based on the employees gross income and the employer and employee contribute in equal amounts, unless self employed, then you pay both parts.

All else being equal, which of the following will receive the smallest income benefit payment from an annuity? A Male age 80 B Female age 70 C Male age 70 D Female age 80

B Female age 70 The younger female will receive the smallest income benefit as she will have the longest remaining life expectancy.

Fred's group health plan offers prepaid routine medical exams to provide early treatment and preventive care. He most likely has what type of coverage? A PPO B HMO C Hospital Indemnity D Blue Cross

B HMO HMOs emphasize preventive medicine and early treatment with prepaid routine medical exams, stress management, and diagnostic screening techniques.

All of the following are true of the Coordination of Benefits Provision under a group plan, except: A It is a method of determining primary and secondary coverage when an insured is covered by more than one group policy B In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary C Secondary carriers will only pay claims that are in excess of the primary carrier's responsibility D In a spousal situation, the insurer for the claim of an employee is primary, with the spouse's plan being secondary

B In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary Under the Coordination of Benefits Provision, the insurer for the parent whose birthday is first in the calendar year is primary, not the plan for the parent who is oldest.

Optional uniform provisions found in health insurance policies are designed to protect the: A Producer B Insurer C Agency D Insured

B Insurer Optional Uniform Provisions are designed to protect the insurer.

Which provision in a health insurance plan is used to avoid over-insurance when a person is covered by more than one plan? A Schedule of Benefits B Coordination of Benefits C Extension of Benefits D Primary Care Coverage

B The purpose of the Coordination of Benefits provision is to prevent over-insurance. The 'COB' provision appears in both group and individual health policies.

When signing the application form, the proposed insured is: A Accepting a binding receipt guaranteeing issue of the policy B Making a formal request to the company for a life or health insurance policy C Accepting the policy regardless of the final outcome or rating of the issued policy D Providing statements guaranteed to be true in all respects

B Making a formal request to the company for a life or health insurance policy A signed application is a request to the insurer by the applicant to issue a policy.

Required Provision 10 'Physical Exam and Autopsy', indicates that if the insurer wants to have an autopsy performed while a claim is pending, the insurer: A May do so if not forbidden by law and any costs involved would be deducted from the policy proceeds B May do so if it is not forbidden by law and if the insurer pays for it C Must have the authorization of the executor of the insured's estate before performing the autopsy D May do so regardless of any law forbidding it because the insurer has a right to validate the claim

B May do so if it is not forbidden by law and if the insurer pays for it Required Provision 10 'Physical Exam and Autopsy', states that the insurer may perform an autopsy at its own expense if it is not forbidden by law.

Based upon Optional Uniform Provisions, an insurer would have the right to deny claim payment in all of the following circumstances, except: A A broken leg injury suffered as the result of ingesting an illegal drug B Misstatement of age on the application C A claim involving an injury sustained in a bank robbery D A claim is covered by another insurer

B Misstatement of age on the application Misstatement of age would not avoid a claim, but could cause a reduced benefit to be paid. The Insurance With Other Insurers, Illegal Occupations and Actions, and Intoxicants and Narcotics are each optional provisions that could allow an insurer to avoid liability for a claim.

Which of the following uses convertible term to help lower premiums initially and then allows you the right to purchase permanent insurance? A Graded premium whole life B Modified whole life C Universal life D Variable life

B Modified whole life This modifies a whole life policy to use term at the beginning to lower premiums and then converts to whole life later. The purpose is to make whole life affordable in the early years.

George has a policy that may not be cancelled by the insurer. The insurer also may never raise George's premiums. George's policy is: A Guaranteed renewable B Noncancellable C Conditionally renewable D Nonrenewable

B Noncancellable While the terms noncancellable and guaranteed renewable are often used interchangeably, there is a difference. A guaranteed renewable policy allows premiums to be increased, where as a noncancellable policy may never increase premiums. A nonrenewable and a conditionally renewable policy can be cancelled.

All of the following are responsibilities the producer owes to the applicant, EXCEPT: A Understanding the applicant's insurance needs B Only offering policies with the lowest possible premium C Evaluating the applicant's current coverage and risks D Forwarding premium on to the insurer on a timely basis

B Only offering policies with the lowest possible premium The cheapest policy may not necessarily be suitable, it might not meet the applicant's true need for coverage.

