OR Life and Health Insurance: Simulate Your Exam from Exam FX.

The authority granted to an agent through the agent's contract is referred to as

a) Absolute authority b) Express authority c) Apparent authority d) Implied authority Answer: b) Express authority ~ Express powers are written into the contract between the insurer and the agent.

Who may complete a paramedical report?

a) An underwriter b) A nursing assistant c) A registered nurse d) A spouse Answer: c) A registered nurse

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

a) Cash surrender b) Reduced paid-up c) Paid-up options d) Extended term Answer: a) Cash surrender

Which of the following will vary the length of the grace period in health insurance policies?

a) The length of time the insured has been insured. b) The term of the policy. c) The mode of the premium payment. d) The length of any elimination period. Answer: c) The mode of the premium payment.

Which of the following types of insurance policies is most commonly used in credit life insurance?

a) Equity indexed life b) Decreasing term c) Increasing term d) Whole life Answer: b) Decreasing term

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

a) Payment of premium. b) Delivery receipt. c) Signed waiver of premium. d) Statement of good health. Answer: c) Signed wavier of premium.

Which of the following is an example of a limited-pay life policy?

a) Renewable Term to Age 70 b) Level Term Life c) Straight Life d) Life Paid-up at Age 65 Answer: d) Life Paid-up at Age 65

How are HMO territories typically divided?

a) Type of physician services available b) Community rating system c) By where the HMO can find the least expensive physicians d) Geographic areas Answer: d) Geographic areas

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) incontestability b) Physical Exam and Autopsy c) Legal Actions d) Time of Payment of Claims Answer: d) Time of Payment of Claims

All of the following are factors that an underwriter could use to select and classify risk EXCEPT

a) morals. b) occupation. c) avocation. d) national origin. Answer: d) national origin. ~ The company will discriminate in favor of good risks and not of poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin in their underwriting.

Lyle has a $10,000 term life policy. He paid his annual premium on February 1. Lyle fails to renew the policy and dies on February 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company?

a) $10,000 b) $9,800 c) $200 d) $0 Answer: b) $9,800 ~ In this scenario, death occurred within the mandatory 30 day grace period. The past due premium, ($200), would be subtracted from the face amount of the policy.

An insured has a major medical policy with a $500 deductible and a coinsurance clause of 80 / 20. If he incurs medical expenses of $4,000, the insurer would pay

a) $3,200. b) $3,500. c) $2,500. d) $2,800. Answer: d) $2,800. ~ Calculations: $4,000 - $500 = $3,500 $3,500 x 0.80 = $2,800

What is the shortest possible elimination period for group short-term disability benefits provided by an employer?

a) 0 days b) 30 days c) 60 days d) 90 days Answer: a) 0 days

Insurers must keep records associated with a given policy for how many years after the policy expiration?

a) 10 b) 20 c) 3 d) 5 Answer: c) 3

What is the minimum number of employees that a small employer can have?

a) 10 b) 25 c) 1 d) 2 Answer: d) 2 ~ The term "small employer" applies to any person or entity that employs at least 2, but not more than 50 employees on business days during the preceding calendar year.

When a producer's residential or office address changes, the Insurance Department must be notified within

a) 10 days b) 15 days c) 30 days d) 60 days Answer: c) 30 days

What is the penalty for IRA distributions that are below the required minimum for the year?

a) 10% b) 25% c) 50% d) 60% Answer: c) 50%

According to the PPACA (Patient Protection and Affordable Care Act) rules, what percentage of health care costs will be covered under a bronze plan?

a) 10% b) 30% c) 40% d) 60% Answer: d) 60%

The Insurance Director shall examine every authorized insurer. How long must insurers keep records pertaining to the insurance transactions under the license?

a) 5 years b) 7 years c) 1 year d) 3 years Answer: d) 3 years

At what age may an individual make withdrawals from an HSA for non-health purposes without being penalized?

a) 55 b) 59.5 (59 1/2) c) 62 d) 65 Answer: d) 65 ~ After age 65, a withdrawal from an HSA used for non-health purposes will be without a penalty, although it will be taxed.

In Oregon, how long does a producer have to notify the Director of a change in location or name?

a) 7 days b) 10 days c) 30 days d) 45 days Answer: c) 30 days

For how many days of skilled nursing facility care will Medicare pay benefits?

a) 90 b) 100 c) 30 d) 60 Answer: b) 100

How many eligible employees must be included in a contributory plan?

a) 90% b) 100% c) 50% d) 75% Answer: d) 75%

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?

a) A business partner of the insured b) The wife of the deceased insured c) The former wife of the deceased insured d) A minor son of the insured Answer: d) A minor son of the insured

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

a) A corporation can be an annuitant as long as the beneficiary is a natural person. b) The contract can be issued without an annuitant. c) The annuitant must be a natural person. d) A corporation can be an annuitant as long as it is also the owner. Answer: c) The annuitant must be a natural person.

According to the Entire Contract provision, a policy must contain

a) A declarations page with a summary of insureds. b) Buyer's guide to life insurance. c) Listing of the insured's former insurer(s) for incontestability provisions. d) A copy of the original application for insurance. Answer: d) A copy of the original application for insurance.

Which of the following are characteristics of a successful self-funded plan?

a) A group large enough to reasonably predict future loss experience. b) A stop-loss contract to assume losses beyond the insured's retention. c) A third party administrator who services claims. d) All of the above Answer: d) All of the above

Who establishes the fees that must be paid in conjunction with an application for an insurance license?

a) A group of producers b) A group of reinsurers c) The Director d) The insurer Answer: c) The Director

All of the following are correct about the required provisions of a health insurance policy EXCEPT

a) A reinstated policy provides immediate coverage for an illness. b) Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. c) A grace period of 31 days is found in an annual pay policy. d) The entire contract clause means the signed application policy, endorsements, and attachments constitute the entire contract. Answer: a) A reinstated policy provides immediate coverage for an illness.

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

a) A surrender charge will not be imposed because the account has been open for at least 1 year. b) The owner will forfeit any premiums he has paid into the account, but will receive any interest earned on the account. c) The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge. d) A surrender charge will be imposed that is equal to 3 times of the owner's monthly annuity payments. Answer: c) The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge.

The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have?

a) Accident-only b) Restrictive c) Accidental Death d) Comprehensive Answer:: a) Accident-only

When the insured purchased his health policy he was a window washer. He has since changed occupations, and now manages a library. If the insurer is notified of the insured's change of occupation, the insurer should

a) Adjust the benefit in accordance with the decreased risk. b) Replace the policy with a new role. c) Return any unearned premium. d) Increase the premium. Answer: a) Adjust the benefit in accordance with the decreased risk.

Which of the following policies would be classified as a traditional level premium contract?

a) Adjustable Life b) Universal Life c) Variable Universal Life d) Straight Life Answer: d) Straight Life ~ Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

a) Annuitization period b) Pay-out period c) Liquidation period d) Depreciation period Answer: d) Depreciation period ~ The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.

All of the following qualify for Medicare Part A EXCEPT

a) Anyone who is at the end stage of renal disease. b) Anyone who is over 65, not covered by Social Security, and is willing to pay premium. c) Anyone who is willing to pay a premium. d) Anyone that qualifies through Social Security. Answer: c) Anyone who is willing to pay a premium.

Employer contributions made to a qualified plan

a) Are subject to vesting requirements. b) May discriminate in favor of highly paid employees. c) Are after-tax contributions. d) Are taxed annually as salary. Answer: a) Are subject to vesting requirements. ~ Qualified plans must have a vesting requirement.

Which of the following is usually true of a participating life insurance policy?

a) Assesses premiums against stockholders. b) Pays dividends to policyowners. c) May be converted to a term life policy. d) Pays dividends to stockholders. Answer: b) Pays dividends to policyowners. ~ Participating is a term used to refer to any insurance policy that distributes its dividends by cash payments, reduced premiums, units of paid-up life insurance, a savings program, or by the purchase of term insurance.

When an annuity is written, whose life expectancy is taken into account?

a) Beneficiary b) Life expectancy is not a factor when writing an annuity. c) Owner d) Annuitant Answer: d) Annuitant

All of the following are personal uses of life insurance EXCEPT

a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation. Answer: b) Buy-sell agreement.

What type of annuity activity will cause immediate taxation of the interest earned?

a) Changing a settlement option b) Failing to make a planned contribution c) Surrendering the annuity for cash d) Using the contract as collateral for a loan Answer: c) Surrendering the annuity for cash.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?

a) Charitable Organization b) Dependents c) Annuitant d) Spouse Answer: d) Spouse ~ If an annuities contract holder dies before the effective starting date, the contract's interest continues to be taxable, unless the beneficiary is a spouse. In that case, this tax can be deferred.

Which of the following is true of a PPO (preferred provider organization)?

a) Claim forms are completed by members on each claim. b) No copayment fees are involved. c) its goal is to channel patients to providers that discount services. d) The most common type of PPO is the staff model. Answer: c) Its goal is to channel patients to providers that discount services.

What term is used to describe when the medical caregiver provides services to only member or subscribers of a health organization, and contractually is not allowed to treat other patients?

a) Closed panel b) Corridor c) Probationary d) Open panel Answer: a) Closed panel

All of the following are characteristics of a Major Medical Expense policy EXCEPT

a) Coinsurance. b) Low maximum limits. c) Deductibles. d) Blanket coverage. Answer: b) Low maximum limits. ~ Major medical expense contracts are characterized by high maximum limits, blanket coverage, coinsurance, and a deductible.

What type of group rating uses the actual experience of the group as a factor in developing the rates to be charged?

a) Community rating b) Individual rating c) Experience rating d) District rating Answer: c) Experience rating

All of the following are beneficiary designations EXCEPT

a) Contingent b) Primary c) Specified d) Tertiary Answer: c) Specified ~ Beneficiary designations determine the order in which benefits will be paid primary or contingent, which includes secondary and tertiary.

Most scheduled plans provide first-dollar benefits without

a) Copays. b) Exclusions and conditions. c) Coinsurance and deductibles. d) Premiums. Answer: c) Coinsurance and deductibles.

According to the Entire Contract provision, what document must be made part of the insurance policy?

a) Copy of the original application b) Buyer's Guide c) Agent's report d) Outline of coverage Answer: a) Copy of the original application.

Which type of insurance provides funds for a business organization to purchase the business interest of a disabled partner?

a) Corporate Disability b) Disability Buy-Sell c) Disability Interest Buy-out d) Corporate Transfer Answer: b) Disability Buy-Sell

Which of the following provisions must be included on the first page of a Medicare supplement policy and states the insurer's right to change premium amounts?

a) Coverage Limitations b) Continuation Provision c) Premium Provision d) Insurer's Rights Answer: b) Continuation Provision ~ The Continuation Provision, also known as a Renewal Provision, must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.

