HS 311 2
As the term is used in liability insurance, personal injury typically includes all the following EXCEPT (A) defamation (B) malicious prosecution (C) breach of a personal contract (D) libel
breach of a personal contract
All the following statements concerning businessowners policies (BOPs) are correct EXCEPT (A) A BOP is usually the only policy a small business needs. (B) A BOP provides both property and liability coverage. (C) Some types of businesses are ineligible for coverage under a BOP. (D) The property coverage of a BOP may cover both the insured's building and personal property inside the building.
A BOP is usually the only policy a small business needs.
Which of the following statements concerning the formation of an insurance contract is correct? (A) An enforceable insurance contract requires either offer or acceptance. (B) An offer to buy insurance usually originates in a request from the person applying for insurance. (C) A life insurance agent is usually permitted to bind coverage on behalf of an insurer. (D) A property-liability insurance agent rarely has the insurer's permission to bind coverage.
An offer to buy insurance usually originates in a request from the person applying for insurance.
Bill has a personal auto policy (PAP) providing liability coverage on his 1965 Mustang. Which of the following persons is protected by Bill's PAP while driving his Mustang?
Bill's estranged wife Elaine, who also has her own PAP
Penalties an agent may face for selling insurance from an unauthorized entity include which of the following? I. liability for unpaid claims II. imprisonment on a felony charge
Both I and II
All the following statements concerning the National Flood Insurance Program are correct EXCEPT (A) Consumers must purchase coverage through salaried federal employees. (B) There are limits on the amount of coverage that is available. (C) Property owners must live in a community that participates in the program in order to be eligible for coverage. (D) The definition of flood includes tidal surges and mudflows.
Consumers must purchase coverage through salaried federal employees.
Which of the following statements concerning the tax treatment of life insurance is (are) correct? I. Inside buildup left inside a permanent life insurance policy is subject to current income taxation. II. Distributions from modified endowment contracts (MECs) receive more favorable tax treatment than distributions from non-MECs.
Neither I nor II
Which of the following statements concerning universal life insurance is (are) correct? I. Policyowners must pay a minimum target premium each year. II. A withdrawal of cash value is treated as a loan.
Neither I nor II
All the following statements concerning key employee life insurance are correct EXCEPT (A) It compensates the business for lost income or increased expenses if the key employee dies. (B) The key employee should be the owner of the life insurance policy. (C) Permanent life insurance may be appropriate if a business also wants to provide retirement income to the employee. (D) Death benefits are received tax free by the business.
The key employee should be the owner of the life insurance policy.
A peril is defined as which of the following? (A) a cause of loss (B) an item of clothing (C) the result of a loss (D) the result of a hazard
a cause of loss
Small Mutual Insurance Company, incorporated in Harrisburg, Pennsylvania, is licensed to write property and liability insurance in the states of Pennsylvania and Maryland. When doing business in Pennsylvania, Small is classified as which of the following? (A) an alien insurer (B) an all-lines insurer (C) a domestic insurer (D) a foreign insurer
a domestic insurer
All the following situations would generally be covered under a business's commercial general liability insurance policy EXCEPT (A) a lawsuit from a competitor claiming that the business's advertising slanders the competing organization and disparages its products (B) a lawsuit from a customer for fire damage to her home resulting from improper wiring installed by an employee of the business (C) a lawsuit from neighbors of the business claiming bodily injury and property damage from the escape of pollutants from the business (D) a lawsuit from a person injured while using a product manufactured by the business
a lawsuit from neighbors of the business claiming bodily injury and property damage from the escape of pollutants from the business
For purposes of prescription drug plans, what is a formulary?
