Practice Exam
An insured files for an accident and health insurance policy claim eight days after the premium due date. The benefit payable is $500 and the overdue premium is $200. Assuming that the policy pays on a first-dollar basis and contains the unpaid premium provision, how much will the insurer pay?
$300
Premature IRA distributions are subject to a penalty tax of
10%
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
Group dental insurers can discourage adverse selection by
Limiting the duration of coverage
Which of the following health insurance provisions requires that the application becomes part of the policy?
Entire Contract clause
XYZ Insurance Company gives direct authority to its agents to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the agent the right to collect premiums?
Express authority
When an accident and health insurance policy provision is in conflict with the statutes of Ohio, it is
Amended to conform to the minimum statutory requirements
Rick is a disabled worker receiving Social Security benefits. What are his wife and dependent children eligible for?
An income benefit which is a percentage of his primary insurance amount
Traditional individual retirement annuity (IRA) distributions must start by
April 1st of the year following the year the participant attains age 70 1/2
Long-term care insurance policies may exclude coverage for all of the following EXCEPT
Senile dementia
An Ohio agent's license to sell insurance may be revoked for all of the following reasons EXCEPT
Sharing commissions with licensed agents
Which statement is true regarding hospital preadmission certification for emergency situations?
Notification is required to be given after insured is admitted to the hospital
Which of the following would NOT have a restricted ability to enter into a contract?
Small employer
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
The policy is surrendered for less than what was paid into it
Which of the following statements is INCORRECT about why the government provides insurance?
Reduce fraudulent claims
Which of the following statements BEST describes the HIPAA portability rules for an individual who changes from one group medical plan to another?
Reduces or eliminates any pre-existing conditions excluded under the new plan
Where does the primary funding for Medicare Part A come from?
Federal payroll and self-employment taxes
Which of these is NOT an allowable deduction made from premium payments of the cash value of a variable life insurance policy?
Federal premium taxes
Major Medical policies are typically characterized by which of the following?
Flat deductible
How can an insurance company minimize exposure to loss?
Reinsuring risks
What is the name of the rider that provides an additional purchase option in a life insurance policy?
Guaranteed insurability rider
Which of the following can be defined as "the potential for loss"?
Risk
Kate received a group accident and health termination notice. How many days does she have to apply for a converted policy?
31
When does the agent give a premium receipt for a life insurance application?
When the initial premium has been collected with the application
A policyowner is permitted to take out a policy loan on a whole life policy at what point?
When the policy has a cash value
After an applicant reads and signs an insurance application, he/she should be conscious of the fact that
a false statement could lead to loss of coverage
The coinsurance for skilled nursing facility services covered by Medicare after the 100% Medicare coverage ends is
a flat dollar amount per day
An insured is covered under a group long-term disability policy. Under this type of policy, the definition of disability based on any occupation typically applies
after two years of disability
When there is a named beneficiary on a life insurance policy, the death benefits
are paid directly to the beneficiary without interference from the insured's creditors
A source of additional income for a life insurance policyowner can be derived from the
cash value
An employee welfare plan exempt from ERISA regulations would be
church plans
The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of
consideration
When a sum of money undergoes capital liquidation, that sum will
decrease in size
The amount of a covered loss to be paid by the insured before a major medical expense policy begins to pay is called the
deductible amount
Employer group dental plans may attempt to minimize adverse selection by utilizing all of the following EXCEPT
encouragement of reduction in employee participation
A prepaid dental plan has an agreement in place with a network of dentists which
establishes amounts that are considered full payment for services rendered
The difference between a doctor's actual charges and the amount approved by Medicare is called a(n)
excess charge
Mark has a policy that uses the regular occupation (own-occ) definition of total disability. Using this definition, he will be considered disabled if unable to
execute the substantial and material duties of his regular occupation
Death benefits from a life insurance policy are normally considered to be
exempt from federal income tax
In Ohio, when an individual is covered under a small employer's accident and health plan, the pre-existing conditions exlcusion period may be partially or wholly satisfied by
having creditable coverage with a previous employer
With life insurance, the needs approach is used primarily in determining
how much life insurance a client should apply for
The insurance coverage in a variable life insurance policy may vary based on the value of
its underlying investments
A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?
less than
An insured is considered to be totally disabled under the presumptive disability provision if he/she
loses the ability to speak
An insurable risk requires
that the chance of loss be calculable
The absolute assignment of a life insurance policy results in
the assignee receives all incidents of ownership
Attainment of the limiting age for dependent children will not terminate the coverage of a dependent child if
the child is incapable of self-sustaining employment by reason of physical or mental disability
The insured's consideration given for a health insurance policy is
the first premium payment and the application
An arrangement where an individual is authorized to act on behalf of another person or company is established through
the law of agency
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
The grouping of two or more small employers in order to obtain group health insurance at a favorable rate is called a multiple employer
trust
In an individual retirement account (IRA), rollover contributions are
unlimited by dollar amount
An insurance company's failure to enforce a contract's provision is called a(n)
waiver
An insurance company can be liable for an agent's unauthorized acts
when the agency contract is unclear concerning the authority given
Pat has a disability income insurance policy that covers disabilities arising from a work-related illness or injury. The amount of his disability income payments for an on-the-job injury may be reduced by
workers compensation benefits already paid
An accident and health insurance policy defines an injury as "bodily injury by accidental means". For an injury to be covered on this policy, what is required?
