Life and Health (Missed ?)

14. The death protection component of Universal Life Insurance is always a) Increasing Term b) Annually Renewable Term c) Whole Life d) Adjustable Life

b) Annually Renewable Term 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.

73. Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a) Policy loans are taxable distributions. b) Accumulations are tax deferred. c) Withdrawals are not taxable. d) Distributions before age 59 1/2 incur a 10% penalty on policy gains.

c) Withdrawals are not taxable. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.

142. A candidate applying for which of the following licenses will NOT be required to pass a written examination? a) A nonresident producer b) A surplus lines producer c) An insurance producer d) An insurance consultant

a) A nonresident producer Unless they are exempt under Indiana regulations, residents must pass a written examination when applying for an insurance producer, consultant or surplus line producer licenses. Nonresident producers do not need to fulfill prelicensing and examination requirements.

136. If a death benefit from a life insurance policy is not paid out in a timely manner, when does the interest begin to accrue? a) After 30 days from the date the benefit is due b) Immediately c) After 2 months from the date the proof of death is received d) 60 days after the death of the insured

a) After 30 days from the date the benefit is due Interest on death benefit begins to accrue after 30 days from the date the benefit is due. The interest rate should be the same as the loan rate.

#41. In order to get a non-resident license in this state, producers must a) Apply and pay a fee to a non-resident state that reciprocates. b) Pass the non-resident state exam and satisfy their continuing education requirements. c) Represent an agency located in this state. d) Surrender their licenses in their state of residence.

a) Apply and pay a fee to a non-resident state that reciprocates. Producers may apply for a non-residential license by showing that they are in good standing as producers in their home states and by paying a fee, if the two states reciprocate.

37. Which of the following statements regarding Business Overhead Expense policies is NOT true? a) Benefits are usually limited to six months. b) Premiums paid for BOE are tax-deductible. c) Any benefits received are taxable to the business. d) Leased equipment expenses are covered by the plan.

a) Benefits are usually limited to six months. Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

#38. If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT a) Loss of the owner's income. b) Rent. c) Utilities. d) Employee payroll.

a) Loss of the owner's income. If business owners want coverage for the loss of their own income due to total disability, they need to purchase a separate individual disability income policy.

106. What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered? a) Probationary period b) Contestable period c) Elimination period d) Grace period

a) Probationary period Probationary period is the period of time after a policy is in effect before claims arising out of an illness are covered. This is to prevent adverse selection, persons waiting until they have been exposed to a cause of loss before purchasing coverage.

23. Todd has been informed that he has a hernia which requires repair. When Todd researches the cost, he learns that his insurance plan will cover 200 points worth of surgical expenses. Each point represents $10, which means that $2000 of his surgery will be covered by his insurance plan. What system is Todd's insurance company using? a) Relative value b) Basic Surgical c) Point-based medical d) Conversion factor

a) Relative value In a relative-value approach, a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery.

#4. Which of the following is NOT covered under Plan A in Medigap insurance? a) The Medicare Part A deductible b) Approved hospital costs for 365 additional days after Medicare benefits end c) The 20% Part B coinsurance amounts for Medicare approved services d) The first three pints of blood each year

a) The Medicare Part A deductible Medicare Supplement Plan A provides the core, or basic, benefits established by law. All of the above are part of the basic benefits, except for the Medicare Part A deductible, which is a benefit offered through nine other plans.

105. Which of the following is NOT true of life settlements? a) The seller must be terminally ill. b) They could be used for a key person coverage. c) They could be sold for an amount greater than the current cash value. d) They involve insurance policies with large face amounts.

a) The seller must be terminally ill. With Life Settlements, unlike with viatical settlements, the seller does not need to be terminally ill. They usually involve life insurance policies with a face amount of $250,000 or more, "key-person" coverage, corporate owned policies, or policies representing excess coverage that is no longer needed, and could be sold for an amount greater than the current cash value.

147. A producer has completed all of his continuing education hours, but his license has just lapsed. Within what timeframe must the producer reinstate his license if he wants to avoid taking an exam to regain his licensed status? a) 2 years b) 12 months c) 30 days d) 6 weeks

b) 12 months If a producer has completed all of the required continuing education hours and allows his/her license to lapse, the license can be reinstated within 12 months. After that point, a written examination is required.

