General Insurance
An individual's tendency to be dishonest would be indicative of a AMoral hazard. BMorale hazard. CPure hazard. DPhysical hazard.
A An applicant that is dishonest in completing an application for insurance or submitting fraudulent claims would be deemed a moral hazard and could be uninsurable from an underwriting standpoint.
When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent? a) 12 months b) 18 months c) 3 months d) 6 months
A Group insurance plans, which are terminated generally, provide for an extension of benefits to any totally disabled employee or dependent. This extension of benefits is generally provided up to a period of 12 months or until the individual is no longer totally or continuously disabled.
Which of the following is NOT provided by an HMO? a) Reimbursement b) Services c) Financing d) Patient care
A Traditionally the insurance companies have provided the financing while the doctors and hospitals have provided the care. The HMO concept is unique in that the HMO provides both the financing and the patient care for its members. The HMO provides benefits in the form of services rather than in the form of reimbursement for the services of the physician or hospital.
Which of the following statements is an accurate comparison between private and government insurers? APrivate insurers may provide insurance in areas where the government will not. BPrivate insurers may be authorized to transact insurance by state insurance departments. CInsurance may be provided by the government is called "federal insurance." DPrivate insurers may offer fewer lines of insurance than government insurers.
B Private insurers offer many lines of insurance. Government insurance programs, also known as "social insurance", cover areas that private companies cannot or will not, providing programs like Medicare, Social Security, and National Flood Insurance. Government programs are funded with tax dollars and serve national causes, in contrast with private insurers.
A tax-sheltered annuity is a special tax-favored retirement plan available to a) Certain age groups only. b) Certain groups depending on factors such as race, gender, and age. c) Certain groups of employees only. d) Anyone.
B A tax-sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? a) Physical b) Morale c) Moral d) Legal
B A morale hazard is someone who has an indifferent attitude towards an insurance company. He is careless or irresponsible because he knows his loss will be covered by insurance.
When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply? a) Claims discrimination b) Case management provision c) Cost reduction d) Claims reduction
B Cost-saving services, also known as "case management provisions", include the following: controlled access of providers, large claim management, preventive care, hospitalization alternatives, second surgical opinions, preadmission testing, catastrophic case management, risk sharing, and providing high quality of care.
What method do insurers use to protect themselves against catastrophic losses? APro rata liability BRisk-management CReinsurance DIndemnity
C Insurers use reinsurance to protect themselves from catastrophic losses. This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously.
Whenever the Commissioner receives a demand for a hearing, a hearing shall be scheduled to be held within a) 5 days. b) 10 days. c) 30 days. d) 6 months.
C When the Commissioner receives a demand for a hearing, the hearing will be scheduled to be held within 30 days, unless, by mutual consent, a long period selected.
An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles how much will the excess plan pay? a) $15,000 b) $10,000 c) $7,500 d) $5,000
D Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable.
Which type of insurance is based on mutual agreements among subscribers?
Reciprocal insurance Correct! Reciprocals are insurance companies made up of subscribers, who are collectively known as a Reciprocal Insurance Company or Exchange. These types of companies are administered by an appointed Attorney in Fact.
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?
indemnity
Which of the following is a requirement that must be satisfied before an applicant can receive an insurance producer license in Alabama? a) Must be a resident of Alabama b) Must complete 40 hours of prelicensing classroom instruction, unless otherwise exempt by the Commissioner c) Must agree to solicit insurance sale to members of his or her immediate family d) All of the above
B Apllicants for a producer license, unless the holder of a profesional designation recognized by the Commisioner, must complete 40 hours of classroom instruction in the principles of insurance, including not less than 5 hours on the licensing and the regulatory laws of Alabama.
A participant contributes more than the maximum amount to her Roth IRA. What kind of tax penalty will he or she have to pay?
B Should a taxpayer make an excess contribution to a Roth IRA, there is a 6% tax penalty.
Following hospitalization because of an accident, Bill was confined in a skilled nursing facility. Medicare will pay full benefits in this facility for how many days? a) 80 b) 3 c) 20 d) 100
C Following hospitalization for at least three days, if medically necessary, Medicare pays for all covered services during the first 20 days in a skilled nursing facility. Days 21 through 100 require a daily copayment.
