Life and Health Insurance

Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policyowner?

Payment of claims. The Payment of Claims provision states that the claims must be paid to the policyowner, unless the death proceeds need to be paid to a beneficiary.

The Federal Fair Credit Reporting Act

Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.

What is the maximum period that an insurer would pay benefits in accordance with an Additional Monthly Benefit rider?

1 year The Additional Monthly Benefit rider stipulates that the insurer will pay benefits comparable to what Social Security would pay. After a year's time, the insurer ends the benefit and assumes that Social Security will then begin benefit payment.

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit. If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.

Which of the following Medicare supplement plans would be available to a reasonably healthy 91-year-old female?

A-N. All Medicare supplement plans (A-N) must be made available to qualifying applicants, regardless of age.

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value. The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.

A producer has successfully completed 52 hours of CE. How many hours can the producer apply to her current reporting period, and how many hours can she carry forward to the next reporting period?

24 hours will be applied to the current reporting period, and 24 can be applied to the period immediately following. The excess 4 hours may not be carried over. Excess hours accumulated during the 2-year period may be carried forward only to the next 2-year period. A maximum of 24 hours may be carried forward.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? a) The policy premiums will remain level for 20 years. b) If the insured dies before the policy expired, the beneficiary will receive $100,000. c) The policy will expire at the end of the 20-year period. d) At the end of 20 years, the policy's cash value will equal $100,000.

d) At the end of 20 years, the policy's cash value will equal $100,000. Term policies do not develop cash values. All the other statements are true.

Where would Long-term care services be rendered?

A nursing home or one's own home. Long-term care policies provide benefits for medically necessary services which one receives in a nursing home or perhaps in one's own home, but not care received in an acute care unit of a hospital.

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan This provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

Which of the following types of LTC is NOT provided in an institutional setting? a) Intermediate care b) Home health care c) Custodial care d) Skilled nursing care

b) Home health care Home health care is given in the home, but skilled nursing, intermediate, and custodial care may all be provided in an institutional setting.

If a retirement plan or annuity is "qualified," this means

It is approved by IRS. A qualified retirement plan is approved by the IRS, which then gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.

A licensee serving in the military is unable to fulfill her continuing education requirement. What would the licensee have to do to renew the license?

The licensee may submit a request to the department to have requirements and fees waived. The department will then determine if the request is permissible. Licensees who are unable to comply with continuing education requirements as a result of military service or other extenuating circumstance may submit a request to the department after the fact. Requests must include sufficient details and supporting documentation. The department will then determine if waiving the requirements is permissible.

Which of the following is INCORRECT concerning Medicaid?

It is solely a federally administered program. Medicaid is assistance program for persons with insufficient income and/or resources to pay for health care. States administer the program that is financed by federal and state funds.

To avoid violations of unfair claims settlement regulations, insurers are required to acknowledge the receipt of a claim within how many days?

10 days. Insurers must acknowledge the receipt of a claim or any other pertinent communication within 10 working days.

Most scheduled plans provide first-dollar benefits without

Coinsurance and deductibles. Scheduled/basic plans pay benefits from a list of procedures up to the amount shown in the schedule. Most plans provide first-dollar benefits without coinsurance or deductibles.

When is the earliest a policy may go into effect?

When the application is signed and a check is given to the agent. 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.

Another name for a substandard risk classification is

Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.

How often must the Commissioner examine rating organizations?

Every 5 years. The Commissioner will examine each rating organization as often as deemed necessary, but at least once every 5 years.

Who negotiates viatical settlement contracts on behalf of a viator?

Viatical settlement broker. A viatical settlement broker is a licensed person that, for a fee, negotiates viatical settlement contracts between the viator and viatical settlement providers. The viatical settlement broker represents the viator.

What is the civil penalty for violating a cease and desist order of the Commissioner?

$10,000 A penalty of up to $10,000 may be leveled for each violation of the Commissioner's cease and desist order.

If an insurance company offers Medicare supplement policies, it must offer which of the following plans?

A. An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.

What is the amount a physician or supplier bills for a particular service or supply?

Actual charge. Actual Charge is the amount a physician or supplier bills for a particular service or supply.

What documentation grants express authority to an agent?

Agent's contract with the principal. The principal grants authority to an agent through the agent's contract.

Issue age policy premiums increase in response to which of the following factors?

Increased benefits The premiums of issue age policies can only increase in response to an increase in benefits.

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.

A participating insurance policy may do which of the following?

Pay dividends to the policyowner. A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium. The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.

Entities that established the Do-Not-Call Registry?

The Federal Trade Commission. The FTC established the do-not-call list in order to protect consumers against unwanted solicitations.

A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim,

The insurance through his company is primary. The policy that covers the person filing the claim will be considered the primary policy.

On a health insurance application, a signature is required from all of the following individuals EXCEPT

The spouse of the policyowner. Every health insurance application requires the signature of the proposed insured, the policyowner (if different than the insured), and the agent who solicits the insurance.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force. The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

What is the purpose of the Insurance Guaranty Association?

To protect policy owners against insurer insolvency.

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.

The death benefit under the Universal Life Option B

Gradually increases each year by the amount that the cash value increases. Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.

Which of the following entities must approve all continuing education courses in this state? a) The State Board of Education b) The Commissioner c) The NAIC d) The appointing insurer

b) The Commissioner All continuing education programs and courses must be approved by the Commissioner.

