Life and health insurance exam

If you have not met the Continuing Education requirement when it is time to renew your license, you may?

Request an extension and continue to do business until your request is accepted or denied.

The fact that insurance is more likely to be purchased by people who expect to experience a loss is known as

adverse selection.

With respect to an insurance application

all statements made by the applicant are considered to be representations.

If an agent tells a proposed insured he has authority to issue a policy, which he is actually disallowed to do by his agency contract, the insured may reasonably assume the agent had this authority. This is an example of

apparent authority.

To receive some Social Security benefits and be considered "currently insured", an individual must have

at least 6 quarters of coverage

An insured allows a permanent policy to lapse. Most insurance companies will:

automatically institute the extended term option.

Withholding of facts that should be included in an application for insurance is called

concealment

When a dependent child covered under the parents' major medical policy reaches the limiting age, what is the provision that allows the child to purchase his or her own policy without establishing insurability?

conversion privilege

Normally, Blue Cross and Blue Shield organizations make payments for medical expenses

directly to the providers

The legal doctrine that prevents one from exercising a right of privilege is called

estoppel

A family medical expense policy typically covers

every member of the family.

A company domiciled in another state that has received permission from the insurance commissioner to do business in this state is called a/an

foreign admitted company.

The fundamental insurance concept that an insured should not profit from a loss but should be restored in whole or in part to the approximate financial condition occupied before the loss is known as the principle of

indemnity.

The life and health insurance marketing system utilizing producers that represent multiple insurance companies at the same time, are compensated on a commission basis, and own their own "book of business" is the

independent agency system.

A certificate of insurance

is issued to each individual covered by the group life insurance.

A disability income policy typically covers

just the wage earners.

The factors that determine the amount of each payment to a beneficiary under the fixed period (fixed time) option are the

length of the fixed period and the death benefit of the policy, and interest.

Medical expense policies generally provide:

medical service or expense reimbursement benefits.

Insurance policies issued by companies which are owned by stockholders and do not pay policy dividends are known as

non-participating policies.

Legally, who does an insurance agent (producer) represent?

only the company

A life insurance policy is a unilateral contract because

only the insurance company is bound to live up to the terms of the agreement.

Disability income policies are designed to

pay you enough to maintain your current standard of living.

A defined contribution plan

promises a specified payment to the plan by the employer.

A disability that is presumed to result from the same or a related cause of prior disability is called a

recurrent disability.

The kind of life insurance that acquires no cash value is

term life.

This rider can be attached to a permanent life insurance policy to add more coverage for a limited time.

term rider

The current rate of interest paid to the cash value account of a universal life policy consists of

the guaranteed interest rate or the current interest, whichever is higher.

Renewable Term guarantees

the insured's insurability.

The Optional Provisions of a standard Health policy address the issue of claims arising from "illegal occupations," "commission of felonies," and "use of narcotics." According to these provisions

the insurer is not liable for claims arising under the conditions described in these provisions.

A parent who purchases a policy on the life of a minor child and wishes to retain complete control of the policy until the child reaches age 18 may do so by means of

the ownership clause.

The "entire contract" law in Alabama says

the policy and the application (or a summary of the application) constitute the entire contract.

A level term policy is one where

the premium and the protection remain constant for the term of the policy.

If the insurance company accepts a special class risk

the premium will be higher than for a normal risk.

Community Rating" generally means the insurer charges

the same rate for everyone in a geographic area.

Dividend options are defined as ways in which the policyowner can:

use or collect policy dividends.

When the owner of a life insurance policy transfers ownership to a third party in return for payment of a large percentage of the death benefit, this is known as

viatical settlement agreement

A man with an Accidental Death & Dismemberment (AD&D) policy having a Principal Sum of $100,000 and a Capital Sum of $50,000 loses a leg due to a blood clot which was not due to an accident. The policy will pay

$0

All of the following are examples of insurable interest EXCEPT:

***A. an airline insuring the lives of its passengers.*** B. a person insuring his or her own life. C. a company insuring the life of its president. D. a parent insuring his or her child's life.

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

. $2,640 [2,000 + 1,500 = 3,500 - 200 = 3,300 x .80]

Darlene dies without having paid the $500 premium on her $50,000 policy that was due a week before her death. With no outstanding policy loans, Darlene's beneficiary can expect to receive

. $49,500, which is the face amount less the premium owed.

