First Stimulate Exam Run Through of Incorrect

What is the typical deductible for basic surgical expense insurance? a) $0 b) $100 c) $200 d) $500

a) $0 As with the other types of basic medical expense coverage, there is no deductible, but coverage is limited.

Selection of coverage in employee benefits plans refers to a) Employee choosing benefits. b) Employer choosing providers. c) Employer choosing the benefits for employees. d) None of the above.

a) Employee choosing benefits. Selection of coverage allows the employee to choose benefits that best suit his/her needs. There may also be a choice of providers for coverage.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a) Guaranteed insurability rider. b) Paid-up additions option. c) Cost of living provision. d) Nonforfeiture option.

a) Guaranteed insurability rider. The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a) Indemnity b) Stop-loss c) Consideration d) Reasonable expectations

a) Indemnity The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.

Which of the following insurance options would be considered a risk-sharing arrangement? a) Reciprocal b) Stock c) Mutual d) Surplus lines

a) Reciprocal When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a) Reduction of premium b) Paid-up addition c) Accumulation at interest d) Cash option

a) Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.

Which of the following information would NOT be included in property insurance policies? a) The insured's address b) A list of policy provisions c) A list of coverages d) The insured's name

a) The insured's address The insured's address is not included in property insurance policies.

Insurance policy is a) Any method used to transfer or avoid catastrophic risk. b) A written instrument in which a contract of insurance is set forth. c) A statement of insurable interest. d) A verbal or written agreement between two parties to transfer risk.

b) A written instrument in which a contract of insurance is set forth. An insurance policy must be in writing to be legally binding. As defined by the California Insurance Code, "a policy" is a written instrument in which a contract of insurance is set forth.

In which Medicare supplemental policies are the core benefits found? a) Plans A-D only b) All plans c) Plans A and B only d) Plan A only

b) All plans The benefits in Plan A are considered to be core benefits and must be included in the other types. Therefore, all types contain the core benefits offered by Plan A.

The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. Which of the following is true? a) The state government will receive the cash value of the annuity. b) The cash value will be paid to the annuitant's estate. c) The premium value will be paid to the annuitant's estate. d) The state government will receive the amount of premiums paid.

b) The cash value will be paid to the annuitant's estate. If an annuitant dies during the accumulation period, the beneficiary is paid either the cash value of the policy or the amount of premiums paid, whichever is the larger amount. In this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate.

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur? a) The premiums will decrease. b) The interest will continue to accumulate tax deferred. c) The interest will become immediately taxable. d) The premiums will increase.

b) The interest will continue to accumulate tax deferred. If the contract holder dies before the annuity starting date, the contract's interest becomes taxable. If the beneficiary of the annuity is a spouse, the tax can continue to be deferred.

Regarding Medicare SELECT policies, what are restricted network provisions? a) They help avoid adverse selection. b) They condition the payment of benefits. c) They determine who can be insured. d) They determine premium rates.

b) They condition the payment of benefits. A Medicare SELECT policy is a Medicare supplement policy that contains restricted network provisions - provisions that condition the payment of benefits, in whole or in part, on the use of network providers.

Which of the following is NOT a goal of risk retention? a) To fund losses that cannot be insured b) To minimize the insured's level of liability in the event of loss c) To reduce expenses and improve cash flow d) To increase control of claim reserving and claims settlements

b) To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is a) An endowment. b) A Multiplicative Policy. c) A Modified Endowment Contract. d) An Accelerated policy.

c) A Modified Endowment Contract. Any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life contract.

Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health care? a) Licensed practical nurses b) Community-based organization professionals c) Attending physician d) Registered nurses

c) Attending physician Home health care is care provided in one's home and could include occasional visits to the person's home by registered nurses, licensed practical nurses, licensed vocational nurses, or community-based organizations like hospice. Home health care might include physical therapy and some custodial care such as meal preparations.

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called a) Living need rider. b) Payor rider. c) Cost of living rider. d) Accelerated benefit rider.

c) Cost of living rider. A "cost of living" rider adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living.