Which of the following statements is NOT correct concerning the COBRA Act of 1985? a) It applies only to employers with 20 or more employees that maintain group health insurance plans for employees. b) COBRA stands for Consolidated Omnibus Budget Reconciliation Act. c) It requires all employers, regardless of the number or age of employees, to provide extended group health coverage. d) It covers terminated employees and/or their dependents for up to 36 months after a qualifying event.

c) It requires all employers, regardless of the number or age of employees, to provide extended group health coverage COBRA Act applies to only employers with 20 or more employees

A hospital indemnity policy will pay

A benefit for each day the insured is in a hospital. Hospital confinement indemnity policies pay specific amounts that depend on the amount of time the insured is confined to the hospital.

According to the Future Increase Option Rider (FIO), which of the following is NOT a qualifying event to increase an insured's benefit level?

Death of Spouse. The FIO rider allows insureds to increase their benefit levels to certain amounts at specific times without proof of insurability. The following are the typical occasions when an insurer allows for a benefit increase: ages 25, 28, 31, 34, 37 and 40; marriage; and the birth of a child.

In life insurance policies, cash value increases

Grow tax deferred. Generally life insurance cash values are only income taxed if the policy is surrendered (totally or partially) and the cash value exceeds the premiums paid.

Which of the following will vary the length of the grace period in health insurance policies?

The mode of the premium payment. The grace period is 7 days on a policy with a weekly premium mode; 10 days if a monthly premium mode; 31 days on other premium modes.

An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay?

$5,000 Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable.

Following hospitalization because of an accident, Bill was confined in a skilled nursing facility. Medicare will pay full benefits in this facility for how many days?

20 days Following hospitalization for at least three days, if medically necessary, Medicare pays for all covered services during the first 20 days in a skilled nursing facility. Days 21 through 100 require a daily copayment.

If an employer provides long-term group disability insurance for its employees, what percentage of monthly wages are lower-paid employees eligible to collect?

66 and 2/3% If an employer provides long-term group disability insurance for its employees, the benefit period may be limited to age 65, and benefits will be limited to 50% of the monthly wages for higher-paid employees and 66 and 2/3% of the monthly wages for lower-paid employees.

The term "illustration" in a life insurance policy refers to

A presentation of non-guaranteed elements of a policy The term "illustration" means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

A producer who fails to segregate premium monies from his own personal funds is guilty of

Commingling It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

If an insurer appoints a producer, which authority must be notified?

Department of Insurance Every insurer authorized to transact business in Pennsylvania must notify the Insurance Department of all appointments and terminations of appointments of producers in the format and within the time frame required by the Commissioner. Termination of appointment shall be provided to the department in writing on an approved form or through an approved electronic process within 30 days following the effective date of the termination.

What is the difference between the Medicare approved amount for a service or supply and the actual charge?

Excess charge Excess Charge is the difference between the Medicare approved amount for a service or supply and the actual charge.

Which policy component decreases in decreasing term insurance?

Face amount. Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider A single rider that provides coverage on every family member is called a "family rider"

If an insurer changes a form that it uses to transact insurance, it must do which of the following?

File the form with the Commissioner for approval. All forms, including changes to previously approved forms, must be filed with the Commissioner. The Commissioner will approve or disapprove the form. If 30 days after the form is filed no action is reported, the insurer can assume that the form is approved.

How many pints of blood will be paid for by Medicare Supplement core benefits?

First 3. Medicare supplemental policies cover costs of deductibles and coinsurance for Parts A and B. Since Medicare will not pay for the first 3 pints of blood, a Medicare Supplement plan will cover that. This is considered to be a core benefit.

An insured is involved in an accident that renders him permanently deaf, although he does not sustain any other major injuries. The insured is still able to perform his current job. To what extent will he receive Presumptive Disability benefits?

Full benefits. Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of at least two limbs (Loss of use does not qualify in some policies.), total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work.

All of the following are differences between individual and group health insurance EXCEPT

Individual insurance does not require medical examinations, while group insurance does require medical examinations. In individual coverage, policies are issued based upon individual underwriting. In group plans, everyone is covered for the same coverage and there is no individual underwriting selection.

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

Concerning Medicare Part B, which statement is INCORRECT?

It is fully funded by Social Security taxes (FICA). Part B is funded by monthly premiums and from the general revenues of the federal government.

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider. The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up. The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term. Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.

An insurer wishes to compare the information given in an insurance application with previous insurance applications by the same applicant but for different companies. What organization can help the insurer accomplish this?

The Medical Information Bureau Members of the Medical Information Bureau (MIB) can request a report on an applicant and receive coded information from any other applications for insurance submitted to other MIB members

The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. Which of the following is true?

The cash value will be paid to the annuitant's estate. If an annuitant dies during the accumulation period, the beneficiary is paid either the cash value of the policy or the amount of premiums paid, whichever is the larger amount. In this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate.

What is necessary in order to be eligible to receive benefits from a long-term care policy?

The insured must be unable to perform some activities of daily living. Normally to be eligible for benefits from a long-term care policy, the insured must be unable to perform some of their activities of daily living (ADLs). ADLs include bathing, dressing, toileting, transferring, continence, and eating.

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge. If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.

Who has the legal title of the property in a trust?

Trustee. The person who receives the legal title of the property to be used for the benefit of the trust beneficiary is called the "trustee".

Who effectuates viatical settlement contracts?

