Life and Health Studying
Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses?
70-75%
The Director of Insurance can examine the business transactions, accounts, and records of insurers and producers as often as necessary, but must do so at least once in how many years?
5 years
Regarding qualified plan required minimum distributions (RMDs), the penalty tax that is assessed on any shortfall (i.e., the difference between the annual RMD amount and actual amount) is what amount?
50%
How long can the look-back period be for pre-existing conditions before the insured enrolled in a group health plan? 1 month 3 months 12 months 6 months
6 months
What is the maximum period for pre-existing limitations or exclusions under Medicare supplement insurance policies? 6 months 9 months 12 months No pre-existing period is permitted under Medicare supplements.
6 months
Producers must keep records of every insurance transaction for at least:
5 years
The optional cancelation provision in an individual health policy allows the insurer to cancel the policy for failure to pay premiums. However, the insurer must give the policyowner how many days' notice before canceling in this case?
10 days
An life insurer cannot employ a person to handle the assets of its separate accounts if the person has been convicted of theft within the last:
10 years
Anthony becomes a producer for Acme Insurance Company. Acme has not filed the notice of appointment with the Director. It must do so within:
15 days
A producer's commission for the sale of a Medicare Supplement policy in the first year following its effective date cannot exceed what percentage of the commission paid for servicing the policy in the second year? 200 150 100 25
200
How long must an insurer keep copies of any illustrations used to sell its life insurance policies?
3 years after the policy expires
Jeff is a licensed insurance producer in both North and South Carolina. He is charged with embezzlement in North Carolina, and his first pretrial hearing is set for March 1. He must notify the South Carolina Director of Insurance of this charge within how many days of the hearing?
30
Upon receiving proof of the insured's death, a life insurer has how many days in which to pay the death benefit before interest begins to accrue on the proceeds?
30 days
Horace buys a Medicare supplement insurance policy, but decides not to keep it. How many days does he have to return it for a full refund of the premium?
30 days (Medicare has a look back period of 30 days)
ABC Life Insurance Co. does not employ producers to sell its policies. If it sells a policy, it must give the customer the right to examine the policy for at least:
31 days (10 days with a prdoucer 31 days without)
Which of the following is a non-admitted insurance company? A foreign insurer with a certificate of authority A domestic insurer without a certificate of authority An alien insurer with a certificate of authority A properly registered domestic corporation that sells holistic medical supplies
A domestic insurer without a certificate of authority
How does a family income policy differ from a family maintenance policy?
A family income policy combines whole life insurance with decreasing term, while a family maintenance policy combines whole life and level term insurance.
A long-term care insurance policy issued in South Carolina cannot exclude coverage or limit benefits for which of the following? service in the armed forces Alcoholism and drug addiction pre existing conditions alzhelmers disease
Alzhelmer's disease
Hillary purchased a fixed deferred annuity from ABC Insurers and named her daughter, Bess, as annuitant and her husband, Charles, as beneficiary. Which of these parties is specifically authorized to make withdrawals from the annuity? Hillary Bess Charles Hillary, Bess, and Charles
Hilary
While reviewing a life insurance policy issued by her home office, Agent Angela notices that the premium is considerably higher than she quoted the insured and the policy contains features that were not requested. Which of the following is her best course of action? Angela should present the policy as is; because it was generated by the home office, the extra features are probably required. Angela should reschedule the upcoming appointment with the insured while the home office reviews the policy and recalculates the premium. Angela should recalculate the premium herself. Angela should call the client and delay, saying the insurer seems to have lost the policy.
Angela should reschedule the upcoming appointment with the insured while the home office reviews the policy and recalculates the premium.
Anne turned 70 this year on March 15. By what date does she have to begin taking distributions from her retirement plan? April 1 this year April 1 next year October 1 this year October 1 next year
April 1 next year
A health insurer, at its expense, may conduct a physical examination of the insured
As often as reasonably necessary to investigate a claim
Employers seek ways in which to minimize group health insurance costs or obtain enhanced benefits, so they will often change plans or insurers. Why is it so easy for employers to change plans or insurers?
Most group health plans are written to provide benefits for a single year only.
