A.D. Banker - Comprehensive Exam Practice (1)

All of the following are common exclusions, except:

Driving Driving is not considered in and of itself an exclusion.

What provision describes the parts of the life insurance contract?

Entire Contract The entire contract clause describes the documents that are parts of the life insurance contract.

If the policyowner specifies the time over which all settlement option installments are to be paid, he/she has chosen which Settlement Option?

Fixed period The key word is time. Any time the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, the Fixed Period Settlement Option has been chosen.

For which of the following may any funds remaining at year-end not be rolled over to the next year?

Flexible Spending Account FSAs are a 'use it or lose it' type of an account.

Which of the following provisions commence at the time of the delivery of the policy to the insured?

Free Look Period The insured/owner has the right to examine the policy for 10 days (this may vary by state) after receipt of delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove date of receipt.

Which action would not render a small employer's health benefit plan nonrenewable?

Frequent claims The insurer cannot cancel for frequency of claims.

A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force. The base policy costs $750 and the rider is $50. What is the total premium annually the policyowner must pay to keep the policy in force?

$800 Riders such as the waiver of premium are a provided benefit for an additional cost, therefore the annual premium would be $800 ($750 + $50).

The viator may rescind the viatical settlement contract within _____ business days after receiving the viatical settlement proceeds.

10

An ordinary straight whole life policy issued 30 years ago would endow at what age?

100 An ordinary straight whole life policy issued 30 years ago would endow at age 100. Only recently issued policies have an endowment of age of 121.

An employer may require a former employee who has COBRA coverage to pay up to _____% of the premium.

102 Recipients of COBRA coverage will be required to pay premiums to the employer. Employers may require a former employee or his/her surviving spouse to pay up to 102% of the premium.

To be issued in North Carolina, an individual life policy must provide a full refund of all premiums paid if the insured commits suicide within the first ______ years.

2

The owner of a traditional individual retirement account withdraws funds and takes the check to place into a new IRA. How much will the original IRA custodian withhold for taxes?

20% When IRA withdrawals are not directly rolled over, instead a check is sent to the account owner, the distributing IRA custodian must withhold 20%.

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

If a plan offers coverage to dependents, eligible dependents include all children, natural and adopted, married and unmarried, up to age ______.

26 If a plan offers coverage to dependents, eligible dependents include all children, natural and adopted, married and unmarried, up to age 26.

How long must an insurer keep a Policy Summary?

3 years after last use Each insurer's home or main office must maintain a copy of each document approved for use during solicitation for 3 years following the date of its last authorized use.

An employee whose group health coverage is terminated is entitled to convert coverage to an individual policy covering self, spouse, and dependents who were covered on the group coverage's termination date by notifying the insurer within ______ days after the date continued coverage terminates.

31

The National Do Not Call Registry requires companies to update their list at least once every ______ days.

31

To be issued in North Carolina, an individual life policy must have a grace period of ______ days.

31

Tom elects the Life Income with 10-year Period Certain settlement option. Tom dies in year 6. The beneficiary receives payments for _______.

4 years With Life Income Period Certain, payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. If the recipient dies prior to the end of the period certain, the payments continue to another beneficiary until the end of the period certain.

Each insurer or its agents must maintain a record of all written complaints for at least _____ years after the complaint's final disposition or, for domestic companies, until the Commissioner adopts a final report of a general examination that contains a review of these records, whichever is later.

5

The waiting period from the start of a disability to be eligible to apply for Social Security disability is:

5 months The waiting period to apply for Social Security is 5 full months from the start of a qualified disability.

A Small Employer is defined as any person, firm, corporation, partnership, or association that is actively engaged in business and has ______ employees or less.

50

Generally, an insurer may defer the granting of a policy loan for up to ______ months.

6 An insurer, by law, can defer granting a policy loan for up to 6 months.

Which of the following examples of elimination periods provides the lowest benefit:

6 months The longest elimination period will provide the lowest benefit, but will also have the lowest premium.

If a nonresident licensee moves to North Carolina and desires licensure in this state, he/she must apply for resident licensure within ______ days of establishing legal residence.

90

All of the following are examples of cost containment and managed health care, except: A Experimental drug treatment B Mandatory second surgical opinion C Concurrent review D Precertification

A Experimental drug treatment is not a cost containment method.

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

Alice's estate With no surviving beneficiaries, the policy proceeds go to Alice's estate.

Any company incorporated or organized under the laws of any jurisdiction outside the United States of America is a(n) ________ company:

Alien Any company incorporated or organized under the laws of any jurisdiction outside the United States of America is an alien company

What will cause the time period of the fixed amount settlement option to be extended?

An increase in interest credited Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.

The policy loan amount cannot exceed the ____________.

Available cash surrender value The policy loan amount cannot exceed the available cash surrender value.

A group of individuals comes together with the objective of obtaining a lower collective insurance premium. This would:

Be disallowed. Group formation must be for a reason other than reducing the cost of insurance. State insurance laws prohibit the issuance of group policies to groups formed primarily for the purpose of obtaining insurance.

What is the fastest way to pay up an ordinary whole life policy?

Buy a single premium policy A single premium life policy only requires one premium payment to be made therefore this would pay up the policy the quickest.

All of the following are ways in which an employee will lose their employer sponsored group health insurance, except: A No longer meeting eligibility requirements B Employment is terminated C Becoming too old while still on the job D Group contract is terminated

C Group coverage may be terminated for an employee if employment is terminated, the employee no longer meets eligibility requirements (becomes part-time), or if the group contract is terminated.

The nonforfeiture option that, if exercised, terminates all coverage is:

Cash Surrender Upon surrendering the policy back to the insurer, the policyowner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest. The insured no longer has insurance coverage if this option is selected.

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

Claire Since Claire outlived Bill and Alice, then Claire is next in line to receive the policy proceeds.

The Medical Information Bureau provides information to the insurer regarding the individual risk of an applicant and does not include:

Credit score The MIB is used to alert underwriters if there is an inconsistency in the applicant's information provided on the application based on previous underwriting. It does not include financial information or credit scores.

A group plan is normally owned by any one of the following, except:

Debtors A group insurance plan is normally owned by an employer, creditor, or association.

Generally speaking, straight whole life is classified as which of the following?

Ordinary Ordinary Life Insurance is any type of life insurance that is not group, industrial, or government insurance.

Which provision is an Optional Uniform Provision?

Other Insurance With This Insurer Other Insurance With This Insurer is an Optional Uniform Provision. The other choices are Mandatory Uniform Provisions.

All of the following are TRUE of Policy Loan Rate provisions, except:

Policies with fixed interest loan rates have a maximum interest rate of 10% The policies with fixed interest loan rates usually have a maximum interest rate of 8%.

A viatical settlement broker is required to inform the viator of all of the following, except:

Proceeds are exempt from creditor claims Proceeds might be subject to the claims of a viator's creditors. The life insurance death benefit, however, would be paid to the viator's beneficiaries free of creditor claims.

A court reporter develops arthritis making it impossible to continue this employment. The reporter now has other employment at a reduced salary and receives a monthly benefit from an insurance contract due to which of the following policy provisions?

Residual Disability Residual Disability recognizes one's ability to continue to work, but at a reduction of earnings.

Examples of preventive care include all of the following, except:

Restricting travel to within 5 miles of home Examples of preventive care include well child care visits, immunizations, and mammography screenings, as well as nutrition and weight loss programs.

What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and initial premium collected?

Return the policy to the insurer with a letter of explanation Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application.

Linda wants her husband to be the beneficiary of her life policy but also wants to retain all rights of ownership. Which of the following types of beneficiary designations should she use?

Revocable beneficiary By naming her husband as a revocable beneficiary, Linda would retain all rights of ownership. To name her husband irrevocably would give her husband a vested interest in policy benefits.

Dental expense insurance deductibles are normally waived for all of the following, except:

Routine paying premiums on time and in full Dental expense insurance deductibles are normally waived for routine preventive care, exams, and/or cleaning.

All of the following are modes of premium payment for health insurance, except: A. Single pay B. Quarterly C. Annually D. Monthly

Single pay Single pay is not considered a mode of premium payment for health insurance.

Which of the following annuities does not have a traditional accumulation phase?

Single premium immediate An immediate annuity essentially does not have an accumulation period and is used to generate immediate income. Income is generated within a year of the issue date.

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.

An applicant's signature on an application indicates what?

That their statements are true The applicant is representing that statements on the application are true to the best of their knowledge and belief.

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 any other 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.

If dividends are left on deposit with an insurer to earn interest:

The dividend is tax-free, but the interest is taxable Interest paid by insurers on dividends left on deposit is taxable as income.

When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________.

The gross premium Insurer expenses (loading) are added to the net premium rate to enable an insurer to meet all costs under the contract, such as operating costs, commissions, medical examination costs, etc.

All of the following can determine the death benefit settlement option, except:

The insurer The policyowner has the right to select the settlement option. If he or she does not, then it is up to the beneficiary to determine how to receive the payment.

Who receives the endowment value of a whole life policy?

The policyowner The policyowner retains all rights in the policy up to and including receiving the endowment proceeds.

Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________.

Total disability Residual Disability provides benefits for loss of income after the insured returns to work usually following a total disability.

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

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

Andrew discovered that the consumer directed health plan he had established was subject to new contribution limits when he switched the Tier 1 payment mechanism from a/n:

HRAs to an HSA Employer contributions to HRAs are not limited, but they are limited to HSAs.

Which is the best description of a Limited Accident Policy?

It provides specific benefits for specific injuries from specific causes A Limited Accident Policy provides specific benefits for specific injuries from specific causes.

The two categories of Group Disability Income policies are:

Long-Term and Short-Term Disability Income policies are characterized as being Long-Term or Short-Term.

Which of the following medical reports cannot be used as the sole basis for rating or denying coverage to an applicant?

MIB The MIB report reveals past medical concerns and cannot be used as the only medical report for rating or denying an application.

A person must be at least ______ years of age to enter into an insurance contract or an annuity.

15 A person must be at least 15 years of age to enter into an insurance contract or an annuity.

A health policy providing benefits for children must cover a newborn, adopted, or foster child for ______ days from the date of birth, adoption, or placement, respectively; the child's parent may continue coverage by enrolling the child and by paying any additional premium due.

30

When a life insurance policy's ownership is changed from the original owner to a new owner without payment, this is known as a(n) ___________.

Absolute assignment When a life insurance policy's ownership is changed from the original owner to a new owner, this is known as an absolute assignment when no money is involved.

Larry owns an insurance contract issued by the ABC company that contains words and phrases that are ambiguous to Larry. If ABC challenges a claim based on these phrases they will lose because an insurance contract is deemed to be a contract of:

Adhesion In a contract of adhesion, ambiguity and questionable wording is construed against the party who drew up the contract (ABC Insurance Company) because the applicant had no say in how it was written.

