🔥 FINAL EXAM ARIZONA LIFE AND HEALTH 🔥
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value?
$16,000 was received tax-free and $4,000 as ordinary income
An insured has a $25,000 whole life insurance policy with $6,000 cash value available. Under the extended term nonforfeiture option, what is the amount of insurance available to the insured?
$25,000
An insured files for an accident and health insurance policy claim eight days after the premium due date. The benefit payable is $500 and the overdue premium is $200. Assuming that the policy pays on a first-dollar basis and contains the unpaid premium provision, how much will the insurer pay?
$300
Who normally pays the premiums for group credit life insurance?
. The borrower typically pays the premiums on any credit life insurance policy.
If an insured legally adopts a baby within ________ month(s) of birth, the maternity coverage for the child's birth is covered.
12
After an annuity has been in force for ______ year(s), it becomes incontestable.
2 years
Mary has a Health Savings Account (HSA). Distributions that she has made for anything other than qualified medical expenses are considered taxable and subject to a penalty of
20%
An insurer must keep advertising materials and records for at least how many years?
3 years
How long must a producer maintain customer records for an insurance transaction?
3 years
A licensee whose name or address changes must notify the Department of Insurance within ______ days.
30
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
31 days
The Telemarketing Sales Rule states that is the LATEST time of day that telemarketing calls may be received is
9PM
Emergency health care coverage for Medicare enrollees traveling abroad is
A Medicare Supplement additional benefit
Which of the following can be defined as "the potential for loss"?
A risk can be described as "the potential for loss"
What do Limited accident and health policies normally cover?
A specific illness or event Limited accident and health insurance policies cover ONLY a specified illness or event.
A group health certificate for coverage issued in Arizona MUST contain a(n)
A summary of policy features and benefits
An individual is seeking coverage for nursing home (custodial) care that does NOT require any previous period of hospitalization. Which program offers these specifications?
AHCCCS
Mike recently lost sight in both eyes. He has a policy that pays a lump sum benefit for this injury. What type of insurance does Mike have?
Accidental Death and Dismemberment
Disability income insurance normally excludes coverage for disabilities that arise from
Active military duty
Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity?
Ages 71 and 73
In what situation could an insurance policy's coverage be modified?
Applicant is a substandard risk
Insurance is NOT characterized as which of the following?
As the number of insureds increase the number of losses decrease
If a disability income policy contains a cost-of-living adjustment rider, benefits must typically be increased
At least once per year from when the benefits begin. (Cost-Of-Living Adjustment (COLA) rider is an optional add-on to a long term disability insurance policy)
Which statement regarding the cash value of a whole life insurance policy is correct?
Available to the policyowner when policy has been surrendered
A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?
Beneficiary receives $50,000 income tax-free
A preferred provider plan and an indemnity plan are similar in what way?
Both pay on a fee-for-service basis
A disabled business owner who has payroll and business expenses paid for has what kind of insurance policy?
Business Overhead Expense
For employees covered in multiple states under a group health plan, jurisdiction rules cannot alter
COBRA laws
Which statement regarding universal life insurance is correct?
Cash value accumulations have a guaranteed minimum interest rate
An employee welfare plan exempt from ERISA regulations would be
Church plans
Prepaid dental plans differ from most other types of dental plans in what way?
Closed panel of dentists can only be used
What effect does interest income have upon insurance premiums?
Decreases premium
Health Maintenance Organization (HMO) wellness programs may include each of the following EXCEPT
Diagnostic testing services
Which statement best defines what a Policy Title means on an insurance policy?
Every policy must have a title on the face and on the back of the policy, briefly describing the policy
Which statement concerning an adjustable life insurance policy is FALSE?
Evidence of insurability is required when there is a change in premium
A consumer who has been recently denied insurance, credit, or employment based on an unfavorable consumer report MUST be advised as such. Which of the following does this statute originate from?
Fair Credit Reporting Act
What are premiums for group credit life insurance based on?
Flat rate unrelated to the borrower's age
An annuity contract may be returned for a full refund during the
Free-look period
Which of the following statements is NOT true concerning the relationship between group health insurance plans and Medicare? (assuming the business has more than 20 employees)
Group health coverage is NOT available for workers over the age of 65
A characteristic of preferred provider organizations (PPO) is
If service is obtained outside the PPO, benefits are reduced and costs increase
When is it acceptable to charge or receive a fee or service charge in addition to the premium in connection with the transaction of insurance?
If the amount of the fee or service charge is reasonably related to the cost of the service
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Income tax and penalty tax
Which of the following causes of disability is NOT covered under Arizona workers compensation laws?
Intentional, self-inflicted injuries that occur at the worksite
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled
Which statement regarding the certificate of insurance is accurate?
