Final Exam Review Questions
All of the following statements concerning group insurance underwriting are correct EXCEPT a.it is best to have few people joining or leaving the group. b.a minimum percentage of eligible employees must participate in the plan. c.insurance should be incidental to the formation of the group. d.benefits should be automatically determined to preclude individual selection of benefits.
A
Curtis purchased a major medical policy. The policy has a calendar-year deductible of $500 and 80-20 coinsurance. Curtis was hospitalized with a covered illness on January 23rd. This hospitalization was his first claim under the major medical policy for the calendar year. His covered medical expenses were $20,500. How much of this amount will the insurer pay, and how much will Curtis be required to pay? a. The insurer will pay $16,000 and Curtis will pay $4,500. b. The insurer will pay $16,900 and Curtis will pay $3,600. c. The insurer will pay $20,000 and Curtis will pay $500. d. The insurer will pay $15,900 and Curtis will pay $4,600.
A
Group medical expense plans usually include a provision that specifies how claims will be settled if more than one group health plan covers the claim. For example, a husband may be covered both under his own group plan and as a covered dependent under his wife's plan. This provision is called a a. coordination-of-benefits provision. b. managed care provision. c. predetermination-of-benefits provision. d. probationary period provision.
A
Maria is covered under a group medical expense plan as an employee. She is also covered under her husband's plan as a dependent. If Maria is hospitalized, how will each plan respond to her medical bills if both plans have the typical coordination-of-benefits provision? a.Maria's plan is primary, and her husband's plan is excess. b.Her husband's plan is primary, and Maria's plan is excess. c.Her husband's plan will pay its benefits, and Maria's plan will deny coverage. d.Both plans will pay benefits on a pro rata basis.
A
Sheila would like to purchase a cash value life insurance policy. She is concerned, however, that if she becomes disabled she will be unable to pay the premiums as they come due. What provision can Sheila add to her policy to address this concern? a. waiver-of-premium rider b. guaranteed purchase option c. reinstatement provision d. accelerated death benefits rider
A
Some physicians, hospitals, and other health care organizations agree to make medical services available to insureds at discounted prices. Insureds are not required to use these entities, but if they do, care costs are less than if these entities are not used. Such health care entities are called a. preferred providers. b. high deductible health plans. c. Blue Cross/Blue Shield Plans. d. health savings accounts (HSAs).
A
Which of the following statements about the continuation of group health insurance under COBRA is true? a. A continuation of coverage must be made available even if an employee voluntarily terminates employment. b. The length of the continuation of coverage is 90 days. c. The option to continue coverage applies to minor children only, not to adults. d. The employer must pay the entire cost of coverage during the continuation period.
A
Which of the following statements about workers compensation insurance is (are) true? I. Under the workers compensation part of the policy, the insurer agrees to pay the benefits required by the workers compensation law of any state listed in the policy declarations. II. The employers liability part of the policy provides workers compensation benefits when employees are working in states other than those listed in the policy declarations. a. I only b. II only c. both I and II d. neither I nor II
A
Which of the following statements is (are) true regarding life insurance policyowner dividends? I. Life insurance policies that pay dividends to policyowners are called participating policies. II. Life insurance policyowner dividends are guaranteed. a. I only b. II only c. both I and II d. neither I nor II
A
Which of the following statements is (are) true with respect to Workers Compensation and Employers Liability Insurance? I. Workers compensation insurance is characterized by deductibles and coinsurance. II. Workers compensation provides coverage for occupational injury and disease. a. II only b. both I and II c. I only d. neither I nor II
A
All of the following are nonforfeiture options EXCEPT a. reduced paid-up insurance. b. paid-up additions. c. cash surrender value. d. extended term insurance.
B
Annette purchased a life annuity at age 65 and started to receive monthly payments from the insurer. Annette's monthly payments consist of all of the following EXECPT a.interest earnings. b.life insurance proceeds from annuitants who live too long. c.premium payments. d.unliquidated principal of annuitants who die early.
B
During the funding period, variable annuity premiums are used to purchase a. guaranteed death benefits. b. accumulation units. c. exclusion units. d. annuity units.
B
The fundamental purpose of a variable annuity is a. to provide funding flexibility to the purchaser. b. to provide a hedge against inflation. c. to fund the purchase of cash value life insurance. d. to guarantee a fixed-dollar benefit throughout retirement.
B
Which of the following statements is (are) true regarding annuities? I. Insurers pool the risk of excessive longevity when offering annuities. II. An annuity intends to provide a lifetime income that cannot be outlived. a. I only b. both I and II c. neither I nor II d. II only
B
Which of the following statements is true regarding health savings accounts (HSAs)? a. If money remains in the HSA at the end of the year, it is forfeited to the federal government. b. To establish an HSA and receive favorable tax treatment, you must be covered by a high-deductible health plan. c. HSAs can be used to pay the uninsured portion of any medically-related bill not covered by private or government insurance. d. HSA contributions are not tax deductible.
