L&H State exam MD
In which of the following situations would the facility of payment clause of a life insurance policy NOT be applied?
=>The insurer learns, when paying the claim, that the designated beneficiary had no insurable interest in the insured at the time of death. The beneficiary dies before the policyowner and the policyowner did not name a contingent beneficiary. The beneficiary is a minor. The beneficiary is an institution that no longer exists.
The federal Risk Retention Act of 1986 applies to which businesses?
=>self-insuring businesses re-insurers credit life insurance companies high-risk business insurers
Medicare Part A does NOT cover which home health care services?
intermittent skilled care =>full-time skilled care home health aide services durable medical equipment and supplies
When a health insurer cancels a policy for failure to pay premiums, the cancelation provision requires the insurer to give the policyowner how many days' advance notice?
45 30 15 =>10
An insurer must notify its current customers of its privacy policies or practices at least once every how often?
6 months =>12 months 18 months 24 months
To qualify for the accelerated benefit rider, an insured must prove he or she either has had a permanently disabling injury or a terminal illness that can be expected to result in death within:
90 days 5 months 12 months =>24 months
In a trustee-to-trustee IRA rollover, what percentage of the rollover amount must the current trustee withhold for tax purposes?
=>0 percent 10 percent 20 percent 50 percent
What is the name of the period during which funds are paid out of an annuity contract in the form of periodic income payments?
=>the annuity payout period the annuitization period the accumulation period the disbursement period
Best Insurance Company issues health insurance policies that reimburse insureds for expenses instead of offering medical services through a provider network. What type of plan does Best Insurance sell?
=>traditional indemnity managed care PPO HMO
Which of the following is not an HMO deceptive practice?
=>unintentionally using misleading advertisements knowingly providing deceptive evidence of coverage refusing to renew based solely upon a member's health status calling itself an HMO without a valid certificate of authority
Which of the following is NOT a requirement for employer-sponsored group life insurance?
All eligible employees must be given the opportunity to participate. If employee contributions are required, then at least 75 percent of eligible employees must elect to participate. =>All employees must be insurable. Plans may be contributory or noncontributory.
With respect to qualifying for Social Security Disability Income benefits, which of the following statements is correct?
Benefits are provided to a worker who becomes partially or totally disabled. Coverage is provided all currently insured and fully insured workers. =>A 5-month waiting period must be met before Social Security disability benefits begin. The Social Security disability benefit amount is equal to the disabled worker's primary insurance amount (PIA) at the time the disability began.
All the following statements about the taxation of qualified long-term care (LTC) insurance policies are correct EXCEPT:
Benefits received by chronically ill people under a qualified long-term care policy are tax free, up to maximum limits. The IRS annually sets the limits on benefits received tax free by chronically ill people under a qualified LTC policy. =>Long-term care premium deductibility limits are flat up to age 61, and then increase through age 70. Premiums for qualified long-term care policies are eligible for the medical expense deduction, up to certain limits.
Diana, age 56, pays $3,000 each year in premiums for her variable annuity and plans to annuitize the contract when she retires in ten years. Which of the following statements is correct while Diana's annuity is still in the accumulation phase?
Diana must pay income tax on the amount of accumulated earnings within the annuity each year. Diana must pay capital gains tax if she withdraws the annuity's earnings before she annuitizes the contract. Diana can make tax-free withdrawals once she reaches age 59'. =>Diana's premium payments will grow on a tax-deferred basis.
Which of the following statements is correct about reporting appointment terminations to the Commissioner?
Every termination must be reported. Terminations no longer need to be reported. =>Only terminations for cause must be reported. Terminations occurring within less than a year of appointment must be reported.
All of the following statements regarding the use of deferred annuities in retirement planning are correct, EXCEPT:
Federal tax law permits the use of deferred annuities with qualified retirement plans such as IRAs, SEPs, or 403(b) plans. There are both group as well as individual annuity contracts that make it possible for employers as well as individuals to use them for a retirement plan. =>Earnings grow on a tax-free basis only when a deferred annuity is used to fund a qualified retirement plan. Depending on the type of qualified plan (and the rules of the plan), the premiums may be tax deductible by the plan owner or sponsor.
Which statement accurately describes the MIB (Medical Information Bureau)?
