PASS THAT TEST

What type of health insurance policy provides an employer with funds to train a replacement if a value employee becomes disabled? a. key person disability b. group disability c. disability buy-sell d. business overhead

A

Under a Key Person disability income policy, premium payments

Are made by the business and are not tax-deductible; however, benefits are received tax-free by the business.

Under which of the following disability income plans would the benefits be subject to income tax? a. individual b. key person c. partnership buy-out d. group

D

Medical Savings Accounts (MSAs) are available to small business employees and self-employed individuals who have

High deductible health insurance

All of the following benefits are available under SS except: a. welfare b. old-age and retirement c. disability d. death

a

A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay? a) 10 days b) 15 days c) 25 days d) 45 days

b

Which of the following is another term for the accumulation period of an annuity? a)Annuity period b)Pay-in period c)Premium period d)Liquidation period

b)Pay-in period The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.

What is a primary care physician?

regularly compensated

Which rider, when added to a disability income policy, provides for changes in the benefits payable based on changes in the consumer price index? a. COLA b. waiver of premium c. social security d. guaranteed insurability

A

After the elimination period, a totally disabled insured qualified and started receiving benefits from his disability income policy that has a waiver of premium rider. What will most likely happen to the premiums paid into the policy during the elimination period? a. premiums will be waived b. premiums will be refunded c. premiums will be retained by the company, but no further premium will be required for the duration of the disability d. premiums will be prorated

B

Which of the following is not true of Disability Buy-Sell coverage? A. The policies provide funds for the business organization to purchase the business interest of a disabled partner. B. Benefits are considered taxable income to the business. C. It is typically written to cover partners or corporate officers of a closely held business. D. Premium payments are not deductible to the business.

B; benefits are tax free.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT a. fully insured status b. waiting period of 5 months c. being age 65 d. inability to perform gainful work

C

Which of the following is NOT a characteristic of group LT disability plan? a. the benefit period may be to age 65 b. the benefit can be up to 66 and 2/3% of one's monthly income c. the benefit can be up to 50% of one's yearly income d. the elimination period is the same as in the short-term plan's benefit period

C

Which of the following is INCORRECT concerning taxation of disability income benefits? A. If the employer paid the premiums, income benefits are taxable to the insured as ordinary income. B. If the insured paid the premiums, any disability income benefits are tax-free. C. If the benefits are for a permanent loss, the benefits paid to the employee are not taxable. D. If paid by the individual, the premiums are tax deductible.

D; If an individual purchases his or her own disability insurance with before-tax dollars, any benefits paid are tax free, but the premium is not tax deductible. If an employer pays the premium, the employer may deduct the premium as a business expense. Any benefits paid to an employee are taxable, unless it is for the permanent loss of a body part, or loss of use of a body part.

To be eligible for a Health Savings Account, an individual must be covered by a

High-deductible health plan

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

They are tax deductible; an individual covered by a high deductible health plan can make a tax - deductible contribution to an HSA & use it to pay for out-of-pocket medical expenses.

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

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.

In a basic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible? a) Corridor b) Full c) Half d) None

a

Once the person meets the stringent requirements for disability benefits under Social Security, how long is the waiting period before any benefits will be paid? a) 5 months b) 12 months c) Benefits will be paid immediately. d) 90 days

a

The provision in a health insurance policy that ensures that the insurer cannot refer to any document that is not contained in the contract is the a) Entire contract clause. b) Time limit on certain defenses clause. c) Incontestability clause. d) Legal action against us clause.

a

To purchase insurance, the policy owner must face the possibility of losing money or something of value in the event of loss. What is this concept called? a) Insurable interest b). Indemnity c). Exposure d). Pure Loss

a) Insurable interest To purchase insurance, the policy owner must face the possibility of losing money or something of value in the event of loss this is called insurable interest

Which is true about a spouse term rider? a) The rider is usually level term insurance. b) Coverage is allowed for an unlimited time. c) The rider is decreasing term insurance. d) Coverage is allowed up to age 75.

a) The rider is usually level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.

An insurer who transact insurance in this state but whose articles of incorporation are registered in Canada is considered what type of insurer? a). Alien b). Unauthorized c). Surplus lines d). Foreign

a). Alien An insurer incorporated in a foreign country is considered to be an alien insurer

Which of the following would be true of both the fixed-period and fixed-amount settlement options? a). Both guarantee that the principal and interest will be fully paid out b). The amount of payments is based on the recipient's life expectancy. c). The size of installments decreases after certain period of time d). Both guarantee payments for the life of the beneficiary

a). Both guarantee that the principal and interest will be fully paid out Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however they both guarantee that the entire principal and interest will be distributed

The Commissioner reports any violations of insurance laws and regulations to the a)Attorney General. b)Guaranty Association. c)Governor. d)NAIC.

a)Attorney General. The Insurance Commissioner is required to report any violation of insurance law to the Attorney General.

Mortality - Interest + Expense = a)Gross premium b)Benefits budget c)Operating expenses d)Net premium

a)Gross premium If "mortality" represents the cost of insured mortality, "interest" represents the interest earned by an insurer, and "expense" (or "loading") represents company operating costs, then the interest is subtracted from the cost of mortality, yielding the net premium, and the loading is added to the net premium to yield the gross premium.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? a)Inspection Report b)Medical Information Bureau's report c)Agent's Report d)Underwriter's Report

a)Inspection Report Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the Fair Credit Reporting Act.

