Prelicense Life & Health Exam
Sue's annual premium is $1,500 and the declared dividend was $200. If Sue chooses the premium reduction dividend option, she will receive a premium notice for which of the following?
$1,300
As a general rule, a separate account may not invest more than what percent of its assets in the securities of one issuer?
10
Persons can buy tax-qualified long-term care insurance policies and deduct their premium payments by the amount that their unreimbursed medical expenses (including LTC premiums) exceed what percent of their adjusted gross incomes?
10 percent
Abby is insured under a Medicare Select policy and received treatment from a non-network provider when she had the flu. Which of the following statements is correct?
Abby is personally responsible for the costs of the care.
Adam is a Medicare beneficiary who is also eligible for his state's Medicaid program. For Adam, what does Medicaid serve as?
Adam's secondary insurer, with Medicare as his primary insurer
Which of the following is not an allowable basis for excluding coverage under a long-term care policy?
Alzheimer's disease
Ann is the beneficiary of an annuity owned by Jim. Jim intended to annuitize the contract at retirement but died shortly before retiring. What benefits will Ann receive from the annuity?
Ann will receive the annuity's accumulated value and may select a payout option.
Which of the following statements best describes the purposes that annuities serve?
Annuities accumulate and/or distribute sums of money.
A husband and wife, ages 49 and 51, jointly earn $175,000 a year. They each participate in a 401(k) plan at work, and each owns a traditional individual IRA. Which of the following statements is correct?
Any contributions they make to their traditional IRAs will not be tax deductible.
Anne turned 70 this year on March 15. By what date does she have to begin taking distributions from her retirement plan?
April 1 next year
On June 1, Sandra submitted proof of her uncle's death and her right as beneficiary to receive the proceeds of his life insurance policy. A life insurance policy settlement must take place by
August 1.
Which of the following protects Peggy if she is no longer covered by her employer's health insurance plan or its benefits?
COBRA
What is the actuary's first step in determining the premium to charge for a policy?
Calculate the net single premium.
A dental plan that separates their covered treatments into 3 different categories will typically include fillings and tooth extractions in
Category 2
Cindy, age 51, withdraws $15,000 from her 401(k) plan so that she can buy a new boat. All the following statements regarding this are correct, EXCEPT:
Cindy can avoid taxation if she can demonstrate to the IRS that the boat was essential to her financial well-being.
Damien just bought a variable annuity from Delta Insurance Company. Which party bears the investment risk with respect to the assets in the separate account?
Damien
Raphael is an agent for ABC Insurers and refers a prospective client to Dana, an agent at XYZ Insurers. Which of the following statements about commissions in this case is correct?
Dana can legally share her commission with Raphael under Texas law
Karen transfers all rights in her life insurance policy to her brother, David, in an absolute assignment. Who is typically responsible for paying the policy's premiums from that point forward?
David must pay the premiums.
Which of the following does not constitute an unfair claims settlement practice in Texas?
Failing to pay a claim for which the insurer's liability is uncertain.
For any given amount of coverage, how does the cost of group life insurance generally compare to the cost of individual life insurance?
Group life is less expensive.
Receiving health care through an HMO is subject to certain conditions, limitations, and restrictions. All of the following statements describe such conditions, limitations, and restrictions EXCEPT:
If a member is outside the HMO's service area, the member must contact the HMO within one hour of receiving treatment.
All of the following statements about the delivery of health insurance policies are correct, EXCEPT
If an applicant applies for a policy without paying the first premium, the producer must collect the first premium along with a surcharge when delivering the policy.
Karen and Greg are leaving their employer and exiting their group health policy. When they are dropped from its coverage, how does their departure affect the insurer and employer?
Individual insureds are not named in a group policy and can join or leave the group without causing a new policy to be issued.
Which of the following statements regarding a disability income insurance "professional starter policy" is correct?
It allows the insured to increase policy coverage in the future without having to provide evidence of insurability.
Walrus Publishing has five employees and wants to apply for a group health plan. Which of the following actions may the insurer take when underwriting the policy?
It can require the employees to provide evidence of insurability for group rating purposes, though it cannot deny coverage for uninsurable employees or charge employees a higher premium if they have a prior history of health problems.
Which of the following statements about the Medical Information Bureau (MIB) is CORRECT?
It collects medical information about insurance applicants.
John, a Texas resident, is covered under a credit life insurance policy while he pays off a car loan. Coverage is paid through December, when his loan is scheduled to be paid off. If John pays off the car loan in September (3 months early), which of the following describes what the credit life insurance company must do with respect to a premium refund?
It must refund the premium for the 3 month period following the date John paid off the loan.
If Rick withdraws funds from his universal life insurance policy, what will be the effect on the policy's death benefit?
It will be reduced by the amount of the withdrawal.
Juan just purchased an individual long-term care insurance policy from Acme Insurers. The first page of the policy states that it is guaranteed renewable, which means that
Juan has the right to continue the insurance in force by timely paying premiums.
Life insurance applies to business arrangements in all of the following ways, EXCEPT:
Life insurance is used to make up for the financial losses that might occur when an important customer dies.
All the following statements regarding group disability income (DI) insurance are correct EXCEPT:
Long-term disability plans can only cover nonoccupational disabilities.
For what purpose was Medicaid created?
Medicaid was established to provide health care and health-related services to people with low incomes.
Which of the following statements about deferred annuity surrender charges is NOT correct?
Most deferred annuities apply surrender charges for all years after the contract is issued.
Diane invested $6,000 two years ago in a Section 529 college savings plan for her daughter, Cathleen, age 5. The account earned $400 the first year and $450 the second year. Which of the following statements is correct?
No income tax must be paid on the earnings this year.
What must an annuity owner do to withdraw funds from his or her annuity contract?
Notify the insurer of the request to withdraw funds.
Which statement regarding defined contribution qualified plans is correct?
Participants can choose to receive the benefit at retirement as annuitized income. The retirement benefit, when paid, is usually fully taxable. Participants can choose to receive the benefit at retirement as a lump-sum payment.
In which of the following areas may a life insurance underwriter discriminate in determining policy eligibility and coverage limits?
Personal health history
Which one of the following statements about variable life insurance is correct?
Policyowners can choose how to invest their policy's premiums and cash values.
Which one of the following statements best describes if and when a life insurance premium may change under the level premium concept?
Premiums are set and remain fixed over the full term of the premium-paying period.
All the following statements about ordinary whole life insurance are correct
Premiums never increase. The insured pays level premiums until he or she dies or reaches age 120, whichever comes first. The premium is level because the increasing cost of pure insurance is offset by a decreasing net amount of pure insurance.
Which statement about return of premium riders is NOT correct?
Return of premium riders are available in all states.
Which of the following sections of the Tax Code deals with the exchange of life insurance policies and annuities?
Section 1035
Grace owns a fixed annuity and wants to exchange it for a variable annuity. What must she use to be sure no taxes are imposed?
Section 1035 exchange
All of the following are common cafeteria plan benefit options EXCEPT
Section 529 college savings plans
Jessica's traditional IRA is worth $300,000 and consists only of prior deductible contributions and earnings. What are the tax implications if Jessica converts her IRA to a Roth IRA?
She must pay income taxes on the entire $300,000.
