Life and Health Insurance

An employee group with which of the following number of employees would qualify for a medical savings account? a) 23 employees b) 51 employees c) 101 employees d) Any number of employees

a) 23 employees Medical savings accounts (MSAs) are only available to groups of 50 or fewer employees or a self-employed person.

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.

What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? a) Application b) Policy Request c) Insurance Request Form d) Request for Insurance

a) Application An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.

All of the following statements are correct regarding Credit Life Insurance EXCEPT a) Benefits are paid to the borrower's beneficiary. b) The amount of insurance permissible is limited per borrower. c) Premiums are usually paid by the borrower. d) Benefits are paid to the creditor.

a) Benefits are paid to the borrower's beneficiary. In Credit Life Insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan.

Which of the following statements regarding Business Overhead Expense policies is NOT true? a) Benefits are usually limited to six months. b) Premiums paid for BOE are tax-deductible. c) Any benefits received are taxable to the business. d) Leased equipment expenses are covered by the plan.

a) Benefits are usually limited to six months. Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

Concerning AIDS and HIV risks, all of the following acts may subject an insurer to liability claims or fines EXCEPT a) Declining applicant for a positive HIV test result. b) Not providing counseling contacts and educational information about HIV and AIDS. c) Disclosing test results to third party without applicant's consent. d) Requiring applicant to pay for HIV test in order to be underwritten.

a) Declining applicant for a positive HIV test result. Companies pay for their medical testing and underwriting. At the time of application, information on HIV and AIDS and counseling options must be given to the clients. Applicants can be declined for HIV/AIDS (a true health risk). Disclosing health results to an unauthorized party is a violation.

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.

The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called a) Expenses. b) Legal reserve. c) Dividend accumulation. d) Premium tax.

a) Expenses. Loading is another term for expenses. Net premium (mortality minus interest earned) plus expenses (or loading) equal the gross premium.

Which nonforfeiture option has the highest amount of insurance protection? a) Extended Term b) Conversion c) Decreasing Term d) Reduced Paid-up

a) Extended Term The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Events or conditions that increase the chances of an insured loss occurring are referred to as a) Hazards. b) Exposures. c) Risks. d) Perils.

a) Hazards. Conditions such as lifestyle and existing health, or activities such as scuba diving are hazards and may increase the chance of a loss occurring.

The key factor of representation that allows the injured party to rescind the contract is a) If the representation is false in a material point. b) That any misrepresentation is considered fraud. c) Representations are statements believed to be true and hold no legal consequences. d) The promise or assurance of the representation.

a) If the representation is false in a material point. If a representation is false in a material point the injured party is entitled to rescind the contract from the time the representation becomes false.

In a Disability Income policy, all of the following are considered presumptive disabilities EXCEPT a) Loss of one eye. b) Loss of hearing. c) Loss of two limbs. d) Loss of speech.

a) Loss of one eye. The definition of a presumptive disability varies by company, but generally includes a total loss of sight, speech, hearing or the use of any two limbs.

B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B? a) Modified Life b) Limited Term c) Limited Pay d) Interest-sensitive Whole Life

a) Modified Life A Modified Life policy would be best. It charges a lower premium for the first few policy years and then a higher level premium for the remainder of the life of the policy. These policies were developed to make the purchase of whole life insurance more attractive for individuals who have limited financial resources but will be able to afford higher premiums in the near future.

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? a) No benefits b) Full benefits c) Partial benefits d) Full benefits until the blindness lifts

a) No benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because the insured's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits

Under a non-contributory group health plan, which of the following is FALSE? a) No less than 50% of the eligible employees must elect to participate in the plan. b) 100% of all eligible employees must be covered under the plan. c) 100% of the premium is paid by the employer. d) Eligibility is usually determined by hours worked per week, length of time with the company and age of the employee.

a) No less than 50% of the eligible employees must elect to participate in the plan The employees do not elect to participate in the plan and since the employer pays the premium, all eligible employees are covered under the plan.

Which renewability provision are you most likely to see on a travel accident policy? a) Period of time b) Noncancellable c) Optionally renewable d) Conditionally renewable

a) Period of time The Period of Time (Term) provision means that the policy will only last a certain period of time and cannot be renewed. It will be cancelled at the end of the term for which it was purchased. A travel accident only policy will only provide coverage during the dates the insured is traveling.

ERISA was designed to establish fiduciary standards that would protect a) Plan participants and beneficiaries. b) Employers. c) Department of Labor and the IRS. d) Plan participants.

a) Plan participants and beneficiaries. The Employee Retirement Income Security Act of 1974 (ERISA) was designed to establish fiduciary standards that would protect plan participants and their beneficiaries.

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may a) Pursue asset recovery against the estate of the recipient. b) Pursue asset recovery against the heirs of the recipient. c) Both 1 and 2. d) Neither 1 nor 2.

a) Pursue asset recovery against the estate of the recipient. Asset recovery will commence only if there is no surviving spouse. If there is a surviving spouse, asset recovery may be postponed until after the surviving spouse dies. The assets of heirs are not subject to recovery for Medi-Cal claims of others.

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 below statements does NOT describe a Blue Cross and Blue Shield Plan? a) Services are paid for at the time of use. b) The physicians and hospitals are considered to be the producers. c) Most of the organizations are voluntary and not-for-profit. d) Benefits are paid to the hospitals and physicians, not the insureds.

a) Services are paid for at the time of use. Blue Cross and Blue Shield Plans have a contractual relationship between physicians/hospitals and Blue Cross and Blue Shield; the physicians and hospitals are the producers in the arrangement. Benefits are paid to the hospitals and physicians, not the insureds, an arrangement which is called a "service plan". These plans are also prepaid by the subscriber, usually on a monthly basis.

Which of the following terms describes the specified dollar amount beyond which the insured no longer participates in the sharing of expenses? a) Stop-loss limit b) Out-of-pocket limit c) First-dollar coverage d) Corridor deductible

a) Stop-loss limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen? a) The PPO will pay reduced benefits. b) The PPO will not pay any benefits at all. c) The insured will be required to pay a higher deductible. d) The PPO will pay the same benefits as if the insured had seen a PPO physician.

a) The PPO will pay reduced benefits. The group health plan will not pay the full amount charged by the non-PPO doctor.

Which of the following is NOT a feature of a guaranteed renewable provision? a) The insurer can increase the policy premium on an individual basis. b) The insured has a unilateral right to renew the policy for the life of the contract. c) Coverage is not renewable beyond the insured's age 65. d) The insured's benefits cannot be reduced.

a) The insurer can increase the policy premium on an individual basis. Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.

Which of the following is NOT a characteristic of pure risk? a) The loss must be catastrophic. b) The loss must be due to chance. c) The loss must be measurable in dollars. d) The loss exposure must be large.

a) The loss must be catastrophic. In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.

Which of the following will vary the length of the grace period in health insurance policies? a) The mode of the premium payment b) The length of any elimination period c) The length of time the insured has been insured d) The term of the policy

a) The mode of the premium payment The grace period is 7 days on a policy with a weekly premium mode; 10 days if a monthly premium mode; 31 days on other premium modes.