Which statement regarding life insurance cost-of-living riders is NOT correct? As the Consumer Price Index (CPI) increases, so does the policyowner's coverage, providing the insured can prove insurability. The cost-of-living rider on a whole life policy is typically an increasing term insurance rider. Adjustable life policies often include a cost-of-living agreement, so if the coverage increases, the premium may also rise. Universal life policies, with their highly flexible terms, are not good candidates for the addition of a cost-of-living rider.
As the Consumer Price Index (CPI) increases, so does the policyowner's coverage, providing the insured can prove insurability.
Terry wants to apply for disability income benefits under his group policy. The policy has a 90-day elimination period. What does this mean for Terry? He must wait 90 days before filing the claim. Benefits will not begin until 90 days after Terry submits his initial claim for benefits. Benefits will be paid only for 90 days. Benefits will not begin until 90 days after the disability occurs.
Benefits will not begin until 90 days after the disability occurs.
For the past two years, Helen was covered under ABC Insurance Company's group health plan. She obtains a new job and enrolls in her new employer's group health plan with PDQ Insurance. PDQ excludes pre-existing conditions for 12 months. In this case, PDQ
Cannot impose a pre-Existing condition exclusion (Because she was under a previous plan and satisfied the pre existing condition exclusionary period of the new plan)
Which of the following is NOT a required provision in life insurance policies issued in South Carolina? right to examine reinstatement conversion incontestability
Conversion
If you were using the formula N x (N - 1) = Number of Policies Required, what type of business insurance agreement would you be working with? Stock redemption plan Entity plan Cross purchase buy sell plan insured buy out plan
Cross purchase buy sell plan
Self-regulation by life and health insurance companies is mainly accomplished through all of the following entities or organizations EXCEPT: National Association of Life Underwriters American Society of Chartered Life Underwriters International Association of Health Underwriters Financial Industry Regulatory Authority
FIRA (They only do variable insurance)
ABC Insurance Company wants to become licensed in South Carolina to sell insurance products. Which of the following is NOT a condition it must fulfill for licensure? Pay license fees Maintain home office in south carolina Demonstate ability to fulfill obligations to policy holders File articles of incorporation and other charter documents with the director
File articles of incorporation and other charter documents with the director
Eduardo purchased an individual long-term care insurance policy and paid $1,500 in premiums this year. He can take a deduction on his income tax return for part of the premiums paid only if
He itemizes his deductions
Nelson is covered by ABC Corporation's group disability plan. He has no other disability income protection and wants to continue the coverage after he terminates his employment with ABC Corporation. What is the most likely outcome? He will be able to continue the policy for up to 18 months. He will be able to convert the policy to an individual disability income policy. He will be able to continue the policy for up to 18 months after which he has the option of converting the policy. He will not be able to continue or convert the policy.
He wil not be able to continue to or convert the policy (group disability insurance isn't portable)
Gloria chooses to take her life insurance policy dividends in cash. The insurance company sends a check for the amount of the declared dividend on the anniversary date of the policy. What is the tax consequence to Gloria for receiving cash dividends? Her dividends are tax deferred. Her dividends are fully taxable. Her dividends are not income taxable. Her dividends are only income tax-free if Gloria is over age 62 ½.
Her dividends are not income taxable (policy dividends are not taxable)
Steve decides to retire this year at age 69. What will happen when he applies for Social Security retirement benefits? His benefits will be slightly lower than if he had retired at normal retirement age. His benefits will be slightly higher than if he had retired at normal retirement age. His benefits will be significantly higher than if he had retired at normal retirement age. His benefits will not be affected.
His benefits will be slightly higher than if he had retired at normal retirement age (Normal retirement age is 66 2 months to 67)
Persons who commit crimes of dishonesty while engaged in interstate insurance transactions can be sentenced to all of the following EXCEPT: A fine of up to 50,000 Restitution Imprisonment for up to 25 years A fine equal to the compensation recieved for the illegal act
Imprisonment for up to 25 years
Which of the following statements about a Medicare Supplement policy is NOT true? It must be guaranteed renewable. It cannot be canceled only on the basis of the insured's deteriorating health. It can terminate a spouse's coverage if the insured fails to pay the premium. It can indemnify against loss from illness on a different basis than loss from accident.