It contains the complete medical history of insurance applicants. =>It collects medical information about insurance applicants and gives that information to member insurance companies. It lists the type of policies denied to applicants due to medical conditions. It makes information from applicants' physicians available to insurance companies.
Which statement is correct about ERISA
It is a type of qualified health plan. =>It is a law that protects enrollees in group health plans and retirement plans. It is a type of managed care plan. It is a federal subsidy for group health plans.
Which of the following is not a correct statement of the duties of an insurance company that directly solicits prospective purchasers?
It must determine whether replacement is involved. It must ask on the application whether replacement is intended. It must send a Notice Regarding Replacement if the applicant indicates that a replacement is intended. =>No further action is needed if the applicant states replacement is not intended or does not answer the question about replacement.
If the Bakersfield Insurance Company has a very low volume of insurance policy sales, must it be a member of the Maryland Life and Health Insurance Guaranty Corporation?
Membership is optional. Membership is not required if insurance sales volume is less than $100,000. Membership is required if insurance volume is $100,000 or more. =>Membership is mandatory.
With respect to disability buy-out policies, which of the following statements is correct?
Only the business may own the policy. They provide a benefit if the insured is partially or totally disabled. =>They have a very long elimination period. They pay a benefit that can be used to pay the business's overhead costs if an owner becomes disabled.
For Medicare Supplement plans K and L, which statement is true?
Plans K and L pay 50 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached. =>Plans K and L pay 100 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached. Plans K and L pay 70 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached. Plans K and L pay 20 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached.
Which statement is correct about access to health care?
Policyholders are usually not permitted to seek care beyond their health plan's network of providers. =>Policyholders must understand any requirements that must be fulfilled for medical treatment or services. Policyholders must know their insurer's financial obligations. Policyholders must understand the preauthorization process.
Sally buys an individual life insurance policy and one week after her agent delivered it to her she decides she doesn't want it. Will she be able to return the policy and receive a refund of the premium she has paid for it?
Possibly; while the policy can be surrendered at any time, refunding the premium is subject to the insurer's approval. No; while the policy can be surrendered at any time, refunds must be requested within 48 hours of submitting the signed application. No; while the policy can be surrendered at any time, the premium cannot be refunded once it is paid. =>Yes, because the request is within the free-look period.
Joanna has a $500,000 permanent life insurance policy that she no longer wants to keep in force. In order to enter into a viatical settlement, what must Joanna prove?
She has a financial need to sell her policy. =>She is terminally or chronically ill. She will use the funds to pay for medical expenses. She is her family's breadwinner.
Who determines the length of the waiting period that must pass before a person is eligible for coverage under an employer's group health plan?
State insurance department Insurer =>Employer and insurer Employer
Which statement about apparent authority is correct?
The agency contract between the insurer and agent creates the authority. The authority arises from the insurer's intent. The authority arises from a third party's reasonably belief based on the conduct of the agent and insurer. =>The insurer is responsible for an agent's conduct while acting with apparent authority.
Henry is on active military duty and suffers a disabling injury while on a combat mission. How will his disability income policy treat the claim?
The disability must be permanent for a claim to be paid. The disability must be temporary for a claim to be paid. The claim will be paid in part. =>The claim will be denied.
Eric's managed care plan states that he and his family must receive care from an approved network provider. If they receive care from an unapproved provider, what will happen?
The insurer will not cover the costs at all. The insurer will negotiate an equitable settlement with Eric. The insurer will fully cover the costs. =>The insurer may not cover the costs at all or may only partially cover them.
Which statement about survivorship life insurance policies is NOT correct?
They pay the death benefit only when the second insured dies. They insure two persons under one policy. =>The premiums are about the same as for two comparable single-life policies. They are also known as second-to-die policies.
Karen, 58, is applying for Social Security disability benefits. If approved, her benefit amount will be based on which of the following?
her adjusted gross income when the disability occurred =>her projected primary insurance amount (PIA) when the disability occurred her W-2 earnings when the disability occurred the extent of her disability
Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own?
indeterminate premium whole life single premium life =>graded premium whole life 20-pay life
For how long must an existing insurer retain replacement notifications?
one year two years three years =>five years
Lisa buys a 10-year renewable term policy at age 30. The renewability provision allows her to:
renew coverage every ten years at the same premium rate renew coverage at an equal or lower premium rate after proving insurability =>continue coverage without having to prove insurability set the terms of her renewal
Once annuitized income payments begin, what are they generally considered?
