L&H State exam MD 2

Suzanne's group health insurance policy terminated on December 31. Within how many days must she apply for a conversion policy?

30 days =>31 days 45 days 60 days

If a policyholder is entitled to medical assistance under Medicaid, how long may his or her Medicare supplement policy be suspended?

6 months 12 months =>24 months 36 months

The Family and Medical Leave Act (FMLA) protects the employment status of certain employees on unpaid leave for up to how long?

=>12 weeks per year 12 weeks per employer 24 weeks per year 24 weeks per employer

Johnny's disability income policy has a probationary period of 20 days. He is injured in an accident ten days after buying the policy. What benefits, if any, will be paid?

=>Benefits for lost income will begin immediately. Benefit payments will begin ten days after the injury. No benefits will be paid. Full income benefit payments will begin after 20 days.

Which of the following is not true about decreasing term insurance?

It is used to cover needs that decrease over time. It is often used to provide for payment of mortgage balances. It can be converted to permanent insurance. =>It can be renewed.

Joan owns a variable universal life insurance policy that now has a $100,000 cash value and is beyond its surrender charge period. This year, she plans to withdraw $25,000 from her policy's cash value to buy a new car. Which one of the following statements is most correct?

Joan must pay a penalty tax for taking an early withdrawal from her cash value. =>Joan's death benefit will be reduced by $25,000. Joan can make the withdrawal but will have to pay it back with interest. Joan can have access to her cash value only through a policy loan or a complete surrender of the policy.

Which statement is correct about the income requirements for Medicaid eligibility?

Only one source needs to be reported at the federal level. Certain states require full income disclosure. Federal tax returns determine qualifying income. =>Income limits are determined by the state.

An insurance policy that reimburses medical expenses directly to the insured is a:

PPO open-ended HMO =>basic medical or indemnity plan Blue Cross Blue Shield

Which statement about the Medicare supplement program is NOT correct?

Plan A provides the basic core benefits. Companies selling Medicare supplement policies must sell Plan A. As Medicare adjusts its deductibles and co-payments, Medicare supplement policies must align their benefits to match the adjustments. =>All Medicare supplement policies must be issued as noncancelable.

Which statement about Medicare supplement Plans K and L is correct?

Plans K and L represent a higher level of benefits. Plans K and L premiums are much higher than those associated with other plans. Plans K and L both pay 20 percent of Medicare coinsurance, co-pays, and deductibles after the insured's annual out-of-pocket limit is reached. =>Plans K and L can offer high-deductible options, which further decrease premium payments.

Which of the following best describes how the insured's money is handled in a variable life insurance policy?

Premiums are placed in the insurer's general account. =>Premiums are placed in investment subaccounts maintained in the insurer's separate account. Premiums are held in a cash account managed by the insurer. Premiums are held in a federally chartered savings institution.

Janet, age 62, plans to quit her job and apply for Social Security retirement benefits this year. Which of the following statements is correct if Janet claims retirement benefits before she reaches her full retirement age?

Retiring before the full retirement age would have no impact on her monthly benefit. Janet's monthly benefit will be reduced, but only until she reaches full retirement age. =>Janet's benefits will be permanently reduced. Janet cannot begin receiving Social Security retirement benefits at age 62.

Sheri received notice of her right to convert her group life insurance policy to an individual policy only five days before the expiration of the conversion period. Which of the following statements is correct about her exercise of this right?

She may receive up to 15 days of additional time. She may receive up to 30 days of additional time. =>She may receive up to 60 days of additional time. She must convert within the five-day notice period.

Fran applied for an individual health insurance policy on July 1 and was issued a binding receipt. If she injured her back on July 4 before the policy was issued, what will happen?

The insurer can reject her claim because the underwriting process was not yet completed. The premium will be returned to Fran because the policy had not been issued. =>Fran's medical claims for her injury will be covered by the policy. The insurer will only be liable for coverage beginning on the date the policy was issued

All the following statements about the paid-up dividend option with participating life insurance are correct, EXCEPT:

The paid-up insurance option lets the policyowner use the dividends to pay up the life insurance policy early. A policyowner who chooses this option could pay up a whole life policy several years early, depending on the policy. After the policy is paid up, the policyowner does not owe any more premiums. =>The policy benefits will continue in force only until the policyholder reaches age 65.

