Life and Health Test
An insured has a $1,000 HRA account through his employer. He incurred $750 in medical expenses the first year of the plan. How much, if anything, will the insured be able to roll over toward the next year's expense?
$250 (Employees are allowed to roll over unused balances at the end of the year, so in this scenario, the employee could apply $250 to the next year's expenses.)
An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer?
$500 (Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs. )
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 beneifits)
What is the elimination period for Social Security disability benefits?
5 months
The minimum number of credits required for partially insured status for Social Security disability benefits is
6 credits (To be considered partially insured, an individual must have earned 6 credits during the last 13-quarter period.)
Benefit periods for individual short-term disability policies will usually continue from
6 months to 2 years (Short-term disability is defined as a disability lasting not more than 2 years.)
What is the penalty for excessive contributions to an IRA?
6% (An individual can contribute 100% of earned income up to a specified amount. The excess contribution penalty for traditional IRAs is 6%)
The legal definition of "person" would NOT include which of the following?
A family
Which of the following individuals will be eligible for coverage on the Health Insurance Marketplace? - A permanent resident lawfully present in the U.S. - Someone who has Medicare coverage - A U.S. citizen who is incarcerated - A U.S. citizen living abroad
A permanent resident lawfully present in the U.S. (To be eligible for health coverage on the Marketplace, the individual must be a U.S. citizen or national or be lawfully present in the United States, must live in the United States, and cannot be currently incarcerated. Medicare recipients are not eligible for coverage in the Marketplace.)
In which of the following situations is it illegal for an insurer to disclose privileged information about an insured?
A researcher for marketing purposes
For variable products, underlying assets must be kept in
A separate account. (Under a variable life insurance policy, assets must be placed in a separate fund, used primarily for the investment of stocks, bonds, and other security investment options.)
Which of the following is another term for an authorized insurer?
Admitted
All of the following are essential benefits required to be included in all health plans purchased in the Marketplace EXCEPT - Adult Dental Care - Hospitalization - Maternity care - Pediatric vision care
Adult dental care (Not a required benefit.)
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
Harry has a disability that prevents him from doing certain kinds of work. Because of his qualifications, he responds to a recruitment ad and is hired for the position. What federal act allows him to apply for the job?
Americans with Disabilities Act
Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?
Annuity credit (Annuity Certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period distribution begins on a specific date and stops on a specific date. )
After being hired to deliver newspapers to his neighbors, a man is provided with $10,000 of life insurance by the newspaper. He would be covered under which kind of life insurance?
Blanket life
Which of the following best describes fixed-period settlement option?
Both the principal and interest will be liquidated over a selected period of time.
What is Medi-Cal?
California's Medicaid health care program
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
Charge a higher premium. (The premium rate will be adjusted to reflect the insurer's increased risk)
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration (The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.)
All of the following statements are true of a nonqualified retirement plan EXCEPT - They do no qualify for special tax treatment by the IRS - Contributions are tax exempt - Increases of funds are not taxed until received. - Contributions grow tax deferred.
Contributions are tax exempt. (Nonqualfied retirement plans do not meet the IRS's requirements for favorable tax treatment. Contributions to these plans grow tax deferred. however, they are not tax exempt. Increases of funds during the accumulation period are not taxed until they are actually received.)
Which of the following would be the beneficiary in credit life insurance?
Creditor (The creditor is the owner and the beneficiary of the policy)
Which of the following is NOT fundable by annuities - Cash accumulation for any reason - A person's retirement - Estate liquidation - Death benefits
Death benefits (Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.)
Which of the following is NOT an example of valid insurable interest? - Child in parents' lives - Debtor in the life of the creditor - Business partners in each other's lives - Employer in key employee's life
Debtor in the life of the creditor (The three recognized areas in which insurable interest exists are as follows: policy owner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them, A debtor does not have an insureable interest int he creditor.)
Which of the following best describes the policy nonrenewal?
Discontinuance of an insurance policy by the insured on the policy anniversary date.
What is the goal of the HMO?
Early detection through regular checkups (The goal of the HMO is early detection so members are encouraged to participate in regular checkups. In this way the HMO hopes to catch disease in its earliest stages when treatment has the greatest chance for success.)
Which of the following is NOT covered by Health Maintenance Organizations (HMOs)? - Immunizations - Routine physicals - Well-baby care - Elective services
Elective Services
An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This indicates that his policy is written with a 30-day
Elimination period (The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.)
Every insurer issuing long term care contracts in California must
Establish standards of agent conduct to prevent misleading comparisons of LTC policies. Be certain that excessive replacements or transaction are not being made Notify insured of the HICAP program and their right to seek services through HICAP free of charge
The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called
Expenses (Loading is another term for expenses. Net premium (mortality minus interest earned) plus expenses (or loading) equal the gross premium)
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
A deceptive act or practice committed by a person with the intent to secure an unfair advantage or lawful gain is know as
Fraud
Morality - Interest + Expense =
Gross Premium.