Hospital indemnity/hospital confinement indemnity policy will provide payment based on a) The number of days confined in a hospital. b) The type of illness. c) The premiums paid into the policy. d) The medical expense incurred.

a) The number of days confined in a hospital. Hospital indemnity/hospital confinement indemnity policy provides payment based only on the number of days confined in a hospital.

In a life settlement contract, whom does the life settlement broker represent? a) The owner b) The insurer c) The beneficiary d) The life settlement intermediary

a) The owner Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.

All of the following statements are true regarding installments for a fixed amount EXCEPT a) The payments will stop when the annuitant dies. b) Value of the account and future earnings will determine the time period for the benefits. c) This option pays a specific amount until the funds are exhausted. d) The annuitant may select how big the payments will be.

a) The payments will stop when the annuitant dies. Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.

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

a) 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.

Which characteristic does NOT describe managed care? a) Unlimited access to providers b) High-quality care c) Shared risk d) Preventive care

a) Unlimited access to providers There are five distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventive care, and high-quality care.

When would a 20-pay whole life policy endow? a) When the insured reaches age 100 b) At the insured's age 65 c) After 20 payments d) In 20 years

a) When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.

When is the insurability conditional receipt given? a) When the premium is paid at the time of application b) After the application has been approved and the premium has been paid c) When an insured individual needs to obtain an insurability receipt for tax purposes. d) If the application is approved before the premium is paid

a) When the premium is paid at the time of application 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.

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.

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a) 15% b) 50% tax on the amount not distributed as required c) No penalties, since the owner is older than 59 ½ d) 10% for early withdrawal

b) 50% tax on the amount not distributed as required When immediate annuities are used to pay IRA benefits, distributions must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT a) A life insurance license. b) A SEC registration. c) A FINRA registration. d) A securities license.

b) A SEC registration. Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

Which of the following would NOT be considered a form of direct response marketing? a) An insurance company's TV commercial b) A sign in an insurer's office c) An ad in a newspaper d) A circular mailed to a city's residents

b) A sign in an insurer's office The mass marketing of insurance products is considered direct response marketing.

In reference to the standard Medicare Supplement benefits plans, what does the term standard mean? a) Coverage options and conditions are developed for average individuals. b) All providers will have the same coverage options and conditions for each plan. c) Coverage options and conditions comply with the law, but will vary from provider to provider. d) All plans must include basic benefits A-N.

b) All providers will have the same coverage options and conditions for each plan. In reference to the standard Medicare Supplement benefits plans, the term "standard" implies that all providers will have the same coverage options and conditions for each plan.

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

b) 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.

If a loss occurs, insurance policies pay the proceeds to a) Agent b) Beneficiary c) Applicant d) Insurer

b) Beneficiary The beneficiary is the person who receives the benefits from the insurance policy

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

b) 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.

Making use directly or indirectly of any methods of marketing which fail to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contract will be made by an insurance agent or insurance company is known as a) Rebating. b) Cold lead advertising. c) High pressure tactics. d) Twisting.

b) Cold lead advertising. Cold lead advertising is any method which fails to disclose in a conspicuous manner that the true purpose is solicitation of insurance.

Why is it essential for an insurer to document all correspondence with an insured? a) Federal law b) Errors and omissions c) Statistics gathering d) State law

b) Errors and omissions Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur. The most common times for these errors are during the sales interview and policy delivery. It is essential to have proof of these interactions, in the events that an insured would sue the insurer.

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach? a) Expenses b) Estimated longevity c) Outstanding debt d) Mortgages

b) Estimated longevity There are four main types of information that an insurer needs to obtain in order to determine the value of someone's life: debt status, income, mortgage, and expenses. Longevity is not a factor in the personal financial planning process.

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

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

Which of the following statements is correct? a) All HMOs and PPOs charge premiums beyond what is paid by Medicare. b) HMOs may pay for services not covered by Medicare. c) HMOs do not pay for services covered by Medicare. d) Medicare Advantage is Medicare provided by an approved Health Maintenance Organization only.

b) HMOs may pay for services not covered by Medicare. The advantages of an HMO or PPO for a Medicare recipient may be that there are no claims forms required, almost any medical problem is covered for a set fee so health care costs can be budgeted, and the HMO or PPO may pay for services not usually covered by Medicare or Medicare supplement policies, such as prescriptions, eye exams, hearing aids, or dental care.

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

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

Annually renewable term policies provide a level death benefit for a premium that a) Fluctuates. b) Increases annually. c) Decreases annually. d) Remains level.

b) Increases annually Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

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

b) 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.

Doug decided to retire at age 62. When he applied for Social Security Retirement Benefits, he discovered a) Medicare Part A was provided without charge, but Part B required a premium. b) Medicare coverage was not available until the month of his 65th birthday. c) Medicare coverage varies from state to state. d) Medicare Part A and Part B were provided automatically without charge.

b) Medicare coverage was not available until the month of his 65th birthday. Those who qualify for Medicare through Social Security are not eligible until age 65, unless they are totally disabled or suffer from kidney failure.

Under the Affordable Care Act, which classification applies to health plans based on the amount of covered costs? a) Risk classification b) Metal level classification c) Guaranteed and nonguaranteed d) Grandfathered and nongrandfathered

b) Metal level classification Plans other than self-insured plans will be classified into four levels determined by how much of one's expected health care costs are covered. The four plans are bronze, silver, gold, and platinum. This is called metal level classification.

Which of the following do the Standard and Preferred risk categories share? a) Permanent coverage b) Premiums are not elevated. c) More medical evaluations are required. d) Possible modifications to include expanded coverage

b) Premiums are not elevated. The "standard" rating indicates that an individual represents a similar level of health and lifestyle quality as other members of the same age cohort. These individuals do not need special policy restrictions or are required to pay higher premiums. Those in the "preferred" category often have to pay smaller premiums than those who are in the "standard" category.

Which nonforfeiture option provides coverage for the longest period of time? a) Accumulated at interest b) Reduced paid-up c) Extended term d) Paid-up option

b) Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

When an employee covered under a health reimbursement account changes employers, the HRA a) Is split between the employee and employer. b) Stays with the employer. c) Follows the employee. d) Returns to the insurer.

b) Stays with the employer. HRAs remain with the originating employer and do not follow an employee to new employment.

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? a) The insured will have to select a plan from which to collect benefits. b) The benefits will be coordinated. c) Neither plan would pay. d) Each plan will pay in equal shares.

b) The benefits will be coordinated. Benefits will be coordinated when individuals are covered under two or more health plans.

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true? a) The cost of coverage paid by the employer is tax deductible by the employees. b) The cost of coverage is a deductible expense by the employer. c) The value of insurance will be deducted from the employees' compensation. d) The cost of coverage paid by the employer is taxed to the employees.

b) The cost of coverage is a deductible expense by the employer. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to a) The insurance company. b) The insured's estate. c) The insured's firstborn child. d) Both children who share equally on a per-capita basis.

b) The insured's estate. Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's estate

Which of the following is true regarding elimination periods and the cost of coverage? a) Elimination periods have no effect on the cost of coverage. b) The longer the elimination period, the lower the cost of coverage c) The shorter the elimination period, the lower the cost of coverage d) The longer the elimination period, the higher the cost of coverage

b) The longer the elimination period, the lower the cost of coverage The "elimination period" is a period of days which must expire after the onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period is, the lower the cost of coverage will be.