a list of preferred medications for specific medical conditions
Which of the following provisions in a long-term care insurance policy would be consistent with National Association of Insurance Commissioners (NAIC) model legislation? (A) a nonforfeiture benefit (B) renewability at the option of the insurer (C) a 12-month preexisting-conditions exclusion period (D) a 3-day hospital stay before eligibility for nursing home benefits
a nonforfeiture benefit
Congress mandated all the following for Medicare supplement (medigap) policies EXCEPT (A) a 6-month open enrollment period (B) a provision permitting duplicate coverage (C) limited preexisting-conditions exclusions (D) guaranteed renewability
a provision permitting duplicate coverage
All the following policy provisions are required by law to be included in a life insurance policy EXCEPT (A) a grace period provision (B) a suicide provision (C) a reinstatement provision (D) a nonforfeiture provision
a suicide provision
Violetta sells commercial real estate and works on a commission. She wants a substantial amount of permanent life insurance protection, but because of her irregular income, she is not sure she will be able to pay a fixed premium every year. Violetta should consider which of the following? (A) a guaranteed renewable term insurance policy (B) a modified whole life insurance policy (C) a single-premium immediate annuity (D) a universal life insurance policy
a universal life insurance policy
permits the policyowner to exchange the term insurance for permanent insurance
adverse selection
Insurance laws require that rates be all the following EXCEPT (A) adequate (B) affordable (C) not excessive (D) not unfairly discriminatory
affordable
Charley, a college professor, is a client who often spends the summer in a remote part of the world where mail service is limited. Although he wants to buy a whole life insurance policy with his grandchildren as beneficiaries, he is concerned that the policy's protection could lapse if he does not receive a premium notice in time to make payment before the end of the grace period. Which of the following options would address Charley's concerns? (A) an automatic premium loan option (B) a late remittance option (C) a nonforfeiture option (D) a policy loan option
an automatic premium loan option
Reinsurance involves which of the following? (A) coverage that duplicates other coverage (B) an insurer transferring risk to another insurer (C) keeping a client's insurance in effect year after year (D) restoring a policy that has lapsed
an insurer transferring risk to another insurer
Long-term care insurance policies provide benefits for care to handle personal needs that can usually be provided by someone without professional skills or training. This type of care is referred to as
custodial care
Part B of Medicare provides coverage for all the following types of medical expenses EXCEPT (A) custodial care (B) surgeons' fees (C) diagnostic tests (D) physical therapy
custodial care
As a key step in the risk management function, risk measurement requires that each risk be analyzed and evaluated in terms of all the following EXCEPT (A) durability (B) frequency (C) severity (D) variability
durability
All the following are basic characteristics of health maintenance organizations (HMOs) EXCEPT (A) use of an organized system to deliver medical services to the members (B) broad, comprehensive health services that are provided to the members (C) emphasis on cost containment through the use of coinsurance and large deductibles (D) a specified geographic region in which members must live
emphasis on cost containment through the use of coinsurance and large deductibles
The life insurance policy settlement option under which installment payments consisting of both death proceeds and interest are made to the beneficiary over a specified time period is referred to as the
fixed-period option
In conducting a needs analysis to determine the amount of life insurance an individual with dependents requires, all the following types of needs must be considered EXCEPT (A) income to meet the individual's retirement needs (B) ongoing income needs of the surviving dependent family members (C) the need to fund the children's education (D) lump-sum cash needs at the individual's death
income to meet the individual's retirement needs
All the following are risk control methods EXCEPT (A) avoidance (B) loss prevention (C) insurance (D) loss reduction
insurance
All the following are suggested changes for decreasing Social Security benefit costs EXCEPT (A) imposing a means test for benefits (B) raising the full retirement age (C) lowering the early retirement age (D) lowering cost-of-living increases
lowering the early retirement age
An earnings test is applied to retired workers between ages 65 and 70, reducing benefits if earnings exceed specified annual amounts. (A) market fluctuations that cause securities to decline in value (B) expenses that continue during the period of a business suspension (C) loss of net income or the difference between revenue and expenses (D) extra expenses to minimize or avoid the suspension of operation
market fluctuations that cause securities to decline in value
Although the claims adjustment process varies by line of insurance, the first step in the process generally involves which of the following? (A) determining what kind of adjuster to use (B) investigating the claim (C) negotiating the amount to be paid (D) notifying the insurer of the loss
notifying the insurer of the loss
Many individual term life insurance policies are convertible policies. The convertibility feature does which of the following? (A) lowers the top premium that may be charged when the policy is renewed (B) changes the policy to an annuity at retirement (C) permits the policyowner to exchange the individual policy for a group policy (D) permits the policyowner to exchange the term insurance for permanent insurance
