Ad bank Ch. 1

If the premium paid by the applicant is the Offer, then the policy issued by the insurer is the:

The premium paid by the applicant is the Offer and the policy issued by the insurer is the Acceptance

Initial and Guaranteed Maximum Premium

The initial premium will be guaranteed but only for the first year, then the premium may increases due to the mortality costs. A guaranteed maximum premium table must be included in the policy showing projections of future maximum premiums.

Limited Payment

The premium is payable for a specified time, such as 20-pay, 30-pay or to age 65.

Modified Premium

The premium is payable for the first few years of the policy (3-5) are lower than an ordinary whole life policy to make it more affordable.

Joe has a whole life policy with a guaranteed insurability rider. He was 21 at the time the policy was issued. If he exercises all of the options at the ages specified under the typical rider, how many policies will he end up with?

Under the typical guaranteed insurability rider, Joe would have options to buy additional policies of the same type and face amount at ages 25, 28, 31, 34, 37, and 40, therefore he would buy 6 more to bring his total policies owned to 7.

Premiums paid in advance are considered what type of premiums until coverage has been provided?

Unearned Premiums paid in advance are considered unearned premiums until coverage has been provided, and the insurer has 'earned' the right to retain the premium.

Which of the following policies requires a producer to have both a life and securities license to sell?

Variable universal Both Variable Life and Variable Universal Life require a securities and life license to sell. A securities license is not required for Adjustable Life, Universal Life, or Equity-Indexed Life.

Jason has a Whole Life insurance policy with a face amount of $100,000, an annual premium of $1,000, and a cash value of $10,000. If he wants to borrow money from the insurer, what is the maximum he can obtain?

$10,000 When using a whole life policy for collateral for a loan from the insurer, the maximum amount of that loan is the amount of cash value in the policy.

The neglect to communicate known information that is material is called: A Concealment B Withholding C Waiver D Non-disclosure

A Concealment is the neglect to communicate known information that is material.

What must an insurance broker have in place in order to be able to receive, directly from an insured, any compensation or fees for services to be provided?

A Brokers Service Contract

A Guaranteed Universal Life policy is also referred to as a(n):

A Guaranteed Universal Life policy is also referred to as 'Universal Life with a No-Lapse Guarantee'.

All of the following are true regarding 24-Hour Care Coverage in California, except: A The 24-Hour Care Coverage product may include the sale of life insurance B It is designed to be a seamless system to provide both occupational and nonoccupational coverage C Life agents desiring to sell the coverage are required to obtain 4 hours of Continuing Education credits in Workers' Compensation Insurance D It is designed to lower the cost of Workers' Compensation and health insurance coverage for employers in California

A) The 24-Hour Care Coverage product may include the sale of life insurance 24-Hour Care Coverage shall not include a life insurance policy.

An insurer has the right to request a physical exam or an autopsy to determine its liability to pay benefits. This request may be made under which provision?

According to the Physical Exam and Autopsy Provision (a Mandatory Uniform Provision), the insurer, at its own expense, has the right to request a physical exam or autopsy where not prohibited by law.

The _________ include bathing, continence, dressing, eating, toileting, and transferring.

Activities of Daily Living The Activities of Daily Living (ADLs) include bathing, continence, dressing, eating, toileting, and transferring.

If an annuity is annuitized, then the _________ investment is recovered income tax-free over the income benefit payment period.

After-tax Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It represents a return of the cost basis.

Annuity income benefit payments are based on all of the following, except:

Age, gender, settlement option selected, and dollar amount used to purchase the income payment benefit are all used in determining the amount of the income benefit payment.

In Life Insurance, a Children's Rider covers a newborn at 14 days of age. In Health Insurance, a newborn is covered:

All individual and group health policies written on an expense-incurred basis providing coverage for dependents of the insured must provide coverage for a newborn child from the moment of birth.

A type of PPO that requires a subscriber to seek treatment from a limited number of network providers where use of a primary care physician and referral to a specialist are not required is called:

An Exclusive Provider Organization (EPO) is a type of PPO that requires a subscriber to seek treatment from a limited number of network providers and use of a primary care physician and referral to a specialist are not required.

Under California life insurance replacement legislation, conservation is defined as:

An attempt by the existing insurer or agent to keep a policy in force where replacement is contemplated As the term 'conservation' implies, it is an attempt on the part of the existing insurer or agent to keep an existing policy in force where replacement is contemplated.

Plans that offer Minimum Essential Coverage include all of the following, except: A Medicare B An employer self-funded plan C Individual insurance offered through an exchange, and employer-sponsored health insurance D Medicaid

B An employer self-funded plan Under the Patient Protection and Affordable Care Act, plans that offer Minimum Essential Coverage include: Medicare. Medicaid, Individual insurance offered through an exchange, and employer-sponsored health insurance.

An application for health insurance is not required to be signed by the:

Beneficiary The producer, applicant, and insured must sign the application.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Alice dies, so who receives the policy proceeds?

Bill Bill is the primary beneficiary and is first in line to receive the policy proceeds if Alice should die first.

Under which business-related use of Disability Income Insurance would the premiums be tax-deductible?

Business Overhead Expense Coverage Business Overhead Expense Coverage is deductible as an ordinary business expense. Any benefits received would be taxable.

Which of the following terms and definitions do not match? A Guaranteed Renewable -- Renewable without proof of insurability, but premiums may increase due to age B Optionally Renewable -- Renewable only at the option of the insurer C Noncancellable -- Guaranteed renewable to a specified age or date with a premium that will not increase D Cancellable -- An effective period for the policy is expressed in its provisions and it cannot be renewed

Cancellable -- An effective period for the policy is expressed in its provisions and it cannot be renewed This is the definition of Nonrenewable, not Cancellable.

Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as:

Case Management Provisions They are included as Case Management Provisions or sometimes referred to as Cost Containment Provisions.

Insurers include provisions in contracts to help reduce unnecessary claims and the overpayment of claims. Which of the following is not one of those provisions?

Consideration Clause The other choices are Case Management Provisions designed to contain costs. The Consideration Clause stipulates that the payment of the first premium and statements in the application are the applicant's consideration, and the insurer's consideration is the promise to pay within the contract terms.

Upon receipt of an application, the insurer's underwriter may issue the contract with exclusions or limitations. This means that:

Coverage is issued, but there are limits on the insurer's obligation to pay Exclusions/limitations may be temporary or permanent, but in any case they limit the insurer's obligation to pay.

All of the following are traits of a Fixed Annuity, except: A The insurer's general account assets guarantee the fixed annuity contract B The purchasing power of a fixed dollar benefit amount decreases as the cost of living increases C The insurer bears any investment risk D The actual rate of interest credited will be based on the state-published interest rate index

D The actual rate of interest credited will be based on the state-published interest rate index The actual rate of interest credited is based on the insurer's general account assets.

All of the following are false statements regarding group disability plans, except: A The plans usually cover work-related disabilities B Benefits are not available to individuals employed beyond age 65 C There is individual medical underwriting D The plans are typically written on a non-occupational basis

D) The plans are typically written on a non-occupational basis There is no individual underwriting, there will be a minimum number of participants required, and those employed beyond 65 are protected under The Age Discrimination in Employment Act. The plans are written on a non-occupational basis.

All of the following are true of insurance, except:

Eliminates risk

Which of the following best defines the 'Cost Recovery Rule'?

Generally, the difference between the amount of cash value received and the amount of premium paid in is subject to income tax upon surrender The 'Cost Recovery Rule' stipulates that upon a partial withdrawal of cash or the surrender of a policy, the cash value in excess of premiums paid (cost basis) is subject to income tax.

What type of term life insurance policy has its policy premium guaranteed to remain level throughout the term of the policy?

Guaranteed level premium term life insurance is a policy whose premium is guaranteed to remain level throughout the term of the policy.

Which of the following statements about a Modified Endowment Contract (MEC) is FALSE?

If a contract is deemed a MEC, any funds distributed are subject to a first-in/first-out (FIFO) tax treatment Any funds distributed are subject to a last-in, first-out (LIFO) tax treatment, meaning gains will be taxed before principal.

In which of the following circumstances is an annuity's tax-deferral benefit lost?

If a corporation owns an annuity, the tax-deferral benefit is lost. Tax-deferral of annuity earnings is only for natural persons.