An agent is a legal person who acts on behalf of a) Himself/herself. b) The principal. c) The applicant. d) The beneficiary.

b) The principal. An agent is a legal person who acts on behalf of the principal (insurer).

An HSA holder who is 65 years old decides to use the money in the account for a nonhealth expense. Which of the following is true? a) There will be a 20% penalty. b) There will be a tax. c) There will be no taxes and no penalties. d) There will be a tax and a 20% penalty.

b) There will be a tax. An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty. After age 65, a withdrawal used for a nonhealth purpose will be taxed, but not penalized.

The paid-up addition option uses the dividend a) To accumulate additional savings for retirement. b) To purchase a smaller amount of the same type of insurance as the original policy. c) To purchase a one-year term insurance in the amount of the cash value. d) To reduce the next year's premium.

b) To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

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 a) Implied warranty. b) Utmost good faith. c) Reasonable expectations. d) A warranty.

b) Utmost good faith 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.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant a) Prior to filling out an application for insurance. b) With the policy. c) Upon issuance of the policy. d) Within 30 days after the first premium payment was collected.

b) With the policy. If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.

What is the penalty for IRA distributions that are below the required minimum for the year? a) 10% b) 25% c) 50% d) 60%

c) 50% If there are no distributions at the required age, or if the distributions are not large enough, the penalty is 50% of the shortfall from the required annual amount.

What is the maximum amount that can be contributed to an MSA of the high-deductible plan for individuals? a) 35% b) 50% c) 65% d) 75%

c) 65% The maximum amount than can be contributed to an MSA is 65% of the high-deductible plan for individuals or 75% of the family deductible for those with family coverage. Nonqualified distributions have a 20% penalty tax.

Which of the following persons is NOT eligible for Medicare? a) A person who has turned age 65 and continues to work b) A person who has a permanent kidney failure c) A person who has been entitled to Social Security disability benefits for the last 6 months d) A person age 70

c) A person who has been entitled to Social Security disability benefits for the last 6 months A person must have been entitled to Social Security benefits for 2 years to qualify for Medicare.

A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is a) A premium. b) A guaranteed benefit. c) A policy. d) A rider.

c) A policy A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is a policy.

The protection of the insurer from adverse selection is provided in part by a) A drop in applicants. b) A reduction in coverage. c) A profitable distribution of exposures. d) Reducing costs.

c) A profitable distribution of exposures The profitable distribution of exposures, which balances poor risks and preferred risks with standard risks in the middle, protects insurers from adverse selection.

All of the following qualify for Medicare Part A EXCEPT a) Anyone who is at the end stage of renal disease. b) Anyone who is over 65, not covered by Social Security, and is willing to pay premium. c) Anyone who is willing to pay a premium. d) Anyone that qualifies through Social Security.

c) Anyone who is willing to pay a premium. For Medicare Part A, a person must be age 65 or otherwise qualify.

Which of the following is NOT an enrollment period for Medicare Part A applicants? a) Special enrollment b) General enrollment c) Automatic enrollment d) Initial enrollment

c) Automatic enrollment There are 3 types of enrollment periods for Medicare Part A: initial enrollment period, general enrollment period and special enrollment period.

The act of revoking or terminating an insurance policy is called a) Nonrenewal. b) Lapse. c) Cancellation. d) Forfeiture.

c) Cancellation. Cancellation is the act of revoking or terminating one's insurance policy.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith

c) 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.

Creditable coverage includes a) Credit-only insurance b) Coverage only for accident or disability income insurance. c) Coverage under a state health benefits risk pool. d) Workers compensation.

c) Coverage under a state health benefits risk pool. Creditable coverage also includes, but is not limited to, coverage provided under any individual or group policy; coverage under Medicare Parts A or B, and Medicaid; or health plans under the Federal Employees Health Benefits Program.

Which agreement specifies how a business will transfer hands when one of the owners dies or becomes disabled? a) Absolute assignment b) Transfer of Ownership c) Disability Buy-Sell d) Proprietary Transfer

c) Disability Buy-Sell The Disability Buy-Sell agreement specifies how a business will pass between business owners if one of the owners dies or becomes disabled.

Which of the following will NOT be considered unfair discrimination by insurers? a) Cancelling individual coverage based on the insured's marital status b) Assigning different risk classifications to applicants based on gender identity c) Discriminating in benefits and coverages based on the insured's habits and lifestyle d) Charging applicants with similar health histories different premiums based on their ethnicity

c) Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? a) Defamation b) Unfair discrimination c) Fraud d) Errors and omissions

c) Fraud According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer.

Which of the following refers to "own occupation" disability? a) Insured business owner is unable to perform the duties of his/her own business. b) Insured business owner is unable to perform the duties of any related business. c) Insured is unable to perform duties of the occupation for which he/she was educated and trained. d) Insured is unable to perform duties of any occupation.

c) Insured is unable to perform duties of the occupation for which he/she was educated and trained. Under an Own Occupation plan, if the insured cannot perform duties of his/her current job or the job that he/she was educated and trained for, disability benefits will be paid, even if the insured would be capable of earning income at a different occupation.

Which of the following is true of a PPO? a) Claim forms are completed by members on each claim. b) No copayment fees are involved. c) Its goal is to channel patients to providers that discount services. d) A most common type of PPO is the staff model.

c) Its goal is to channel patients to providers that discount services. Insureds are treated by providers who have agreed to discount their charges.

Issuance of health policies to insureds with chronic or ongoing conditions could result in all of the following EXCEPT: a) Adverse selection and consequently higher overall costs and premiums. b) An immediate claim. c) Lower overall costs and premiums. d) A very high claim within a short period of time.

c) Lower overall costs and premiums. Chronic or ongoing is defined as prolonged, continuing, or lingering illness or disability. Issuance of health policies to insureds with chronic or ongoing conditions could result in immediate or very high claims within a short period of time. This results in adverse selection and, consequently, higher overall costs and premiums.

In franchise insurance, premiums are usually a) Higher than individual policies or than group policies. b) Higher than individual policies, but lower than group policies. c) Lower than individual policies, but higher than group policies. d) Lower than individual policies or group policies.

c) Lower than individual policies, but higher than group policies. Premiums charged are generally less than for an individual policy, but more than group coverage.

In a situation when a Medicare insured uses the services of a non-participating provider, which of the following is NOT true? a) The provider must file a Medicare claim on the insured's behalf. b) The insured must pay his/her portion at the time service is rendered. c) Medicare pays its share of the bill directly to the provider. d) The insured may have to pay most of or the entire bill.

c) Medicare pays its share of the bill directly to the provider. If a health care provider does not accept Medicare assignments, the insured may have to pay most of or the entire bill at the time the service is rendered. The provider is required to file a claim on the behalf of the insured, and Medicare would then pay its share of the bill directly to the insured, not the provider.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a) Pay nothing; there was a misrepresentation on the application b) Pay the full death benefit and refund excess premium c) Pay a reduced death benefit d) Pay the full death benefit

c) Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

Which of the following is NOT among the goals of a Medicare supplement application? a) Determining whether or not the policy will replace another accident and health policy b) Advising applicants regarding the availability of counseling services c) Presuming the applicant is eligible for Medicaid, based on the nature of the policy d) Determining whether or not an applicant has an existing Medicare supplement policy

c) Presuming the applicant is eligible for Medicaid, based on the nature of the policy Medicare supplement policies must ask the applicant if they are eligible for Medicaid.

