Insurance

Which of these is NOT a reason the insurance application is important?

When attached to the policy, the application becomes part of the insurance clause

Which of these is not a reason the insurance application is important?

When attached to the policy, the application becomes part of the insurance clause

At what point does a whole life policy pay the face amount?

Upon the insureds death or reaching the age of 100

When medical expenses reach a certain dollar amount, the insured is no longer responsible for sharing the cost of expenses. The insurance company then pays 100% of the covered expenses. This major medical policy provision is called a(n):

stop-loss limit

Policy dividends for life insurance are:

not guaranteed

Buying land with the anticipation of it going up in value is an example of:

speculative risk

Which of the following statements concerning an insurance policy is TRUE?

An issued policy can never be changed by a producer

A disability policy in Alabama that is paid on a monthly basis is required to have a grace period of:

10 days

At what age is an insured for life insurance considered statistically "dead"?

100

Julio, the insurance producer, has allowed his license to lapse. He would like to reinstate his license without retaking a prelicense course or passing a written examination. To do this, Julio must reinstate the license within months from the renewal date.

12

Tim has a Universal Life policy. The cash value growth in his policy is:

Interest sensitive

Which of the following is NOT guaranteed by a whole life policy?

Policy dividends

Bert purchased an immediate annuity with quarterly payments. When will this annuity start making payments?

3 months after the annuity is bought

Which of the following statements concerning a life insurance policy is TRUE?

An issued policy can never be changed by a producer

The Commissioner of Insurance may NOT do which of the following?

Change insurance laws

In regards to insurance applications, which of the following statements is true?

Changes on the application must be consented to in writing

A Cross Purchase Buy-Sell Agreement is in place for ABC Company's four founding partners. What would this agreement require if the agreement is funded with individual life insurance?

Each partner must own a policy on the other partners

Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plans conversion option. Two weeks late, Ann dies in an automobile accident. How will this situation be handled?

Full benefits must be paid by the insurer

At certain ages or dates, an insured can increase the stated benefit (within limits) under their disability income policy, regardless of health. Which policy rider BEST describes this?

Future income option

Jackie has just enrolled in Medicare Part B for the first time. He cannot be refused or rated for a Medicare Supplement policy as long as he applies for coverage within 6 months of enrolling in Part B. What is this requirement called?

Guaranteed issue

Which of the following events would allow a policyowner with a guaranteed insurability rider purchase additional life insurance?

Having a child Getting married Reaching a specified age stated in the policy All of the above*

What does Disability Buy-Sell insurance provide?

Lump-sum benefit

Which is NOT true regarding Medicare Supplement policies?

Must include a minimum 20-day Free-Look provision

John has recently died and it was discovered that he was actually ten years older than what was listed on his life insurance policy. What will the insurer pay his beneficiary?

O The amount of insurance that his premiums would have purchased at his correct age

Which type of life insurance policy combines insurance protection with an accumulation of cash value?

Permanent insurance

A dependent child can receive continuation of coverage under the parents' policy for which of the following conditions?

Physical or mental disability

Which of these is a correct statement?

Policy dividends cannot be guaranteed

Which of these actions could result in a lapsed policy?

Premium was not paid during the grace period

Which of the following best describes a Health Maintenance Organization (HMO)?

Provides full medical services that stress preventative medicine

Which of these statements is true regarding the Medical Information Bureau (MIB)?

Reports given to member companies contain information regarding the insurability of insurance applicants The proposed insured must give authorization before information can be given to member companies The MIB is a nonprofit agency which aids in underwriting insurance policies All of the above*

Which of the following terms may be used when describing the premiums for a life insurance policy advertised in Alabama?

Savings Profit Deposit None of these*

Which of the following life insurance policies will build up cash value the fastest?

Single premium

What kind of risk are amateur pilots normally classified as?

Special class risks

Which entity is responsible for the majority of regulations imposed on the insurance industry?

State government

John is an annuitant who has surrendered his annuity at age 55. What will he pay?

Tax on the interest earned

Which of the following permanent life insurance policy riders add more coverage for a limited amount of time?

Term rider

Who does the insurance agent legally represent?