Which is true about a spouse term rider?

a) Coverage is allowed for an unlimited time. b) The rider is decreasing term insurance. c) Coverage is allowed up to age 75. d) The rider is usually level term insurance. Answer: d) The rider is usually level term insurance.

Under a typical health insurance policy, claims that result from injuries while the insured was intoxicated or under the influence of drugs are generally

a) Covered, but an extra premium is charged when a claim is filed. b) Covered with a 90 days' waiting period. c) Excluded. d) Covered. Answer: c) Excluded.

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

a) Credit health. b) Decreasing whole life. c) Multiple Protection insurance. d) Credit life. Answer: d) Credit life.

Which of the following is TRUE about credit life insurance?

a) Debtor is the policy beneficiary. b) Creditor is the policyowner. c) Debtor is the annuitant. d) Creditor is the insured. Answer: b) Creditor is the policyowner.

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT

a) Employer contributions are tax deductible as ordinary business expense. b) Funds accumulate on a tax-deferred basis. c) Employee and employer contributions are not counted as income to the employee for income tax purposes. d) At distribution, all amounts received by the employee are tax free. Answer: d) At distribution, all amounts received by the employee are tax free. ~ Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.

OBRA requires which disease to be covered by an employer for 30 months before Medicare becomes the primary mode of coverage?

a) End-stage heart failure b) End-stage renal failure c) Black lung d) Leukemia Answer: b) End-stage renal failure

Which type of dental care would cover the cost of filings?

a) Endodontics b) Orthodontics c) Oral Surgery d) Restorative Answer: d) Restorative ~ Restorative care re-establishes functional use to natural teeth, such as the application of fillings and crowns.

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

a) Entire contract. b) Total contract. c) Aleatory contract. d) Complete contract. Answer: a) Entire contract. ~ The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.

All of the following are characteristics of group life insurance EXCEPT

a) Group life insurance is written as a master policy. b) Individuals covered under the policy receive a certificate of insurance c) Certificate holders may convert coverage to an individual policy without evidence of insurability. d) Premiums are determined by the age, sex, and occupation of each individual certificate holder. Answer: d) Premiums are determined by the age, sex, and occupation of each individual certificate holder.

Which of the following factors would be an underwriting consideration for a small employer carrier?

a) Health status b) Medical history of the employees c) Percentage of participation d) Claims experience Answer: c) Percentage of participation ~ Coverage under a small employer health benefit plan is generally available only if at least 75% of eligible employees elect to be covered.

The main difference between immediate and deferred annuities is

a) How the annuity is purchased. b) The number of insureds. c) The amount of each payment. d) When the income payments begin. Answer: d) When the income payments begin.

In a survivorship life policy, when does the insurer pay the death benefit?

a) If the insured survives to age 100 b) Upon the last death c) Upon the first death d) Half at the first death, and half at the second death. Answer: b) Upon the last death

What describes the specific information about a policy?

a) Illustrations b) Buyer's guide c) Producer's report d) Policy summary Answer: d) Policy summary

A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?

a) Immediate b) Flexible c) Deferred d) Variable Answer: a) Immediate

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

a) Implied b) Apparent c) Assumed d) Express Answer: a) Implied

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

a) Interviews b) State records c) Medical records d) Application Answer: d) Application

An applicant wants to buy a policy that has a cash value element. Which type should she buy?

a) Investment b) Term c) Permanent d) Stock Answer: c) Permanent

What statement best describes the free look period?

a) It allows the proposed insured to carefully look over the application prior to filling it out. b) It allows the company to obtain an inspection and medical examination on the proposed insured prior to issuing the policy. c) It allows for the proposed insured to carefully look over the policy before applying for it. d) It allows for the insured to return the policy within 10 days for a full refund of premiums if dissatisfied for any reason. Answer: d) It allows for the insured to return the policy within 10 days for a full refund of premiums if dissatisfied for any reason.

Which of the following statements is TRUE about a policy assignment?

a) It authorizes an agent to modify the policy. b) It transfers rights of ownership from the owner to another person. c) It is the same as a beneficiary designation. d) It permits the beneficiary to designate the person to receive the benefits. Answer: b) It transfers rights of ownership from the owner to another person. ~ The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment).

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. Answer: 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.

Which of the following is TRUE regarding the annuity period?

a) It may last for the lifetime of the annuitant. b) During this period of tie the annuity payments grow interest tax deferred. c) It is also referred to as the accumulation period. d) It is the period of time during which the annuitant makes premium payments into the annuity. Answer: a) It may last for the lifetime of the annuitant. ~ The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.

Which of the following statements about the reinstatement provision is true?

a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash. Answer: a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

a) Joint Life Policy b) Survivorship Life Policy c) Second-to-Die d) Family Income Policy Answer: a) Joint Life Policy

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

a) Joint and survivor b) Life with period certain c) Joint limited annuity d) Joint life Answer: d) Joint life ~ Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.

In group insurance, what is the policy called?

a) Master policy b) Entire contract c) Certificate of authority d) Certificate of insurance Answer: a) Master policy ~ In group insurance the policy is called the master policy and is issued to the policyowner, which could be the employer, an association, a union, or a trust.

If a dental plan is integrated, it is combined with what type of plan?

a) Medical b) Secondary dental c) Supplemental d) Life Answer: a) Medical

Fred and Jody are covered under a group health insurance plan at his place of employment. When Jody gave birth to their first child, what must he do in order to have coverage for their child?

a) Notify the insurer within 31 days in order for coverage to continue without any evidence of insurability. b) Notify the insurer on the anniversary date of the plan. c) Notify the employer within 10 days. d) Notify the insurer immediately and provide proof of insurability. Answer: a) Notify the insurer within 31 days in order for coverage to continue without any evidence of insurability.

The primary eligibility requirement for Medicaid benefits is based upon

a) Number of dependents. b) Need. c) Whether the claimant is insurable on the private market. d) Age Answer: b) Need.

Which type of dental treatment involves the dental pulp within the teeth?

a) Oral surgery b) Soft dental c) Root canal d) Endodontics Answer: d) Endodontics ~ Endodontics involves the treatment of dental pulp within natural teeth.

How can a new physician be added to the PPO's approved list?

a) Pay an annual fee for being on the PPO list. b) New physicians are only added once a year, and are selected by the PPO's Board of Directors. c) Agree to follow the PPO standards and charge the appropriate fees. d) Fill out the appropriate paperwork and wait the 12 month pre-certification period. Answer: c) Agree to follow the PPO standards and charge the appropriate fees.

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

a) Pay half of her claim because the insured had an outstanding premium. b) Pay the claim. c) Hold the claim as pending until the end of the grace period. d) Deny the claim. Answer: b) Pay the claim.

Hospice care is intended for

a) People in need of acute care. b) Home health visits from a participating home health agency. c) The caregiver. d) The terminally ill. Answer: d) The terminally ill.

Which of the following statements is an accurate comparison between private and government insurers?

a) Private insurers may be authorized to transact insurance by state insurance departments. b) Insurance provided by the government is called federal insurance. c) Private insurers offer fewer lines of insurance than government insurers. d) Private insurers provide insurance in areas where the government will not. Answer: a) Private insurers may be authorized to transact insurance by state insurance departments.

In respect to the consideration clause, which of the following is consideration on the part of the insurer?

a) Promising to pay in accordance with the contract terms. b) Offering a secondary policy to the applicant. c) Offering an unconditional contract. d) Explaining policy revisions to the applicant. Answer: a) 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.

What is the goal of the HMO?

a) Provide free health services b) Limiting the deductibles and coinsurance to reduce costs c) Providing health services close to home d) Early detection through regular checkups Answer: d) Early detection through regular checkups

After a brief emergency room visit, an insured discovered that his plan required a larger copayment for an out-of-network provider than for a local, in-network provider. Under the PPACA (Patient Protection and Affordable Care Act) provisions, this is

a) Reasonable and customary. b) Part of the plan's benefit schedule. c) Not permitted. d) Counted as part of the insured's annual deductible. Answer: c) Not permitted ~ Under PPACA, plans must not charge a coinsurance or copayment amount that is greater for an out-of-network emergency service provider than for an in-network emergency service provider.

As it pertains to group health insurance, COBRA stipulates that

a) Retiring employees must be allowed to convert their group coverage to individual policies. b) Terminated employees must be allowed to convert their group coverage to individual policies. c) Group coverage must be extended for terminated employees up to a certain period of time at the employer's expense. d) Group coverage must be extended for terminated employees up to a certain period of time at the former employer's expense. Answer: d) Group coverage must be extended for terminated employees up to a certain period of time at the former employer's expense. ~ COBRA requires employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for a specified period of time. The employee can be required to pay up to 102% of the coverage's premium.

All of the following coverage's are usually included under a dental insurance plan EXCEPT

a) Routine examinations. b) Braces and appliances. c) Teeth whitening. d) Oral surgery. Answer: c) Teeth whitening.

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

a) Secondary beneficiary. b) Primary beneficiary. c) Irrevocable beneficiary. d) Revocable beneficiary. Answer: d) Revocable beneficiary. ~ The policyowner may change a revocable designation at any time and without the consent of the beneficiary. Irrevocable beneficiaries, on the other hand, have a vested interest in the policy, so the policyowner may not be able to exercise certain rights without their consent.

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance Answer: d) Any form of life insurance

An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, "Yes," which of the following best describes the agent's next step?

a) The agent must collect the existing policies and turn them over to the replacing insurer. b) The agent must get his supervisor involved in the transaction. c) The agent has no further duties. d) The agent must provide a replacement notice to the applicant. Answer: d) The agent must provide a replacement notice to the applicant.

In a group life insurance policy, the employer may select all of the following EXCEPT

a) The amount of insurance. b) The premium payor. c) The beneficiary. d) The type of insurance. Answer: c) The beneficiary.

Which of the following can surrender a deferred annuity contract?

a) The beneficiary after the owner's death. b) A deferred annuity cannot be surrendered. c) Only the annuity owner. d) Only the insurance company for nonpayment of premiums. Answer: c) Only the annuity owner.

Peril is most easily defined as

a) The cause of loss insured against. b) An unhealthy attitude about safety. c) The chance of a loss occurring. d) Something that increases the chance of loss. Answer: a) The cause of loss insured against.

Which of the following statements about group life is correct?

a) The cost of coverage is based on the ratio of men and women in the group. b) The premiums are higher in an individual policy because there is no medical exam. c) The group sponsor receives a Certificate of Insurance. d) The policy can be converted to an individual term insurance policy. Answer: a) The cost of coverage is based on the ratio of men and women in the group. ~ Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.

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

a) The earnings in the plan accumulate tax deferred. b) Distributions prior to age 59.5 (59 1/2) are tax deductible. c) Employer contributions are deductible as a business expense when the employee receives benefits. Answer: a) The earnings in the plan accumulate tax deferred.

