Insurance Exam

When transacting business in this state an insurer formed under the laws of another country is known as a/ana) Admitted insurer. b)Alien insurer. c)Domestic insurer. d)Foreign insurer.

b

Which of the following terms describes the specified dollar amount beyond which the insured no longer participates in the sharing of expenses?a )First-dollar coverage b)Corridor deductible c)Stop-loss limit d)Probationary limit

c A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? a)Subrogation b)Warranty c)Aleatory d)Adhesion

c An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a a)Joint and survivor annuity. b)Deferred annuity. c)Pure annuity .d)Joint life annuity.

d

What is the maximum period of time during which an insurer may contest fraudulent misstatements made in a health insurance application? a)90 days after the effective policy date b)6 months after the effective policy date c)1 year after the effective policy date d)As long as the policy is in force

d An insurer can contest a fraudulent misstatement as long as the policy is in force. No other statement or misstatement made in the application at the time of issue will be used to deny a claim after the policy has been in force for 2 years.

Which of the following special policies covers unusual risks that are NOT normally included under Accidental Death and Dismemberment coverage?a)Limited Risk Policy b)Specified Disease Policy c)Credit Disability d)Special Risk Policy

d The Special Risk Policy will cover unusual types of risks that are not normally covered under AD&D policies. It covers only the specific hazard or risk identified in the policy, such as a racecar driver test-driving a new car.

All of the following are advantages of an HMO or PPO for a Medicare recipient EXCEPT a)Prescriptions might be covered, unlike Medicare. b)Health care costs can be budgeted. c)There are no claims forms required. d)Elective cosmetic procedures are covered.

d The advantages of an HMO or PPO for a Medicare recipient may be that there are no claims forms required, almost any medical problem is covered for a set fee so health care costs can be budgeted, and the HMO or PPO may pay for services not usually covered by Medicare or Medicare supplement policies, such as prescriptions, eye exams, hearing aids, or dental care.

When is the earliest a policy may go into effect? a)When the first premium is paid and the policy has been delivered b)When the insurer approves the application c)After the underwriter reviews the policy d)When the application is signed and a check is given to the agent

d The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a)An offer to share in commissions generated by the sale. b)Dividends from a mutual insurer. c)An offer of employment. d)Stocks, securities, or bonds.

b Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a)Binding contracts. b)Contracts of adhesion. c)Unilateral contracts. d)Aleatory contracts.

b Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.

How long is the incontestability period in group life insurance policies issued in Texas? a)1 year b)2 years c)3 years d)Indefinitely

b Life insurance policies (individual and group) are incontestable after the policy has been in force for a period of 2 years.

Which of the following provisions states the insurer's right to change premium amounts? a)Coverage Limitations b)Continuation Provision c)Premium Provision d)Insurer's Rights

b The Renewal Provision, also known as a "Continuation Provision", must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.

In which Medicare supplemental policies are the core benefits found? a)Plans A-D only b)All plans c)Plans A and B only d)Plan A only

b The benefits in Plan A are considered to be core benefits and must be included in the other types. Therefore, all types contain the core benefits offered by Plan A.

Which of the following is NOT an example of a valid insurable interest? a)Child in parents' lives b)Debtor in the life of the creditor c)Business partners in each other's lives d)Employer in key employee's life

b The three recognized areas in which insurable interest exists are as follows: a policyowner insuring their own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to the policyowner. A debtor does not have an insurable interest in the creditor.

Which of the following health insurance plans does NOT require an insured to pay a deductible? a)Medicare Part A b)HMO c)Major medical d)PPO

b While HMOs require an insured to pay a copay, deductibles and coinsurance are not required.

How long must producer maintain records of continuing education course completion? a)1 year b)3 years c)4 years d)5 years

c Producers must maintain records of completion of continuing education courses for 4 years from the date of the course completion.

Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss? a)Claims Initiation b)Consideration c)Notice of Claim d)Loss Notification

c The Notice of Claim Provision spells out the insured's duty to provide the insurer with reasonable notice in the event of a loss.

What is the period of coverage for events such as death or divorce under COBRA? a)31 days b)12 months c)36 months d)60 days

c The maximum period of coverage under COBRA is 36 months, in the event of the covered employee's death or divorce.

Which of the following is TRUE regarding variable annuities? a)The company guarantees a minimum interest rate. b)A person selling variable annuities is required to have only a life agent's license. c)The annuitant assumes the risks on investment. d)The funds are invested in the company's general account.

c The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

The Commissioner of Insurance issues a Cease and Desist Order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request? a)10 days b)30 days c)60 days d)90 days

c The person charged with a cease and desist order may request a hearing to contest or review the charges. The written request must be made within 60 days of the emergency cease and desist order.

In a group health policy, a probationary period is intended for people who a)Have additional coverage through a spouse. b)Want lower premiums. c)Join the group after the effective date. d)Have a pre-existing condition at the time they join the group.

c The probationary period is the waiting period new employees must satisfy before becoming eligible for benefits.

Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within a)30 days of a loss. b)60 days of a loss. c)90 days of a loss. d)20 days of a loss.

c nder the Uniform Required Provisions, proof of loss under a health insurance policy normally should be filed within 90 days of a loss.

Which of the following best describes the "first-dollar coverage" principle in basic medical insurance? a)The insurer covers the first claim on the policy. b)Deductibles and coinsurance are taxed first. c)The insured is not required to pay a deductible. d)The insured must first pay a deductible.

c. The three basic types of coverage (hospital, surgical and medical) are often referred to as first-dollar coverage because they usually do not require the insured to pay a deductible.

Who might receive dividends from a mutual insurer? a)Policyholders b)Subscribers c)Stockholders d)Agents

a A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.