Generally speaking, straight whole life is classified as which of the following? A Industrial B Ordinary C Government D Group

B Ordinary Ordinary Life Insurance is any type of life insurance that is not group, industrial, or government insurance.

When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company will: A Consider this fraud, and will void the policy with no death benefits paid to anyone B Pay only the amount of insurance that Jonas' premiums would have purchased at his correct age C Pay the policy proceeds in full because the policy is considered incontestable after two years D Void the policy and only pay the beneficiary the amount of premiums paid into the policy to date

B Pay only the amount of insurance that Jonas' premiums would have purchased at his correct age Misstatement of age or gender provision states that when the age or gender is misstated at application, the insurer will, at death, adjust the death benefit to that which the premiums collected would have purchased had the insurer known the correct age or gender at application. If discovered before death, the premiums are simply adjusted accordingly. This provision is not subject to the two-year incontestability provision.

Which of the following is NOT true regarding a group insurance plan? A Group coverage is often available for dependents and eligible employees B Proof of insurability is required to be eligible C Premiums are determined based on the underwriting of the group as a whole D The employer chooses the coverages

B Proof of insurability is required to be eligible Proof of insurability is usually not required under a group plan.

The factors necessary for an insurer to calculate a Net Premium are: A Mortality rate and expenses B Rate of interest assumed and mortality rate C Expenses and rate of interest assumed D Premiums paid plus interest earned

B Rate of interest assumed and mortality rate Mortality Rate - Rate of Interest Assumed = Net Premium.

A court reporter develops arthritis making it impossible to continue this employment. The reporter now has other employment at a reduced salary and receives a monthly benefit from an insurance contract due to which of the following policy provisions? A Recurrent Disability B Residual Disability C Partial Disability D Total Disability

B Residual Disability Residual Disability recognizes one's ability to continue to work, but at a reduction of earnings.

Which of the following would prevent creditors of beneficiaries from seizing or receiving any death benefit proceeds prior to the beneficiary actually receiving benefits? A Assignment B Spendthrift clause C Common disaster clause D Incontestability

B Spendthrift clause Spendthrift Clause denies the beneficiary the right to commute, alienate, or assign their interest in the proceeds. The purpose is to prevent creditors from claiming any benefits before the beneficiary actually receives the benefits. It also prevents a beneficiary from receiving any proceeds until the insurance company has completed the claims process. In other words; you can't spend it until you get it. Due Process MUST take place before anyone can receive it.

Which of the following is NOT an essential element of an insurable risk? A The chance of loss must be calculable B The loss must be intentional C The loss must be measurable D A large number of similar or same type units facing the same perils

B The loss must be intentional Intentional losses are excluded. The loss must be accidental.

If the premiums are not paid on a Traditional Whole Life policy that has been in force for decades with no loan outstanding, what happens? A The policy lapses and is of no value to the policyowner B Unless specified otherwise, the cash values buy extended term C The policy becomes a reduced paid-up policy D The insurer mails a check to the policyowner in the amount of the policy's cash value

B Unless specified otherwise, the cash values buy extended term Upon non-payment of premium due, the extended term option kicks in automatically and is paid for by the cash values of the policy. The policy has nonforfeiture values which are available to the policyowner.

Mark has a disability plan with a 30 day waiting period and a 6 month recurrent disability period and pays $5,000 per month in benefit. He was injured and was out of work for 4 months. He returned to work a month later and reinjured the previous injury. He was out of work for 2 more months, how much did his policy pay? A $30,000 B $15,000 C $25,000 D $20,000

C $25,000 Calculate as follows: 1st: The Benefit Amount is $5,000 per month x 4 months = $20,000. 2nd: Subtract the 30 day waiting period, which now makes it $15,000. 3rd: Add back in the 2 Additional Months that Recurred: $10,000 + the previous $15,000 = $25,000. Since the second injury occurred within the 6 month recurrent period, it picks up where the first injury left off without any additional waiting period. The Total is: $25,000.

Z suffers a total and permanent disability. The policy he has requires a premium payment of $100 per month. He is on claim for 100 months. Initially, how much did Z have to pay before the waiver of premium benefit on his policy started? A $1,200 B $10,000 C $600 D $1,800

C $600 There is usually a maximum 6-month elimination period before premiums are waived.