Which of the following beneficiary designations is a class designation?

Any children of this marriage A class designation is when the beneficiary is not directly identified by name.

Group long-term disability benefits are paid for:

As long as the policy specifies While this coverage is often characterized by benefit periods of 2 years, 5 years, to age 65, or lifetime, the best answer to this question is based on the specifications of the policy.

An insurance professional who represents the insured is which of the following?

Broker An insurance broker is a person who places insurance with an authorized insurer that has not appointed the person, and is deemed to represent an insured.

When disabled, which of the following would ensure payment for the wages of a business owner's employees?

Business overhead The Business overhead expense policy will provide income to the business to cover losses such as employee's wages if the owner becomes disabled.

The deductible that applies after the Basic Plan is exhausted and the Supplemental Major Medical Coverage begins is called:

Corridor Deductible A Corridor Deductible is used between the Basic Plan and the start of coverage under the Supplemental Major Medical policy.

Beth has a contract stating she must be disabled for 3 months before benefits will begin to be paid. This 3-month period is known as the:

Elimination Period The Elimination Period is a period of time that must elapse after onset of a disability before benefits begin to be paid.

All of the following are life insurance disability riders, except:

Jumping Juvenile A payor benefit can be added to a jumping juvenile policy.

A beneficiary wants a guarantee that benefits will be paid for a period of 10 years or life whichever time period is greater. Which of the following options should the beneficiary select?

Life with 10-year Period Certain Life with 10-year Period Certain pays out for the greater of 10 years or life.

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.

Which of the following has an insurable interest in the other?

One business partner in his/her partner Business partners have insurable interests in each other. Employees don't generally have insurable interests in their employer or in each other. But an employer may have an insurable interest in an employee, if notice is given.

Coordination of Benefits is a provision designed to reduce ________ when an insured is covered under multiple health plans.

Overinsurance Overinsurance means having more than 100% of a claim paid. This could happen if a person were covered by more than one health plan.

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

Paid-Up Additions 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.

Which of the following is not an underwriting factor for health insurance?

Place of birth The underwriters do not take into consideration where the applicant was born.

If a policyowner wants to increase the death benefit of an Adjustable Life Insurance policy, what is required?

Prove insurability for the increase In just about every situation in which a policyowner wants to increase the face amount of a policy, the insured must prove insurability for the increase.

A firm with 50 employees replaces its existing group health plan. With regard to ongoing existing claims, the replacing insurer will be:

Required to continue paying them under the No Loss-No Gain law The No Loss-No Gain law (a.k.a. the Hold Harmless Agreement) establishes mandatory risk transfer.

Policy __________ are the net premiums paid plus interest earned and reflect potential insurance contract obligations.

Reserves A reserve is maintained by an insurer in order to meet future potential obligations and is also required by State insurance laws.

The insurance industry is primarily regulated at the _________ level.

State

What is the primary source of underwriting information for an individual health insurance policy?

The application The application is the primary source of underwriting information. All other sources are supplementary.

Generally, regulatory jurisdiction over a group insurance plan belongs to the insurance commissioner of:

The state in which the group contract was delivered to the policyowner It is generally accepted that the state in which the group contract is delivered to the policyowner has governing jurisdiction.

A partial withdrawal is permitted on which of the following policies?

Universal Life Policies on a universal life platform allow for partial withdrawals.

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.

An evaluation of Simon's past earnings reveals his average earned monthly income to be about $4,000. 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.

K has a $50,000 traditional whole life policy in force with $25,000 of cash values. Her outstanding loan and loan interest total $5,000. If K surrenders the policy, K will receive:

$20,000 Any outstanding loans will be deducted from the face amount at the time of claim or from the cash values upon surrender along with any interest due. $25,000 - $5,000 = $20,000.

A health policy's preexisting condition exclusion period may not exceed _____, and time spent toward any preexisting condition exclusion period under previous coverage must be credited toward the current policy.

1 year

A health policy must contain a _____-day free look period with a full premium refund if the policy is returned.

10 A health policy must contain a 10-day free look period with a full premium refund if the policy is returned.

A license applicant must notify the Commissioner in writing within _____ days of a change in residential or email address or of being convicted of a crime other than an auto misdemeanor.

10 A license applicant must notify the Commissioner in writing within 10 days of a change in residential or email address or of being convicted of a crime other than an auto misdemeanor.

A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason.

10 The standard Free Look, or Right to Examine provision allows the insured to return the policy for any reason within 10 days after policy delivery.

One of your clients just reinstated his health insurance plan. When is coverage effective for sickness and accident?

10 days for sickness, and immediately for accidental injuries Upon reinstatement, accidents are covered immediately and sickness after 10 days.

All of the following are situations in which the insurer is likely to waive any annuity surrender charges, except:

1035 exchange into a life insurance policy Annuity surrender charges are generally waived if the annuitant is hospitalized for an extended period, placed in a nursing facility for at least 30 days, becomes disabled, or dies.

Small employer plan preexisting conditions may not be excluded for any longer than _____ months.

12 Preexisting conditions may not be excluded for any longer than 1 year.

A health insurer must give insured employees who pay for coverage through payroll deduction at least _____ days' notice before cancelling an employer's group policy for nonpayment of premium.

15

The pregnancy discrimination act applies to groups with ______ or more employees.

15

An insurer must provide an application within ______ days, upon request, to a health policy's owner who intends to reinstate or renew the policy.

15 An insurer must provide an application within 15 days, upon request, to a health policy's owner who intends to reinstate or renew the policy.

Hicks Corp. wants to install a contributory group plan. It employs 200 people. How many employees must participate in order to install the plan?

150 Contributory plans require a participation percentage of 75%.

The Commissioner of Insurance may issue a temporary license, without regard to education, experience, or exam requirements, for up to ___ days, to specified persons, under certain circumstances.

180

A health policy must contain a time limit on certain defenses of _____ years from the date of issue.

2 A health policy must contain a time limit on certain defenses of 2 years from the date of issue.

To be issued in North Carolina, an individual life policy must be incontestable after being in force for _____ years from the issue date.

2 To be issued in North Carolina, an individual life policy must be incontestable after being in force for 2 years from the issue date.

Individual life policies typically pay out a death benefit if death is a result of suicide after they have been in force for _____ years.

2 Two years is typically the standard suicide limitation period for individual life policies. In some states it may be different.

Which of the following is a typical benefit period for a group long-term disability benefit?

2 years Group long-term disability is characterized by benefit periods of at least 2 years and as long as the lifetime of the insured.

To obtain an insurance license, a person must complete at least _____ hours of prelicensing education for each license sought.

20

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.

Each life agent licensee must obtain how many insurance continuing education credits during each biennial compliance period?

24 Of the 24 credits, it is also required that 3 credits must be obtained by completing an ethic course.

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

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

An insurer must pay interest on death benefits not paid within _____ days after receiving proof of loss.

30 An insurer must pay interest on death benefits not paid within 30 days after receiving proof of loss.

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.

When a person obtains a replacement life insurance policy the free look period is _____ days from the date the policy is delivered.

30 When a person obtains a replacement life insurance policy the free look period is 30 days from the date the policy is delivered.

How much time does an insurer have to notify the Commissioner after an agent's appointment is terminated?

30 days An insurer that terminates a producer's appointment must notify the Commissioner within 30 days after the termination's effective date. The notice must state the cause for termination if the cause is also ground for license suspension, probation, revocation, or nonrenewal.

Payment of the first premium and an application must be submitted to an insurer for individual coverage within how many days to convert group coverage to an individual policy not requiring proof of insurability?

31 days State insurance laws require a 30- or 31-day Conversion Period in group insurance policies.

The XYZ Company, which employs 800 workers, provides group disability insurance for the 400 employees working 30 hours or more. How many workers must be covered if this group benefit is offered on a noncontributory basis?

400 Employees must work a minimum number of hours in order to qualify for benefits; therefore, only 400 employees qualify. Because the company offers the benefit on a noncontributory basis, all eligible employees must be covered.

A health policy is considered reinstated when the insurer accepts the premium or, if the insurer does not deny reinstatement, ______ days after the insurer receives the premium, whichever occurs first.

45 A health policy is considered reinstated when the insurer accepts the premium or, if the insurer does not deny reinstatement, 45 days after the insurer receives the premium, whichever occurs first.

How many employees would an employer require in order to be considered a small employer:

50 or less A Small Employer is any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.

Unless an exception applies, a tax penalty is assessed for withdrawals from annuities of tax-deferred earnings prior to age ______.

59 1/2 A penalty of 10% is levied on withdrawals of tax-deferred earnings in order to discourage the use of annuities as short-term tax shelters.

HIPAA defines a pre-existing condition as one for which the insured received medical advice, diagnosis, care, or treatment within the past _____ months.

6 A pre-existing condition is a condition for which the insured received medical advice, diagnosis, care, or treatment within the past 6 months.

If the insured is receiving regular disability income payments, the insurer can require notice of continuance of claim every ______ months.

6 If the insured is receiving regular disability income payments, the insurer can require notice of continuance of claim every 6 months.

If an insurer makes a payment for a claim but the insured is dissatisfied with it, the insured must wait _____ days after proof of loss before taking any legal action.

60 According to the Legal Actions Provision (a Mandatory Uniform Provision), the insured must wait at least 60 days after proof of loss before legal action can be brought against the insurer.

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.

The employee or the beneficiary must notify the employer within ______ days if they elect to continue coverage under COBRA.

60 The employee or the beneficiary must notify the employer within 60 days if they elect to continue coverage under COBRA.

The Legal Actions provision preserves the insured's right to bring suit against his/her own insurer, but the insured must wait at least _____ days after filing a proof of loss before pursuing this action.

60 The insured must wait at least 60 days following the filing of a proof of loss before pursuing any legal action against the insurer.

Which of the following is NOT an acceptable grace period for late premium payments?

61 days for annual premiums The 31 day grace period applies to all policies with premium payment schedules other than weekly or monthly (including quarterly). Premiums may be 7 days late for weekly premiums and 10 days late for monthly premiums.

Proof of loss is required within _____ days of loss.

90 The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must generally provide proof of the loss within 90 days of the loss, or within the shortest time possible, but not exceeding 1 year unless the insured suffers legal incapacity.

All of the following are unfair claims settlement practices, except: A Promptly explaining, based on applicable provisions or laws, a claim's denial B Making known to insureds or claimants a policy of appealing arbitration awards C Compelling insureds to sue to recover amounts due by offering substantially less than the amounts typically recovered in actions brought by legal process D Not attempting in good faith to promptly, fairly, and equitably settle a claim in which liability has become reasonably clear

A Failing to promptly explain, based on applicable provisions or laws, a claim's denial is an unfair claims settlement practice.