92. 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.

#40. In Indiana all of the following may act as insurance consultants EXCEPT a) A trust officer of a bank acting in the normal course of his duties. b) An individual who holds both the producer's and consultant's license. c) An attorney acting within his professional capacity. d) A licensed insurance producer.

b) An individual who holds both the producer's and consultant's license. The Insurance Code allows certain professionals, acting within the scope of their profession, to advise their clients on matters of insurance without holding an insurance license. While a producer may act as a consultant, he/she may not, however, hold both licenses at the same time.

20. Which statement is NOT true regarding a Straight Life policy? a) It has the lowest annual premium of the three types of Whole Life policies. b) Its premium steadily decreases over time, in response to its growing cash value. c) The face value of the policy is paid to the insured at age 100. d) It usually develops cash value by the end of the third policy year.

b) Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

21. Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider

b) Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

#34. 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 a) Juvenile protection provision b) Survivor protection c) Life planning d) Survivorship insurance

b) 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.

119. Who is responsible for issuing a certificate of authority? a) The Insurance Department b) The Commissioner c) The NAIC d) The Governor

b) The Commissioner When an insurance company has proven that it is compliant with Indiana insurance laws, the Insurance Commissioner can issue a certificate of authority so the company can start conducting business. It is illegal for an insurance company to transact insurance without this certificate.

#30. An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy? a) Within two years of the application, the insurer discovers a misrepresentation. b) The insured is in an accident and incurs a large claim. c) The insured does not pay the premium. d) The insured reaches the maximum age limit specified in the policy.

b) The insured is in an accident and incurs a large claim. The company may not cancel coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract.

24. Which of the following is NOT a feature of a noncancellable policy? a) The insured has the right to renew the policy for the life of the contract. b) The insurer may terminate the contract only at renewal for certain conditions. c) The premiums cannot be increased beyond the amount stated in the policy. d) The guarantee to renew coverage usually applies until the insured reaches certain age.

b) The insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

#36. All of the following are requirements for life insurance illustrations EXCEPT a) They must differentiate between guaranteed and projected amounts. b) They must be part of the contract. c) They may only be used as approved. d) They must identify nonguaranteed values.

b) They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

16. 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? a) Capital sum b) Double the amount of the death benefit c) Refund of premiums d) Principal sum

b) Time of Payment of Claims 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.

15. An insured notifies the insurance company that he has become disabled. What provision states that claims must be paid immediately upon written proof of loss? a) Legal Actions b) Time of Payment of Claims c) Incontestability d) Physical Exam and Autopsy

b) Time of Payment of Claims The Time of Payment of Claims provision specifies that claims are to be paid immediately upon written proof of loss.

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

b) 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.

130. When producers change the address of their residence or office, the Insurance Department must be notified within a) 10 days. b) 31 days. c) 30 days. d) 60 days.

c) 30 days. Producers have 30 days to notify the Insurance Department when they have changed their residential or business address, legal name, or email address.

126. If an insurance company offers Medicare supplement policies, it must offer which of the following plans? a) B-N b) A-D c) A d) A & B

c) 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.

#11. All of the following are examples of third-party ownership of a life insurance policy EXCEPT a) A company purchases a life insurance policy on their manager, who is an important part of the operation. b) When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. c) An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. d) An insured couple purchases a life insurance policy insuring the life of their grandson.

c) An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan.

#29. An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have, and then leaves. What did he forget to do? a) Ask the applicant to sign a statement that acknowledges that the policy had been delivered b) Collect a late payment fee c) Ask her to sign a statement of good health d) Offer her a secondary policy

c) Ask her to sign a statement of good health If the premium is not collected until the policy is delivered, the agent must receive a statement of good health, which acknowledges that the insured's health status has not changed since the policy was approved.

50. Insured A recently purchased an individual health policy. Insured B purchased the same policy, but did so as the result of a direct response solicitation. Which of these two insureds has a longer free look period? a) Both have the same free look period b) Neither has a free look period c) Insured B d) Insured A

c) Insured B Individual health policies entitle insurers to 10-day free look periods. However, policies issued as the result of direct response solicitations provide 30-day free look periods. So, in this case, Insured B has a longer free look period.