What is a major problem with naming a trust as the beneficiary of a life insurance policy? a) It is illegal to name a trust as the beneficiary. b) The insured must have the Superintendent's permission to name a trust as the beneficiary. c) They are expensive to administer. d) The insurance company will not pay the proceeds to a nonliving beneficiary.

c) They are expensive to administer. The major disadvantage of trusts is that they are expensive to administer.

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least a) Quarterly b) Annually c) Semiannually d) Monthly

c) Semiannually According to CIC 10234.93, the insurer must submit an updated list semiannually of all agents authorized to solicit long term care insurance.

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a) Nonforfeiture option. b) Rollover. c) Settlement option. d) Nontaxable exchange.

c) Settlement option. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

Which of the following is NOT covered under Plan A in Medigap insurance? a) The 20% Part B coinsurance amounts for Medicare approved services b) The first three pints of blood each year c) The Medicare Part A deductible d) Approved hospital costs for 365 additional days after Medicare benefits end

c) The Medicare Part A deductible Medicare Supplement Plan A provides the core, or basic, benefits established by law. All of the above are part of the basic benefits, except for the Medicare Part A deductible, which is a benefit offered through nine other plans.

All of the following statements are TRUE concerning Debtor Groups EXCEPT a) The premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both. b) An insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer. c) The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. d) The debtors eligible for insurance under the policy shall all be the debtors of the creditor(s).

c) The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. The amount of insurance of the life of any debtor may at no time exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a) A corporation can be an annuitant as long as the beneficiary is a natural person. b) The contract can be issued without an annuitant c) The annuitant must be a natural person. d)A corporation can be an annuitant as long as it is also the owner.

c) The annuitant must be a natural person. Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction. b) The benefit is received as taxable income. c) The benefit is received tax free. d) The benefit is subject to the exclusionary rule.

c) The benefit is received tax free. Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim, a) The insurance plans will split the coverage evenly. b) Both plans will pay the full amount of the claim. c) The insurance through his company is primary. d) The insurance through his wife's company is primary.

c) The insurance through his company is primary. The policy that covers the person filing the claim will be considered the primary policy.

On a disability income policy that contains the "own occupation" definition of total disability, the insured will be entitled to benefits if they cannot perform a) Any job that they are suited for by prior training. b) Any job that they are suited for by prior experience. c) Their regular job. d) Any job that they are suited for by prior education.

c) Their regular job. If a disability income policy contains the own occupation definition, then the insured will be considered disabled if they cannot perform that particular job, regardless of other jobs that they may be able to do.

All of the following are requirements for life insurance illustrations EXCEPT a) They must identify nonguaranteed values. b) They must differentiate between guaranteed and projected amounts. c) They must be part of the contract. d) They may only be used as approved.

c) They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

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

c) 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.

Why do group health providers usually require a certain amount of participation in the plan by eligible employees? a) To ensure a higher profit for the insurer b) To ensure the employer is being fair to employees c) To guard against adverse selection and reduce cost d) To promote preventive care

c) To guard against adverse selection and reduce cost The reason for the minimum participation requirement is to guard against adverse selection and to reduce administrative costs for the insurer.

Which of the following is NOT the purpose of HIPAA? a) To prohibit discrimination against employees based on their health status b) To limit exclusions for pre-existing conditions c) To provide immediate coverage to new employees who had been previously covered for 18 months d) To guarantee the right to buy individual policies to eligible individuals

c) To provide immediate coverage to new employees who had been previously covered for 18 months HIPAA does not prohibit employers or providers from establishing waiting periods or pre-existing conditions exclusions, in which case the coverage to new employees would not be immediate.

What percentage of a company's employees must take part in a noncontributory group life plan? a) 0% b) 25% c) 75% d) 100%

d) 100% If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

Under the Affordable Care Act, what percentage of preventive care must be covered without cost sharing? a) 25% b) 50% c) 80% d) 100%

d) 100% The Act requires that 100% of preventive care be covered without cost sharing.

How long does the initial enrollment period for Medicare Part B last? a) 90 days b) 1 year c) 6 months d) 7 months

d) 7 months Initial enrollment period (IEP) is a 7-month period during which an individual may enroll into Medicare Part B program that usually begins 3 months before the month in which the individual turns age 65, and ends 3 months after that after the birthday month.

Which of the following best describes the waiting period? a) A period of time the insurer has to wait for a claim to be submitted. b) A period of time during which a policy can be returned to the insurer for a complete refund of the premium. c) A period of time that needs to lapse before coverage for specified conditions goes into effect. d) A period of time the insured has to wait before payments of benefits begin after a disability.

d) A period of time the insured has to wait before payments of benefits begin after a disability. The waiting or elimination period is a period of time the insured has to wait after a disability occurs and before benefit payments begin.

Who is a third-party owner? a) An insurer who issues a policy for two people b) An employee in a group policy c) An irrevocable beneficiary d) A policyowner who is not the insured

d) A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

Regarding a PPO, which of the following is correct when selecting a primary care physician? a) The insured may choose medical providers not found on the preferred list and still retain coverage. b) The insured is allowed to receive care from any provider, but if the insured selects a PPO provider, the insured will realize lower out-of-pocket costs. c) If a non-network provider is used, the insured's out-of-pocket costs will be higher. d) All of the above are correct

d) All of the above are correct In a PPO, the insured does not have to select a primary care physician. Conversely, In a PPO, all network providers are considered "preferred," and you can visit any of them, even specialists, without first seeing a primary care physician. Certain services may require Plan precertification, an evaluation of the medical necessity of inpatient admissions and the number of days required to treat your condition.

What factors would an insurer consider when assessing risk and projecting losses? a) Geographic area b) Zip code c) Type of industry d) All the above

d) All the above Insurers will consider the type of industry as well as the city or county where the business is located.

What size companies are eligible for health reimbursement accounts (HRAs)? a) Small employers only b) Sole proprietors only c) Companies with at least 100 employees only d) Companies of all sizes

d) Companies of all sizes HRAs are open to employees of companies of all sizes.

What happens when a policy is surrendered for its cash value? a) Coverage ends but the policy can be reinstated at any time. b) The policy can be reinstated by paying back all policy loans and premiums. c) The policy can be converted to term coverage. d) Coverage ends and the policy cannot be reinstated.

d) Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated.

Which of the following best describes the aleatory nature of an insurance contract? a) Only one of the parties being legally bound by the contract b) Ambiguities are interpreted in favor of the insured c) Policies are submitted to the insurer on a take-it-or-leave-it basis d) Exchange of unequal values

d) Exchange of unequal values An aleatory contract is a contract in which unequal amounts or values are exchanged. The amount of premium the insured pays is much less than the potential loss assumed by the insurer.