All are considered medical expense controls utilized by HMOs, except: A Allowing out-of-network coverage B Controlling hospital stays and visits C Minimizing administrative costs D Encouraging preventive care through low-cost physical exams

A HMOs do not cover out-of-network services except in emergencies or when there is no network-contracted provider for the health care required by a subscriber.

All of the following are life insurance policy prohibited provisions, except: A Voiding a policy for failing to repay any policy loan or loan interest when the total outstanding policy debt is greater than the policy's cash value B Backdating a policy more than 6 months to save age in order to lower the policy premium C Limiting the time to bring legal action against an insurer to less than 1 year D Settlements for less than the face amount plus dividends minus the sum of outstanding policy loans, loan interest, and unpaid premium

A If the policy no longer has sufficient collateral to sustain the total outstanding policy debt then the insurer can require that the outstanding debt be reduced or the policy can be cancelled.

Which of the following statements is true? A Q completes an application and submits it with premium to the insurer. Q made an offer B Insurer X rates the insured based on health reasons. X accepted an offer and the policy is in effect C Insurer X issues a policy with an outstanding premium requirement. X accepted an offer and the policy is in effect D Q completes an application and submits it to the insurer. Q made an offer

A Offers must be accepted prior to contracts coming into being.

Which one of the following would not exempt a person from the examination requirement if applying for a life and health agent license?

A GED A person applying for a life and health agent license is exempt from the exam if he/she is a Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Life Underwriter Training Council Fellow (LUTCF), or Fellow of Life Management Institute (FLMI).

A type of company that is owned by its policyholders, that traditionally issues participating policies in which policyholders may be eligible to receive dividends is a _______ company.

A Mutual Insurance Company is owned by its policyholders, who elect the Board of Directors to carry out the company's mission. In successful years the Board may declare a dividend which can be paid out to its policyholders.

Which of the following rules regarding PPOs is INCORRECT?

A PPO may make exclusive contracts with health care providers so that they don't sign up with other PPOs A PPO may not make exclusive contracts with health care providers; a provider may enter PPO contracts with multiple PPOs. The Commissioner has 90 to disapprove a PPO contract. Providers have 30 days to request contracts with a new PPO. The relationship between a preferred provider and an insurer must be reported to the Commissioner annually.

Ordinarily, who would not be the owner of a juvenile policy from the outset?

A brother or sister Typically it is the parents or grandparents who buy juvenile policies on their children or grandchildren.

A Hospital Indemnity Plan pays for:

A daily hospital benefit on a daily limit as stated in the policy Hospital Income or Indemnity pays directly to the insured a specified dollar amount per day during hospitalization. Payment is based solely on the number of days the insured is hospitalized. It pays the daily amount stated in the policy.

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.

A partial withdrawal is considered ______________.

A partial surrender of the policy A partial withdrawal is considered a partial surrender of the policy.

Which of the following disability income benefits would be received free of federal income tax?

A personal disability income insurance policy benefit The beneficiary must also be the premium payer, and the premiums must be paid with after-tax dollars.

A personalized computer-generated illustration detailing premiums, cash values, interest rates, and surrender values is called __________.

A policy summary Policy summaries detail premiums, cash values, interest rates, and cash surrender values of a particular policy for a specific insurance prospect

If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered:

A representation Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements of absolute truth. Concealments occur when known information is not communicated.

Sylvia was the insured and owner of a policy that named her husband as the beneficiary. Upon her husband's death, she decided to change the beneficiary designation to her best friend since she has no close living relatives. The insurance company will:

Accept the beneficiary change As the policyowner, Sylvia is free to change a revocable beneficiary at any time. She may also name a new beneficiary if an irrevocable beneficiary dies before the insured. A beneficiary is not required to have an insurable interest in the insured.

An employer who has an Open Enrollment Period four times during a policy period for group dental coverage might cause the insurer to have concerns about:

Adverse Selection Frequent Open Enrollment periods would make the insurer more exposed to immediate claims and would likely increase adverse selection.

Which of the following is incorrect regarding the group underwriting process?

Adverse selection is not a concern for group contracts Adverse selection is a major underwriting concern for group contracts.

Sandra owns a Medical Expense Plan that contains a 60/40 Participation (Coinsurance) Provision and a $200 deductible. How much will Sandra and the insurer each pay under the coinsurance provision if Sandra's first medical claim for the year totals $10,200?

After Sandra has satisfied the deductible, the insurer would pay 60% of $10,000 or $6,000. Sandra would pay 40% of the $10,000 or $4,000, in addition to the $200 deductible for a total of $4,200.

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.

o act as an agent in North Carolina, a person must obtain a license for the kinds of insurance for which the person intends to act as an agent and, if acting for an insurer, __________ from the insurer.

An appointment To act as an agent in North Carolina, a person must obtain a license for the kinds of insurance for which the person intends to act as an agent and, if acting for an insurer, an appointment from the insurer.

Which of the following concerning Noncontributory Group Life insurance is FALSE?

An employer pays 75% of the premium To minimize the effects of adverse selection, a noncontributory group life policy must cover 100% of the eligible employees. The employer pays 100% of the premium.

A policy is issued with a rider. Years later the policyowner would like to drop the rider in order to save some money. Who has the authority to effect that policy change?

An executive officer of the insurer Any policy changes or modifications must be in writing and signed off at the home office by an executive officer. A producer cannot change, alter, modify, or waive any policy provisions.

Which of the following actions would NOT result in a misdemeanor penalty?

An insurance agency employee embezzles $500 from the agency Embezzlement up to $100,000 results in a Class H felony. The other actions would result in a misdemeanor.

What must a producer give an insured who purchased an accident and health policy no later than policy delivery?

An outline of coverage (also called a policy summary) An outline of coverage (also called a policy summary) must be provided to a prospective buyer of health insurance at the time of application or policy delivery. The outline of coverage includes benefits, premiums, and other relevant information regarding the sale of the policy.

Social Security uses which of the following definitions to determine total disability?

Any substantial gainful activity Under Social Security, total disability means an individual must be unable to engage in any substantial gainful activity due to a medical condition.

Insurable interest for life insurance is necessary only at the time of:

Application In Life and Health Insurance, insurable interest must exist at the time of application or policy issuance. It is not required at any later point in time.

Concerning COBRA, which of the following is correct?

Applies to employers with 20 or more employees Federal law mandates that employers with 20 or more employees provide a COBRA option. Termination of employment provides only 18 months of continuation. Qualifying events for dependents only (not employees) permit continuation up to 36 months.

With a Contributory Group Life Plan, what percentage of the employees must participate?

At least 75% A Contributory Plan is one in which the participants pay all or a portion of the premiums. The high enrollment percentage, 75%, helps to minimize the risk of adverse selection.

When is the earliest a beneficiary designation can be made?

At the time of policy application Beneficiaries are indicated for the first time when the application for life insurance is completed for submission to the home office of the insurer.

The Financial Privacy rule requires insurers to provide consumers with a privacy notice:

At the time the consumer relationship is established and annually thereafter The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter.

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?

Automatic Premium Loan The Automatic Premium Loan Provision enables the insurer to borrow automatically from the policy's cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.

All of the following are common complaints filed by clients against Errors and Omissions policies, except: A Quoting inflated information B Failure of the agent to share the commission with the client C Misrepresenting the plan of coverage D Failure to obtain proper coverage

B All are common complaints filed except sharing commissions with the client.

All of the following are Anti-Money Laundering 'red flags', except: A Early cancellation of the policy, regardless of cancellation fees (surrender charges) B Paying annual policy premiums C Strong reliance on wire or electronic fund transfers to foreign accounts D Paying for an entire policy up front with cash

B Most red flags involve practices that are outside the norm for life insurance transactions, such as paying for an entire policy up front with cash; early cancellation of the policy, regardless of cancellation fees (surrender charges); the heavy use of third parties for policy transactions; and strong reliance on wire or electronic fund transfers to foreign accounts.

All of the following signatures would be required on a life insurance application for an adult, except that of the:

Beneficiary Both the producer and the applicant/insured must sign the application. If the applicant is a minor, a guardian must sign the application.

Dental plans are normally written with a stated annual maximum on the number of:

Benefit dollars that will be paid Dental plans normally state an annual maximum dollar benefit.

Hank was in the hospital last month for 2 days for which he received a check for $200. This month Hank was in the hospital for 5 days for which he received a check for $500. These checks are most likely:

Benefit payments from a Hospital Income or Indemnity Policy A Hospital Income or Indemnity Policy pays a specified dollar amount per day of hospitalization directly to the insured.

What type of disability income insurance provides funds to cover business expenses when the business owner becomes disabled?

Business overhead expense Business Overhead Expense provides the funds to cover the overhead expenses of a business when the owner becomes disabled. The benefits include expenses such as office rent, utilities, and employee labor. The owner cannot collect loss of income under this policy, however.

All of the following are life insurance policy prohibited provisions, except: A Backdating a policy more than 6 months to save age in order to lower the policy premium B Limiting the time to bring legal action against an insurer to less than 1 year C Voiding a policy for failing to repay any policy loan or loan interest when the total outstanding policy debt is greater than the policy's cash value D Settlements for less than the face amount plus dividends minus the sum of outstanding policy loans, loan interest, and unpaid premium

C If the policy no longer has sufficient collateral to sustain the total outstanding policy debt then the insurer can require that the outstanding debt be reduced or the policy can be cancelled.

Based upon Optional Uniform Provisions, an insurer would have the right to deny claim payment in all of the following circumstances, except: A A claim involving an injury sustained in a bank robbery B A claim is covered by another insurer C Misstatement of age on the application D A broken leg injury suffered as the result of ingesting an illegal drug

C Misstatement of age would not avoid a claim, but could cause a reduced benefit to be paid. The Insurance With Other Insurers, Illegal Occupations and Actions, and Intoxicants and Narcotics are each optional provisions that could allow an insurer to avoid liability for a claim.

All of the following are true about riders, except: A Once a rider drops from the policy, the additional premium will also drop B Most riders are added at the time of policy issue C All riders are available free of charge and can be added at anytime without proof of insurability D Riders added after the policy has been issued usually require evidence of insurability

C Most riders have a charge associated with them and can require providing proof of insurability after the policy has been issued.