permits the policyowner to exchange the term insurance for permanent insurance
Which of the following is a primary reason for purchasing a variable annuity rather than a fixed annuity? (A) protection against inflation (B) higher interest guarantees (C) reduced risk of outliving annuity income (D) the absence of SEC regulation
protection against inflation
All the following are incidents of ownership in a life insurance policy the right to EXCEPT (A) assign the policy as collateral for a loan (B) take a policy loan (C) receive death proceeds as a named beneficiary (D) surrender the policy
receive death proceeds as a named beneficiary
Katy, who recently retired, no longer wants to pay the premiums on her whole life insurance policy, which has been in force for the past 40 years. However, she expects to live a long time and would like to keep some coverage in force until her death to help pay her estate costs. Which of her policy's nonforfeiture options would be most appropriate? (A) annuity option (B) cash surrender option (C) extended term insurance option (D) reduced paid-up insurance option
reduced paid-up insurance option
Mrs. Woods raised a wild animal, which she kept in a cage in her backyard. The animal escaped one day and mauled a professional golfer who had held the lead in a high-stakes tournament on a golf course adjacent to the Woods property. On which of the following legal bases would Mrs. Woods most likely be held liable for the claim by the injured golfer? (A) intentional act or omission (B) proximate cause (C) punitive damages (D) strict liability
strict liability
Coverage F of a homeowners policy, Medical Payments to Others Coverage, provides benefits to a person who sustains minor injuries while at an insured location in all the following situations EXCEPT when the injury is (A) caused by an insured's negligence (B) caused by an insured's dog (C) sustained by a guest (D) sustained by a resident family member
sustained by a resident family member
property loss exposure is defined as
the possibility that a person or organization will sustain a property loss
An agent uses misrepresentation to induce a policyowner to cancel an old life insurance contract and purchase a new contract. This transaction turns out to be to the policyowner's detriment. The agent's actions are an example of (A) misappropriating (B) rebating (C) refinancing (D) twisting
twisting
Which of the following is one of the six activities of daily living (ADLs) that is permitted in a qualified long-term care insurance policy? (A) managing medication (B) using the telephone (C) using the toilet (D) preparing meals
using the toilet
The rider to a life insurance policy that excuses the policyowner from paying the premium during the insured's disability is referred to as (A) accelerated benefits (B) disability income (C) guaranteed purchase (D) waiver of premium
waiver of premium
Tom currently earns $5,000 per month. He has an individual disability income policy that will pay $3,000 per month if he is totally disabled. The policy also provides residual disability benefits. If Tom becomes disabled and earns only $2,000 per month, how much will he collect each month under his disability income policy?
$1,800 (Lost Income/Predisability income) x Total disability benefit = Residual-disability benefit
Kristina buys a homeowners policy HO-3 with a $500,000 limit on the dwelling building. The standard limit of coverage on her personal property is
$250,000
Peter Batcheller has been totally and permanently disabled for the past 3 years. He is single and has annual investment income of $5,000 in addition to Social Security disability benefits and $6,000 in annual long-term disability benefits from his employer's group disability income plan. While he was actively employed, he was required to pay 40 percent of the cost of his coverage under the employer's plan. How much of Peter's disability benefit from the employer's plan is includible in his gross income for federal income tax purposes?
$3,600 (Because Peter paid 40 percent of the cost of his coverage, 40 percent of the benefit ($2,400) is not taxable income. The remaining $3,600 is included in his gross income. Peter will not be eligible for an income tax credit because the taxable disability benefit and his investment income exceed $7,500.)
Robert has a personal auto policy with split limits of $250,000/$500,000/ $50,000. He negligently caused an accident that destroyed a motor home and seriously injured the couple who were riding in it. How much would Robert's insurer pay if he is determined to be legally liable for $300,000 to the wife for her injuries, $45,000 to the husband for his injuries, and $95,000 for damage to the motor home?
$345,000 (The insurer will pay the $250,000 per person limit for the wife's injuries, $45,000 for the husband's injuries, and the $50,000 property damage limit for damage to the motor home, for a total of $345,000.)
All the following statements concerning monthly Social Security benefits are correct EXCEPT (A) An earnings test is applied to retired workers between ages 65 and 70, reducing benefits if earnings exceed specified annual amounts. (B) Workers who delay application for benefits until after full retirement age are eligible for increased benefits. (C) Benefits are subject to annual cost-of-living increases. (D) There is a minimum primary insurance amount (PIA) for workers who have been covered under Social Security for at least 10 years but at very low wages.
An earnings test is applied to retired workers between ages 65 and 70, reducing benefits if earnings exceed specified annual amounts.
Common characteristics of preferred-provider organizations (PPOs) include which of the following? I. Providers are paid on a fee-for-service basis as their services are used. II. Members have financial incentives to receive treatment within the preferred-provider network.