A policy which pays monthly income upon the death of the breadwinner for a predetermined number of years after death, plus a lump sum at death, and combines level term and whole life is known as which policy? a) Family income b) Family policy c) Family protection plan d) Family maintenance

d) Family maintenance Whole life pays a lump sum, and level term pays monthly benefits for the predetermined years of the policy.

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.

A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? a) Noncancellable b) Nondiscriminatory c) Indemnity d) Guaranteed

d) Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Dividend options b) Guaranteed renewable option c) Nonforfeiture options d) Guaranteed insurability option

d) Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT a) Has a constitution and by-laws. b) Holds annual meetings. c) Is contributory. d) Has at least 50 members.

d) Has at least 50 members. All of the above characteristics would make an association group eligible for buying group insurance, except the group must have at least 100 members.

The mode of premium payment a) Is the factor that determines the amount of dividends in a policy. b) Is the method used to compute the cash surrender value of the policy. c) Does not affect the amount of premium paid. d) Is defined as the frequency and the amount of the premium payment.

d) Is defined as the frequency and the amount of the premium payment. The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly.

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? a) Joint and survivor b) Single life c) Fixed-amount d) Life income with period certain

d) Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

What describes the specific information about a policy? a) Illustrations b) Buyer's guide c) Producer's report d) Policy summary

d) Policy summary A policy summary describes the features and elements of the specific policy for which a person is applying.

Pertaining to insurance, what is the definition of a fiduciary responsibility? a) Helping insureds to file claims b) Performing reviews of insured's coverage c) Offering additional coverage to clients d) Promptly forwarding premiums to the insurance company

d) Promptly forwarding premiums to the insurance company Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.

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

d) 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.

An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy? a) The principal amount in a lump sum b) The capital amount in monthly installments c) The principal amount in monthly installments d) The capital amount in a lump sum

d) The capital amount in a lump sum Accidental Death and Dismemberment policies pay a capital amount (a percentage of the principal amount) for the loss of one limb or loss of sight in one eye. The principal amount is paid for death or often for the loss of 2 limbs or loss of sight in both eyes. Benefits are paid in a lump sum.

In insurance, an offer is usually made when a) The insurer approves the application and receives the initial premium. b) The agent hands the policy to the policyholder. c) An agent explains a policy to a potential applicant. d) The completed application is submitted.

d) The completed application is submitted. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

How are contributions to a tax-sheltered annuity treated with regards to taxation? a) They are never taxed. b) They are taxed as income for the employee. c) They are taxed as income for the employee, but are tax free upon withdrawal. d) They are not included as income for the employee, but are taxable upon distribution.

d) They are not included as income for the employee, but are taxable upon distribution. Funds contributed are excluded from the employee's current taxable income, but are taxable upon withdrawal.

How are employer contributions to Health Reimbursement Accounts treated in regards to taxation? a) They are taxed as a regular business expense. b) They are treated as income tax for the employer. c) They are excluded from all taxation. d) They are tax deductible.

d) They are tax deductible. Employers' contributions to HRAs are tax deductible.

Which of the following is NOT true regarding Equity Indexed Annuities? a) The insurance company keeps a percentage of the returns. b) They have guaranteed minimum interest rates. c) They are less risky than variable annuities. d) They earn lower interest rates than fixed annuities.

d) They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

Which of the following products requires a securities license? a) Fixed annuity b) Equity Indexed annuity c) Deferred annuity d) Variable annuity

d) Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? a) On the designated effective date b) On the application date c) When the agent submits the application to the company and the company issues a conditional receipt d) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

d) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) One-year term option. b) Paid-up option. c) Accelerated endowment. d) Paid-up additions.

a) One-year term option. The dividend is utilized to purchase one year term insurance.

Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT a) The Grace Period. b) The Incontestability Period. c) The Free-Look Period. d) The Right of Rescission.

a) The Grace Period. When the customer signs and dates the policy delivery receipt, the exact date of acceptance is established, which starts the incontestability period. The client also has between 10 to 30 days to review the policy and return for a full refund, called the Right of Rescission, or Free Look Period. The grace period refers to the time period allowed after subsequent premium payments during which a policy will not lapse.

What is the penalty for excessive contributions to an IRA? a) 4% b) 6% c) 10% d) 15%

b) 6% An individual can contribute 100% of earned income up to a specified amount. The excess contribution penalty for traditional IRAs is 6%.

Which of the following best defines earned surplus? a) Dividends paid to policyholders. b) Insurer's unassigned funds. c) Insurer's expenses and liabilities. d) None of the above.

b) Insurer's unassigned funds. As defined by the California Insurance Code 1152, "earned surplus is unassigned funds, as required to be reported on the insurer's annual statement."

Who can make a fully deductible contribution to a traditional IRA? a) Someone making contributions to an educational IRA b) A person whose contributions are funded by a return on investment c) An individual who has earned income d) Anybody: all IRA contributions are fully deductible regardless of income level

c) An individual who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the full amount of their IRA contributions regardless of their income level.

Charges for services provided through a HICAP agency are a) Paid for 80% by the insurer and 20% by the insured. b) Based on the client's ability to pay. c) Never made to the client. d) Billed to the client's insurance company.

c) Never made to the client. HICAP services are provided free of charge to clients.

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds a) $10,000. b) $15,000. c) $25,000. d) $50,000

d) $50,000 The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

What is a penalty tax for nonqualified distributions from a health savings account? a) 8% b) 10% c) 12% d) 20%

d) 20% An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty.

An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage? a) $102 b) $25 c) $25.50 d) $100

a) $102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.

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) 20 b) 100 c) 80 d) 3

a) 20 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.

Assuming that all of the following people are covered by a High Deductible Health Plan and are not claimed as dependents on anyone's tax returns, which would NOT be eligible for a Health Savings Account? a) Amanda is 67 and is covered by a basic medical expense policy b) Andy is 55 and is covered under a dental care policy c) Jenny is 60 and also has a long-term care insurance plan d) Joe is 40 and is not covered by any other health insurance

a) Amanda is 67 and is covered by a basic medical expense policy To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance except for specific injury, accident, disability, dental care, vision care, or long-term care insurance, must not be eligible for Medicare (usually age 65), and can't be claimed as a dependent on someone else's tax return.

If a Medicare insured uses a non-participating in Medicare physician, he or she may be asked to sign a private contract. Which of the following conditions will NOT apply when the insured signs a private contract with the provider? a) Claims should be submitted to Medicare. b) Medicare supplement policy will not pay for the services. c) The provider must tell the insured if he/she has opted out of or been excluded from the Medicare program. d) The insured has to pay all the charges.

a) Claims should be submitted to Medicare When an insured uses services of a non-participating in Medicare physician, the insured and the provider might need to sign a private contract. The insured will have to pay whatever the provider charges for the services; Medicare limiting charges will not apply. Therefore, no claims should be submitted to Medicare, and Medicare will not pay if one is submitted.

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions? a) Distributions are taxable. b) Distributions are nontaxable. c) Distributions cannot begin prior to age 70½. d) There are no distributions.

a) Distributions are taxable. If contributions are made with before-tax dollars, contributions to this fund are fully taxable. Distributions must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.