What is the minimum grace period, provided in the Required Provision, 'Grace Period', for all policies other than monthly or weekly premium policies? A 7 days B 30 days C 31 days D 10 days

C 31 days Required Provision 'Grace Periods' states that a grace period of 7 days for weekly premium policies, 10 days for monthly premium policies, and 31 days for all other policy modes must be granted.

Which of the following traditional whole life policies has the lowest first-year annual premium? A 10-pay life B 20-pay life C 40-pay life D 30-pay life

C 40-pay life The longer the premium paying period, the lower the premium. A Limited Pay Life policy of 40 years would have a lower premium than a 30-pay, 20-pay, or 10-pay life policy.

Which of the following should be put in place by two business partners who want to be assured that the business will not be lost should either one of them become disabled? A A Business Overhead Expense Contract B A Guaranteed Purchase Option C A Buy-Sell Agreement D An Errors & Omissions Policy

C A Buy-Sell Agreement The partners should put in place a Buy-Sell Agreement funded by a Disability Policy that would provide the funds needed to buy out the interests of either partner should one of them become totally disabled.

If Insurer ABC is authorized to do business in a particular state, it is said to be: A Domestic B Non-admitted C Admitted D Foreign

C Admitted An admitted insurer is an insurer that is authorized to transact insurance in a state by that state's insurance department, as evidenced by a certificate of authority issued to the insurer to transact business. It is not clear what state or country Insurer ABC is incorporated in, so its domicile (domestic, foreign, or alien) cannot be determined.

J took out a life policy when he was 35. It had a conversion feature that he exercised at age 45. Age 45 is referred to as his ____ age.

C Attained Attained age is the insured's age at any point in time, typically used at renewal or conversion.

All of the following signatures would be required on a life insurance application for an adult, except that of the: A Producer B Applicant C Beneficiary D Insured

C Beneficiary Both the producer and the applicant / insured must sign the application. If the applicant is a minor, a guardian must sign the application.

How does life insurance reduce financial loss upon the insured's death? A Through applicant risk retention strategies B Through reinsurance risk techniques C By transferring the risk to the insurer D By eliminating the risk

C By transferring the risk to the insurer For a premium, the applicant can transfer a specific dollar amount of risk to the insurer, thereby reducing but not eliminating the entire risk.

When rating health insurance risk: A The underwriters consider one's political and religious preferences B Underwriters use the same guidelines as they do for long-term care insurance C Certain factors may be more or less important than for the underwriting of life insurance D The underwriters use the same guidelines as they do when they underwrite disability income insurance

C Certain factors may be more or less important than for the underwriting of life insurance Certain underwriting factors for health insurance may be more of less important than for the underwriting of life, disability, or long-term care insurance.

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except: A Standard B Preferred C Declined D Substandard

C Declined Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.

Based on the 3-stage incontestability process, an insurer in Alabama can deny a claim under an LTC insurance policy for any misrepresentation: A At any time B If the policy has been in force more than 6 months, but less than 2 years C If the policy has been in force for less than 6 months D After the policy has been in force 2 years

C If the policy has been in force for less than 6 months An insurer may rescind, or deny a claim under an LTC policy in force for less than 6 months on the basis of material misrepresentation. This is referred to as an Incontestability Clause. The insurer may deny a claim under a policy in force for at least 6 months, but less than 2 years, if the material misrepresentation pertains to a condition for which benefits are payable. In LTC policies, the incontestability operates in a two stage manner.

A United States insurance company is considered to be domiciled: A In any state in which it is an admitted carrier B In any state in which it has an office C In the state whose laws the company is incorporated under D In any state where it is a member of the guaranty association

C In the state whose laws the company is incorporated under Domicile refers to the jurisdiction (i.e., state or country) where an insurer is formed or incorporated. An insurer might be an admitted carrier in multiple states, but it can only ever have one domicile.

A(n)____________ is the person or entity that is covered by an insurance policy. A Agency B Producer C Insured D Owner

C Insured The insured is the person whose life is being used for insurability purposes for a life and/or health insurance policy.

