Comprehensive Exam Questions W/ Answers

W has a health insurance policy with an 80/20 coinsurance, a $1,000 deductible. If in January W goes into the hospital for an overnight stay, the bill coming to $2,000, what will W pay?

$1200

Victoria, age 62, calculated last year's gross income to be $60,000. When she totaled up the cost of individual Medical and Long-term Care insurance, as well as her various out-of-pocket medical costs, she discovered the total was $7,500, which meant she could deduct _______ from her taxable income. (Hint: 10%)

$1500

Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount?

$3500

XYZ Corporation has 59 employees. The company decides to purchase a group life policy and will pay the total premium. What percentage of employees must participate under this arrangement?

100%

After a life insurance policy has been in force for more than _____ years the policy is considered incontestable.

2

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

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

In a viatical settlement, a third party purchases a policy from a terminally ill insured for approximately _____% to _____% of the policy's face amount.

60/80

When a life insurance policy does not pass the ______-pay test, it becomes classified as a MEC.

7

Jacob owns a policy that pays a death benefit only if he dies within the 20-year policy period. If Jacob dies anytime that the policy is in force, his beneficiary will receive $100,000. The premium that Jacob pays for this policy will be the same throughout the 20-year policy period. Jacob owns:

A Level Term policy

In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what else must the agent obtain to make the delivery complete?

A statement of good health

Which Term Life insurance policy would have the highest initial premium, all else being equal? A. 20-year Term B. 1-year Term C. 10-year Term D. 5-year Term

A. 20-year term

To be included in an employer-sponsored group plan, an employee must be employed full time by any of the following, except: A. A silent partner B. The immediate group C. A subsidiary of the firm D. An active partner

A. A silent partner

Which of the following is truly a Key Person (Key Employee)? A. An executive sales manager B. A rank-and-file employee C. The company's truck driver D. The company bookkeeper

A. An executive sales manager

All of the following are prohibited provisions in a long-term care policy, except: A. Cancelling a policy due to nonpayment of premium B. Limits or denies benefits to a policyholder who is diagnosed with any destructive brain tissue disease that will result in loss of brain function C. Cancels, nonrenews, or terminates the policy on the grounds of age or deterioration of the mental or physical health of the insured D. Provides coverage for only skilled nursing care instead of lower levels of care

A. Cancelling a policy due to nonpayment of premium

For which of the following is coverage not required to be provided or offered under Medical Expense Insurance by most insurers? A. Intentionally self-inflicted wounds coverage B. Alcohol abuse coverage C. Speech and hearing disorders coverage D. Mental illness coverage

A. Intentionally self-inflicted wounds coverage

Which of the following statements regarding coverage for emergency care under the Affordable Care Act is correct? A. Plans must do so regardless of network affiliation without requiring prior approval B. Plans do not provide out of network care C. Benefits are paid at the out of network rate D. Prior authorization is needed

A. Plans must do so regardless of network affiliation without requiring prior approval

HMOs may provide one or more of the following supplemental benefits, except: A. Private hospital rooms B. Prescription drugs C. Physical therapy D. Psychological services

A. Private hospital rooms

All of the following are requirements that insurers may place on a group plan to avoid adverse selection, except: A. Proof of insurability from each employee B. Coverage only for full-time employees C. A purpose other than obtaining insurance D. A minimum level of employee participation

A. Proof of insurability from each employee

Which of the following is NOT true about social insurances? A. Social insurance provides equal benefits to all citizens that contribute B. The government, as an insurance provider, has a clear and strong monopoly C. Benefits are prescribed by law; any changes to the benefit structure and provisions are made by changes in the law D. Participation is mandatory and automatic for all eligible citizens

A. Social insurance provides equal benefits to all citizens that contribute

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

A. The plan sponsor is issued the Master Policy

All of the following are true of a substandard risk, except: A. The premium would be discounted B. The insured may be rated as older than their actual age C. The insured may have a flat additional premium added to their base premium D. The coverage could be reduced for a period of time

A. The premium would be discounted

Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage.