Which of the following is NOT covered by Health Maintenance Organizations (HMOs)? a) Routine physicals b) Well-baby care c) Elective services d) Immunizations

c) Elective services HMOs emphasize preventive health care as a method of reducing medical expenses by early detection of health problems before they may require more costly treatment.

Variable Life insurance is based on what kind of premium? a) Decreasing b) Graded c) Level fixed d) Increasing

c) Level fixed Variable Life insurance is a level fixed premium investment based product.

Anyone convicted of committing an insurance fraud may be fined up to the greater amount of double the value of the fraud or a) $50,000. b) $75,000. c) $100,000. d) $150,000.

d) $150,000. The Insurance Code sets the maximum penalty at $150,000 or double the amount of the fraud, whichever is greater.

A person caught violating provisions regarding misrepresentation could be subject to a) Imprisonment in a county jail for up to 3 years. b) A written warning from the Commissioner. c) A permanent suspension of license. d) A fine up to $25,000.

d) A fine up to $25,000. Agents in violation of provision on misrepresentation may be punished by a fine up to $25,000, imprisonment in a county jail for a period no longer than 1 year, or by both a fine and imprisonment. The Commissioner may also suspend the agent's license for a maximum of 3 years.

A tornado that destroys property would be an example of which of the following? a) A pure risk b) A loss c) A physical hazard d) A peril

d) A peril A peril is the cause of loss insured against in an insurance policy.

In which of the following situations is it illegal for an insurer to disclose privileged information about an insured? a) The Department of Insurance to assess legal compliance b) Law enforcement authorities for law-oriented purposes c) An auditor for auditing purposes d) A researcher for marketing purposes

d) A researcher for marketing purposes There are certain circumstances in which it is legal for an insurer to disclose privileged information about an insured, including law enforcement, auditing, and legal purposes.

Which of the following long-term care benefits would provide coverage for care for functionally impaired adults on a less than 24-hour basis? a) Residential care b) Assisted living c) Home health care d) Adult day care

d) Adult day care Adult day care is designed for those who require assistance with various ADLs on a daily basis, but not around the clock. Custodial care is usually the only service provided by adult day care facilities.

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? a) As of the policy delivery date b) As of the first of the month after the policy issue c) As of the policy issue date d) As of the application date

d) As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.

Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that the annuity owner will have to pay? a) Flat fee determined by an index of interest gains, combined with the amount of time the annuity would take to mature b) There are no penalties imposed for surrendering annuities prematurely. c) Guaranteed minimum interest rate stipulated in the contract d) Current interest rate at the time of surrender

d) Current interest rate at the time of surrender If a Market Value Adjusted Annuity owner surrenders his/her policy prematurely, a penalty is imposed, the amount of which depends directly upon the current interest rates at the time of surrender. The market value adjustment is calculated as a percentage of the difference between the contracted rate of interest in the annuity and the current interest rate at the time of the annuity's surrender.

Which of the following levels of care in long-term care policies specifically includes assistance with activities of daily living? a) Respite care b) Hospice care c) Intermediate care d) Personal care

d) Personal care Personal Care includes hands-on services to assist an individual with activities of daily living, and can be provided by a skilled or unskilled person.

A situation in which a person can only lose or have no change represents a) Speculative risk. b) Adverse selection. c) Hazard. d) Pure risk.

d) Pure risk. Pure risk refers to situations that can only result in a loss or no change. Pure risk is the only type insurance companies are willing to accept.

Which of the following is true regarding health insurance underwriting for a person with HIV? a) A person may be declined for HIV but not AIDS. b) The person may be declined. c) The person may only be declined if he/she has symptoms. d) The person may not be declined for medical coverage solely based on HIV status.

d) The person may not be declined for medical coverage solely based on HIV status. The HIV consent form provides the insurance company with authorization to test for the presence of the HIV virus and applies to all life and health policies. Underwriting for HIV or AIDS is permitted as long as it is not unfairly discriminatory. Medical coverage, however, cannot be denied per recent health care reform (no exclusions for pre-existing conditions).