#17. 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 a) Payment of claims. b) Proof of loss. c) Legal actions. d) Time limit on certain defenses.

c) 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.

#18. Variable Life insurance is based on what kind of premium? a) Decreasing b) Graded c) Level fixed d) Increasing

c) Level fixed Variable Life insurance is a level fixed premium investment based product.

#42. In Indiana controlled business is a) Illegal. b) Completely unregulated. c) Limited to 25% of a producer's annual commission income. d) Limited to 25% of a producer's annual gross premium income.

c) Limited to 25% of a producer's annual commission income. An insurance license is intended to be issued to those that will solicit and serve the general public, not to allow a person to avoid paying commissions to another producer for the writing of their own insurance business. When 25% or more of a producer's total commissions earned in a year is from controlled business, the Commissioner will deem that writing that business was the purpose of the license and take action to suspend or revoke such license.

99. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the a) Interval expense coverage. b) Limited coverage. c) Major medical coverage. d) Comprehensive expense coverage.

c) Major medical coverage. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage.

100. An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point? a) Approved the application b) Issued the policy c) Neither approved the application nor issued the policy d) Both approved the application and issued the policy

c) Neither approved the application nor issued the policy When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.

85. A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a) Juvenile rider. b) Payor rider. c) Other-insured rider. d) Change of insured rider.

c) 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.

5. Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policyowner? a) Entire Contract Clause b) Proof of Loss c) Payment of Claims d) Change of beneficiary

c) 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.

123. A policyholder with a dependent child who needs hospital and medical coverage past a limiting age due to physical or mental handicap must furnish which of the following for continued coverage? a) An affidavit by an attending physician outlining the necessity of coverage due to the child's disability b) All pertinent medical records relating to the disabled dependent c) Proof of incapacity for self-sustaining employment and dependency upon the policyholder for support and maintenance d) A petition of dependency

c) Proof of incapacity for self-sustaining employment and dependency upon the policyholder for support and maintenance Proof of incapacity and dependency must be furnished at least 31 days prior to the child's attainment of the limiting age. The insurance company may require at reasonable intervals during the 2 years following the child's attainment of the limiting age subsequent proof of the child's disability and dependency. After the 2-year period, the insurance company may require subsequent proof not more than once a year.

70. A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a) Her parents' federal income tax receipts b) Medical exam and parents' medical history c) Proof of insurability is not required. d) Medical exam

c) Proof of insurability is not required. If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.

30. Which of the following would qualify as a competent party in an insurance contract? a) The applicant is a 12-year-old student. b) The applicant is under the influence of a mind-impairing medication at the time of application. c) The applicant has a prior felony conviction. d) The applicant is intoxicated at the time of application.

c) The applicant has a prior felony conviction. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent.

150. Under the Replacement Regulation, Rule 16.1, which of the following statements would best describe the producer's duties? a) The producer must provide an applicant with a copy of the Important Notice Regarding Replacement of Life Insurance. b) The producer must make sure that the applicant has received all required forms. c) The producer must conduct a reasonable investigation to determine if a replacement will take place. d) The producer must notify the existing company of the replacement.

c) The producer must conduct a reasonable investigation to determine if a replacement will take place. While the producer must provide the applicant with all the appropriate documentation and notices, first and foremost, the producer must take an active role and conduct an investigation to determine whether the replacement will indeed take place.

#47. Which of the following is true regarding Medicare supplement policies? a) They must contain a minimum of Plans A and B. b) They must be available to those aged 60 and over. c) They must be guaranteed renewable. d) They must have a 15-day free-look period.

c) They must be guaranteed renewable. Each Medicare supplement policy must be at least guaranteed renewable.

10. What percentage of a company's employees must take part in a noncontributory group life plan? a) 0% b) 25% c) 75% d) 100%

d) 100% If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

#21. What is the waiting period on a Waiver of Premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months

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

138. Under which circumstance can a producer receive a commission and a consultant's fee for the same transaction? a) When a producer holds a valid consultant's license. b) When the transaction is approved by the Commissioner. c) Under no circumstances: producers cannot be consultants d) A producer makes a disclosure about the compensation arrangements prior to the transaction.

d) A producer makes a disclosure about the compensation arrangements prior to the transaction. A producer may accept both a fee and a commission for the same transaction, if he/she provides to the insured a written agreement on the fees, and discloses to the insured that he/she will receive compensation for the sale of the policy and the method of compensation prior to the sale, solicitation, negotiation, or renewal of any policy.