The insurance company

Medicare eligibility is typically based on:

age

Under a Health Maintenance Organization (HMO), service providers are paid a fixed monthly fee for each member. This concept is called:

capitation

Paul has a major medical policy which begins with basic first dollar coverage that pays up to its limits, then he must pay a certain dollar amount of covered expenses before the major medical portion steps in. The dollar amount Paul must pay is called the:

corridor deductible

The aviation exclusion:

excludes coverage when the insured is riding in certain kinds of air travel

A______ _____company is one that is domiciled in another state and has NOT received a license to do business in Alabama.

foreign nonadmitted

The Alabama Life and Disability Insurance Guaranty has the power to:

loan money to an insolvent insurance company quarantee the obligations of an insurance company provide money to satisfy the obligations of an insurance company All of these**

How frequently does a disability income policy typically pay benefits?

monthly

The number of an insurance company's health insureds that is expected to become sick or injured is called:

morbidity experience

Insurance policies issued by companies which allow their policyowners to participate in the favorable experience of the company through payment of dividends are known as:

participating policies

Nick has a Major Medical insurance policy with a $1,000 deductible, an 80% coinsurance clause, and a $1,500 stop-loss feature. He is hospitalized and incurs the following covered expenses: $10,000 hospital room and board, $2,500 surgeon's fee. What is Nick responsible for paying?

$1,500

A.J. has a Major Medical insurance policy with a $500 deductible and an 80% coinsurance clause. He incurs the following covered expenses under a recent hospitalization: $3,500 hospital room and board%3; $2,000 surgeon's fee. What will A.J.'s policy pay?

$4.000

What will the insurance company pay once the stop loss is exceeded on a Major Medical policy?

100% of covered expenses

What is the minimum age requirement for a minor in Alabama to purchase a life insurance policy?

15

A Long Term Care insured must be unable to perform a minimum____of Activities of Daily Living (ADLS) to receive benefits.

2

If a Long Term Care (LTC) policy in Alabama has been in effect for more than,___the insurer CANNOT contest any material representation on the application.

2 years

If an insured under a Major Medical insurance policy with a $200 deductible and an 80% coinsurance clause incurred the following covered expenses: Hospital room and board $2,000; Surgeon's fee $1,500. How much would the policy pay?

2,640 (2,000 + 1,500 = 3,500 - 200 = 3,300 x .8)

The Notice of Claim Provision states that the insured notify the insurance company within ___days of a claim.

20

Alabama's continuing education law states that an insurance producer must report how many classroom hours every two years?

24

Within how many calendar days must all clean electronic health insurance claims be paid in Alabama?

30

The minimum grace period for life insurance policy sold in Alabama is:

30 days

Within how many days of a written demand must the commissioner of insurance hold a hearing?

30 days

Required Provision 3 states that the minimum grace period for all policies (except those with monthly or weekly premium modes) is:

31 days

Under Alabama's annuity disclosure regulation, the disclosures must be mailed to the applicant within____business days if the application is taken over the telephone.

5

Jackie took out a Medicare supplement insurance policy and also has a preexisting condition. In this situation, a preexisting condition if defined as a condition for which medical advice was given or received within _______ of the effective date of coverage?

6 months

Who would most likely own a Medicare supplement policy?

69-year old female covered by medicare

What is a certificate of insurance

A certificate issued to each individual covered by the group life insurance

Which statement concerning Alabama's life insurance solicitation regulations is true?

A life insurance illustration must contain information regarding for the non-guaranteed elements of a policy over time A buyers guide explains the purpose and structure of various policies available A buyers guide and policy summary must be provided to an applicant prior to policy delivery All of these

Peggy surrenders a permanent life policy with a cash value of $15,000 and an outstanding policy loan of $5,000. If she chooses the reduced paid up option,what will be the result.

A paid-up permanent policy purchased with $10,000

A substandard or special class risk typically results in:

A premium that is higher than a normal risk

Which of these is NOT considered a form of advertisement in Alabama?

A producer sending a Christmas card to a client

ABC Company takes out a Key Employee policy on its CEO. The CEO leaves ABC Company and begins working for XYZ Company five years later. If this person were to die ånd the policy is still in force and unchanged, where would the death proceeds be directed?

ABC Company

Anita is an office clerk at the time she purchased a disability income policy. She later changed her career to a king crab fisherman. If she ever becomes injured on the boat, the Change of Occupation provision states that the insurer can:

Adjust the benefits

Individual disability income policies normally have a premium that:

Adjusts annually

Which of the following statements is NOT correct?