Viatical settlement providers. Viatical settlement providers are the people/entities who enter into or effectuate a viatical settlement contract, other than the viator. The viator is the person who sells the insurance policy to the provider.

How soon after the due date should the insurer pay the agent appointment fees?

Within 30 days. The annual appointment fee must be paid within 30 days of the bill.

Which of the following hospice expenses would NOT be covered in a cost-containment setting? a) Antibiotics b) Tylenol c) Morphine d) Special hospital bed

a) Antibiotics. In a cost-containment setting, daily needs and pain relief are provided for hospice patients, but curative measures are not.

Which of the following is true regarding a term health policy? a) It is nonrenewable. b) It is conditionally renewable. c) It is guaranteed renewable. d) It is noncancellable.

a) It is nonrenewable. In term health policies, the owner has no rights of renewal.

In a Disability Income policy, all of the following are considered presumptive disabilities EXCEPT a) Loss of one eye. b) Loss of hearing. c) Loss of two limbs. d) Loss of speech.

a) Loss of one eye. The definition of a presumptive disability varies by company, but generally includes a total loss of sight, speech, hearing or the use of any two limbs.

All of the following statements about equity index annuities are correct EXCEPT a) The annuitant receives a fixed amount of return. b) They have a guaranteed minimum interest rate. c) The interest rate is tied to an index such as the Standard & Poor's 500. d) They invest on a more aggressive basis aiming for higher returns.

a) The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.

Which of the following is an example of a limited-pay life policy? a)Life Paid-up at Age 65 b)Renewable Term to Age 70 c)Level Term Life d)Straight Life

a)Life Paid-up at Age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

Which of the following statements about the reinstatement provision is true? a) It guarantees the reinstatement of a policy that has been surrendered for cash. b) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. c) It permits reinstatement within 10 years after a policy has lapsed. d) It provides for reinstatement of a policy regardless of the insured's health.

b) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.

Which of the following is an example of a peril covered in an accident and health insurance policy? a) Death b) Sickness c) Alcoholism d) Smoking

b) Sickness. There are two major causes of loss (or perils) covered under a health insurance policy: sickness and accident. Smoking and alcoholism would be considered hazards that may cause a loss.

An Adjustable Life policyowner can change which of the following policy features? a) The insured. b) The coverage period. c) The mortality expense. d) The investment account.

b) The coverage period. Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.

An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true? a) The insured must submit proof of loss to the Department of Insurance. b) The insured was in compliance with the policy requirements regarding claims. c) The claim most likely will not be paid since the official claims form was not submitted. d) The insurer will be fined for not providing the claims forms.

b) The insured was in compliance with the policy requirements regarding claims. If claims forms are not furnished to the insured, the claimant is deemed to have complied with the requirements of the policy if he or she submits written proof of the occurrence, nature of the loss, and extent of loss to the insurer.

Which of the following is NOT the consideration in a policy? a)The promise to pay covered losses b)The application given to a prospective insured c)Something of value exchanged between parties d)The premium amount paid at the time of application

b)The application given to a prospective insured Consideration is something of value that is transferred between the two parties to form a legal contract.

Which of the following statements is true regarding LTC insurance? a) LTC policies may not include any riders. b) LTC policies must allow a 60-day free-look period. c) Every policy must offer nonforfeiture benefits to the applicant. d) Every policy must offer reduced paid-up insurance to the applicant.

c) Every policy must offer nonforfeiture benefits to the applicant. Long-term care policies or certificates issued or delivered in this state must offer to the applicant nonforfeiture benefits. Reduced paid-up insurance is one of the possible nonforfeiture options, but it is not necessarily required. LTC policies may contain riders, and must offer a 30-day free-look period.

Which is TRUE about the cash surrender nonforfeiture option? a) The policy remains active for some time after the policyholder opts for cash surrender. b) The policyholder receives the original cash value of the policy. c) Funds exceeding the premium paid are taxable as ordinary income. d) After the cash surrender, the insured is covered for a grace period of 1 month.

c) Funds exceeding the premium paid are taxable as ordinary income. The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Equity Indexed Universal Life b) Variable Universal Life c) Universal Life - Option A d) Universal Life - Option B

c) Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

Which two terms are associated directly with the way an annuity is funded? a) Increasing or decreasing b) Immediate or deferred c) Renewable or convertible d) Single payment or periodic payments

d) Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

Which of the following is true regarding a waiver of a surrender charge on an annuity contract? a) The charge can only be waived if the annuitant needs the funds for medical expenses. b) The surrender charge will be applied to all premature surrenders. c) The surrender charge waiver only applies to immediate annuity. d) The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

d) The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days. Annuity contracts provide for a waiver of surrender charges if the annuitant is confined to a Long-term Care facility for at least 30 days.

In forming an insurance contract, when does acceptance usually occur? a) When an insurer delivers the policy b) When an insurer receives an application c) When an insured submits an application d) When an insurer's underwriter approves coverage

d) When an insurer's underwriter approves coverage In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.

What describes the specific information about a policy?

Policy summary. A policy summary describes the features and elements of the specific policy for which a person is applying.

Which type of life insurance policy generates immediate cash value?

Single Premium. Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

An applicant is considered to be high-risk, but not so much that the insurer wants to deny coverage. Which of the following is NOT true?