revocable tax deferred =>irrevocable capital gains
If a qualified retirement plan has a cliff vesting schedule, covered employees typically become 100 percent vested in the employer-funded benefits in the:
second year of participation =>fifth year of participation seventh year of participation tenth year of participation
Which of the following states that the applicant must provide both a signed application and payment of the first premium for the policy to become effective?
the insuring clause =>the consideration clause the payment of premium provision the incontestability provision
Which characteristic about an insurance policy prevents the policyowner from transferring it to a third party without the insurer's consent?
unilateral =>personal aleatory conditional
Which one of the following best describes what an agent's goals should be in completing an application for insurance?
speed =>accuracy, thoroughness, and clarity getting the applicant's full medical history getting the applicant's signature as quickly as possible
A variable annuity owner has a subaccount with a current net asset value (NAV) of $15. If the VA owner makes a $1,000 premium payment, how many accumulation units will be acquired?
15 units 20 units =>66.6 units 50 units
How long can the look-back period be for pre-existing conditions before the insured enrolled in a group health plan that has 'grandfather' status under the Affordable Care Act?
18 months 24 months 12 months =>6 months
How many hours a week must an employee work to be an eligible employee under a small employer's health plan?
20 hours 25 hours =>30 hours 40 hours
Under the other insured term rider, a person can buy a term life insurance rider to cover the life of a spouse (or other adult). This coverage usually ends sometime before the primary insured reaches which of the following ages?
21 50 =>70 120
Which of the following may receive dividends on his life insurance policy?
=>David, who owns a participating whole life policy issued by ABC Mutual Insurance Company Don, who owns a term life insurance policy issued by fraternal benefit society insurance organization. Daniel, who owns a universal life insurance policy issued by a stock insurance company. Donald, who is covered through his employer's group life insurance policy.
Which statement about modified premium whole life insurance is NOT correct?
=>It does not build cash value. It charges lower premiums in the early policy years. At the end of the initial period, the premium increases and stays at the new level for the life of the policy. It is good for people who want the guarantees of whole life insurance and lower early premiums.
Abby receives $15,000 of benefits this year from her employer's managed care plan. Which statement is correct about the taxation of these benefits?
=>The benefits are not taxable income. She must include part of the benefits in her income. She must treat the benefits as taxable income. She must include the benefits in taxable income to the extent they exceed a certain percentage of adjusted gross income.
In which case does ABC Insurance Company most accurately reflect its group underwriting standards in its premium rates?
=>The company prices a policy based on its own morbidity experience. The company prices a policy based on general industry experience. The company prices a policy based on the experience of its closest competitor. The company prices a policy based on the experience of local insurers.
Which of the following statements regarding third-party ownership of a life insurance policy is correct?
=>The insured has no rights in the policy. The insured can access the policy's cash value but cannot designate the beneficiary. The insured cannot access the policy's cash value but can designate the beneficiary. The insured can designate the beneficiary and access the cash value, but cannot assign the policy to another third-party owner
With respect to the difference between variable life insurance (VLI) and variable universal life insurance (VUL), which of the following statements is correct?
=>Variable life policies require a fixed premium payable for the life of the policy while variable universal life permits premium flexibility. Only variable life policies allow the policyowner to put funds in investment subaccounts. Only variable universal life policies offer a minimum death benefit. Only variable universal life is a securities product.
What must an insurance company do to appoint a producer as its agent?
=>document the appointment in writing and record the appointment in its producer register file a notice of appointment with the Administration and pay the required fee notify other authorized insurers before appointing a producer determine from the state's licensing database whether the producer is already appointed by another insurer
Eric is a single, self-employed young man of modest means who needs a small amount of life insurance, primarily as a burial fund. Which one of the following types of insurance is most designed for this need?
=>industrial insurance ordinary insurance group insurance whole life insurance
When is a new life insurance purchase considered a financed purchase?