What is the goal of the HMO? a) Early detection through regular checkups b) Providing free health services c) Limiting the deductibles and coinsurance to reduce costs d) Providing health services close to home

a) Early detection through regular checkups The goal of the HMO is early detection so members are encouraged to participate in regular checkups. In this way the HMO hopes to catch disease in its earliest stages when treatment has the greatest chance for success.

Health coverage becomes effective when the a) First premium has been paid and the application has been approved. b) Producer delivers the policy to the insured. c) Medical examination has been completed and the premium paid. d) First premium has been received in the insurance company's home office.

a) First premium has been paid and the application has been approved. If the premium has been paid, coverage becomes effective when the company underwriter approves the application.

Which of the following statements is correct? a) Medicare will cover nursing home care if it is part of the treatment for a covered illness. b) Care needed because of aging is covered by Medicare but not by Medicare supplements. c) Care needed because of aging is covered by Medicare. d) Medicare does not pay for nursing home care in any case.

a) Medicare will cover nursing home care if it is part of the treatment for a covered illness. Medicare will cover nursing home care if it is part of the treatment for a covered injury or illness, but care needed because of aging is not covered by Medicare or Medicare supplements. Medicare and Medicare supplements pay for skilled nursing care, but the coverage is limited. Medicaid does pay for nursing home care, but it provides coverage only for those that qualify with low income and low assets.

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

a) 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.

Which of the following statements is INCORRECT concerning Medicare Part B coverage? a) Part B coverage is provided free of charge when an individual turns age 65. b) Participants under Part B are responsible for an annual deductible. c) Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges. d) It is a voluntary program designed to provide supplementary medical insurance to cover physician services, medical services and supplies not covered under Part A.

a) Part B coverage is provided free of charge when an individual turns age 65. Those who desire Part B coverage must enroll and pay a monthly premium.

All of the following are examples of risk retention EXCEPT a) Premiums. b) Deductibles. c) Copayments. d) Self-insurance.

a) Premiums. Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.

All of the following are true regarding rebates EXCEPT a) Rebates are allowed if it's in the best interest of the client. b) Rebates are only allowed if specifically stated in the policy. c) Rebating can be anything of economic value, given as an inducement to buy. d) Dividends are not considered to be rebates.

a) Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

Which of the following is NOT covered under Basic Hospital Expense Coverage? a) Surgeons' fees b) Hospital room and board c) Lab charges d) X-ray charges

a) Surgeons' fees Hospital expense policies cover hospital room and board, and miscellaneous hospital expenses, such as lab and x-ray charges, medicines, use of operating room and supplies, while the insured is confined in a hospital.

Which of the following is NOT a feature of a noncancellable policy? a) The insurer may terminate the contract only at renewal for certain conditions. b) The premiums cannot be increased beyond the amount stated in the policy. c) The guarantee to renew coverage usually applies until the insured reaches certain age. d) The insured has the right to renew the policy for the life of the contract.

a) The insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

Under an extended term nonforfeiture option, the policy cash value is converted to a) The same face amount as in the whole life policy. b) The face amount equal to the cash value. c) A lower face amount than the whole life policy. d) A higher face amount than the whole life policy.

a) The same face amount as in the whole life policy. 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.

Following an injury, a policyowner covered under Medicare Parts A & B was treated by her physician on an outpatient basis. How much of her doctor's bill will she be required to pay out-of-pocket? a) A per office visit deductible b) 20% of covered charges above the deductible c) 80% of covered charges above the deductible d) All reasonable charges above the deductible according to Medicare standards

b) 20% of covered charges above the deductible After the deductible, Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges.

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

b) 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.

Naming a trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner EXCEPT a) Receive death benefits on behalf of beneficiaries who are minor children. b) Allow the trustee to transfer the assets of the trust to their personal account. c) Establish an account to fund the insured's children's education. d) Give the policyowner flexibility in disbursing the proceeds of a death benefit.

b) Allow the trustee to transfer the assets of the trust to their personal account. A trustee is paid a fee to administer the trust; however, he or she cannot access the funds personally

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called a) Multiple Protection insurance. b) Credit life. c) Credit health. d) Decreasing whole life.

b) Credit life. Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

A health insurance policy that pays a lump sum if the insured suffers a heart attack or stroke is known as a) Medical expense. b) Critical illness. c) Major medical. d) AD&D.

b) Critical illness. A critical illness policy covers multiple illnesses, such as heart attack, stroke, renal failure, and pays a lump-sum benefit to the insured upon the diagnosis (and survival) of any of the illnesses covered by the policy.

Because of the history of cancer in her family, Julie purchased a policy that specifically covers the expense of treating cancer. Her policy would be classified as what type of policy? a) Term Health Policy b) Dread Disease Policy c) Family History Cancer Policy d) Specified Health Policy

b) Dread Disease Policy A Dread Disease Policy is a limited policy that is written to specifically cover cancer expense.

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a) Variable amount b) Fixed period c) Fixed amount d) Variable period

c) Fixed amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies.

Which special policy combines decreasing term insurance with whole life insurance to provide the insured's family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments? a) Survivorship Life b) Family Income Policy c) Family Protection Policy d) Family Maintenance Policy

b) Family Income Policy The Family Income Policy provides monthly income upon the death of the insured while maintaining permanent coverage until the end of the income payments by combining decreasing term insurance and whole life insurance.

Both Universal Life and Variable Universal Life have a a) Increasing premium. b) Flexible premium. c) Level fixed premium. d) Decreasing premium.

b) Flexible premium. Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.

Which of the following is true concerning an Exclusive Provider Organization (EPO)? a) EPO members choose health care providers. b) It has a very limited number of providers. c) It's a type of HMO. d) Providers are EPO's salaried employees.

b) It has a very limited number of providers. EPO is a type of PPO, in which the members do not choose health care providers. Instead, they use specific providers who are paid on a fee-for-service basis. Number of providers is very limited; however, they offer deeper discounts on their rates.

Which of the following does NOT describe hospice care? a) It provides care to terminally-ill people. b) It provides care to people with life expectancies of 1 to 2 years. c) It provides continuous care. d) It provides care in a home-like setting.

b) It provides care to people with life expectancies of 1 to 2 years. Hospice provides short-term, continuous care in a home-like setting to terminally-ill people with life expectancies of 6 months or less.

Which of the following information regarding an insured is NOT included in an Investigative Consumer Report, which is requested by an underwriter? a) General reputation b) Medical History c) Applicant's character d) Personal habits

b) Medical History An Investigative Consumer Report is considered to be a part of an insurance application. This report is used in the underwriting process in order to assess non-medical risk factors related to moral standing and avocations. Friends and colleagues are interviewed in order to evaluate the applicant's character, reputation, and habits. The applicant must be informed in writing if the insurer decides to conduct the investigation.

HSAs are owned by the individual, not the employer, which means the individual is not dependent on a particular employer to enjoy the advantages of having an HSA. What term best describes this? a) Stationary b) Portable c) Mobile d) Attached

b) Portable HSAs are portable, which means the individual is not dependent on a particular employer to enjoy the advantages of having an HSA, because it is owned by the individual.