It can indemnify against loss from illness on a different basis than loss from accident.
Which of the following statements best describes an annuity payout period? It guarantees income will be paid for any period the owner wants. It guarantees that income will be paid for any period beginning at age 65. This period is intended to provide income for the rest of the annuitant's life. This period must be set for a specific number of years.
It guarantees income will be paid for any period the owner wants.
Which of the following best describes the nature of insurance regulation? It is regulated exclusively at the federal level. It is regulated primarily at the federal level, though some aspects are regulated at the state level. It is regulated exclusively at the state level. It is regulated primarily at the state level, though some aspects are regulated at the federal level.
It is regulated primarily at the state level, though some aspects are regulated at the federal level.
Nicole, age ten, is the insured in a traditional "jumping juvenile" policy with a $5,000 face amount. When she reaches age 21, what will most likely happen to the policy's face amount? It will increase to $10,000. It will increase to $20,000. It will increase to $25,000. It will remain $5,000.
It will increase to 25,000
Increasing term insurance offers which of the following? increasing premiums and an increasing death benefit increasing premiums and a guaranteed death benefit level premiums and a fixed, unchanging death benefit level premiums and an increasing death benefit
Level premiums and an increasing death benefit
Which of the following annuity settlement options will pay the annuitant an income for life no matter how long he lives, and will pay the beneficiary a death benefit equal to the difference between the total contract value at annuitization and the sum of payments made if the annuitant dies prematurely? straight, or pure, life income life income with guaranteed minimum (refund guarantee or life annuity certain) life income with period certain joint and survivor life income
Life income with guarnteed minimum (WHen annuiant dies with straight life no more payments are made)
Which of the following accurately describes differences between tax-qualified and non-tax-qualified long-term care insurance plans? Medical necessity cannot be a benefit trigger with non-tax-qualified LTC plans. Cognitive impairment must be severe under non-tax-qualified plans. Medical necessity cannot be a benefit trigger under tax-qualified LTC plans. Non-tax-qualified LTC plans require an inability to perform two of six activities of daily living (ADLs).
Medical necessity cannot be a benefit trigger under tax-qualified LTC plans.
Bill failed to satisfy the continuing education requirements to keep his producer's license active in South Carolina. One year later, he decides to renew his license. Can he do so? Yes, if he pays the renewal fee. Yes, if he fulfills the continuing education requirement. No; he must wait one more year. No; he must apply for a new license.
No; he must apply for a new license. (The period is 6 months)
Harry, age 18, is insured under a juvenile life insurance policy. His mother, Lara, can no longer pay the policy's premium after being partially disabled in a work-related accident. Which policy rider will waive the premiums until Harry reaches the age of majority? Payor Benefit Rider Waiver of insurability rider Waiver of Premium Rider Juvenile disability rider
Payor benefit rider
herry operates her business as a sole proprietor. The company buys a disability insurance policy on her to fund a buy-sell agreement in the event of her disability. It treats the premiums as a business expense. Assuming Sherry's disability, all of the following are correct statements EXCEPT: Policy premiums are tax deductible to the business. Policy proceeds may be taxable to the business. Sherry will have a capital gain on her business interest as a result of the sale. Policy proceeds are tax deductible to the business.
Policy proceeds are tax deductible to the business
Jessica's traditional IRA is worth $300,000 and consists only of prior deductible contributions and earnings. What are the tax implications if Jessica converts her IRA to a Roth IRA?
She must pay income taxes on the entire 300,000 (no penalties when converting an IRA to a Roth IRA)
Of the various life contingency income options, which option provides the largest monthly income payment for a given amount of annuity funds? straight life income (also referred to as pure life income) life income with guaranteed minimum (refund guarantee or life annuity certain) life income with period certain joint and survivor life income
Straight life/Pure life income
Ted is the insured under a ten-year family income policy that will pay a $500 monthly income. What will happen if he dies 15 years after taking out the policy? Ted's family will get a $500 monthly income for ten years. Ted's family will get a $500 monthly income for five years. Ted's family will get a $500 monthly income for ten years plus the face amount of the underlying policy. Ted's family will not receive monthly income payments but will only be paid the face amount of the underlying policy as the death benefit.