B
Elaine was diagnosed with a terminal illness. Her doctor said that her only chance of survival is an experimental treatment. The treatment is expensive and is not covered by Elaine's health insurance. Which life insurance policy provision will permit Elaine to use the life insurance proceeds before she dies to pay for her medical care? a. guaranteed purchase option b. cost of living rider c. accelerated death benefits rider d. accidental death benefit rider
C
Eric purchased a cash value life insurance policy six years ago. He forgot to pay the premium that was due last week. Eric's coverage is still in force because of which life insurance policy provision? a. reinstatement provision b. incontestable clause c. grace period provision d. entire contract clause
C
Which of the following is not a workers' compensation benefit? a. rehabilitation benefits, b. medical benefits, c. 90 percent of income replacement.
C
Which of the following statements about preferred provider organization (PPO) health plans is (are) true? I. A PPO plan contracts with health care providers to provide medical services to members at reduced fees. II. Plan members are given a financial incentive to use PPO providers rather than other providers. a. I only b. II only c. both I and II d. neither I nor II
C
Which of the following statements is (are) true with respect to disability income insurance? I. A standard definition of disability is used in all disability income insurance policies. II. The longer the elimination period in a disability income insurance policy, the higher the premium for the policy. a. I only b. both I and II c. neither I nor II d. II only
C
All of the following are optional methods of settlement after the insured has died EXCEPT a. life income option. b. cash (lump sum). c. fixed-period option. d. reduced paid-up insurance.
D
All of the following are typical eligibility requirements for group insurance plans EXCEPT a. being actively at work on the day insurance becomes effective. b. satisfying a probationary period. c. being a full-time employee. d. earning more than a specified amount, such as $50,000
D
Bob and Jasmine Davis are a married couple who are both 67 years old. Bob and Jasmine purchased an annuity covering both of their lives. The settlement option will provide payments until Bob and Jasmine are both deceased. The settlement option Bob and Jasmine selected is a(n) a. installment refund option. b. cash option. c. life income with guaranteed payments option. d. joint-and-survivor annuity option.
D
Dirk suffered a heart attack and was rushed to the hospital where heart surgery was performed. His total bill for medical services was $50,000. Dirk has a major medical policy with 80-20 coinsurance, a $1,000 calendar-year deductible, and a $5,000 out-of-pocket limit. The out-of-pocket limit applies to coinsurance only. Assuming this hospitalization was the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay? a. $39,000 b. $39,200 c. $40,000 d. $44,000
D
Gerald paid $45,000 for an immediate annuity. Gerald's insurer will pay him $500 per month for as long as he lives. Gerald's life expectancy is 15 years. For tax purposes, what is Gerald's exclusion ratio for this annuity? a. 40.0% b. 45.0% c. 66.7% d. 50.0%
D
Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). If Juanita is alive 20 years later, how much of the $6,000 received during the year is taxable? a. nothing b. $3,000 c. $4,500 d. $6,000
D
Marv is covered by a group health insurance plan at work. His employer funds the entire cost of the group health insurance. Because of this characteristic, the group health insurance plan can be described as a. defined benefit. b. contributory. c. defined contribution. d. noncontributory.
D
One life insurance policy provision permits the policyowner to pledge certain rights in the life insurance policy to secure a loan. This provision is called a(n) a. entire contract clause. b. absolute assignment. c. policy loan provision. d. collateral assignment.
D
One life insurance policy provision specifies that the insurer cannot deny payment to the beneficiary because of concealment or misrepresentation if the life insurance policy has been in force for two years during the insured's lifetime. This provision is the a. assignment clause. b. entire contract clause. c. ownership clause. d. incontestable clause.
D
Paula, a 42 year-old surgeon, purchased disability income insurance. The policy defined disability as "the inability to perform the duties of your own occupation" for the first two years. After two years, disability is defined as "inability to perform the duties of any occupation for which you are reasonably suited by education, experience, and training." The policy would replace three-fourths of lost income after a six-month elimination period, with benefits payable until age 65. Recently, Paula was severely injured in an automobile accident in which her hands were crushed and had to be amputated. Which of the following statements is true regarding the benefits that Paula will receive under her disability income policy? a. The policy will replace one hundred percent of Paula's lost income. b. Paula will receive disability benefits for life, no matter how long she lives. c. Benefits under the policy will begin immediately. d. Paula will receive disability benefits for at least two years.
D
Which of the following statements is (are) true with respect to group life insurance? I. Most group life insurance in force is term insurance. II. The amount of group life insurance is often related to an employee's salary. a. neither I nor II b. II only c. I only d. both I and II
D
Which of the following statements is (are) true with respect to life insurance policy loans? I. Interest must be paid on life insurance policy loans. II. If a policy loan has not been repaid when the insured dies, the outstanding loan balance is deducted from the proceeds paid to the beneficiary. a. neither I nor II b. II only c. I only d. both I and II
D
Which of the following statements is (are) true with respect to the Roth IRA? I. Roth IRA contributions are tax deductible. II. Roth IRA contributions accumulate income tax free and qualified distributions are not taxable if certain requirements are met. a. both I and II b. I only c. neither I nor II d. II only
D
The advantages of private commercial insurers over state funds and self-insurance in the workers' compensation field include all but one of the following: a. Private insurers offer more certainty in handling out-of-state claims than do other methods, b. The services rendered by private insurers are generally better than those rendered by state funds, c. Contributions in private insurance are tax deductible, d. The insured has a choice of how much risk to transfer in private insurance plans, e. Private insurers do not bother with experience rating and retrospective rating.
E