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)Joint Life b)Decreasing Term c)Whole Life d)Ordinary Life

a)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.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? a)Level term b)Term to specified age c)Ordinary life policy d)Limited pay whole life

a)Level term A 20-year term policy is written to provide a level death benefit for 20 years.

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

a)Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

Using a class designation for beneficiaries means a)Naming beneficiaries as a group. b)Not naming beneficiaries. c)Naming an estate as the beneficiary. d)Naming each beneficiary by his or her name

a)Naming beneficiaries as a group. Class designations are used when an insured chooses to distribute benefits among the living beneficiaries and/or their heirs without naming each individual person, such as "all my children."

Equity indexed annuities a)Seek higher returns. b)Are more risky than variable annuities. c)Are security instruments. d)Invest conservatively.

a)Seek higher returns. Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a)The insured may choose to convert to term or permanent individual coverage. b)The insured would not need to prove insurability for a conversion policy. c)The insured may convert coverage to an individual policy within 31 days. d)The premium for individual coverage will be based upon the insured's attained age.

a)The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.

A husband and wife both incur expenses that are attributed to a single major medical insurance deductible. Which type of policy do they have? a) Mutual b) Family c) Combined d) Joint

b

Which of the following is NOT covered under Basic Hospital Expense Coverage? a) X-ray charges b) Surgeons' fees c) Hospital room and board d) Lab charges

b

Which of the following is true regarding elimination periods and the cost of coverage? a) Elimination periods have no effect on the cost of coverage. b) The longer the elimination period, the lower the cost of coverage c) The shorter the elimination period, the lower the cost of coverage d) The longer the elimination period, the higher the cost of coverage

b

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as a) Defamation. b) Coercion. c) Rebating. d) Misleading advertising.

b) Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer then makes a matching contribution up to an amount equal to what percent of the employee's annual wages? a)10 b)3 c)5 d)7

b)3 Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer can then contribute up to an amount equal to 3% of the employees' annual compensation. Contributions and earnings are both tax-deferred until funds are withdrawn.

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.

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.

In cases when an applicant for insurance is blind or deaf, the insurer underwriting the policy may do which of the following? a)Limit the amount or type of coverage available to the applicant b)Apply the same standards as are used for applicants whose sight and hearing are not impaired. c)Charge a different rate for the same coverage based on increased risk. d)Refuse to insure the applicant because of adverse risk.

b)Apply the same standards as are used for applicants whose sight and hearing are not impaired. Insurers cannot refuse to insure or refuse to continue to insure an individual, limit the amount, extent, or kind of coverage available to an individual, or charge an individual a different rate for the same coverage, solely because of blindness or partial blindness, or deafness or partial deafness.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a)The same as the original policy minus the cash value b)Equal to the original policy for as long as the cash values will purchase. c)In lesser amounts for the remaining policy term of age 100. d)Equal to the cash value surrendered from the policy

b)Equal to the original policy for as long as the cash values will purchase. With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.

Which of the following is NOT true regarding the accumulation period of an annuity? a)It is also known as the pay-in period. b)It would not occur in a deferred annuity. c)It is the period during which the annuity payments earn interest. d)It is the period over which the owner makes payments into an annuity.

b)It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Which nonforfeiture option provides coverage for the longest period of time? a)Accumulated at interest b)Reduced paid-up c)Extended term d)Paid-up option

b)Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a)Graded premium whole life. b)Single premium whole life. c)Modified Endowment Contract (MEC). d)Level term life.

b)Single premium whole life. Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.

A small company offers group health insurance to its employees, but recently has decided to terminate the health insurance contract, leaving the workers without insurance. What can the employees do regarding their insurance? a) Apply for another group health insurance b) Request a refund of unearned premium c) Convert to an individual health policy d) Sue the employer

c

Which of the following entities can legally bind coverage? a) Federal Insurance Board b) Agent c) Insurer d) The insured

c

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith

c) Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.

All of the following are included within the Insurance Commissioner's duties EXCEPT a) Conducting investigation of all domestic insurers. b) Reviewing the insurers' annual reports. c) Writing North Carolina insurance laws. d) Reporting any violations of insurance laws to the Attorney General. Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is.

c) Writing North Carolina insurance laws. Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is.

Under what circumstances will the contingent beneficiary receive the death benefit? a). If designed by the insured b). If designed by the primary beneficiary c). If the primary beneficiary dies before the insured d). If the tertiary beneficiary dies before the insured

c). If the primary beneficiary dies before the insured

All of following are true of annually renewable term insurance EXCEPT a). The death benefit remains level b). The policy must be renewed no matter what happens to one's health c). Proof of insurability must be provided at each renewal d). The premium increases each year

c). Proof of insurability must be provided at each renewal ART is a form of level term insurance, in which the death benefit remains level and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the insured's attained age.

Which of the following best describes fixed-period settlement option? a)The death benefit must be paid out in a lump sum within a certain time period. b)Income is guaranteed for the life of the beneficiary c)Both the principal and interest will be liquidated over a selected period of time. d)Only the principal amount will be paid out within a specified period of time.

c)Both the principal and interest will be liquidated over a selected period of time. Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.

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

c)Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated.

Which nonforfeiture option has the highest amount of insurance protection? a)Decreasing Term b)Reduced Paid-up c)Extended Term d)Conversion

c)Extended Term The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose a)403(b) plan. b)401(k) plan. c)HR-10 (Keogh Plan). d)Section 457 Deferred Compensation Plan.

c)HR-10 (Keogh Plan). HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.