All of the following are unfair trade practices in insurance, except: A Making misleading representations or fraudulent comparisons of policies; misrepresenting a policy's terms or benefits; or making misleading representations as to an insurer's financial condition B Giving capital stock, benefit certificates or shares in a corporation, securities, special or advisory board contracts, or contracts promising returns and profits as inducements to purchase insurance C Offering any rebate, discount of premium, advantage, or valuable consideration specified in the policy D Making any false statement that is maliciously critical or derogatory of any insurer's financial condition with intent to injure someone in the insurance business

C Offering any rebate, discount of premium, advantage, or valuable consideration not specified in the policy is an unfair trade practice in insurance.

All of the following are standard provisions of an individual life insurance policy, except: A A lapsed policy may be reinstated within 5 years B The policy is incontestable after 2 years C The grace period for late payment of premiums is 45 days D Errors in age or gender of the insured may be corrected by adjusting premiums or benefits

C The grace period for late payment of premiums is 31 days, during which the policy remains in force. A policy is incontestable after being in force for 2 years from the issue date. It must specify the method for adjusting premiums, benefits, or both to correct a misstatement of age or gender on the application. A lapsed policy may be reinstated within 5 years by providing evidence of insurability and by paying all overdue premiums, indebtedness, and interest.

Policy replacement is the process of:

Cancelling an existing policy and issuing a new policy Replacement means cancelling an old policy and replacing it with new a new policy.

If an insured suffers a dismemberment under the AD&D policy, which of the following will provide benefit payouts to the beneficiary?

Capital sum Dismemberment benefits payable under an AD&D policy are referred to as the capital sum.

The rates charged by Independent Practice Association HMO physicians are prenegotiated on a ________ basis.

Capitation, capitated HMOs compensate physicians with monthly capitation to cover general expenses, in exchange for prenegotiated rates for services actually performed.

Mona let her permanent policy lapse. She discovered there was $2,498 in cash value 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.

Which of the following is NOT prohibited from disclosing personal information about a client under the Insurance Information and Privacy Protection Act?

Client No insurers, agents, or agency support personnel may disclose any personal information about a client in connection with an insurance transaction, without having the client's written authorization before the disclosure occurs. The client owns the information about him/herself and is free to disclose it.

An insured goes to the bank for a business start-up loan. Asking for more security, the bank agrees to accept a(n) __________ on a permanent life insurance policy owned by the customer.

Collateral Assignment A Collateral Assignment is a partial transfer of the death benefit. In this case, the policyowner is collateralizing the loan by providing the bank a priority interest in a portion of the policy's death benefit without naming it a beneficiary.

______________ Major Medical insurance coverage combines the features of the Basic Medical Expense policies and a Major Medical policy into a single policy and includes reimbursement for covered expenses on a 'usual, customary, and reasonable' basis.

Comprehensive

If the premium is paid at the time of application, the agent will provide the applicant with a:

Conditional receipt The agent will provide a conditional receipt if the premium is paid by the applicant at the time of application

If a premium is collected at the time of the application, the producer will issue a:

Conditional receipt The conditional receipt provides coverage at the time of application as long as the coverage is issued. If a loss occurs prior to the issuance of the policy, the insurer would have to prove the policy would not have been issued, or pay the claim.

If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do?

Conduct further investigation to obtain more information prior to making a decision When the home office underwriter receives MIB codes that are inconsistent with information provided on the application, the underwriter is required to conduct a further investigation to obtain more information prior to making an underwriting decision. Underwriting decisions cannot be based solely on MIB codes since there could be a reasonable explanation for the discrepancy.

Which of the following is a requirement for continuation coverage under a group health policy?

Continuation of coverage lasts up to 18 months, so long as the (former) employee pays premiums Continued coverage can last up to 18 months but terminates if the (former) employee fails to pay the premiums or becomes eligible for similar coverage under another group policy or if the employer terminates the policy for all employees. The right to continue coverage applies only to medical benefits, excluding dental, vision, or prescription drug benefits. The premium to continue coverage may not exceed 102% the group rate.

Which statement would be considered inaccurate regarding the underwriting of a group plan?

Contributory plans require 100% employee participation Contributory plans require both the employee and the employer to contribute to the premium, and 75% participation is required.

When a group member terminates employment, he or she has 31 days to purchase an individual policy without proof of insurability. This is referred to as the:

Conversion Priviledge It is the Conversion Privilege, which affords a group member the right to purchase individual coverage without proof of insurability. The 31-day period also applies when COBRA continuation is exhausted.

Which provision of group health plans is used to determine primary and secondary coverage when an insured is covered by more than one insurance plan?

Coordination of Benefits The Coordination of Benefits provision describes how primary and secondary coverage will be determined when an insured is covered by more than one group policy.

When an individual is covered by more than one health plan and is injured, what provision determines which plan is that person's primary coverage?

Coordination of Benefits The Coordination of Benefits provision determines that a person's own employer-sponsored health plan is his/her primary coverage. However, if any plan fails to include a coordination of benefits provision, that plan would automatically be primary.

If the insurer issues a policy after receiving an application for health insurance in which questions regarding preexisting conditions were left blank, what would be the consequence to the insured's coverage if a preexisting condition caused a claim shortly after the policy was issued?

Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank If a policy is issued with questions unanswered, the contract will be interpreted as if the question had not been asked and is therefore waived by the insurer. However, if the insurer can demonstrate that an inadvertent omission is a material concealment, the policy may be voided, because intentional or unintentional concealment allows the insurer to void the policy.

A client wants to make sure that they can have a permanent life insurance policy several years from now when they can afford it without having to prove insurability. What feature should they make sure they have on their new term life insurance policy?

Covertibility Convertibility allows for the conversion of term to permanent without proof of insurability.

All of the following are primary duties of the Commissioner of Insurance of North Carolina, except:

Creating insurance laws to protect the public While the Commissioner of Insurance can establish rules and regulations necessary to fulfill North Carolina insurance laws, he/she cannot make insurance laws, that is up to the state legislature.

If a consumer would like to make sure that survivors are left with a paid-off car, boat, and home, at an affordable price, what type of policy should he or she consider acquiring at the time each one of those items were purchased?

Credit life insurance Credit life insurance is used to pay off the outstanding balances of loans. The decreasing term protection is closely matched to the amount of the debt outstanding based on the loan repayment schedule.

______________ is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

Current Assumption Whole Life Current Assumption or Interest-Sensitive Whole Life is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

Which of the following situations is subject to the replacement rules? A Agent Jessica is making a presentation to employees covered by group life insurance B Agent Nathaniel is working with a client to upgrade her policy with a new policy from the same insurer C Agent Roman's client is in the last 2 years of a 10-year non-convertible, non-renewable term policy D Agent Steve is recommending that his client take a policy loan from an existing policy to buy a new one from a different insurer

D A replacement is any transaction in which a life insurance policy or an annuity is to be purchased, and it is known that an existing contract will be lapsed, forfeited, surrendered, or terminated; converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values; amended to reduce the benefit or the term of coverage; reissued with a reduced cash value; or used in a financed purchase (e.g., subjected to borrowing).

Under HIPAA, coverage may be nonrenewed for all of the following reasons, except: Nonpayment of premium B Participation requirements not fulfilled C Noncompliance with plan provisions D Frequency of claims

D All of the other choices are a basis for nonrenewal under HIPAA.

Which of the following is correct pertaining to underwriting a group health policy? A All participants are always eligible immediately B The average age of the group is not taken into consideration C Group insurance cannot be based upon community experience D Premiums are generally re-evaluated annually and may be based upon prior claims

D Typically, large group policies are reevaluated annually on the basis of claims. This is known as 'experience rated,' and the prior year's claims will be a significant factor in establishing the next year's premiums, and could result in non-renewal, if permitted. Smaller groups may be 'community rated,' and evaluated in comparison to similar-sized groups. In all cases, the average age of the group is a premium consideration.

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

Dale Dale is the living primary beneficiary when Alice dies. Alice has the right to name, change, and re-name beneficiaries at any time.

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except:

Declined Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.

Sean has a home with a mortgage. He needs life insurance to protect his family but also wants to leave them without a mortgage payment if he dies. Ideally which of the following riders should he acquire?

Decreasing Term Rider Decreasing Term Riders are ideally suited to cover the balance of an outstanding mortgage.

An initial amount the insured must meet per year before benefits are paid is known as the:

Deductible The deductible is an initial amount the insured must meet per year before benefits are paid. A copayment is a dollar amount paid per claim. The coinsurance is a percentage paid up to a stop loss once the deductible is met.

Which of the following limitations is not included in most dental expense insurance plans?

Deductibles for preventive care Dental expense plans typically waive deductibles for preventive care.

Which of the following plans is commonly known as a pension?

Defined benefit The company assumes the responsibility for making sure money will be available to fund a pension for retiring workers when a defined benefit plan is in place.

Abigail has a preexisting condition noted in her new A & H policy. If she submits a claim for this condition during the probationary period, what will the insurer do?

Deny the claim Since Abigail's claim occurred during the probationary period for preexisting conditions stated in her policy, the insurer would deny the claim.

An annuity policyowner has all of the following rights, except: A. Elect or cancel any riders B. Determine the mortality table to use C. Select a settlement option D. Name a beneficiary

Determine the mortality table to use The owner has all of the contractual rights in the policy, but choosing the mortality table is not one of them. The insurer does that.

Which of the following products replaces lost income when one is unable to work due to a condition for which therapeutic and rehabilitative care services is often necessary?

Disability Insurance Disability insurance covers replaces lost income.

Which of the following is covered by the Life and Health Insurance Guaranty Association?

E has submitted a claim for $500,000 of medical expenses when GHI Insurance becomes insolvent The Association will cover medical claims against an insolvent insurer of up to $500,000. Self-insurance and nonguaranteed benefits are not covered. Neither are claims for which the insolvent insurer would not have been liable (a claim under O's life insurance is not valid until O dies).

Which of the following is consistent with group health underwriting?

Each member of the group is covered regardless of his or her health history Group health insurance does not usually require individual underwriting, and the group is either accepted or rejected as a whole. If accepted, all of the group members are covered, regardless of their health history.

Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the:

Elimination Period The elimination period is the period of time between the onset of a disability, and the time the insured is eligible for benefits. It can be thought of as a deductible period for the policy.

All of the following are true regarding Tax-Sheltered Annuities (TSAs), except:

Employees can make direct contributions into their account Employees do not make direct payments to the retirement fund.

All of the following statements about Group Life Insurance are true, except:

Employees receive a tax deduction for employer paid premiums Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income.

When the life insurance policy's cash value equals the face amount of the policy and the proceeds are paid to the policyowner, this is known as the policy's _________.

Endowment When the life insurance policy's cash value equals the face amount, the policy is said to endow.

Buying life insurance so that the death benefit will be available for paying estate taxes due upon the death of the insured is known as:

Estate conservation Estate taxes are due nine months after the insured's death. Life insurance can provide the proceeds in which to pay the tax thereby conserving the estate for the heirs.