What is the advantage of reinstating a policy instead of applying for a new one?

a) The face amount can be increased. b) The cash values have gained interest while the policy was lapsed. c) The original age is used for premium determination. d) Proof of insurability is not required. Answer: c) The original age is used for premium determination. ~ The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

Which of the following are generally NOT considered when underwriting group insurance?

a) The nature of the group b) The group's past claim experience c) The size of the group d) The insureds' medical history Answer: d) The insureds' medical history

If a policy is rated-up, which of the following is true?

a) The number of exclusions decreases. b) The number of benefits increases. c) The premium increases. d) The premium decreases. Answer: c) The premium increases.

All of the following are true of an annuity owner EXCEPT

a) The owner has the right to name the beneficiary. b) The owner is the party who may surrender the annuity. c) The owner must be the party to receive benefits. d) The owner pays the premiums on the annuity. Answer: c) The owner must be the party to receive the benefits.

An insurer offers a policy very similar to Medicare, although it differs slightly. An agent tells an applicant that the policy is Medicare, since the policies are so similar anyway. Which of the following is true?

a) This is illegal only if the policy is bought by the applicant. b) This practice is illegal. c) This is a legal practice. d) This is legal as long as the applicant understands all the benefits. Answer: b) This practice is illegal.

An insured replaces his current policy with one offered by another insurer. If he finds that he is unsatisfied with the new policy, within what period of time can he return it and receive a full refund?

a) This is not possible with replacement policies unless a mistake was made by either of the insurers. b) 30 days c) 60 days d) 90 days Answer: b) 30 days

Why do group health providers usually require a certain amount of participation in the plan by eligible employees?

a) To ensure the employer is being fair to employees. b) To guard against adverse selection and reduce cost. c) To promote preventive care. d) To ensure a higher profit for the insurer. Answer: b) To guard against adverse selection and reduce cost.

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

a) Variable life b) Universal life c) Whole life d) Decreasing term Answer: d) Decreasing term

Most LTC plans have which of the following features?

a) Variable premiums b) Open enrollment c) Guaranteed renewable d) No elimination period. Answer: c) Guaranteed renewable ~ The benefit amount payable under most LTC policies is usually a specific amount per day, and some policies pay the actual charge incurred per day. Most LTC policies are also guaranteed renewable, however, insurers do have the right to increase the premiums.

When is the insurability conditional receipt given?

a) When an insured individual needs to obtain an insurability receipt for tax purposes. b) If the application is approved before the premium is paid. c) When the premium is paid at the time of application. d) After the application has been approved and the premium has been paid. Answer: c) When the premium is paid at the time of application.

Under what condition are group disability income benefits received by an employee NOT taxable as income?

a) When the employee is 59.5 (59 1/2). b) When the amount of the benefit is equal or less than the amount of contributed by the employer. c) When the benefits received are equal or less than the employee's percentage of the contribution. d) When the employer makes all the premium payments. Answer: c) When the benefits received are equal or less than the employee's percentage of the contribution.

In individual health insurance coverage, the insurer must cover a newborn from the moment of birth, and if additional premium payment is required, allow how many days for payment?

a) Within 10 calendar days b) Within 15 working days c) Within 31 days of birth d) Within a reasonable period of time Answer: c) Within 31 days of birth

Which of the following is NOT covered by a health insurance policy?

a) Dental b) Funeral c) Hospital d) Disability Answer: b) Funeral

What is the benefit of experience rating?

a) It helps employers with high claims experience to get group coverage. b) It helps employees with low claims experience to become exempt from group premiums. c) It allows employers with high claims experience to obtain insurance. d) It allows employers with low claims experience to get lower premiums. Answer: d) It allows employers with low claims experience to get lower premiums. ~ Group health insurance is usually subject to experience rating where the premiums are determined by the experience of this particular group as a whole. Experience rating helps employers with low claims experience because they get lower premiums.

If a retirement plan or annuity is "qualified", this means

a) It is approved by the IRS. b) It has a penalty for early withdrawal. c) it accepts after-tax contributions. d) It is noncancellable. Answer: a) It is approved by the IRS.

Which of the following best describes annually renewable term insurance?

a) It is level term insurance b) It requires proof of insurability at each renewal. c) Neither the premium nor the death benefit is affected by the insured's age. d) It provides an annually increasing death benefit. Answer: a) It is level term insurance.

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?

a) Legal b) Physical c) Morale d) Moral Answer: c) Morale

The amount of disability benefits that an insured receives often depends upon the insured's

a) Number of children at the time of the application. b) Medical history at the time of the application. c) Income at the time of the application. d) Marital status at the time of the application. Answer: c) Income at the time of the application.

An applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract. Which type should he buy?

a) Permanent b) Variable c) Any type of annuity d) Fixed Answer: d) Fixed ~ Fixed life insurance policies offer minimum guaranteed or fixed benefits stated in the contract. Variable life insurance or annuities are contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values, and death benefits for specific policy years?

a) Policy summary b) Notice regarding replacement c) Privacy notice d) Buyer's guide Answer: a) Policy summary

Which of the following are responsible for making premium payments in an HMO plan?

a) Producers b) Insureds c) Payors d) Subscribers Answer: d) Subscribers ~ Subscribers are people in whose name the contract is issued. They would be responsible for making the premium payments.

In reference to fixed annuities, what comprises most of a life insurance company's general account?

a) S & P 500 index b) Conservative investments like bonds c) Aggressive stocks and bonds d) Company stock Answer: b) Conservative investments like bonds.

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called

a) Sharing. b) Avoidance. c) Transfer. d) Reduction. Answer: b) Avoidance.

Which of the following is NOT a metal level of coverage offered under the Patient Protection and Affordable Care Act?

a) Silver b) Bronze c) Iron d) Gold Answer: c) Iron

Which of the following types of insurance policies would preform the function of cash accumulation?

a) Term life b) Credit life c) Increasing term d) Whole life Answer: d) Whole life

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

a) Whole Life b) Ordinary Life c) Joint Life d) Decreasing Term Answer: c) Joint Life ~ A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

a) has a constitution and by-laws. b) Hold annual meetings. c) Is contributory. d) Has at least 50 members. Answer: d) Has at least 50 members. ~All of the above characteristics would make an association group eligible for buying group insurance, except the group must have at least 100 members.

The two types of assignments are

a) Absolute and collateral b) Absolute and partial c) Complete and partial d) Complete and proportionate Answer: a) Absolute and collateral ~ Absolute assigns the entire policy. Collateral assigns a part or all of the benefits.

Which of the following terms is used to name the nontaxed return of unused premiums?

a) Interest b) Surrender c) Dividend d) Premium return Answer: c) Dividend ~ The return of unused premiums is called a dividend. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums.

A man is still employed at age 65 and is now eligible for Medicare. He wants to know what health insurance coverage he is eligible to receive. Which of the following options are available to him?

a) Reapplication for group health b) Medicare only c) Both group health and Medicare d) Continuation of group health only Answer: c) Both group health and Medicare.

Which of the following Medicare supplement plans would be available to a reasonably healthy 91-year-old female?

a) A - C only b) A - N c) K & L only d) A only Answer: b) A - N ~ All Medicare supplement plans (A - N) must be made available to qualifying applicants, regardless of age.

Under a Key Person disability income policy, premium payments

a) Are made by the business and are not tax-deductible. b) Are made by the employee and are not tax-deductible. c) Are made by the employee and are tax-free. d) Are made by the business and are tax-deductible. Answer: a) Are made by the business and are NOT tax-deductible.

Which of the following entities is in charge of making sure that producers follow the Insurance Code properly?

a) Director b) State law enforcement c) Governor d) NAIC Answer: a) Director

Which type of care re-establishes functional use to natural teeth?

a) Functionality b) Repair c) Restorative d) Fillings Answer: (C) Restorative

Which of the following is TRUE regarding the accumulation period of an annuity?

a) It is also referred to as the annuity period. b) It is a period of time during which the beneficiary receives income. c) It is limited to 10 years. d) It is a period during which the payments into the annuity grow tax deferred. Answer: d) It is a period during which the payments into the annuity grow tax deferred.

Which benefits would a disability plan most likely pay?

a) Medical expenses associated with a disability. b) Income lost by the insured's inability to work. c) Rehabilitation costs. d) Co-payments. Answer: b) Income lost by the insured's inability to work. ~ Disability benefits are paid to those who are unable to work as they normally would, due to an accident or illness. Benefits are designed to help the insured recover income lost as a result of the disability. The amount of benefits that an insured receives is determined by the insured's earned income and is usually limited to a certain percentage of that amount.

What limits the amount that a policyowner may borrow from a whole life insurance policy?

a) Premiums paid b) Amount stated in the policy c) Face amount d) Cash value Answer: d) Cash value

Which of the following types of risk will result in the highest premium?

a) Substandard risk b) Standard risk c) Preferred risk d) All risks pay equal premiums Answer: a) Substandard risk

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

a) Taxes must be paid in full. b) Employer's matching contributions can be 50% of employee's salary. c) 75% of employee's contributions are taxed. d) They are tax deferred until withdrawn. Answer: d) They are tax deferred until withdrawn. ~ Taxation is deferred on both contributions and earnings until funds are withdrawn.

An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation?

a) They are not deductible. b) They are taxed as income. c) They are tax deductible. d) They are considered after-tax contributions. Answer: c) They are tax deductible. ~ An individual covered by a high deductible health plan can make a tax-deductible contribution to an HSA and use it to pay for out-of-pocket medical expenses.

The Waiver of Cost Insurance rider is found in what type of insurance?

a) Whole Life b) Joint and Survivor c) Juvenile Life d) Universal Life Answer: d) Universal Life ~ The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

Which of the following is licensed solely to advise insureds about their polices?

a) Broker b) Actuary c) Consultant d) Agent Answer: c) Consultant ~ Insurance consultants offer advice and counseling regarding any contract of insurance issued in Oregon.

A 55-year-old employee has worked part-time for his new employer for 3 months now, but has not been offered health insurance. What factor has limited the employee's eligibility?

a) Income b) Number of hours worked per week c) The total amount of time worked for the company d) Age Answer: b) Number of hours worked per week.

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

a) Joint life annuity. b) Joint and survivor annuity. c) Deferred annuity. d) Pure annuity. Answer: a) Joint life annuity. ~ Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.