All the following statements about HIPAA are true EXCEPT
The Health Insurance Portability and Accountability Act (HIPAA) protects those who are no longer covered by an employer's health insurance plan or its benefits.
The Smiths set up a Section 529 prepaid tuition plan for their daughter, Jenna. They invested a total of $15,000, which covers the current cost of two semesters of college at their in-state public university. However, by the time Jenna goes to college, it will cost $30,000 for two semesters. What will happen in this case?
The Smiths' prepaid tuition plan will cover two semesters of college for Jenna.
Annuities are often referred to as "insurance against living too long" for all of the following reasons, EXCEPT:
The annuity contract includes a face amount that pays a death benefit whether death occurs before or after annuitization.
Which of the following statements about long-term care insurance (LTC) and long-term care services is correct?
The cost of long-term care services can easily be more than one person or a couple can afford.
Which of the following most accurately describes the tax treatment of group disability income benefits?
The employee is taxed on a percentage of benefits equal to the percentage of premium the employer pays.
Which of the following statements regarding the underwriting of group disability income insurance is correct?
The group is underwritten as a whole.
All of the following statements about long-term care riders and long-term care policies under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 are correct, EXCEPT:
The insured must spend time in a hospital before payment.
What can the insured do if it is not possible to notify the insurer of a covered loss within the required number of days?
The notice of claim provision allows the insured to notify the insurer within 20 days or "as soon as reasonably possible."
The IRS has identified three situations in which pre-59 ½ annuity withdrawals are not penalized. The IRS does not impose the 10 percent penalty if the withdrawal is made for any of the following reasons, EXCEPT:
The owner can establish financial hardship
With respect to penalties and fines for noncompliance with the coverage requirements of the Patient Protection and Affordable Care Act, all the following statements are correct EXCEPT
The penalty for non-coverage is the same for adults and children.
What happens when a universal life insurance policy's cash value no longer covers the monthly deductions to cover the policy's insurance and operational costs?
The policy lapses.
Which of the following statements about children's term riders is CORRECT?
The same premium applies to all of the insured's children, no matter how many are covered.
How is the term "immediately" defined under the time payment of claims provision?
The term "immediately" is defined by individual states.
All of the following statements about the right to continue group health insurance under COBRA are correct, EXCEPT:
The younger spouse of a participant who becomes eligible for Medicare benefits is not eligible to have group coverage continued under COBRA.
Which statement about death benefits paid to a beneficiary under a group life insurance plan is NOT correct?
They are fully tax exempt.
Why are endowment contracts NOT considered life insurance?
They endow before age 120.
True or False: Major medical plans must be guaranteed renewable.
True
All the following statements regarding Section 125 cafeteria plans are correct EXCEPT
When an employee is reimbursed for a qualifying expense, reimbursements are subject to federal income or Social Security taxes.
To qualify for coverage under the Children's Health Insurance Program (CHIP), a child must be`
a U.S. citizen or legal permanent resident.
A health insurance policy is a type of contract. As a contract, it requires all of the following elements EXCEPT:
a counteroffer
Which of the following would provide instant liquidity upon the death of an estate owner?
a life insurance policy on the owner's life, payable to his estate
With a tax-qualified long-term care insurance plan, what are premium payments considered?
a medical expense for federal income tax purposes
Laura was injured when she accidentally fell from a ladder. As a result of the accident, she incurred $1,000 in medical bills. Her disability income policy paid for these expenses even though she did not lose any income or have a sustained disability. What must her policy have?
a nondisabling injury provision
Dental insurance indemnity policies have all of the following characteristics EXCEPT
a restriction on the dentists a policyowner may use.
Which of the following need NOT be included in an advertisement that is considered an invitation to contract?
a statement that the Texas Department of Insurance has approved the advertisement
Which one of the following entities would be eligible to set up a Keogh plan?
a three-person law partnership
All the following are common types of term life insurance EXCEPT:
adjustable term insurance
Although exceptions exist, distributions from a qualified retirement plan are subject to a penalty tax if taken any earlier than
age 59 1/2
The Royale Insurance Company, headquartered in Toronto, Canada, conducts business legally in New York. In New York, Royale is a(n)
alien insurance company
Under the integrated long-term care option, the beneficiary receives the remainder of the face amount as the death benefit at the insured's death. In this way, the long-term care integrated option is similar to which of the following?
an accelerated benefits rider
Which of the following is least likely to want blanket insurance?
an employer looking for comprehensive medical insurance for its employees
Frank is a PPO member and just received information from his insurer which lists all of the covered services and benefits under his plan. As a PPO member, Frank is also entitled to all of the following information EXCEPT
an explanation of his legal remedies if he disagrees with the insurer's decision, including his right to arbitration and mediation.
Disability products that are marketed to blue-collar workers and manual laborers typically contain which definition of total disability?
any occupation
A PPO is a managed care arrangement made up of a network of health-care providers, which contracts with a sponsoring organization, an employer, an insurer, or a third-party administrator to provide health-care services on what fee basis?
at negotiated reduced fees
Kevin owns a whole life insurance policy, issued on a standard basis, that has lapsed for nonpayment of the premium. If Kevin has NOT chosen a nonforfeiture option, which of the following actions will the insurer most likely take?
automatically apply the extended term option
Shelley is an agent and has been misrepresenting the terms of the policies that she sells in order to boost her commissions. When the Texas Department of Insurance discovers her actions, it can do all of the following EXCEPT
begin criminal proceedings against her.
Blue Sky Cruise Lines wants to buy group health coverage for its passengers. It would be most likely to buy
blanket health insurance.
In an insurance transaction, who gives consideration?
both the applicant and the insurer
After Bob and Karen won the lottery, their state lottery board offered them a choice in how to receive their winnings. Instead of a lump sum, Bob and Karen chose to receive the funds in installment payments over a 10- to 20-year period. In this case, what is the state lottery board most likely to do?
buy a structured settlement annuity from an insurance company to pay a stream of income to the lottery winners over the specified period
David, age 66, was covered by a Medicare supplement policy that just terminated. During the past year, he has been receiving treatment for diabetes. If he applies for a new Medicare supplement policy, the insurer
cannot include a pre-existing condition exclusion
Which of the following most correctly describes the nonforfeiture option(s) available with universal life insurance?
cash surrender option only
Which of the following types of health plans covers a variety of conditions or medical services?
comprehensive plans
Which of the following occupations would most likely NOT qualify for a disability income policy based on the "own occupation" definition of disability?
construction foreman
Medical expense insurance policies are typically what type of contracts?
contracts of indemnity
What are the other insurance with this insurer provision and the other insurance with other insurer(s) provision examples of?
coordination of benefits
Brooke is covered by her company's group health plan. One of the plan's provisions specifies that if she is eligible for benefits under another policy, her group plan will be the primary plan. What is this provision called?
coordination of benefits provision
Paul is covered by his own group health insurance plan as well as by his wife's group plan. Which of the following provisions in Paul's plan will prevent overinsurance?
coordination of benefits provision
Like all health insurance plans, dental insurance does NOT cover which of the following?
cosmetic treatment
Which of the following riders gives the policyowner the option to increase his or her life insurance policy's face amount based an inflation index?
cost-of-living rider
All of the following are TRUE of continued coverage requirements under group plans EXCEPT
coverage terminates after 12 months.