=>when premiums are paid with funds obtained from an existing policy or contract when premiums are paid with funds obtained through an unsecured loan when premiums are paid with funds obtained through a secured loan when premiums are paid by a co-signer or joint guarantor
All the following statements regarding conditional premium receipts are correct EXCEPT:
A conditional receipt begins on the date of application or the date of a medical exam if required, whichever is later, and it is made on the condition that underwriting determines the insured is insurable. With a conditional receipt if the insured were to die after the date of the application (or medical exam) and the insurer would have issued the policy, the coverage is made effective as of the date of the application, and a death benefit would then be paid. With a conditional receipt, if the applicant proves to be uninsurable (or insurable only as substandard) as of the date of application (or medical exam), no coverage takes effect and the insurer refunds the premium payment. =>Insurers are required to provide the death benefit coverage applied for when issuing a conditional receipt.
Which statement about the conversion provision in group life insurance policies is correct?
An employee must provide evidence of insurability to convert to an individual policy. An employee must complete an application and pay the first premium within six months after the date employment is terminated. =>A person will not have the right to convert a policy if it was terminated due to nonpayment of premium. A person must prove that he or she was insured under the group policy for at least one year before termination.
Which of the following statements about deferred compensation plans is correct?
Annuities and mutual funds are most commonly used in funding deferred compensation plans. =>They allow executives to delay receiving current compensation until a future time. They are considered qualified plans. All employees over the age of 21 with at least one year of service must be eligible to participate in the plan.
May an insurance producer use a trade name to sell insurance in Maryland?
Trade names are permitted if approved by the appropriate court. =>Trade names may be used in Maryland if on file with the Commissioner. Trade names may not be used in Maryland. It would depend on the circumstances.
The Maryland Health Benefit Exchange (MBHE) is primarily intended to do which of the following?
Ensure that existing health insurance policies comply with the PPACA =>Make consumer-friendly health insurance policies available from private insurers. Reduce premium costs for all consumers. Improve health insurers' financial stability
All of the following statements about health savings accounts (HSAs) are correct, EXCEPT:
Health savings accounts are available on either an individual or a group basis. If an employer offers an HSA, employees must first have a high-deductible, high-cost insurance plan and set up an HSA account. =>Group HSAs must be entirely employee-funded. Employers cannot discriminate in any way when making HSA contributions.
Sara has a disability income policy. If she meets the policy's definition of disability, in which of the following cases will coverage apply?
Her previously diagnosed muscular dystrophy becomes debilitating. Her alcoholism renders her chronically immobile. She is severely injured while making deliveries at her job. =>In a freak accident, she is struck by lightning and is paralyze
Policyowners who pay their premiums monthly pay more in one year than those who pay an annual premium at the start of the policy year because:
Insurers prefer to bill annually. Monthly billing puts an added burden on the insurer. More-frequent billing is subject to a higher risk of processing errors. =>The insurer needs to account for lost interest and the administrative costs of processing more frequent payments.
Which of the following statements about a disability income insurance policy's waiver of premium rider is correct?
Older disability income policies provided premium waivers as a clause in the policy rather than as a rider. =>Most modern policies include a waiver of premium provision in the policy itself. Today, insureds must buy a waiver of premium rider for an additional premium. Waiver of premium riders are uncommon in modern disability income policies.
The states' "any willing provider" laws limit the ability of health insurers to:
decide who they will sell policies to set prices =>exclude hospitals and doctors from their networks decide what treatments they will offer
Upon the lapse or surrender of a permanent life insurance policy, the cash value is available to the policyowner in the form of:
distribution options =>nonforfeiture options surrender options settlement options
An insurance company can exclude coverage for a specific medical condition by including which type of rider in a health insurance policy?
dread disease cancelation pre-existing condition =>impairment
ERISA protects enrollees in an employer-sponsored health care plan in each of these ways EXCEPT:
ensuring access to information about the plan =>guaranteeing immediate processing of claims permitting temporary continuation of terminated group coverage. review of a coverage dispute
With long-term care insurance, a longer elimination period will do which of the following?
reduce the benefit period increase the number of benefit triggers needed to qualify for benefits =>reduce the policy's premium increase the policy's benefit amount
What happens if an insured stops paying premiums for an insurance policy?
The insurance company will compel the insured to continue paying the premiums. The insured breaches the contract. The insurance company must return all premiums that have been paid if no claims have been made under the policy. =>The insurance company is released from its promise to pay benefits and the contract expires.
A group disability income policy has a 90-day elimination period. How does this affect benefit payments?
The insured must wait 90 days before filing a claim. Benefits will not begin until 90 days after the insured submits an initial claim. Benefits will be paid for 90 days. =>Benefits will begin 90 days after the disability occurs.