If a senior citizen returns a life insurance policy or annuity within the free look period after receipt of the policy, they are entitled to:

If a senior citizen returns a life insurance policy or annuity within the free look period after receipt of the policy they are entitled to a full refund of any premiums paid by returning it to the insurance company or agent who sold him/her the policy.

Cost Comparison Indexes

If an agent or insurer makes a presentation comparing the cost of life insurance which does not recognize the time value of money, the agent must present the Life Insurance Surrender Cost Index and the Life Insurance Net Payment Cost Index.

An employee who becomes entitled under the terms of the group policy to have an individual policy issued without evidence of insurability must:

If an employee under a group policy becomes entitled under the terms of the policy to have an individual policy issued without evidence of insurability, he/she must submit an application with the initial premium.

A copy of an application becomes part of the entire contract:

If it is attached to the policy

Death benefits are paid to the estate of the policyowner/insured in which of the following situations?

If the beneficiary is listed as the estate, then upon death of the insured that is where the funds will end up.

Under what circumstance would a policy loan in a life insurance policy be taxable?

If the policy lapses or is surrendered, any loan amount in excess of cost basis is taxable Policy loans and unpaid loan interest are subject to taxation if the loan amount exceeds the cost basis (the Cost Basis is the amount of premiums paid into the policy less any dividends or withdrawals previously taken) in the contract in the event the policy lapses or is surrendered for its cash value. Surrender charges, if any, may be applied as an offset to cost basis.

When would a life insurance policy loan be subject to income taxation?

If the policy lapses when there is a policy loan outstanding which is in excess of the policy's cost basis Only the portion of an outstanding policy loan in excess of the policy's cost basis will be subject to income taxation if the policy lapses.

Each of the following is an element of a legal contract, except: Consideration Legal Purpose Agreement Indemnity

Indemnity Competent parties is the missing element of a legal contract.

Which statement is incorrect concerning an Accidental Death and Dismemberment Policy?

It provides a specified payment for a specified injury This describes a Limited Accident Policy, not an Accidental Death and Dismemberment Policy.

The __________ is the person on whose life the annuity contract's income benefit is based.

Just like a life insurance policy is based on the life of the insured, an annuity is based on the life of the annuitant.

Any notice required to be given to an insured by the insurer may be mailed, postage paid, and addressed to the policyowner, insured, claimant, or beneficiary to be notified at the:

Last known address of record Under the California insurance code any notice required to be given to an insured may be mailed, postage paid, and addressed to the policyowner, insured, claimant, or beneficiary to be notified at his/her last known address of record.

Which provision is a Mandatory Uniform Provision?

Legal Actions The only response that is a Mandatory Uniform Provision is Legal Actions. All of the other responses are Optional Uniform Provisions.

Life insurance benefits are usually paid ____________, unless another mode of settlement has been selected.

Life insurance benefits are usually paid in a lump sum, unless another mode of settlement has been selected.

Disclosure or lack of disclosure in a statement that would change an insurer's decision to issue a policy for the same premium is considered:

Material

Medicare Part B provides coverage for:

Medicare Part B covers medical expenses, preventative care, laboratory services, home health care, mental health care, and outpatient hospital (emergency room/urgent care) treatment, but not long-term care.

Under Medicare Part B, the amount a doctor or supplier that accepts assignment can charge a patient is the:

Medicare-approved amount Under Medicare Part B, the amount a doctor or supplier that accepts assignment can charge a patient is the Medicare-approved amount.

When group health insurance is being replaced, ongoing claims under the former policy must continue under the new policy, overriding any preexisting condition exclusion. This is a requirement under which of the following?

No Loss - No Gain Statutes The question describes the No Loss-No Gain legislation, sometimes called a Hold-Harmless Agreement.

Ole Olson owns a Business Overhead Expense Policy whereby if he should become disabled, the policy will continue to cover most business expenses in his absence. The policy would cover all of the following, except:

Ole's personal lost income The intent of the policy is to offset expenses, not to replace the disabled owner's personal lost income. If Ole is concerned about his own personal lost income, he should own an individual Disability Income policy.

When underwriting group life, the underwriter treats the group as if it were:

One individual In group insurance, the group as a whole is considered an individual, and issuance is based upon that whole. Having one uninsurable individual in a group will not cause a declination, but may increase the premium charged.

Part A of Medicare is known as:

Part A of Medicare is formally known as Hospital Insurance. Part B is formally known as Medical Insurance.

What factors are not used in underwriting an individual disability policy?

Religious preference and political affiliation are not factors used in underwriting individual health policies.

An oral or written statement made at the time of application or before issuance of the policy that is believed to be true to the best of the knowledge of the applicant is called a(n):

Representation. Representations are an oral or written statement made at the time of application or before issuance of the policy that is believed to be true to the best of the knowledge of the applicant.

As a disciplinary measure when a violation of the Insurance Code would justify suspension, revocation or denial of license, the Commissioner may revoke the permanent license and issue a:

Restricted License Under the California Insurance Code, as a disciplinary measure when a violation of the Insurance Code would justify suspension, revocation or denial of license, the Commissioner may revoke the permanent license and issue a restricted license.

For Medi-Cal beneficiaries there may be a __________ requirement, which requires the beneficiary to spend a certain amount of monthly income toward health care expenses before Medi-Cal begins to cover those expenses.

Share of cost For Medi-Cal beneficiaries there may be a 'Share of Cost' requirement, which requires the beneficiary to spend a certain amount of monthly income toward health care expenses before Medi-Cal begins to cover those expenses.

The Essential Health Benefits plan category that provides coverage for 70% of the total amount an individual will spend for essential health benefits during a year is the:

Silver Plan The Silver Plan provides coverage for 70% of the total amount an individual will spend for essential health benefits during a year.

If an accelerated death benefit is in effect, how often must the insurer provide a report showing the amount paid and the amount of the remaining benefit?

The insurer is required to provide the report monthly.

Only the _________ can surrender an annuity.

The owner has all rights in the policy, including the right to surrender it.

Level (Guaranteed) Premium

The premium remains level for the duration of the contract

What health insurance product is designed to provide coverage for necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital?

The question describes a Long-Term Care Policy.

For what type of provider are services covered in or out of a network by a combination of a medical expense plan and/or an HMO?

The question describes a POS (Point-of-Service) plan. POS plans were developed to include a larger number of providers than HMO plans.

In California, which of the following is true concerning the right of cancellation period for an individual life insurance policy or individual annuity contract purchased by a senior citizen (60 years of age or older):

The right of cancellation period for an individual life insurance policy or individual annuity contract purchased by a senior citizen is not less than 30 days.

By what means is a transfer for value made?

To effect a transfer for value, an absolute assignment needs to take place.

Purchasing insurance is an example of:

Transfer of risk Purchasing insurance is one way of employing the risk management technique of transferring.

If the premiums are not paid on a Traditional Whole Life policy that has been in force for decades with no loan outstanding, what happens?

Upon non-payment of premium due, the extended term option kicks in automatically and is paid for by the cash values of the policy. The policy has nonforfeiture values which are available to the policyowner.

Many insurers pay benefits based on the average fee charged in a geographical area. This is referred to as:

Usual, Customary, and Reasonable UCR is not scheduled, but is based on the average fee charged by all doctors in a given geographical area.

The applicant/insured wants a term life insurance policy that will last for 20 years and is willing to risk that the insurer is managing its financial affairs properly and is not concerned about the premium of the policy down the road so long as there is a cap on how much it can ultimately become, so the producer should show him/her a(n):

20 year indeterminate premium term life insurance policy Indeterminate premium term can have the premium fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns.

All of the following are recognized classes of insurance in California, except: A Medicare Supplement B Disability C Marine D Burglary

A Medicare Supplement These classes are: Life, Fire, Marine, Title, Surety, Disability, Plate glass, Liability, Workers' Compensation, Common Carrier Liability, Equipment Breakdown, Burglary, Credit, Sprinkler, Team and Vehicle, Automobile, Aircraft, Mortgage Guaranty, Insolvency, Legal Insurance, and Miscellaneous. Medicare Supplement is a subsection of Disability.

An underwriter will consider each of the following factors when considering a risk, except: A Rates B Hazards C Claim history D Nature of the risk

A Rates The underwriter protects the insurer against adverse selection.