An insurance company is developing a new product. Which one of the following is the actuaries' most important responsibility?
deciding the premium for the new product
When underwriting group life insurance, the underwriter can offset the risk of loss posed by the group by doing all of the following, EXCEPT
denying insurance coverage to any person with a pre-existing condition.
An agent is figuring out how much money a surviving family would immediately need when an insured dies. The agent must estimate the amount of money that they would need immediately to pay for all of the following
estate taxes pay off debts final medical expenses.
When a person dies, the survivors often immediately need a certain amount of money to cover costs. The survivors will need an immediate lump sum to pay for all of the following,
estate taxes. final medical and funeral expenses. debts incurred by the insured.
Workers' compensation plans offer all of the following benefits to covered workers EXCEPT
expenses of running a business until a disabled worker can return to work
BIG Corporation is applying for a new group health insurance plan. During the underwriting process, the insurer looks specifically at BIG Corporation's past claims experience and the makeup of its group. Which rating method is the insurer using?
experience rating
All of the following are common types of government health insurance plans EXCEPT:
federal workers' compensation plans
Medicare supplement plans B through L offer core benefits plus additional benefits. Which of the following is a core benefit provided by Part A?
first three pints of blood
Fran has an annuity into which she is making monthly fixed premium deposits of a specified amount and which she intends to use to supplement her income when she retires in 15 years. The annuity is credited with the higher of a current or guaranteed rate of interest. What type of policy does Fran most likely own?
fixed premium deferred annuity
A type of not-for-profit insurance provider that is operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a
fraternal insurance company
Jeanine was treated by a doctor and had to pay the full cost of the treatment herself. This probably means that
her treatment was for a condition not covered by the PPO
Medicare Part A covers home health care. Covered services include all of the following EXCEPT
home registered nursing services
Which of the following is NOT a factor states would use to determine eligibility for Medicaid?
household size
What is the name of one of the first systems developed for determining how much life insurance is necessary, based on the economic value of a human life?
human life value approach
Big Country Insurers issued a noncancelable individual disability income policy to Paul, a doctor. The amount of benefits that Big Country Insurers will pay is based on a percentage of Paul's income. In this case, Big Country Insurers is using which approach to paying benefits?
income-formula approach
In-person delivery of a whole life insurance policy gives the agent the opportunity to do all of the following, EXCEPT
increase the policy's face amount, if the applicant agrees to do so (and pay the additional premium) within ten days of policy delivery.
How is a person who is covered by a medical expense insurance plan commonly referred to?
insured or subscriber
Insurers often set children's term rider limits on the basis of which of the following?
issuing the rider for a specified amount or for a specified percentage of the base policy
You answered 25% of the questions correctly Question 1 All the following statements regarding the stop-loss provision in a major medical insurance policy are correct EXCEPT:
its basic purpose is to limit the insurance company's loss on a claim
Which of the following is NOT a standard form of basic medical expense policy?
lab expense policy
Which of the following is the principal method that HMOs use to control health-care costs?
limiting access to health-care providers
Which of the following disabilities would most likely qualify under the presumption of disability provision?
loss of eyesight
What is the main appeal of joint life insurance?
lower cost than two separate policies.
Though the employer sets group health insurance eligibility standards, the insurer may set which of the following?
minimum participation standards
From an insurance risk perspective, a person who smokes heavily and drinks alcohol to excess exhibits which of the following traits?
moral hazard
Juan went to the emergency room in the middle of the night because he was having a heart attack. If a non-network physician provides emergency care, then Juan's HMO
must pay for the care at its usual and customary rate or at an agreed rate, regardless of whether the physician is in the network or not.
What type of life insurance company is owned by the policyowners?
mutual company
The premiums that Acme Company pays for corporate-owned life insurance on the lives of its employees are generally:
not tax deductible
The FICA tax is split between an employee and employer, with the employee paying how much?
one-half (50 percent) of the total tax.
Kendra is a welder and is covered by a group long-term disability plan. She is injured on the job and receives benefits under that plan. The benefit can be reduced by income that she receives from all of the other sources EXCEPT
personal savings used for support
The automatic premium loan (APL) provision does which of the following?
prevents a life insurance policy from lapsing if the policyowner fails to pay a premium
What is the term for the amount payable for death under an accidental death and dismemberment (AD&D) insurance policy?
principal sum
The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policy owner
renew the policy at lower current rates, though evidence of insurability would be required.
Under which of the following provisions may a policyowner return the policy to the insurer and receive a full refund of the premium?
right to examine (free look)
When using illustrations to sell a life insurance policy, an agent can
show the policy's guaranteed death benefits before non-guaranteed values.
Laura has selected the paid-up additions dividend option with her participating whole life insurance policy. In Laura's case, which of the following types of life insurance best describes the type of product that will be purchased with policy dividends?
single premium whole life insurance
All the following statements regarding perils and hazards are correct EXCEPT
smoking cigarettes is an example of a peril.
Which of the following is NOT a common optional benefit available with long-term care (LTC) insurance policies?
substance abuse coverage option
A currently insured worker is eligible for which of the following Social Security benefits?
survivor death benefits only.
At the end of an equity-indexed annuity (EIA) contract's term, what can the owner or annuitant do?
take the accumulated values free of surrender charge or leaves them in the contract to continue for another term
When an employee retires, what is the tax treatment of the payments he or she receives under a deferred compensation plan?
taxable to the employee as he or she receives benefits
Tony pays the premium for his individual health insurance policy on the first of every month. However, he went on a 30-day trip and forgot to pay the premium. His policy must contain a grace period of at least
ten days.
Which of the following is NOT a mandatory provision for an individual life insurance policy issued in Texas?
ten-day grace period
The notice of replacement for health insurance applicants contains an acknowledgement of all of the following EXCEPT
that a written release is required from the existing insurer
Harry is diagnosed with a mental disorder. To become eligible for payments under his policy's long-term care rider, he must prove which of the following?
that his health or safety would be at risk without supervision
Which of the following is NOT a party to an annuity?
the agent
What is the name of the period during which funds are paid out of an annuity contract in the form of periodic income payments?
the annuity payout period
All the following expenses may be covered under a business overhead expense (BOE) disability policy EXCEPT
the business owner's salary
What does the length of an annuity's surrender charge period depend on?
the contract design and the insurer issuing the contract
Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer?
the full death benefit
When an insurer issues individual health insurance policies, all the following factors are included in the premium rate EXCEPT
the insurer's reserves.
Under group insurance coverage, one policy covers a number of people. Who owns these group polices?
the organization that represents the group and which sponsors the coverage
What is the primary difference between a revocable and an irrevocable beneficiary?
the policyowner's ability or inability to change the beneficiary designation.
Both the benefit schedule and usual and customary payment approach specify the maximum amount paid for medical services or supplies. Under either approach, what is the amount a policy pays based on?
the stipulated amount or the actual amount charged for the care or service, whichever is lower
Some types of life insurance policy ownership transfers are not "transfers for value" and are therefore not taxable. Which of the following ownership transfers is a taxable transfer for value?
transfers to the beneficiary
What is another name for the insured in a viatical settlement?
viator
When can Hank add a waiver of premium or a waiver of cost rider to his universal life policy?
when the policy is issued or at a later date
Ben, a single working father, dies at age 50. How much will his only dependent child, Tom (age 15), receive from Social Security in a lump-sum death benefit?