Actual loss experience of the group

When can a policyowner make a change in the policy's coverage or other benefits if an irrevocable beneficiary has been named?

After the irrevocable beneficiary dies or With written consent from the irrevocable beneficiary

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

After-tax

Confidential information shared by the producer to the insurer and does not become part of the policy is the __________.

Agent's Report

Amounts paid out under the accelerated benefits rider:

Are deducted from the policy's death benefit

Which of the following would be considered a good result from an underwriter's action when an individual Life Insurance Policy is issued as applied for? A. Issued rated-up B. Issued standard C. Issued with exclusions or limitations D. Application is rejected

B. Issued standard

Which statement is false? A. When an insured owes back premiums but is still within the grace period, the Unpaid Premium Provision is operative for any claims submitted B. Mandatory Second Surgical Opinion is when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered C. A nonoccupational policy pays for injury or illness off the job D. Changes in an Accident and Health contract may be completed only with the written consent of the insurer

B. Mandatory Second Surgical Opinion is when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered

All of the following are true regarding disclosures at the point of sale and issues relating to AIDS, except: A. Insurers must avoid unfair discrimination between those in the same underwriting class for the risks of AIDS B. Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV C. Insurance companies may refuse to issue a policy to individuals based on positive HIV test results D. Insurers must require the maintenance of strict confidentiality of personal information obtained through testing

B. Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV

Which of the following is a limited form of medical expense coverage added to a disability income policy? A. Social insurance supplement rider B. Non-disabling injury rider C. Additional monthly benefit rider D. Hospital confinement rider

B. Non-disabling injury rider

Which of the following is not provided under Part A of Medicare? A. Home Health Care B. Outpatient Medical Treatment C. Post-hospital Skilled Nursing Facility Care D. Hospice Care

B. Outpatient Medical Treatment

Which of the following statements is correct regarding a Waiver of Premium Rider on a participating whole life policy? A. Cash values do not grow B. The premiums are waived until either the insured recovers from the disability, the policy achieves paid-up status, or the insured dies C. The death benefit is reduced by the amount of all premiums waived D. Dividends cease when the rider activates

B. The premiums are waived until either the insured recovers from the disability, the policy achieves paid-up status, or the insured dies

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

Bill

Which of the following would not be a situation in which the annuity premium dollars would qualify for an income tax deduction for the premium payor? A. A school teacher purchasing a periodic premium tax sheltered annuity (TSA) through payroll deduction B. An employee purchasing a flexible premium deferred variable annuity within a traditional 401(k) plan through payroll deduction C. A married couple purchasing a flexible premium non-qualified deferred annuity to supplement their future retirement income D. An employed individual purchasing a traditional IRA flexible premium deferred annuity each year from discretionary dollars

C. A married couple purchasing a flexible premium non-qualified deferred annuity to supplement their future retirement income

All of the following statements regarding a group Accidental Death and Dismemberment policy are incorrect, except: A. Accidental Death and Dismemberment Insurance is not available on a group basis, only on an individual basis B. The premiums paid by the employer are considered part of the employee's income C. Any benefits received are not taxable to the recipient D. The premiums paid by the employer are not deductible as a business expense to the employer

C. Any benefits received are not taxable to the recipient

Social Security uses which of the following definitions to determine total disability? A. Loss of income B. Own occupation C. Any substantial gainful activity D. Any occupation

C. Any substantial gainful activity

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

C. Determine the mortality table to use

A life insurance policy lists the names of 3 people as primary beneficiaries. Other than listing the person's names, which of the following is the most important next step? A. Specify the occupation of each beneficiary B. Include the beneficiary's middle name or initial C. Indicate what percentage of the death benefit each is entitled to receive D. Make certain the names are listed in alphabetical order

C. Indicate what percentage of the death benefit each is entitled to receive

All of the following are insurance or financial rating services, except: A. A.M. Best B. Moody's C. Insurance rating bureau (IRB) D. Standard and Poor's