An insurer authorized to transact insurance in a particular state by that state's insurance department is known as:

An admitted insurer

An agent who violates any replacement regulations is liable for an administrative penalty of no less than how many dollars for the first violation?

An agent who violates any replacement regulations is liable for an administrative penalty of no less than $1,000 for the first violation.

The Attending Physician's Statement (APS) is completed by:

An applicant's physician to provide information about the applicant's medical history An Attending Physician's Statement (APS) is used in cases where the individual application and/or medical reports reveal conditions for which more information is required. The treating physician will provide information regarding the medical history of the applicant. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.

Which statement is true of the Law of Large Numbers?

As the number of insured units increases, predictability of losses improves. The larger the sample is, the more accurate the prediction is.

Elements of an insurable risk do not include: A The ability to set a measurable value on it B Catastrophic perils C Large number of homogenous units D Accidental loss

B Catastrophic perils

A married couple wants to have funds available so that the heirs to their estate have the funds necessary to pay the estate taxes. Which of the following would be the most economical and effective way to accomplish this?

Buy a Joint Survivorship Life policy Joint Survivorship Life pays upon the death of the last to die, and for this reason it is a popular policy with couples who want to defer estate taxes until both are deceased. It is also more economical to buy this one policy than to buy two separate policies.

Which of the following is the correct term to describe a contract prepared by one party and submitted to the other party on a take it or leave it basis, without negotiations? A Valued contract B Aleatory C Contract of Adhesion D Conditional contract

C Contract of Adhesion A Contract of Adhesion is one that is prepared by one party and presented to the other party on a take it or leave it basis.

Which one of the following will pay the highest premium for a life insurance policy all other factors being equal? A Female age 70 B Female age 65 C Male age 70 D Male age 65

C Male age 70 The higher the age group, the higher the mortality rate which translates in to a higher premium and the Mortality Table shows that males have a higher mortality rate than females, therefore based on this statistic, males will pay a higher rate than females.

Which of the following is not a factor in premium determination? A Mortality B Interest C Reserves D Expenses

C Reserves Premiums are based on expected mortality, interest, and expenses.

Mona let her permanent policy lapse. She discovered there was $2,498 in cash remaining in the policy and decided to pay off some of her credit card debt. She exercised which Nonforfeiture Option?

Cash Surrender. Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.

All of the following statements regarding a warranty is correct, except: A Failure to comply with a warranty breaches a contract B A warranty is either expressed or implied C A warranty may relate to past, present, or future D An implied warranty is stipulated in the contract and is considered a fact

D An implied warranty is stipulated in the contract and is considered a fact An expressed warranty is a statement stipulated in the policy relating to the insured risk that is a fact.

Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured?

Decreasing Term reduces in death benefit while the policy is in effect. It is most often used to cover the balance of an outstanding loan, for example, a mortgage.

When does a change in beneficiary take effect?

Even if the insured dies prior to the time the insurer receives the change of beneficiary form, the change actually goes into effect as of the date the change of beneficiary form is signed by the policyowner.

The insurer has the right to rescind a policy due to all of the following, except:

Failing to pay the premium in full and on time

The Return of Premium Rider, the Return of Cash Value Rider, and the Cost of Living Rider all use which type of term insurance to accomplish their objective?

Increasing term The purpose behind each of the 3 riders in the question is to increase the death benefit to fulfill the objective of the rider.

An agent that enters into agreements with more than one insurer is which of the following?

Independent. The independent agent may represent many insurers at the same time.

What type of term life insurance policy has a policy premium that can fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns?

Indeterminate Premium Indeterminate premium term can have the premium fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns.

Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be:

Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be:

A policy may not be voided for which of the following reasons?

Non-Payment of a premium A voidable contract is a valid contract that for reasons satisfactory to a court may be set aside by one of the parties.

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a:

Notice of replacement Replacement rules require a Notice of Replacement.

Persons who are defined as a senior citizen on the date of purchase of a life insurance policy or an annuity must be given a free look period of how many days?

Persons who are 60 years of age or older on the date of purchase of a life insurance policy or an annuity must be given a 30-day free look period.

An underwriter will consider each of the following factors when considering a risk, except:

Rates

Which term describes the probability of loss?

Risk

The shifting of risk of loss to a larger homogeneous group is known as which of the following:

Risk transfer

All of the following are characteristics of a Mutual Insurance Company, except:

Stockholders have ownership. A Mutual Insurance Company is owned by its policyholders, and does not have stockholders.

Which insurance company department determines the probability of loss and sets the premium rates?

The Actuarial Department interprets the statistical information used in rate making, whereas the Underwriting Department is responsible for risk selection.

The interest earned on dividends is:

The dividends themselves are generally not taxable, but any interest earned on the dividends is taxable.

What "jumps" in a jumping juvenile policy?

The face amount jumps one time, usually to five times the amount of insurance, at age 21 or 25 A "jumping juvenile" policy will normally increase the face amount of insurance by a factor of five with no change in premium at the next anniversary after the child turns anywhere from age 21-25 (depends on the policy). Ownership of the policy also changes at that time to the child, who is now an adult.

Fixed Premium

The premium amount is determined by the insurance company. Fixed premiums do not have to be level, but cannot be changed by the policyowner.

Adjustable Premium

The premium can be increased or decreased by the policyowner on an annual basis. Premiums must be paid and adjusting the premium will affect other features of the policy.

Flexible Premium

The premium can fluctuate at the policyowner's discretion. It can be increased, decreased, or even skipped at any premium due date. Universal and Variable Universal have flexible premium.

Insurable Interest

The relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid. An individual has an insurable interest in his or her own self. Insurable interest also exists if a financial or economic loss by the owner results in the event that the insured dies. Examples of insurable interest include a policy taken out on a family member, business partner, or debtor of the policyowner.

When an individual's risk of loss is assumed by a larger homogeneous group, it is known as risk _________.

Transfer. Risk transfer involves an assumption of the risk in whole or in part by another party, such as an insurance company, underwriting syndicate, or risk retention group.

How long, typically, is the reinstatement period from policy lapse?

Typically, the reinstatement period is 3 years, but it can be up to 5 years with some policies or some insurers.

Under the California Financial Information Privacy Act, what must consumers be advised of?

Under Cal-GLBA, consumers must be advised that a financial institution has authority to share their personal financial information.

The process of evaluating a risk for the purpose of issuing insurance coverage is:

Underwriting. Underwriting is the process by which an insurer evaluates a risk for the purpose of issuing insurance coverage.

Through whom do direct writing companies normally market?

Salaried employees

The method of premium can vary depending on the:

Type of policy issued Life insurance policy premium paying methods can vary depending on the type of policy issued.

Persons who willfully commit unfair acts and practices may be issued a cease and desist order, carrying administrative penalties of up to how much per act?

$10,000 The Commissioner also has authority to issue cease and desist orders relative to unfair acts and practices enumerated in the Code. Committing any act considered an unfair method of competition or an unfair act or practice recognized by the Code may result in an administrative fine of $5,000 for each such act, up to $10,000 per act when determined to be a 'willful' violation or committed with such frequency that it may be considered a 'general business practice' of the person.

An evaluation of Simon's past earnings reveals his average earned monthly income to be about $4,000 monthly. The greatest amount of benefit that Simon will likely be able to purchase under a Disability Income Policy, in order to reduce malingering in the event of a claim, is:

$2,500 monthly Benefits are usually determined as a percentage of the insured's current earnings, normally 60 to 70%. Simon would be unlikely to obtain 100% of his income as a disability benefit.

An individual license will automatically terminate immediately upon the death of the licensee or if the license has not been renewed within _____ months following its expiration.

12 Under the California Insurance Code, an individual license will automatically terminate immediately upon the death of the licensee or if the license has not been renewed within 12 months following its expiration.

An insured should receive necessary claim forms within _____ days after notice of claim.

15 According to the Claim Forms Provision (a Mandatory Uniform Provision), the insured should receive the necessary claim forms within 15 days after notice of claim.

In California, upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee shall immediately, but in no event more than _____ calendar days after receipt of the communication, furnish the claimant with a complete response based upon the facts as known.

15 Such response is due no more than 15 calendar days after receipt of the communication.

A Group Health plan with _____ or more employees is primary to Medicare and pays first.