The insurer will issue a conditional coverage. If an applicant is considered to be too much of a risk, the application can be denied. If, however, the applicant's risks are not high enough to decline, two measures can be taken to protect the insurer: the policy can be rated-up, which means that the premiums will increase, and exclusions can be added, which means that the insurer will not have to cover conditions that make the applicant a high risk to insure.

Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is

Monthly. If a claim involves disability income benefits, the policy must pay those benefits not less frequently than monthly. In all other cases, the company may specify the time period of 45 or 60 days for payment of claims.

COBRA applies to employers with at least

20 employees. Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), any employer with 20 or more employees must extend group health coverage to terminated employees and their families.

Which of the following is true regarding Continuing Education required for those holding a Pennsylvania producer license?

24 hours each licensing period. Continuing education requirements are mandated by the insurance code. Producers may carry forward excess continuing education credit hours, up to a maximum of 24, from one compliance period to the next.

A producer sold an insurance policy. Subsequently, his license was suspended. In this case, how much of the commission will the producer receive?

All. An insurance entity or licensee cannot pay a commission or fee to a person if the person's license is suspended or revoked. However, a commission may be paid if the person was licensed at the time of the sale.

The most the Insurance Guaranty Association will pay for net cash surrender values is

$100,000 The Insurance Guaranty Association will not pay more than $100,000 for net cash surrender and net cash withdrawal values.

Adopting parents must inform their insurer that a child has been added to the family within

31 days. Adopting parents must inform their insurer that a child has been added to the family within 31 days.

Naming a trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner EXCEPT

Allow the trustee to transfer the assets of the trust to their personal account. A trustee is paid a fee to administer the trust; however, he or she cannot access the funds personally.

Insurers are required to keep records. When may the Department examine these records?

At any time.

When must an insurance company present an outline of coverage to an applicant for a Medicare supplement policy?

At the time of application. For Medicare supplement policies, the insurance company must present an Outline of Coverage to all applicants at the time of the application.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as

Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

An insured is receiving hospice care. His insurer will pay for painkillers but not for an operation to reduce the size of a tumor. What term best fits this arrangement?

Cost-containment In a cost-containment setting, daily needs and pain relief are provided for hospice patients, but curative measures are not.

A Return of Premium term life policy is written as what type of term coverage?

Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy. The premium does not change on the inclusion of additional children; it is based on an average number of children.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life. A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

The annuity period is?

The period of time during which accumulated money is converted into income payments. The annuity period is the time during which accumulated money is converted into an income stream.

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract. It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000 The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

An insurance policy specifies that it will pay $600 for a specific loss. The policyowner suffers a loss of $535. How much will the policy pay?

$535. Applying the principle of indemnity, the insurer will pay the actual cost of the loss, up to the limit stated in the policy. In this case, the insurer will pay $535.

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?

$9,800 In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

According to the 2001 CSO Table, at what age will the terminal reserves be reached?

120 The 2001 CSO Mortality Table extends to age of 120.

What is the maximum age for qualifying for a catastrophic plan?

30 Young adults under age 30 and individuals who cannot obtain affordable coverage (have a hardship exemption) may be able to purchase individual catastrophic plans that cover essential benefits.

An insured has an advanced form of dementia. Because his physician and family are concerned about his safety while unsupervised, the insured is moved to a nursing home, where he can be closely monitored and receive assistance with basic tasks. Which of the following terms best describes the insured's state of health?

Chronically ill. "Chronically ill" is a condition in which a person is unable to perform at least 2 activities of daily living or that requires substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.

What are the 2 types of Flexible Spending Accounts?

Health Care Accounts and Dependent Care Accounts. There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account to help pay for dependent care expenses which make it possible for an employee and his or her spouse, if applicable, to work.

Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer If an insurer requests a medical examination, the insurer is responsible for the costs of the exam.

Which of the following entities has the authority to make changes to an insurance policy?

Insurer's executive officer. Only an executive officer of the company, not an agent, has authority to make any changes to the policy. The insurer must have the insured's written agreement to the change.

Which of the following does a producer NOT have the authority to do?

Issue policies. An insurance producer sells, solicits or negotiates contracts of insurance.

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits. Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

Maximum benefits for a major medical plan are usually lifetime

Maximums Major medical plans have high maximum benefits such as $1,000,000 or $2,000,000. Maximum benefits are usually lifetime maximums.

An applicant is discussing his options for Medicare supplement coverage with his agent. The applicant is 65 years old and has just enrolled in Medicare Part A and Part B. What is the insurance company obligated to do?

Offer the supplement policy on a guaranteed issue basis. Once a person becomes eligible for Medicare supplement plans, and during the open enrollment period, coverage must be offered on a guaranteed issue basis.

Which renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date?

Optionally renewable. In an optionally renewable policy, it is the insurer's option as to whether to renew or not.

All of the following are requirements for producer license renewal EXCEPT

Renewal examination. A producer's license may be renewed biennially. In order to renew, proper renewal forms must be submitted, accompanied by payment of the required fees, and proof of the completion of continuing education. Any producer renewing his or her license who has not previously submitted fingerprints will have to do so upon renewal. Producers do not have to take any special renewal exams.

Insurance producers that do not have company appointments are considered a/an

Representative of the consumer. Insurance producers that do not have company appointments are considered a representative of the consumer. Such producers must have a written agreement with the consumer before acting on the consumer's behalf. The agreement should specify the services to be provided and disclose any fee to be paid to the producer. This type of producer was formerly referred to as a broker.