C. Insurance rating bureau (IRB)

Basic expense policies typically cover all of the following, except: A. Miscellaneous expenses B. Hospital expenses C. Routine vision (optometry) or dental care expenses D. Medical expenses

C. Routine vision (optometry) or dental care expenses

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

C. The employee must only be unable to engage in his/her own occupation to be considered disabled

An insured with a participating life insurance policy receives an annual dividend check in the mail. He must have selected which Dividend Option:

Cash

Which of the following permanent policies could actually end up acting like term life insurance? A. Ordinary Straight Whole Life B. Single Premium Whole Life C. Indeterminate Premium D. Adjustable Life

D. Adjustable Life

Which of the following provisions commence at the time of the delivery of the policy to the insured? A. Misstatement of Age or Gender B. Suicide Clause C. Insuring Clause D. Free Look Period

D. Free Look Period

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? A. Harold had 31 days in order to request COBRA coverage B. Harold was covered for an additional 30 days under the conversion provision C. Harold was covered by his group plan until he found individual coverage D. Harold had 31 days to convert his policy to an individual plan

D. Harold had 31 days to convert his policy to an individual plan

Amy owns her own individual Medical Expense Policy. Which of the following is true about the taxation of her premiums and medical expenses? A. In all cases, the premiums for Medical Expense policies are deductible, but expenses are not B. Only unreimbursed medical expenses, excluding premiums, are deductible C. Benefits she receives from her policy are taxable to the extent they exceed her premiums D. If she itemizes deductions and her medical expenses, including premiums, exceed 10% of her adjusted gross income, the portion exceeding that amount may be deducted

D. If she itemizes deductions and her medical expenses, including premiums, exceed 10% of her adjusted gross income, the portion exceeding that amount may be deducted

Which of the following is the proper sequence of beneficiaries? A. Primary, estate, tertiary B. Estate, contingent, primary C. Primary, tertiary, contingent D. Primary, contingent, tertiary

D. Primary, contingent, tertiary

If a disability insurance applicant is insurable, but not at a standard rate, all of the following are actions an underwriter can take, except: A. Charge a higher premium B. Reduce the benefit period and/or amount C. Increase the elimination period D. Reduce the dividends the policy is eligible for

D. Reduce the dividends the policy is eligible for

Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: A. She has 31 days of eligibility to convert to the private plan without having to prove insurability B. If she waits until the conversion period has closed, she will lose the ability to convert her coverage C. The premium will be higher than the group premium D. She will be converting her group term benefit to an individual term benefit

D. She will be converting her group term benefit to an individual term benefit

All of the following are characteristics of Credit Life Insurance, except: A. The amount of the insurance benefit must not exceed the total amount of indebtedness B. This insurance is normally Decreasing Term and the amount of insurance reduces as the obligation reduces C. The insurance is either a form of individual coverage on the life of a debtor, or a form of group insurance issued to a creditor providing coverage for debtors D. The debtor generally is both policyowner and beneficiary

D. The debtor generally is both policyowner and beneficiary

All of the following are examples of an absolute assignment, except: A. A donor transfers ownership of a paid-up policy to charitable organization as a donation B. A court orders the existing policyowner to change it to their ex-spouse C. A business permits the change of ownership of a company owned policy over to a retiring executive D. Using a Life Insurance policy as collateral for a loan

D. Using a Life Insurance policy as collateral for a loan

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

D. Waiver of Premium

The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy.

Decreases

The surrender charge schedule for a variable universal life policy generally ________ over time.

Decreases

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

Deductible

The owner of an annuity may do all of the following, except: A. Name and change the beneficiary B. Determine the contract's interest credit C. Select or change the settlement option prior to death D. Change the annuity date

Determine the contract's interest credit

The State's __________ branch enforces the existing statutes that have been put in place.

Executive

In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer.

Existing

The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party.

FCRA

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits.