Which of the following factors about the insured determines the amount of disability benefit that the insured will receive?

a) Martial status b) Age c) Income d) Gender Answer: c) Income

How many pints of blood will be paid for by Medicare Supplement core benefits?

a) None, Medicare pays for it all. b) Everything after the first 3. c) 1 pint. d) First 3. Answer: d) First 3

Which of the following best details the underwriting process for life insurance?

a) Reporting and rejection of risks b) Selection, classification, and rating of risks c) Solicitation, negotiation and sales of policies. d) Issuance of policies Answer: b) Selection, classification, and rating of risks

In a group policy, the contract is between

a) The employer and the union. b) The employee and the employer. c) The employer and the insurance company. d) The individual and the insurance company. Answer: c) The employer and the insurance company.

Which of the following does the Insuring Clause NOT specify?

a) The name of the insured b) A list of available doctors c) Covered perils d) The insurance company Answer: b) A list of available doctors

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. What amount would his beneficiary receive as a settlement?

a) $0 b) $100,000 c) $200,000 d) $100,000 plus the total of paid premiums. Answer: c) $200,000

The sole proprietor of a business makes a total salary of $50,000 a year. This year, his medical expenses have reached a total of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses?

a) $10,000 b) $25,000 c) $50,000 d) $75,000 Answer: c) $50,000 ~ The proprietors of a business may deduct the cost of a medical expense plan because they are considered to be self-employed individuals instead of employees. The deduction cannot legally exceed the taxpayer's earned income for the year even if the cost of the medical expense plan exceeds this amount (in this scenario, $50,000).

An insured's long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged a $100 per day. How much will the insurance company pay?

a) $100 a day b) 80% of the total cost c) 20% of the total cost d) $120 a day Answer: d) $120 a day ~ Most LTC policies will pay the benefit amount in a specific fixed dollar amount per day, regardless of the actual cost of care.

An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage?

a) $25.50 b) $100 c) $102 d) $25 Answer: c) $102 ~ The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.

One of the differences between group underwriting and individual underwriting is that there is little or no medical information required regarding plan participants in groups of

a) 100 or more. b) 25 or more. c) Fewer than 50. d) 50 or more. Answer: d) 50 or more. ~ In groups of 50 or more, medical information cannot be required for plan participants.

In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective?

a) 100% b) 75% c) 50% d) 25% Answer: a) 100%

Employer health plans must provide primary coverage for individuals with end-stage renal disease before Medicare becomes primary for how many months?

a) 12 months b) 24 months c) 30 months d) 36 months Answer: c) 30 months

Notice of a hearing for a cease and desist order must be given at least how may days in advance?

a) 15 b) 30 c) 7 d) 10 Answer: c) 7 ~ Notice of a hearing for a cease and desist order must be given at least 7 days in advance of the hearing and must include the time and place of the hearing.

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

a) 15% for early withdrawal b) 50% tax on the amount not distributed as required c) No penalties, since the owner is older than 59 1/2 d) 10% for early withdrawal Answer: b) 50% tax on the amount not distributed as required.

According to OBRA ( Omnibus Budget Reconciliation Act) what is the minimum number of employees required to constitute a large group?

a) 20 b) 50 c) 100 d) 15 Answer: c) 100 ~ There must be at least 100 employees in order to qualify for OBRA large-group status. The act states that plans must provide primary coverage for disabled individuals under age 65 who are not retired.

What is the maximum age for qualifying for a catastrophic plan?

a) 26 b) 30 c) 45 d) 62 Answer: b) 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 benefits.

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

a) A hair dresser who operates her business at her house. b) The president and employee of a family corporation. c) A sole proprietor of a service station who employs four employees. d) A sole proprietor of film development store with no employees. Answer: b) The president and employee of a family corporation.

All of the following individuals may qualify for Medicare health insurance benefits EXCEPT

a) A person age 45 who has a permanent kidney failure. b) A person under age 65 who is receiving Social Security disability benefits. c) A retired person age 50. d) A healthy person age 65. Answer: c) A retired person age 50.

This state provides for a temporary license for all of the following EXCEPT

a) A producer's time in the military service. b) A producer's retirement. c) The death of a producer. d) A producer's disability. Answer: b) A producer's retirement.

Which of the following is the basic source of information used by the company in the risk selection process?

a) Agent's report b) Warranty c) Consumer report d) Application Answer: d) Application ~ The application is the basic source of information an insurer uses in the risk selection process.

Which of the following best describes the aleatory nature of an insurance contract?

a) Ambiguities are interpreted in favor of the insured. b) Policies are submitted to the insurer on a take-it-or-leave-it basis. c) Exchange of unequal values. d) Only one of the parties being legally bound by the contract. Answer: c) Exchange of unequal values.

Where would Long-term care services be rendered?

a) An acute care unit of a hospital b) A doctor's office c) A nursing home or one's own home d) A surgery center Answer: c) A nursing home or one's own home

Which of the following would be considered a nonmedical insurance application?

a) An application that does not ask any questions about the applicant's medical history. b) An application submitted with the Agent's Report. c) Any application for life insurance. d) An application on which the medical information is completed by the applicant and the agent only. Answer: d) An application on which the medical information is completed by the applicant and the agent only. ~ An application on which all of the questions, including medical history questions, do not need to be completed by medical professionals, and may be completed by the applicant and the agent.

What is a foreign insurer?

a) An insurer with licensed agents doing business in other countries. b) An insurer with licensed agents who are citizens in more than one country. c) An insurer with a home office in another state. d) An insurer with a home office in another country. Answer: c) An insurer with a home office in another state.

Which of the following losses will be covered by a group medical expense policy?

a) An intentionally self-inflicted injury b) An elective cosmetic surgery c) A pre-existing condition d) An injury resulting from active military duty. Answer: c) A pre-existing condition

If a company has a Simplified Employee Pension plan, what type of plan is it?

a) An undefined contribution plan for large businesses. b) A qualified plan for a small business. c) The same as a 401(k) plan. d) The same as an IRA, with the same contribution limits. Answer: b) A qualified plan for a small business.

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employee?

a) Basic Medical Expense b) Disability Income c) Major Medical d) Dental Expense Answer: b) Disability Income

Which of the following is NOT required to be stated in the outline of coverage provided with a long-term care policy?

a) Basic information about the insurance company. b) Basic information about supplementary policies. c) The policy number. d) The right to return the policy for a refund. Answer: b) Basic information about supplementary policies.

An individual purchased a Medicare supplement policy in March and decided to replace it 2 months later. His history of coronary artery disease is considered a pre-existing condition. Which of the following is true?

a) Because this is a new policy, the pre-existing condition waiting period starts over. b) The pre-existing condition waiting period fulfilled in the old policy will be transferred to the new policy, the new one picking up where the old one left off. c) Coronary artery disease coverage will be permanently excluded from the new policy. d) In replacement pre-existing conditions must be waived, so sickness relating to coronary artery disease will be covered upon the policy's effective date. Answer: b) The pre-existing condition waiting period fulfilled in the old policy will be transferred to the new policy, the new one picking up where the old one left off. ~ When an insured replaces one Medicare supplement policy with another, the pre-existing conditions waiting period does not start over. All types of waiting and elimination periods are carried over, not restarted, since that time was served with the original policy.

Which of the following is not true of Disability Buy-Sell coverage?

a) Benefits are considered taxable income to the business. b) It is typically written to cover partners or corporate officers of a closely held business. c) Premium payments are not deductible to the business. d) The policies provide funds for the business organization to purchase the business interest of a disabled partner. Answer: a) Benefits are considered taxable income to the business.

All of the following statements are correct regarding Credit Life Insurance EXCEPT

a) Benefits are paid to the borrower's beneficiary. b) The amount of insurance permissible is limited per borrower. c) Premiums are usually paid by the borrower. d) Benefits are paid to the creditor. Answer: a) Benefits are paid to the borrower's beneficiary.

The First Street Church plans to sponsor a summer camp for the youth of the their congregation. They would like to purchase insurance that would pay benefits should one of the youth get injured while participating in the camp activities. The type of policy they would likely need is a / an

a) Blanket. b) Limited Sickness. c) Accidental Death and Dismemberment. d) Limited Accident. Answer: a) Blanket.

Which of the following riders would NOT cause the Death Benefit to increase?

a) Cost of Living Rider b) Accidental Death Rider c) Payor Benefit Rider d) Guaranteed Insurability Rider Answer: c) Payor Benefit Rider

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

a) Creditor becoming a policy beneficiary. b) Creditor requiring that a debtor buys insurance from a certain insurer. c) Creditor having a collateral assignment on the policy. d) Creditor requiring that a debtor has a life insurance. Answer: b) Creditor requiring that a debtor buys insurance from a certain insurer. ~ In credit life insurances, creditor may require that the debtor has a life insurance, but they cannot tell you who to buy the insurance from.

When must an IRA be completely distributed when a beneficiary is not named?

a) December 31 of the year following the year of the owner's death. b) Due date of the deceased owner's final tax return including extensions. c) December 31 of the year that contains the fifth anniversary of the owner's death. d) Due date of beneficiary's tax return including extensions. Answer: c) December 31 of the year that contains the fifth anniversary of the owner's death.

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

a) Decreased death benefit at each renewal. b) Required a premium increase each renewal. c) Built cash values. d) Required proof of insurability every year. Answer: b) Required a premium increase each renewal. ~ Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age, however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

a) Decreases b) Stays the same c) Doubles d) Increases Answer: a) Decreases

An IRA purchased by a small employer to cover employees is known as a

a) Defined contribution plan. b) 403(b) plan. c) Simplified Employees Pension plan. d) 401(k) plan. Answer: c) Simplified Employees Pension plan.

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

a) Disclosure rule b) Replacement rule c) Reinstatement rule d) Conversion rule Answer: b) Replacement rule

When transacting business in this state an insurer formed under the laws of another country is known as a / an

a) Domestic insurer. b) Foreign insurer. c) Admitted insurer. d) Alien insurer. Answer: d) Alien insurer.

In disability income insurance, the own occupation definition of disability applies

a) During the elimination period. b) As long as an individual is unable to work. c) For the first 2 years of a disability. d) During the waiting period. Answer: c) For the first 2 years of a disability. ~ The own occupation definition of disability usually applies to the first 24 months after a loss.

When an employee is still employed upon reaching age 65 and eligible for Medicare, which of the following is the employee's option?

a) Enroll in Medicare when eligible; otherwise, Medicare benefits will be forfeited. b) Wait until the next birthday to enroll. c) Remain on the group health insurance plan and defer eligibility for Medicare until retirement. d) Enroll in Medicare, while the company must provide additional retirement benefits. Answer: c) Remain on the group health insurance plan and defer eligibility for Medicare until retirement.