Annually renewable term policies provide a level death benefit for a premium that a)Remains level. b)Fluctuates. c)Increases annually. d)Decreases annually.

c)Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

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

c)It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

In which of the following situations is it legal to limit coverage based on marital status? a)Legal separation during the application process b)Divorce within the last six months of applying for insurance c)It is never legal to limit coverage based on marital status. d)Excessive number of divorces, as defined by the Insurance Code

c)It is never legal to limit coverage based on marital status. Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.

Which of the following would be considered an advantage of owning term insurance? a)It provides the death benefit regardless of when the insured dies. b)It provides the greatest living benefits to the insured. c)It provides the highest amount of coverage for a temporary period of time. d)It provides the greatest cash value for a temporary period of time.

c)It provides the highest amount of coverage for a temporary period of time. Term insurance has no cash value and provides no death benefit if the insured dies after the policy is expired; however, it provides the highest amount of protection for a temporary period of time.

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? a)It will decrease for the new 5-year term since the insured is now a lesser risk to the company. b)It will increase each year during the next 5 years as the face amount increases each year. c)It will increase because the insured will be 5 years older than when the policy was originally purchased. d)It will remain the same for the new 5-year term.

c)It will increase because the insured will be 5 years older than when the policy was originally purchased. The premium will remain level during the entire level premium term policy period. If the policy renews at the end of the term, the premium will be based on the insured's attained age at the time of renewal.

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

c)Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? a)Installment refund b)Joint and survivor c)Pure life d)Life with guaranteed minimum

c)Pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.

The regulation of the insurance industry primarily rests with a)Private insurers. b)The federal government. c)The State. d)The NAIC.

c)The State. Each state regulates the business of insurance conducted within that state.

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.

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.

Which of the following products requires a securities license? a)Equity Indexed annuity b)Deferred annuity c)Variable annuity d)Fixed annuity

c)Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.

All are true regarding the Insurance Commissioner's power related to hearings and investigations EXCEPT a). The Commissioner must examine every domestic insurer at least once every 5 years b). If the Commissioner finds that there is sufficient evidence to charge a person with a criminal violation, he or she may have the person arrested c. The Commissioner may hold hearing immediately after determining that a violation has occurred. d). The Commissioner may examine the affairs of anyone involved in the insurance industry

c. The Commissioner may hold hearing immediately after determining that a violation has occurred. The Commissioner must give 10 days written notice of all hearings

An insured's disability income policy includes an additional monthly benefit rider. For how many years can the insured expect to receive payment from the insurer before Social Security benefits begin? a. 5 b. 3 c. 2 d. 1

d

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

d

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

d

Which of the following special policies covers unusual risks that are NOT normally included under Accidental Death and Dismemberment coverage? a) Limited Risk Policy b) Specified Disease Policy c) Credit Disability d) Special Risk Policy

d

In term policies, what happens to the premium throughout the term of the policy? a) Premium gradually increases. b) Premium gradually decreases. c) Premium fluctuates. d) Premium always remains level.

d) Premium always remains level. There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy.

Which of the following is TRUE regarding an indeterminate premium whole life policy? a) The premium is lower in the first year of the policy; then it is gradually raised every year. b) The premium is level throughout the life of the policy. c) The premium is usually higher in the first few years of the policy. d) The premium can be raised up to a guaranteed maximum rate.

d) The premium can be raised up to a guaranteed maximum rate. Indeterminate premium whole life policy premium rate may vary from year to year. After the initial period (usually 2-3 years) when a lower premium is paid, the insurer establishes a new rate which could be raised up to the guaranteed maximum stated in the policy, kept the same or lowered, based on the company's expected mortality, expense and investments.

If a licensee is convicted of a criminal violation, the licensee's insurance license is a)Automatically revoked. b)Not affected. c)Suspended after a hearing. d)Automatically suspended.

d)Automatically suspended. The conviction of an insurance licensee for a criminal violation automatically suspends the license of that person.

Which of the following best describes an insurance company that has been formed under the laws of this state? a)Sovereign b)Alien c)Foreign d)Domestic

d)Domestic A company is domestic when doing business within the state in which it is incorporated.

During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes a)Defamation. b)Twisting. c)Coercion. d)Misrepresentation.

d)Misrepresentation. Making false or misleading statements with the intent to defraud another is misrepresentation.

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? a)One-year term b)Reduction of premium c)Accumulation at interest d)Paid-up option

d)Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? a)Accumulation at Interest b)Paid-up additions c)Dividend Accumulation option d)Paid-up option

d)Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.

All of the following are the types of term insurance depending on how the face amount changes during the policy term EXCEPT a)Decreasing. b)Level. c)Increasing. d)Renewable.

d)Renewable. There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy. Only the amount of the death benefit may fluctuate.

Which of the following is INCORRECT concerning a noncontributory group plan? a)They help to reduce adverse selection against the insurer. b)They require 100% employee participation. c)The employer pays 100% of the premiums. d)The employees receive individual policies.

d)The employees receive individual policies. The employer receives a master policy, and employees receive a certificate of insurance.

Which of the following determines the cash value of a variable life policy? a)The company's general account b)The policy's guarantees. c)The premium mode d)The performance of the policy portfolio

d)The performance of the policy portfolio The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

Health Savings Accounts (HSAs) are designed to

help individuals save for qualified out-of-pocket health care expenses; such as the deductible expense from a high deductible health plan.

