NWM Exam study set

Which type of misrepresentation persuades an insured, to their detriment, to cancel, lapse, or switch policies from one to another?

"Twisting" is a misrepresentation that persuades an insured/owner, to their detriment, to cancel, lapse, or switch policies from one to another.

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

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

In health insurance, what is a copayment?

A copayment is a pre-determined amount the insured pays at the time he or she receives the service. The insurance company pays the remaining amount.

Which of the following is NOT true about a joint and survivor annuity benefit option?

A joint and survivor annuity will pay until the last annuitant has died; however, the surviving annuitant may receive reduced payments.

Which of the following is NOT covered under a long-term care policy?

A long-term care policy may provide coverage for home health care, adult day care, hospice care or respite care. Acute care is not covered under a long-term care policy

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

A tornado that destroys property would be an example of which of the following?

A peril is the cause of loss insured against in an insurance policy.

The legal definition of "person" would NOT include which of the following?

A person is a legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in its own name. Persons include individual human beings, associations, organizations, corporations, partnerships, and trusts.

Profitable distribution of exposures serves the purpose of

A profitable distribution of exposures exists when poor risks are balanced with preferred risks, with the standard risks in the "middle." The purpose behind distributing risks in this manner is to protect the insurer from adverse selection.

Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?

Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.

All of the following are essential benefits required to be included in all health plans purchased in the Marketplace EXCEPT

Adult dental care is not a required benefit.

Adverse selection is a concept best described as

Adverse selection means that there are more risks with higher probability of loss seeking to purchase and maintain insurance than the risks who present lower probability. Underwriters must guard against this.

What license or licenses are required to sell variable annuities?

Agents are required to have both a life insurance license and a securities license to sell variable annuities.

What document describes an insured's medical history, including diagnoses and treatments?

An Attending Physician's Statement (APS) is the best way for an underwriter to evaluate an insured's medical history. The report includes past diagnoses, treatments, length of recovery time, and prognoses.

An independent agent may have contracts with which of the following?

An independent agent may have contracts with more than one insurer.

Which of the following is NOT fundable by annuities?

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 a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated?

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.

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may

Asset recovery will commence only if there is no surviving spouse. If there is a surviving spouse, asset recovery may be postponed until after the surviving spouse dies. The assets of heirs are not subject to recovery for Medi-Cal claims of others.

An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?

Avoidance is a method of risk management by which a person tries to eliminate risk of loss by avoiding any exposure to an event that could give rise to such loss. Risk avoidance is effective but seldom practical.

Which of the following is NOT true regarding Basic Surgical Expense coverage?

Basic Surgical Expense Coverage is commonly written in conjunction with Hospital Expense policies. These policies pay for the costs of surgeons' services, whether the surgery is performed in or out of the hospital. Coverage includes surgeons' fees, anesthesiologist, and the operating room when it is not covered as a miscellaneous medical item. As with the other types of basic medical expense coverage, there is no deductible, but coverage is limited.

An insured pays her Major Medical Insurance premium annually on March 1. Last March she forgot to mail her premium to the company. On March 19, she had an accident and broke her leg. The insurance company would

Because the accident occurred during the grace period, the insurance company will pay the claim.

Which of the following is NOT true regarding a Certificate of Authority?

Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.

Who must sign the notice regarding replacement?

Before issuing a replacement policy, the insurer must furnish the applicant with a notice regarding replacement, which must be signed by both the applicant and the agent.

Which of the following groups would most likely be covered under a blanket accident policy?

Blanket insurance is issued on those groups that have members that are constantly changing.

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 insurance is available to newspapers hiring persons as "independent contractors" to deliver newspapers. (CIC 10222).

In the event of a loss, business overhead insurance will pay for

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.

Which of the following would automatically qualify for Medi-Cal benefits?

California residents in a variety of situations may qualify for benefits from Medi-Cal; however, individuals who receive cash assistance from one of the following programs are automatically eligible for Medi-Cal: SSI/SSP, CalWORKS, Refugee Assistance and Foster Care or Adoption Assistance Program.

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?

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.

Which of the following best describes the tax advantage of a qualified retirement plan?

Contributions are tax deferred, and earnings on the money in the plan accrue on a tax-deferred basis.

All of the following are true regarding copayments, EXCEPT

Copayments are typically expressed in specific dollar amounts, not percentages (like co-insurance).

Which of the following statements regarding deferred compensation funds is INCORRECT?

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.

Which of the following would be a qualifying event as it relates to COBRA?

Employee qualifying events include the termination of employment for reasons other than for misconduct; dependents' qualifying events include the death of the employee, divorce or legal separation.

Who will be affected by the share of cost requirement for Medi-Cal?

If an individual's income exceeds the Medi-Cal limit for his/her family size, that individual will have to pay a certain amount, called share of cost (SOC), in the month when medical expenses occurred.

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

If the employer pays all of the premium, then all employees must be included.