$255
When Gary bought an equity-indexed annuity (EIA) with a $10,000 premium deposit, the S&P 500 Index was at 1000. At the end of the contract's first term one year later, this index was at 1100. Based only on this information, what is the basis for the amount of interest credited to Gary's contract?
10 percent
What did the NAIC's Uniform Accident and Sickness Policy Provision Model Law create in the early 1950s?
12 mandatory provisions that must be included in all policies, as well as 11 optional provisions
A group health insurance policy is NOT required to provide
120 days of inpatient treatment for mental illness.
The elimination period of a business overhead expense (BOE) policy is typically
15 to 60 days
A disability buy-out insurance policy typically has an elimination period of
18 to 24 months
Endowment contracts issued today no longer qualify as life insurance (for tax purposes), but those issued before what date were grandfathered and still retain favorable life insurance taxation?
1986.
Gwen knows that there is a limit to the amount of insurance she can place on herself and her family each year. How much business must she place with persons outside her family and business associates?
25 percent of the total premium volume
Offbeat Music Inc. has 40 full-time employees and wants to provide coverage for them under a small employer health benefit plan. To be eligible to do so, at least how many eligible employees must choose to participate in the plan?
30
Ed had worked at ABC Computers for 15 years when he was laid off unexpectedly. To convert his group life insurance policy to an individual policy, Ed must apply for a conversion policy within how many days after being laid off?
31
A recurrent disability occurs while the disability income policy is in force and within how many months of an earlier, related disability?
6 months
Under a disability waiver of premium rider, an insured most commonly must be totally disabled for how long before the waiver begins?
6 months
Which statement about binding receipts is NOT correct?
A binding receipt guarantees coverage from the time the applicant completes the application (or the insured completes the medical exam). This does not hold true if the insured is later found to be uninsurable.
Which of the following statements about business overhead expense policies is FALSE?
A business is not taxed on the benefits.
Which one of the following is guaranteed under most variable annuity contracts?
A death benefit is paid if the owner or annuitant dies before the contract's funds are annuitized.
In accordance with Section 1035 of the Tax Code, which of the following exchanges is permitted on a tax-free basis?
A deferred market-value adjusted annuity for an immediate variable annuity.
All the following statements about basic split-dollar plans are correct
A permanent life insurance policy is bought on the life of a key executive. The employer typically receives an amount equal to the cash value when the executive dies. Either the executive or employer owns the policy.
Robert is purchasing a life insurance policy, which he wants to keep out of his taxable gross estate. Which of the following arrangements would help him meet that goal?
A third party (such as an irrevocable trust) can apply for and own the policy from the beginning.
Which of the following best explains why Section 1035 of the Tax Code does not permit a tax-free exchange of an annuity for a life insurance policy?
Allowing a tax-free exchange of an annuity for life insurance would enable taxable annuity gain to escape taxation via the life insurance death benefit.
People can set up a health savings account (HSA) and buy a high-cost insurance policy, but what is another way to set up an HSA?
An employer can set up an HSA plan for the benefit of its employees.
Which of the following statements about individual disability income policies is NOT correct?
An individual disability income policy can be written for almost any amount the owner wants
Jessica applied for a life and health insurance agent license on March 1, 2009. The Texas Department of Insurance issued her license four weeks later on April 1. Unless she timely submits a renewal application and renewal fee, Jessica's license will expire on
April 1, 2011.
All the following statements about Medicare supplement policies are correct EXCEPT
As Medicare adjusts its deductibles and co-payments, Medicare supplement policies can align their benefits to match the adjustments, but that is not required.
Brick Motors Co. offers a group disability income plan and pays all of the premiums. Which of the following statements is correct if an employee suffers a disabling injury?
Benefits paid to the employee are taxable income to the employee.
What will happen if a person starts receiving Social Security retirement benefits before reaching his or her full retirement age and continues to work and earn money that exceeds specified earnings limits?
Benefits will be reduced each year until the worker attains full retirement age.
Best Insurers just created an advertising campaign in which to publicize the new health insurance policy that it is offering. The company asks you for advice about which of the following items may be used alone in the advertisements. You inform them correctly that their advertisements must contain
Best Insurers' full name.
Bill owns an indeterminate premium whole life insurance policy. Which one of the following statements about his policy is most correct?
Bill's premium will never be higher than the maximum level that the insurer guaranteed when it issued his policy.
Bob's Medicare benefits are paid directly to the health-care provider. What does the fact that Bob is eligible for Medicare coverage under Part A mean?
Bob is at least 65 years old and eligible for Social Security retirement benefits, or has received Social Security disability benefits.
Which statement about profit-sharing plans is NOT correct?
Both the employer and employee contribute to the plan.
Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Texas. Based on their job descriptions below, which of them is NOT an agent?
Brian, who is a vice president in AllPro's human resources department and does not receive commissions
Cindy and Rich each bought a $100,000 universal life insurance policy from the same insurer, each with a ten-year surrender charge schedule. In year two, Cindy withdrew $5,000 from her policy. Rich withdrew $5,000 from his policy in year five. Which one of the following statements is most likely correct?
Cindy will probably pay a higher surrender charge than Rich.
Under the other insurance with other insurer provision, what must be done with any premiums Larry paid to Company A that exceed those that are needed for coverage?
Company A must return them to Larry.
The main purpose for errors and omissions insurance (E&O) is to
Cover damages that arise due to services a producer non-willfully failed to render.
Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which one of the following?
Cross out and initial the incorrect entry, and enter the correct information next to it.
All the following statements regarding workers compensation disability benefits are correct EXCEPT:
Disabled workers must sue their employer for workers compensation benefits.
Janson Automotive is a small family-owned business with 20 employees. If it offers a small employer health benefit plan, which of the following employees will be eligible for coverage?
Dora, who works 35 hours a week as a full-time office manager
All the following statements regarding life insurance policy riders that cover additional insureds are correct EXCEPT:
Each additional insured is issued his or her own separate policy.
Which statement about life policy riders that cover additional insureds is NOT correct?
Each additional insured is issued his or her own separate policy.
Ella is an agent for State Industry Insurance Company in Texas. After meeting with several family members, she learns that they would like to buy some life and health insurance contracts from her company. Which of the following statements is correct?
Ella can sell insurance to her family members provided at least 25 percent of the total volume of her premiums comes from non-family members.
All of the following statements about flexible spending accounts (FSAs) are correct, EXCEPT:
Employees can use the amounts contributed to FSAs to pay qualified medical costs as well as costs their employer's health plan covers.
Who is the tertiary beneficiary in the following beneficiary designation: "Sally Grant, wife of the insured, if she survives the insured; otherwise in equal shares to surviving children of the insured, if any; otherwise to Frank Grant, brother of the insured."
Frank Grant
Which one of the following most correctly describes the tax treatment of withdrawals from a modified endowment contract (MEC)?