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Universal Life - Option B b) Equity Indexed Universal Life c) Variable Universal Life d) Universal Life - Option A

d) Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

hat is the elimination period for Social Security disability benefits? a) 12 months b) 3 months c) 5 months d) 6 months

c) 5 months The elimination period for Social Security disability benefits is 5 months.

In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective? a) 100% b) 75% c) 50% d) 25%

a) 100% One hundred percent of eligible employees must participate in a non-contributory health insurance plan for the plan to become effective.

How long is an open enrollment period for Medicare supplement policies? a) 6 months b) 1 year c) 30 days d) 90 days

a) 6 months An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B.

"A physical or mental impairment which substantially limits one or more major life activities, or a record of such impairment, or being considered as having such an impairment," is the definition of a disability according to a) ADA b) COBRA c) ERISA d) ADL

a) ADA This is the definition of the Americans with Disabilities Act.

The federal act which mandates that "all personnel actions must be unrelated to either the existence or consequence of disability to include recruitment and selection of employees, compensation of employees, training, and all terms, conditions and privileges of employment" is known as a) Americans with Disabilities Act. b) Equal Opportunity Employment Act. c) Age Discrimination Act. d) Social Security Act.

a) Americans with Disabilities Act. This is the definition of the ADA.

Under HIPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy? a) An individual who was previously covered by group health insurance for 6 months is eligible. b) An individual who has used up COBRA continuation coverage is eligible. c) An individual who doesn't qualify for Medicare may be eligible. d) The gap of coverage for eligibility is a period of 63 or less days.

a) An individual who was previously covered by group health insurance for 6 months is eligible. All of these eligibility requirements are correct, except an individual who was previously covered for at least 6 months. HIPAA requires that the individual have a previous continuous creditable health coverage for at least 18 months.

All other factors being equal, the least expensive first-year premium payment is found in a) Annually Renewable Term. b) Increasing Term. c) Decreasing Term. d) Level Term.

a) Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

Maurice's health insurance plan covers practically all types of medical expenses. Maurice's insurer provides first-dollar coverage for basic benefits, but applies a deductible for major benefits and then pays 80/20 coinsurance. What type of coverage does Maurice have? a) Comprehensive major medical b) Customized medical c) Combined major medical d) Combined medical

a) Comprehensive major medical A comprehensive major medical plan is a combination of basic expense and major medical coverage. This policy covers practically all medical expenses, since it includes both types of coverage. The plan will provide first-dollar coverage for basic medical benefits, but a deductible may be applied to the major medical benefits.

Which of the following is true regarding commissions for Medicare supplement policies? a) They are permitted up to a certain amount for each policy. b) Restrictions only apply to MGAs. c) Restrictions only apply to monetary compensation. d) They are not permitted.

a) They are permitted up to a certain amount for each policy. An agent or other representative that is involved in the sale of Medicare supplement policies may receive commissions as long as the first year commission does not exceed 200% of the commissions paid for selling or servicing the policy in the second year. Commission regulation rules apply to both monetary and non-monetary compensation.

The purpose of having an elimination period in a policy is to accomplish which of the following? a) To allow the client some flexibility in determining their own premium b) To allow the insured time to save up the initial premium charged when they receive a premium rating. c) To allow the insurer to do an in-depth background check on ethnic groups which pose an enhanced risk prior to issuing a policy. d) To assure that claims are not paid until an investigation can be done to assure the claim is valid and covered by the policy.

a) To allow the client some flexibility in determining their own premium The clients' choice of the length of their elimination period allows them to make their own value judgment in regard to balancing premium expense and benefits.

Every small employer carrier must actively offer to small employers at least how many health benefit plans? a) One plan b) 2 plans c) 3 plans d) There is no minimum.

b) 2 plans As a condition of transacting business in this state with small employers, every small employer carrier is required to actively offer to small employers at least 2 health benefit plans. One plan offered by each small employer carrier must be a basic health benefit plan, and one plan must be a standard health benefit plan.