Ted's family will not receive monthly income payments but will only be paid the face amount of the underlying policy as the death benefit.
Sandra's accounting business owns a business overhead expense policy in the event she becomes disabled. Sandra has a heart attack and calls on the policy. Which of the following is a correct statement with regard to the taxation of the benefits received under the policy? The BOE benefits are taxable as income to the business. The BOE benefits are not taxable as income to the business. The BOE benefits are taxable as income to Sandra. The BOE benefits are not taxable.
The BOE benefits are taxable as income to the business.
When a policyowner converts a term life insurance policy into a permanent life insurance policy, which one of the following statements is most correct? The insured must prove insurability. The amount of the new policy cannot exceed the amount of the term policy. premiums for the new policy will be based on the insured's age when he or she applied for the term policy. The premium and death benefit of the new policy cannot exceed the premium and death benefit of the term policy.
The amount of the new policy cannot exceed the amount of the term policy.
One week after reinstating his major medical insurance policy, Sri breaks his arm when he falls from a ladder while cleaning the gutters on his house. He lost his balance in a fit of coughing, the result of bronchitis. His policy will cover medical expenses for:
The broken arm only (Sickness begins 10 days after reinstatement)
Which statement about increasing term insurance policies is NOT correct? The premium normally stays level throughout the term. The death benefit and premium increase over the term of the policy. The death benefit increases over the term of the policy. The increasing term coverage is typically provided by a rider on a base policy.
The death benefit and premium increase over the term of the policy.
Under which one of the following riders is the base policy's death benefit unaffected by any benefits paid through rider? generalized or independent long-term care option integrated long-term care option an automatic premium loan rider an accelerated benefits rider
generalized or independent long term care option
Which statement regarding participating and non-participating life insurance policies is NOT correct? A non-participating policy is a life insurance policy that does not participate in the divisible surplus of the insurer When a life insurance policy participates, it can receive dividends from the insurer if and when declared. Mutual insurance companies issue participating policies. The difference between companies issuing participating and non-participating policies remains distinct.
The difference between companies issuing participating and non-participating policies remains distinct.
Which statement regarding the extended term nonforfeiture option is NOT correct? An extended term option allows the policyowner to have insurance coverage for some period with no further premium payments required. Policies under extended term insurance cannot normally receive dividends. The extended term option is available where the original policy was issued on a substandard (rated) basis. If an owner of a lapsed policy does not choose a nonforfeiture options, then the insurer automatically applies the extended term insurance option.
The extended term option is available where the original policy was issued on a substandard (rated) basis.
Interest that accumulates on funds paid into deferred annuities is taxed in which of the following ways? It is taxed as it enters the annuity. The funds are not taxed while they remain in the annuity. It is taxed before entering the annuity. It is taxed during the conservation stage. Explanation:
The funds are not taxed while they remain in the annuity
An Outline of Coverage contains all of the following information for a health insurance policyholder EXCEPT: A description of benefits the conditions for renewal the type of coverage provided the governing provisions of the policy
The governing provisions of the policy
Which statement about taxes on group health insurance benefits is NOT correct? Reimbursements an insured receives for covered expenses under a group medical expense insurance indemnity plan are not taxable to the insured. The tax treatment of all types of group health benefits is uniform. The insured is not taxed for health services rendered through a group managed care plan. Insureds are not taxed on benefits received under an AD&D policy.
The tax treatment of all types of group health benefits is uniform.
Marilyn, 72, thinks she may be spending a significant amount of money on medical expenses. She considers transferring her assets to her son so that she will be poor enough to qualify for Medicaid. Her son cautions her about Medicaid's look-back rules. How will these rules pertain to her? They will reflect the amount of Medicaid benefits paid on Marilyn's behalf during the first six months of Medicaid eligibility. They will reflect the amount of benefits Medicare pays for care that Marilyn receives if she is in a skilled nursing home facility. Look-back rules look at the income, if any, that Marilyn earned during the 36 months before she applied for Medicaid. These rules allow Medicaid to look back on transfers of assets Marilyn made during the 60 months before applying for Medicaid.
These rules allow Medicaid to look back on transfers of assets Marilyn made during the 60 months before applying for Medicaid.