88. All other factors being equal, the least expensive first-year premium payment is found in a) Increasing Term. b) Decreasing Term. c) Level Term. d) Annually Renewable Term.

d) Annually Renewable Term. 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.

#10. The premium charged for exercising the Guaranteed Insurability Rider is based upon the insured's a) Assumed age. b) Average age. c) Issue age. d) Attained age.

d) Attained age. The premium charged for the increase will be based upon the attained age of the insured.

42. In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is a) More limited in general. b) More limited in duration. c) Broader in duration. d) Broader in general.

d) Broader in general. A policy that uses the accidental bodily injury definition will provide broader coverage than a policy that uses the accidental means definition.

135. Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer's right to change premium amounts? a) Premium provision b) Insurer's rights c) Coverage limitations d) Continuation provision

d) Continuation provision The renewal provision, also known as a continuation provision, must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.

#7. What happens when a policy is surrendered for its cash value? a) Coverage ends but the policy can be reinstated at any time. b) The policy can be reinstated by paying back all policy loans and premiums. c) The policy can be converted to term coverage. d) Coverage ends and the policy cannot be reinstated.

d) 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.

137. Rule 38.1 is also known as a) Employee-sponsored groups. b) Individual employer plans. c) No-loss, no-gain insurance. d) Group Coordination of Benefits.

d) Group Coordination of Benefits. As the name suggests, Rule 38.1: Group Coordination of Benefits was created to allow group health insurance plans to include a coordination of benefits provision, and to establish the order for payment of claims.

8. Which of the following is INCORRECT concerning Medicaid? a) It provides medical assistance to low-income people who cannot otherwise provide for themselves. b) It pays for hospital care, outpatient care, and laboratory and X-ray services. c) The federal government provides about 56 cents for every Medicaid dollar spent. d) It is solely a federally administered program.

d) 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.

22. 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 a) Time limit on certain defenses. b) Payment of claims. c) Proof of loss. d) Legal actions.

d) 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.

143. All of the following are qualifications of a resident producer EXCEPT a) Paying a nonrefundable fee for each license. b) Being 18 years old. c) Having submitted a uniform application to the Commissioner. d) Obtaining a sponsorship of an admitted insurance company.

d) Obtaining a sponsorship of an admitted insurance company. The state of Indiana does not include sponsorship of admitted insurance companies on qualification requirements for resident producers. Producers do, however, need to be appointed by the Commissioner.

#23. In respect to the consideration clause, which of the following is consideration on the part of the insurer? a) Offering a secondary policy to the applicant b) Offering an unconditional contract c) Explaining policy revisions to the applicant d) Promising to pay in accordance with the contract terms

d) Promising to pay in accordance with the contract terms The consideration clause requires the insurer to promise to pay in accordance to the terms stated in the contract.

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

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

#37. When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a) The insurance company b) The insured's estate c) The primary beneficiary's estate d) The insured's contingent beneficiary

d) The insured's contingent beneficiary Under the Uniform Simultaneous Death Law, the law will assume that the beneficiary dies first in a common disaster. This provides that the proceeds will be paid to the contingent beneficiary or to the insured's estate if none is designated.

39. Which of the following best defines target premium in a universal life policy? a) The maximum amount the policyowner may pay on a policy b) The minimum amount to make sure the policy is annually renewable c) The corridor of insurance d) The recommended amount to keep the policy in force throughout its lifetime

d) The recommended amount to keep the policy in force throughout its lifetime 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.

9. Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? a) An irrevocable beneficiary b) A buy-sell agreement c) Family term rider d) Third-party ownership

d) Third-party ownership Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

116. When can a Long-Term Care policy deny a claim for losses incurred because of a pre-existing condition? a) Within 12 months of the effective date of coverage b) At any time c) At no time d) Within 6 months of the effective date of coverage

d) Within 6 months of the effective date of coverage A long-term care policy cannot deny a claim for losses incurred more than 6 months from the effective date of coverage because of a pre-existing condition.