Ray has an individual major medical policy that requires a coinsurance payment. Ray very rarely visits his physician and would prefer to pay the lowest premium possible. Which coinsurance arrangement would be best for Ray? a) 90/10 b) 50/50 c) 75/25 d) 80/20

b) 50/50 After the deductible has been paid, the insurance company will pay a specified amount for a physician's visit, while the insured pays the remaining percentage. This is called "coinsurance". Plans will often be listed in a fraction format, with the first number representing the amount that will be paid by the insurer. The less the insurer must pay with coinsurance payments, the lower the premiums will be. Therefore, Ray should choose the 50/50 plan.

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider? a) Variable annuity b) Annuity certain c) Fixed annuity d) Refund Life

b) Annuity certain Annuity Certain option allows the annuitant to select the time period or the amount for the benefits. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a) Company is the owner, and the company pays the premium. b) Executive is the owner, and the executive pays the premium. c) Company is the owner, but the executive pays the premium. d) Board of directors is the owner, and the board of directors pays the premium.

b) Executive is the owner, and the executive pays the premium. Executive buys the policy and pays the premium, and the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.

Which of the following policy components contains the company's promise to pay? a) Entire contract provision b) Insuring clause c) Premium mode d) Consideration clause

b) Insuring clause The insuring clause contains the company's promise to pay.

Under which of the following organizations are the practicing providers compensated on a fee-for-service basis? a) Open panel b) PPO c) HMO d) Blue Cross/Blue Shield

b) PPO PPOs contract on a Fee-for-service basis.

What do living benefit riders do? a) Provide a way for beneficiaries to receive money from the policy before the death benefit is paid b) Pay part of the policy death benefit to insureds in order to help fund long-term care or nursing home care c) Allow the insured to obtain an early death benefit to pay medical costs, in the event that the insured is expected to die within one year d) Allow the insured to take out policy loans for the purpose of funding major life expenses.

b) Pay part of the policy death benefit to insureds in order to help fund long-term care or nursing home care Living benefit riders allow part of the policy's death benefit to fund long-term care or nursing home care.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a) Effect of inflation on income over time. b) Predicted needs of the family after the insured's death. c) Insured's current and future income. d) Insured's annual expenses.

b) Predicted needs of the family after the insured's death. The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

What happens if a non-member physician is utilized under the Point-Of-Service plan? a) The member patient will have to pay all costs out-of-pocket. b) The attending physician will be paid a fee for service, but the member patient will have to pay a higher coinsurance amount. c) The non-member physician will be paid a fee for service. d) The non-member physician will be paid a fee for service, but the member patient will be penalized per visit on his/her monthly premium.

b) The attending physician will be paid a fee for service, but the member patient will have to pay a higher coinsurance amount. If a non-member physician is utilized under the Point-Of-Service plan, then the attending physician will be paid fee for service, but the member patient will have to pay a higher coinsurance amount or percentage for the privilege.

Can an individual who belongs to a POS plan use an out-of-network physician? a) Yes, but they must use the HMO physician first b) Yes, and they may use any preferred physician, even if not part of the HMO c) No d) Yes, but they must use the POS physician first

b) Yes, and they may use any preferred physician, even if not part of the HMO In a POS plan the individuals can visit an in-network provider at their discretion. If they decide to use an out-of-network physician, they may do so.

According to the Medical Loss Ratio (MLR), what is the minimum percentage of health coverage premium that must be applied to actual medical care in an individual health plan? a) 25% b) 50% c) 80% d) 90%

c) 80% MLR requires insurance companies to spend at least 80% (for individual and small group markets) or 85% (for large group markets) of premium dollars on medical care and health care quality improvement, rather than on administrative costs.

The violation of a material warranty or other material provision of a policy allows a) Only the insured to rescind. b) Only the insurer to rescind. c) Both the insurer and the insured to rescind. d) Neither the insurer nor the insured to rescind.

c) Both the insurer and the insured to rescind. The violation of a material warranty or other material provision of a policy, on the part of either party, entitles the other to rescind.