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 that annuity owner will have to pay? a) There are no penalties imposed for surrendering annuities prematurely. b) Guaranteed minimum interest rate stipulated in the contract c) Current interest rate at the time of surrender d) Flat fee determined by an index of interest gains, combined with the amount of time the annuity would take to mature
C 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.
What qualifications must an agent hold in order to sell variable life insurance policies? a) National Association of Insurance Commissioners (NAIC) registration b) State licensing to sell life insurance and variable products c) Both state and federal licensing d) Same certification as fixed life policies
C Agents selling variable life products must be registered with the Financial Industry Regulatory Authority (FINRA) (formerly National Association of Securities (NASD)) and must be licensed within the state to sell life insurance and variable products.
A policy provision conflicts with state statutes. Which of the following will happen? a) The provision will be reviewed by the Federal Insurance Commission. b) The provision must be amended to conform to the state statutes. c) The provision may be altered to conform to the state statutes if the Conformity with State Statutes provision is included in the policy. d) The insurer must submit a request to the Commissioner of Insurance in order to approve the conflicting provision.
C If a policy provision conflicts with state statutes, it may be altered to conform to the statutes. The Conformity with State Statutes Provision states that any conflicting provisions must be changed. Although this is technically an optional provision, many states require its inclusion in insurance policies.
What type of insurance would be used for a Return of Premium rider? a) Decreasing Term b) Annually Renewable Term c) Increasing Term d) Level Term
C The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary.
The market value adjustment in modified guaranteed annuities refers to which of the following? a) The performance of the annuity investments b) The percentage the insurer keeps for its services c) The difference between the contracted interest rate and the rate at surrender d) The penalty for a premature surrender of the annuity
C The market value adjustment in a modified guaranteed annuity is usually a percentage of the difference between the contracted rate of interest in the annuity and the current rate at surrender.
A resident of another state wishing to transact insurance in Alabama may obtain a nonresident producer license, without examination, upon meeting one of the following EXCEPT a) Have completed a comparable initial educational requirement and/or written examination in the residential state. b) Provide the Commissioner with a letter of certificate from the resident state indicating the lines of insurance the applicant is qualified to sell. c) Been an executive officer of an insurance company. d) Hold a valid resident producer license in his or her state of residence for the same lines of insurance for which a nonresident license is being sought.
C With states that reciporcate, the Commisioner may issue a nonresident producer license to applicants of such state without examination for the lines of insurance that they are qualified in their resident state. Just prior experience as an executive officer does not qualify an individual to receive a nonresident producer license.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?
Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.
An applicant is considered to be high-risk, but not so much that the insurer wants to deny coverage. Which of the following is NOT true? a) The insurer can increase the premium. b) The insurer can add exclusions to the policy. c) The insurer can rate-up the policy. d) The insurer will issue a conditional coverage.
D If an applicant is considered to be too much of a risk, the application can be denied. If, however, the applicant's risks are not high enough to decline, two measures can be taken to protect the insurer: the policy can be rated-up, which means that the premiums will increase, and exclusions can be added, which means that the insurer will not have to cover conditions that make the applicant a high risk to insure.
When is the insurability conditional receipt given? a) After the application has been approved and the premium has been paid b) When an insured individual needs to obtain an insurability receipt for tax purposes. c) If the application is approved before the premium is paid d) When the premium is paid at the time of application
D Under the terms of the insurability conditional receipt, the insurance coverage becomes effective as of the date of the receipt, provided the application is approved. This receipt is generally provided to the applicant when the initial premium is paid at the time of application.
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance Insurers use reinsurance to protect themselves from catastrophic losses. This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously.
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as
Utmost good faith. Correct! The insurer must be able to rely on the statements given by the insured in the application. The insured must be able to rely on the insurer's promise to pay covered losses.
Which of the following statements would best describe the difference between viatical settlements and accelerated death benefits?
Viaticals are funded by a third party, and Accelerated Death benefits are provided by the insurer that issued the original policy. Viatical Settlements allow someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death. Viatical settlements are separate contracts in which the insured sells the death benefit to a third party at a discounted rate.