If a change needs to be made to the application for insurance, the agent may do all of the following EXPECT

a) Erase the incorrect answer and record the correct answer. b) Draw a line through the first answer, record the correct answer, and have the applicant initial the change. c) Note on the application the reason for the change. d) Destroy the application and complete a new one. Answer: a) Erase the incorrect answer and record the correct answer.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT

a) FINRA registration. b) A securities license. c) A life insurance license. d) SEC registration. Answer: d) SEC registration. ~ Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. ***SEC registration is for securities, not agents.***

Medicaid is sponsored by what kind of sources?

a) Federal only b) State only c) Both state and federal d) Private companies Answer: c) Both state and federal

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

a) For 20 years or until death, whichever occurs first. b) Until the policyowner reaches age 65. c) For 20 years. d) Until the policyowner's age 100, when the policy matures. Answer: a) For 20 years or until death, whichever occurs first.

Life insurance death proceeds are

a) Generally not taxed as income. b) Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. c) Taxed as a capital gain. d) Taxed as ordinary income. Answer: a) Generally not taxed as income.

According to the PPACA (Patient Protection and Affordable Care Act) metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that?

a) Gold b) Platinum c) Bronze d) Silver Answer: b) Platinum ~ Bronze level benefit plans pay 60% of expected health care costs; silver level plans pay 70%; gold level plans pay 80%, and platinum level plans pay 90%.

The automatic premium loan provision is activated at the end of the

a) Grace period. b) Free-look period. c) Elimination period. d) Policy period. Answer: a) Grace period. ~ Provided there is sufficient cash values in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.

The benefits received by the business in a Disability Buy-Sell policy are

a) Income tax free. b) Tax deductible. c) Partially taxable. d) Fully taxable. Answer: a) Income tax free. ~ In disability buy-sell policies, whether cross purchase or entity, the benefits are received income tax free by the business, but the premiums are not deductible to the business.

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

a) Incontestability period b) Assignment c) Automatic premium loan d) Waiver of premium Answer: c) Automatic premium loan ~ This provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

All of the following are differences between individual and group health insurance EXCEPT

a) Individual insurance does not require medical examinations, while group insurance does require medical examinations. b) In individual policies, the individual selects coverage options, while in a group plan all employees are covered for the same coverage which is chosen by the employer. c) Individual coverage can be written on an occupational or nonoccupational basis, while group plans cover only nonoccupational. d) Individual policies are renewable at the option of the insured, while group usually terminates when the individual leaves the group. Answer: a) Individual insurance does not require medical examinations, while group insurance does require medical examinations.

Which of the following refers to "own occupation" disability?

a) Insured is unable to perform duties of any occupation. b) Insured business owner is unable to perform the duties of his / her own business. c) Insured business owner is unable to perform the duties of any related business. d) Insured is unable to perform duties of the occupation for which he / she was educated and trained. Answer: d) Insured is unable to perform duties of the occupation for which he / she was educated and trained.

All of the following statements about Medicare Part B are correct EXCEPT

a) It is a compulsory program. b) It covers services and supplies not covered by Part A. c) It is financed by monthly premium. d) It is financed by tax revenues. Answer: a) It is a compulsory program. ~ Part B is elective. Individuals become eligible for Part B at the same time they become eligible for Part A, however Part B requires that a monthly premium be paid. (Compulsory insurance is any type of insurance an individual or business is legally required to buy.)

Which of the following best describes the MIB?

a) It is a rating organization for health insurance. b) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. c) It is a government agency that collects medical information on the insured from the insurance companies. d) It is a member organization that protects insured against insolvent insurers. Answer: b) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments?

a) It is paid out as dividends. b) It is used to fund executive bonuses. c) It is used to increase the death benefit. d) It is used to lower premiums. Answer: d) It is used to lower premiums.

All other factors being equal, which of the following types of annuities will generally provide the highest monthly income?

a) Joint and Survivor b) Installment Refund c) Life with a 10-year Period Certain d) Straight Life Answer: d) Straight Life ~ Pure or straight life annuity settlement option will pay for as long as the annuitant lives; therefore, it has the potential to provide the highest monthly income. Any time a "period certain" option is included, it will reduce the monthly payout amount because, even if the annuitant dies, the company must continue to pay benefits for the period certain.

All other factors being equal, the least expensive first-year premium payment is found in

a) Level Term. b) Annually Renewable Term. c) Increasing Term. d) Decreasing Term. Answer: b) 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.

A policyowner is reading a statement on the first page of his health insurance policy, which says "this is a limited policy." What is the name of this statement?

a) Limited Policy Notice b) Policy Limitation Notice c) Statute of Limitations d) Limited Benefit Statement Answer: a) Limited Policy Notice ~ It is required by law that a Limited Policy Notice must be printed on the first page of insurance policies. The stated reads "this is a limited policy", which means that the benefits offered by the policy are limited.

If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to

a) Live at least to his life expectancy. b) Die before his life expectancy. c) Name a beneficiary. d) Name another annuitant. Answer: a) Live at least to his life expectancy.

In franchise insurance, premiums are usually

a) Lower than individual policies, but higher than group policies. b) Lower than individual policies or group policies. c) Higher than individual policies or than group policies. d) Higher than individual policies, but lower than group policies. Answer: a) Lower than individual policies, but higher than group policies. ~ Premiums charged are generally less than for an individual policy, but more than group coverage.

All of the following statements describe a MEWA (multiple employer welfare arrangement ) EXCEPT

a) MEWA's can be self-insured. b) MEWA's are groups of at least 3 employers. c) MEWA's can be sponsored by insurance companies. d) MEWA employers retain full responsibility for any unpaid claims. Answer: b) MEWA's are groups of at least 3 employers. ~ MEWA's are a way for smaller companies to offer employee benefits outside of the government-run health insurance exchanges by sharing risk.

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)

a) Medical examination. b) Attending Physician Statement. c) Inspection report. d) Medical Information Bureau report. Answer: c) Inspection report.

A health insurance policy may cover all of the following risks EXCEPT

a) Medical expenses. b) War-related injuries. c) Dental expenses. d) Loss of income due to disability. Answer: b) War-related injuries.

Which of the following programs is made up of 4 parts, where the first part is paid for by FICA, and the second part is financed by premiums and payroll taxes?

a) Medicare b) Blue Cross c) Blue Shield d) Medicaid Answer: a) Medicare

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

a) Monthly premium waiver and monthly income. b) Percentage of medical costs paid by the insurer. c) Payments for life. d) Yearly premium waiver and income. Answer: a) Monthly premium waiver and monthly income.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

a) Mortality rate b) Risk exposure c) Morbidity d) Life expectancy Answer: d) Life expectancy ~ Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

In order to be eligible for group health insurance, all of these are conditions an employee must meet EXCEPT

a) Must be working in a covered classification. b) Must be actively at work. c) Must be a full-time employee. d) Must have dependents. Answer: d) Must have dependents.

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

a) Needs approach b) Blackout approach c) Lump-sum approach d) Human life value approach Answer: d) Human life value approach ~ Human life value approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

What is the advantage of having a qualified annuity?

a) No filing with the IRS b) Receiving a lump-sum settlement tax free c) Higher dividends d) Favorable tax treatment Answer: d) Favorable tax treatment

Can a group that is formed for the sole purpose of obtaining group insurance qualify for group coverage?

a) No, the group must be formed for a purpose other than obtaining group insurance. b) No, a group of individuals cannot apply for group coverage unless represented by an association or trust. c) Yes, any group can apply for group coverage d) yes, but only if the group is over 35 people. Answer: a) No, the group must be formed for a purpose other than obtaining group insurance.

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an

a) Nonqualified annuity. b) Modified endowment contract. c) Accelerated benefit policy. d) Endowment. Answer: b) Modified endowment contract.

Under which plan does preventative dental treatment not apply toward the deductible?

a) Nonscheduled b) Focused c) Provisional d) Limited Answer: a) Nonscheduled ~ Under nonscheduled plans, routine examinations and preventative care generally do not apply toward the deductible.

All of the following actions by a person could be described as a risk avoidance EXCEPT

a) Not driving after being in an accident. b) Investing in the stock market. c) Refusing to scuba dive. d) Never flying in an airplane. Answer: b) Investing in the stock market.

Premium payments for personally-owned disability income policies are

a) Not tax deductible. b) Eligible for tax credits. c) Tax deductible. d) Tax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions. Answer: a) Not tax deductible.

Premiums paid by self-employed sole proprietors or partners for medical expense insurance are

a) Not tax deductible. b) Partially tax deductible. c) Totally tax deductible. d) Taxable. Answer: c) Totally tax deductible. ~ Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees.

An insured misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued?

a) Pay the full amount of a claim because the contestable period has ended. b) Adjust the claim benefit to reflect the insured's true age. c) Deny any claims and cancel the policy. d) Deny paying a claim based on misrepresentation. Answer: b) Adjust the claim benefit to reflect the insured's true age.

The causes of loss insured against in an insurance policy are known as

a) Perils b) Losses c) Risks d) Hazards Answer: a) Perils

Which of the following is NOT covered under Part B of a Medicare policy?

a) Physician expenses b) Routine dental care c) Home health care d) Lab services Answer: b) Routine dental care

Which provision allows a person to return a Medicare supplement policy within 30 days for a full premium refund?

a) Policy Review b) Trial Period c) Refund of Premium d) Free Look Answer: d) Free Look

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?

a) Policy Summary b) Illustrations c) Buyer's Guide d) Insurance Index Answer: c) Buyer's Guide ~ The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process. It is a generic guide that does not address the specific policy of the insurer, instead explaining life insurance in a way that the average consumer can understand.

Which of the following is a risk classification used by underwriters for life insurance?

a) Poor b) Normal c) Excellent d) Standard Answer: d) Standard

Which of the following statements regarding HIV testing for life insurance purposes is NOT true?

a) Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant. b) The testing practices must meet the criteria of the U.S. Department of Health and Human Services. c) HIV testing is regulated at the state level. d) Insurers are barred from requesting HIV testing. Answer: d) Insurers are barred from requesting HIV testing.

A policy available to business owners that provide payment for normal business expenses in the event that the owner is disabled is called

a) Recurrent Disability b) Business Overhead Expense c) Credit Accident and Health coverage d) Partial Disability Answer: b) Business Overhead Expense ~ Business Overhead insurance is often purchased by small employers to pay the ongoing business expenses (such as payroll) in the event the owner of the business becomes disabled. Premiums paid are tax deductible as a business expense, but proceeds paid are taxable as income.

As deductible amounts increase, premium amounts change in what way?

a) Remain the same. Changes in premium amounts do not affect deductible amounts. b) Either increase or decrease. c) Decrease. d) Increase. Answer: c) Decrease. ~ If deductible increase, premiums decrease in response. In other words, if the insured assumes more risk by paying a higher deductible, the insurer will lower premium amounts in response.

In long-term care (LTC) policies, as the benefit period lengthens, the premium

a) Remains unchanged. b) LTC premiums are not based on benefit periods. c) Decreases. d) Increases. Answer: d) Increases. ~ LTC policies define the benefit period for how long coverage applies, after the elimination period. The longer the benefit period, the higher the premium will be.