When the insured initiates the cancellation of a policy, the unearned premium will be refunded on a

Short rate basis. When a policy is cancelled at the insured's request, the amount of returned unearned premium will be calculated on the short rate table that the insurer has filed with the insurance department. This allows the insurer to retain some of its cost of issuing the policy and providing service.

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments. Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

An insured loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will she most likely receive from this policy?

The Capital amount in a lump sum. Accidental Death and Dismemberment policies pay a capital amount (a percentage of the principal amount) for the loss of one limb or loss of sight in one eye. The principal amount is paid for death or often for the loss of 2 limbs or loss of sight in both eyes. Benefits are paid in a lump sum.

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy?

The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.

In a group policy, who is issued a certificate of insurance?

The individual insured. The individuals covered under a group insurance contract are issued certificates of insurance. The certificate tells what is covered in the policy, how to file a claim, how long the coverage will last, and how to convert the policy to an individual policy.

On a disability income policy that contains the "own occupation" definition of total disability, the insured will be entitled to benefits if they cannot perform

Their regular job. If a disability income policy contains the own occupation definition, then the insured will be considered disabled if they cannot perform that particular job, regardless of other jobs that they may be able to do.

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?

Universal life. The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

Under the Physical Exam and Autopsy provision, how many times can an insurer have the insured examined, at its own expense, while a claim is pending?

Unlimited The Physical Exam and Autopsy provision allows the insurer to examine the insured as much as is reasonably necessary while the claim is being processed, provided that the insurer pays the expenses.

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a)Indemnity b)Stop-loss c)Consideration d)Reasonable expectations

a) Indemnity The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.

An insured has entered into a viatical settlement but decides that he would like to back out of the contract. Which of the following is true? a) The insured has 15 calendar days from the effective date of the contract to rescind it. b) The insured has 30 days from the effective date of the contract to rescind it. c) This is possible at any time, but the longer the insured waits, the more of a penalty he will have to pay. d) Once a contract has been signed, it cannot be rescinded.

a) The insured has 15 calendar days from the effective date of the contract to rescind it. The viator has 15 calendar days to rescind a viatical settlement. If the insured dies in the rescission period, the settlement contract will be deemed rescinded.

Which of the following is NOT true regarding a Variable Universal Life policy? a) The minimum death benefit is guaranteed. b) The cash values are not guaranteed. c) The death benefit is fixed. d) The policyowner can participate in some of the investment decisions.

c) The death benefit is fixed. In a variable universal life policy, the death benefit is adjustable, and the cash values are not guaranteed. While the death benefit may decrease and increase, it cannot go below a guaranteed minimum face amount.

In order for a foreign insurer to do business in this state, it must apply for and obtain

A certificate of authority. Any insurance company doing business in this state must obtain a certificate of authority.

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period. Under the "installments for a fixed period" option, the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be. This option pays for a specific period of time only, and there are no life contingencies.

Bob decides to sell his life insurance policy to a viatical settlement company. Which of the following is true?

It is the viatical settlement provider's responsibility to inform his insurance company that the policy has been viaticated. After a viatical settlement contract has been completed, it is the viatical settlement provider's responsibility to provide written notice to the insurer that the insurance policy has been viaticated. This notice must be provided within 20 days.

If a dental plan is integrated, it is combined with what type of plan?

Medical. Integrated plans allow for dental plans to be included in a medical plan, providing coverage for both under a single contract. Sometimes the deductibles are merged, but this does not have to be the case.

An applicant wants to buy a policy that has a cash value element. Which type should she buy?

Permanent. Unlike term insurance, permanent insurance provides lifetime death protection and a savings or cash value option.

If another governmental agency takes legal action against a licensee, whose responsibility is it to report the action?

The Licensee. Licensees must make a report, of any action taken against them in another jurisdiction or by another governmental agency in Pennsylvania within 30 days of the final disposition of the matter.

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

A full death benefit. Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

A Straight Life policy has what type of premium?

A level annual premium for the life of the insured. Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.

A Universal Life Insurance policy is best described as a/an

Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

An insured has a major medical policy with a $500 deductible and a coinsurance clause of 80/20. If he incurs medical expenses of $4,000, the insurer would pay

$2,800. The insurer would pay 80% of covered expenses after the $500 deductible is satisfied. ((4000-500)= 3500*80%)= 2800)).

Which of the following would be considered an unfair claims settlement practice?

Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered. This act is a violation as defined in the Unfair Settlement Practices.

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement. During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

According to the privacy of consumer financial information regulation, if a consumer decides to opt out, this means

The consumer directs the licensee not to disclose the consumer's nonpublic personal financial information to a third party. As it pertains to the privacy of consumer financial information regulation, the term opt out means a direction by the consumer that the licensee not disclose his or her nonpublic personal financial information to a third party.

Which of the following programs expands individual public assistance programs for people with insufficient income and resources?

Medicaid. Medicaid is a "needs" tested program administered by the states to provide assistance to persons who are not able to provide for themselves.

Which of the following best describes the difference between Pure Life and Life with Guaranteed Minimum settlement options?

Life with Guaranteed Minimum will pay the remaining principal to the beneficiary. With the Life with Guaranteed Minimum, if the annuitant dies before the principal amount (the amount he paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Under the Pure Life option, the payments cease upon the annuitant's death regardless of the amount of the principal paid out.

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives?