The _______ date is the date on which the insurance coverage ends.

Expiration The expiration date is when the coverage ends, the effective date is when it begins. Conversion and continuation allow it to remain in effect.

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted?

Extended Term Cash Surrender is a Nonforfeiture Option that terminates the policy. Extended Term continues the same coverage until the cash value from which the premium is paid is exhausted.

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option?

Extended term The automatic nonforfeiture option is extended term. Automatic premium loan is a policy provision which must be elected by the policyowner in advance of the policy lapsing.

The nonforfeiture option that provides protection equal to the policy's face amount for a specified number of years and days is:

Extended term With Extended Term, the Present cash value is used to buy a single premium term policy of the same face amount for as long a period as it will buy, expressed a combination of years and days. This option is sometimes referred to as the Automatic (or Default) Option if no other option has been selected. This option and the policy will expire prior to age 100.

Which of the following procedures might be covered by an FSA, but not an HRA?

Eyeglasses Eyeglasses are covered separately from major medical expenses.

Choose the passive unfair claim settlement practice.

Failing to promptly explain, based on applicable provisions or laws, a claim's denial Failing to act promptly upon receiving a claim, failing to implement reasonable standards for the prompt investigation of claims, and failing to affirm or deny coverage within a reasonable time after receiving the proof of loss are also passive unfair claim settlement practices.

If life insurance proceeds are paid to the deceased's estate they may be subject to ________ taxes.

Federal Estate While the death benefit is income tax free, the amount in the deceased's estate may be subject to Federal Estate taxes.

The __________ monitors the insurance industry and identifies issues and gaps in the state regulation of insurers.

Federal Insurance Office (FIO) It is the job of the FIO to monitor the insurance industry and identify issues and gaps in the state regulation of insurers.

If the beneficiary is concerned about a payout for a particular period of time, the _______ settlement option should be select

Fixed Period Fixed Period Payments are guaranteed for a specified period of time, such as 10 or 20 years, after which time payments will cease. The proceeds and interest are used to make the payments. The interest will increase the amount of each payment.

Which one of the following actions would be considered a misdemeanor?

For an agent to sign a blank contract It is a misdemeanor for an agent or limited representative to sign a blank contract.

If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due.

Grace If the insured dies during the grace period, the death benefit of the policy is payable to the beneficiary, minus any premiums or loans due.

The _________ period keeps a policy in force for a short time after the premium due date, allowing policyowners a little extra time to pay an overdue premium without a lapse in coverage.

Grace The grace period is designed to prevent unintentional policy lapse by allowing overdue premiums to be paid, typically within one month of the premium due date, while the coverage remains in effect.

All of the following are characteristics of Group Life Insurance, except:

Group is typically written utilizing Permanent Insurance Group Insurance is typically written on a Renewable Term basis. However, some insurers do make Permanent Insurance available.

All of the following must be included in a whole life policy, except:

Guaranteed dividend table Dividends represent a 'refund of unused premiums' when mutual insurers have a surplus (profit). Dividends are not guaranteed. Cash value accumulates as the policyowner pays premium over the years. The cash surrender value must be stated in the contract if the owner wishes to cancel the policy, and Extended Term is a Nonforfeiture option that must be offered.

Which of the following health plans will only cover losses by an approved provider:

HMO An HMO is designed to provide benefits for losses of an approved provider. While emergency room benefits may be covered at an out of network hospital, restrictions apply and this is an exception to the rule.

Ashley wanted to establish her company benefit plan so that it could cover her individual health insurance premiums and out-of-pocket expenses without group insurance or loss of unused benefits. After some research, she established a:

HRAs A self-employed entrepreneur may establish an HRA without also establishing an HDHP.

When Harold became no longer eligible for coverage under his employer's group benefit program, which of the following statements accurately reflects the conversion privilege defined by his group contract?

Harold had 31 days to convert his policy to an individual plan Group plans offer a 31-day conversion privilege. During that time, an employee can choose from among the available individual plants. COBRA refers to an extension of group benefits, not individual benefits. It is available under certain conditions, and is mandated by law, not the insurance contract.

All of the following are considered specialty physicians, except:

Health administrator Neurologist, Oncologist, and Urologist are all considered specialty physicians. A hospital administrator is not a doctor.

All of the following are characteristics of Term Insurance, except:

High premium outlay in the early years Term Insurance is characterized by a low initial premium outlay when the insured is young and increases as the insured's age advances.

Ed purchased a policy naming his children as per capita beneficiaries. Upon his death the proceeds are paid to:

His surviving children, who will share the proceeds equally Per capita means that surviving beneficiaries share equally in the death benefits. If Ed's policy has a $100,000 death benefit, and if upon his death, there are two surviving children, each gets $50,000.

_______________ is the process of selection, classification and rating, and determining if someone is insurable.

Home office underwriting Home office underwriting is the process of selection, classification and rating, and determining if someone is insurable.

In determining the proper amount of life insurance coverage for an insured, the ________ approach measures the projected future earnings and the value of the insured's services in the event of his or her premature death.

Human Life Value The Human Life Value Approach concerns itself with the replacement of future earnings and the value of the insured's services in the event of premature death.

Which of the following properly states a requirement of a group health policy?

If a group policy is replaced within 15 days of being terminated, the replacing insurer must cover everyone covered under the policy being replaced An association group must have at least 500 members. A creditor group must receive 100 new debtors yearly. The association group must also be organized for purposes other than getting insurance. An employer group must cover all employees, not just executives. If a group policy is terminated then replaced within 15 days, the new policy must cover everyone covered under the old policy.

Under the Fair Credit Reporting Act, which of the following statements is correct?

If an individual is denied coverage, they can request a copy of the report The FCRA is designed to protect the public and requires the reporting agency to investigate disputed information. The applicant has the right to request a copy of the report from the reporting agency. This act protects confidential information.

Under what circumstances should the producer obtain a statement of good health?

If no premium was paid at time of application and the policy is now being delivered The producer must also get a Statement of Good Health from the applicant/insured at the time of policy delivery that verifies that the insured has not suffered injury or illness, had any surgeries, or been admitted to a hospital since the application date.

In which of the following situations will the annuity's value be included in the deceased annuitant's estate?

If the annuitant dies during the annuity or payout phase with any remaining value If the annuitant dies during the payout phase of an annuity with any remaining values, those values will be included in the annuitant's estate. For all of the other answer choices, there would be zero remaining value and therefore nothing would be left to include in the estate.

Under the ACA, Insurer's provided group or individual health insurance coverage are prohibited from:

Imposing annual or lifetime dollar limits on essential services Plans may impose neither lifetime nor annual dollar limits on certain costs, though the frequency or number of procedures per year may be restricted.

If Alan owns a market value adjustment annuity (MVA) and interest rates have fallen since he has taken out the policy, what impact will this have on the policy values?

In effect, the policy values would have increased If a Market Value Adjustment Annuity is crediting interest at rates that are higher than those available in the open market, then upon surrender the insurer will add money to the policy's cash value, in effect sharing some of the gain it is realizing on its general account bond portfolio.

All of the following are true of the Coordination of Benefits Provision under a group plan, except:

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.

Own occupation is the:

Inability to perform all duties of one's own occupation Own Occupation requires the insured's inability to perform the main duties of one's own occupation.

The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ____________ clause.

Incontestability The incontestability clause limits the period of time during which the insurer has the right to contest a claim and void the contract upon proof of a material misstatement.

Which of the following types of term life insurance can be written as a rider to provide cost of living or return of premium benefits?

Increasing term Increasing term can be issued as a rider on a policy to provide cost of living or return of premium benefits.

All are types of service plans, except:

Indemnity Plans HMOs, PPOs, and POSs are all types of service plans (i.e., those in which the insurer contracts with service providers in advance to control costs). An indemnity plan not a service plan.

Debit life insurance is classified as which of the following?

Industrial Debit life insurance is classified as industrial life or home service life insurance.

Which of the following disclosures is prohibited under the Insurance Information and Privacy Protection Act?

Information about an individual in connection with an insurance transaction It is prohibited to disclose personal information about an individual in connection with an insurance transaction, but there are many exceptions.

The ability of an individual to meet an insurance company's underwriting requirements is known as:

Insurability

What is required to add a nonfamily member to a life insurance policy under a term rider?

Insurable interest Nonfamily riders can cover insured who are not family members such as business partners.

The burden of proof falls on the _________ to establish issued policies were in fact delivered to the applicant.

Insurer The insurer has the burden of proving that an issued policy was delivered.

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.

Ultimately, insurability of an applicant is determined by the

Insurer's home office underwriter Underwriting is the process of determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged. It is ultimately the home office underwriter's responsibility to determine if an individual meets the underwriting requirements of the insurer.

The ______________ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.

Insuring The insuring clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.

For which of the following is coverage not required to be provided or offered under Medical Expense Insurance by most insurers?

Intentionally self-inflicted wounds coverage Intentionally self-inflicted injuries are typically excluded by Medical Expense policies.

If a beneficiary has the choice and is interested in capital conservation, then which of the following settlement options should be chosen?

Interest Only With interest only, the death benefit proceeds may be left with the insurer while interest payments are paid at least annually or more frequently. The principal amount does not decrease. This method of providing income is known as capital conservation.

Which of the following beneficiary designations prevents a policyowner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent?

Irrevocable An irrevocable beneficiary has a vested interest in the policy and anything that could affect the values of the policy requires their consent.

Regarding COBRA, which of the following is not true?

It covers participants who have resigned for 36 months following the date of their resignation Termination of employment other than for gross misconduct allows former employees and their dependents a maximum of 18 months of continuation.

What is an impairment rider?

It excludes specific conditions that normally would cause the entire policy to be declined An impairment rider is a rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.

All of the following are TRUE about the Automatic Premium Loan (APL) Provision, except:

It is available on any type of life insurance policy The Automatic Premium Loan Provision is available on cash value policies only.

If an employer purchases a Key Person disability policy on an employee, when would the disability benefit be received income tax free?

It is by definition tax-free since the employer buys it for his or her own benefit Key employee insurance indemnifies the company for the risk of losing an employee. The company pays to receive a benefit, which is not considered a business expense.

If a copy of the application, which led to a life insurance policy being issued, is attached to the policy:

It is considered part of the entire contract If a copy of the application is attached to the policy it becomes part of the entire contract and information contained within or left out can be the basis upon which the insurance company can challenge a claim during the contestable period.

Which one of the following regarding the Life and Health Insurance Guaranty Association of North Carolina is false?

It is funded by the State through the collection of insurance premium taxes Member insurers each pay an assessment to fund the Life and Health Insurance Guaranty Association of North Carolina.