Both I and II
Reasons why there is a need for long-term care insurance include which of the following? I. inability of families to provide full care II. increasing costs of care
Both I and II
Which of the following statements comparing the mortality of annuitants with that of insureds under life insurance is (are) correct? I. Persons who purchase annuities tend to have longer life expectancies than persons who purchase life insurance at the same age. II. From an insurer's perspective, the trend toward longer lifespans is less favorable for annuity providers and more favorable for life insurance.
Both I and II
Which of the following statements concerning major medical expense plans for employees is (are) correct? I. Under health care reform (PPACA), new health plans cannot place annual or lifetime limits for "essential health benefits." II. Most plans contain some type of family deductible provision.
Both I and II
Which of the following statements concerning the benefits of insurance is (are) correct? I. Because they specialize in handling risks, insurers can often handle risks more efficiently than individuals or businesses. II. Insurance companies foster loss prevention by supporting various organizations that promote safety.
Both I and II
he use of a high-deductible medical expense plan and a savings account can lead to cost savings for which of the following reasons? I. by largely eliminating the expense of administering and paying small claims II. by giving participants a direct financial incentive to avoid unnecessary care
Both I and II
All the following statements concerning the scheduled personal property endorsement to a homeowners policy are correct EXCEPT (A) It provides coverage on an open-perils basis. (B) Essentially the same coverage can be purchased in a separate floater. (C) It can be used to expand coverage on specific categories of personal property, such as jewelry and furs. (D) Coverage applies only when the property is in the United States, its territories, or its possessions.
Coverage applies only when the property is in the United States, its territories, or its possessions
Many major medical plans contain coverage for treatment in facilities that are alternatives to hospitals. All the following statements concerning this coverage are correct EXCEPT A) Extended care facility benefits often require a prior hospitalization for the same or a related medical condition. (B) Home health care benefits are limited to either a maximum number of visits or a period of time. (C) Hospice benefits are designed to provide benefits to cure chronic medical conditions that would be fatal if left untreated. (D) Birthing center benefits provide coverage for delivery by nurse-midwives in homelike facilities that are separate from hospitals.
Hospice benefits are designed to provide benefits to cure chronic medical conditions that would be fatal if left untreated.
Generally, which of the following types of risks can be most effectively handled with risk retention even when other risk treatment devices are available to an individual or a small business? I. risks involving the possibility of high-frequency, low-severity losses II. risks involving the possibility of low-frequency, high-severity losses
I only
Palmolive Life Insurance Company uses the personal producing general agent (PPGA) system. Which of the following statements concerning a PPGA is (are) correct? I. The PPGA is a person who has demonstrated previous success in selling life insurance. II. The PPGA's primary responsibility is to use his or her experience to train other successful agents.
I only
Which of the following methods of dealing with substandard life insurance risks is (are) used when the extra risk is an increasing one? I. extra percentage tables II. flat extra premium
I only
Which of the following statements concerning long-term care insurance contracts that pay benefits on a per diem basis is (are) correct? I. They pay a predetermined daily dollar amount regardless of the cost of care. II. They must be coordinated with Medicare in order to be tax-qualified policies.
I only
Which of the following statements concerning pure and speculative risks is (are) correct? I. Both pure risks and speculative risks present the possibility of loss. II. Only pure risks present the possibility of gain.
I only
Which of the following statements concerning sick-leave plans is (are) correct? I. Most plans require an employee to satisfy a probationary period before becoming eligible for benefits. II. Most plans are designed to provide benefits equal to 60 percent or less of an employee's regular pay.
I only
Which of the following statements concerning Medicare prescription drug coverage (Part D) is (are) correct? I. It is designed to cover 100 percent of the cost of prescription drugs after an annual deductible is satisfied. II. It is a voluntary plan with a monthly premium that may be waived for persons with very low incomes.
II only
Which of the following statements concerning group life insurance is (are) correct? I. To qualify for group coverage, employees who have completed a probationary period must usually provide evidence of insurability. II. Covered employees may be required to pay a portion of the premium.
II only
Which of the following statements concerning insurable interest is (are) correct? I. Life insurance requires that insurable interest exist at the time of a claim. II. Without an insurable interest, insurance would be a wager or gambling contract.
II only
Which of the following statements concerning monthly Social Security retirement benefits is (are) correct? I. A worker is eligible to receive benefits as early as age 60 if he or she is currently insured. II. The election to receive benefits prior to the full retirement age results in a reduced benefit.