When do funds in a deferred annuity become the owner's?
They always belong to the contract owner.
Which statement regarding the conversion of a traditional IRA to a Roth IRA is NOT correct? Income taxes must be paid on the traditional IRA when the account is converted. To convert to a Roth IRA, a person must have earned income. Amounts converted to a Roth IRA will grow tax free. To convert to a Roth IRA, the owner may have any amount of modified adjusted gross income in the year of conversion.
To convert to a Roth IRA, a person must have earned income. `
What is the main difference between decreasing term insurance and level term insurance?
Under decreasing term insurance, the death benefit decreases over the policy period while with a level term policy, the death benefit stays level over the policy period.
James is a licensed producer who lives in Georgia. He moves to South Carolina. When must he notify the South Carolina Department of Insurance of his move?
Within 30 days
Ashleigh is searching for a job. Although she knows she will eventually be covered by an employer's plan, she needs health insurance while she is unemployed. Under these circumstances, what should Ashleigh consider? a policy that is renewable at the option of the insurer a nonrenewable term policy a conditionally renewable policy a guaranteed renewable policy
a nonrenewable term policy
In most states, insurance companies can include a provision in their contracts that allows which of the following? a provision limiting the period for filing a lawsuit against the insurance company to less than one year after a triggering event. a provision making the settlement of the cash value at maturity less than the sum of the face amount plus dividend additions less any loan amount. a provision that makes the acts or representations of the agent binding on the insurer. a provision that allows a policy to be forfeited if the total owed on a policy loan is less than the loan value of the policy.
a provision that makes the acts or representations of the agent binding on the insurer.
One month after paying the initial premium for a disability income policy, Suri was hit by a car and was seriously injured. She then received disability income payments for the next 12 months. The fact that Suri ultimately received more in value under the policy than what she paid demonstrates which characteristic of insurance contracts? adhesion aleatory conditional unilateral
aleatory
In addition to charges for a hospital room, hospital expense policies cover miscellaneous hospital charges up to an amount. How is that amount stated?
as a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount.
At what point do insurers need to decide if insurable interest exists?
before entering into the contract
A disability waiver under a universal life policy can take the form of a waiver of stipulated premium or a waiver of which of the following? cost of insurance payment of cash value mortality charges expenses
cost of insurance
Which of the following is not a factor in determining an individual's life insurance needs using the human life value approach? net annual salary net annual expenses cost of the life insurance number of years the individual can continue working
cost of life insurance
In a close corporation buy-sell agreement, the most common type of plan would be which of the following? cross-purchase plan equity cross-purchase plan equity insured buy-out plan entity plan with stock redemption
entity plan with stock redemption
Disability income policies pay an ongoing monthly income if the insured suffers a disabling injury. Which method of determining the amount of benefits payable is most common in individual policies? percent-of-earnings approach flat approach direct approach totality of income approach
flat approach (percent of earnings is used in group insurance)
When selling a long-term care insurance policy, the insurer or producer must provide the applicant with all of the following EXCEPT: guaranteed noncancelability the Outline of Coverage the Notice to Applicant Regarding Replacement of Accident and Health Insurance, if applicable the option to buy inflation protection
guaranteed noncancelability
If an agent is performing actions in his day-to-day business dealings that are not stated in the agent's contract but are necessary to carry out his express authority, he is exercising what kind of authority?
implied
June's employer's plan has a two-month waiting period and a pre-existing condition exclusion period. June has a pre-existing condition. How many months after the waiting period ends can June's benefits begin? two months three months four months insufficient information
insufficent information
In addition to several premium payment modes, what two payment plans can you as a life insurance agent offer your client? fixed or variable level or flexible term or permanent interest only or principal and interest
level or flexible
Medicare Part A hospital insurance covers, within certain limits, all of the following expenses, EXCEPT inpatient hospital costs. long-term care costs. home health-care costs. hospice costs.
long-term care costs.