None. General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?

Jumping juvenile policy. While many policies provide a level death benefit, Jumping Juvenile policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21).

In long-term care insurance, what type of care is provided with intermediate care?

Occasional nursing or rehabilitative care. Intermediate care is nursing and rehabilitative care provided by medical personnel for stable conditions that require assistance on a less frequent basis than skilled care.

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT

Other insurance coverages. Part 2 of the application contains questions regarding the applicants' health history. Part I of the application includes questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers.

What would a physician utilize if he/she wanted to know if a treatment is covered under an insured's plan and at what rate it will be paid?

Prospective review Under the prospective review or precertification provision, the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.

Which of the following is an example of a producer's fiduciary duty?

The trust that a client places in the producer in regard to handling premiums. An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.

If a licensee wants to transact insurance under a different name than that listed on his or her producer's license, which of the following must occur?

The change must be reported to the Commissioner. If a licensee is doing business under a fictitious name other than the name appearing on the producer license, the licensee is required to notify the commissioner in writing prior to use of the fictitious name.

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period. Under the fixed-period installments option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.

Which document is used to assess risk associated with an applicant's lifestyle and character?

Investigative Consumer Report. An Investigative Consumer Report is considered to be a part of an insurance application. This report is used in the underwriting process in order to assess non-medical risk factors related to moral standing and avocations. Friends and colleagues are interviewed in order to evaluate the applicant's character, reputation, and habits. The applicant must be informed in writing if the insurer decides to conduct the investigation.

The Gramm-Leach-Bliley Act was passed to

Protect private customer information filed with a financial institution. The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.

Under the Accidental Death and Dismemberment (AD&D) coverage, what type of benefit will be paid to the beneficiary in the event of the insured's accidental death?

Principal sum. Accidental Death and Dismemberment coverage only pays for accidental losses and is thus considered a pure form of accident insurance. The principal sum is paid for accidental death. In case of loss of sight or accidental dismemberment, a percentage of that principal sum will be paid by the policy, often referred to as the capital sum.

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?

Return of premium. The Return of Premium Rider pays the beneficiary not only the face amount of the policy but also the amount that had been paid in premiums. The rider stipulates that death must occur prior to a certain age in order for the premium amount to be returned. The Return of Premium Rider is funded by using increasing term insurance.

Equity indexed annuities a) are more risky than variable annuities. b) Seek higher returns.

Seek higher returns Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments?

Spendthrift provision. When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.

Which of the following would help prevent a universal life policy from lapsing?

Target premium. The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Why is it essential for an insurer to document all correspondence with an insured?

Errors and omissions. Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur. The most common times for these errors are during the sales interview and policy delivery. It is essential to have proof of these interactions, in the events that an insured would sue the insurer.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?

Only written statements can be considered fraud. According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud.

Which type of dental care corrects natural teeth misalignments with dental appliances?

Orthodontics Orthodontic care involves the prevention or correction of dental anomalies with the use of dental appliances and braces.

The Commissioner of Insurance is placed in office by which means?

An appointment by the Governor. The Commissioner is appointed by the Governor.

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be

Authorized. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.

Which of the following is an eligibility requirement for all Social Security Disability Income benefits?

Have attained fully insured status. Although Social Security offers many benefits, such as retirement, survivors and Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.

Which of the following refers to "own occupation" disability?

Insured is unable to perform duties of the occupation for which he/she was educated and trained. Under an Own Occupation plan, if the insured cannot perform duties of his/her current job or the job that he/she was educated and trained for, disability benefits will be paid, even if the insured would be capable of earning income at a different occupation.

All of the following statements concerning Medicaid are correct EXCEPT

Medicaid is a state funded program that provides health care to persons over age 65, only. Medicaid is a government funded (both state and federal) program designed to provide health care to poor people of all ages.

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must

Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.

The insuring clause of a disability policy usually states all of the following EXCEPT

The method of premium payment. The insuring clause, usually on the first page of the policy, is the general statement that defines the insurance agreement and identifies the insured and the insurance company and states what kind of loss (peril) is covered.

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit. If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit.

According to OBRA, what is the minimum number of employees required to constitute a large group?

100. There must be at least 100 employees in order to qualify for OBRA large-group status. The act states that plans must provide primary coverage for disabled individuals under age 65 who are not retired.

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days. Consumers must be advised that they have a right to request additional information concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.

Which of the following authorities is authorized to issue a temporary insurance producer's license?

Commissioner. The Commissioner has the power to issue and revoke all types of licenses, including those that are temporary.

Which of the following authorities monitors the financial strength of insurers?

Department of Insurance. The Commissioner and the Department of Insurance are charged with monitoring the financial strength and integrity of insurers authorized to conduct business in Pennsylvania in order to determine whether the continued operation of any insurer might be financially hazardous to policyholders, creditors, or to the public in general.

The automatic premium loan provision is activated at the end of the

Grace period. Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)

Inspection report. An inspection report may be ordered about an applicant from an independent investigating firm or credit agency. It is a general report of the applicant's finances, character, work, hobbies, and habits.

Which of the following is NOT covered under Part B of a Medicare policy?

Routine dental care. Medicare Part B covers dental expense resulting from an accident only.

Who is the beneficiary in a credit health policy?

The lending institution. Creditor group, also called credit life and health insurance is a specialized use of group life and group health insurance. It protects the lending institution from losing money as the result of a borrower's death or disability. Generally the borrower is the premium payor, but the lending institution is the beneficiary of the policy.