Full withdrawals and policy loans from a MEC are treated on a LIFO (last in, first out) basis; in addition to income tax, MEC withdrawals taken before the owner's age 59 ½ are subject to a 10 percent penalty.
Bruce, an HMO member, cannot get covered health-care services outside the HMO's provider network. What must Bruce do if he wants to use services outside the network but not pay for them?
He must buy a point-of-service (POS) option.
Which of the following statements best describes the providers of health insurance?
Health insurance is available in the private sector and through local, state, and federal governments.
All of the following statements about health insurance are correct, EXCEPT:
Health insurance policies define the risks assumed by the insurer.
Sally wants to qualify for a Medicare supplement policy. All of the following statements about her qualification are correct EXCEPT:
If Sally is at least 65 years old and applies for a Medicare supplement policy within six months of enrolling in Part B, she qualifies for the policy of her choice in her state as long as she meets the program's health requirements.
All the following statements regarding the life insurance return of premium rider are correct
If the insured dies during the policy term, the policy face amount is paid to the beneficiary, but no premiums are returned. The rider pays to the owner of a term life insurance policy a sum equal to all or a portion of the premiums paid. Interest is not included in the returned premium amount.
All the following statements about annuity death benefits are correct
If the owner or annuitant dies during the accumulation period, a beneficiary receives as a death benefit an amount at least equal to the amount invested in the contract. Deferred annuities offer the guarantee of a death benefit, which is distributed if the owner or annuitant dies during the accumulation period. Variable annuities guarantee a death benefit equal to at least the premium invested.
What of the following best describes the meaning or purpose of insurable interest?
Insurable interest exists only if the person buying the contract will suffer a financial loss when the insured dies
Which of the following most accurately describes "insurable interest"?
Insurable interest is the relationship between the person applying for life insurance and the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract.
All the following statements about taxes on accidental death and dismemberment (AD&D) benefits are correct EXCEPT
Interest earned on a benefit settlement option involving proceeds retained by the insurer are not taxed.
In general, life insurance death benefits paid to a beneficiary in a lump sum are not taxed. Which statement is correct if the payout option is other than a lump sum?
Interest earnings are taxable income to the beneficiary.
All of the following statements regarding the practice of backdating a life insurance application are correct EXCEPT:
It effectively extends the incontestability period by adding the backdated period to the two-year incontestability period provided in the contract.
Why does an individual health insurance policy include a probationary period?
It helps the insurer avoid adverse selection.
Howard, 33, and Mary, 32, want to fund their 13-year-old daughter's college education. Which one of the following would be the most appropriate advice about using a deferred annuity for this purpose?
It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59 may be subject to a tax penalty.
Lydia, age 65, annuitizes a deferred annuity and selects a 100 percent joint and survivor annuity with John as the joint annuitant. If Lydia dies before John after annuity payments have begun, which one of the following most correctly describes how the annuity payments will be taxed when they are paid to John?
John will continue to exclude from income the same portion of each payment as originally excluded by Lydia.
Acme Insurers issued an individual health insurance policy to Stan with a standard cancellation provision. If Acme wants to cancel the policy and delivers written notice to Stan on June 1, the earliest date that the cancellation will be effective is.
June 6.
All the following statements regarding key person disability income insurance are correct EXCEPT
Key person disability income insurance provides a benefit to executives or to key employees.
Which association protects owners of life and health insurance policies issued by insurers who become financially unable to pay claims and benefits?
Life, Accident, Health and Hospital Service Insurance Guaranty Association
Martha was covered by a $50,000 group life insurance policy through her employer. After losing her job and deciding to take an early retirement, she talked to her agent about converting the group policy to individual coverage. Her agent informs her correctly that
Martha can be issued a conversion policy with no more than $50,000 in coverage.
What is a Medicare supplement plan of an insurance company that offers the policy's benefits through a network of doctors, hospitals, and health-care service providers called?
Medicare SELECT plan
Which of the following statements best describes the Medicare program?
Medicare is a federal health insurance program designed specifically for people age 65 and over and for certain disabled people.
Alicia, Dave, Michelle, and Sean are licensed agents in Texas. Which of them is NOT required to notify the Texas Department of Insurance about the events listed below within 30 days?
Michelle, who now only works part-time as an agent
Steve, age 72, owns an IRA. The required minimum distribution (RMD) for Steve this year was $6,000, but he only withdrew $4,000. Based only on this information, what penalty tax will Steve have to pay?
$1000
Kate bought a universal life policy with a $200,000 death benefit and chose death benefit option 1. In year five of the policy, she withdrew $50,000 from the policy's cash value. If she dies after withdrawing the $50,000, what will her beneficiary receive?
$150,000
Pam is a 56-year-old vice president employed by Gulf, Inc. Under Gulf's employer-pay-all group life plan, Pam's coverage is $300,000. The premiums for what portion of that coverage are taxable to Pam?
$250,000
Jake is a new life insurance agent and was reviewing several applications for insurance to determine whether an insurable interest exists between the parties. He determined that an insurable interest does NOT exist in which of the following cases?
Patricia, who is applying for life insurance on her best friend's life
Which of the following statements best characterizes the differences between life insurance and individual health insurance plans?
People are likely to own just one or two life insurance policies, but because one health insurance plan typically covers only one or two risks, people are likely to own several health plans, each covering different risks.
For Medicare Supplement plans K and L, which of the following statements is true?
Plans K and L pay 100 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached.
The premiums paid by Paul's employer for his group medical insurance coverage are not subject to Social Security taxes (FICA) or Medicare taxes. Why is this the case?
Premiums paid by Paul's employer for his group medical insurance coverage are not considered wages.
Which of the following statements is NOT correct about the federal income tax treatment of health insurance?
Premiums paid for individual disability income insurance are a deductible expense.
An actuary is setting life insurance rates. What affect will it have on a policy if higher interest assumptions are used?
Premiums will be lower.
The purpose for the Policy Summary, which must be given to every insurance applicant, is to
Provide buyers with policy details of the insurance contract they are considering for purchase.
Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. If Judy's life insurance policy designates the death benefit be paid "per stirpes," how will the insurer distribute the policy benefits?
Ralph's $200,000 share will pass equally to his two children when Judy dies. The surviving siblings, Jerry and Paula, will each receive $200,000.
Marie is an agent for Country Life Insurers. She receives a claim from a new client and reviews it before submitting it to Country Life. During her review, she detects inconsistencies that lead her to suspect the claimant is making a false claim for benefits. What must she do?
Report her suspicions to TDI within 30 days.
Which of the following practices may an insurer adopt for lawfully settling its claims?
Requiring a prompt investigation of a claim, even if the insured has not submitted all proofs of loss
Debbie is insured under a noncancelable individual disability income policy from Slate Insurance Company. She submitted a disability claim, received benefits for one year, and then returned to work. Debbie would now like to renew her policy. Which of the following statements is correct?
Slate Insurance Company cannot refuse to renew Debbie's policy as long as she pays the premiums.
Which one of the following statements regarding Social Security disability benefits is most correct?
Social Security disability benefits are available to totally disabled workers of any age.
All the following statements about standard policy exclusions are correct,
Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. The war exclusion usually excludes paying the death benefit if the death directly resulted from war. If an insurer excludes a risk from coverage, then it is not covered, and the insurer will not pay the policy's benefit if death results from that risk.