Fraternal Benefit Societies

The only time a policy loan is taxable is in which of the following situations? A. Having the policy lapse with a loan outstanding in excess of cost basis B. Borrowing more than the premiums paid in C. Borrowing the entire cash value D. Borrowing less than the cash value

Having the policy lapse with a loan outstanding in excess of cost basis

In a SIMPLE plan, employer contributions vest: (When and percentage)

Immediately at 100%

Proceeds from a buy-sell agreement are received ___________.

Income tax free

All are types of managed care plans, except:

Indemnity Plans

Which one of the following regarding insurable interest is false? A. At the time of the application, the insured must consent to the contract except for a spouse or minor child B. Insurable interest includes a relationship by blood, marriage, economic (financial) interest, and a business relationship C. Insurable interest is determined at the time of claim D. A contract owned by someone other than the insured is considered a third party ownership

Insurable interest is determined at the time of claim

The Payment Option that pays an income to two annuitants while both are living, and stops upon the death of the first annuitant, is which of the following? A. Life Income Joint and Survivorship with Period Certain B. Joint Life C. Life Income Joint and Survivorship D. Life Income with Refund

Joint Life

What is the name of a single policy covering two or more lives that pays benefits upon the death of the first insured?

Joint life

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? A. An Ordinary Straight Whole Life policy with a Level Term rider to age 65 B. Adjustable Life with a large death benefit and minimal premiums C. Limited Pay Whole Life-Age to age 65 D. Indeterminate Premium Whole Life

Limited Pay Whole Life-Age to age 65

Any policy designed to provide coverage for not less than 12 consecutive months for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital is the definition of:

Long-Term Care

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

Which of the following is the most expensive premium mode overall?

Monthly

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

Morbidity table

Variable Universal Life should only be sold to those clients who are:

More investment savvy

If the annuitant, now deceased, was receiving income from a pure life or straight life annuity, how much goes into the annuitant's estate for valuation?

Nothing

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 _________ tax rates.

Ordinary income

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

Overinsurance

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

Overinsurance

Monte has a health care plan whereby if he stays within the network, benefits are paid as an HMO. However, if he goes outside the network, benefits are paid from the medical expense portion of the plan subject to high deductibles and copayments. Monte is covered by a:

Point-of-Service Plan

Beth owns a 20-Pay Life participating policy. She has decided that the dividends should be applied toward future premiums. Which Dividend Option did she choose?

Premium Reduction

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

The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers.

Residual

Annuities are primarily designed to accumulate funds for a(n) _________ fund.

Retirement Fund

Blue Cross and Blue Shield have traditionally offered benefits under the form of:

Service contracts

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

Service provider

Medicare is available to individuals who have been receiving ______________ benefits for 24 months.

Social security disability

Which of the following listed policies has the least likelihood of keeping pace with inflation? A. Straight Whole Life B. Variable Whole Life C. Variable Universal Life D. Whole Life with an increasing term rider

Straight Whole Life

Which of the following would have the highest first-year annual premium for a 30-year-old, all other factors being equal? A. Term to age 70 B. Term to age 60 C. Term to age 40 D. Term to age 50

Term to age 70

Failure to repay a loan or loan interest will void a life insurance policy if:

The total amount due equals or exceeds the policy's cash values

Which of the following statements about life insurance buyer's guides and policy summaries is NOT true? A. They must show all estimated values B. They may be provided within 60 days of a direct solicitation C. They must be provided at the time of a direct solicitation D. They must show the generic name of the policy

They may be provided within 60 days of a direct solicitation

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

What is the primary purpose of an annuity?

To protect against outliving one's income

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

Expense loading ___________ from company to company.

Varies

Which of the following policies could be expected to have the lowest premium? A. 10-pay life B. Whole life C. Endowment to age 65 D. Single pay life

Whole life

Benefits received from an individual Long-Term Care Policy are not subject to ______, regardless of the deductibility of the premiums paid for the plan.

income tax

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

A _________ policy is one that is written on the life of a minor.

juvenile

The insurance industry is primarily regulated at the _________ level.

state