In the event there is a policy issued and there are questions on the insurance application that went unanswered: A A new application must be filed B The agent will fill in the answers after the fact C It will be assumed that the insurer waived their right to have answers to those questions D The insurer will cancel the policy

C It will be assumed that the insurer waived their right to have answers to those questions If a policy is issued with application questions unanswered, the contract will be interpreted as if the question had not been asked and is therefore waived by the insurer.

Which of the following is true concerning a Medical Expense Policy for a family? A It will discontinue coverage for their physically handicapped child at age 30 B It will continue to cover their 26-year-old child who is a full-time college student C It will continue to cover their unemployed 25-year-old child who is habitually unemployed D All of these are true

C It will continue to cover their unemployed 25-year-old child who is habitually unemployed Policies providing dependent coverage must allow coverage for any child, even if married, up to age 26 ('through age 25'). Physically and mentally handicapped children may be covered indefinitely as long as their disability occurred prior to age 26.

For a contributory plan with some insurance companies, if the employee does not apply within the eligibility period he or she: A Must wait until the employers next open enrollment period, no exceptions B Must satisfy a 6 month elimination period before they can apply again C May be required to take a medical exam, even for a nonmedical plan D Will be required to seek coverage elsewhere

C May be required to take a medical exam, even for a nonmedical plan In some cases, for a contributory plan, if the employee does not apply for coverage during the eligibility period, a medical exam may be required if the employee enrolls before the next open enrollment period, even if the employers plan is a non-medical, simplified issue type of plan.

The initial enrollment period for Part B of Medicare begins: A On the first day of the month in which the individual attains age 65 B On their 65th birthday C On the first day of the third month before the month in which the individual attains age 65 D January 1st of the year the individual turns age 65

C On the first day of the third month before the month in which the individual attains age 65 The initial enrollment period for Medicare Part B is a 7 month period that begins on the first day of the third month before the month in which the individual attains age 65 and ends on the last day of the third month after the individual attains age 65.

Producer X has a resident license in Georgia. Which of the following statements is incorrect regarding the producer's eligibility for an Alabama nonresident license? A Producer X can only receive a nonresident license if Georgia awards nonresident licenses on a reciprocal basis B Producer X cannot receive a nonresident license if their current license is suspended C Producer X must pass Alabama's licensing examination prior to approval D Producer X must submit an application and pay the licensing fee

C Producer X must pass Alabama's licensing examination prior to approval Because producers will have met the prelicensing and examination requirements of their home state, an additional exam is not required to receive a nonresident license.

When an insurance company sells part of their risk to another insurance company, this is called: A Other insurance B Risk retention C Reinsurance D Hold harmless agreement

C Reinsurance Reinsurance is how insurance companies spread out their risk. Particularly larger risks. This is referred to as Risk Sharing or Reinsurance. An insurer retains part of the risk and cedes the remaining risk to one or more insurers with a reinsurance agreement.

Guaranteed Renewable means: A Renewable with adjustable premiums determined by frequency of claim B Renewable with guaranteed premium C Renewable with adjustable premiums, by classification only D Renewable only at the option of the insurer

C Renewable with adjustable premiums, by classification only The Guaranteed Renewable Provision does allow the insurer to adjust premiums upon renewal, but by class only, not on an individual basis. A class of insureds is based on age or other uniform, nondiscriminatory method.

Accidental Injury is a: A Catastrophic loss B Predictable event C Sudden, unexpected and unforeseen event D Pre-existing condition

C Sudden, unexpected and unforeseen event Accidental Injuries are events that are, sudden, unexpected and unforeseen.

Which of the following would have the highest first-year annual premium for a 30-year-old, all other factors being equal? A Term to age 50 B Term to age 40 C Term to age 70 D Term to age 60

C Term to age 70 40 years of coverage is more costly than shorter terms of coverage.

When calculating premium of life insurance policies, insurers assume all of the following, except: A Claims are paid at year end B Premiums are paid in advance C The actual life expectancy of each group of insured's D Premiums will be invested and earn interest

C The actual life expectancy of each group of insured's When calculating premium rates, life insurers assume that: premiums are paid in advance of the period of coverage, premiums will be invested and earn interest and claims are paid at the end of a year. Insurers assume that the average life expectancy of each group will materialize.