Starr Construction Company applied for a group health insurance policy for its employees. Which of the following statements is correct if the insurer offers Starr a community-rated plan?
Starr's plan and premium rate will be the same as that offered by the insurer to all similar groups in the area.
Stephen joined a group health plan in January 2014 while he had a pre-existing condition. Which statement is correct about coverage for this condition?
Stephen's pre-existing condition must be covered the same as all other medical conditions and cannot be excluded for any length of time.
Which of the following most correctly describes the typical deductible found with supplemental major medical insurance policies?
Supplemental major medical plans typically have a high deductible.
All of the following statements about the taxation of business overhead expense (BOE) insurance for a partnership are correct EXCEPT
The BOE policy premiums are not tax deductible.
All of the following statements about the funding of Social Security benefits are correct
The FICA tax is allocated between OASDI and Medicare The FICA tax is split between a worker and his or her employer. Social Security benefits are funded through payroll taxes.
Mary and her husband Mark are covered by a group health insurance policy that provides health coverage for newborn children. Mary has a baby on March 1. Which of the following correctly describes the policy's coverage of the child?
The baby is covered by the policy from the time of birth.
Which of the following best describes the tax treatment of fixed annuity death benefit payments?
The beneficiary must pay taxes on any amount he or she receives that exceeds the sum of the premiums paid into the contract.
Which statement about disability reducing term insurance policies is NOT correct?
The benefit payment under such policies increases over the policy's term.
Which statement is correct about a benefit period in a credit disability insurance policy?
The benefit period is the same as the loan period.
Which of the following statements is correct about earnings building within an individual's qualified plan account?
The employee-participant pays no income tax on the earnings until they are withdrawn.
Which statement about corporate-owned life insurance (COLI) plans is NOT correct?
The employees own the policies.
If an employer sets up a profit-sharing plan for its employees, which one of the following statements is most correct?
The employer must make substantial and recurring contributions for the plan to maintain its qualified status.
Replacement is considered to have occurred if a life insurance policy is purchased and, in conjunction with that purchase, any of the following occur with an existing policy EXCEPT
The existing policy's beneficiary designation is changed.
Advertisements for indeterminate premium whole life policies sold in Texas must prominently set forth all the following terms EXCEPT
The fact that the nonguaranteed maximum premium can never be changed.
Interest that accumulates on funds paid into deferred annuities is taxed in which of the following ways?
The funds are not taxed while they remain in the annuity.
All of the following statements about the interest rates on deferred annuities are correct
The guaranteed minimum rate extends for the life of the contract. The annuity contract usually stipulates a minimum period the current declared rate will remain in effect. The current declared rate is subject to change.
All the following statements regarding stranger-owned life insurance (STOLI) are correct EXCEPT
The insured retains the right to designate the policy's beneficiary.
Under what circumstances may some insurers be willing to remove waivers of coverage specified in impairment riders?
The insured's health or condition improves.
Which statement regarding apparent authority is NOT correct?
The insurer is not liable for an agent's acts when he or she is acting under apparent authority.
Under the fixed amount life settlement option, the payee receives a fixed income for an unspecified period of time. All of the following statements about the fixed amount settlement option are correct EXCEPT
The insurer may only pay out the proceeds annually.
An employer with fewer than ten employees applies for a group insurance policy that will provide medical expense benefits. Which of the following statements is correct?
The insurer may require the participants to complete a medical exam or provide evidence of insurability before it will issue a policy.
If a person submits an insurance application without the first premium, which of the following statements is correct?
The insurer must make an offer to the applicant.
Which statement about key person insurance coverage is NOT correct?
The key person's family receives the death benefits.
Which of the following instances is an exception that will impose insurer liability for a claim despite the intoxicants and narcotics provision?
The loss was sustained because the insured was under the influence of a narcotic administered on the advice of a physician.
Eligible people who apply for Social Security retirement benefits at age 65 are automatically enrolled in Medicare Part A. What happens if a person does not apply for Social Security retirement benefits at age 65 but still wants Medicare?
The person must enroll for Medicare Part A.
Which one of the following statements regarding a Keogh plan for a business partnership is correct?
The plan must comply with the same maximum contribution and benefit limits applicable to other qualified plans.
Which of the following statements is correct if a group offers non-contributory group life insurance?
The plan must cover 100 percent of eligible group members.
Andrea bought a $300,000 term-to-55 policy. Which of the following statements about the policy is NOT correct?
The policy will pay the entire death benefit only if Andrea reaches age 55
Mary inherited $10 million several years ago. She has just bought a life insurance policy to help preserve her estate. All of the following statements regarding this are correct EXCEPT
The policy's death benefit cannot be used to pay Mary's estate taxes or settlement fees.
Thomas suffered a debilitating injury in a car accident and then filed a claim under his individual disability income policy. Which of the following statements is correct?
The policy's elimination period must be no greater than 90 days for benefit periods of one year or less.
If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens?
The premium goes down
If a life insurance policy's death benefit is paid to the insured's estate, which of the following statements is correct?
The proceeds can be used to pay for estate taxes or other costs that an estate may face.
All of the following statements about annuitized payments under a variable annuity are correct
The value of each annuity payment is directly affected by changes in the assumed interest rate (AIR). If the value of the annuity units grows at the same rate as the assumed interest rate (AIR), payments to the annuitant will stay the same. Annuitized payments under a variable annuity are based on the assumed interest rate (AIR) and the value of the contract's annuity units.
All the following statements regarding the waiver of premium rider on a disability income (DI) policy are correct EXCEPT:
The waiver of premium benefit is available with DI policies only in the form of an optional policy rider.
The payor benefit rider for a juvenile insured sets the terms for when and how long the premium waiver stays in effect. If the payor becomes totally disabled or dies before the specified age, which of the following happens?
The waiver usually stays in effect until the payor recovers or the child reaches a certain age.
Which of the following most accurately describes the standard life insurance policy war clause
The war exclusion excludes paying the death benefit only if the death is the direct result of war action.
Which statement about life insurance accelerated living benefits riders or provisions is NOT correct?
They are commonly used to supplement an individual's retirement income.
Marty was covered by an individual health insurance plan for 13 months, and then under a group insurance plan for seven months. Suppose he applies for another individual health insurance plan 60 days after leaving the group plan. Which of the following is true of the policy's pre-existing condition exclusion period?
They will not apply.
Which statement about the interest-only life settlement option is NOT correct?
Though a policy guarantees a minimum interest rate, if the interest earned is more than the guaranteed minimum, the company pays the lower amount.
State Insurance Company keeps a record of all complaints it receives from its policyholders. State is required to maintain this record for no less than
Three years, or three years since the date of their last examination by the Department, whichever is shorter
Why would a large manufacturer choose to self-insure rather than buy an insurance policy from an insurance company?
To save insurance premiums by paying relatively minor losses.
Which statement about life insurance cash value withdrawals from a universal life policy is NOT correct?
Universal life insurance policies allow loans and full or partial policy surrenders
All of the following statements about key person life insurance are correct, EXCEPT:
Upon the insured employee's death, the surviving family receives the policy's death benefit.
Which one of the following statements about variable life insurance is correct?