Agents are allowed to waive certain policy provisions

An insurance company licensed to solicit insurance in a specific state is called

An admitted company

Janet is retired and looking to invest a lump-sum of money through an insurance company. Which product would be best suited for this?

Annuity

How is the Alabama Life and Disability Insurance Guaranty Association able to pay claims for insolvent insurers?

Assessments against other admitted insurers in Alabama

All students attending a large college would most likely be covered by which type of health policy?

Blanket policy

Medicare supplement policies marketed in Alabama:

Cannot offer benefits that simply duplicate Medicare benefits Can't be more restrictive than Medicare Can't treat a loss due to injury differently than a loss due to illness All of these*

Which type of assignment transfers a portion of the policy owners right to another party in order to secure debt to the party?

Collateral assignment

Which of the following is a TRUE statement regarding dental insurance?

Comprehensive dental care policies usually cover a percentage of reasonable and customary charges for non-routine treatment

Ed has an insurance policy with an insurance company. Before Ed's policy will play a claim, certain events must occur. Because of this an insurance policy is considered to be

Conditional

An insurance contract is said to be an ____ because there is a mutual reliance of truthfulness on both parties

Contract of utmost good faith

Which type of term policy allows the policyowner to switch to permanent insurance?

Convertible term

Replacement regulation in alabama does not apply to

Credit life insurance

When an estate is named beneficiary to a life insurance policy, the policy proceeds are:

Distributed according to state law

Which of the following is NOT a factor typically used by insurers to classify risk?

Education level

The agreement between a producer and the insurance company specifies the authority given to a producer to act on behalf of the insurer. This is called:

Expressed authority

On November 10, Ozzies major medical policy is reinstated. He is later ima an automobile accident on November 13 and immediately hospitalized. Ozzie is eligible for:

Full benifits

If insurance premiums are paid more frequently than annually, the policy owner can expect to:

Have a higher total outlay of dollars for the coverage for that year

If an individual would like to sell insurance for an insurance company he/she must:

Have passed the state exam for the lines of authority for which licensure is a sought Be licensed as an insurance producer Be appointed by an insurer All of these*

Tina has an insurance policy with a 10-day free look provision. Which of these statements is correct?

Her policy can be returned for 100% refund of the premium within 10 days from the date the policy is delivered

The automatic premium loan provision is NOT used in which of the following policies?

Increasing term policy

The waiver of premium provision normally excludes which of the following disabling acts?

Injuries sustained while committing a felony Injuries sustained while serving in the military Self-inflicted injuries All of these*

Which of the following best describes the function of insurance

It spreads financial risk over a large group to minimize the loss to any one individual

Jan is named irrevocable beneficiary of Jim's life insurance policy. Which of the following statements is correct?

Jim needs Jan's permission to borrow the policy's loan value

A retirement plan intended for a sole proprietor and his/ her employees would be an

Keogh Plan

An individual unable to perform two or more Activities of Daily Living (ADLS) will trigger coverage from a ____policy.

Long Term Care (LTC)

Health Maintenance Organization (HMO) and Preferred Provider Organizations are both considered to be:

Managed health care systems

Don and Marie are married and each have a Major Medical plan provided by their employees, Don was born in August of 1969 and Marie was born in March of 1976. For their two dependent children.

Marie's plan is primary and Dons is secondary

Katherine is a retiree and was recently hospitalized for 10 days. Which type of insurance policy would be best cover her for excess hospital expenses?

Medicare supplement

An insurance premium can be defined as:

Money paid to an insurance company for benefits provided in the policy

A Preferred Provider Organization (PPO) contract typically uses which payment arrangement?

Negotiated fee-for-service

Why are insurance contracts said to be contracts of adhesion?

One party writes the contract and the other party must accept the contract as written

Terry owns a 20 year life annuity certain and dies before the period of 20 years has elapsed. What happens to any monies left?

Paid to the beneficiary for the rest of the certain period

Mary and Paul have individual disability income policies that both pay a $5,000/month benefit. Mary's policy has a 30-day elimination period, and Paul's policy has a five month elimination period. Which of the following statements is true?

