Final Exam - Florida Life and Health

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death and Dismemberment clause. An AD&D clause provides benefits for death due to an accident or for the loss of one or more hands, feet, arms, legs, or loss of sight.

Which provision is NOT a requirement in a group life policy?

Accidental. An AD&D provision is not required in a group life policy.

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Aleatory. Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss.

Which of the following areas of state regulation is NOT protected by the savings clause in ERISA?

All of these areas of state regulation are protected by the savings clause in ERISA EXCEPT for commerce.

Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is

Business Overhead Expense. A Business Overhead Expense policy's purpose is to cover certain overhead expenses that continue when the businessowner is disabled.

When must insurable interest exist for a life insurance contract to be valid?

Insurable interest must only exist at the inception of the contract.

Which statement is TRUE in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt. Interest on a loan which is not paid when due is added to the total debt.

Which of the following provisions is NOT required in HMO contracts/certificates?

Seven-day grace period. A grace period of no less than 10 days must be expressly included in an HMO contract.

Which of the following is NOT considered rebating?

Sharing commissions with an agent licensed in the same line of business. Sharing commissions with other licensed agents is not considered rebating.

What is required in the Florida Employee Health Care Access Act?

Small group benefit plans are to be issued on a "guarantee-issue" basis

Which Accident and Health policy provision addresses preexisting conditions?

The Time Limit on Certain Defenses provision limits the period during which an insurer can deny a claim on the basis of a preexisting condition.

What is the required minimum percentage of employee participation for a noncontributory group health insurance plan according to Florida Law?

"0%". Most noncontributory group health plans require 100% participation by eligible members. Under Florida law, there is no specific minimum percentage participation for employees covered by employee group health insurance.

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

Employers with less than __ employees are affected by Florida's Health Insurance Coverage Continuation Act (Mini COBRA).

20. Florida's Mini COBRA regulation entitles individuals to continuation of coverage for groups with less than 20 full-time employees.

In Florida, a health policy that is paid on a quarterly basis requires a grace period of

31 days. Florida law requires that the minimum grace period on a health insurance policy paid on a quarterly basis is 31 days.

Which of the following annuities pays benefits based on units rather than specific dollar amounts?

A Variable annuity pays benefits based on units rather than specific dollar amounts.

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?

A contingent beneficiary will receive the policy proceeds if the primary beneficiary dies before the insured's death.

Which of the following statements about noncontributory employee group life insurance is FALSE?

A minimum number of employees is required to participate". Noncontributory employee group life insurance plans must cover ALL eligible employees at all times

A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as

A representation is a statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract.

Who owns a stock company?

A stock insurance company is owned by its stockholders.

An assignment of benefits of a Health Policy

An assignment of benefits of a Health Policy transfers payments to someone other than the policyowner.

Which of the following statements BEST describes what the Legal Actions provision of an Accident and Health policy requires?

An insured must wait at least 60 days after Proof of Loss has been submitted before a lawsuit can be filed. The Legal Actions provision of an Accident & Health policy requires that the insurer settle a claim within 60 days after receipt of Proof of Loss.

An example of false advertising would be

An insurer exaggerating its dividends in a magazine advertisement

J owns a business and has a Group Life policy covering her employees. J decides to cancel the policy by letting it lapse on the renewal date. What action must be taken?

An insurer must notify each certificate holder (employee) when the master policy has expired or is being cancelled. The insurer may take such action through the policyholder (employer).

When an insurance application is taken by a producer, which of these statements is true?

Any changes made on the application require the applicant's initials

When is a Group Health policy required to provide coverage for a newborn child?

At the moment of birth.

At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?

At the time of application. With life insurance, insurable interest must exist only at the policy inception.

A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?

Claim will be paid and coverage will remain in force. After a policy has been in force for 2 (sometimes 3) years, it enters the incontestable period, in which the insurer may not deny a claim based on information not disclosed at the time of application.

In Florida, which of the following is considered an Unfair Trade Practice?

Coercion

As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?

Coercion. A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt. A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.

Which of the following unfair trade practices involves an agent who makes malicious statements about another person's financial condition?

Defamation. An agent who makes a statement that is maliciously critical of another person's financial condition is guilty of defamation.

K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?

Disability Income would reimburse an insured for loss of earnings if the insured became sick.

Which of the following does Social Security NOT provide benefits for?

Dismemberment. Social Security provides for all of these types of benefits EXCEPT dismemberment. (Survivorship, Disability, Retirement)

S takes out a health insurance policy which contains a provision that states that the agent does not have the authority to change the policy or waive any of its provisions. Which health policy provision is this?