In a plan funded entirely by the employer,

income benefits are included in the employee's gross income and taxed as ordinary income.

Any portion of the benefit paid for and deducted by the employer will be considered

taxable income to the employee.

Which of the following is considered a presumptive disability under a disability income policy? a) Loss of hearing in one ear b) Loss of one hand or one foot c) Loss of two limbs d) Loss of one eye

c

The regulation of the insurance industry primarily rests with a) The NAIC. b) Private insurers. c) The federal government. d) The State.

d

What type of health insurance policy provides an employer with funds to train a replacement if a valued employee becomes disabled? a) Group Disability b) Disability Buy-Sell c) Business Overhead d) Key Person Disability

d

Under what condition are group disability income benefits received by an employee NOT taxable as income? A. When the employer makes all the premium payments. B. When the employee is 59 ½. C. When the amount of the benefit is equal or less than the amount of contributed by the employer. D. When the benefits received are equal or less than the employee's percentage of the contribution.

D; Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income.

All of the following would be qualified as a dependent under a Dependent Care Flexible Spending Account, EXCEPT A. Joe was paralyzed from the neck down in a car accident and is cared for by his wife B. Matt must be constantly watched due to his violent muscle spasms which often lead to Matt injuring himself C. Pete is severely autistic and refuses to take care of his own personal needs, which are taken care of by his father D. Jeremy had to have both legs amputated, but has learned how to take care of himself and to get around in a wheelchair

D; Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

Which of the following individuals is eligible for a Health Savings Account? A. Margaret is 68 years old B. Suzie is a dependent on her parent's tax returns C. Tomas is insured by a Low Deductible Health Plan (LDHP) D. Allison is insured by a High Deductible Health Plan (HDHP)

D; To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance except for specific injury, accident, disability, dental care, vision care, or long-term care insurance, must not be eligible for Medicare, and can't be claimed as a dependent on someone else's tax return.

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

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.

A guaranteed renewable health insurance policy allows the a) Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class. b) Policyholder to renew the policy to a stated age and guarantees the premium for the same period. c) Policy to be renewed at time of expiration, but the policy can be canceled for cause during the policy term. d) Insurer to renew the policy to a specified age.

a

What is the elimination period for SS disability benefits? a. 5 months b. 6 months c. 12 months d. 3 months

a

Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss? a) 15 b) 30 c) 31 d) 45

a) 15 When any company under any insurance policy requires a written proof of loss after notice of the loss has been given by the insured or beneficiary, the company must furnish a blank form within 15 days.

A person who knowingly obtains information about an individual from an agent or the insurer under false pretenses has committed a(n) a)Class 1 misdemeanor. b)Trustworthy act. c)Unfair trade practice. d)Felony.

a) Class 1 misdemeanor. A person who knowingly obtains information about an individual from an insurer or agent under false pretenses is guilty of a Class 1 misdemeanor.

All are true regarding the Insurance Commissioner's powers related to hearing and investigations EXCEPT a). Enact statutes to govern the insurance industry b). Disseminate information regarding the Department activities c). Enforce the NC Insurance Code d). Determine if an agent has acted in violation of the Insurance Code

a). Enact statutes to govern the insurance industry State statutes are enacted by the state legislature. The Insurance Commissioner is empowered to enforce the laws pertaining to insurance

What is a specific requirement regarding the number of employees in a SIMPLE plan? a). No more that 100 employees b). At least 100 employees c). Between 2 and 50 employees d). No more than 2 employees

a). No more that 100 employees A SIMPLE ( Saving Incentive Match of Employees) plan is available to small business that employ not more than 100 employees receiving at least 5K in compensation from the employer during the previous year.

If the Commissioner is scheduling a hearing for a potential violation of the Insurance Code, what is the minimum required notice? a)10 days b)15 days c)30 days d)45 days

a)10 days All hearings will be held at a time and place designated in a written notice provided by the Commissioner. The notice must be provided at least 10 days prior to the hearing, and must also state any specific charges.

Which of the following acts would be grounds for a person's license suspension, revocation, or refusal to renew? a)An agent fails to pay state income tax. b)An agent unknowingly misrepresents the terms of an insurance contract. c)An agent refuses to offer an explanation to a policyholder concerning the coverage provided by another insurer. d)A broker does not return a client's calls on timely basis.

a)An agent fails to pay state income tax. Failure to pay state income tax is a violation subject to license suspension or revocation; all the other examples are not.

Which of the following premium payment modes will incur the lowest overall payment? a)Annual b)Semi-annual c)Quarterly d)Monthly

a)Annual Annual premiums are the only modes of payment that do not result in service fee, so the overall payment will be lower.

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated? a)Annuity certain b)Fixed annuity c)Refund life d)Variable annuity

a)Annuity certain Annuity Certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.

Which of the following is NOT true about a joint and survivor annuity benefit option? a)Payments stop after the first death among the annuitants. b)A period certain option may be included. c)This option guarantees income for two or more recipients. d)The surviving annuitant may receive reduced payments.

a)Payments stop after the first death among the annuitants. A joint and survivor annuity will pay until the last annuitant has died; however, the surviving annuitant may receive reduced payments.

When a licensee is accused of any act, omission, or misconduct that would subject the licensee to a license suspension or revocation, with the approval of the Commissioner, the license may be surrendered for a period of a)Time to be set by the Commissioner. b)90 days. c)6 months. d)1 year.

a)Time to be set by the Commissioner. The Commissioner sets the time for a licensee suspension or revocation.