Shamrock Soda Bottling Company employs 40 full-time employees and applies for a health insurance plan issued through the Small Business Health Options Program (SHOP). Which statement is correct about any plan Shamrock buys through the SHOP?
The insurer assigns the level of coverage. The employees choose the level of coverage. =>Shamrock selects the level of coverage. Both Shamrock and the employees choose the level of coverage.
With respect to the interest-only life insurance settlement option, what happens to the death benefit proceeds that the insurer was holding upon request by the beneficiary?
The insurer pays the proceeds in a lump sum. =>The insurer pays the proceeds, either in a lump sum or under one of the other settlement options. The insurer pays the proceeds to the beneficiary. The insurer keeps the interest, thus increasing the death benefit amount.
Mr. Smith has a life insurance policy with a guaranteed insurability rider that has four additional purchase option dates. If he fails to exercise the first option date, what is the result?
The option will be exercised anyway. =>The option expires and coverage continues unchanged until the next option date. Coverage continues unchanged and all future option dates are cancelled. The face amount will remain the same but the premium will decrease.
Variable universal life combines features of variable life and universal life. Variable universal life and universal life are alike in all of the following ways EXCEPT:
The premium payments for both are flexible. Both types of policies let the policyowner choose a death benefit from two (or sometimes three) options. For both policies, the insurer deducts insurance and expenses monthly from the cash value. =>Both are considered securities products as well as life insurance.
Which of the following is the most accurate definition of a SIMPLE retirement plan?
a retirement plan for the self-employed an individual retirement plan =>a plan reserved for small companies with no existing qualified employee retirement plan a plan for employees of government or nonprofit businesses
Patty worked full-time for the past 20 years and has obtained 40 quarters of coverage for Social Security benefit purposes. She is now eligible for full death, retirement, and disability benefits under Social Security, which means that she is considered which of the following?
completely insured =>fully insured currently insured partially insured
In a fixed annuity, what is the declared rate after the initial rate period called?
interest schedule post-initial interest rate =>renewal rate secondary credit amount
Most major medical policies have which of the following types of deductibles?
monthly deductibles =>annual deductibles quarterly deductibles lifetime deductibles
When underwriting an individual disability income policy, the insurer will NOT consider which as a source of income and insurance protection?
other individual disability policies the applicant owns group disability insurance benefits the applicant receives Social Security disability benefits the applicant receives =>family income and inheritances available to the applicant
Although Medicare Part A covers home health care, it does NOT cover:
part-time or intermittent skilled care =>managed care durable medical equipment and supplies home health aide services
When qualifying for Medicaid, the concept of "spending down" assets means that an applicant must:
reduce spending exhaust other insurance policy limits first =>almost exhaust his or her savings exhaust Social Security assets first
Which of the following provisions, found in all major medical insurance policies, states that the insured must pay a certain percentage of the covered costs after the deductible is satisfied?
stop-loss provision carryover credit provision =>co-insurance provision payment of claims provision
What does the length of an annuity's surrender charge period depend on?
the age of the beneficiary the amount selected by the owner =>the contract design and the insurer issuing the contract the age of the annuitant
William purchased an annuity that will provide his wife, Anna, with monthly income payments for as long as she lives. In this scenario, what is Anna called?
the agent the owner =>the annuitant the beneficiary
Newborn children are automatically covered under an insured's individual health insurance policy from birth until when?
the first birthday =>31 days the end of the first calendar year the policy renewal date
In a modified endowment contract, the life insurance policy's cash value grows more quickly than is permitted by the Tax Code, which results primarily from which of the following?
the policy's death benefit shrinking the policyowner buying two or more policies and combining them the issuance of a variable life policy =>excessively large premiums being deposited into the contract within the first seven policy years
An individual long-term care insurance credit is equal to what amount of LTC premiums paid by the individual?
up to $250 for each insured =>up to $500 for each insured up to $750 for each insured up to $1,000 for each insured
When calculating the surviving family's ongoing cash needs at the death of the prospective customer, the agent must consider all of the following expenses EXCEPT:
utilities transportation expenses family medical expenses =>the insured's funeral expenses
A life insurance policy matures or endows when its guaranteed cash value equals its face amount. With an endowment contract, when does the policy endow?
when the insured dies at age 120 after age 120 =>well before age 120, usually at age 65