Which of the following is NOT an example of insurable interest? a) Employer in employee b) Child in parent c) Debtor in creditor d) Business partners in each other

c) Debtor in creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.

In disability income insurance, the own occupation definition of disability applies a) During the elimination period. b) As long as an individual is unable to work. c) For the first 2 years of a disability. d) During the waiting period.

c) For the first 2 years of a disability. The own occupation definition of disability usually applies to the first 24 months after a loss.

As it pertains to group health insurance, COBRA stipulates that a) Terminated employees must be allowed to convert their group coverage to individual policies. b) Group coverage must be extended for terminated employees up to a certain period of time at the employer's expense. c) Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense. d) Retiring employees must be allowed to convert their group coverage to individual policies.

c) Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense. COBRA requires employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for up to 18 months to 36 months. The employee can be required to pay up to 102% of the coverage's premium.

Which of the following is NOT an advantage of an HRA for an employer? a) HRAs give smaller employers an opportunity to compete with larger employers in the benefits offered to employees b) HRAs permit an employer to reduce health plan costs by coupling the HRA with a high-deductible (and usually lower-cost) health plan c) HRAs are defined benefit programs d) Employer contributions are tax-deductible

c) HRAs are defined benefit programs HRAs are defined contribution, not defined benefit, programs.

Which of the following would be considered false advertising? a) Stating that a policy has limitations and exclusions b) Failing to include premiums in sales materials c) Implying that the agent is the insurer d) Stating the differences in benefits between Whole Life Insurance and Term Life Insurance

c) Implying that the agent is the insurer A person or entity cannot use a name that deceptively suggests it is an insurer. Premiums do not have to be included in sales materials because they will vary depending on the insured's age and health. Most policies have limitations and exclusions, and there is a difference between whole life and term. It is not illegal to note this for applicants.

Which of the following is TRUE of a qualified plan? a) It may discriminate in favor of highly paid employees. b) It may allow unlimited contributions. c) It has a tax benefit for both employer and employee. d) It does not need to have a vesting schedule.

c) It has a tax benefit for both employer and employee. A qualified plan is approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.

What is the benefit of choosing extended term as a nonforfeiture option? a) It allows for coverage to continue beyond maturity date. b) It can be converted to a fixed annuity. c) It has the highest amount of insurance protection. d) It matures at age 100.

c) It has the highest amount of insurance protection. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

An insured who signs a fraudulent claim form may be guilty of a) Misrepresentation. b) Rebating. c) Perjury. d) Misdemeanor.

c) Perjury. If an insured signs a fraudulent claim form, the insured may be found guilty of perjury.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a) Pay back all premiums owed plus interest. b) Receive payments for a fixed amount. c) Purchase a single premium policy for a reduced face amount. d) Purchase a term rider to attach to the policy.

c) Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.

Which of the following is called a "second-to-die" policy? a) Juvenile life b) Joint life c) Survivorship life d) Family income

c) Survivorship life Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.

ABC Insurance has determined that the premiums that it currently charges for its Safe Driver II plan need to be increased. ABC's underwriters have reevaluated the rate plan and sent the new rate schedule to each managing general agent for distribution to its agents. After two weeks of marketing the new plan, ABC filed the new plan with the Commissioner for approval. This method of rate plan marketing is considered a) File and use rate laws. b) Adjust and market rate laws. c) Use and file rate laws. d) Develop and file rate laws.

c) Use and file rate laws. Use-and-file laws require that rate plans be filed within a specified period, generally 15-30 days, after they are first used with the public.

Jason is insured under his employer's group health insurance. He splits the cost of the premiums with his employer. This is an example of a) A noncontributory plan. b) A half and half plan. c) A co-pay plan. d) A contributory plan.

d) A contributory plan. With a contributory plan the eligible employees contribute to payment of the premium (both the employee and employer pay part of the premium).