For what reason may a life insurance producer backdate a life insurance policy?

To avoid an increase in premium rate for the insured. Agents may backdate policies up to 6 months in order to obtain a better premium rate for the insured.

A typical Accidental Death & Dismemberment policy covers all of the following losses EXCEPT a) Life. b) Income. c) Eyesight. d) Limb.

b) Income. Accidental Death & Dismemberment policies cover loss of body parts or life only.

A tornado that destroys property would be an example of which of the following? a) A loss b) A physical hazard c) A peril d) A pure risk

c) A peril A peril is the cause of loss insured against in an insurance policy.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a) A corporation can be an annuitant as long as the beneficiary is a natural person. b) The contract can be issued without an annuitant. c) The annuitant must be a natural person. d) A corporation can be an annuitant as long as it is also the owner.

c) The annuitant must be a natural person. Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.

All of the following are true regarding the Medical Information Bureau (MIB) EXCEPT a) MIB information is reported to underwriters in coded form. b) MIB reports contain previous insurance information. c) Insurers may not refuse to accept an application solely due to information in an MIB report. d) MIB reports are based upon information supplied by doctors and hospitals.

d) MIB reports are based upon information supplied by doctors and hospitals. The information contained in MIB reports comes from the underwriting disclosures made by applicants to MIB member insurers on prior insurance applications

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a) Unfair Trade Practices Law b) The Guaranty Association c) Consumer Privacy Act d) The Fair Credit Reporting Act

d) The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.

How long is the right to examine period for new individual annuities issued in the state of Pennsylvania?

10 days. Any individual fixed-dollar annuity or pure endowment contract delivered in Pennsylvania must include a notice on the first page that clearly states that the annuity owner may return the contract within 10 days of its delivery if dissatisfied with it for any reason, and to have any premium paid refunded.

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income?

10% Most people who itemize their deductions can claim deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 10% of their adjusted gross income.

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months. Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.

The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as

Legal actions. This mandatory provision requires that no legal action to collect benefits may be started sooner than 60 days after the proof of loss is filed with the insurer. This gives the insurer time to evaluate the claim.

Which of the following statements is NOT true concerning Medicaid? a) It consists of 3 parts: Part A: hospitalization, Part B: doctor's services, Part C: disability income. b) It is a state program. c) It is funded by state and federal taxes. d) It is intended to provide medical assistance for certain categories of people who are needy.

a) It consists of 3 parts: Part A: hospitalization, Part B: doctor's services, Part C: disability income. Medicaid is a state program funded by state and federal taxes that provide medical care for the needy. Parts A-C are part of Medicare.

Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary? a) It will decrease the benefits paid to the beneficiary. b) It will not affect the benefits paid to the beneficiary. c) It will reduce the benefits by 70%. d) It will increase the benefits paid to the beneficiary.

a) It will decrease the benefits paid to the beneficiary. Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.

Which of the following programs is made up of 4 parts, where the first part is paid for by FICA, and the second part is financed by premiums and payroll taxes? a) Medicare b) Blue Cross c) Blue Shield d) Medicaid

a) Medicare Medicare has four parts: A, B, C and D. Part A, Hospital Insurance, is financed through a portion of the payroll tax (FICA). Part B, Medical Insurance, is financed from monthly premiums paid by insureds and from the general revenues of the federal government. Part C allows people to receive all of their health care services through available provider organizations, and Part D is for prescription drug coverage.

Which of the following statements about group life is correct? a) The cost of coverage is based on the ratio of men and women in the group. b) The premiums are higher than in an individual policy because there is no medical exam. c) The group sponsor receives a Certificate of Insurance. d) The policy can be converted to an individual term insurance policy.

a) The cost of coverage is based on the ratio of men and women in the group. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.

All of the following are correct about the required provisions of a health insurance policy EXCEPT a) The entire contract clause means the signed application, policy, endorsements, and attachments constitute the entire contract. b) A reinstated policy provides immediate coverage for an illness. c) Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. d) A grace period of 31 days is found in an annual pay policy.

b) A reinstated policy provides immediate coverage for an illness. Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.

Which statement regarding insurable risks is NOT correct? a) An insurable risk must involve a loss that is definite as to cause, time, place and amount. b) Insureds cannot be randomly selected. c) Insurance cannot be mandatory. d) The insurable risk needs to be statistically predictable.

b) Insureds cannot be randomly selected. Granting insurance must not be mandatory, selecting insureds randomly will help the insurer to have a fair proportion of good risks to poor risks. All other statements are true.

Insurers may change which of the following on a guaranteed renewable health insurance policy? a) No changes are permitted b) Rated by class c) Coverage d) Individual rates

b) Rates by class. On a guaranteed renewable health insurance policy, the insurer may increase premiums on a class basis only and not on an individual policy.

Which of the following is NOT a goal of risk retention? a)To fund losses that cannot be insured b) To minimize the insured's level of liability in the event of loss c) To reduce expenses and improve cash flow d) To increase control of claim reserving and claims settlements

b) To minimize the insured's level of liability in the event of loss. Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to

10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.

Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?

Life insurance proceeds. There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Daycare is considered to be among these expenses.