Variable life insurance policyowners can transfer funds between subaccounts and the insurer's general account.
When Matthew met with a potential client, he used a life insurance illustration to show how the policy's cash value would grow over the client's lifetime. Matthew could include all of the following in the illustration without violating Texas regulations EXCEPT
a statement that the policy is a type of investment and savings plan.
Insurers will decline applicants with very high substandard risk ratings. What percentage of applicants do insurers reject?
about 2 percent
The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider?
accidental death benefit rider
Disability income policies usually contain certain exclusions for which no coverage is provided. Common exclusions include all of the following, EXCEPT
accidental injuries
The insurance company function that is responsible for calculating company mortality and morbidity rates, and calculating dividends on participating life insurance policies, is the
actuarial division
Under the misstatement of age provision in John's individual health insurance policy, what can the insurer do if it discovers that John inadvertently listed the wrong age in his application?
adjust the benefits
A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured turns
age 21.
What type of annuity option pays income over a set number of years or in specified amounts?
annuity certain income option
An agent for ABC Insurance Company met with a client to talk about long-term care policies. The agent showed the client ABC's sample policies, referred to the ABC rate book, gave him an ABC business card, and told the client that ABC has given him unlimited binding authority, which, in fact, the company did not do. If the client assumes the agent has binding authority, which of the following describes the type of agent's authority illustrated in this case?
apparent authority
After meeting with his agent Jackie to discuss Medicare Supplement policies, Phil decides to purchase a policy. When must Jackie give an outline of coverage to Phil?
at the time she gives an application to Phil
ERISA requires written rules for how claims must be filed and how participants can appeal if they are denied covered services. Claims appeals processes must be fair and timely. What is this function of ERISA called?
claims procedures and appeals
Jim, age 20, plans to withdraw $3,000 from his Section 529 college savings plan this year to pay for some of his college expenses. He can withdraw the money tax free to pay for all of the following, EXCEPT
clothes
Steven is filling out an application for life insurance. The application asked whether he had ever had heart problems. Steven intentionally skips this question even though he had heart surgery three years ago because he is afraid his application will be denied. What is the term for Steven's failure to give his entire medical history?
concealment
Steven was having lunch with a group of agents when he made some false statements about a competitor's financial condition in order to hurt their reputation. In this case, Steven has committed
defamation
John is thinking about buying major medical expense coverage for himself and his family. He has determined that his family will require all of the services listed below. Which of the following will NOT be covered by his policy?
dental check-ups for his teenage son
Which of the following provides a benefit to a business if a partner becomes totally disabled and cannot work, so that the business can continue without the partner?
disability buy-out insurance
In a participating policy, the insurance company pays the policyowner a dividend out of which of the following?
earnings available for distribution (the divisible surplus)
Which of the following are NOT reimbursable flexible savings account (FSA) expenses?
elective cosmetic surgery and visits to non-licensed medical practitioners
What is the period after a disability starts during which no benefits are payable known as?
elimination period
A person must be totally disabled to qualify for Social Security disability benefits. In addition, a person is subject to a waiting period of how long before benefits are paid?
five months
To qualify for Social Security disability benefits, a worker must satisfy a waiting period of how many months?
five months
Under which of the following are payments made for as long as it takes to liquidate the annuity principal, with the contract owner choosing a monthly amount, and the insurance company computing how long it will take to liquidate the principal at the selected amount?
fixed amount certain payout option
What of the following uses employee withholdings to fund out-of-pocket costs for health and medical care that insurance does not reimburse, including annual deductibles and co-payments?
flexible spending account (FSA)
Under a small employer medical plan, a newborn child must be covered
from the time of birth
Producers must act in the best interests of applicants and insureds, which requires that they do which one of the following in all cases?
give all important information about a proposed policy
Another name for the future increase option rider, which is available with most individual disability income policies, is the
guaranteed insurability rider
Which kind of health insurance policy gives the insurer the right, at the time of policy renewal, to change the premium rate on a class basis?
guaranteed renewable
A supplemental major medical plan supplements a basic plan. A comprehensive major medical plan replaces a basic and a supplemental plan. Benefits under a comprehensive major medical plan are typically:
high
The Texas Department of Insurance regulates the state's insurance industry. Which of the following is NOT one of its responsibilities?
imposing civil and criminal penalties on producers who violate the state's insurance laws
If Tim wants to avoid paying taxes on the interest earned on his AD&D benefits, how should he receive the benefits?
in a lump sum
Jan's health insurance plan pays benefits based on the actual amount of the loss, as determined at the time of the loss. So Jan is repaid for some or all of the medical expenses the policy covers. What type of health insurance plan does Jan have?
indemnity plan
Annuity income payments are most commonly paid on what schedule?
monthly
Bob was reading an advertisement for a long-term care policy which stated that the policy had a level premium. When he contacts the agent to get more information, the agent informs him correctly that this policy is
noncancellable
The Smith family just became eligible for the Children's Health Insurance Program (CHIP) on January 1. Their children will be eligible to receive benefits under the program
on April 1
Jake is a painter and injured his left arm when he fell off a ladder. While he can still paint, he cannot perform other duties of his job. If he is covered by a disability income policy, he is considered
partially disabled
What type of life insurance policy distributes its surplus after the company accounts for liabilities, reserves, capital, and expenses?
participating policy
Jeff graduated from college two years ago and wants to work in the insurance industry as a life and health insurance counselor. His mentor advises him that he must
pass an exam covering the basics of life and health insurance, business insurance, and estate planning, among other topics.
Producers may be held legally liable to both their insureds and their insurers for making any of the following errors and omissions, EXCEPT
placing insurance with insurers who are licensed in the state and in other states.
All of the following are accurate reasons for not using deferred annuities for short-term accumulation goals
possible immediate taxation of gain upon distribution possible surrender charges upon distribution possible penalty tax upon distribution
Brad invested $8,000 in a savings plan that lets him lock in the cost of a future college tuition at today's prices. What type of plan is this?
prepaid tuition plan
The purpose of a "relation of earnings to insurance" provision in a disability income policy is to
prevent a person from receiving more from a disability insurance policy than he or she could have earned by working.
CHIP coverage is provided through which of the following?
private insurers
Jack, an insurance agent, offers free season football tickets to anyone who buys a life insurance policy from him. This sales practice is called
rebating.
TDI does all of the following EXCEPT
recommends insurance products to the public.