20 A Group Health plan with 20 or more employees is primary to Medicare and pays first.

COBRA applies to employers with:

20 or more employees COBRA states that employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents.

COBRA is a federal law requiring employers with _____ or more employees to provide the option of continuing the employee's existing health coverage for dependents for up to _____ months following certain qualifying events such as death of the employee.

20, 36 The question specifies coverage for dependents (36 months), not the employee (18 months).

An employee is considered full time and eligible for small employer medical expense insurance if he or she works a minimum of ________ hours per week.

30 To be eligible to enroll in a small employer medical expense insurance plan, an individual must work a minimum of 30 hours per week.

An Essential Health Benefits package is required to provide coverage for at least one of _____ levels of coverage offered through all health exchanges.

4 An Essential Health Benefits package is required by the Patient Protection and Affordable Care Act to provide coverage for at least one of four levels (Metal Tiers) of coverage offered through all health exchanges.

Under the California Insurance Code, records must be kept by agents for at least _____ years following actual policy delivery, or the date of application if no policy is issued.

5 Under the California Insurance Code, records must be kept by agents for at least 5 years following actual policy delivery, or 5 years from the date of application if no policy is issued.

A qualified Long-Term Care Policy may exclude losses incurred from preexisting conditions for no longer than ______ months from the effective date of coverage.

6 This is the requirement for qualified Long-Term Care Policies under the NAIC Model Act.

A carrier replacing employer group coverage is not required to cover all employees and dependents covered by, or eligible for, coverage under the previous policy if the replacement takes place more than _____ days after of the previous policy's termination.

60 If the replacement is not within 60 days of the previous policy's termination, the carrier replacing the coverage is not required to cover all employees and dependents covered by, or eligible for, coverage under the previous policy as of its date of discontinuance.

A qualified health plan is any plan which provides coverage for the 10 Essential Health Benefits and provides a minimum actuarial value of ______%.

60% Under the Patient Protection and Affordable Care Act, a qualified health plan is any plan which provides coverage for the 10 Essential Health Benefits and provides a minimum actuarial value of 60%.

Which statement is false concerning Credit Disability Insurance? A The benefit may exceed the total amount of the debt or the amount of monthly payment B The creditor receives the benefits to pay the debt if the debtor is disabled C It is commonly sold as a group plan, although individual contracts may be written D It is commonly written with installment debt obligations

A The benefit may exceed the total amount of the debt or the amount of monthly payment The benefit may not exceed the total amount of debt or the amount of the monthly payment.

Which statement is false concerning Social Security disability benefits? A The employee must only be unable to engage in his/her own occupation to be considered disabled B The amount of the benefit is based on the employee's Primary Insurance Amount C To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system D Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement

A The employee must only be unable to engage in his/her own occupation to be considered disabled The employee must be unable to engage in any kind of gainful employment, not just his/her own occupation.

Since a self-funded plan may or may not be insured, ultimately who retains liability for all expenses incurred?

A self-funded plan may or may not be insured which means that the employee/member ultimately retains liability for all expenses incurred.

Which statement is incorrect regarding COBRA? A The employee or beneficiary must respond to the notification of his/her right to continue coverage within 90 days, if he/she wants to continue the coverage B Evidence of insurability is not required to continue coverage under COBRA C The employer may require the former employee or beneficiary to pay an amount equal to 102% of the premium D Coverage continues for 29 months for individuals receiving Social Security disability

A The employee or beneficiary must respond to the notification of his/her right to continue coverage within 90 days, if he/she wants to continue the coverage The employee or beneficiary must notify the employer within 60 days if he/she wants to continue the coverage.

Which one of the following must be communicated in an insurance contract? A The risks insured against B The financial rating of an insurance company C Information already known by both parties D Information that is not material to a risk

A The risks insured against

Which of the following is not an unfair trade practice? A Replacement of policies B Misrepresentation C False advertising D Illegal inducement to purchase

A Replacement of Policies Replacement is not an unfair trade practice. There are specific requirements required when replacing a policy such as making fair comparisons, but the act itself is legal.

The __________ allows an insurer to pay death benefits anyone it deems to be entitled in the absence of a designated beneficiary.

A Facility of Payment Clause allows the insurer to pay the death benefit to a relative or anyone it deems is entitled in the absence of a designated beneficiary.

Which contract would a bus line passenger purchase to cover injuries sustained while traveling across the United States?

A Limited Travel Accident Policy provides specific benefits for specific injuries from specific causes such as travel.

This type of policy covers various expenses that an insured may incur due to a routine accident or sickness.

A Medical Expense contract covers the various expenses which an insured may incur due to an accident or sickness.

Until yesterday, J. J. worked for his father's company and was covered by the company's large group health plan. He stopped working to go to college. He is 26 years of age and wants to keep the same coverage until he earns his degree in approximately 24 months. Which of the following statements is true?

A good option for J.J. is to exercise the COBRA option under his father's group plan Since J.J has lost his dependent status, but still wants the same group coverage, he can continue that coverage under COBRA for up to 36 months.

Under Medicare Part D, individuals enrolled in a standalone plan from a participating approved Prescription Drug Provider (PDP) will pay:

A monthly premium, annual deductible and copays Under Medicare Part D individuals enrolled in a standalone plan from a participating approved Prescription Drug Provider (PDP) will have to pay a monthly premium, annual deductible and copays.

To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor.

A probationary period is set up to help reduce the chance of facing immediate claims.

Which of the following is not a prohibited form of advertising?

A side-by-side comparison of two policies issued by different insurers Comparisons of policies are not prohibited, but they must be complete, accurate, and fair.

Which of the following regarding the additional monthly benefit (AMB) rider is not correct? A The long-term benefit of the rider can supplement only a government benefit plan B The rider is not related to Social Security, therefore, the rider is used to define the benefit C The rider does not consider the amount of a Social Security Benefit, it is strictly in addition to all other disability benefits D Some insurers refer to the this rider as a Social Security Rider as it pays benefits while the insured is awaiting Social Security Benefits

A) The long-term benefit of the rider can supplement only a government benefit plan The short-term benefit of the additional monthly benefit (AMB) rider can supplement either a government or private benefit plan.

Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? A Waiver of Premium B Payment of Claims C Time Limit on Certain Defenses D Proof of Loss

A) Waiver of Premium The other choices are Mandatory Uniform Provisions. Waiver of Premium is a provision that may or may not be included.

Which of the following would not be eligible for coverage under an employer group life insurance plan?

An employee's best friend Employer group life insurance plans can offer coverage to the employee's spouse and dependents.

When gathering information from a third party to use during underwriting, an insurance company must meet the requirements of the:

An insurance company must meet requirements under the Fair Credit Reporting Act (FCRA) when gathering information from a third party to use during underwriting.

If a non-qualified variable annuity owned for 15 years is surrendered, what is the income tax consequence?

Any amount received in excess of its cost basis is taxable as ordinary income If a non-qualified variable annuity owned for 15 years is surrendered, what is the income tax consequence?

Any employee-paid group life insurance premiums are __________

Any employee-paid group life insurance premiums are not tax-deductible.

Janelle is the beneficiary of a life insurance policy in which the insured has died. What is the only way she can receive the claim amount totally free from income taxes?

Any settlement option will generate taxable income to the beneficiary. The only way to be exempt from any income taxation is to receive the death benefit in a lump sum.

The type of life insurance used to provide funds for a Buy-Sell Agreement is:

Any type of life insurance may be used to provide funds for a Buy-Sell Agreement.

As adopted into California law, the NAIC's '2010 Model Suitability in Annuity Transactions Model Regulations' require all producers to document that an annuity sold to a senior is:

As adopted into California law, the NAIC's '2010 Model Suitability in Annuity Transactions Model Regulations' require all producers to document that an annuity sold to a senior is suitable for that person's needs and objectives.

As specified by the California Insurance Code, the validity of a group policy cannot be contested, except for nonpayment of premiums, after it has been in force for:

As specified by the California Insurance Code, the validity of a group policy cannot be contested, except for nonpayment of premiums, after it has been in force for 2 years.