It indicates evidence of an emplovee's insurance coverage
Which of these pays an income to two or more annuitants until the death of the last annuitant?
Joint and survivor annuity
A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?
Kept by the insurance company
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
Less than the policy's face amount
Joe is a life insurance policyowner who has failed to pay interest on his policy loan. What will result from this nonpayment?
Loan amount is increased to reflect the amount of interest due
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
Which of the following covers the Part A deductible of Medicare?
Medicare supplement core benefits
Which of the following actions may result in a producer's license being suspended?
Misappropriation of premiums / rebating
Which of these actions is considered to be an Unfair Claims Settlement Practice?
Misrepresenting pertinent policy provisions relating to coverage after a loss
Which of the following does NOT meet the requirements of "skilled nursing care"?
Must be provided exclusively in a hospital
Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?
Net payment cost index
Which of these is NOT an Unfair Claims Settlement Practice?
Offering to settle a claim by arbitration
Insurable interest involves what assumption?
One person benefits from another person's continued life
Which statement is NOT true regarding health insurance policies that provide limited benefits?
Only persons under the age of 65 are eligible
Which statement best describes a single premium whole life policy?
Paid-up policy that offers lifetime protection
Which type of deductible must be satisfied again for each illness or accident in a major medical plan?
Per-cause
Which would NOT be a location where skilled nursing care is provided?
Personal residence
A health insurance applicant is notified that a physical examination is required. Which of the following statements is correct?
Physical examinations are performed at the expense of the insurer
Tim is covered by Policy A with a $4,000 limit and by Policy B with a $2,000 limit. Policy A is primary. If a $6,000 loss is incurred, what will each policy pay?
Policy A will pay $4,000 and Policy B will pay $2,000
Which of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance
These are all accurate statements regarding universal life insurance EXCEPT
Policy loans are not permitted
Dividends from a mutual insurance company are paid to whom?
Policyholders- Mutual insurance companies are owned by policyowners, to whom dividends are paid.
A disability income insurance policy was recently issued with a rating. What does this mean?
Policyowner will be charged an additional premium
The law of large numbers enables an insurer to
Predict losses
How are level term policies able to provide level premiums?
Premiums are averaged over the term of the policy
Home health care benefits typically do NOT include coverage for
Prescription medication
A Medicare Supplement policy is required to do which of the following?
Provide a 30 day free-look period
An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called
Reasonable Expectations- Reasonable expectations is a concept that states that the insured is entitled to coverage under a policy that a sensible and prudent person would expect it to provide
Omar is covered by a disability income policy. He is hurt while performing an occupation more hazardous than the occupation listed in his policy. The policy's change of occupation provision will have what effect?
Reduce the benefit level
What could be the potential result of taking out a cash value loan under a life insurance policy?
Reduces the amount receivable upon surrender of the contract
Which of the following is NOT an objective of the National Association of Insurance Commissioners?
Regulate state insurance commissioners
The inability to perform SOME of the duties of one's own occupation is known as a
Residual disability
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
Risk Retention Group- A group-owned insurer whose primary activity consists of assuming and spreading the liability risks of its members is called a risk retention group.
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
Which of these is NOT considered the responsibility of a producer during the underwriting process?
Selecting the final approval date
Which of these situations would NOT potentially involve a prison sentence under Federal law?
Selling insurance with a nonresident license
Laura is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?
Sign an enrollment card
A loss of minimum essential coverage usually counts as a qualifying event that triggers what?
Special Enrollment Period
Kelly purchases a health insurance policy issued on a conditionally renewable basis. The insurance company has a right to refuse renewal of the policy for
Specific reasons stated in the contract
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?
Split-dollar
Which of the following entities does NOT establish regulations for variable insurance products?
State Attorney General
In regards to technology and the ACA, which of the following statements is correct?
States which operate with an Exchange must offer an internet-based portal
An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as?
Surrender charge
Which of the following is a syndicate established by a group of insurers to share underwriting duties?
The Lloyd's organization is a syndicate of individuals and companies that individually underwrite insurance.
Which factor determines the maximum disability income benefit that can be purchased by an applicant?
The applicant's income
Which statement concerning a deferred annuity contract is correct?
The owner can be the beneficiary, annuitant, or neither
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
The policy is surrendered for less than what was paid into it
An advantage of owning a flexible premium life insurance policy would be
The policyowner can make policy changes without difficulty
Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate?
The premium to purchase the coverage comes from the policy's cash value
When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?
The producer The producer is responsible for providing the insurance applicant with privacy notices.
How is a community rating used for underwriting purposes?
The same rates are charged for individual and group plans in the same geographical area
How is an insured's accident and health claim handled by an insurer if it occurs during the policy's grace period?