Which of the following is true regarding the regulation of providers? a) Only health care service plan providers fall under the jurisdiction of the DOI. b) Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. c) Only the Department of Insurance can be the regulator for insurance providers. d) There are no specifications on regulation of providers.

b) Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. All entities that provide coverage designed to pay for health care providers' services and expenses must be under the jurisdiction of either the Department of Insurance or other governmental agencies

What type of care is Respite care? a) 24-hour care b) Relief for a major caregiver c) Daily medical care, given by medical personnel d) Institutional care

b) Relief for a major caregiver Respite Care is designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the care giver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.

Insurance is the transfer of a) Peril. b) Risk. c) Loss. d) Hazard.

b) Risk. Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company.

All the factors are FALSE when used to provide data and statistics to an insurer in order to project losses and the subsequent cost of insuring risks in a group disability policy, EXCEPT a) The number of group carriers. b) Stability, Price, Longevity with a particular carrier. c) Experience, Expenses and Interest of a particular carrier's premiums. d) The number of eligible participants in the group.

b) Stability, Price, Longevity with a particular carrier. Stability, Price and Longevity are all factors used to determine losses and cost of insuring risks in a group (or individual) policy.

What is the "elimination period" under a long term care policy? a) The amount of time that benefits can be received tax-free. b) The amount of time during which no benefits will be paid. c) The amount of time that the insured will have to review the policy and return it for a full refund. d) The amount of consecutive days during which the benefits will be paid.

b) The amount of time during which no benefits will be paid. The elimination period starts on the day that the policy goes into effect. This is the amount of time (usually 0-365 days) that no benefits will be paid. LTC policies typically have a 30-day elimination period.

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to a) The insurance company. b) The contingent beneficiary. c) The insured's spouse. d) The policyowner.

b) The contingent beneficiary. A contingent beneficiary receives the death benefit if the primary beneficiary predeceases the insured. If there are no designated beneficiaries surviving the insured, the benefits are paid to the estate of the insured.

An insured had $500 left in his Health Reimbursement Account when he quit his job. What happens to that money? a) The insured can use up the $500 as long as he has qualified medical expenses. b) The insured can have access to the $500 at his previous employer's discretion. c) The previous employer must issue a check for $500 payable to the insured. d) It may be rolled over into a HRA with his new employer.

b) The insured can have access to the $500 at his previous employer's discretion. Former employees, including retirees, can have continued access to unused HRAs, but this is at the employer's discretion.

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a) Face amount of the policy. b) The insured's age at death. c) The beneficiary's life expectancy. d) Projected interest rates.

b) The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.

How does a member of an HMO see a specialist? a) The member is allowed to choose his or her own specialist. b) The primary care physician refers the member. c) The insurer chooses the specialist. d) HMOs do not cover specialists.

b) The primary care physician refers the member. In order for the member to get to see a specialist, the primary care physician must refer the member. If the member feels that the specialist should be treating him or her but is unable to get the referral from the primary care physician, the member might consider changing primary care physicians. In some HMOs there is a financial cost to the primary care physician for referring a patient to a more expensive specialist.

All of the following are true regarding copayments, EXCEPT a) The insured pays a specific amount for a claim, regardless of the actual cost of the service. b) They are expressed as a percentage of the cost. c) They are typically due at the time of receiving the service. d) They are arrangements between the insured and the insurer.

b) They are expressed as a percentage of the cost. Copayments are typically expressed in specific dollar amounts, not percentages (like co-insurance).

The Waiver of Cost of Insurance rider is found in what type of insurance? a) Juvenile Life b) Universal Life c) Whole Life d) Joint and Survivor

b) Universal Life The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

When may an insured deduct unreimbursed medical expenses paid under a long-term care policy? a) Only if the insured does not itemize the expenses b) When the expenses exceed a certain percentage of the insured's adjusted gross income c) Only if the insured is age 65 or older d) All LTC expenses are tax deductible.

b) When the expenses exceed a certain percentage of the insured's adjusted gross income In either medical expense insurance policies or long-term care insurance policies, unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT a) Fully insured status. b) Waiting period of 5 months. c) Being age 65. d) Inability to perform any gainful work.

c) Being age 65. The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

An insurance company and its agents must notify all applicants and policyholders of information-gathering processes utilized for written application transactions a) At the time of delivery of the policy when personal information is only collected from the applicant, an insured under the policy, or public records. b) At the time of application for the policy when information is collected from sources other than the applicant, persons under the policy, or public records. c) Both of these answers are correct. d) Neither of these answers is correct.

c) Both of these answers are correct. CIC 791.04 states that notice must be made at application when sources other than the applicant, persons under the policy, or public records are used, but at delivery when personal information is only collected from the applicant, an insured under the policy, or public records.

Which of the following are NOT fundable by annuities? a) A person's retirement b) Estate liquidation c) Death benefits d) Cash accumulation for any reason

c) Death benefits Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.

The types of policies that are covered under the terms of the Association include a) Contracts involving reinsurance. b) An annuity issued by a charitable organization. c) Direct, nongroup life, health, annuity and supplemental policies. d) Employer self-funded contracts.

c) Direct, nongroup life, health, annuity and supplemental policies. The Guarantee Association does NOT provide coverage to employer self-funded groups, contracts involving reinsurance nor annuity issued by a charitable organization.

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT a) Collect any premium due. b) Explain the rating procedures if the policy is rated differently than applied for. c) Disclose commissions earned from the sale of the policy. d) Explain the policy provisions, riders, and exclusions.

c) Disclose commissions earned from the sale of the policy. A producer must explain policy provisions, exclusions, and riders at the time of delivery, as well as the rating procedures, especially if the policy is rated differently than applied for. The producer must also collect any due premium and have the insured sign the statement of continued good health.

Who can provide skilled nursing care? a) Family Member b) Community volunteer c) Doctor d) Spouse

c) Doctor Skilled nursing care is daily nursing and rehabilitative care that can only be provided by medical personnel, under the direction of a physician. Skilled care is almost always provided in an institutional setting.

A contract which one party undertakes to indemnify another against loss is called a) Risk. b) Indemnity. c) Insurance. d) Adverse Selection.

c) Insurance. Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.

What is NOT a benefit of a POS plan? a) It allows the employee to use a doctor not covered under the HMO. b) With the Point-Of-Service plan the employees do not have to make a decision between the HMO or PPO plans that lock them in. c) It allows guaranteed acceptance of all applicants. d) It allows the employee to use an HMO provided doctor.

c) It allows guaranteed acceptance of all applicants. A different choice can be made every time a need arises for medical services.

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 insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments? a) It is used to fund executive bonuses b) It is used to increase the death benefit. c) It is used to lower premiums. d) It is paid out as dividends.

c) It is used to lower premiums. Because insurers receive premiums before they must pay out benefits, they can invest the premium money and use the interest to lower premium amounts charged to insureds.

Qualified medical expenses paid for participants in a Medical Savings Account (MSA) are a) Taxable for up to 50% of benefits paid. b) Fully taxable. c) Not taxable. d) Taxable if they exceed the amount of the deductible.

c) Not taxable. Employees use the funds from an MSA to cover health insurance deductibles during the year. MSA funds are taxable only when distributions are made for reasons other than qualified medical expenses.

According to the PPACA metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that? a) Silver b) Gold c) Platinum d) Bronze

c) Platinum Bronze level benefit plans pay 60% of expected health care costs; silver level plans pay 70%; gold level plans pay 80%, and platinum level plans pay 90%.