Which statement is incorrect regarding HMOs? A HMOs are sponsored by medical schools, hospitals, employers, labor unions, consumer groups, commercial insurers, governments, and hospital-medical service plans B HMOs must provide basic health care services including hospitalization, laboratory services, optical services, physical therapy, dental care, and preventive services C Members are required to pay a small copayment for basic health care services D The copayment discourages unnecessary use of medical resources

B HMOs must provide basic health care services including hospitalization, laboratory services, optical services, physical therapy, dental care, and preventive services Usually optical services, physical therapy, and dental care are supplemental and offered as an option.

All of the following are true of the Coordination of Benefits Provision under a group plan, except: A Secondary carriers will only pay claims that are in excess of the primary carrier's responsibility B In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary C In a spousal situation, the insurer for the claim of an employee is primary, with the spouse's plan being secondary D It is a method of determining primary and secondary coverage when an insured is covered by more than one group policy

B In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary Under the Coordination of Benefits Provision, the insurer for the parent whose birthday is first in the calendar year is primary, not the plan for the parent who is oldest.

Under a Key Employee Disability Income Policy, the employer is all of the following, except: A Premium payor B Policyowner C Insured D Recipient of the proceeds

C) Insured As in Key Employee or Key Person life insurance (Chapter 1), the employer is the owner, premium payor, and recipient of the proceeds. The key employee or person is the insured.

All of the following are true of the Fair Credit Reporting Act, except: A It protects the rights of the individual from overly intrusive information collection practices B The consumer who was investigated must be informed whenever credit or insurance was denied because of an adverse report C Regardless of what the consumer learns about the unfavorable information, the report can be changed by court action only D The consumer has the right to obtain the substance of the information in the reporting agency file

C Regardless of what the consumer learns about the unfavorable information, the report can be changed by court action only If a consumer says that certain information is incorrect, the reporting agency must reinvestigate the facts and make changes as necessary.

If an insurer cancels a contract, written notice must be provided to the insured within a certain period of time. This is a requirement under which of the following provisions?

Cancellation Cancellation (an Optional Uniform Provision) establishes that the insurer may cancel a policy with written notice to the insured of between 5 and 31 days, depending on the policy.

If Robert wishes to cash out his annuity at age 70 after having it for over 40 years, what should he know about prior to doing it?

Cashing out an annuity exposes the tax-deferred earnings to income taxation.

A Life-Only Agent who is not also licensed as an Accident and Health Agent may transact:

Certain disability benefits as riders to life or annuity contracts and are subject to specific continuing education requirements Under the California Insurance Code a Life-Only Agent who is not also licensed as an Accident and Health Agent may transact certain disability benefits as riders to life or annuity contracts, such as disability income or long-term care, subject to any specific continuing education requirements.

Under the California insurance code, the penalty for unlawfully acting as an insurer without a(n) _____________ is imprisonment (state or county jail) not to exceed 1 year, and/or a fine not to exceed $100,000.

Certificate of Authority Under the California insurance code the penalty for unlawfully acting as an insurer without a Certificate of Authority is imprisonment (state or county jail) not to exceed 1 year, and/or a fine not to exceed $100,000.

As specified by the California Insurance Code, an employer group policy may exclude or limit coverage for losses arising from conditions relating to all of the following, except:

Change in job classification As specified by the California Insurance Code, an employer group policy may provide for the exclusion or limitation of coverage for losses arising from conditions relating to war, military service, or aviation exposures.

Under Medicare Part B, a(n) _______ is the request for payment and is submitted by Medicare approved participating providers and suppliers to the Centers for Medicare and Medicaid Services (CMS).

Claim Under Medicare Part B a Claim is the request for payment and is submitted by Medicare approved participating providers and suppliers to the Centers for Medicare and Medicaid Services (CMS).

A person will be deemed to be transacting insurance when the person advertises on the internet, and does any of the following, except: A Communicates an invitation to inquire B Communicates with a California resident regarding one or more terms of an agreement to provide insurance on an insurance policy C Accepts an application for coverage from a California resident D Provides an insurance premium quote to a California resident

Communicates an invitation to inquire Under the California Insurance Code, a person will be deemed to be transacting insurance when the person advertises on the internet, and provides an insurance premium quote to a California resident, accepts an application for coverage from a California resident, or communicates with a California resident regarding one or more terms of an agreement to provide insurance on an insurance policy.

Which of the following is not a Mandatory Uniform Provision?

Conformity with State Statutes Conformity with State Statutes is an Optional Uniform Provision.

A Certified Insurance Agent is certified by the Individual Exchange and Small Business Health Options Exchange (SHOP) to transact in the individual and Small Business Health Options Program (SHOP) to write applications for Qualified Health Plans through:

Covered California A Certified Insurance Agent is certified by the Individual Exchange and Small Business Health Options Exchange (SHOP) to transact in the individual and Small Business Health Options Program (SHOP) to write applications for Qualified Health Plans through Covered California.

All health plans, group and individual, offered through a Health Insurance Exchange must provide, at a minimum, essential health benefits in all of the following categories of care and services, except: A Hospitalization B Maternity and newborn care (including prenatal and delivery care) C Laboratory services D Long-term care

D Long-term care Minimum, essential health benefits must be provided in the following categories of care and services: Ambulatory patient services, Mental health and substance use disorders, including behavioral health treatment, Emergency services, Hospitalization, Laboratory services, Maternity care, Prescription drugs, Pediatric services, including dental and vision care, Preventive care, Rehabilitative services.

Which one of the following regarding individual or employer eligibility to buy insurance through the California Health Benefit Exchange is false? A Individuals and small employers must meet federal citizenship or legal residency requirements B Households with incomes between 138% and 400% of the federal poverty level in addition may qualify for Advanced Premium Tax Credits or Cost Sharing Reductions C The California Exchange will ensure that federally-authorized tax credits are paid to the insurers D Small employers with less than 1000 employees may purchase coverage through the exchange

D Small employers with less than 1000 employees may purchase coverage through the exchange To be eligible to buy insurance through the California Health Benefit Exchange small employers must have less than 100 employees.

All of the following statements regarding 'any occupation' total disability are true, except: A Requires the insured to be unable to perform the duties of any occupation for which the insured is reasonably suited by reason of education, training, and experience B In order to qualify for disability benefits, it may be required that the insured be under the care of a physician C Typically reserved for the lesser skilled occupations and may result in a lower premium D Any occupation is less restrictive than own occupation and is easier to qualify for benefits

D) Any occupation is less restrictive than own occupation and is easier to qualify for benefits Any occupation total disability is more restrictive and harder to qualify for benefits.

All of the following are possible business uses of Disability Income Insurance, except: A Buy-Sell B Business Overhead Expense C Key Employee Insurance D Workers' Compensation

D) Workers' Compensation Disability Income Insurance would not be used to provide benefits under Workers' Compensation.

Albert owns a printing business in which he, at times, prints counterfeit money. One day while processing counterfeit bills, his arm is severely damaged. His insurance will:

Not cover the claim since he was involved in an illegal act at the time of injury The Illegal Occupation/Act Provision (an Optional Uniform Provision) allows the insurer to deny liability if the insured is injured while engaged in an illegal occupation or committing an illegal act.

In a presentation to the local life underwriter association, Randy wrongly stated that ABC insurer is in financial difficulty. Randy may be guilty of:

Defamation A statement critical of an insurer's financial condition is called defamation.

A partnership involving four equal partners is valued at $1,800,000. Under a Buy-Sell Agreement (Cross Purchase Plan), the amount of the policy on the life of each partner would be:

Each partner's ownership share equals $450,000, thus each partner would own a $150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 x $150,000 = $450,000). There would be a total of 12 (4 x 3) policies (12 x $150,000 each = $1,800,000).

With a managed health care plan all _________ care must be covered as if it were provided on an in-network basis.

Emergency With a managed health care plan all emergency care must be covered as if it were provided on an in-network basis.

Employer-paid premiums for employee group term life do not constitute taxable income to the employee for coverage up to ___________.

Employer-paid group life insurance premiums for coverage up to $50,000 are not taxable as income to the employee.

Premium Tax Credits are available from the ________ government to help lower the cost of health coverage for individuals and small employers who meet certain income requirements and do not have affordable health insurance that meets the minimum essential coverage requirements.

Federal Premium Tax Credits are available from the federal government to help lower the cost of health coverage for individuals and small employers who meet certain income requirements and do not have affordable health insurance that meets the minimum essential coverage requirements.

