Final Exam - North Carolina Life and Health

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

The employee

Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT?

The income from the TSA is received income tax-free

What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?

Waiver of premium rider

At what point does an informal contract become binding?

When one party makes an offer and the other party accepts that offer

The automatic premium loan provision is designed to

avoid a policy lapse

Under a Group Health Insurance Policy, continuation shall be available only to an employee who has been insured immediately prior to the date of termination for a period of AT LEAST

3 months

If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds, the insurer must pay interest on the proceeds after how many days?

30

AT LEAST how many days before the effective date of a rate increase must an insurer provide written notice to individual accident and health policyowners?

30 Days

Which of the following Dividend options results in taxable income to the policyowner?

Accumulation at interest

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will

Adjust the death benefit to a reduced amount

Which of the following statements describes what an Accident and Health policyowner may NOT do?

Adjust the premium payments

In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments

After an insured has become totally disabled as defined in the policy

P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?

An immediate annuity

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)

Anti-Money Laundering violation

An incomplete life insurance application submitted to an insurer will result in which of these actions?

Application will be returned to the writing agent

Medicaid was designed to assist individuals who are

Below a specific income limit

Variable Whole Life Insurance can be described as

Both an insurance and securities product

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?

Commercial insurer

Before a Health Policy is issued or delivered, the form, classification or risks, and premium rates MUST be filed with the

Commissioner of Insurance

The following acts are examples of unfair methods of competition and deceptive practices in the business of insurance EXCEPT the use of

Comparisons showing that a policy had higher benefits

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company

Proceeds of the viatical settlement contract could be subject to the claims of

Creditors

K has an Accidental Death and Dismemberment (AD&D) insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

Daughter

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing term

Additional coverage can be added to a Whole Life policy by adding a(n)

Decreasing term rider

Circulation of any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of an insurer is known as

Defamation

Making false statements about the financial condition of another insurance company is called

Defemation

Which contract permits the remaining partners to buy-out the interest of a disabled business partner?

Disability buy-sell

K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?

Disability income

Which of the following does Social Security NOT provide benefit for?

Dismemberment

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

Dread disease insurance

In a Disability Income policy, which of these clauses acts as a deductible?

Elimination Period

The purpose of the Insurance Guaranty Fund is to

Ensure that claims filed against insolvent insurance companies will be paid

What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract provision

The Rules Governing Life Insurance and Annuity Replacements define replacement as

Exchanging an existing policy for a new policy

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?

Fair Credit Reporting Act

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Flexible Installment Deferred

What kind of special need would a policyowner require with an Adjustable Life insurance policy?

Flexible premiums

When L applies for a Health Insurance Policy, L unintentionally fails to list a previous visit to a cardiologist. If the insurance company contests the policy, it MUST do so within 2 years

From the date of issue

A vacancy that occurs during the North Carolina Commissioner of Insurance's term of office MUST be filled by the

Governor

Which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements?

HMO

To be licensed as an accident and health insurance agent in North Carolina, the applicant MUST

Have successfully completed at least 20 hours of instruction approved by the Commissioner of Insurance

Continuation of coverage of a group Hospital, Surgical, and Major Medical Policy MUST include

Hospital Expense

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?

If the primary beneficiary dies before the insured

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?

Increase her policy's coverage amount

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have

Insurable interest in the proposed insured

Which of the following requires that an applicant for an individual Health Policy be notified of an investigation into his personal character, general reputation, and mode of living?

Insurance Information and Privacy Protection Act

Which of the following BEST describes Credit Life insurance?

Insurance issued on a debtor to cover outstanding balances on installment loans

The Insurance Information and Privacy Protection Act is designed to limit or direct the information collection activities of all of the following EXCEPT

Insurance regulators

Variable annuities may invest premiums in each of the following EXCEPT

Insurer's corporate business account

The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the

Insuring clause

Which of these types of coverage is best described as a short term medical policy?

Interim coverage

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?

Irrevocable beneficiary

Which of the following statements is CORRECT about the period in which a Term Policy can be converted?

It varies according to the contracts

On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26

Companies in North Carolina may transact solicitations for insurance ONLY through

Licensed agents

Which of the following types of health coverage frequently uses a deductible?

Major Medical Policy

J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay

$3,600

North Carolina requires that an insurance agent must complete __ hours of continuing education on the subject of law and ethics every two years.

3

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$0

Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?

$2,100

J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?

$25,000

The policyholder has how many days to return an Accident/Health Insurance Policy and receive a full refund on premiums?

10

Approved premium rates for group health insurance shall be guaranteed by the insurer for an initial period of not LESS than how many months?

12

A 15-year mortgage is best protected by what kind of life policy?

15-year decreasing term

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20-pay life

M's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force?

45 days

One becomes eligible for Social Security disability benefits after having been disabled for

5 months

An insured MUST submit a proof of loss on a health insurance claim within how many days after the date of loss?

90

An agent who sells an individual life insurance policy in North Carolina MUST deliver to the policyowner

A Policy Summary and Buyer's Guide

If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase

A Whole Life Policy with an Other Insured Rider

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

Modified Endowment Contract (MEC)

All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for

Modified Whole Life

What type of renewability guarantees premium rates and renewability?

Noncancellable

J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?

Nonoccupational coverage

In an individual retirement account (IRA), rollover contributions are

Not limited by dollar amount

Deductibles are used in health policies to lower

Overuse of medical services

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?

PPO

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

Payor Provision

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor clause

Which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

An insured covered by Accidental Death and Dismemberment (AD&D) insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary?

Proceeds will go to the continent beneficiary

K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?

Reinstatement

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

Renewable

Which of the following terms is defined as any transaction in which new life insurance or a new annuity is to be purchased and existing life insurance or annuity is to be terminated or discontinued?

Replacement

The Commissioner of Insurance may suspend or revoke the license of an agent who takes any of the following actions EXCEPT

Represents more than one insurance company

T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?

Request of the change will be refused

D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?

Residual Benefit clause

An individual Disability Income insurance applicant may be required to submit all of the following information EXCEPT

Spouse's occupation

The insuring clause

States the scope and limits of the coverage

Medicare is intended for all of the following groups EXCEPT

Those enrolled as a full-time student

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds

Essential Benefits without annual and lifetime limits are required on any health policy purchased

Through the Federal Marketplace

A disability elimination period is best described as a

Time deductible

What is the elimination period of an individual disability policy?

Time period a disabled must wait before benefits are paid

Which of the following BEST describes how pre-admission certifications are used?

Used to prevent nonessential medical costs

Viatical settlements between a policyowner and a viatical settlement provider are negotiated through a(n)

Viatical settlement broker

An example of unfair discrimination would be

offering different terms of coverage for different policyowners having the same risk classification