Which of the following would be considered an unfair claims settlement practice?

a) Requesting the insured swear under oath concerning the facts of the claim. b) Delaying the settlement of a claim for 30 days in order for the insured to conduct an investigation. c) Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered. d) Requesting the insured to submit a signed proof of loss statement, after the insured has already verbally advised the insurer of the claim. Answer: c) Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered.

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

a) Require a higher premium. b) Prolong the open enrollment period. c) Increase medical requirements on existing members. d) Require evidence of insurability. Answer: d) Require evidence of insurability.

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?

a) Sharing b) Retention c) Avoidance d) Reduction Answer: c) Avoidance

If an agent fails to obtain an applicant's signature on the application, the agent must

a) Sign the application for the applicant. b) Sign the application stating it was by the agent. c) Send the application to the insurer with a note explaining the absence of signature. d) Return the application to the applicant for a signature. Answer: d) Return the application to the applicant for a signature.

What type of benefit plan is a managed plan that is developed in conjunction with the Health Benefit plan committee?

a) Small Employee Carrier Plan b) Open Care Plan c) Basic Coverage Benefit Plan d) Catastrophic Coverage Benefit Plan Answer: c) Basic Coverage Benefit Plan

Which of the following applicants would NOT qualify for a Keogh Plan?

a) Someone who works 400 hours per year. b) Someone who has been employed for more than 12 months. c) Someone who is over 25 years of age. d) Someone who works for a self-employed individual. Answer: a) Someone who works 400 hours per year.

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

a) Straight life b) Joint and survivor c) Joint annuity d) Cash refund annuity Answer: b) Joint and survivor

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) Survivorship insurance b) Juvenile protection provision c) Survivor protection d) Life planning Answer: c) Survivor protection

Which of the following is called a "second-to-die" policy?

a) Survivorship life b) Family income c) Juvenile life d) Joint life Answer: a) Survivorship life ~ Survivorship life (also referred to as "second-to-die" or "last survivor" policy) 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.

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

a) Tax-sheltered account plan b) HR 10-plan c) Profit sharing plan d) 401(k) plan Answer: c) Profit sharing plan

An applicant has a history of heart disease in his family, so he would like to buy a health insurance policy that strictly covers heart disease. What type of policy is this?

a) Term health coverage b) Scheduled benefit coverage c) Dread disease coverage d) Single indemnity protection Answer: c) Dread disease coverage

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

a) The annuity is subject to state taxes only. b) The annuity is subject to both state and federal taxation. c) The growth is subject to immediate taxation. d) Taxes are deferred. Answer: d) Taxes are deferred.

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

a) The insured can transfer the policy to his friend and then notify the insurer of the change. b) The insured will need a written consent of the insurer. c) It is impossible to transfer a policy. d) The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. Answer: b) The insured will need a written consent of the insurer. ~ A personal insurance contract is written between an insurance company and an individual, and the company has a right to decide with whom it will and will not do business. An insured can transfer an insurance contract to another person, but he or she must first obtain the written consent of the insurer.

An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?

a) The insured has to wait 2 more months to start receiving the benefits. b) For the business, payments are not considered tax deductible as an ordinary business expense. c) The insured can deduct his medical expense benefits from his income tax. d) Benefits that are attributable to employer contributions are fully taxable to the employee as income. Answer: d) Benefits that are attributable to employer contributions are fully taxable to the employee as income.

All of the following are true regarding the guaranteed insurability rider EXCEPT

a) The insured may purchase additional coverage at the attained age. b) The insured may purchase additional insurance up to the amount specified in the base policy. c) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. d) This rider is available to all insureds with no additional premium. Answer: d) This rider is available to all insureds with no additional premium.

An insured has a Social Insurance Supplement rider in her disability income plan. Following a disability, she begins receiving benefit payments from the insurer. She then begins receiving Social Security benefits that are smaller than the SIS benefit payments. Which of the following best describes the situation?

a) The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit. b) Miscommunication. The proper authorities should be notified in order to end Social Security payments so that the SIS rider will continue to pay. c) Although a mistake may have occurred, the insured has no recourse. d) This is typical of an SIS rider. Answer: a) The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit.

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

a) The insured's spouse. b) The policyowner. c) The insurance company. d) The contingent beneficiary. Answer: d) The contingent beneficiary.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

a) The insurer will increase the interest rate on the loan and charge a penalty. b) The insurer will not permit the policyowner to take out any more loans. c) The policy will be reduced to an extended term option. d) The policy will terminate when the loan amount with interest equals or exceeds the cash value. Answer: d) The policy will terminate when the loan amount with interest equals or exceeds the cash value.

Regarding the return of premium option for LTC policies, what happens to the premium if the policy lapses?

a) The insurer will not return any premiums in the case the policy's allowed to lapse. b) The premium will only be returned if the insured dies. c) The insurer will return all of the premiums paid. d) The insurer will return a percentage of the premium paid. Answer: d) The insurer will return a percentage of the premium paid.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

a) The interest is credited at a rate specified by the policy. b) The policyholder has the right to withdraw the accumulations at any time. c) The interest is not taxable since it remains inside the insurance policy. d) The annual dividend is retained by the company. Answer: c) The interest is not taxable since it remains inside the insurance policy. ~ The interest credited under this option is TAXABLE, whether or not the policyowner receives it.

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?

a) The interest will continue to accumulate tax deferred. b) The interest will become immediately taxable. c) The premiums will increase. d) The premiums will decrease. Answer: a) The interest will continue to accumulate tax deferred. ~ If the contract holder dies before the annuity starting date, the contract's interest becomes taxable. If the beneficiary of the annuity is a spouse, the tax can continue to be deferred.

Which of the following is NOT a characteristics of an insurable risk?

a) The loss exposure must be large. b) The loss must be catastrophic. c) The loss must be due to chance. d) The loss must be measurable. Answer: b) The loss must be catastrophic. ~ In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

a) The owner will receive some of the money back, which will depend on the surrender value established at the time that the contract is terminated. b) The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned. c) It is not possible to surrender an annuity before the annuitization period. d) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. Answer: d) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. ~ If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.

Which of the following best describes what the annuity period is?

a) The period of time from the accumulation period to the annuitization period. b) The period of time during which money is accumulated in an annuity. c) The period of time from the effective date of the contract to the date of its termination. d) The period of time during which accumulated money is converted into income payments. Answer: d) The period of time during which accumulated money is converted into income payments. ~ The annuity period is the time during which accumulated money is converted into an income stream.

A policy with a 31-day grace period implies

a) The policy will not lapse for 31 days if the premium is not paid when due. b) The policyholder may return the policy for a full refund within 31 days. c) The policy is incontestable after 31 days of delivery. d) The policy benefits must be paid within 31 days after a claim is submitted. Answer: a) The policy will not lapse for 31 days if the premium is not paid when due.

What type of information is NOT included in a certificate of insurance?

a) The procedures for filing a claim b) The length of coverage c) The cost the company is paying for monthly premiums d) The policy benefits and exclusions Answer: c) The cost the company is paying for monthly premiums.

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

a) The surrender charge is always 7% of the cash value. b) The surrender charge is a flat fee determined by the annuity owner when the annuity is purchased. c) The surrender charge will increase as the accumulation period increases. d) The surrender charge is a percentage of the cash value and decreases over time. Answer: d) The surrender charge is a percentage of the cash value and decreases over time. ~ If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?

a) The surrender value will not be more than 80% of the cash value in the annuity at the time of surrender. b) The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. c) A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments. d) The surrender value will be based on current interest rates. Answer: b) The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. ~ If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.

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

a) The surviving annuitant may receive reduced payments. b) Payments stop after the first death among the annuitants. c) A period certain option may be included. d) This option guarantees income for two or more recipients. Answer: b) Payments stop after the first death among the annuitants.

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

a) They are both tied to an equity index. b) Both are considered to be more risky than variable annuities. c) They invest on a conservative basis. d) They have a guaranteed minimum interest rate. Answer: d) They have a guaranteed minimum interest rate.

What is the main purpose of the regulation on life insurance policy illustrations?

a) To help customers make educated decisions in buying life insurance. b) To compare life policies. c) To help producers submit proper reports to the department of insurance. d) To present a life policy in a visual way. Answer: a) To help customers make educated decisions in buying life insurance. ~ The purpose of the regulation on individual and group life insurance policy illustrations is to provide standards that will protect and educate consumers.

What is the purpose of COBRA (Consolidated Omnibus Budget Reconciliation Act )?

a) To provide coverage for the dependents. b) To provide health coverage for people with low income. c) To protect the insured against insolvent insured. d) To provide continuation of coverage for terminated employees. Answer: c) To provide continuation of coverage for terminated employees.

What is a characteristic of a 501(c)(9) trust?

a) To provide group insurance to small employers within a trust. b) 501(c)(9) trusts can be contributory plans. c) 501(c)(9) trusts can be non-contributory plans. d) All of the above are characteristics of a 501(c)(9) plan. Answer: d) All of the above are characteristics of a 501(c)(9) plan. ~ Some small employers do not have enough employees to form a group large enough to qualify for group insurance. These employers may join with other employers in the same or similar industry and form a trust to provide health coverage. They may operate as a non-profit trust under the IRS code. The plan may be "employer-pays-all" (noncontributory) or may require the employee to pay a portion of the costs (contributory).

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of report is that?

a) Underwriter's Report b) Inspection Report c) Medical Information Bureau's report d) Agent's Report Answer: b) Inspection Report

Which of the following programs expands individual public assistance programs for people with insufficient income and resources?

a) Unemployment compensation b) Medicaid c) Medicare d) Social Security Answer: b) Medicaid

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

a) Universal life b) Flexible life c) Variable life d) Adjustable life Answer: a) Universal life

How long must records associated with an insurance policy be kept?

a) Until the insurance company is no longer in business. b) 10 years c) 3 years after the policy terminates d) 5 years after the policy terminates Answer: c) 3 years after the policy terminates

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

a) Variable b) Term c) Securities d) Stock Answer: a) Variable

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a/an

a) Variable Annuity. b) Flexible Annuity. c) Immediate Annuity. d) Equity Indexed Annuity. Answer: d) Equity Indexed Annuity.

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider?

a) Variable annuity b) Annuity certain c) Fixed annuity d) Refund Life Answer: b) Annuity certain

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

a) Variable annuity b) Flexible payment annuity c) Deferred interest annuity d) Immediate annuity Answer: d) Immediate annuity ~ An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement.