Every licensee must file with the Commissioner in writing the true name of the individual or organization and all _______names under which business will be conducted.

Fictitious Under the California Insurance Code, every individual and organization licensee and every applicant for a license must file with the Commissioner in writing the true name of the individual or organization and all fictitious names under which business will be conducted and, after licensing, must file with the Commissioner any change in or discontinuance of such names.

A person who handles insurer funds in a trust capacity is a(n):

Fiduciary

A person may terminate enrollment in a Medicare Advantage plan and return to Original Medicare at any time during the ____ year of coverage

First A person may terminate their enrollment in a Medicare Advantage plan and return to Original Medicare at any time during the first year of coverage.

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select?

Frank's objective is to use his dividends to increase the death benefit. Paid-Up Additions purchases single premium additional permanent benefits at the insured's attained age. The additional insurance is added to the face amount and it generates cash values and dividends as if the paid-up additional benefit was part of the original policy.

The _________ Enrollment Period provides an open enrollment period from January 1 to March 31 each year for those who did not enroll in Medicare Part B when they first became eligible.

General The General Enrollment Period provides an open enrollment period from January 1 to March 31 each year for those who did not enroll in Medicare Part B when they first became eligible.

An insurer cannot consider sexual orientation in its underwriting criteria or use marital status, living arrangements, occupation, sex, beneficiary designation or Zip Code to determine whether to require a test for the presence of:

HIV Under the California insurance code an insurer cannot consider sexual orientation in its underwriting criteria or use marital status, living arrangements, occupation, sex, beneficiary designation or Zip Code to determine whether to require a test for the presence of HIV.

To become a Certified Insurance Agent, to write applications for Qualified Health Plans through Covered California, eligible individuals must do all of the following, except: A Hold a health insurance industry recognized professional designation B Recertify every 5 years following initial certification C Complete the Exchange training requirements D Pass an exam administered by the Exchange

Hold a health insurance industry recognized professional designation To become a Certified Insurance Agent, to write applications for Qualified Health Plans through Covered California, eligible individuals must: Create an account for agents at www.CoveredCA.com; Select a preferred method of payment; Submit a completed application; Complete the Exchange training requirements; Pass an exam administered by the Exchange; and Recertify every 5 years following initial certification.

Mr. Zamboni is the owner and the annuitant of an annuity. Mrs. Zamboni, the designated beneficiary, will be able to assume all ownership rights and tax-deferral if Mr. Zamboni should die ___________.

If Mr. Zamboni's death were to occur during the Accumulation Period, then his spouse, if she were the named beneficiary, would be able to become the new owner and continue the policy in force.

Medicare benefit payments are made to the medical provider:

If the benefit has been assigned Part A claim payments are made directly to the provider. Part B claim payments can be paid directly to the doctor or provider by assignment.

In Preferred Provider Organizations (PPOs), the providers perform services to subscribers for what amount from which payment is made directly to the provider after treatment is received?

In Preferred Provider Organizations (PPOs), the providers perform services to subscribers and charge a discounted fee-for-service negotiated in advance then payment is made directly to the provider after treatment is received.

Optional Uniform Provisions are included in the contract at the _______ option.

Insurer's The Optional Uniform Provisions are included at the insurer's option. However, if used, they must conform to that state's insurance code.

Which one of the following is the best underwriting class for disability insurance?

Issued as a Preferred Risk means a lower rate will be used if the insured meets the insurance company's qualifications as a preferred risk (lower than average risk).

An individual owns a variable annuity. Upon annuitization, the number of Annuity Units on which the benefit amount is based will __________ from month to month.

It is important that the individual understand that upon annuitization, the number of units used to calculate the benefit amount will always be the same. It will be the unit value that fluctuates according to the performance of the separate account(s).

Delivering the policy and explaining it so the insured understands the benefits, provisions, riders, exclusions, and ratings endorsements is the responsibility of the:

It is the producer's responsibility to deliver the policy and explain it so the insured understands the benefits, provisions, riders, exclusions, and ratings endorsements.

Probing beyond the stated questions contained in the application as part of the field underwriting process is the responsibility of the:

It is the producer's responsibility to probe beyond the stated questions contained in the application as part of the field underwriting process.

Martha's Disability Income policy contains a definition of 'Presumptive Disability'. Each of the following situations would meet this definition, except:

Loss of a finger Presumptive Disability involves the loss of two or more limbs, not the loss of a finger.

With Medicare Advantage plans, the use of network providers, referrals to specialists, and pre-authorization of scheduled procedures are methods used to:

Manage care With Medicare Advantage plans the use of network providers, referrals to specialists, and pre-authorization of scheduled procedures are methods used to manage care.

Most group Disability Income contracts are offered on a(n):

Nonoccupational basis Workers' Compensation is designed to cover occupational or job-related accidents and disease, so the group plan would be designed to cover nonoccupational disabilities.

Accident and health insurance policy exclusions typically include all of the following, except:

Nonoccupational injuries Nonoccupational injuries are covered. Job related or occupational injuries are typically excluded as they are covered by Workers' Compensation.

The sources of underwriting information include the application, medical exams, an Attending Physician's Statement, the Medical Information Bureau (MIB), an inspection report, and the agent's report.

Not college transcripts

In Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's:

Occupation Although many factors are considered in the underwriting process, the applicant's occupation is the single most important.

If premiums were submitted at the time of application, when is a life insurance policy considered constructively or legally delivered by the insurer?

Once the insurer mails the issued as applied for policy to the producer Once the insurer mails the issued as applied for policy to the producer, it is considered constructively or legally delivered by the insurer, if premiums were submitted at the time of application.

Which of the following do Fixed and Variable Annuities have in common?

One thing Fixed Annuities and Variable Annuities have in common is the basic types of settlement options available at annuitization: life income, fixed period, fixed amount, etc. The way that the benefit amount is determined may be different, but the payment pattern is the same for both types of annuities.

Under the Patient Protection and Affordable Care Act, _____________ begins on November 15 before the Benefit Year and ends on February 15 of the Benefit Year.

Open enrollment Under the Patient Protection and Affordable Care Act, open enrollment begins on November 15 before the Benefit Year and ends on February 15 of the Benefit Year.

When an individual carries more accident and health insurance than he/she would need for a loss, it is called:

Overinsurance Overinsurance usually occurs when a person is covered by more than one plan of insurance, such as when both spouses work and each is covered as a dependent under the other's employer-sponsored group health insurance plan.

Which statement is false regarding Social Security Disability benefits?

Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or her usual job For Social Security Disability benefits, the proper insured status is either 'fully' insured (40 credits) or 'currently' insured (a sliding scale of credits based on age), and the disability must last 12 months or be expected to result in death. In addition to satisfying the 5-month waiting period, the person must be unable to perform 'any substantial gainful activity.'

If an insurer fails the medical loss ratio test (the loss ratio is lower than the required minimum) in a calendar year for all plans in a given market segment (individual or group), the excess premium is to be:

Refunded to consumers enrolled in plans in that market segment The Patient Protection and Affordable Care Act requires that if an insurer fails the medical loss ratio test (the loss ratio is lower than the required minimum) in a calendar year for all plans in a given market segment (individual or group), the excess premium is to be refunded to consumers enrolled in plans in that market segment.

With a managed health care plan, an 'emergency' is whatever the insured believes it to be, but the insured is expected to not use the emergency room for ________ healthcare needs.

Routine With a managed health care plan, an 'emergency' is whatever the insured believes it to be, but the insured is expected to not use the emergency room for routine healthcare needs.

If an annuity is purchased in December and monthly benefits begin in January of the following year, what type of annuity is it?

Single Premium Immediate Annuity The question addresses when the actual receipt of benefits from an annuity begins. When benefits begin within a year of the issue date, this is referred to as 'immediate'.

Which of the following would always be considered a Modified Endowment Contract?

Single Premium Whole Life would always be a MEC as it would always fail the 7-Pay Test.

Social Security Retirement Benefits are available as early as age _______ but are less than if paid at the full retirement age.

Social Security Retirement Benefits start as early as age 62, but at a reduced amount.

Under the Patient Protection and Affordable Care Act, a(n) _______ enrollment period is the length of time during which a person may enroll in a Qualified Health Plan outside of open enrollment if a qualifying life event, such as marriage, divorce, or the birth of a child, takes place.