Under which nonforfeiture option does permanent life insurance continue in force with no further need for premiums?
reduced paid-up option
In a fixed annuity, what is the second interest crediting rate called?
renewal rate
Beth is a senior vice president at Acme Insurers. While reviewing some health insurance claims, she discovers that one of the company's agents has been filing illegal claims for financial gain. After discovering the fraudulent insurance act, Beth must
report the information in writing to the Texas Department of Insurance within 30 days
Which of the following risk management techniques best describes the role of insurance?
risk transfer
To be considered currently insured, a worker must have earned how many quarters of coverage in the 13-quarter period before he or she dies?
six
Under standard exclusions, most insurers would deny coverage of which of the following?
someone serving as an aircraft crew member
Before leaving on a business trip, Alison bought a round-trip travel accident policy at the airport. What type of policy did she buy?
specified accident coverage
Which of the following does the insuring clause NOT do?
state the premium ranges for covered risks
Julie is the beneficiary of her husband's $150,000 life insurance policy. When he dies, Julie chooses to receive payments of about $800 a month, or $9,600 a year, which will continue as long as she lives, whether she lives past her life expectancy or dies before it. Payments are to cease when she dies, whenever that may occur. Julie has chosen which of the following settlement options?
straight life income settlement option
When pricing health insurance policies, insurers must account for morbidity rates. What do these rates indicate?
the average number of persons at various ages who can be expected to become disabled because of accident or sickness
What part of group life insurance-if any-is tax exempt for employees?
the cost of the first $50,000 of coverage
Which of the following parties makes an enforceable promise in an insurance contract?
the insurance company
Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined?
the joint life expectancy of Sue's son and daughter
Which of the following best describes income payments under the period certain payout option?
the longer the payout period, the smaller the amount of each monthly payment
What does the employer own under a group insurance plan?
the master policy
What do most insurance agents and buyers use today to figure out how much life insurance to buy?
the needs approach
George purchased an annuity in which his wife will receive income for as long as she lives. In this scenario, what is George most correctly called?
the owner
In a third-party life insurance contract, the parties to the contract are the
the owner, the insured and the insurance company.
Under Texas insurance law, the definition of total disability in a disability income policy CANNOT include
the person's inability to engage in any occupation whatsoever.
Kara is insured under a specified disease policy that covers medical expenses arising from cancer and leukemia. If she later develops tuberculosis and incurs medical expenses to treat the disease,
the policy will not pay any medical benefits.
Besides select policy anniversary dates, a life insurance guaranteed insurability rider usually permits special alternative option dates that typically include all the following, EXCEPT
the policyowner's college graduation.
Which of the following optional provisions applies to policies that provide income payments if the insured becomes disabled?
the relation of earnings to insurance provision
A worker's eligibility for Social Security disability benefits, and the amount received, is dependent upon all the following criteria EXCEPT:
the worker's family status
Proceeds from a life insurance policy can be paid out in a variety of ways. Which one of the following most correctly describes the two general categories of life insurance settlement options?
those without a life contingency and those with a life contingency
Harvey and Jim want to set up an insurance partnership that would advertise and place insurance. They both will sell policies in the partnership. How many licenses are required?
three licenses—one for each partner and one for the partnership
ABC Insurance advertises its product and says that the product is available during a special limited enrollment period. How long after this enrollment period must ABC wait before it runs the same promotion again?
three months
Acme Insurance Company's advertisements for its individual long-term care insurance policies state that the policies are available only during a special limited enrollment period. If the enrollment period ends on June 1, how long must Acme wait before it runs the same promotion again?
three months
Why is the exclusion ratio applied to each annuity payment?
to determine the portion that is excluded from tax
Which of the following statements best describes the purpose of the annuity payout period?
to distributes funds in the form of guaranteed periodic payments over a time period selected by the annuity owner, throughout the annuitant's lifetime and even afterward.
Long-term care insurance policies have benefit periods, which are the length of time benefits will be paid. What are common benefits periods?
two to five years
The ABC Company offers a fixed annuity, guaranteeing a minimum rate of 3 percent, which Jim buys with a $10,000 premium payment. At the time Jim bought his contract, ABC had declared a "crediting rate" of 6 percent for two years. For how long will Jim receive a 6 percent interest rate?
two years
Under what circumstances does a guaranteed insurability rider guarantee the policyowner's right to buy additional coverage?
under any circumstances
Which of the following riders waives the cost of insurance from being deducted from a universal life insurance policy's cash value in the event the insured becomes disabled?
universal life waiver of cost of insurance rider
The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following?
using life insurance for wagering or betting
When a person applies for Medicaid, the limits and the types of income and assets counted vary depending on which of the following?
whether the applicant has a spouse who requires support
From an insurance perspective, all the following statements regarding risk and loss are correct EXCEPT:
Only speculative risk is insurable.
Under a survivorship life insurance policy, when does the insurer pay the death benefit?
when the surviving insured dies
Which statement about survivorship life insurance policies is NOT correct?
The premiums are about the same as for two comparable single-life policies.
Fred's license was revoked on January 15, 2009 because he had engaged in controlled business on a regular basis. If he did not seek a judicial review of the license revocation, what is the earliest date that he can re-apply for an agent's license?
January 15, 2014
Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. Judy's life insurance policy designates the death benefit per capita. How will the insurer distribute the policy benefits?
Jerry and Paula will each receive $300,000
Variable universal life policies have the same two death benefit options as those in fixed interest universal life insurance policies. As a third death benefit option, what do some variable universal life polices offer?
a guaranteed minimum death benefit equal to the policy's level net amount at risk plus the sum of total premiums paid
Mary lost her job on June 15. She wants to convert her group life insurance policy to an individual policy. To do so, Mary must apply for a conversion policy by
July 16
Which of the following statements most correctly describes the relationship, if any, between the application and the insurance contract?
The application is part of the entire contract.
Which of the following most correctly describes death benefit option 1 of a universal life insurance policy?
The death benefit equals the policy's cash value plus a decreasing net amount at risk; thus, it generally remains level over time.
Which of the following types of life insurance is best suited for mortgage protection purposes?
decreasing term insurance
The Texas Consumer Information Privacy Regulation was enacted to protect consumers' personal health and financial information from unwanted disclosure. Which of the following is NOT required of insurers under this regulation?
explain the penalties that apply if the applicants and policyholders do not return a signed copy of the privacy notice to the insurer
Frank, an applicant for life insurance who is a substandard risk, can expect to pay a premium that is best described as which of the following?
generally higher premiums than for a standard risk
Sue, an applicant who is a preferred risk, can expect to pay a premium that is best described as which of the following?
generally lower premiums than for standard risks
Permanent life insurance can also provide funds, through its cash value, that may be used during the insured's lifetime. What is that feature called?
living benefits
Brian is an insurance agent for ABC Insurers. When he meets with Sarah to discuss long-term care insurance policies, Brian intentionally does not tell her that the policy has a cap on the amount of benefits that it will pay. Sarah buys the policy, thinking that it will cover all of her long-term care expenses. Based on this information, Brian has committed
misrepresentation
Bob's only goal is to provide a death benefit to protect his family in case he dies while his children are young. What type of life insurance is best suited to this need?
term insurance
The purpose of Tom's life insurance policy's rights provision is which of the following?
to establish Tom's rights as policyowner and the conditions under which he can exercise those rights
Terry is licensed in Texas as both a life and health insurance agent and property and casualty agent. To maintain his licenses, how many hours of continuing education must he complete during each license period?
24
Which of the following is true about the Consumer Information Privacy regulation?
It allows consumers to refuse to have their information disclosed to third parties
Jenner Insurance has been charged with unfairly discriminating among insureds. Which of the following practices is unfair discrimination?
Jenner charged two individual insureds of the same class and risk different premiums for life insurance policies based on where they lived and their ethnicities
The Commissioner issued a cease and desist order against Nether Insurance Company for committing certain practices when settling claims. Nether ignores the order. The Commissioner may refer the case to which of the following for enforcement?
State attorney general