Paul's premium is probably less than Mary's

A policy owner with an automatic premium loan provision must:

Pay back the loan amount to keep the policy's cash value at its maximum

What is the applicant's consideration in an insurance contract?

Premiums

An Accidental Death & Dismemberment (AD&D) policy will pay the ______ upon the accidental loss of two of the insured's primary parts.

Principal Sum

An insured should be restored to the approximate financial condition occupied before the loss occurred.This is called the:

Principle of indemnity

Alabama head of the department of insurance does NOT have the power to:

Promulgate insurance laws

of the annuity. If she were to die, her beneficiary would continue receiving annuity payments until this Kris is receiving annuity payments that has not yet paid an amount which is equal to the purchase price- amount has been reached. What type of annuity is this?

Refund life annuity

Which of these statements is true regarding the Medical Information Bureau (MIB)

Reports given to member companies contain information regarding the insurability of insurance applicants The proposed insured must give authorization before information can be given to member companies The MIB is a nonprofit agency which aids is underwriting insurance policies All of the above*

In regards to a life insurance policy or an annuity contract , all statements made on the application are considered to be:

Representations

The highest premium payment would be charged to which risk classification?

Substandard

A husband and wife purchases a life insurance policy that covers both of them. The policy paid nothing when the husband died. Two years later, the wife dies and a death benefit is paid to the beneficiary. Which type of policy is this?

Survivorship life policy

What use does a business have for a key employee disability insurance policy?

Temporarily replace a disabled key employee

Total disability can be defined as "the insureds inability to perform the occupation for which he/ she is reasonably qualified by education, training, or experience." For disability income insurance purposes this definition is known as:

The "own occupation" definition

The period of time during which a surviving spouse does not qualify for Social Security survivor or retirement benefits is called:

The Blackout Period

The monthly benefit of an Annuity Certain is determined by:

The annuitants payout period selection

What is vesting?

The employee's right the employer's contributions in a retirement plan if employment terminates prior to retirement

What does renewable term guarantee?

The insured insurability

Which of the following statements does not risk describe an element of an insurance risk?

The loss must not be due to chance

In Alabama, when are newborns covered under a health policy?

The moment of birth

An Insurance company may cancel a life insurance policy under which of the following conditions

The outstanding policy loan exceeds the cash value of the policy

Ins. Company may cancel a life insurance policy under which of the following conditions ?

The outstanding policy loan exceeds the cash value of the policy

Who is considered the individual that retains all rights, values, and options of an insurance policy?

The policy owner

Which of the following statements about a noncancellable policy is FALSE.

The premium rate CAN be increased over time

Which of the following is true concerning the fixed period option?

The principal amount gradually decreases to zero

A policyowner with a $100,000 whole life policy has a cash value of $10,000. There is an outstanding loan of $5,000 and a past-due premium of $250. If the policyowner chooses the reduced paid-up option and then later dies, what will the beneficiary receive?

The reduced paid-up coverage amount minus $5,250

All of these statements concerning the coordination of benefits are true, EXCEPT:

The secondary insurer does NOT pay benefits

Any individual who has failed two Alabama insurance licensing examinations must wait how long before retaking it a third time?

Three months

How long must a producer keep complete records pertaining to his/her insurance transactions?

Three years

Purchasing disability insurance best represents which treatment of risk

Transference

Risk is defined at the:

Uncertainty of loss

Which of these statements concerning COBRA is correct?

Under COBRA, dependents of employees covered by group plans have the same extension and conversion privileges available to them as the employee

What do major medical policies typically cover?

Usual, customary, and necessary expenses

Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called?

Viatical settlement agreement

Who does a disability income policy normally cover?

Wage earners

Which provision allows disability income policy to remain in force without further payments when the insured has become totally and permanently disabled?