When he applied for his life insurance policy four years ago, Terry omitted any information in the application related to treatment he received several years earlier for a serious chronic illness. Which of the following actions can the insurance company take when it learns of the omission? cancel the policy reduce the benefits impose additional exclusions nothing
nothing
Your client has a life insurance policy with an accidental death benefit rider. He is seriously injured in an automobile accident. After a month, he is released from the hospital to continue rehabilitation at home. During rehabilitation, he dies from pneumonia. What will the rider pay? 100 percent of the face amount, double if there is a rider 100 percent of the face amount 50 percent of the face amount nothing
nothing
In classifying insurance risks, which method is used most often by insurance underwriters?
numerical rating system
John is preparing to become a licensed insurance agent. Which of the following qualifications is not required for his license application? residency in state satisfaction of all state prelicensing requirements official assessment of character and trustworthiness intent to engage in insurance business with the general public
official assessment of character and trustworthiness
Which of the following would be the best choice of insurance to fund a buy-sell agreement in a two-person partnership? two level term policies one joint life policy two variable life policies two decreasing term policies
one joint life policy
Sal loses his sight in a chemical accident in his garage. His group disability insurance plan pays a regular monthly benefit but does not require proof of ongoing disability. Which of the following policy provisions is guiding this practice? statutory disability partial disability presumptive disability residual disability
presumptive disability
When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT notify individuals about the company's privacy practices. describe conditions under which the company may disclose the information to other parties. provide methods for individuals to prevent disclosure of the information. provide individuals with copies of documents disclosed to other parties.
provide individuals with copies of documents disclosed to other parties.
Becky was injured when another driver hit her car. Her insurance company covered her claims and then sought recovery of the payments from the other driver's insurance company. What is the insurance company's right to do this known as? indemnification subrogation reimbursement coordination of benefits
subrogation
Jack bought a life insurance policy to make sure his surviving family members would have an income for ten years if he died prematurely. Five years after purchasing the policy, Jack died. Beginning with the date of his death, the policy began paying a level monthly benefit to his family for ten years. What type of policy did Jack buy? ten year family income policy ten-year family maintenance policy ten-year family protection policy endowment
ten year family maintenance policy (Maintenance begins at death)
Which of the following provides an additional death benefit for death due to any cause? accidental death benefit rider cost of living rider term rider return of premium rider
term rider
What are the main sources of information about an applicant for health insurance? the agent report and application the application and investigative consumer report the application and credit reports the application and attending physician's statement
the agent report and application
When pricing health insurance policies, insurers must account for morbidity rates. What do these rates indicate? the average number of persons in a large group who can be expected to die in any given year the average number of persons at various ages who can be expected to become disabled because of accident or sickness the average number of persons who are likely to allow the policy to lapse during the first year the average number of persons who are likely to submit a claim during the first year
the average number of persons at various ages who can be expected to become disabled because of accident or sickness
If a group health insurance plan is experience-rated, which of the following factors will the insurer NOT examine when issuing the policy? the average age of group members and their sex the community or region in which the group operates the group's prior claims history the group's participation levels
the community or region in which the group operates
Ed was seriously injured while working at a construction site. He incurred $10,000 in medical expenses, $3,000 for vocational rehabilitation, and $25,000 in lost wages. Which of these items will be covered by workers' compensation? the lost wages only the medical expenses only the lost wages and medical expenses the lost wages, medical expenses, and vocational rehabilitation expenses
the lost wages, medical expenses, and vocational rehabilitation expenses
The Notice of Replacement provides all of the following information to the life insurance applicant EXCEPT: a list of any life insurance policies that will be replaced whether an existing policy will fund the new policy the insurer's identity the protections of the Life and Health Insurance Guaranty Association
the protections of the life and health insurance guaranty association
Which of the following primarily regulates life insurance? the federal government the state in which the policyowner resides the state in which the insurance company is licensed the state in which the death benefit is filed
the state in which the insurance company is licensed
A major medical policy with an 80/20 coinsurance clause will pay 80 percent until the stop/loss or maximum out-of-pocket limit is reached. Then the policy will pay costs based on which of the following? the physician bill alone the usual and customary charge the hospital bill alone the scheduled amount
the usual and customary charge
Why does an insurance company issue a conditional receipt?
to cover the proposed insured before policy issue
What does a family life insurance policy offer?
whole life on the primary insured and term life insurance coverage on the spouse and each child to age 21.