No assignment of a policy will be binding on the insurer, unless:

It is in writing and received at the insurer's home office No assignment of the policy will be binding on the insurer unless it is in writing and received at the insurer's home office. The insurer is not responsible for determining the validity of the assignment.

If the insurer cancels an individual health plan, what happens to the unearned premium?

It is refunded on a pro rata basis According to the Cancellation Provision (an Optional Uniform Provision), if the insurer cancels a policy, unearned premiums are refunded on a pro rata basis.

Which of the following statements is false regarding the Affordable Care Act?

It requires all employers to provide health insurance to their employees The ACA imposes a penalty on larger employers that don't provide health insurance to their employees, but it doesn't state a requirement that employers offer coverage.

The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except:

Job change The Guaranteed Purchase Option (Guaranteed Insurability, Future Increase) Rider guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc., the insured may purchase additional monthly benefits, if income justifies it, without proof of insurability. Rates are based on attained age.

K has a $10,000 traditional whole life policy with a loan outstanding of $1,000 and a 5% interest charge. At the end of the first year of the loan, K did not pay the loan interest. What is the result of K's inaction?

K's new loan balance is $1,050 The cash value is used as collateral against the loan. Interest will be charged annually, and if unpaid, will be added to the balance of the unpaid loan. $1,000 x 5% = $1,050.

What type of disability income insurance pays a benefit to a business to help in the search, cost, and hiring of a replacement when an employee becomes disabled and is unable to work for the company?

Key employee Key Employee Insurance pays a benefit to the business when a key employee becomes disabled by helping pay for a replacement, training a new employee, or loss of revenue due to the disabled employee's lack of work.

The Commissioner of Insurance may suspend, place on probation, revoke, or refuse to renew a license for all of the following reasons, except:

Knowingly accepting business from an appropriately licensed broker Knowingly accepting business from an unlicensed or inappropriately licensed broker would be a reason the Commissioner of Insurance may suspend, place on probation, revoke, or refuse to renew a license.

Individuals who do not enroll during the initial enrollment period are considered ___________ enrollees.

Late Individuals who do not enroll during the initial enrollment period are considered late enrollees and must provide evidence of insurability unless they wait until the next open enrollment period.

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.

The ___________ branch writes and passes state insurance laws, or statutes, to protect the insuring public.

Legislative The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public.

An adjuster is a person who investigates all of the following types of insurance claims, except:

Life An adjuster is a person who investigates health, property, or casualty insurance claims.

Which of the following disability income benefit periods will result in the highest premium?

Life The benefit period is the time period the insured is eligible to receive payments after the elimination period has been met. The benefit period may be written for a specified number of years (2, 5, or 10 years), to age 65, or for life. The longer the potential benefit period, the higher the premium.

Albert, as the owner of a life insurance policy insuring his son David, wants a Settlement Option that, if David were to die, would provide guaranteed payments to Albert and his wife Lois, until both of them die. Albert should choose:

Life Income Joint and Survivor Albert's desire would be Life Income Joint and Survivor, as he is concerned with payments continuing until both he and Lois have died.

A married couple is interested in a life insurance policy settlement option that will guarantee them both an income for as long as they live, an amount which reduces to 2/3 of that initial amount after one of them dies. What should they select?

Life Income Joint and Survivor The Life Income Joint and Survivor Settlement Option pays a periodic benefit until the last surviving recipient dies. However, depending upon which survivor option is chosen (e.g. joint-and-full, joint-and-2/3, joint-and-1/2), the benefit paid following the first death could be different.

Cranston wants a Settlement Option for his beneficiary that will guarantee the beneficiary an income as long as the beneficiary lives. Cranston should choose:

Life Income Only The option that will guarantee the beneficiary an income as long as she/he lives is Life Income Only.

A life insurance applicant wants a combination of savings and insurance protection with guarantees. If the applicant is willing to pay premiums only until the age of 65, at which time the policy is fully paid-up, which of the following should he/she purchase?

Limited Pay Whole Life-Age to age 65 A life policy payable to age 65 is a limited payment policy. If the insured does not die within the limited premium period, premiums cease because the policy is fully paid up (i.e. no more premiums are due). Death always results in the payment of the policy proceeds as long as the policy is in force. Cash values build as in any other Ordinary Whole Life policy.

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

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

Which is not considered one of the basic benefits required of all HMOs?

Long-term care Long-Term Care Coverage is not usually provided by HMO health insurance.

Which of the following is a common exclusion in a medical expense plan:

Loss due to Worker's Compensation Typical exclusions include preexisting conditions, intentionally self-inflicted injuries, war or any act of war, elective cosmetic surgery, medical expenses payable under Workers' Compensation, military service and overseas residence, coverage payable under a governmental plan, and losses due to the commission or attempt of a felony.

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

Managed Care Provisions They are included as Managed Care Provisions or sometimes referred to as Cost Containment Provisions.

The annuity product which features fixed interest rate guarantees, combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions, is known as:

Market Value Adjustment Market-Value Adjustment (Adjusted) Annuity is an annuity product that features fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions.

Howard talks to his agent Jane about buying a critical illness policy from the XYZ insurance company to cover his wife Deborah, and naming his daughter Mary as the beneficiary in case of death. Jane told him that she would need signatures from all of the following, except:

Mary Beneficiaries are not required to sign. The agent must sign on behalf of the company, and the insured, not being a minor, must give consent to being insured. The policy owner, who is also the applicant, must by definition sign the application.

All of the following are 'statutory claims' for benefits under most states' Workers' Compensation laws, except:

Maternity There are 4 'statutory claims' for benefits under most states' Workers' Compensation laws: Disability Income, Rehabilitation (job retraining), Medical Expenses, and Survivors Income (including a burial benefit).

A basic medical plan provides a specified dollar limit per medical procedure as stated in the policy. This specified amount is the:

Maximum benefit the policy will pay for that procedure Basic policies generally specify the benefit limit for covered expenses; either a flat dollar amount or a schedule of benefits. The benefit limit may be less than actual expenses incurred.

During the underwriting process, an underwriter was alerted that the applicant previously failed a medical exam by testing positive for marijuana while applying for a disability income policy 2 years ago. Which of the following sources provides this type of information to assist member companies when determining the eligibility of an individual risk?

Medical Information Bureau The MIB acts as an information exchange by alerting underwriters to previous claim information, adverse medical information, fraud, errors, omissions, or misrepresentations made on insurance applications. A consumer credit report provides financial information, the Attending Physician's Statement provides information specific to a current medical condition, and a nurse does not report information to other insurance companies.

The benefits received from which of the following personal policies are received tax-free?

Medical expense insurance, long-term care insurance, and disability income insurance Health insurance benefits from these policies are tax-free. The difference is in the treatment of the premiums.

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?

Monthly The insurer is required to provide the report monthly.

The mathematical probability table used by insurance companies to determine loss due to sickness or injury is the:

Morbidity Table The morbidity Table is used by Insurance companies to determine premiums for Accident and Health Insurance.

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? A

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

Provisions and clauses, unlike riders, are included in the contract for:

No additional change Provisions and clauses, unlike riders, are included in the contract for no additional charge.

An aunt and uncle purchase a life insurance policy on their niece, for whom they are the legal guardians. Both guardians perish in an accident some time later. Who receives the death benefit?

No claim is paid out The policy insures the life of the niece, and she has not died.

What taxes apply to the benefits under an individual Disability Income Policy on which the insured has paid the premiums?

No tax Benefits received from an individual Disability Income Policy are not subject to taxation because the premiums are not deductible.

A replacing insurer must assume liability for paying ongoing existing claims under which law?

No-Loss, No-Gain The process being described is mandatory risk transfer accomplished by a Hold-Harmless Agreement or No Loss-No Gain legislation.

Which one of the following types of policies are exempt from standard policy replacement rules?

Non-convertible, non-renewable term policies with less than 5 years of coverage remaining Non-convertible, non-renewable term policies with less than 5 years of coverage remaining are exempt from standard policy replacement rules.

Which of the following is a limited form of medical expense coverage added to a disability income policy?

Non-disabling injury rider A Non-Disabling Injury Rider does not pay disability income, but pays medical expenses related to an injury that does not result in total disability (emergency room, x-rays, durable medical equipment, etc.). It is a limited form of medical expense coverage added to a disability income policy.

Raymond owns an Accidental Death and Dismemberment Policy with a principal sum of $50,000, and a capital sum of $25,000. After owning the policy for several months, Raymond dies as the result of coronary artery disease. Lynn, his beneficiary, can expect to receive what amount of benefit from the policy?

None Lynn will receive no benefit from this policy since Raymond died of coronary artery disease, and not as the result of an accident.

A _______ Option protects the policyowner against total loss of benefits in the event of a lapsed policy.

Nonforfeiture Nonforfeiture Options are found in life insurance policies that generate a cash value, and protect the owner against total loss of that cash value, if the policy should lapse or is cancelled.

A (an)_________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes.

Nonmedical application A nonmedical application is used when the insured's age, medical history, or amount of coverage does not call for a medical exam.

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.

All of the following are duties of the producer when involved in a replacement transaction, except:

Notify each existing insurer within 5 business days and, upon request, furnish a copy of any proposals and comparison statements Notifying each existing insurer within 5 business days and, upon request, furnishing a copy of any proposals and comparison statements is a duty of the replacing insurer not the replacing producer.

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.

How long, typically, is the grace period on a $500,000 level term life insurance policy?

One month Typically, the grace period runs one month (30 or 31 days) from the premium due date.

Three years ago, Charles purchased a health policy from the QRS Company; he has purchased two additional contracts from the same insurer since. Each contract contains the Other Insurance With This Insurer Provision. What happens if Charles has a claim?

Only one policy will pay, the premiums for the other contracts will be returned Other Insurance With This Insurer (an Optional Uniform Provision) stipulates that if the insured has more than one policy of the same type with the same insurer, the insured may elect the policy to be used, and excess premiums for the excess coverage will be returned.

Dominic is a physician associated with a closed panel HMO. This means that Dominic can work with:

Only that HMO's subscribers Under closed panel HMOs, the physician can only see that HMO's subscribers.

Universal Life provides for an increasing death benefit only if the applicant chooses: Death Benefit Option B

Option B pays the face amount stated in the contract that is level term, plus any cash values accumulated over the years. This provides for an increasing death benefit.

Which of the following types of life insurance provides the largest portion of all coverage in force?

Ordinary Ordinary life insurance represents the largest portion of all life insurance in force in the United States.

Lucy uses her dividends to purchase single premium additional permanent benefits at her attained age. Which Dividend Option is Lucy exercising?