II only
Which of the following statements concerning reciprocal exchanges is (are) correct? I. They must be incorporated. II. They are regulated as licensed insurers.
II only
Which of the following statements concerning the federal income tax treatment of property and liability insurance benefits is (are) correct? I. Benefits paid on behalf of the insured under a liability policy result in taxable income to the policyowner. II. Benefits paid under a property insurance policy may be subject to capital gains taxation under certain circumstances.
II only
Which of the following statements concerning the federal tax treatment of insured group medical expense plans is (are) correct? I. Employer contributions for an employee's coverage are taxable income to the employees. II. Contributions by the employer for an employee's coverage are generally tax deductible to the employer.
II only
Which of the following statements concerning the income tax treatment of individually purchased medical expense insurance is (are) correct? I. As a general rule, benefits are subject to income tax to the extent they exceed actual medical expenses incurred. II. A tax credit is available for premium payments by individuals who are at least age 55 and receiving benefits from the Pension Benefit Guaranty Corporation.
II only
Which of the following statements concerning an installment refund annuity is correct? (A) If the annuitant dies during the accumulation period, the annuity company's obligation to provide a refund ceases. (B) If the annuitant dies during the liquidation period before receiving monthly payments equal to the annuity's purchase price, payments continue until the full cost is recovered. (C) Periodic annuity payments will be made to the annuitant until all premiums have been returned, and beyond that point no further benefits will be paid. (D) The annuitant is entitled to request a refund at any time during the 20-day free-look period after purchasing the annuity, but the refund will be paid in installments rather than a lump sum.
If the annuitant dies during the liquidation period before receiving monthly payments equal to the annuity's purchase price, payments continue until the full cost is recovered.
Which of the following statements concerning the operation of a life insurance policy is correct? (A) If the insured dies during the grace period, the insurer refunds only the premiums paid. (B) If, after the insured's death, it is discovered that the insured's age has been misstated, the amount payable is the amount the premiums paid would have purchased at the correct age. (C) Generally, a policy can be reinstated after it has been surrendered for its cash value as long as evidence of insurability is provided to the insurer. (D) Once a life insurance policy has been issued, it is incontestable on the basis of material misrepresentation or concealment.
If, after the insured's death, it is discovered that the insured's age has been misstated, the amount payable is the amount the premiums paid would have purchased at the correct age.
ll the following statements concerning individual major medical expense policies are correct EXCEPT (A) The purchaser of a policy selects the deductible and a coinsurance percentage. (B) Individual policies are likely to have much more generous benefits than are found in insured, employer-provided coverage. (C) Maternity coverage frequently requires the purchase of a separate rider. (D) In some policies, there is a lower level of benefits unless services are received from a PPO network provider.
Individual policies are likely to have much more generous benefits than are found in insured, employer-provided coverage
All the following statements concerning Part A of Medicare are correct EXCEPT (A) Inpatient hospital care is subject to an initial deductible for each benefit period. (B) Inpatient hospital care is paid in full after the 60th day of hospitalization. (C) Inpatient care in a skilled-nursing facility requires a prior hospital stay of at least 3 days for the same medical condition. (D) Hospice benefits are available to terminally ill beneficiaries with a life expectancy of 6 months or less.
Inpatient hospital care is paid in full after the 60th day of hospitalization.
Which of the following statements concerning the uncertainty of investment gains or losses in a variable life insurance policy is correct? (A) It is jointly borne by both policyowner and insurer. (B) It is nonexistent. (C) It is borne by the policyowner. (D) It is borne by the insurer.
It is borne by the policyowner
All the following statements concerning a typical personal umbrella liability policy are correct EXCEPT (A) It covers personal injury liability in addition to bodily injury and property damage liability. (B) It pays claims on a pro rata basis when coverage is available from any required underlying policies. (C) Among the persons insured are family members living with the named insured. (D) A self-insured retention applies to losses that are not covered by an underlying policy.
It pays claims on a pro rata basis when coverage is available from any required underlying policies.
What is the purpose of the statistical data in a mortality table?
It shows how many persons alive at different ages are expected to die during the coming year.