A waiver of premium provision may be included with which kind of health insurance policy? a) Dread disease b) Disability income c) Basic medical d) Hospital indemnity

b

According to the PPACA 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

b

Which of the following insurance providers must be nonprofit and sell insurance only to its members? a) Reciprocal b) Fraternal c) Service d) Mutual

b) Fraternal To be characterized as a fraternal benefit society, the organization must be nonprofit, have a lodge system that includes ritualistic work and maintain a representative form of government with elected officers. Insurance may only be sold to members of the society.

When an insurer requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company must a) Request a police report from the Department of Motor Vehicles. b) Furnish a blank form to be used for that purpose. c) Document the request for further investigation. d) Submit the loss claim to underwriting for premium review and resolution.

b) Furnish a blank form to be used for that purpose. When any company under any insurance policy requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company or its representative must furnish a blank form to be used for that purpose.

Before the Commissioner will issue a broker's license, the licensee must obtain a bond for at least a)$10,000 b)$15,000 c)$20,000 d)$50,000

b)$15,000 In order to receive a broker's license, the applicant must file a bond with the Commissioner for at least $15,000, or in lieu of a bond, deposit with the Commissioner the equivalent amount in cash or certificate of deposits.

Which of the following best describes a misrepresentation? a)Discriminating among individuals of the same insuring class b)Issuing sales material with exaggerated statements about policy benefits c)Making a deceptive or untrue statement about a person engaged in the insurance business d)Making a maliciously critical statement that is intended to injure another person

b)Issuing sales material with exaggerated statements about policy benefits Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a)The insurer determines the amount for each payment. b)It is a life contingency option. c)It will pay the benefit only for a designated period of time. d)The payments are not guaranteed for life.

b)It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? a) Misrepresentation b) Adverse selection c) Discrimination d) Law of large numbers

c

The interest earned on policy dividends is a)40% taxable, similar to a capital gain. b)Taxable. c)Nontaxable. d)Tax deductible.

b)Taxable. Dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income.

What is the advantage of reinstating a policy instead of applying for a new one? a)The cash values have gained interest while the policy was lapsed b)The original age is used for premium determination c)Proof of insurability is not required d)The face amount can be increased

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

b)The recommended amount to keep the policy in force throughout its lifetime The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which of the following indicated the person upon whose life the annuity income amount is determined? a). Owner b). Insured c). Annuitant d). Beneficiary

c). Annuitant The annuitant is the person upon whose life the annuity income amount is determined

What type of an interest rate is guaranteed in universal life policies a). Adjustable interest rate b). Current interest rate c). Contract interest rate d). Nominal interest rate

c). Contract interest rate The insurer guarantees a contract interest rate. A current interest rate is not guaranteed in the contract and may be higher because of current market conditions

An important fact about financial status of an insure was deliberately withheld. Which of the following terms best describes this action? a). Twisting b). Loading c). False financial statement d). Defamation

c). False financial statement Statements of this kind - when used to put the company into a favorable light are often called false financial statements

A licensee who ceases to maintain residency in North Carolina is required to deliver any insurance licenses to the Commissioner by mail or in person within how many days after terminating residency? a)10 days b)21 days c)30 days d)90 days

c)30 days Any licensee who ceases to maintain his residency in North Carolina shall deliver his insurance license or licenses to the Commissioner by personal delivery or by mail within 30 days after terminating residency.

In insurance, an offer is usually made when a) The insurer approves the application and receives the initial premium. b) The agent hands the policy to the policyholder. c) An agent explains a policy to a potential applicant. d) The completed application is submitted.

d

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? a)Conditional b)Personal c)Adhesion d)Unilateral

c)Adhesion A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.

Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be a)A managing partner of the insured. b)In violation of the free credit act. c)An agent of the company. d)A designated representative of the agent.

c)An agent of the company. Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be the company's agent. Any agent, broker or limited representative knowingly procuring by fraudulent representations payment, or the obligation for the payment, of a premium of insurance, may be found guilty of a Class 1 misdemeanor.

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%

d

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.

d

An insured has Medicare Part D coverage. He has reached his initial benefit limit and must now pay 50% of his prescription drug costs. What is the term for this gap in coverage? a) Bridge b) Blackout period c) Latency period d) Donut hole

d

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? a) Full b) 50% c) 25% d) None

d

Which of the following is an example of a producer being involved in an unfair trade practice of rebating? a) Inducing the insured to drop a policy in favor of another one when it's not in the insured's best interest b) Charging a client a higher premium for the same policy as another client in the same insuring class c) Making deceptive statements about a competitor d) Telling a client that his first premium will be waived if he purchased the insurance policy today

d

Which of the following is true about the requirements regarding HIV exams? a) Results may be disclosed to the agent and the underwriter. b) Prior informed oral consent is required from the applicant. c) HIV exams may not be used as a basis for underwriting. d) The applicant must give prior informed written consent.

d

Which of the following provisions is mandatory for health insurance policies? a) Free-look b) Unpaid premiums c) Intoxicants and narcotics d) Physical examination and autopsy

d

After an insurer appoints a new agent, the Commissioner must be notified within a). 10 days b). 15 days c). 20 days d). 30 days

d). 30 days Within 30 days of new agent appointments, the insurer must file the names, addresses, and other information with the Commissioner.