Waiver of premium

All of these are correct concerning group life insurance, EXCEPT:

Whole life insurance is the form of insurance typically used in group life insurance

The option to convert term life insurance to a permanent form of coverage can normally be excited:

Without proof of insurability

Ron turned over all rights in his policy over to an assignee. This is called:

an absolute assignment

After the insurance company receives a written request, an insured may have health insurance benefits paid to:

anyone designated by the insured

A licensed Alabama insurance producer would NOT be disciplined by the Commissioner of Insurance for:

being convicted of a misdemeanor

An accidental death rider claim is usually paid if the insured:

dies within 90 days of the accident

The exclusions and conditions in an insurance contract are required to be conspicuous, plain, and clearly stated. There should be no surprise when an insurance company denies a claim for a hidden clause. This is called the:

doctrine of reasonable expectations

Benefits under a health insurance policy may (with the insured's written request) be payable to:

hospital, physician, or surgeon

An insurance producer represents the:

insurance company

A life insurance policy owned by a third party:

is used largely in estate-planning as well as business situations

A life insurance producer's agency agreement normally authorizes the licensee to do all of the following, EXCEPT:

issue policies

Extended residence in a nursing home is covered by a(n):

long-term care policy

Kim has purchased a straight life annuity. What will this type of annuity provide her with?

periodic income to the annuitant for life

An insurance producer who offers a potential client something of value as an incentive to purchase insurance is engaging in:

rebating

Alabama's annuity disclosure regulation:

requires the delivery of a buyer's guide and a disclosure document to an annuity applicant

With key employee life insurance,

the company is the owner of the policy

In Alabama, an insurer who violates state laws for the payment of insurance commissions may be fined up to:

three times the amount of the commissions paid

If an insured commits suicide, a life insurance policy's face amount will be paid only after the policy has been in force for at least:

two years

A group disability income policy will:

usually pay short-term benefits of less than 2 years in duration

A waiver of premium:

waives the premiums when the policyowner becomes totally disabled

Bart is injured and provides notice of a health claim to his insurer. He later receives the required claims forms. Within how many days of the loss must Bart file proof of loss with the insurance company?

90

A written agreement that involves two or more parties and consideration is:

A contract

A business owner has disability coverage that covers business expenses (other than income, the cost of capital goods, and other specified expenses). What kind of disability coverage is this?

Business overhead expense insurance

A husband and wife are receiving annuity payments. When the husband dies, the wife still receives annuity payments for life. What kind of annuity is this?

Joint and survivor life annuity

Wayne is covered under a nonoccupational group health policy. He is hurt while traveling for business and requires a lengthy hospital stay. His group health policy refuses to pay for hospital expenses because

O this is considered a job-related accident

Susan owns a life insurance policy that has accumulated $10,000 in cash value in which she can no longer pay its premiums. If she elects to take the extended term option, which of these actions would she take?

OUses the $10,000 to buy term insurance of the same face amount as her original policy

Which dividend option allows a policyowner to use his/her dividends to buy life insurance on a single premium basis?

Paid-up additions option

Which of the following are NOT covered under Major Medical policies?

Pain and suffering

Pat applies for insurance, pays the initial premium, and receives a document from the agent. This document indicates that if the policy is issued, coverage begins on the date of the document. This document is called a(n):

conditional receipt

Replacement regulation in Alabama does NOT apply to:

credit life insurance

In Alabama, an insurance company incorporated and licensed to do business in this state is called:

domestic company

The maximum amount of coverage placed on a disability income policy is based on the insured's:

earned income from the previous year

A policyowner can collect the face amount on what type of policy?

endowment policy

A Long Term Care (LTC) policy has a minimum renewability level of:

guaranteed renewable

In Alabama, all Health Maintenance Organizations must:

have a complaint system to resolve written complaints from enrollees

According to Alabama law, agents of a Health Maintenance Organization (HMO):

must be licensed as insurance producers

How are employer-paid premiums for employee group health insurance normally treated for tax purposes?

Tax deductible to the employer/Nontaxable to the employee

XYZ Insurance Company issued a new life policy to an insured that replaced an existing policy. XYZ Insurance Company is considered to be the:

replacing insurer

Shawn has a waiver of premium rider on his life insurance policy. He becomes disabled for 3 years, during which the insurance company waives $3,000 in premiums. When Shawn recovers, he must:

resume paying premiums again

The proceeds of a life insurance policy can be paid in a form other than a lump-sum payment. These forms of payment are called:

settlement options

The Long Term Care Partnership program is designed to allow seniors to:

shelter assets from the spend-down requirements of Medicaid

According to Required Provision 4, when an insured applies for reinstatement of a health policy and receives a conditional receipt, how long does the insurer have to approve or deny?

within 45 days of the date of application