John is the only named insured under his homeowners policy. Which of the following persons is classified as an insured under John's policy? (A) John's wife, from whom he is separated and who lives elsewhere (B) John's 65-year-old mother, who lives with him (C) John's 19-year-old son, who lived with him until he went to State University where he is a part-time student and an aspiring rock musician (D) John's 44-year-old childhood friend, who resides in John's household and who is cared for by John and his mother because of the friend's mental illness
John's 65-year-old mother, who lives with him ((A) is incorrect because a spouse of the person listed in the policy declarations qualifies as an insured only if he or she is a resident of the same household. (C) is incorrect because John is not a full-time student. (D) is incorrect because the friend is not a relative of the named insured or under the age of 21.)
Maria is covered under her own group medical expense insurance plan as an employee and also 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 usual coordination-of-benefits (COB) 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.
Maria's plan is primary, and her husband's plan is excess.
All the following statements concerning benefits under workers' compensation programs are correct EXCEPT (A) Disability income benefits are often paid retroactively to the date of injury if the worker is still disabled after a specified time period. (B) Burial benefits and benefits to eligible survivors are payable if a worker is killed on the job. (C) Medical benefits are usually subject to deductibles and coinsurance. (D) Rehabilitation benefits are available to restore disabled workers to productive employment.
Medical benefits are usually subject to deductibles and coinsurance.
Which of the following statements concerning individual disability income insurance policies is correct? (A) Most states prohibit incontestability provisions to eliminate fraud. (B) A cost-of-living (COLA) rider keeps the policy's benefit amount in step with increases in the insured's income prior to disability. (C) Most individual disability income insurance policies contain a definition of disability that is comparable to that used in the Social Security program. (D) Most insurance companies give the purchaser an option to select the duration of the waiting period.
Most insurance companies give the purchaser an option to select the duration of the waiting period.
All the following statements concerning business uses of disability income insurance are correct EXCEPT (A) Business overhead policies tend to be limited to benefit durations of 1 or 2 years. (B) Benefits from key employee disability income policies are paid to the business entity that purchased the policy. (C) The tax implications of a formal salary continuation plan differ depending on whether the business or the employee owns the disability income policy. (D) Most policies used to fund a buy-sell agreement pay benefits in installments over 5 to 10 years.
Most policies used to fund a buy-sell agreement pay benefits in installments over 5 to 10 years.
An endorsement (rider) is attached to many insurance policies. Which of the following statements concerning endorsements is (are) correct? I. If an endorsement conflicts with the wording in the policy to which it is attached, the wording in the policy takes precedence. II. Endorsements are used solely to restrict the scope of coverage under a policy.
Neither I nor II
When a person enters into a charitable gift annuity agreement, the charity receives which of the following benefits? I. the revocable donation of property that is permanently transferred only upon the annuitant's death II. a tax deduction equal to the value of the gift
Neither I nor II
Which of the following statements concerning an immediate annuity is (are) correct? I. It is usually purchased on an installment basis over a number of years. II. The first benefit payment is payable immediately after the date of purchase.
Neither I nor II
Which of the following statements concerning an interest-adjusted cost index for life insurance is (are) correct? I. The surrender cost index is useful when the main concern is with the death benefit to be paid at the end of the time period. II. The net payment cost index is useful when the main concern is the level of cash values available at the end of the time period.
Neither I nor II
Which of the following statements concerning backdating in a life insurance policy is (are) correct? I. Backdating increases the annual policy premium because of extra risk assumed by the insurer. II. Most states allow backdating for up to 5 years.
Neither I nor II
Which of the following statements concerning deductibles in a property insurance policy is (are) correct? I. Higher deductibles tend to increase the attitudinal hazard. II. Choosing a lower deductible is often a good way for an insured to lower his or her property insurance premiums.
Neither I nor II
Which of the following statements concerning homeowners insurance policies is (are) correct? I. Section I-Property Coverage is the same in every homeowners form. II. Section II-Liability Coverage is optional.
Neither I nor II
Both Joe and his friend have personal auto policies (PAPs). If Joe is involved in an auto accident while driving his friend's car, how do the two PAPs coordinate their liability coverage (Part A)?
The friend's PAP is primary coverage while Joe's PAP is excess.
All the following statements regarding nonforfeiture options for long-term care insurance contracts are correct EXCEPT (A) A shortened benefit period option can provide for a reduced period during which benefits will be paid. (B) A return-of-premium option allows for return of some premium, but only if the contract has been in force for a specified number of years. (C) Some states require that a policy contain a contingent benefit upon lapse provision if the applicant has selected a nonforfeiture benefit. (D) Few applicants elect these options because of their cost.