Entire Contract. The Entire Contract provision states that the agent does NOT have the authority to change the policy or waive any of its provisions.

In a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion. The feature of a life insurance policy stating that the policy will not cover certain risks is called an exclusion.

What is Florida's definition of Life insurance replacement?

Florida's Replacement Rule defines replacement of Life insurance as a transaction in which a new policy is bought and an old policy is discontinued.

What action should a producer take if the initial premium is NOT submitted with the application?

Forward the application to the insurer without the initial premium. In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.

Which of the following employees may NOT be excluded from a group life plan?

Full-time employees after the probationary period. All of these employees may be excluded from a group life plan except for "Full time employees after the probationary period".

What is considered a valid reason for small businesses to insure the lives of its major shareholders?

Fund a buy-sell agreement. Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.

An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors?

Gender. An insurance company may NOT reject a prospective insured's life application on the basis of gender.

K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered

Guaranteed renewable. Guaranteed renewable is best described as a policy that must be renewed and premium rate increases can only be applied if for an entire class of insureds.

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

In this situation, the insurance company will deny the claim, as the policy would have lapsed due to nonpayment by September 15.

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

In this situation, the maximum allowable IRA contribution is $25,000.

Which of these actions should a producer take when submitting an insurance application to an insurer?

Inform insurer of relevant information not included on the application.

Which of the following situations are NOT subject to Florida life insurance laws?

Insurance companies' day-to-day operations

T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition?

Insurer will likely treat as a pre-existing condition which may not be covered for one year

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)

Insuring agreement. The insuring clause or provision sets forth the company's basic promise to pay benefits upon the insured's death.

A policyowner's rights are limited under which beneficiary designation?

Irrevocable. An irrevocable beneficiary designation requires the consent and signature of that named beneficiary before a change of beneficiary occurs.

According to Florida law, which of the following statements accurately describes an admitted mail order insurance company?

It may solicit insurance business by mail without the assistance of a licensed agent

An example of an unfair trade practice is

Making a material misrepresentation to an insured is considered to be an unfair trade practice.

According to Florida law, which of the following information does NOT need to be obtained by an agent recommending an annuity purchase?

Marital status. Florida law requires an agent who is recommending the purchase of an annuity to a person to obtain information regarding all of these EXCEPT the person's marital status.

The health insurance program which is administered by each state and funded by both the federal and state governments is called

Medicaid- is funded by both the federal and state governments and administered by individual states.

Which Unfair Trade Practice involves making a false statement on an insurance application in order to receive money from an insurer?

Misrepresentation

Under an Individual Disability policy in Florida, what is the minimum schedule of time in which claims must be made to an insured?

Monthly. Claims on an individual disability policies must be paid out at monthly intervals, at minimum.

J purchased a Disability Income Policy that ONLY J can terminate and on which the rates will never increase above those illustrated in the policy. Which of the following types of policies did J purchase?

Noncancelable. A Disability Income Policy that only the policyowner can terminate and on which the rates will never increase is a Noncancelable policy.

Which of the following BEST describes a short-term medical expense policy?

Nonrenewable. A typical short-term medical expense policy is best described as nonrenewable.

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

P will still receive declared dividends. Even though premiums are waived because of the disability, the insured will continue to receive dividends just as if the insured were still making the payments themselves.

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to

P. In this situation, benefits will be paid to P because P survived the accident and is the primary beneficiary.

K is an agent who made an improper sale of an annuity to a client. Which of the following corrective actions would the Department of Financial Services likely order K to take?

Pay monetary restitution to the client. The Department of Financial Services may order the agent to pay monetary restitution to the client.

Which action could result in a hearing being ordered by the Department of Financial Services?

Performing insurance transactions without a license

Which of these do NOT constitute policy delivery?

Policy issued with a rating. All of these constitute delivery of the policy EXCEPT issuing a rated policy.

How does group insurance differ from individual insurance?

Premiums are lower

What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?

Premiums may increase at time of renewal. A Conditionally Renewable Health Insurance policy can increase premiums at time of renewal.

The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as

Premiums paid by an employer for an employee's coverage are deductible by the employer as a business expense.ì

Which of these options can an individual use their medical flexible spending account to pay for?

Prescription drugs are an allowable expense when paid for by a medical flexible spending account.

What must the policyowner provide to the insurer for validation that a loss has occurred?