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?

In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.

Which of the following is NOT allowed in credit life insurance?

In credit life insurance, a creditor may require that the debtor have life insurance, but may not require the debtor to purchase insurance from a specific insurer.

Which of the following is true of a PPO?

Insureds are treated by providers who have agreed to discount their charges.

For how long is an insurance company allowed to defer policy loan requests?

Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.

All of the following are the responsibilities of every long-term care insurer in California EXCEPT

Long-term care insurers must maintain strict requirements. These include establishing marketing procedures to assure that comparison is fair and accurate and to assure that excessive insurance is not sold. In addition, insurers must semiannually submit to the Commissioner a list of all agents authorized to solicit for the sale of long-term care insurance.

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?

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.

All of the following are personal uses of life insurance EXCEPT

Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity. A buy-sell agreement is for business uses of life insurance.

All of the following are covered by Part A of Medicare EXCEPT

Physician's and surgeon's services are covered under Part B.

All of the following are true regarding a decreasing term policy EXCEPT

Premiums remain level with a decreasing term policy; only the face amount decreases.

What type of care is Respite care?

Respite Care is designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the care giver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.

Which of the following is NOT a goal of risk retention?

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.

Which of the following are considered standard levels of care?

Skilled nursing care, intermediate nursing care, custodial care, home health care, home care and community based care are considered standard levels of care. (CIC10232.1)

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of

Stranger-originated life insurance (STOLI) policies are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements.

The premium of a survivorship life policy compared with that of a joint life policy would be

Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

Which of the following is true regarding elimination periods and the cost of coverage?

The "elimination period" is a period of days which must expire after the onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period is, the lower the cost of coverage will be.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?

The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. How much will the beneficiary receive from the policy?

The beneficiary will most likely receive twice the face value of the policy, since the insured's fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

The difference between the premiums paid and the cash value would be taxable. In this example, the difference between the premiums paid ($15,000) and the cash value ($18,000) is $3,000.

Which of the following statements concerning group health insurance is CORRECT?

The employer receives the master policy; each employee receives a certificate of insurance. All employees have the same coverage under the master contract.

What is the goal of the HMO?

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.

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy?

The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT

The injured party has the right to rescind the contract whenever there is a violation of a material warranty, intentional or unintentional concealment, or intentional or fraudulent omissions. The amount of paid claims would not rescind the policy.

Which is TRUE about the cash surrender nonforfeiture option?

The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.

Which of the following best describes taxation during the accumulation period of an annuity?

The interest accumulated in an annuity is the tax base, but the taxes are deferred during the accumulation period. The cost base is the premium dollars that have already been taxed and will not be taxed again when withdrawn from the contract.

Which of the following settlement options in life insurance is known as straight life?

The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.

Which of the following would NOT be considered a primary risk factor in underwriting individual health insurance policies?

The marital status of an applicant is not a primary risk factor considered in the underwriting process.

Which of the following plans offers a limited choice of health care providers?

The members of Exclusive Provider Organizations do not choose health care providers from a list of preferred providers. Instead, insureds under an EPO plan use specific providers who are paid on a fee-for-service basis.

In terms of parties to a contract, which of the following does NOT describe a competent party?

The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

The policy does not go into effect until the premium has been collected. If the premium was not collected at the time of the application, the producer may also be required to get a Statement of Good Health from the applicant at the time of policy delivery. Waiver of premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.

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?

The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.

What method is used to determine the taxable portion of each annuity payment?

The ratio of the total investment in that contract to the expected return is developed to determine the portion of the annuity payment that will be taxable and nontaxable.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT

The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

Which characteristic does NOT describe managed care?

There are five distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventive care, and high-quality care.

An Adjustable Life policyowner can change which of the following policy features?

Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.

An insured was involved in an accident and could not perform her current job for 3 years. If the insured could reasonably perform another job utilizing similar skills after 1 month, for how long would the insured be receiving benefits under an "own occupation" disability plan?

Under an "own occupation" plan, if the insured cannot perform their current job for a period of up to 2 years, disability benefits will be issued, even if the insured would be capable of performing a similar job during that 2-year period. After that, if the insured is capable of performing another job utilizing similar skills, benefits will not be paid.

When is the insurability conditional receipt given?

Under the terms of the insurability conditional receipt, the insurance coverage becomes effective as of the date of the receipt, provided the application is approved. This receipt is generally provided to the applicant when the initial premium is paid at the time of application.

What is the benefit of choosing extended term as a nonforfeiture option?

Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

Acting as an agent for a nonadmitted insurer (unless a surplus line broker) is considered a/an

Unless a person is a surplus line broker, it is consider a misdemeanor in this state to act as an agent for a nonadmitted insurer in the transaction of insurance business.

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium rider waives the premium if the insured owner has been totally disabled for a predetermined period. The payor benefit provides for an

Why is an equity indexed annuity considered to be a fixed annuity?

While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.