In the life insurance agency relationship, what party is the principal?

. The insurance company

In Health Maintenance Organizations (HMOs), the use of a primary care physician or PCP is common as part of

. the gatekeeper system.

In noncontributory group insurance plans, what percentage of eligible employees must be covered by the plan?

100%

An individual insurance producer who allows his or her license to lapse may, within a maximum period of ________ months from the due date of the renewal fee, reinstate the same license without having to complete the prelicensing course or pass a written examination.

12

You must notify the Company of a health insurance claim within how many days (or as soon thereafter as reasonable possible)?

20 days

If administrative action is taken against you, or you are criminally prosecuted in another jurisdiction, you have how long to submit notice to the Alabama Commissioner?

30 days

According to Required Health Policy Provisions, the insured is prevented from filing suit against the insurer for at least

60 days and not longer than three years from the date of proof of loss.

For weekly premium disability policies in Alabama, there must be a grace period of

7 days

A straight life annuity provides which of the following?

A periodic income to the annuitant for life

The Accidental Death Rider pays double the face amount (or another multiple of the face) if death is caused by what?

A. Accidental cause and within 90 days of the accident.

Which of the following is TRUE concerning willful violations of Alabama insurance regulations?

A. Each instance of violation is considered as a separate offense. B. Each violation is punishable as a misdemeanor. C. Each violation, upon conviction, may result in both fines and hard labor. ***D. All of the above are correct.***

Which of the following characteristics apply to Medicare Supplement Policies (MSPs)?

A. First-time applicants (over age 65) for MSPs cannot be turned down. B. The definitions used in MSPs must be the same definitions used in Medicare. C. MSPs may not duplicate coverage provided by Medicare. ***D. All of the above.***

Alabama law regulates Life insurance benefits with respect to minors. Which statement is FALSE?

A. Minors can receive benefits without restriction

Paid-up Additions act as a default if the Policyholder doesn't indicate an option. Paid-up Additions are:

A. Single payment premiums which purchase additional amounts of insurance which add to the face amount.

The Entire Contract Provision stipulates each of the following EXCEPT:

A. The entire contract includes the application. ***B. Any verbal changes made by the agent are permissible if in writing.*** C. Statements made on the application are representations and not warranties. D. Riders and amendments are part of the entire contract.

Which of the following is CORRECT regarding Alabama's annuity suitability regulation?

A. The producer must make every effort to obtain information to clarify the prospective purchaser's financial status, tax status and investment objectives. B. The producer must have reasonable grounds to believe the recommended annuity purchase is suitable based on the facts disclosed. C. The producer must maintain records of information obtained for at least three years after the transaction. ***D. all of the above are correct.***

A life insurance company may pay a death claim for less than the face amount of a policy under which of the following conditions?

A. When there is an outstanding policy loan. B. When the policy is in the grace period because of an unpaid premium. C. When the age of the insured was understated on the application. ***D. All of the above***

Most major medical policies include as eligible expenses coverage of

A. hospital room and board, intensive care, and hospital medical and surgical services. B. physicians' medical, diagnostic and surgical services. C. nursing services, outpatient services and ambulance charges. ***D. all of the above.***

If you qualify for COBRA, coverage under the group health plan

A. may be extended for up to 18 months for you and your dependents. B. may be extended for a total of 29 months if on the date coverage is terminated your or any of your dependents meet the qualifications for Social Security Disability. C. may be extended for your dependents for 36 months when they marry or reach the limiting age. ***D. all of the above.***

Which of the following are true regarding Medicare Prescription Drug Coverage (Part D)?

A. there is a monthly premium B. there is an annual deductible C. there are copay requirements ***D. all of the above***

Which of these is NOT a feature of Health Savings Accounts?

A.They are funded by the employee, employer, or both. B. The accounts are used to offset high deductibles. ***C. The accounts earn no interest. *** D. The accounts roll over at year-end and are not forfeited.

Annuities have two basic stages. They are called what?

Accumulation Period and Income Period

A contract requires an Offer and Acceptance. What constitutes a valid offer?

An application and premium payment submitted to the company or one of its agents.

The Grace Period has what effect?

An extension of time to pay a late premium.

Which of the following is CORRECT concerning the payment of commissions for insurance in Alabama?

An insurer who violates the Alabama rules on commission payments may be fined up to three times the amount of the commissions paid.

When a policy claim contains a deductible and a coinsurance provision, the policyholder's portion of the claim is calculated by:

Applying the deductible first.

If Louise allows her whole life policy to lapse, which nonforfeiture option should she elect to obtain the most life insurance protection?

Extended term option

A man applied for a Long Term Care (LTC) policy. Three months earlier he was diagnosed with diabetes. Can the LTC policy exclude future health problems linked with diabetes?

B. Yes, for 6 months.

The income period when a surviving spouse does not qualify for Social Security survivor or retirement benefits is called the

Blackout Period.

In general, advertising would include each of the following EXCEPT:

Communication of administrative matters.

An applicant for insurance may pay the initial premium and receive a document from the agent indicating that if the policy is issued as requested, coverage begins on the date of the document. What is this document called?

Conditional receipt

Interest Sensitive Whole Life is also called?

Current Assumption Whole Life.

When does the 10-day Free Look begin?

D. Date of policy delivery

Under the typical Coordination of Benefits Clause in Group Health Insurance, how is primary coverage determined?

D. The employee's plan is primary and the other may be excess.

Which of the following is CORRECT regarding a Health Maintenance Organization (HMO) operating in Alabama?

Every HMO must have a complaint system to resolve written complaints from enrollees.

Under which of the following circumstances will the payor rider waive premiums and allow a life insurance policy to remain in force?

If the policyowner dies or becomes disabled prior to the insured reaching either age 21 or 25.

All Health Insurers must pay claims as prescribed by Alabama law. Which of these statements is FALSE?

Insurers may decide which claim forms they will accept.

The Suicide Clause has what effect?

It excludes suicide during the first two years.

The General Provisions that apply to all Medicare Supplement Plans (MSPs) are all of the following EXCEPT:

MSPs must not be more restrictive than Medicare.

A form of welfare that provides assistance to the needy is:

Medicaid

Which of the following is NOT a Workers Compensation benefit?

Medical benefits B. Disability benefits C. Rehabilitation benefits ***D. Extra income benefits***

Which life policy starts as term insurance but after a certain period of time automatically converts to whole life?

Modified Life.

Which of the following premium payment modes will result in the highest total premium?

Monthly

The primary components in premium calculations include each of the following EXCEPT:

Mortality or morbidity risk.

Benefits paid under an employer-paid Group Health Insurance policy are?

Non-taxable to the employee.

The State's Nonforfeiture Law is supported by?

Nonforfeiture Clause.

Which of the following statements is true?

Policy dividends cannot be guaranteed.

Which of the following is INCORRECT concerning premiums collected by an insurance producer in Alabama?

Premium payments become the property of the producer.

An entities chance of loss is determined by reviewing loss experience for large numbers of entities with similar risk characteristics. This predictability of loss relies upon what principle?

The Law of Large Numbers

Each of the following statements is true about Disclosures EXCEPT:

The company must keep a copy of the Buyer?s Guide and Policy Summary for at least 5 years.

When Jonas died, it was discovered that he was actually six years older than he had claimed when applying for an insurance policy. Upon his death what will the insurance company pay?

The company will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age.

Oliver has a life insurance policy with a $50,000 death benefit. At his death, there is a $5000 policy loan outstanding. Which of the following statement is CORRECT?

The insurer will subtract the amount of the loan and pay $45,000 to the beneficiary.

A beneficiary is always which of the following?

The person named to receive the sum specified in a life insurance contract when the insured dies.

Contracts must have consideration. Insurance contracts are considered to be aleatory contracts. This means what?

The promise to pay claims will most likely not be equal to all premium payments.

According to the Alabama regulations concerning Long-Term Care (LTC) insurance, which of the following practices is allowed?

Use of large amounts of direct mail to market a specific LTC policy

Which of the following riders could decrease the amount of the policy death benefit if utilized?

Which of the following riders could decrease the amount of the policy death benefit if utilized?

If you misstate your age when applying for Disability Income insurance, you may suffer what consequence at claim time?

Your benefits will be reduced if your age is higher than stated.

If you suffer a loss linked directly to your use of intoxicants or non-prescribed narcotics, what is the effect?

Your claim may be denied by the carrier.

What are the two major approaches to defining "totally disabled" for Disability Income insurance?

Your" occupation or "Any" occupation

The usual payment arrangement under a Preferred Provider Organization (PPO) contract is

a negotiated fee-for-service.