Both the cause and resultant injury must be accidental
What is a prosthodontics dental procedure?
Bridgework
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
The power to change the beneficiary in an individual annuity lies with the
owner
A contingent beneficiary is described as the
person who receives the death benefits if the primary beneficiary dies before the insured
Under a key person disability income policy, benefits will be received as
tax-free income to the business
Prepaid dental plans differ from most other types of dental plans in what way?
Closed panel of dentists can only be used
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
Life insurance premiums are based on what three factors?
Mortality, interest, expenses
All of these statements correctly describe an aleatory contract EXCEPT
Only one party makes any kind of legally enforceable offer
In Ohio, continuation of medical plan coverage for a handicapped child beyond the age limit stated in the policy may require proof of the child's
Incapacity and dependency upon reaching the age limit
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
Which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has passed?
Incontestable clause
Which of these factors does NOT influence an applicant's need for life insurance?
Self-maintenance expenses
Which statement regarding whole life insurance is accurate?
Insurance coverage can continue for life
Which type of deductible must be satisfied again for each illness or accident in a major medical plan?
Per-cause
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
Health providers are compensated by a preferred provider organization (PPO) for normal dental procedures by what means?
Decreased fee schedules
All of these are used to prevent adverse selection in a group dental plan EXCEPT
Decreased participation
Which of these pays an income to two or more annuitants until the death of the last annuitant?
Joint and survivor annuity
Straight whole life insurance can be accurately described in all of these statements EXCEPT
Policy protection normally expires at age 65
Which of the following describes a participating life insurance policy?
Policyowners are entitled to receive dividends
What must the claimant do if the proper forms are not provided by the insurer?
Proceed by providing written verification of the loss
A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that
The policyowner may need to resume premium payments depending on actual results
Which of the following statements about universal life insurance is NOT true?
Universal life insurance normally has a minimum guaranteed cash value for duration of the policy
Which of the following combinations best describe a universal life insurance policy?
A flexible premium deposit fund and a monthly renewable term insurance policy
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
Allows a policyowner to take out a policy loan to cover premium payments in the event of total disability
What type of policy can group term life insurance normally be converted to?
An individual permanent life insurance policy
Who normally pays the premiums for group credit life insurance?
Borrower
What could be the potential result of taking out a cash value loan on a life insurance policy?
Cash surrender value will be reduced if policy is forfeited
A policyowner suffers a covered accident and health insurance loss on June 30 and submits the proof of loss to the insurer July 10. If the policyowner cancelled the coverage on July 2, how will the insurance company handle the claim?
Claim must be paid after proof of loss is received
Which of these is NOT considered a Federal punishment for unfair and deceptive insurance practices?
Community service
Which report contains information regarding an individual's general reputation and credit standing?
Consumer report
In regards to the Affordable Care Act (ACA), which of these is NOT a role of a health insurance exchange?
Contact the employer if an employee stops coverage under a plan offered in the exchange
What does a Mandatory Second Surgical Opinion provision provide to an employer-paid health insurance plan?
Containment of the employer's premium cost
Which of the following is a key characteristic of an HIC compared to other health and accident plans?
HIC combines health care delivery and financing
Which of the following is NOT true of a preferred provider plan?
Hospitals can only initiate preferred provider plans
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
According to HIC laws, confidentiality of health information applies to
Information supplied by both the covered individual and the providers
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
Less than the policy's face amount
Skilled nursing facility expenses are sometimes covered by _____, but ONLY if the insured was hospitalized prior to entering the facility.
Medicare
Which of these is a type of private insurance that covers the cost-sharing amounts under Medicare?
Medicare Supplement
Medicare Part B excess charges are covered by
Medicare Supplemental insurance
Who does TRI-CARE provide accident and health coverage to?
Military families
Medicare Supplement insurance requires an individual to be at least how old for open enrollment?
No minimum age
All of these are normally covered under most dental plans EXCEPT for
Oral cancer
When a deferred annuity is surrendered, who must sign the authorization to do so?
Owner
Which of the following is NOT a function of accident and health insurance?
Pays a death benefit as a result of natural causes
With whom may the subscriber of an HIC file an appeal regarding the resolution of a complaint concerning services provided?
Peer Review Committee
Which of these plans allow a participant to choose either a network or non-network provider at the time when medical care is needed?