Paid-up Additions Only Paid-up Additions, Paid-up Option and One-Year Term are dividend options. Reduced Paid-Up is a nonforfeiture option. Lucy wanted additional permanent benefits so she should choose Paid-up Additions.

If an insured is not able to perform one or more of the regular duties of an occupation, and is receiving a disability income based upon this partial loss, it is considered a:

Partial Disability Partial Disability is an inability to perform one or more of the regular duties of an occupation.

Angela bought a policy from her friend, an insurance producer. After looking it over thoroughly, Angela only has one question. Will she receive dividends? She will if the policy is which of the following?

Participating Dividends are declared under participating policies, are paid as declared, and are not guaranteed. The dividends are a return of excess premiums paid.

If an insured dies during the policy's grace period, the insurer will:

Pay the death benefit, less the amount of premium due The policy is in force during the grace period and if death occurs during the grace period, the insurer pays the death benefit, minus any premiums or loans due.

What is the name of the rider that requires that the premium payor become totally and permanently disabled before it will pay a claim?

Payor Benefit (Waiver of Payor's Premium) A Payor Benefit (Waiver of Payor's Premium) is a rider most typically available on a juvenile insurance policy. The premium is waived if the premium payor becomes totally disabled or dies prior to the juvenile's reaching the age of majority.

When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit:

Pays income tax on any gains at his or her own income tax rate When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit must pay income tax on any gain from the policy at his or her own income tax rate.

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?

Physical Exam & Autopsy 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.

A procedure used by dental insurance carriers to determine the benefit to be paid is known as:

Precertification Precertification or Predetermination of Benefits, although not always mandatory, allows both the patient and the dentist to know what will be covered before treatment.

Which of the following best describes the general tax rules regarding employer sponsored group disability income insurance plans?

Premiums are deductible, the benefits are taxable While there are some exceptions to the general rule, premiums paid for employer sponsored group disability income insurance policies are deductible, the benefits are income taxable.

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

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

Which of the following is required to sign the application for insurance?

Producer and the applicant The producer and the applicant must sign the application. If the applicant and insured are different, then both must sign as well as the producer.

All of the following are requirements that insurers may place on a group plan to avoid adverse selection, except:

Proof of insurability from each employee Proof of insurability is not required for group plans. All of the other answers are underwriting measures employed to help reduce adverse selection under a group plan.

Which of the following is NOT true regarding a group insurance plan?

Proof of insurability is required to be eligible Proof of insurability is usually not required under a group plan.

Martin is age 30 when he applies for life insurance. The underwriter classifies him the same as a person age 40 and his policy is issued with a premium for a person age 40. What substandard rating has been applied to Martin's policy?

Rated-up Age As the name implies, Rated-up Age is a substandard rating assigned to the insured whose insurable characteristics appear to be the same as those for someone much older, resulting in a higher premium than anticipated.

Offering a premium discount not specifically included in the policy is called:

Rebating Rebating is offering any rebate, discount of premium, advantage, or valuable consideration not specified in the policy, but does not include a bonus, reduction in premium for mailing premium, and readjusting group rates based on claims experience.

A mandatory participation rate for noncontributory group plans is designed to:

Reduce adverse selection Requiring 100% of eligible employees to participate in a noncontributory employer group life insurance plan reduces the risk of adverse selection.

All of the following are Settlement Options, except:

Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option.

An insured, whose policy is in force, intentionally kills herself 7 months after purchasing the policy. How much will the insurer pay?

Refund of premiums paid only Suicide within 2 years of policy issue is a common exclusion in life insurance (the time can vary by state). Only premiums paid are refunded.

Company expenses to issue and administer a policy include all of the following, except:

Refund of unearned premium Refunding an unearned premium is not a company expense, as a refund means coverage was terminated and is therefore no longer a risk to the insurer.

Which of the following term policies costs the most, all other factors being equal? A Renewable and convertible B Renewable and non-convertible C Nonrenewable and non-convertible D Nonrenewable and convertible

Renewable and convertible The more features a policy has, the more it will cost the consumer.

The area of the dentistry profession dealing primarily with restoring the functional use of natural teeth, is called:

Restorative care Restorative care includes services to restore the functional use of natural teeth. Orthodontics deals with the alignment of teeth, periodontics is concerned with diseases of the gum tissues, and endodontics deals with the pulp of the teeth (such as root canal therapy).

If after meeting with a client, a producer returns to the agency office and notices that the application has unanswered questions, what is the best course of action for the producer to take?

Return the original application back to the applicant for completion prior to submission Any unanswered questions need to be answered before the policy is issued. The producer should return the original to the applicant to complete before submitting the application to the insurer for underwriting.

All of the following are duties of the Commissioner, except:

Selling contracts of insurance The Commissioner administers the state's insurance laws. This included issuing certificates of authority and licenses, various actions to stop violations of the law (including arresting the suspected violators), declaring disasters and arranging for orderly administration of claims during disasters. The Commissioner does not sell insurance.

An organization that pays benefits to the providers of health care, rather than to the insured, is known as what type of provider?

Service Service providers pay benefits to the providers of health care rather than to the insured. Service providers includes Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point-of-Service plans (POSs).

When a Medical Expense plan pays eligible expenses directly to the hospital, physician, or surgeon, it is paying on a:

Service basis When a Medical Expense plan makes payments directly to the provider of health care (hospital, physician, etc.) rather than to the insured or subscriber, it is paying on a service basis.

The annuity __________ option selected can provide a temporary or lifetime payment.

Settlement The annuity settlement option selected can provide a temporary or lifetime payment. If a lifetime benefit is selected, in most cases it is an irrevocable election.

Most often, life policies pay death claims in a single lump sum. The options that allow benefits to be paid other than lump sum are called _____________.

Settlement Options Settlement Options allow for life insurance proceeds to be distributed in a manner other than lump sum.

Mary decides to convert her Term Policy to permanent protection. Which of the following statements is true regarding the conversion?

She may convert without evidence of insurability The Conversion Option of a Term Policy allows conversion to a Permanent Policy without evidence of insurability, but it is not an option that lasts forever. Typically the policyowner must do so within the first 10 years or so, and not after a specified age, such as 60.

If a lump sum from a lawsuit, a lottery winning, or inheritance, is used to purchase a guaranteed lifetime income. It is referred to as a ___________.

Structured settlement Lump sum structured settlements come from lawsuits, lottery winnings, or an inheritance which can be used to purchase a structured settlement in the form of an annuity. The annuity can then be used to provide guaranteed lifetime income to the annuitant.

Which of the following types of coverage has a corridor deductible?

Supplemental major medical A Corridor Deductible is used between the Basic Plan (when the limits of coverage are exhausted) and the start of coverage under the Supplemental Major Medical policy. The Corridor Deductible is the specified expense the insured must personally incur before the supplemental benefits begin.

Which policy utilizes a Corridor Deductible after Basic Medical Expense Coverage benefits have been exhausted and before Major Medical benefits begin?

Supplementary Major Medical The question describes the characteristics of a Supplemental Major Medical Policy.

Which is true regarding the taxation of the cash value in a Universal Life Policy prior to withdrawal?

Tax deferred All life insurance cash value accumulations are tax deferred. The primary benefit of Universal Life is the potential of a higher interest crediting rate than the fixed rate in whole life policies.

A young couple just starting out on a limited budget, but having a large need for life insurance coverage, most likely would be best suited for ________ life insurance:

Term Term is for the price conscious. It provides the largest amount of coverage for the lowest premium initially.

Which of the following statements regarding North Carolina insurance law is FALSE?

The Commissioner is appointed by the Governor The Commissioner of Insurance is elected by North Carolina residents for a 4-year term.

Which of the following two documents always constitutes part of the entire contract?

The application and policy The entire contract is comprised of the policy itself, the application and any riders attached. The Agent's Report and APS are not included.

Capital liquidation assumes:

The balance of the account will reduce over a period of time once payout begins Capital liquidation assumes both principal (capital) and interest are liquidated over the relevant time period to provide the required income for the dependents. This will cause the balance to decrease and benefits are paid.

Which statement is false concerning Credit Disability Insurance?

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.

John is the insured. His wife Mary is the primary beneficiary. Their three children are the contingent beneficiaries. John and Mary are killed in a common accident. The proceeds of John's policy would be paid to:

The children Contingent beneficiaries receive the policy proceeds in the absence of the primary beneficiary. The common disaster clause assumes the primary beneficiary died before the insured if both are killed in the same accident.

A life insurance applicant pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect?

The date of the application or upon the completion of any required medical exam (whichever is later) In the case of a Conditional Receipt, the coverage is effective as of the date of the application or upon the completion of any required medical exam, unless it is declined within a stipulated period.

A premium is paid at the time of application and a conditional receipt is issued. If the policy is issued as applied for, coverage becomes effective:

The date of the conditional receipt The conditional receipt is issued upon the premium being paid at the time of application. If the policy is issued as applied for, coverage is effective as of the date of the conditional receipt.

When does a change in beneficiary take effect?

The date the policyowner signs the request to change the beneficiary 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.

Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except:

The death benefit is not guaranteed Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except:

A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal?

The death benefit or cash accumulation will be reduced by the partial withdrawal A partial withdrawal also known as a partial surrender will cause the policy to have either the face amount or cash accumulation reduced by the amount of the withdrawal.

Events that will cause termination of continuing health coverage under COBRA include all of the following, except:

The employee fails to convert to an individual health insurance plan on the day it is offered Events that will cause termination of continuing health coverage by COBRA include failure to pay premiums on time, cessation of group health coverage by the employer, and employee eligibility for Medicare benefits. Employees have a period of time in which to convert coverage.

Variable Whole Life and Variable Universal Life are similar, except for:

The guaranteed death benefit Since all premiums are credited to a separate account, there is no guaranteed minimum death benefit in a Variable Universal Life policy.

If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit?

The insured's estate When no named beneficiaries are alive at the time the insured dies, the estate of the insured receives the death benefit

If an insured has a policy with 80/20 coinsurance, how is payment split?

The insurer pays 80% and the insured pays 20% Coinsurance is a cost sharing feature and is stated as a percentage, such as 80/20, of sharing between the insurer and the insured; The insurer pays the larger percentage.

Once a policy is classified as a MEC, it will maintain that classification for ____________.

The life of the policy Once a policy is classified as a MEC, it will maintain that classification for the life of the policy.

A Credit Life Policy will be cancelled if:

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

Which of the following would be considered a presumptive disability?

The loss of the ability to speak The only response that reflects complete loss of a function is the ability to speak. 'The loss of a leg below the knee does not represent loss of two limbs, and loss of sight in an eye or hearing in an ear does not reflect loss of all sight or hearing.