Proof of Loss. A Proof of Loss statement must be provided to an insurance company to show that a loss actually occurred.

All of these are considered sources of underwriting information about an applicant EXCEPT

Rating Services.

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification. Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.

A mutual insurance company and a stock insurance company have one main difference between them. What is this major contrast?

Stock company is owned by its shareholders. Mutual company is owned by its policyholders.

Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party?

Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid to the insured for the loss.

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term life. Level Term or Level-Premium: Level term life insurance provides the insured with coverage for a specified period of time; the term may be one, five, 10, 20 years or longer. The premium is calculated based on the age and health of the insured.

What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?

The Primary Insurance Amount (PIA) determines the full amount of retirement benefits for an eligible person.

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

The conversion privilege allows an individual to leave the group term plan and continue his or her insurance without providing evidence of insurability.

Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?

The conversion provision allows the policysowner to change the policy to a permanent life policy without providing evidence of insurability.

Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due?

The grace period is the additional period of time after a premium payment is due that will allow the policy to remain in force in the event of nonpayment.

G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G's policy, who is responsible for paying the medical bills?

The insured. In this situation, the insured is liable for the medical bills.

In a Life insurance contract, an insurance company's promise to pay stated benefits is called the

The insuring clause in a Life insurance contract establishes the basic promise of the insurance company.

W gave W's age as 50 when W purchased a Life policy. At the time of W's death seven years later, the company discovered W's true age at issue had been 59. What would the normal procedure be under the misstatement of age provision in regard to the payment of the death claim?

The proceeds would be reduced based on whatever the premium would have been if purchased at age 59

The coordination of benefits (COB) provision exists in order to

The purpose of the coordination of benefits (COB) provision, found only in group health plans, is to avoid duplication of benefit payments.

An agent who makes misleading statements that lead to the termination of an existing insurance policy so that a new policy with another insurer can be taken out has committed

Twisting is knowingly making misleading statements that would cause an insured to lapse, assign, or terminate an insurance policy in order to switch companies.

J is an agent who has induced an insured through misrepresentation to surrender an existing insurance policy. What is J guilty of?

Twisting. Twisting is the unfair trade practice of replacing an insurance policy from one insurer to another based on misrepresentation.

The waiting period for a pre-existing condition under a Medicare Supplement policy may NOT go beyond

Under a Medicare Supplement policy, the waiting period for pre-existing conditions may not exceed 6 months.

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life is designed to provide flexible premiums and an adjustable death benefit.

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.

Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy?

When replacing an existing life insurance policy, an agent must submit notice to existing insurer and replacing insurer of intentions.

Who does an agent represent during the solicitation of insurance?

When soliciting insurance to a client, an agent represents their insurance company.

A Return of Premium life insurance policy is

Whole life and Increasing term. A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.

A life insurance policy that provides a policyowner with cash value along with a level face amount is called

Whole life- Whole life provides the insured with a cash value as well as a level face amount.

According to Florida's rules on disclosure, a life insurance applicant is expected to be provided with

a Buyer's Guide and Policy Summary

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

applicant's physician. Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured's physician

A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will

continue coverage but exclude the heart condition. If the insured did not cite the condition on the application and the insurer did not exclude the conditon, the pre-existing condition provision still applies. Exclusions are subject to the "time limit on certain defenses" provision, however.

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

coverage will go into effect the date the agent delivers the policy, collects the initial premium, and obtains a good health statement from the insured.

An example of an unfair claims practice would be

failing to effectuate prompt, fair, and equitable settlements of a claim

Periodic health claim payments MUST be made at least

monthly. Under an individual health policy, periodic claim payments must be made at least monthly.

Under Florida law, a variable annuity policyowner must be notified of the accumulated value of the contract

once each year. A variable annuity policyholder must be informed at least once each year of the accumulated value of the contract during the premium payment period

T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?

the insurer will rescind the policy, deny the claim, and recover all payments made.

When replacing or exchanging an annuity, the agent must disclose to the annuitant

the possible tax ramifications as a result of the transaction. An agent must disclose the possible tax consequences of replacing or exchanging an existing annuity or life insurance policy.

Association Plans that are designed to provide health benefits to their members are regulated by the state because

they are insured by an authorized insurer. Association Plans must be fully insured by an authorized insurer. The insurer is subject to state regulation.

A life insurance policyowner may sell their policy to a(n) _____ in order to receive a percentage of the policy's face value.

viatical settlement provider. To receive a percentage of the policy face value, an owner of a life policy may sell the policy to a viatical settlement provider.