Which of the following is NOT true regarding a deferred annuity? a). It is used to accumulate funds for retirement b). It can be purchased with single lump sum c). The annuity grows tax deferred d). Income payments begin within 1 year from the date of purchase

d). Income payments begin within 1 year from the date of purchase Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities.

All of the following are true of the Survivorship Life policy EXCEPT a). The death benefit is not paid until the last death b). The premium would be lower than in a joint life policy c). It can insure more than 2 lives d). The premium is based on the age of each insured

d). The premium is based on the age of each insured Survivorship Life (or second-to-die 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

How long is a free-look period for replacement policies? a)10 days b)14 days c)20 days d)30 days

d)30 days The replacing insurer must provide to the policyowner notice of the right to return the policy or contract within 30 days of the delivery of the contract and receive an unconditional full refund of all premiums.

Any person who violates a cease and desist order of the Commissioner pertaining to consumer information privacy may be subject to which of the following penalties? a)Imprisonment for up to 5 years b)Imprisonment for up to 1 year c)A monetary fine up to $5,000 for each violation d)A monetary fine up to $10,000 for each violation

d)A monetary fine up to $10,000 for each violation Violations of the cease and desist order pertaining to consumer information privacy will result in a monetary fine of not more than $10,000 for each violation.

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)Waiver of premium b)Incontestability period c)Assignment d)Automatic premium loan

d)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.

Which of the following is TRUE about a class designation? a)Beneficiaries must be part of the insured's immediate family. b)It is not allowed. c)It determines the succession of beneficiaries. d)Beneficiaries are not identified by name.

d)Beneficiaries are not identified by name. A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.

What are the two components of a universal policy? a)Insurance and investments b)Mortality cost and interest c)Separate account and policy loans d)Insurance and cash account

d)Insurance and cash account A universal policy has two components: an insurance component and a cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Corridor option b)Variable option c)Option A d)Option B

d)Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

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

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

Which of the following applicants would NOT qualify for a Keogh Plan? a)Someone who has been employed for more than 12 months b)Someone who is over 25 years of age c)Someone who works for a self-employed individual d)Someone who works 400 hours per year

d)Someone who works 400 hours per year A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.

All of the following are true about variable products EXCEPT a)The minimum death benefit is guaranteed. b)The cash value is not guaranteed. c)Policyowners bear the investment risk. d)The premiums are invested in the insurer's general account.

d)The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a)The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. b)The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. c)One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. d)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

d)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.

The renewable provision allows the policyowner to renew the coverage at the expiration date a). Only with evidence of insurability b). With evidence of insurability if the insurer requires it c). With evidence of insurability if the insurer risk has increased d. Without evidence of insurability

d. Without evidence of insurability The renewable provision allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability.

Which of the following are the main factors taken into account when calculating residual disability benefits? A. present earnings and earnings prior to disability B. earnings prior to disability and length of disability C. employee's full-time status and length of disability D. present earnings and standard cost of living

A

Regarding the taxation of Business Overhead Policies a. premiums are not deductible, but expenses paid are deductible b. premiums are deductible and benefits are taxed c. premiums are not deductible and benefits are taxed d. premiums are not deductible, but benefits are deductible

B

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? a. 4 credits b. 6 credits c. 10 credits d. 40 credits

B

Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to A. enable the insurer to reduce variable costs B. prevent overutilization and malingering C. prevent the insured from obtaining excess insurance D. enable the insurer to provide affordable coverage

B

An insured purchased a disability income policy with a 10-year benefit period. The policy stated a 20 day probationary period for illness. If the insured is hospitalized with an illness 2 weeks after the policy was issued, how much will the policy pay? a. the insured will receive a return of premium b. it will pay up to 10 years of benefits c. it will pay until the insured is released from the hospital d. nothing; illness is not covered during the first 20 days of the contract

D

In a disability policy, the elimination (or waiting) period refers to the period between a. the effective date of the policy and the date the first premium is due b. coverage under a disability policy and coverage under SS c. during which any specific illness or accident is excluded from coverage d. the first day of disability and the insured starts receiving benefits

D

A woman's health insurance policy dictates which doctors she is allowed to see. Her health providers share an assumed risk for their patients and encourage preventative care. What best describes the health system that the woman is using? a) Managed Care b) Comprehensive health c) Major medical d) Group health

a

In the event of loss, after a notice of claim is submitted to the insurer, who is responsible for providing claims forms and to which party? a) Insurer to the insured b) Insured to the insurer c) Insurer to the Department of Insurance d) Insured to the Department of Insurance

a

In which of the following cases would an "any occupation" disability income policy pay the benefits? a. the insured is unable to perform any jobs in the field related to the insured's education and experience? b. the insured is unable to perform the duties of his or her specific occupation c. the insured changes jobs and is injured as a result of a more hazardous occupation d. the insured's family has unexpected expenses due to the insured's disability

a

What type of benefit helps to pay for accidental injuries that are not severe enough to qualify as disabilities? a. medical reimbursement benefit b. partial disability c. basic accidental injury d. accidental death and dismembermnet

a

Which of the following will NOT be considered unfair discrimination by insurers? a) Discriminating in benefits and coverages based on the insured's habits and lifestyle b) Charging applicants with similar health histories different premiums based on their ethnicity c) Cancelling individual coverage based on the insured's marital status d) Assigning different risk classifications to applicants based on gender identity

a

All of the following long-term care coverages would allow an insured to receive care at home EXCEPT a) Home health care. b) Skilled care. c) Custodial care in insured's house. d) Respite care.