Which statement concerning individual A&H policy renewal provisions is most correct from the perspective of the insured?

The more favorable the renewal provision to the insured, the higher the cost The more favorable a renewal provision is to the insured, the higher the premium will be. A Noncancellable policy will cost the most because its premium may not be changed in the future.

Equity Indexed, Variable, and Variable Universal all have which of the following characteristics in common?

The overall policy performance has something to do with the stock market in general All of these policies do not have a guaranteed death benefit, and the Equity Indexed life policy does not require a securities registration. However, all of them have a death benefit that is somehow tied to the stock market.

Jerry has selected a Life Income 10 year Period Certain. What happens to the income payments if he dies in year 4 after starting to receive income benefit payments?

The payments continue for the balance of the Period Certain to a named beneficiary Life Income 10 year Period Certain pays out for the longer of 10 years or the lifetime of the income benefit payment recipient. If they die prior to the end of the tenth year then their named beneficiary receives the balance of the years income benefit payments.

If a child is covered under more than one group health insurance plan how is it determined which carrier is primary?

The plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage In the event children are covered by more than one group plan, the 'birthday rule' which says the plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage.

Which of the following would be a violation of a health plan policyholder's right to choose the provider of service?

The plan denies a claim because the services were performed by a registered nurse A plan man not deny a claim if services were performed by a registered nurse or physician's assistant. A plan may require the use of network providers to obtain benefits, or to obtain a higher level of benefits. It may also require certification of a disability claim by a licensed medical professional, and it may not deny or decrease benefits for treatment provided by a duly licensed chiropractor.

Regarding group health insurance, which is true? A The premium payment is the responsibility of each individual B Each plan participant receives a policy C Individual underwriting is utilized D The plan sponsor is issued the Master Policy

The plan sponsor is issued the Master Policy In group health insurance, only the plan sponsor receives a copy of the Master Policy. Covered individuals receive a Certificate of Insurance. The plan sponsor is responsible for paying the premiums.

How is Variable Whole Life different from Variable Universal Life?

The policy has a guaranteed minimum face amount Generally speaking, Variable Whole Life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a Variable Universal Life policy has no guaranteed death benefit.

If a client owns an equity-indexed product, what happens if the market falls in value by a large amount?

The policy's values can never be impaired due to negative index performance When the market declines, the policy is credited with the minimum guaranteed interest rate or zero interest. The policy's values can never be impaired due to negative index performance.

The life insurance policy cost basis consists of:

The premiums paid in The premiums paid establish a cost basis in the policy.

What information must appear on the policy summary provided to a life insurance client?

The producer's name and address The producer's name and address along with the address of the insurance company must appear on the policy summary.

Which of the following is a major risk to an employee covered under an employer's group life insurance plan?

The sponsor can elect to discontinue the plan If employees are relying solely on an employer's group life insurance coverage for their protection needs, they need to be made aware that the plan sponsor can discontinue the plan.

What happens to a spouse or child rider just prior to it expiring?

The spouse or child has a conversion option Both spouse and child riders will also provide a conversion provision permitting the spouse or child to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy (or upon reaching age of majority for the child covered under a child rider).

The HIV Consent Form specifies which types of individuals may receive __________.

The test results The HIV Consent Form specifically addresses who may receive test results, most often it is the insured's doctor.

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.

If an applicant is a minor, who signs the application?

Their guardian If the applicant is a minor, a guardian must sign the application.

Which is correct concerning Blue Cross and Blue Shield Plans?

They are service plans with benefits paid directly to the hospital or physician Originally established as a form of indemnity plans, Blue Cross/Blue Shield Plans were different because they paid benefits directly to service providers instead of insureds, and became known as 'service organizations.' Most BC/BS plans available today are either HMOs or PPOs, but the original style coinsurance plans, which are much more costly, are still available.

How do PPOs save consumers money?

They charge patients utilizing providers contracted with the PPO less than those who are not contracted with the PPO The organizers and the providers agree upon medical service charges that are generally less than the providers would charge patients not associated with the PPO.

Why are dividends not taxable as income when paid out to a participating policyholder?

They represent a return of a portion of the premium paid A participating insurance company's dividend consists of the amount of premium that is returned to the policyowner if the insurance company achieves lower mortality and expense costs than expected.

Which of the following is true of traditional commercial insurers?

They traditionally market reimbursement-type contracts that pay directly to the insured

What is one of the main reasons for a Universal Life policy to have a surrender charge?

This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy Surrender charges provide a means for the insurer to recapture their upfront expenses involved in issuing the policy.

All of these groups are considered to be exempt from the Affordable Care Act's requirement to purchase coverage, except:

Those who must pay less than 9.5% of their income for health insurance Those that must pay more than 9.5%, even after subsidies, are exempt.

How is the funding for Social Security provided?

Through FICA taxes that are paid by both employers and employees Both the employer and employee fund Social Security through paying FICA taxes. Self-employed persons pay the entire amount.

What is the main purpose that IRC section 1035 was enacted?

To allow for continued tax-deferral on any gains in an existing policy when a policyowner moves into a new one The main purpose of section 1035 is to allow for the continuation of tax-deferral from an old policy into a new policy.

What is the primary purpose of the free look period?

To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for The free look allows the policyowner a specified number of days following receipt of the policy to look it over. If dissatisfied for any reason, the owner has the right to return it for a full refund of any premiums paid.

The contract type in which only one party is legally bound to its contractual obligations after a premium is paid is a(n)_______ contract.

Unilateral In insurance, only the insurer is legally bound once the premium is paid by the insured, which is why it is a unilateral contract

One characteristic of life insurance is that the insurer is obligated to pay a claim in the event of the death of the insured, however, the insured is not contractually obligated to do anything other than keep the policy in force. This is a:

Unilateral Contract In a Unilateral Contract, only one party is legally bound to contractual obligations after the premium is paid.

A Variable Universal Life (VUL) is a combination of:

Universal and Variable Life A Variable Universal Life (VUL) is a combination of Universal and Variable Life Policies.

In order to achieve its goals, the Affordable Care Act instituted a variety of measures, including all of the following, except:

Universal use of Consumer Driven Health Plans (CDHPs) CDHPs are still allowed, but to some extent de-emphasized.

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?

Unless specified otherwise, the cash values buy extended term 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.

How would a term policy normally be used to pay off a mortgage upon death?

Using the death proceeds after the insured has died Term can be used as mortgage insurance which typically provides a decreasing term benefit.

Benefit payments made on a ____________ basis are not scheduled, but are based on the average fee charged by all doctors in a given geographical area.

Usual, customary, and reasonable (UCR) Usual, Customary, Reasonable (UCR) is not scheduled, but is based on the average fee charged by all doctors in a given geographical area. Many insurers pay the (UCR) amount and the balance of any overcharges or costs of any disallowed services are the insured's responsibility.

When payment under a Medical Expense policy is based on the average fee charged by all doctors in a given geographical area, and the balance of any overcharges or costs of any disallowed services are the insured's responsibility, the payment is known as:

Usual, customary, reasonable (UCR) payment

Which of the statements about a utilization review is FALSE?

Utilization reviews must be overseen by the accounting department An insurer is required to have qualified medical professionals oversee its utilization reviews. A reviewer may request only that information that is necessary to certify health care services. An insurer must notify an insured and his/her provider of a claim denial, stating the reason for denial, within 5 business days, and must disclose utilization review procedures to insureds.

When two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive means that the contract was entered into upon the basis of:

Utmost good faith This is one of the characteristics of an insurance contract and is the definition of utmost good faith.

Which of the following annuities uses unit values rather than dollars to account for its value?

Variable Deposits buy accumulation units, distributions are from liquidation of annuity units. Units are like shares of a mutual fund.

Z is terminally ill and is looking to find someone who will buy Z's life insurance policy to get funds to pay for care. Z is a:

Viator The viator is the sick person who needs funds. The broker helps the viator find a provider who will enter into a viatical settlement contract, which will provide the funds.

Producer Andy is sent a newly issued policy by his insurer. Andy should now:

Visit the insured in person to deliver the policy Producers must make sure that policies are delivered to insureds, preferably in person.

If an insured is concerned about being unable to pay the premiums on his or her whole life policy in the event of a total disability, which of the following riders should be added to the policy?

Waiver of Premium The Waiver of Premium Rider would waive premiums for a disabled insured. If the insured also wanted to replace income due to disability, then he or she would purchase the Waiver of Premium/Disability Income Rider.

Which is true regarding the advertising of Accident and Sickness Insurance?

When insurers advertise that a group endorses a certain health product, the public must be made aware of any control the insurer may have regarding the group Both agent and insurer are accountable. Such words as all, complete, or comprehensive are prohibited. Sales talks and testimonials are considered advertising and are regulated activities.

All of the following will determine whether or not an IRA contribution is deductible, except:

Whether the IRA owner is over a specified age An individual's age does not determine whether or not a contribution is deductible. Age may determine whether a contribution can be made, but not if it is deductible. All other choices determine if the contribution is deductible or nondeductible.

All of the following are considered specialized policies, except:

Whole Life Whole Life is considered an ordinary, not a specialized, policy.

An insured forgets to pay his insurance premium. Instead of the policy lapsing, the premium is paid by the company. This would suggest that a __________ policy was purchased.

Whole life

Which of the following is considered 'twisting'?

Willfully misrepresenting or incompletely comparing the terms of an insurance policy to induce the policyholder to replace it Twisting is giving prospects misleading information or comparisons about an insurance policy in order to sell them a replacement policy. The other choices describe prohibited practices, but they are not called 'twisting.'

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 a 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.

Increases in insurance protection to keep a Current Assumption policy from endowing is provided:

Without evidence of insurability It is possible that the cash value will increase too quickly and could cause the policy to mature prior to age 100. To prevent this from happening, the insurer will add a corridor of insurance protection without requiring evidence of insurability to keep the policy from endowing.

Group Disability Income is usually offered only on a nonoccupational basis, which will not cover work-related disabilities, because:

Work related injuries are normally covered under Workers' Compensation Most group disability is written to be nonoccupational, because Workers' Compensation was developed and designed to cover work- and job-related accidents and disease.

Annually renewable term life insurance's premiums increase every:

Year Annually renewable term life insurance premiums increase every year to reflect the increase in risk to the company.

Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses the Life Income with Refund Payment Option when he annuitizes the policy. After receiving $1,000 each month for 80 months, Harry suddenly dies. How much will his beneficiary, his wife Lucille, receive?

Zero A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected.

The net amount at risk to the insurance company at the endowment date is:

Zero Net amount at risk is the difference between the face amount and cash surrender value. Since the policy endows, there is no spread between them. Therefore, there is no net amount at risk to the insurer.