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis?
Guaranteed (If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.)
Which of the following annuity riders ensures investors will receive a set amount of income annually?
Guaranteed Minimum Income Benefit (The Guaranteed Minimum Income Benefit provides a set annual income, no matter how the underlying investments perform.)
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
Guaranteed insurability. (Guaranteed insurability is a rider that is included at the time of application (or can be added at a later date) which allows the insured to increase the amount of insurance without proving evidence of insurability.)
An exclusive agent
Has a contract with one company. (The exclusive agent, also known as the captive or career agent, chooses to have a contract with one company.)
Which of the following is an eligibility requirement for all Social Security Disability Income benefits? - Have attained fully insured status - Be disabled for at least 1 year - Have permanent kidney failure - Be at least age 50
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.)
Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT - His children have been covered by a child rider - He had purchased a 20 year renewable term insurance policy in the face amount of $150,000 - His total annul premium amount. - His spouse had been assigned the primary beneficiary
His spouse had been assigned the primary beneficiary
Which of the following types of LTC is NOT provided in an institutional setting? - Intermediate care - Home health care - Custodial care - Skilled nursing care
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.)
In which of the following cases would a credit disability policy be issued?
If an individual is in debt to a specific creditor, payments will be made for him/her until the return to work
The key factor of representation that allows the injured party to rescind the contract is
If the representation is false in a material point. (If a representation is false in a material point the injured party is entitled to rescind the contract from the time the representation becomes false)
Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?
Immediately after receiving written proof of loss
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?
Indemnity
Which of the following persons represents several insurance companies but owns the records of the policies sold?
Independent agent
If a client has purchased a long term care policy that a HICAP counselor determines to be inadequate for the needs of the client, the counselor will
Inform the client of the inadequacies in the policy (HICAP does not sell policies or recommend agents or companies. It provides free assistance in analyzing policies and explaining coverage to clients.)
Stranger-originated life insurance policies are in direct opposition to the principle of
Insurable interest (Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity. STOLI policies violate the principle of insurable interest)
Which of the following is NOT one of the services that HICAP offers to consumers
Insurance sales.
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.)
If a retirement plan or annuity is "qualified", this means
It is approved by the IRS
Which of the following is true of a PPO?
Its goal is to channel patients to providers that discount services.
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers (The law of large numbers, which states that the larger a group is, the more accurately losses reported will equal the underlying probability of loss, is the basis for statistical prediction of loss upon which rates for insurance are calculated.)
A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n):
Legal Hazard (Legal hazard is defined as a set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred.)
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.)
Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?
Long-term care
Which of the following insurance coverages would be allowed with an MSA?
Long-term care (MSA participants cannot have medicare or any other health coverage that is not a HDHP. Following exceptions are workers compensation, specific disease or illness, a fixed amount per day of hospitalization, accidents and/or disability, dental care, vision care and LTC.)
Medi-Cal is designed to provide health insurance primarily for persons who are
Low-income and uninsured.
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower.
If a settlement option is not chosen by the policy owner or the beneficiary, which option will be used?
Lump sum (Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.)
All of the following are true regarding the Medical Information Bureau (MIB) EXCEPT
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 insurer's on prior insurance applications.)
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
Morale (A morale hazard is someone who has an indifferent attitude towards an insurance company. He is careless or irresponsible because he knows his loss will be covered by the insurance.)
Which of the following terms most precisely fits the definition of "the incidence or probability of sicknesses or accidents within a given group of people?"
Morbidity
The classification Small Employer means any person actively engaged in a business that on at least 50% of its working days during the preceding year employed
No more than 100 employees. (Classification rules established by the Insurance Code state that Small Employer means any person actively engaged in a business that on at least 50% of its working days during the preceding year employed not more than 100 eligible employees)
Can a group that is formed for the sole purpose of obtaining group insurance qualify for group coverage?
No, the group must be formed for a purpose other than obtaining group insurance
Which renewal provision(s) must be included in a long-term care policy issued to an individual?
Noncancellable and guaranteed renewable (No long-term care policy issued to an individual may contain renewal provisions other than guaranteed renewable or noncancellable.)
Shortly after a replacement transaction on a Medicare supplement policy, the insured decided to cancel the policy, but is unsure whether the free-look provision applies. The insured could find the that information in the
Notice Regarding Replacement.
When is the annual open enrollment for state insurance exchanges?
November 1 through January 31
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.)
When does Medicare cover nursing home care?