When may an insured deduct unreimbursed medical expenses paid under a long-term care policy?

a) When the expenses exceed a certain percentage of the insured's adjusted gross income. b) Only if the insured is age 65 or older. c) All LTC expenses are tax deductible. d) Only if the insured does not itemize the expense. Answer: a) When the expenses exceed a certain percentage of the insured's adjusted gross income. ~ In either medical expense insurance policies or long-term care insurance policies, unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income.

All of the following cases show when a Small Employer Medical plan cannot be renewable EXCEPT

a) When the small employer carrier elects to non-renew all of its health benefit plans delivered or issued for delivery to small employers. b) When the employer chooses to renew the plan. c) For nonpayment of required premiums. d) When the Commissioner / Director finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or may impair the carrier's ability to meet its contractual obligations. Answer: b) When the employer chooses to renew the plan.

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

a) Withdrawn amounts are taxed on a last in, first out basis. b) Withdrawn amounts are taxed on a first in, last out basis. c) Taxes are deferred on withdrawn amounts, but a flat penalty is charged. d) Taxes are deferred on withdrawn amounts. Answer: a) Withdrawn amounts are taxed on a last in, first out basis. ~ When money is withdrawn from the annuity during the accumulation phase the amounts are taxed on a last in first out basis (LIFO). Therefore, all withdrawals will be taxable until the owner's cost basis is reached. After all of the interest is received and taxed the principal will be received with no additional tax consequences.

When must the Medicare Supplement Buyer's Guide be presented?

a) Within 30 days of policy delivery. b) When the prospective policyholder inquires about the policy or at the time of application, depending on which occurs first. c) At the time of application. d) When the policy is delivered. Answer: c) At the time of application. ~ Issuers of accident and sickness policies which provide hospital or medical expense coverage on an expense incurred or indemnity basis to a person eligible for Medicare by reason of age, must provide to that applicant a Medicare Supplement Buyer's Guide. Except for direct response issuers, delivery of the Buyer's Guide must be made at the time of application, and the insurance company must obtain a receipt.

An employee that becomes ineligible for group coverage because of termination of employment must exercise extension of benefits under Oregon state continuation rules for group health insurance

a) Within 31 days of employment termination. b) Immediately after receiving a notice of termination. c) Before termination is complete. d) Within 10 days. Answer: a) Within 31 days of employment termination.

Are insurance company underwriters allowed to discriminate?

a) Yes, but not unfairly b) No, higher risks pay higher premium c) No, discrimination is an unfair practice d) Yes, but only for gender Answer: a) Yes, but not unfairly

When compared with the administrative cost found in individual coverage, the per capita administrative cost in group health insurance is

a) comparable. b) equal. c) lower. d) higher. Answer: c) lower.

Under a pure life annuity, an income is payable by the company

a) for as long as either the annuitant or a named beneficiary is alive. b) Only for the life of the annuitant. c) Until the principal and interest are exhausted. d) For a guaranteed period of time, whether or not the annuitant survives to the end of that period. Answer: b) Only for the life of the annuitant. ~ With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life.

Which of the following would be the beneficiary in credit life insurance?

a) Company b) Borrower c) Creditor d) Insured Answer: c) Creditor

The risk of loss may be classified as

a) Named risk and un-named risk. b) High risk and low risk. c) Pure risk and speculative risk. d) Certain risk and uncertain risk. Answer: c) Pure risk and speculative risk

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

a) Nothing b) $50,000 c) $100,000 d) $200,000 Answer: c) $100,000

S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct?

a) 25% b) 50% c) 75% d) 100% Answer: d) 100% ~ Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees.

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 Answer: d) 6 months

Which of the following is the best reason to purchase life insurance rather than annuities?

a) To liquidate a sum of money over a period of years. b) To create regular income payments c) To liquidate a sum of money over a lifetime. d) To create an estate Answer: d) To create an estate ~ With insurance, the death benefit creates an immediate estate should the insured die.

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?

a) Unfair claims b) Twisting c) Defamation d) False advertising Answer: d) False advertising

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. Answer: 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.

An insurer invest the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments?

a) It is used to lower premiums. b) It is paid out as dividends. c) It is used to fund executive bonuses. d) It is used to increase the death benefit. Answer: a) It is used to lower premiums. ~ Because insurers receive premiums before they must pay out benefits, they can invest the premium money and use the interest to lower premium amounts charged to insureds.

Which of the following is NOT true regarding a nonqualified retirement plan?

a) It needs IRS approval. b) Contributions are not currently tax deductible. c) It can discriminate in benefits and selecting participants. d) Earnings grow tax deferred. Answer: a) It needs IRS approval.

Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health plan?

a) Licensed practical nurses b) Community-based organization professionals c) Attending physician d) Registered nurses Answer: c) Attending physician. ~ Home health care is care provided in one's home and could include occasional visits to the person's home by registered nurses, licensed practical nurses, licensed vocational nurses or community-based organizations like Hospice. Home health care might include physical therapy and some custodial care such as meal preparations.

Which of the following is NOT true regarding policy loans?

a) Policy loans can be repaid at death. b) An insurer can charge interest on outstanding policy loans. c) A policy loan may be repaid after the policy is surrendered. d) Money borrowed from the cash value is taxable. Answer: d) Money borrowed from the cash value is taxable. ~ Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans.

In dental insurance, what type of care will cover crowns?

a) Preventative b) Prosthondontics c) Orthodontics d) Restorative Answer: d) Restorative ~ Restorative care covers crowns and fillings. Prosthodontics covers bridgework. Preventative care would include cleanings. Endodontics covers oral surgery (such as root canals). Orthodontics covers braces.

An insured has a major medical policy with a $500 deductible and 80 / 20 coinsurance. The insured's hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay?

a) $500 b) $900 c) $1,000 d) $2,500 Answer: b) $900 ~ The insured will pay the $500 deductible, plus 20% of the remainder. * $2,500 (total bill) - $500 (deductible) = $2,000. * 20% (coinsurance) of $2,000 = $400 * $500 (deductible) + 20% (coinsurance) = $900 (total amount due by the insured).

What documentation grants express authority to an agent?

a) Agent's contract with the principal b) Agent's insurance license c) Fiduciary contract d) State provisions Answer: a) Agent's contract with the principal. ~ The principal grants authority to an agent through the agent's contract.

A man bought an individual health insurance policy for himself. Which of the following roles does he now legally have?

a) Broker b) Subscriber only c) Insured only d) Both subscriber and insured. Answer: d) Both subscriber and insured.

Which is TRUE about the cash surrender nonforfeiture option?

a) Funds exceeding the premium paid are taxable as ordinary income. b) After the cash surrender, the insured is covered for a grace period of 1 month. c) The policy remains active for some time after the policyholder opts for cash surrender. d) The policyholder receives the original cash value of the policy. Answer: a) Funds exceeding the premium paid are taxable as ordinary income.

Which type of care is NOT covered by Medicare?

a) Long-term care b) Hospice c) Respite d) Hospital Answer: a) Long-term care ~ Hospice care, which includes respite care, and hospital care are included in Medicare Part A.

Which of the following will NOT be covered under an individual health insurance policy?

a) The applicant's spouse b) The applicant's house help c) The applicant's adopted child d) The applicant Answer: b) The applicant's house help

What is the purpose of the buyer's guide?

a) To allow the consumer to compare the costs of different policies b) To provide the name and address of the agent / producer issuing the policy c) To list all policy riders d) To provide information about the issued policy. Answer: a) To allow the consumer to compare the costs of different policies. ~ The buyer's guide provides generic information about life insurance polices and allows the consumer to compare the costs of different policies The policy summary provides specific information about the issued policy, as well as the insurer's information.

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?

a) Nonqualified b) Individual c) Independent Group Contract d) Single Answer: b) Individual

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

a) 2 years b) 1 month c) She would not receive any benefits d) 3 years Answer: a) 2 years ~ Under an Own Occupation plan, if the insured cannot perform his / her current job for a period of up to two years, disability benefits will be issued, even if the insured would be capable of performing a similar job during that two-year period. After that, if the insured is capable of performing another job utilizing similar skills, benefits will not be paid.

If the Director requests information regarding a claim, within how many days must the insurer provide a response?

a) 3 days b) 10 days c) 21 days d) 31 days Answer: c) 21 days. ~ Upon an inquiry about a claim from the Director, the insurer must furnish an adequate response within 21 days.

Which of the following groups seeking group health insurance would represent a bad risk for underwriters?

a) A group that changes insurance annually. b) A group that pays a low premium. c) A group that has a noncontributory plan. d) A group that has a large number of members. Answer: a) A group that changes insurance annually.

When an insured purchased her disability income policy, she misstated her age to the agent. She told the agent that she was 30 years old, when in fact, she was 37. If the policy contains the optional misstatement of age provision

a) The elimination period will be extended 6 months for each year of age misstatement. b) Because the misstatement occurred more than 2 years ago, it has no effect. c) Amounts payable under the policy will reflect the insured's correct age. d) The contract will be deemed void because of the misstatement of age. Answer: c) Amounts payable under the policy will reflect the insured's correct age.

All of the following are general requirements of a qualified plan EXCEPT

a) The plan must be permanent, written and legally binding b) The plan must provide an offset for social security benefits. c) The plan must be communicated to all employees. d) The plan must be for the exclusive benefits of the employees and their beneficiaries. Answer: b) The plan must provide an offset for social security benefits.

To be eligible under HIPPA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?

a) 63 days b) 18 months c) 5 years d) 12 months Answer: b) 18 months ~ Under HIPPA regulations, to be eligible to convert health insurance coverage from a group plan to an individual policy, the insured must have 18 months of continuous creditable health coverage.

Jason is insured under his employer's group health insurance. He splits the cost of the premiums with his employer. This is an example of

a) A noncontributory plan b) A half and half plan c) A co-pay plan d) A contributory plan Answer: d) A contributory plan

Every small employer carrier shall, as a condition of transacting business in this state with small employers, actively offer to small employers at least how many health benefit plans?

a) 5 b) 10 c) 25 d) 2 Answer: d) 2 ~ As a condition of transacting business in this state with small employers, every small employer carrier is required to actively offer to small employers at least 2 health benefit plans. One plan offered by each employer carrier must be a basic health benefit plan, and one plan must be a standard health benefit plan.

Which of the following is an IRS qualified retirement program for the self-employed?

a) Buy and Sell Agreement b) 401(k) c) Keogh d) Split Dollar Answer: c) Keogh

Which of the following is NOT true regarding the annuitant?

a) The annuitant receives the annuity benefits. b) The annuitant must be a natural person. c) The annuitant cannot be the same person as the annuity owner. d) The annuitant's life expectancy is taken into consideration for the annuity. Answer: c) The annuitant cannot be the same person as the annuity owner. ~ While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.

In insurance, an offer is usually made when

a) The completed application is submitted. b) The insurer approves the application and receives the initial premium. c) The agent hands the policy to the policyholder. d) An agent explains a policy to a potential applicant. Answer: a) The completed application is submitted. ~ 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.