Which of the following would automatically qualify for Medi-Cal benefits? a) A child under the age of 21 b) A low-income person under the age of 65 c) An individual receiving Social Security payments d) A person receiving Supplementary Security Income assistance

d) A person receiving Supplementary Security Income assistance California residents in a variety of situations may qualify for benefits from Medi-Cal; however, individuals who receive cash assistance from one of the following programs are automatically eligible for Medi-Cal: SSI/SSP, CalWORKS, Refugee Assistance and Foster Care or Adoption Assistance Program.

A 63-year-old man is planning to be employed until age 68. When will he be eligible for Medicare? a) As soon as he retires at age 68 b) Age 70, if still employed c) Age 69 ½ if no longer employed d) Age 65, regardless of his employment status

d) Age 65, regardless of his employment status The individual will still be eligible for Medicare at age 65, but if he is still insured under his employer's group health plan, the group plan will be his primary coverage and Medicare will be secondary coverage.

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be a) Certified. b) Qualified. c) Approved. d) Authorized.

d) Authorized. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

What is Medi-Cal? a) California's Medicare program b) California's social security program c) California's long-term care coverage program d) California's Medicaid health care program

d) California's Medicaid health care program Medicaid is a federal-state partnership in which the federal government pays for the majority of medical claims, while the states are responsible for their own administrative expenses. In California, the program is known as Medi-Cal.

Which is TRUE about the cash surrender nonforfeiture option? a) After the cash surrender, the insured is covered for a grace period of 1 month. b) The policy remains active for some time after the policyholder opts for cash surrender. c) The policyholder receives the original cash value of the policy. d) Funds exceeding the premium paid are taxable as ordinary income.

d) Funds exceeding the premium paid are taxable as ordinary income. The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.

Which of the following will be covered by a nonoccupational policy? a) All of the above. b) John gets hurt in an accident on his way to a client visit. c) John injures himself at work. d) John gets hurt in a car accident during his lunch break.

d) John gets hurt in a car accident during his lunch break. Nonoccupational policies exclude coverage of claims that arise from job-related accidents. Workers Compensation would pay for illness of injury that is work related. Occupational policies would cover accidents on or off the job.

Which Universal Life option has a gradually increasing cash value and a level death benefit? a) Juvenile life b) Term insurance c) Option B d) Option A

d) Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a) Corridor option b) Variable option c) Option A d) Option B

d) Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

To achieve the profitable distribution of exposures, a) The most coverage goes to average risks and preferred risks, while less goes to poor risks. b) Poor risks and average risks make up the majority of coverage. c) A majority of coverage goes to preferred risks. d) Preferred risks and poor risks are balanced, with average risks in the middle.

d) Preferred risks and poor risks are balanced, with average risks in the middle. Balancing poor risks and preferred risks with average risks in the middle creates a profitable distribution of exposures.

All of the following are actual deductibles found in medical insurance policies EXCEPT a) Common accident b) Family c) Per cause d) Replacement

d) Replacement "Family," "per cause," and "common accident" deductibles are available.

Events in which a person has both the chance of winning or losing are classified as a) Insurable. b) Pure risk. c) Retained risk. d) Speculative risk.

d) Speculative risk. Speculative risk involves the chance of gain or loss and is not insurable.

Which of the following describes the tax advantage of a qualified retirement plan? a) Distributions prior to age 59½ are tax deductible. b) Employer contributions are deductible as a business expense when the employee receives benefits. c) Employer contributions are not taxed when paid out to the employee. d) The earnings in the plan accumulate tax deferred.

d) The earnings in the plan accumulate tax deferred. Contributions are tax deferred, and earnings on the money in the plan accrue on a tax-deferred basis.

Which of the following best describes the "first-dollar coverage" principle in basic medical insurance? a) The insured must first pay a deductible. b) The insurer covers the first claim on the policy. c) Deductibles and coinsurance are taxed first. d) The insured is not required to pay a deductible.

d) The insured is not required to pay a deductible. The three basic types of coverage (hospital, surgical and medical) are often referred to as first-dollar coverage because they usually do not require the insured to pay a deductible.