Which of the following statements about Equity Indexed Life insurance is TRUE? A The insured/owner bears all risk regarding cash surrender value, as negative stock market performance can cause the cash values to decrease B The policyowner can decide which separate accounts to invest the policy's cash values into C The interest credited to the policy is based off of the performance of a stock market index like the S&P 500 D To sell Equity Indexed Life, a producer only needs a securities license

C The interest credited to the policy is based off of the performance of a stock market index like the S&P 500 The attraction of this policy is that potentially the interest credit can be higher than what a typically insurer's general account can pay by tying the potential interest credit to a stock market index. Based on the design of the policy, if the index falls in value there is no negative impact to existing cash values.

What differences exist between the treatment of sole proprietors and partners when it comes to the taxation of medical expense insurance? A Sole proprietors can deduct 100% of their premiums with no restrictions, while partners have a partial deduction B Sole proprietors can deduct their premiums, but partners are subject to amounts in excess of 10% of the partner's AGI C There is no difference D Sole proprietors can deduct their premiums, but partners cannot

C There is no difference There is no difference. Neither a partnership nor a sole proprietorship is separately taxable from their owners; therefore, the owners do not have access to a separately purchased plan as they would from a corporation--which would be taxed separately on its income.

A partial withdrawal is permitted on which of the following policies? A Whole Life B Variable Whole Life C Universal Life D Current Assumption Whole Life

C Universal Life Policies on a universal life platform allow for partial withdrawals

Which of the following statements regarding the taxation of individual LTC policies is TRUE? A Premium costs are never tax deductible B Benefits are always taxable C Unreimbursed LTC expenses may be applied toward the medical expenses deduction D Unreimbursed LTC expenses cannot be applied toward the medical expenses deduction

C Unreimbursed LTC expenses may be applied toward the medical expenses deduction LTC policies beginning after 1996 MUST be considered a Qualified Plan according to the IRS if it is to be allowed to the same 7.5% tax deductibility as a Medical Expense plan does. Premiums paid over 7.5% of the individuals Adjusted Gross Income (AGI) may be deducted if the policy qualifies.

An insured is hospitalized for at least 3 days. How long will Medicare pay for confinement in a skilled nursing facility? A Up to 30 days B Up to 90 days C Up to 100 days D Up to 365 days

C Up to 100 days Medicare Part A will provide coverage for up to 100 days of post-hospital skilled nursing care. Only the first 20 days are covered at 100% of the actual cost.

In a viatical settlement, the life insurance policyowner is referred to as the _________. A Settler B Buyer C Viator D Beneficiary

C Viator A viatical settlement is an agreement between a viatical settlement provider and a life insurance policyowner, known as a viator.

Which of the following best describes a viatical settlement? A Gifting a policy to a non-profit organization in exchange for certain benefits B A policy that is donated to a charitable organization in exchange for certain benefits C An insured with 5 years or more life expectancy sells a policy he or she no longer needs for more than its cash value D A terminally ill insured/owner sells his or her policy to a third party for much needed cash

D A terminally ill insured/owner sells his or her policy to a third party for much needed cash Viatical settlements occur when a terminally ill insured/owner sells his/her policy to a third party for less than the death benefit, but more than the cash values, in order to obtain funds when no other sources are readily available.

A permanent policy is surrendered for its cash value, and that sum is greater than the amount of premiums paid in. How is the excess taxed? A Taxed as a short term capital gain B No tax is due C Taxed as long term capital gain D Taxed as ordinary income

D Taxed as ordinary income Upon surrender, any equity (i.e., amount above total premiums paid) is taxed as ordinary income. The premiums paid are also referred to as 'cost basis.'

Life insurance protection for a specified period of time is provided by what type of policy? A Straight Whole Life B Fixed Period C Period Certain D Term

D Term Term insurance is protection for a specified period of time or to a specified age.

In terms of planning out a company's budget, what must be taken into consideration if a group life insurance plan is in place? A If it is a contributory plan, not all covered employees will pay their share of the premiums B Those converting to an individual plan are most likely the least insurable C The group rate will go down based upon an increase in the company's credit rating D The insurer can increase the premium at renewal

D The insurer can increase the premium at renewal An insurer providing a group life insurance plan can change the rate that it charges. That is important to know for a company's budgeting purposes.