All of the following are true regarding a decreasing term policy EXCEPT a) The payable premium amount steadily declines throughout the duration of the contract. b) The death benefit is $0 at the end of the policy term. c) The contract pays only in the event of death during the term and there is no cash value. d) The face amount steadily declines throughout the duration of the contract.

a) The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance. Any form of Life insurance may be used to fund a buy-sell agreement.

What document describes an insured's medical history, including diagnoses and treatments?

Attending Physician's Statement. An Attending Physician's Statement (APS) is the best way for an underwriter to evaluate an insured's medical history. The report includes past diagnoses, treatments, length of recovery time, and prognoses.

The insurance code identifies all of these as prohibited acts that can cause suspension, revocation or denial of an insurance producer license for a licensee or applicant, with the exception of

Commission of any misdemeanor. Only the commission of misdemeanors that involve the misuse or theft of money or property belonging to others will affect the maintenance or obtaining of an insurance producer license.

Which component increases in the increasing term insurance?

Death benefit Increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term.

The provision in a health insurance policy that ensures that the insurer cannot refer to any document that is not contained in the contract is the

Entire contract clause. Entire contract is a mandatory provision that is required by law.

Health coverage becomes effective when the

First premium has been paid and the application has been approved. If the premium has been paid, coverage becomes effective when the company underwriter approves the application.

A Universal Life insurance policy has two types of interest rates that are called

Guaranteed and Current. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

Pay the policy proceeds only if it would have issued the policy. The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.

What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary's heirs, instead of splitting the benefit among surviving primary beneficiaries?

Per stirpes Per stirpes class designation provides distribution by family line or branch in the event a beneficiary predeceases the insured

A guaranteed renewable health insurance policy allows the

Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class. Coverage is guaranteed, but rates can be adjusted for the entire class.

Paul is a producer in Ohio and wants to become a producer in Pennsylvania. The Commissioner will waive certain examination requirements, provided that Ohio would waive these same requirements if a Pennsylvania producer sought licensure in Ohio. What term is used to describe this phenomenon?

Reciprocity. "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Pennsylvania.

Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? a) Employee paid premiums may be deducted if certain conditions are met. b) Employee benefits are tax deductible the year in which they were received. c) Benefits received by the employee are free from federal income tax. d) Premiums paid by the employer are deductible as a business expense.

b) Employee benefits are tax deductible the year in which they were received. For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense. However, any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee.

Which of the following do the Standard and Preferred risk categories share? a) Permanent coverage b) Premiums are not elevated. c)More medical evaluations are required. d)Possible modifications to include expanded coverage

b) Premiums are not elevated. The "standard" rating indicates that an individual represents a similar level of health and lifestyle quality as other members of the same age cohort. These individuals do not need special policy restrictions or are required to pay higher premiums. Those in the "preferred" category often have to pay smaller premiums than those who are in the "standard" category.

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a) It is a life contingency option. b) The beneficiary receives the remainder of the principal amount upon the annuitant's death. c) Payments can be made in installments and as a single cash refund. d) It provides a higher monthly benefit than a pure life annuity.

d) It provides a higher monthly benefit than a pure life annuity. With the Life with Guaranteed Minimum annuity settlement option, if the annuitant dies before the principal amount (the amount he paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Pure life provides the highest monthly benefits for an individual annuitant.

What required provision protects against unintentional lapse of the policy?

Grace period. The grace period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of the grace period provision is to protect the policyholder against an unintentional lapse of the policy.

All of the following are true about group disability Income insurance EXCEPT

Coverage applies both on and off the job. Employees who are injured on the job are covered by Workers Compensation insurance. Group Disability Income insurance is designed to cover employees only while they are off the job, so the coverage is considered to be nonoccupational in nature.

To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?

18 months. Under HIPAA regulations, to be eligible to convert health insurance coverage from a group plan to an individual policy, the insured must have 18 months of continuous creditable health coverage.

A producer licensed in Pennsylvania must notify the Insurance Department of any change of address in his or her residence or business address within how many days?

30 days. Every producer licensed in Pennsylvania must notify the Insurance Department in writing, within 30 days, of any change of address in his or her residence or business address. The producer must also notify all the entities for which the producer holds an appointment.

Under the Affordable Care Act, a special enrollment period allows an individual to enroll in a qualified health plan within how many days of a qualifying event?

60 days. Unless specifically stated otherwise, individuals or enrollees have 60 days from the date of a triggering event to select a qualified health plan.

What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?

Conditionally renewable. The conditionally renewable provision is very similar to the optionally renewable provision. The primary difference is that conditionally renewable policies may be canceled for specific conditions contained in the policy, but optionally renewable policies do not specify a condition or reason for cancellation.

Elijah and Mary are to receive the proceeds of a life insurance policy jointly until the first one dies. If either one should die within a specified time, the other one will receive benefits until the end of the specified time. This settlement option is known as:

Joint Life with Term Certain. Joint Life with Term Certain pays to two or more until the first one dies. However, if the first one dies within a specified time, it will continue to pay to the other one(s) until the end of the specified term.

When an individual is covered under two health insurance policies that have duplicate benefits which could make a claim for benefits because of an injury or illness profitable, it is called

Overinsurance. Overinsurance is a term used to describe the situation that is created when an individual purchases duplicating coverage with the intent to collect from each policy for a single loss.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.

The interest earned on policy dividends is

Taxable. Dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income.

If a life insurance policy has an irrevocable beneficiary designation

The beneficiary can only be changed with written permission of the beneficiary. If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.