Point-of-service
Which of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance
Which of the following statements accurately describes the financial impact of total disability?
The financial impact may be worse than that of death
Which statement concerning a deferred annuity is correct?
The owner can be the beneficiary, annuitant, or neither
Which statement about group life insurance is INCORRECT?
Each participant requires evidence of insurability
An employer has a group life insurance plan in place for his employees. How would an employee in poor health be treated in this situation?
Eligible for the same type of coverage as the other employees
Which parties are directly involved in a group accident and health insurance contract?
Employer and insurer
Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value?
Flexible premium fixed annuity
Which life insurance policy provision allows a policyowner to cancel the policy within a limited time period and be given a full refund?
Free-look period
A business may purchase an annuity for all of the following reasons EXCEPT
Funding a non-qualified deferred compensation plan
Which of these statements is NOT true regarding a cash value loan against a life insurance policy?
Interest payments made by policyowner are deductible
Medicare will cover a maximum of how many days per benefit period in a skilled nursing facility?
100 days
Mary is the sole proprietor of her business and has a family health plan. She would like to deduct the premiums from her taxes. What percentage of her premiums are tax deductible?
100%
Which of the following best describes the tax treatment of medical expense policies for the self-employed?
100% of medical expense plan premiums are tax deductible
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
What is the MAXIMUM number of employees an employer may have for qualified medical savings accounts?
50 employees
Which of the following is NOT a reason for a business to buy key person life insurance?
An increased pension liability if the key employee dies
What qualifies as acceptance of an insurance contract offer?
An issued policy
Which of the following statements is true regarding accident and health insurance claims that reimburse on an indemnity basis?
Claims can be sent directly to the insured
What does the rehabilitation benefit cover in a disability income policy?
Covers the approved cost of the rehabilitation necessary to help a disabled insured return to work
Which of the following is NOT an intended use of an annuity?
Create new funds upon the death of a wage-earner
ABC Partnership is a business with a limited number of partners. Which disability buy-sell agreement is best suited for this business?
Cross purchase agreement
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up?
Decreases
Individuals covered with employer-paid group health plans will normally receive tax-free benefits under all of these plans EXCEPT
Disability income
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately had the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?
Minors are normally not capable of handling money in a reasonable manner
An insured covered under a Disability Income policy is disabled and collecting benefits for a period of two months. He returns to work and is again disabled from the same cause, whereupon benefits continue to be paid. This is an example of which of the following?
Recurrent disability
When an annuity contract has been surrendered, how will the surrender charges affect the final contract settlement?
Settlement will be reduced
All of the following are causes for termination of an employee's group insurance coverage EXCEPT
The plan's coinsurance limit is reached
In dental insurance coverage, which of the following typically is EXCLUDED?
Treatment started prior to the eligibility date
Under which circumstance is the interest rate guaranteed within a market value adjusted annuity?
When the contract has been held for a stated time period
In a qualified retirement plan, the yearly contributions to an employee's account
are restricted to maximum limits set by the IRS
A signed good health statement may be collected by a life agent at the time of
policy delivery
Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)?
policy loans
Where is the difference between a standard risk and a substandard risk reflected?
premium charges
An owner's cost basis for a non-qualified deferred annuity is typically the same as the
premiums paid into the annuity
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a
profit-sharing plan
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a(n)
risk retention group
When a health insurance policy includes a Mandatory Second Surgical Opinion provision, the insured must
seek a second opinion for specified elective surgeries
When issuing disability income coverage on a substandard risk, an insurance company may
shorten the benefit period
The premiums paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer
Long-term care policies normally cover expenses associated with
Nursing homes
Which benefit can be found in an equity indexed annuity, but not in a fixed annuity?
Protection against long-term inflation
Which of the following would NOT be a reason for purchasing life insurance on a child's life?
Provide benefits for the child if the parents die
A characteristic of a Preferred Provider Organizations (PPO) is
If service is obtained outside the PPO, benefits are reduced and costs increase
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?
If the interest rate falls below a specified level, the surrender charge is waived
All of these are considered features of whole life insurance EXCEPT
Initial premium is lower than for an equivalent amount of term insurance
In what way are insurance policies said to be aleatory?
Involves the potential for the unequal exchange of value
Which term describes the elimination of a hazard?
Risk avoidance
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?
Split-dollar
Darrell has a group long-term disability income policy paid by his employer. Which of these statements is true?
The specified benefit amount is a percentage of his wages
Which of these is NOT a reason to buy a term life policy?
To accumulate savings
What is the effect of the market value adjustment in a market value adjustment annuity?
Transfers some of the investment risk to the policyowner
The contractual rights that allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called
nonforfeiture options
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will
remain a constant dollar amount for the duration of the annuity period
Which of the following can be defined as "the potential for loss"?
risk