Special Under the Patient Protection and Affordable Care Act, a special enrolment period is the length of time during which a person may enroll in a Qualified Health Plan outside of open enrollment if a qualifying life event, such as marriage, divorce, or the birth of a child, takes place.

Group blanket insurance covers a group of individuals whose membership changes frequently, such as students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people while being exposed to a(n) _______ risk:

Specific Group blanket insurance covers a group of individuals whose membership changes frequently, such as students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people while being exposed to a specific risk.

All of the following are benefits an annuity can provide that other investment or savings products cannot, except:

Tax-free distributions Annuities can be used simply as funding vehicles or can be used to provide benefits that other investments cannot, such as a guaranteed minimum death benefit, a guaranteed minimum interest rate, an income benefit payment that cannot be outlived, or other various benefits and riders. But annuity distributions are not tax-free.

The type of disability that impairs an insured's ability to work but a full recovery is expected is considered:

Temporary With a temporary disability an insured's ability to work is impaired, but a full recovery is expected.

Under COBRA, coverage for dependents of an employee may continue up to 36 months for any of the following events, except:

Termination of the employee If the qualifying event under COBRA is termination of employment, the coverage may be continued only for 18 months.

Which is not a qualifying event for the continuation of dependent coverage under the Consolidated Omnibus Budget Reconciliation Act?

Termination of the employee for theft This would be termination for gross misconduct and neither the employee nor his/her dependents would be eligible for continuation under COBRA.

Karen, age 50, withdraws $1,000 from her Health Savings Account (HSA) for a purpose other than a qualified medical expense. As a result of this action:

The $1,000 is taxed as ordinary income, with an additional $200 penalty tax applied The $1,000 would be taxed as ordinary income with an additional 20% penalty tax of $200 applied. The penalty tax is not applied if the taxpayer is age 65 or older, or if a withdrawal is due to the death or disability of the account owner.

The Initial Enrollment Period for Medicare is 7 months in length. Which of the following are the start and stop dates for this period?

The 1st day of the 3rd month before the individual turns age 65 and the last day of the 3rd month after the month the individual turns age 65 The initial enrollment window spans the entire 3 months before and after the month in which a person turns age 65.

Who has jurisdiction over all that provide coverages designed to pay for health care providers' services and expenses?

The California Department of Insurance (CDI) has jurisdiction over all that provide coverages designed to pay for health care providers' services and expenses.

The Insurance Code requires producers who meet with prospective clients age 65 and older in their homes for the purpose of transacting life insurance, annuities, or disability insurance products to provide a written notice of the first meeting at least how many hours in advance?

The Insurance Code requires producers who meet with prospective clients age 65 and older in their homes for the purpose of transacting life insurance, annuities, or disability insurance products to provide a written notice of the first meeting at least 24 hours in advance.

Primarily, the _________ is the person who will receive any residual policy benefits after the annuitant has died. A

The beneficiary of an annuity receives any residual policy benefits upon the death of the annuitant.

Which statement is true regarding taxation of health insurance?

The benefits received from a group Disability Income Policy paid entirely by the employer are fully taxable as income to the employee When an employer pays the full cost of disability income insurance for the employee, any benefit received is fully taxable to the employee.

The ___________ provision deals with expenses that did not satisfy the previous year's deductible, were incurred in the last 3 months of that year, and are used towards satisfying the current year's deductible.

The carryover provision deals with expenses that did not satisfy the previous year's deductible, were incurred in the last 3 months of that year, and are used towards satisfying the current year's deductible.

Regarding alternatives to traditional healthcare facilities, the cost of care provided at:

The cost of care provided at a surgicenter will be less expensive than an overnight stay in a hospital.

A Credit Life Policy will be cancelled if:

The credit life policy can be cancelled when the debt is paid off or is refinanced.

Single Premium

The entire cost of the policy is paid in a lump sum at the time of purchase.

Consumers must be made aware of all of the following in a replacement sale, except:

The financial ratings from each rating service Upon issue of a new policy, there may be a new waiting period (probationary period) for pre-existing conditions or the policy may be issued with lower benefits, or with more limitations or exclusions compared to the old policy. Premiums may also be higher in the new policy.

Medicare Part A covers all of the following, except: A Operating room costs B The first 3 pints of blood per calendar year C Semiprivate room and board D Prescription drugs including anesthesia

The first 3 pints of blood per calendar year Medicare Part A provides coverage for semiprivate room and board, operating room costs, prescription drugs including anesthesia, miscellaneous hospital services and supplies, and blood transfusions after the first 3 pints of blood.

Clayton is asking his life insurance producer about any potential taxation issues related to his $100,000 personal Whole Life policy. All of the following are TRUE, except: Upon surrender of the policy, he will be taxed on any amount by which the cash value exceeds the cost basis (premiums paid) of the contract B Annual increases in the policy's cash value are not taxable at the time they are credited to the policy C The interest that he pays on policy loans is tax-deductible D Since his policy is a personal policy, he cannot deduct the premiums he pays for the policy

The interest on policy loans is not tax-deductible.

Which one of the following is not a reason why a license may be suspended or revoked after it has been issued? A The licensee is not properly qualified to perform the duties of a person holding the license B The licensee has a good business reputation C The licensee has shown incompetency or untrustworthiness in the conduct of any business D The licensee has by commission of a wrongful act or practice exposed the public to the danger of loss

The licensee has a good business reputation Under the California Insurance Code, a license may be suspended or revoked after it has been issued if the licensee is not of good business reputation. All other examples will cause a license to be suspended or revoked.

Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability.

The question describes the Residual Disability provision.

When a group is covered by a MET, who is issued the Master Policy?

The trust The sponsor develops the plan, sets the underwriting rules, and administers the plan, but the trust is the Master Policyowner.

There is a conversion period of how many days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy?

There is a conversion period of 31 days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy.

All of the following statements are true regarding Long-Term Care policies, except: A They must require prior confinement in a hospital as a condition for payment B They must have a renewal provision shown on the first page of the policy C They must provide a free look period of at least 30 days D They may exclude coverage for illegal drug abuse

They must require prior confinement in a hospital as a condition for payment Prior confinement in a hospital cannot be a condition for coverage or payment.

Which of the following annuities is known for having the highest surrender charge percentages and the longest surrender charge time periods?

Traditionally, Indexed Annuities have had the highest surrender charge percentages and the longest surrender charge time periods.

Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options?

Under Life Income Joint and Survivor, payments would continue until the death of the second person to die.

Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is all of the following, except:

Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is the owner, premium payor, and beneficiary of a policy written upon each of the partners or shareholders who are the insureds.

A license which has been revoked may not be reinstated within:

Under the California Insurance Code, a license which has been revoked may not be reinstated within 1 year of revocation.

If an annuity uses units instead of dollars to determine the value of the policy, then it is a(n) _________ annuity.

Variable Annuities are valued and paid in terms of units, rather than dollars. Upon annuitization, accumulation units are converted to annuity units, and the income is paid on the value of the annuity units.

Who is generally named as the beneficiary when a credit life insurance policy is issued?

When a credit life insurance policy is issued, the creditor is normally named as the beneficiary in order to be able to recover the outstanding debt when the insured dies.

Regarding Social Security survivor benefits, when the youngest child reaches age 16, the widow's/widower's _________ period begins and continues until the surviving (non-remarried) spouse reaches age 60.

When the youngest child reaches age 16, the widow's/widower's blackout period begins.

The Insurance Code specifies larger groups that are eligible for group life insurance, such as elementary and secondary school teachers, employees of the state colleges and universities, and members of the National Guard as long as they have at least:

While group life insurance is available to employee groups as small as two persons, the Insurance Code defines a number of specific larger groups that are eligible for group life insurance, such as elementary and secondary school teachers, employees of the state colleges and universities, and members of the National Guard which must have at least 25 members.

Harry was hospitalized and in a coma for 6 months. When does proof of loss for this claim have to be submitted?

Within 1 year, unless he suffers legal incapacity The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must provide proof of the loss within 90 days of the loss, or within in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity. Since Harry was in a coma for 6 months, it would not have been possible for him to file a claim within the 90-day time period.

Does the insured have the right to change the beneficiary designation of a health insurance policy?