What happens when a universal life insurance policy's cash value no longer covers the monthly deductions to cover the policy's insurance and operational costs?

The policy goes on the extended term option. The policy goes on the reduced paid-up option. The policy is surrendered for cash. =>The policy lapses.

Which of the following best explains the reason an annuity cannot be exchanged tax free for a life insurance policy under Section 1035?

The two products are unrelated. =>If allowed, annuity values could escape income taxation if paid out as a life insurance death benefit. The life insurance industry continues to lobby against it. One is insurance against living too long while the other is insurance against dying too soon.

In what way is a profit-sharing plan unique among defined contribution plans?

There is a limit on contributions. A participant's retirement benefit depends on the amount of contributions made on his or her behalf. =>The employer is the sole contributor. Contributions are directed to a participant's individual account.

All of the following statements regarding viatical settlement brokers are correct, EXCEPT:

They must be licensed in most states. They work on behalf of the viator in the agreement. They arrange the viatical settlement agreement between the viatical settlement purchaser, provider, and viator. =>They fund a viatical settlement on behalf of the viatical settlement provider.

With respect to a disability buy-out policies, which of the following statements is correct?

They typically have a short elimination period. They typically include provisions to cover the business's overhead expenses. They typically provide benefits for partial as well as total disability. =>They typically give policyowners the option to receive benefits in a lump sum payment.

With respect to the uninsurable (declined) underwriting risk classification, which of the following statements is correct?

This rating is assigned to applicants who represent anything below a standard risk. About 10 percent of applicants are declined as uninsurable. =>An underwriter's decision to decline an applicant or to apply a substandard rating is usually reviewed by another underwriter. Applicants who are deemed uninsurable are usually offered a policy with a smaller face amount.

Which of the following statements about universal life insurance (UL) cash value withdrawals is correct?

Universal life insurance policy cash value withdrawals are possible either through policy loans or partial surrenders. Withdrawals are limited to 50 percent or less of the total cash value. =>Regardless of withdrawn amounts, a UL policy will continue in force as long as the remaining cash value can cover the monthly deductions. Withdrawals can be in any amount, with no minimum amount requirements. Explanation:

How long can a pre-existing condition be excluded from coverage under a group health insurance plan, if the plan has "grandfather" status under the Affordable Care Act?

Up to 18 months Indefinitely =>Up to 12 months Up to 24 months

Are group medical expense insurance benefits paid to employees taxable income to the employer who pays the premium?

Yes, employers pay income tax on these benefits. =>No, benefits paid to an employee are not taxable income to the employer. Yes, both employers and employees pay income tax on these benefits. No, only employees pay income tax on these benefits.

What is the monetary penalty for a nonprofit health service plan that operates without a certificate of authority?

a fine of up to $10,000 a fine of up to $20,000 a fine of up to $25,000 =>a fine of up to $50,000

Agent Jill received a letter from the Administration asking her to submit verification of having completed the continuing education requirements for the previous licensing period. Jill did not respond. What action may the Administration take against her?

a fine of up to $100 per day no response is provided a fine of up to $10,000 total termination of her agent's appointment =>nonrenewal of Jill's license

After paying the initial premium for a disability income policy, Suri was injured in an accident. She received disability income payments for the next 12 months. These payments were far more than the amount of the premium she paid. This is characteristic of contracts that are:

adhesive =>aleatory conditional unilateral

A worker's primary insurance amount (PIA) is paid only if the worker retires at:

age 62 or later age 65 =>his or her full retirement age (FRA) age 70'

An insurable risk is not:

ascertainable =>catastrophic uncertain an economic hardship

For continuation coverage, an insured must request an election notification form from the insured's employer during the election period. How long after the employment termination date does this period end?

at least 15 days after the date at least 30 days after the date =>at least 45 days after the date at least 60 days after the date

Sam's contract with the insurer he represents authorizes him to solicit insurance applications. Which of the following is implied by Sam's authority?

authority to perform underwriting functions =>authority to contact prospective clients to arrange sales meetings authority to represent other insurance companies authority to set policy premiums

A long-term care insurance policy provides benefits after the insured satisfies which of the following?

benefit approval dates payment triggers approval triggers =>benefit triggers

Dr. Sanjay participates in a PPO. When PPO enrollees come to his office for care, Dr. Sanjay must:

bill the patients for the care =>accept the PPO's negotiated fee as full payment for services negotiate his payment with the PPO have patients pay his bill and then get reimbursement from the PPO

Which is NOT an optional provision in health insurance policies?

change of occupation misstatement of age illegal occupation =>reinstatement

An agent acting on behalf of an insurance company even though these acts are not specified in the agent's contract with the company but are necessary to carry out the company's express authority, exercises what kind of authority?

express apparent special =>implied

What is the main appeal of joint life insurance?

higher death benefit =>lower cost renewal feature ability to cover an entire family

Manny lost both legs in a motorcycle accident. His health insurance policy paid double the normal benefits due to the accident. Which type of rider does Manny's policy contain?

indemnity rider =>double indemnity rider accidental death and negligence rider accidental injury rider

Written rules for how claims and appeals are handled must be fair and timely in accordance with ERISA's requirements for:

information disclosure accountability =>claims procedures and appeals administration

Which of the following types of whole life insurance is paid with one premium at the time the policy is bought?

modified premium whole life limited pay life graded premium whole life =>single-premium life

When it comes to the frequency of paying life insurance premiums, what options are commonly available to policyowners?

monthly or quarterly payments only monthly payments only =>monthly, quarterly, semi-annual, or annual payments only monthly or annual payments only

Benefits paid through a life insurance policy's accelerated benefits rider:

must be used for medical expenses directly related to the reason for the insured's terminal illness or disabling injury can be used for any purpose as long as the expense is medical-related must be used for long-term care expenses =>can be used for any purpose

Which of the following would not cause an individual to have his or her coverage terminated or denied under the Maryland Health Insurance Plan?

nonpayment of premium previous termination for fraud or intentional misrepresentation =>residence in Maryland for less than a year residence in Maryland for only six months

The Commissioner of Insurance can examine an HMO's affairs as often as reasonably necessary but must do so at least once in how many years?

one year =>three years five years ten years

The ABC Company offers a fixed annuity, guaranteeing a minimum rate of 3 percent, which Jim buys with a $10,000 premium payment. At the time Jim bought his contract, ABC had declared a "crediting rate" of 6 percent for two years. For how long will Jim receive a 6 percent interest rate?

one year =>two years five years for the entire contract

For how long is an insurance producer's license valid in Maryland?

one year =>two years three years five years

For what length of time after its issue does a group life insurance policy become incontestable

one year =>two years three years five years

Which standard provision in a life insurance policy forbids changes to any policy provision unless it is agreed to and signed by an officer of the insurance company?

ownership rights provision =>entire contract provision consideration clause reinstatement provision

A major medical policy with an 80/20 coinsurance clause pays 80 percent of medical expenses until the stop/loss or maximum out-of-pocket limit is reached. Then the policy pays costs based on the:

physician bill alone =>usual and customary charge hospital bill alone scheduled amount

A person who is insured under a managed care plan is considered a:

subject client patient =>member

George purchased an annuity in which his wife will receive income for as long as she lives. In this scenario, what is George most correctly called?

the agent =>the owner the annuitant the beneficiary

Part 2 of a life insurance application generally covers:

the agent's contact information and history with the insurance company the applicant's explanation for why he or she is applying for life insurance the applicant's personal information =>the applicant's medical history

What is the name of the period during which premium funds are paid into an annuity contract?

the annuity period the benefit period =>the accumulation period the annuity payout

In helping a prospective customer determine the lump sum of money his survivors would need at his death, it's necessary for the agent to consider all the following EXCEPT:

the insured's debt final medical expenses estate taxes =>ongoing monthly expenses

A married couple that files a joint tax return asks their agent about opening up a Roth IRA. What is the first piece of information the agent needs before she can advise them?

their current retirement plan coverage =>their joint income amount of their initial contribution when they plan to take their distribution

Your client has a $200,000 term life insurance policy with a return of premium rider. If the insured dies within the term life coverage period after having paid $15,000 in premiums, how much will the beneficiary receive?

$0 $185,000, less premiums that would have been paid up to age 65 =>$200,000 $215,000

Wally annuitized his nonqualified fixed annuity and now receives $1,800 each month. Of this amount, $1,500 represents his investment in the annuity, and $300 represents interest earnings. Which statement regarding the taxation of Wally's annuity payments is correct?

$1,800 is taxed as ordinary income $1,500 is taxed as ordinary income =>$300 is taxed as ordinary income none of the income is taxable

Under a health insurance policy's notice of claim provision, how many days does the insured have to notify the insurer after having a covered loss?

1 day 10 days 15 days =>20 days

The cancelation provision in a health insurance policy permits the insurer to cancel the policy after it gives the insured at least how much notice?

10 days 15 days 21 days =>45 days

What is the grace period for payment of a premium on a group life insurance policy?

15 days 20 days 30 days =>31 days

Which of the following statements regarding the tax treatment of endowment contracts is correct?

=>Endowment contracts no longer get the good tax treatment given to life insurance policies. Endowment contracts are treated like other life insurance policies for tax purposes. Congress has given endowment contracts the best tax status of all types of insurance policies. Endowment contracts are still popular today because of their good tax treatment.

Agent Randy learns that his client Brenda will be replacing her existing life insurance policy. Which document must he give Brenda at the time of application?

=>Notice Regarding Replacement Buyer's Guide policy summary consumer guide

If an applicant submits the first premium payment with an application for life insurance, the agent may give the applicant a temporary insurance receipt that does which of the following?

=>offers interim coverage while the insurer approves the application and formally issues the policy issues permanent coverage for the applicant guarantees that the insurer will accept the application states the insurer's refund policy

Which of the following correctly describes a comparison between a supplemental major medical policy and a comprehensive major medical policy?

=>supplemental policies generally have a higher deductible than comprehensive policies both types of policies use a corridor deductible only comprehensive policies have a coinsurance provision a supplemental policy is a valued contract while comprehensive policies are indemnity contracts

Which of the following statements about deferred annuity surrender charges is NOT correct?

A deferred annuity owner has rights to his or her contract values but may be forced to pay an insurer-imposed charge for withdrawing them. Most deferred annuities apply them if the owner withdraws from, or surrenders, the contract within a set period after he or she buys the contract. The surrender charge is typically a declining percentage of the contract's accumulated value. =>Most deferred annuities apply surrender charges for all years after the contract is issued.

Which statement about spouse/other insured term riders on a life insurance policy is NOT correct?

A person can buy a term life insurance rider to cover the life of a spouse (or other adult). Usually the coverage ends sometime before the other insured's age 100. The intent of this coverage is temporary. =>A policyowner often buys a term life insurance rider on a spouse to provide additional coverage once the children have grown and moved out on their own.

Which is NOT necessary for Medicare Part A to cover the cost of skilled nursing care?

Admission to the facility must occur within 30 days of hospital discharge. Care at the facility must be related to the care at the hospital. The stay at the skilled nursing facility must be for at least three days. =>The patient must have supplementary health insurance.

Medicare Part A provides reasonable and medically necessary hospital care for how long?

21 days =>60 days 30 days Inpatient hospital care is not covered.

Aiden's individual long-term care credit for this taxable year exceeded its tax liability. What is the longest period of time Aiden may carry over this year's unused credit?

=>Credit may not be carried over. Credit must be used in the year following this taxable year. Credit must be used within three years following this taxable year. Credit must be used within five years following this taxable year.

With life insurance, for how long must insurable interest exist?

=>Insurable interest must exist only at the time the applicant enters into a life insurance contract. It must continue for the life of the policy. It must exist when a claim is submitted. If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced.

Which of the following statements correctly describes the tax treatment of disability buy-out insurance?

=>Premiums are not tax-deductible and benefit payments are tax-free. Premiums are not tax-deductible and benefit payments are taxable. Premiums are tax-deductible and benefit payments are tax-free. Premiums are tax-deductible and benefit payments are taxable.

Which statement about return of premium riders is NOT correct?

=>Return of premium riders are available in all states. They allow the insured to get back part of the premium if the insured's claims are below a certain level. They allow the insured to get back part of his or her premium payments if he or she has no claims against the policy. The policyowner pays an additional premium when a return of premium rider is added to a policy.

Ted buys a term-to-65 life insurance contract while Jane buys a whole life paid-up-at-age-65 contract. All other factors being equal, which of the following statements is correct?

=>Ted and Jane will both stop paying premiums at age 65. At age 65, life insurance coverage continues for both Jane and Ted. At age 65, Ted will stop paying premiums but Jane's premiums will continue. At age 65, life insurance coverage ends for both Jane and Ted.

Which one of the following statements about non-qualified deferred compensation plans is most correct?

=>The basic purpose of a deferred compensation plan is to defer the receipt of compensation until one is in a lower tax bracket and will pay lower taxes. The executive will receive the deferred compensation when he or she changes jobs. If the executive dies before retirement, his or her heirs will not receive any of the deferred compensation. Life insurance is never used with deferred compensation plans.

Disability income insurance is NOT typically provided through:

=>a basic medical expense policy an employer's or association's group insurance policy an individual disability income policy Social Security

Which of the following types of healthcare reimbursement programs is currently available, used with high-deductible health insurance plans, and features tax deductible contributions that accumulate on a tax-free basis?

=>health savings accounts (HSAs) medical savings accounts (MSAs) individual retirement accounts (IRAs) flexible spending accounts (FSAs

An individual certificate for a group life insurance policy is not required to include which of the following?

=>inflation protection entitled insurance protection person to whom benefits are payable significant rights and conditions

Although most insurance policies are personal contracts between the insurer and the policyowner, which type is not a personal contract?

=>life insurance homeowner's policy automobile policy professional malpractice insurance policy

Under which of the following settlement options does the insurer distribute all the proceeds upon the death of the insured or surrender of the policy, with none held by the insurer?

=>lump-sum cash payment interest only fixed period fixed amount

What are policies that do not meet IRC Section 7702's definition of life insurance generally called?

=>modified endowment contracts (MECs) seven-pay policies LIFO policies FIFO policies

Annuity income payments are most commonly paid on what schedule?

=>monthly quarterly annually in a lump sum

Variable life and variable universal life insurance are similar in all of the following ways EXCEPT:

Both are considered securities. Both offer a death benefit that varies based on the performance of the subaccount investments. Both let the policyowner put funds in investment subaccounts. =>Both require fixed, set premiums.

Glen files a notice of claim with his health insurance provider. Of what, specifically, is he notifying his insurer?

He is filing a claim against the insurer and expects the claim to be paid. He is terminating coverage and expects a return of unused premium. He expects an agent to deliver a claim check as soon as possible after proof of loss. =>He will be making a claim against the policy and that the insurer should send Glen the required claim forms.

Benefits paid under Ken's qualified long-term care policy up to a daily limit are not taxed. What must happen for Ken to receive these amounts tax free?

He must be employed. He must be under a doctor's care. =>He must be diagnosed as chronically ill. He must be receiving treatment for a recurring medical condition.

All the following statements about standard policy exclusions are correct EXCEPT:

If an insurer excludes a risk from coverage, then it is not covered, and the insurer will not pay the policy's benefit if death results from that risk. Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. =>The war and commission of a felony exclusions are required by law. The war exclusion usually excludes paying the death benefit if the death directly resulted from war.

How will a PPO treat coverage of nonemergency medical treatment from an out-of-network physician?

The claim will be denied. =>The insured will pay a higher amount for the medical care. The insured's cost will not be affected. The insured will pay a lower amount for the medical care.

Which statement is correct about insurance regulation?

The federal government alone regulates the insurance industry. The federal government primarily regulates the insurance industry, and state governments regulate some aspects of it. State governments alone regulate the insurance industry. =>State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it.

Payment of a life insurance claim requires all of the following, EXCEPT:

a policy in force at the time of death a living or designated beneficiary proof the insured's death did not result from an excluded activity =>the beneficiary's report of the cause of death

ABC Insurers orders a consumer report on an applicant for an individual health insurance policy. Which of the following must the applicant receive, according to the Fair Credit Reporting Act?

disclosure statement that the applicant must sign confidentiality agreement privacy notice =>notice that an investigation and report have been requested

Which of the following is not required in an order of the Commissioner before it goes into effect?

effective date intent or purpose =>insurance code provision that supports it grounds on which it is based

Another name for a long-term care insurance policy's waiting period is:

probationary period service period =>elimination period deductible period

Which of the following is the primary regulator of those who sell variable life insurance?

state insurance departments only Financial Industry Regulatory Authority (FINRA) only =>state insurance departments and Financial Industry Regulatory Authority (FINRA) The Securities Exchange Commission (SEC)

Sal loses his sight in a chemical accident in his garage. His group disability insurance plan pays a monthly benefit but does not require proof of ongoing disability to continue benefit payments. Which policy provision exempts him from supplying this proof?

statutory disability partial disability =>presumptive disability residual disability