b

All of the following statements concerning Accidental Death and Dismemberment coverage are correct EXCEPT a) Accidental death and dismemberment insurance is considered to be limited coverage. b) Death benefits are paid only if death occurs within 24 hours of an accident. c) Accidental death benefits are paid only if death results from accidental bodily injury as defined in the policy. d) Dismemberment benefits are paid for certain disabilities that are presumed to be total and permanent.

b

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply? a) Coverage will apply, but will be reduced by 50%. b) No coverage will apply, since the injury could have been foreseen. c) No coverage will apply, since disability income policies cover sickness only. d) Coverage will apply since the break was accidental.

b

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? a) 7 days b) 10 days c) 31 days d) 60 days

b

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? a) Defamation b) Illegal c) A legal advertising strategy d) Unfair Discrimination

b

Another term used to describe "no deductible" is a) Immediate cooperative b) First-dollar basis. c) Comprehensive. d) Total coverage.

b

Candidates for either a Property license or a Casualty license must complete how many hours of prelicensing education? a) 15 b) 20 c) 5 d) 10

b

If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she have earned to receive benefits? a) 40 credits b) 12 credits c) 20 credits d) 6 credits

b

In a group health policy, a probationary period is intended for people a) Who want lower premiums. b) Who joined the group after the effective date. c) Who had a pre-existing condition at the time they joined the group. d) Who have additional coverage through a spouse.

b

Items stipulated in the contract that the insurer will not provide coverage for are found in the a) Consideration clause. b) Exclusions. c) Insuring clause. d) Benefit Payment clause.

b

Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to a) The spouse of the insured. b) The insured. c) Creditors. d) Beneficiary of the death benefit.

b

What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered? a. grace period b. probationary period c. contestable period d. elimination period

b

What is the minimum required age for an insurance producer in this state? a) 17 years old b) 18 years old c) 21 years old d) 23 years old

b

Which of the following must be present in all Medicare supplement plans? a) Plan C coinsurance b) Plan A c) Foreign travel provisions d) Outpatient drugs

b

Which of the following persons is required to hold a producer license? a) A person who administers employee benefits b) A person who negotiates insurance contracts c) A person who only takes messages related to claims d) A person who creates insurance advertisements

b

According to the provisions of the Patient Protection and Affordable Care Act, all of the following are required preventive care services EXCEPT a) Well-woman visits and counseling. b) Screenings for autism and behavioral disorders in children. c) Cervical cancer exams for all women starting at age 40. d) Diet counseling for adults.

c

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a) Stocks, securities, or bonds. b) An offer to share in commissions generated by the sale. c) Dividends from a mutual insurer. d) An offer of employment.

c

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

c

How many pints of blood will be paid for by Medicare Supplement core benefits? a) Everything after first 3 b) 1 pint c) First 3 d) None; Medicare pays for it all

c

If a producer continues to violate the Insurance Code, a new civil penalty will be assessed every a) Month. b) Year. c) Day. d) Week.

c

If an employer provides LT group disability insurance for its employees, what percentage of monthly wages are lower-paid employees eligible to collect? a. 33 and 1/3% b. 50% c. 66 and 2/3% d. 90%

c

The insurance policy, together with the policy application and any added riders form what is known as a) Contract of adhesion. b) Whole life policy. c) Entire contract. d) Certificate of coverage.

c

The provision that provides for the sharing of expenses between the insured and the insurance company is a) Deductible. b) Divided cost. c) Coinsurance. d) Stop-loss.

c

Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within a) 30 days of a loss. b) 60 days of a loss. c) 90 days of a loss. d) 20 days of a loss.

c

What is the best way to change an application? a) White-out the previous answer b) Draw a line through the incorrect answer and insert the correct one. c) Start over with a fresh application d) Erase the previous answer and replace it with the new answer

c

Which of the following factors does an insurer use the most to determine the extent of disability benefits that it will promise in a contract? a. insured's moral history b. insured's hobbies c. insured's income d. insured's marital status

c

Which of the following provides coverage on a first-dollar basis? a) Supplementary major medical b) Limited major medical c) Basic expense d) Accident expense

c

Which of the following statements concerning Medicare Part B is correct? a) It pays on a first dollar basis. b) It pays 100% of Medicare's standards for reasonable charges. c) It pays for physician services, diagnostic tests, and physical therapy. d) It is provided automatically to anyone who qualifies for Part A.

c

Which of the following statements is NOT correct concerning the COBRA Act of 1985? a) It applies only to employers with 20 or more employees that maintain group health insurance plans for employees. b) COBRA stands for Consolidated Omnibus Budget Reconciliation Act. c) It requires all employers, regardless of the number or age of employees, to provide extended group health coverage. d) It covers terminated employees and/or their dependents for up to 36 months after a qualifying event.

c

Which of the following statements is true regarding coinsurance? a) The smaller the percentage that is paid by the insured, the lower the required premium will be. b) The smaller the percentage that is paid by the insured, the more consistent the required premium will be. c) The larger the percentage that is paid by the insured, the lower the required premium will be. d) The larger the percentage that is paid by the insured, the higher the required premium will be.