Yes, unless the beneficiary is designated as irrevocable The Change of Beneficiary Provision (a Mandatory Uniform Provision) establishes the insured's right to change the beneficiary, unless it is designated as irrevocable.

Which one of the following applicants is most likely to have an insurable interest in the insured? A A spouse applying for coverage on their spouse B An applicant who is applying for coverage on a person he/she is expecting an inheritance from C An employee applying for a policy on a co-worker D An individual applying for insurance on a neighbor

A A spouse applying for coverage on their spouse The policyowner must have a potential for financial hardship in the event of a loss, such as a spouse.

All of the following statements concerning contract law are correct, except: A An insurance policy is a legal contract between 4 parties B An individual committing a tort may be referred to as a tortfeasor C A tort is a civil wrong other than a crime or a breach of a contract D Contract law pertains to the formation and enforcement of contracts

A An insurance policy is a legal contract between 4 parties. Insurance is a legal contract between 2 parties.

All of the following are considered part of the consideration of an insurance contract, except: A Issuance of a policy or binder B The insurer's promise to indemnify in the event of loss C Statements made in the application by the insured D Payment of the first premium

A Issuance of a policy or binder Although the insurer's promise to indemnify is stated on or in it, issuance of a policy or binder is not truly the consideration element of an insurance contract. It is, more correctly, the agreement element (acceptance).

Insurance contracts are required to include all of the following, except: A The financial rating of the insurance company B The parties between whom the contract is made C The period during which the insurance is to continue D The premium rate or basis for determining the final rate

A The financial rating of the insurance company The property or life being covered must also be included, however the financial rating of the insurer is not required.

All of the following are true of the Law of Large Numbers, except: A The prediction of individual losses is based exclusively upon past experience B The prediction of group loss is based upon past experience C It relates to the determination of the probability of loss D There is a decreased degree of error in predicting losses of large groups

A The prediction of individual losses is based exclusively upon past experience The Law of Large Numbers gives predictability to losses of homogeneous groups, not to individual losses.

Which term describes a contract prepared by one party and submitted to the other party on a "take it or leave it" basis, without negotiations?

A Contract of Adhesion is one that is prepared by one party and presented to the other party on a take it or leave it basis.

Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions?

A Life Settlement is like a Viatical Settlement except it does not involve a terminally ill insured.

A Living Needs Accelerated Benefit Rider allows the early payment of a portion of the face amount of a life insurance policy before death, should the insured become terminally ill with less than how many months to live?

A Living Needs Accelerated Benefit Rider allows the early payment of a portion of the face amount of a life insurance policy before death, should the insured become terminally ill with less than 24 months to live.

A Long-Term Care Rider provides up to what percentage of the policy's death benefits if the insured qualifies for long-term care benefits based on being chronically ill as defined in the rider?

A Long-Term Care Rider provides up to 100% of the policy's death benefits if the insured qualifies for long-term care benefits based on being chronically ill as defined in the rider, this will reduce the ultimate death benefit payable to the beneficiary.

A current and prior HIV positive test result (two positive blood tests) may be the basis for a life insurer to:

A current and prior HIV positive test result (two positive blood tests) may be the basis of a decline for life insurance.

The following are all correct, except: A Flammable material near a furnace would be considered a physical hazard B A physical hazard includes an attitude of indifference to loss C A moral hazard includes dishonesty D A physical hazard includes location

B A physical hazard is a physical condition that increases the likelihood of loss. A morale hazard is an attitude of indifference to loss.

The idea that there are always some insureds (risks) that are less desirable than average risks, and that these insureds tend to seek or continue insurance coverage to a greater extent than better risks is termed: A Sharing B Adverse selection C Law of Large Numbers D Estoppel

B Adverse Selection Adverse selection is seen in the insured's propensity to obtain coverage for risks more prone to loss than average risks. Underwriting seeks to prevent adverse selection.

Regarding insurable interest which one of the following is false? A A creditor has an insurable interest in one of their debtors B An insurable interest exists in cases where a financial or economic loss by the insured results in the event that the policy owner dies C An individual has an insurable interest in his or her own self D A parent has an insurable interest in his/her son or daughter

B An insurable interest exists in cases where a financial or economic loss by the insured results in the event that the policy owner dies An individual has an insurable interest in his or her own self and in cases where a financial or economic loss by the owner results in the event that the insured dies.

Policy delivery in California will be accomplished by all of the following, except: A Registered or certified mail with a signed receipt of delivery B Calling the applicant/insured to inform him/her that the policy was issued and keep in the client file C Personal delivery with a signed receipt of delivery D First-class mail with a signed receipt of delivery

B Calling the applicant/insured to inform him/her that the policy was issued and keep in the client file Policy delivery in California will be accomplished by personal delivery, with a signed receipt of delivery, registered or certified mail with a signed receipt of delivery, first-class mail with a signed receipt of delivery, or delivery by reasonable means, as determined by the Commissioner.

An insurance transaction includes any of the following, except: A Execution of a contract B Determining rates C Negotiating prior to the execution of the contract D Transaction of matters subsequent to the execution of the contract

B Determining rates Insurance transaction includes solicitation, negotiation, execution, and transaction required to execute the contract such as collecting premiums and settling claims. An agent does not determine rates.

All of the following are types of insurers, except: A Stock insurers B Proprietary insurers C Mutual insurers D Reciprocal insurers

B Proprietary insurers

Which of the following term life insurance policies would be the most expensive, everything else being equal at the time of issuance? A Renewable B Convertible C Renewable and Convertible D Non-Renewable and Non-Convertible

C Renewable and Convertible To have a term policy with both features would mean that the term policy would be the most expensive of the ones listed.

In order for an insurance policy to be issued, the insured must have: A debt to income ratio of less than 5 B Worked at a job for at least 90 days C A clean driving record D An Insurable interest with the policy owner

D An insurable risk with the policy owner Insurance may not be issued for an illegal activity or an act contrary to public policy therefore every insured must have an insurable interest.

Which of the following best describes a Statement of Good Health? A It is a sworn oral statement made by the insured at time of delivery which allows for coverage to come into effect B It is what comes along with the policy at the time of delivery confirming the underwriting class the insured falls into if the policy was issued standard or better C It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery D It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date

D It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date Generally, this is used when the policy was issued with an outstanding premium requirement to assure the issuer that the health status of the insured has not significantly changed since the time of application.

A person or entity that buys insurance for protection from loss of life or disability is a(n):

Insured

The Commissioner, Director, or Superintendent of insurance is responsible for all of the following, except: A Approves premium rates B Admits insurance companies to do business in the state C Examines insurance companies D Make insurance laws when appropriate

D Make insurance laws when appropriate The state legislature is responsible for passing insurance laws.

All of the following are options for dealing with risk, except: A Transferring the risk B Retaining the risk C Avoiding the risk D Subrogating the risk

D Subrogating the risk

California law requires that the purchaser of life insurance be provided with a copy of a Buyer's Guide to Life Insurance produced by:

D The NAIC

Which of the following is true? A The insured and the policyowner are always the same B The applicant, insured, and policyowner must approve any changes to a policy in writing C Any changes to a policy must be approved by both the insured and policyowner in writing D The insured and the policyowner are usually the same, but not necessarily

D The insured and the policyowner are usually the same, but not necessarily The applicant, insured, and owner might all be different parties, and any changes to the policy must be approved only by the policyowner.

Which Settlement Option pays a specified dollar amount until benefits are exhausted?

Fixed Amount. The key words are specified dollar amount. Fixed Amount pays benefits at a specified dollar amount (such as $1,000/month) until the benefits are exhausted.

Which of the following is FALSE about the Automatic Premium Loan Provision (APL)?

For it to be included in the policy, there is an additional premium charge The Automatic Premium Loan provision automatically becomes effective at the end of the grace period to prevent the policy from lapsing. There is no charge for having this provision in a cash value policy.

For life and health insurance, when must an insurable interest exist?

For life insurance an insurable interest need only exist at the time the insurance takes effect, not the time of claim.

An insurer organized in another state than the state in which it is authorized to do business is known as which type of insurer?

Foreign

The Medical Information Bureau (MIB) is formed by:

Insurance Companies The MIB is a member-owned corporation that operates on a not-for-profit basis in the United States and Canada. The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies.