Life & Health Insurance Exam Review

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.

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT

The license holder's sister-in-law. A temporary license holder sale to a family member or an individual the temporary license holder has an employment or business relationship with will not pay commission.

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.

An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely

Adjust the premium. In group insurance, if the insured participant misstated his or her age, the premium and/or the benefit will be adjusted to the correct age.

Which of the following long-term care benefits would provide coverage for care for functionally impaired adults on a less than 24-hour basis?

Adult day care. Adult day care is designed for those who require assistance with various ADLs on a daily basis, but not around the clock. Custodial care is usually the only service provided by adult day care facilities.

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions.

An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. If the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable?

$3000 On partially contributory group disability income insurance, only that portion of the benefits that are related to the premium paid by the employer is taxable to the employee. In this case, because the employer pays 75% of the premium, the employee will be taxed on 75% of the benefits.

L has a major medical policy with a $500 deductible and 80/20 coinsurance. L is hospitalized and sustains a $2,500 loss. What is the maximum amount that L will have to pay?

$900 (deductible + 20% of the bill after the deductible [20% of $2,000]) L would first pay the $500 deductible; out of the remaining $2,000, the insurer will pay 80% ($1,600) and the insured will pay 20% ($400).

If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she have earned to receive benefits?

12 credits. Persons disable between ages 24 and 31 can qualify for benefits if they have credit for having worked half of the time between age 21 and the start of the disability. For example, if Joe becomes disabled at age 27, he would need 12 credits (or 3 years' worth) out of the prior 6 years (between ages 21 and 27).

What is a penalty tax for nonqualified distributions from a health savings account?

20%. An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty.

An insured has Medicare Part D coverage. Upon reaching the initial benefit limit, what percentage of the prescription drug cost is the insured responsible for paying?

25%. Once the initial benefit limit is reached, an insured is only responsible for 25% of the prescription drug cost. This percentage applies to generic and brand name drugs.

How long is the grace period in group policies?

31 days. Group policies also have many of the SAME policy provisions included in INDIVIDUAL insurance such as a 2-year incontestability period and a 31-day grace period.

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.

Assuming that all of the following people are covered by a High Deductible Health Plan and are not claimed as dependents on anyone's tax returns, which would NOT be eligible for a Health Savings Account?

Amanda is 67 and is covered by a basic medical expense policy. To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance except for specific injury, accident, disability, dental care, vision care, or long-term care insurance, must not be eligible for Medicare (usually age 65), and can't be claimed as a dependent on someone else's tax return.

The LEAST expensive FIRST-year premium is found in which of the following policies?

Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

What is the maximum period of time during which an insurer may contest fraudulent misstatements made in a health insurance application?

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

Which members of a corporation or partnership are required to obtain an individual insurance agent's license in order for the association to be licensed?

At least one officer or partner and any other person acting as an agent. At least one officer of the corporation or one active partner of the partnership and all other persons performing any acts of an agent on behalf of the corporation or partnership in this state must be individually licensed separately from the corporation or partnership.

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.

Which of the following statements is NOT correct concerning the COBRA Act of 1985?

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.

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.

Variable Whole Life insurance is based on what type of premium?

Level fixed Variable Whole Life insurance is a level fixed premium investment-based product.

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.