c

Which of the following would best describe total disability? a) A person's total loss of income. b) A person's inability to qualify for insurance coverage. c) A person's ability to work is significantly reduced or eliminated for the rest of his/her life. d) A person's inability to perform one of the regular duties of his/her occupation

c

With respect to the Consideration Clause, which of the following would be considered consideration on the part of the applicant for insurance? a) Providing warranties on the application b) Notice of policy cancellation c) Payment of premium d) Promise to renew the policy at the end of the policy period

c

An insurance producer may not act as an agent for an insurer unless he/she has become which of the following? a) Approved b) Commissioned c) Licensed d) Appointed

d

An insured is covered under a Medicare policy that provides a list of network healthcare providers that the insured must use to receive coverage. In exchange for this limitation, the insured is offered a lower premium. Which type of Medicare policy does the insured own? a) Medicare Part A b) Medicare Supplement c) Medicare Advantage d) Medicare SELECT

d

How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company? a) As soon as possible b) Within 20 days c) Within 60 days d) Within 90 days or as soon as reasonably possible, but not to exceed 1 year

d

The annual contribution limit of a Dependent Care Flexible Spending Account is set by a) The employer. b) The insurer. c) The insured. d) The IRS.

d

Which of the following riders would NOT increase the premium for a policyowner? a) Payor benefit rider b) Waiver of premium rider c) Multiple indemnity rider d) Impairment rider

d

An insured owns a medical expense policy that he purchased for his family. The insured's employer purchased a Group Disability income policy for the insured and all eligible employees. The insured subsequently suffered an accident on the job that left him unable to work for four months. If the insured receives benefits from his disability income policy, which of the following would be true? a. benefits from employer contributions are not taxable b. the insured can deduct his medical expense benefits from his income tax c. benefits received that are attributable to employer contributions are fully taxable to the employee as income d. premiums the insured paid for his medical expense policy are normally deductible from his income

C

Which of the following statements about occupational vs. nonoccupational coverage is true? a. individual disability policies never cover nonoccupational injuries b. only group disability income policies can be written on an occupational basis c. disability insurance can be written as occupational or nonoccupational d. group medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries

C

A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay? a. 10 days b. 15 days c. 25 days d. 45 days

b

A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim, a) Both plans will pay the full amount of the claim. b) The insurance through his company is primary. c) The insurance through his wife's company is primary. d) The insurance plans will split the coverage evenly.

b

All of the following statements about Medicare supplement insurance policies are correct EXCEPT a) They are issued by private insurers. b) They cover the cost of extended nursing home care. c) They cover Medicare deductibles and copayments. d) They supplement Medicare benefits.

b

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.

b

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

b

Which of the following is NOT an exclusion in medical expense insurance policies? a) Routine dental care b) Coverage for dependents c) Military duty d) Self-inflicted injuries

b

f only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? a) A legal (but unethical) contract b) Unilateral c) Adhesion d) Conditional

b

According to the rights of renewability rider for cancellable policies, all of the following are correct about the cancellation of an individual insurance policy EXCEPT a) Claims incurred before cancellation must be honored. b) An insurance company may cancel the policy at any time. c) Unearned premiums are retained by the insurance company. d) The insurer must provide the insured a written notice of the cancellation.

c

Before a customer's agent delivers his policy, the insurer makes a last-minute change to the policy. The agent informs the customer of this change, and he accepts it. What must the agent do now? a) The agent must notify the beneficiary of the change in policy. b) If the change would affect the premium, the agent must have the customer sign a statement acknowledging the change. c) The agent should ask the customer to sign a statement acknowledging that he is aware of the change. d) Nothing. After the explanation, the agent is not legally bound to do anything else.

c

Concerning Medicare Part B, which statement is INCORRECT? a) It offers limited prescription drug coverage. b) It provides partial coverage for medical expenses not fully covered by Part A. c) It is fully funded by Social Security taxes (FICA). d) It is known as medical insurance.

c

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a) Aleatory contracts. b) Binding contracts. c) Contracts of adhesion. d) Unilateral contracts.

c

How long is the free-look period with a Medicare supplement policy? a) 10 days b) 20 days c) 30 days d) 60 days

c

Medicaid provides all of the following benefits EXCEPT a) Home health care services. b) Eyeglasses. c) Family planning services. d) Income assistance for work-related injury.

d

The free-look provision allows for which of the following? a) Immediate coverage when the application is submitted b) A guarantee that the policy will not lapse if the premium is overdue c) A guarantee that the policy will be issued d) A right to return the policy for a full premium refund

d

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? a) Adhesion b) Personal c) Unilateral d) Conditional

d

What is the main difference between coinsurance and copayments? a) With copayments, the insured pays all of the cost. b) With coinsurance, the insurer pays all of the cost. c) Coinsurance is a set dollar amount. d) Copayment is a set dollar amount.

d

Which entity must approve a new group policy? a) Federal Insurance Regulation Board b) MIB c) NAIC d) Commissioner

d

Which of the following best describes an insurance company that has been formed under the laws of this state? a) Sovereign b) Alien c) Foreign d) Domestic

d

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

d

Which of the following is NOT covered under a long-term care policy? a) Adult day care b) Hospice care c) Home health care d) Acute care in a hospital

d

Which of the following statements is INCORRECT concerning Medicare Part B coverage? a) Participants under Part B are responsible for an annual deductible. b) Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges. c) It is a voluntary program designed to provide supplementary medical insurance to cover physician services, medical services and supplies not covered under Part A. d) Part B coverage is provided free of charge when an individual turns age 65.

d