The unpaid premium may be subtracted from the reimbursement
A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death?
Total premiums paid plus the policy face amount
Which of the following does medical expense insurance NOT typically cover?
Treatment in a government facility
Which of the following BEST describes a "partial disability"?
Unable to perform one or more job duties
Mentally or physically handicapped dependent children MUST be covered under an individual health insurance policy
Until they become self-supporting
How do birthing centers reduce medical costs?
Using certified nurse midwives
If a producer replaces a client's existing life insurance policy with a new one, which of these actions is advisable?
Wait until the new policy is issued and delivered before surrendering existing policy
Which of the following best describes the presumptive disability provision?
Waives the typical total disability requirements
Under what circumstance does an accident and health insurer have the right to request an autopsy?
When not prohibited by state law
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
Under which circumstance is the interest rate guaranteed within a market value adjusted annuity?
When the contract has been held for the period specified in the policy
When would evidence of insurability be required for a person already covered with a variable universal life policy?
When the death benefit is increased
Pete is covered by a group health insurance plan which covers employees in multiple states. This plan is governed by the laws of which state?
Where the master contract was issued
A licensee or applicant who is ordered into active military service may request that the license or application be placed on inactive status by sending the department a:
Written statement
A producer working for an insurance company may be personally liable for
acts performed which are prohibited in the agency contract
A trade association group is seeking coverage for group medical benefits. The members of this association
are probably in the same industry
The Affordable Care Act (ACA) established "exchanges" in order to
assist individuals and small businesses when making their health insurance purchases
Julie is in need of assistance with one or two activities of daily living. She may be eligible for a(n)
assisted living facility
An insured has been court-ordered to provide a child's health insurance. Upon this order, the insurer must allow the enrollment of this child
at any time
A ________ company is licensed by the Department of Insurance to conduct insurance business in Arizona.
authorized
The purpose of the 'No-loss No-gain' provision is to avoid duplication of and when an individual is covered under multiple group health insurance plans:
benefit payments and overinsurance
The refusal of doing business with an individual or business is called a(n)
boycott
A(n) ______ insurer restricts the exposures it writes to those of its owners
captive
The principal source of information concerning an applicant's identity, age, and marital status is found in the
completed application
If dividend option choices are offered on a whole life insurance policy, the policy MUST
contain a statement that dividends are NOT guaranteed
Interest is credited to a fixed annuity no lower than the
contract guaranteed rate
Al surrenders his life insurance policy for its cash value. The total of premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the
cost basis
When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT
employee benefits
Terry suffers an injury at his workplace which is covered by workers compensation. Terry also has a medical expense insurance policy. Under medical expense insurance policies, losses that are covered by workers compensation are typically
excluded from coverage
A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for
experimental and investigative services
An appointed producer's implied authority is derived from
express authority
The Medical Information Bureau consists of members from which group?
insurance companies
The Optionally Renewable provision allows what party to cancel the contract?
insurer
The Arizona Life and Disability Insurance Guaranty Fund protects an insured in the event of
insurer's insolvency
What will Medicare charge if someone doesn't enroll in certain Medicare programs or plans when they're first eligible?
late enrollment penalty
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?
national origin
If a producer surrenders their license, how long must they wait to re-apply for the same license?
one year
A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called
period certain
Under a long-term care inflation rider, the benefit levels
periodically increase without proof of insurability
Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)?
policy loans
Patrick purchased a long-term care policy. He has a health condition for which medical treatment was recommended by a physician within 6 months prior to the policy's effective date. This condition is called a(n)
pre-existing condition
Where is the difference between a standard risk and a substandard risk reflected?
premium charges
A statement MUST be signed by the ________ for any illustrations used in the sale of a life insurance policy.
producer
The ________ is responsible for determining the appropriateness of a Medicare Supplement policy for an applicant.
producer
The ACA (Affordable Care Act) must ensure a sufficient choice of ________ in the marketplace:
providers
During an annuity's liquidation phase, the annuitant normally
receives benefit payments at regular intervals
A life insurance policy's waiver of premium rider has the ability to
relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
When issuing disability income coverage to a substandard risk, an insurance company may
shorten the benefit period
Under a deferred annuity, which contract feature initially charges a 5-10% fee that eventually reduces to $0 after a stated amount of time?
surrender charge
Qualified long-term care premiums are treated for tax purposes as
tax-deductible to the extent they exceed 7 1/2% AGI Qualified long-term care premiums are treated for tax purposes as tax-deductible to the extent they exceed 7 1/2% of an individual's AGI (Adjusted Gross Income).
A hold-harmless clause is an example of risk
to transfer
A life insurance policy can usually be contested by the insurer only during the first _ years of the contract.
two
Accident and health policies exclude loss as result of
war