Some states require that a policy contain a contingent benefit upon lapse provision if the applicant has selected a nonforfeiture benefit.
Which of the following statements correctly describes a coverage need that can be met with an auto loan/lease coverage endorsement? (A) The client's outstanding obligation on a leased auto exceeds the vehicle's current actual cash value. (B) The client wants to trade in his or her car before the term of the lease has expired. (C) The lender exercises an option to renegotiate the terms of an adjustable lease. (D) The lender wants to be included as the payee on any claim check.
The client's outstanding obligation on a leased auto exceeds the vehicle's current actual cash value.
All the following statements concerning COBRA are correct EXCEPT (A) The cost of the continued coverage may be as high as 200 percent of the cost of coverage for employees who are actively at work. (B) The continued coverage must be provided without having to show evidence of insurability. (C) The continued coverage must extend from the date of the qualifying event to the earliest of several specified dates. (D) The continuation of coverage is not automatic but must be elected by a qualifying beneficiary.
The cost of the continued coverage may be as high as 200 percent of the cost of coverage for employees who are actively at work.
All the following statements concerning health savings accounts (HSAs) are correct EXCEPT (A) Contributions for an employee can be split between the employee and his or her employer. (B) The high-deductible health plans used with HSAs are permitted to waive the deductible requirement for preventive care. (C) Tax-free distributions can be used to pay premiums for long-term care insurance up to specified limits. (D) The current year's contribution for a participant is reduced by a portion of any unused amounts in an HSA that are attributable to prior years' contributions.
The current year's contribution for a participant is reduced by a portion of any unused amounts in an HSA that are attributable to prior years' contributions.
The terms net rate and gross rate are used in connection with insurance rates developed by the pure premium method of rate making. Which of the following statements concerning these terms is correct? (A) The gross rate is the net rate plus a loading for profit and contingencies. (B) The gross rate is the insurer's estimated loss costs per unit of coverage. (C) The net rate is the charge for profit and contingencies. (D) The net rate is multiplied by the number of units of coverage to arrive at a gross rate.
The gross rate is the net rate plus a loading for profit and contingencies.
Which of the following statements concerning the typical conversion provision found in group medical insurance contracts is correct? (A) Evidence of insurability is required. (B) Conversion must be elected prior to the termination of the group coverage. (C) The insurer has the right to refuse to issue a policy to anyone who is covered by Medicare. (D) Coverage for preexisting conditions is limited for the first 6 months of coverage.
The insurer has the right to refuse to issue a policy to anyone who is covered by Medicare.
All the following statements concerning the viatical settlement of a life insurance policy are correct EXCEPT (A) The policy must have been in force long enough so that the contestability period is past. (B) The settlement provider assumes the responsibility for keeping the policy in force. (C) The prior policyowner may be subject to capital gains taxes on the difference between the settlement received and the total premiums paid for the policy. (D) The prior policyowner typically receives a settlement of between 90 and 95 percent of the policy's death benefit.
The prior policyowner typically receives a settlement of between 90 and 95 percent of the policy's death benefit.
Property insurance contracts are characterized in all the following ways EXCEPT (A) They cover the insured person rather than the subject property. (B) They are subject to conditions precedent or subsequent. (C) They are contracts of adhesion. (D) They are bilateral agreements between the parties.
They are bilateral agreements between the parties.
All the following statements concerning uninsured motorists coverage are correct EXCEPT (A) An unidentified hit-and-run driver is considered an uninsured motorist. (B) The cost of uninsured motorists coverage is borne by the innocent victim. (C) The insured must establish that an uninsured motorist, as defined, was legally liable to pay damages for the insured's injuries. (D) Uninsured motorists coverage applies to both bodily injury and property damage claims in most states.
Uninsured motorists coverage applies to both bodily injury and property damage claims in most states.
In underwriting an application for life insurance, an insurer is likely to use all the following sources of information concerning a specific applicant EXCEPT (A) insurer bureaus and associations (B) insurance regulators (C) the application signed by the applicant (D) the insurance agent who submitted the application
insurance regulators
Every insurance policy contains one or more provisions spelling out the basic promise the insurer makes in the policy, such as the promise to pay money if a certain type of event occurs. Insurance policy provisions of this type are known as which of the following? (A) conditions (B) insuring agreements (C) financial risks (D) miscellaneous provisions
insuring agreements
In a cash value life insurance policy, the difference between the death benefit and the reserve is referred to as the
net amount at risk