Only if it is part of treatment for a covered illness or injury
What do living benefit riders do?
Pay part of the policy death benefit to insureds in order to help fund long-term care or nursing home care
Which of the following is the most common time for errors and omissions to occur on the part of an insurer?
Policy Delivery (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.)
Which of the following individuals must have insurable interest in the insured?
Policyowner (The policy owner must have an insurable interest in the insured (his/her own life if the policy owner and the insured is the same person) or in the life of a family member or a business partner)
All of the following are characteristics of group life insurance EXCEPT - Certificate holders may convert coverage to an individual policy without evidence of insurability - Premiums are determined by the age, sex and occupation of each individual certificate holder. - Amount of coverage is determined according to nondiscriminatory rules - Individuals covered under the policy receive a certificate of insurance
Premiums are determined by the age, sex and occupation of each individual certificate holder. (Premiums are determined by the age, sex, and occupation of the entire group.)
All of the following are examples of risk retention EXCEPT
Premiums.
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 the describe?
Reduction of premium (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.)
In the event of a loss, business overhead insurance will pay for
Rent
In the event of a loss, business overhead insurance will pay for
Rent (Business overhead insurance is designed to pay the ongoing business expenses of a small business owner while they are disabled and unable to work. It does not pay the salary of the business owner or their loss of profits. However, it will provide the funds needed to pay the salary of employees other than the owners and their other ongoing business expenses, such as rent.)
In case of a loss, the indemnity provision in insurance policies
Restores an insured person to the same financial state as before the loss. (Indemnity (Sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss. and is not allowed to gain financially because of the existence of an insurance contract.)
Restoration of Benefits is most beneficial to the insured when they
Suffer a large loss.
Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are
Tax deductible.
The Health Insurance Counseling and Advocacy Program is administered by
The California Department of Aging. (The Department of Aging is responsible for overseeing the operations of each local HICAP agency in California.)
Which of the following is NOT covered under Plan A in Medigap insurance?
The Medicare Part A deductible
Which of the following statements about HRAs is TRUE? - The account allows roll-over of unused balances at the end of the year at the employee's discretion - The account only allows roll-over of half the unused balances at the end of the year - The account does not allow roll-over of unused balances at the end of the year - The account allows roll-over of unused balances at the end of the year at the employer's discretion.
The account allows roll-over of unused balances at the end of the year at the employer's discretion.
An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?
The cost of coverage is a deductible expense by the employer (The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.)
If a business wants to buy a disability income policy on a key employee, which of the following is considered the beneficiary?
The employer
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? - The insured is in an accident and incurs a large claim. - The insured does not pay the premium - The insured reaches the maximum age limit specified in the policy - Within two years of the application, the insurer discovers a misrepresentation
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.)
Which of the following is NOT a characteristic of pure risk?
The loss must be catastrophic
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
An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation?
They are tax deducitble (An individual covered by a high deductible health plan can make a tax-deducitble contribution to an HSA and use it to pay for out-of-pocket medical expenses.)
Which of the following statements regarding deferred compensation funds is INCORRECT? - They can be established by employers - They can be made with cash deposits to annuity - They generally provide additional retirement benefits. - They are usually qualified plans
They are usually qualified plans (Deferred Compensation Funding refers to any employer retirement, savings, or other deferred compensation plan that is not a qualified retirement plan. Funding involves a contractual commitment between the employer and employee to pay compensation in future years. These plans are typically made with selected employees to provide additional retirement benefits.)
Regarding Medicare SELECT policies, what are restricted network provisions?
They condition the payment of benefits (A Medicare SELECT policy is a Medicare supplement policy that contains restricted network provisions - provisions that condition the payment of benefits, in whole or in part, on the use of network providers.)
Which of the following is NOT a goal of risk retention?
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. )
What is the main purpose of Medi-cal?
To provide coverage for medical services for individuals with limited income
HICAP counselors are primarily
Trained and registered volunteers.
Which of the following types of insurance policies is most commonly used in credit life insurance?
Whole Life
To which of the following products does the Replacement Regulation apply? - Credit life insurance - Converting an existing policy with the same insurer - Whole life insurance - Group annuities
Whole life insurance
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? - Distributions before age 59 1/2 incur a 10% penalty on policy gains. - Policy loans are taxable distributions. - Accumulations are tax deferred. - Withdrawals are not taxable.
Withdrawals are not taxable.
Which of the following is NOT a factor in determining qualifications for Social Security disability benefits? - Worker's PIA - Worker's age - Number of work credits earned - Worker's occupation
Worker's occupation (A worker's specific occupation is not a factor in determining benefits so long as the worker has earned the required amount of work credits.)
Which document is used to asses risk associated with an applicant's lifestyle and character?
X Character Assessment X