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?

a) The proceeds will be split evenly between the two beneficiaries. b) The policyowner can specify the way proceeds are split in the policy. c) The way proceeds are split between beneficiaries is decided by which type of policy is chosen. d) Life insurance policies may have only one beneficiary. Answer: b) The policyowner can specify the way proceeds are split in the policy.

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

a) Installments for a fixed amount b) Installment refund c) Cash refund d) Installments for a fixed period Answer: d) Installments for a fixed period. ~ Under the "installments for a fixed period" option, the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be. This option pays for a specific period of time only, and there are no life contingencies.

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

a) Insured b) Policyowner c) The insured and the policyowner d) Beneficiary Answer: b) Policyowner

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. Answer: c) Other-insured rider.

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

a) Cash value of the plan b) Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount. c) Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount. d) Amount paid into the plan. Answer: b) Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount. ~ If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.

What is the main difference between coinsurance and copayments?

a) Copayment is a set dollar amount. b) With copayments, the insured pays all of the cost. c) With coinsurance, the insurer pays all of the cost. d) Coinsurance is a set dollar amount. Answer: a) Copayment is a set dollar amount. ~ With both copayment and coinsurance provisions, the insured shares part of the cost for services with the insurer. Unlike coinsurance, a copayment has a set dollar amount that the insured will pay each time certain medical services are used.

In health insurance, if a doctor charges $50 more than what the insurance company considers usual, customary and reasonable, the extra cost

a) Counts toward coinsurance. b) Is not covered. c) Must be covered by the insurer. d) Counts toward deductible. Answer: b) Is not covered. ~ An insurance company will pay the usual, reasonable, or customary amount for a given procedure based upon the average charge for that procedure.

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

a) Each employee receives a policy. b) Under group insurance, the insurer may reject certain individuals from coverage. c) The employer is the policyholder. d) Only the employer receives a certificate of insurance. Answer: c) The employer is the policyholder.

Which of the following is NOT a characteristic or a service of an HMO plan?

a) Encouraging early treatment b) Providing care on an outpatient basis c) Contracting with insurance companies d) Providing free annual checkups Answer: c) Contracting with insurance companies. ~ HMO's seek to identify medical problems early by providing preventive care. They encourage early treatment and whenever possible provide care on an outpatient basis rather than admitting the member into the hospital. Contracts are between the insured and the HMO, not an insurance company.

An agent selling variable annuities must be registered with

a) FINRA (Financial Industry Regulatory Authority, Inc). b) Department of Insurance. c) The Guaranty Association. d) SEC (Securities and Exchange Commission). Answer: a) FINRA ~ Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD; National Association of Securities Dealers) and hold a securities license in addition to a life agent's license in order to sell variable annuities.

Which of the following is NOT an advantage of an HRA for an employer?

a) HRA's give smaller employers an opportunity to compete with larger employers in the benefits offered to employees. b) HRA's permit an employer to reduce health plan costs by coupling the HRA with a high-deductible (and usually lower-cost) health plan. c) HRA's are defined benefit programs. d) Employer contributions are tax-deductible. Answer: c) HRA's are defined benefit programs. ~ HRA's are defined contribution, not defined benefit, programs.

Issue age policy premiums increase in response to which of the following factors?

a) Increased benefits b) Increased deductible c) Inflation d) The insured's age Answer: a) Increased benefits ~ The premiums of issue age policies can only increase in response to an increase in benefits.

Credit Life insurance

a) Is purchased on an installment basis. b) Insures the life of the creditor. c) Has a maximum term for insurance of 20 years. d) Insures the life of a debtor. Answer: d) Insures the life of the debtor.

A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as

a) Relative-value schedule. b) Benefit schedule. c) Gatekeepers. d) Usual, customary and reasonable. Answer: d) Usual, customary and reasonable.

All of the following are unfair claims settlement practices EXCEPT

a) Suggesting negotiations in settling the claim. b) Refusing to pay claims without conducting a reasonable investigation. c) Failing to adopt and implement reasonable standards for settling claims. d) Failing to acknowledge pertinent communication pertaining to a claim. Answer: a) Suggesting negotiations in settling the claim.

How many days from the finalization of a divorce or separation does the spouse of a group health certificate owner have to notify the insurer when requesting continuance of coverage?

a) 30 b) 45 c) 14 d) 60 Answer: d) 60 ~ Within 60 days of the separation or divorce of the spouse of the group policy certificate owner the insurer must receive notice. The insurer will notify the spouse of the certificate owner within 14 days that the policy may be continued.

Which clause states that a representation may NOT be contested after a 2 year period?

a) Free look b) Nolo Contendere c) Grace Period d) Incontestability Answer: d) Incontestability

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

a) Insurance company b) Estate c) Beneficiary d) Owner Answer: c) Beneficiary

Which of the following is NOT an allowable 1035 exchange?

a) A life insurance policy is exchanged for an annuity. b) A whole life insurance policy is exchanged for a term insurance policy. c) A whole life insurance policy is exchanged for a Universal life insurance policy. d) An annuity is exchanged for another annuity. Answer: b) A whole life insurance policy is exchanged for a term insurance. ~ The key is the the exchange may not be from a less tax-advantaged contract to a more tax-advantaged contract. "Same to same" is acceptable.

Following an injury, a policyowner covered under Medicare Parts A & B was treated by her physician on an outpatient basis. How much of her doctor's bill will she be required to pay out-of-pocket?

a) A per office visit deductible. b) 20% of covered charges above the deductible. c) 80% of covered charges above the deductible. d) All reasonable charges above the deductible according to Medicare standards. Answer: b) 20% of covered charges above the deductible. ~ After the deductible, Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges.

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?

a) Adjustable Life b) Single Premium Whole Life c) Interest - sensitive Whole Life d) Decreasing Term Answer: a) Adjustable Life

Which of the following statements is true concerning the alteration of optional policy provisions?

a) An insurer may change the wording of optional provisions, regardless of its effect on the policyholder. b) An insurer may change the wording of optional policy provisions that would adversely affect the policyholder but must first receive state permission before the change goes into effect. c) Once any kind of provision is written, it cannot be changed. d) An insurer may change the wording of optional provisions, as long as the change does not adversely affect the policyholder. Answer: d) An insurer may change the wording of optional provisions as long as the change does not adversely affect the policyholder. ~ Optional policy provisions can be changed by an insurer, as long as the changes do not adversely affect the policyholder.

In order to get a nonresident license in this state, producers must

a) Apply and pay a fee to a nonresident state that reciprocates. b) Pass the nonresident state exam and satisfy their continuing education requirements. c) Represent an agency located in this state. d) Surrender their license in their state of residence. Answer: a) Apply and pay a fee to a nonresident state that reciprocates. ~ Producers may apply for a nonresidential license by showing that they are in good standing as producers in their home state and by paying a fee, if the two states reciprocate.

Which of the following is NOT an activity of daily living (ADL)?

a) Bathing b) Talking c) Eating d) Dressing Answer: b) Talking

All of the following are true of the Key Person disability income policy EXCEPT

a) Benefits are considered taxable income to the business. b) Premiums are not deductible to the business. c) It is typically written to protect the company in the event a key employee becomes disabled and is unable to work. d) The income may be used to find a replacement for the key employee. Answer: a) Benefits are considered taxable income to the business.

When Bob filled out an application for health insurance, he accidentally misstated the time period during which he was treated for acid reflux. If he had recorded this information correctly, his insurer would have charged a higher premium. When Bob is treated for erosive esophagitis 3 years after the policy's effective date, the insurer discovers the error. Which of the following is most likely true?

a) Bob will be required to pay the "extra" premium that he would have been charged. b) Nothing, assuming that Bob's misstatement is found to be an honest mistake. c) Bob will be required to pay all medical bills related to erosive esophagitis. d) Bob's policy will be terminated. Answer: b) Nothing, assuming that Bob's misstatement is found to be an honest mistake.

Which of the following options best depicts how the eligibility of members for group health insurance is determined?

a) By conditions of employment b) Eligibility is not determined, but simply accepted c) By the physical conditions of the applicants at the time of employment d) In such a manner as to establish individual selection as to the amounts of insurance Answer: a) By conditions of employment.

Which of the following is true regarding taxation of dividends in participating policies?

a) Dividends are not taxable. b) Dividends are taxable only after a certain amount is accumulated annually. c) Dividends are taxable in some life insurance policies and nontaxable in others. d) Dividends are considered income for tax purposes. Answer: a) Dividends are not taxable.

Who can provide skilled nursing care?

a) Doctor b) Spouse c) Family member d) Community volunteer Answer: a) Doctor

For a retirement plan to be qualified, it must be designed for the benefit of

a) Employer b) IRS c) Employees d) Key employee Answer: c) Employees

A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective?

a) Immediately b) After 14 days c) After 21 days d) After 31 days Answer: a) Immediately

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

a) Limited pay whole life b) Interest-sensitive whole life c) Life annuity with period certain d) Increasing term Answer: a) Limited pay whole life ~ Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

Which of the following is NOT true of basic medical expense plans?

a) Low dollar limits b) Coverage for catastrophic medical expenses c) No deductibles d) First - dollar coverage Answer: b) Coverage for catastrophic medical expenses.

Which of the following is NOT provided by an HMO?

a) Patient care b) Reimbursement c) Services d) Financing Answer: b) Reimbursement ~ Traditionally the insurance companies have provided the financing while the doctors and hospitals have provided the care. The HMO concept is unique in that the HMO provides both the financing and the patient care for its members. The HMO provides benefits in the form of services rather than in the form of reimbursement for the services of the physician or hospital.

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

a) Reciprocal b) Fraternal c) Stock d) Mutual Answer: c) Stock

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

a) Standard risk pays a higher premium than a substandard risk. b) Standard risk requires extra rating. c) Standard risk is also known as high exposure risk. d) Standard risk is representative of the majority of people. Answer: d) Standard risk is representative of the majority of people.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

a) The death benefit can be increased only when the policy has developed a cash value. b) The death benefit can be increased only by exchanging the existing policy for a new one. c) The death benefit can be increased by providing evidence of insurability. d) The death benefit cannot be increased. Answer: c) The death benefit can be increased by providing evidence of insurability. ~ The policyowner (insured) would need to prove insurability for the amount of the increase.

In a group policy, who is issued a certificate of insurance?

a) The individual insured b) The health care provider c) The insurance company d) The employer Answer: a) The individual insured

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

a) The insurance company's general account. b) Forwarded to an investor. c) Each contract's separate account. d) The annuity owner's account. Answer: a) The insurance company's general account.

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?

a) When the agent submits the application to the company and the company issues a conditional receipt. b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health. c) On the designated effective date. d) On the application date. Answer: b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health.