All of the following are true regarding key person disability income insurance EXCEPT a) The employer pays the premiums. b) The employee is the insured. c) Premiums are tax deductible as a business expense. d) The employer receives the benefits if the key person is disabled.

c) Premiums are tax deductible as a business expense. In key person disability insurance, the contract is owned by the business, the premium is paid by the business, and the business is the beneficiary. The key person is the insured, and the business must have the key person's consent to be insured in writing.

Susan has a short-term disability income policy with an "integration of benefits" provision. If she becomes disabled and is also eligible to receive benefits from the state disability insurance program, her policy will a) Pay the full benefits. She cannot collect state disability payments if she has a personal disability policy. b) Waive premium payments after the state disability payments begin. c) Reduce its benefits by an amount equal to her state disability payments. d) Not pay until her state disability benefits have been exhausted.

c) Reduce its benefits by an amount equal to her state disability payments. The "integration of benefits" provision is designed to prevent a duplication of benefits or "overinsurance."

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences? a) 401(k) Plan b) Section 457 Deferred Compensation Plan c) Section 1035 Policy Exchange d) Modified Endowment Exchange

c) Section 1035 Policy Exchange As long as the funds are transferred intact and the form is filed, taxation is deferred.

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? a) Accelerated benefit provision b) Loan provision c) Spendthrift provision d) Settlement option

c) Spendthrift provision When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.

All of the following are true regarding a decreasing term policy EXCEPT a) The contract pays only in the event of death during the term and there is no cash value. b) The face amount steadily declines throughout the duration of the contract. c) The payable premium amount steadily declines throughout the duration of the contract. d) The death benefit is $0 at the end of the policy term.

c) The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.

Which of the following statements regarding deferred compensation funds is INCORRECT? a) They can be made with cash deposits to an annuity. b) They generally provide additional retirement benefits. c) They are usually qualified plans. d) They can be established by employers.

c) They are usually qualified plans. Deferred Compensation Funding refers to any employer retirement, savings, or other deferred compensation plan that is not a qualified retirement plan. Funding involves a contractual commitment between the employer and employee to pay compensation in future years. These plans are typically made with selected employees to provide additional retirement benefits.

To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan? a) 5 years b) 12 months c) 63 days d) 18 months

d) 18 months Under HIPAA regulations, to be eligible to convert health insurance coverage from a group plan to an individual policy, the insured must have 18 months of continuous creditable health coverage.

What is the period of coverage for events such as death or divorce under COBRA? a) 60 days b) 31 days c) 12 months d) 36 months

d) 36 months The maximum period of coverage under COBRA is 36 months, in the event of the covered employee's death or divorce.

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of a) A prearranged funeral plan. b) A viatical settlement. c) Third-party ownership. d) A STOLI policy.

d) A STOLI policy. Stranger-originated life insurance (STOLI) policies are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements.

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).

"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) COBRA b) ERISA c) ADL d) ADA

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

All of the following are essential benefits required to be included in all health plans purchased in the Marketplace EXCEPT a) Hospitalization. b) Maternity care. c) Pediatric vision care. d) Adult dental care.

d) Adult dental care. Adult dental care is not a required benefit.

Which of the following would be among the prohibited provisions for long-term care insrance policies delivered to the insured in California? a) Canceling or failing to renew the policy due to changes in a person's health. b) Having the premium increased in the event of a divorce. c) Limiting benefits to skilled nursing facilities only. d) All of these

d) All of these All of the above are prohibited provisions for long-term care insurance policies. (CIC 10233.2)

Which of the following would be among the prohibited provisions for long-term care insurance policies delivered to the insured in California? a) Canceling or failing to renew the policy due to changes in a person's health. b) Having the premium increased in the event of a divorce. c) Limiting benefits to skilled nursing facilities only. d) All of these

d) All of these All of the above are prohibited provisions for long-term care insurance policies. (CIC 10233.2)

Harry has a disability that prevents him from doing certain kinds of work. Because of his qualifications, he responds to a recruitment ad and is hired for the position. What federal act allows him to apply for the job? a) There is no federal law; he can apply for any job. b) Social Security Act c) Equal Opportunity Employment Act d) Americans with Disabilities Act

d) Americans with Disabilities Act The existence or consequence of Harry's disability cannot be excluded from recruitment, selection, compensation, training, and all terms and conditions and privileges of employment.

When must insurable interest exist in a life insurance policy? a) At the time of policy delivery b) When there is a change of the beneficiary c) At the time of loss d) At the time of application

d) At the time of application In life insurance, insurable interest must exist at the time of application.

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? a) Extended term b) Reinstatement c) Reduce-paid up d) Automatic premium loan

d) Automatic premium loan Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

The rider that may be added to a Disability Income policy that allows for an increase in the benefit amount under certain conditions is called a) Waiver of Premium. b) Double Indemnity. c) Residual benefits. d) Cost of Living (COLA).

d) Cost of Living (COLA). The purchasing power of fixed disability benefits may be eroded due to inflation and increases in the cost of living. This rider is used to protect against these trends by increasing the monthly benefits automatically once the insured has been receiving benefits for 12 months, if the cost of living increases.

Which of the following is considered a qualifying event under COBRA? a) Marriage b) Relocation c) Promotion d) Divorce

d) Divorce Other qualifying events include the voluntary termination of employment; an employee's change from full time to part time; or the death of the employee.

An insured has Medicare Part D coverage. He has reached his initial benefit limit and must now pay 50% of his prescription drug costs. What is the term for this gap in coverage? a) Bridge b) Blackout period c) Latency period d) Donut hole

d) Donut hole Once the initial benefit limit is reached, a gap called a "donut hole" occurs, in which the beneficiary is responsible for a portion of prescription drug costs.

Insurer X charges the premium from its insured customers, passing on operating expenses for the company. The operating expenses plus the premium equals the "gross" premium. What is another name for the operating costs for Insurer X? a) Gross premium b) Level premium c) Net premium d) Expense loading

d) Expense loading Expense loading is combined with premiums to spread the operating costs of a business to all insureds. Premiums without expense loading are called "net" premiums.

Factual statements about the insured or the risk in an insurance policy are considered a) Representations. b) Implied warranty. c) Material representations. d) Express warranty.

d) Express warranty. Warranties can either be expressed or implied. Statements in a policy are considered express warranty. Every express warranty becomes part of the insurance contract. Implied warranty is an unwritten or unspoken guarantee presumed to be made based on the circumstances of a transaction.

What are the 2 types of Flexible Spending Accounts? a) Health Care Accounts and Health Reimbursement Accounts b) Medical Savings Accounts and Dependent Care Accounts c) Medical Savings Accounts and Health Reimbursement Accounts d) Health Care Accounts and Dependent Care Accounts

d) Health Care Accounts and Dependent Care Accounts There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account to help pay for dependent care expenses which make it possible for an employee and his or her spouse, if applicable, to work.

Which of the following statements concerning Medicare Part B is correct? a) It is provided automatically to anyone who qualifies for Part A. b) It pays on a first dollar basis. c) It pays 100% of Medicare's standards for reasonable charges. d) It pays for physician services, diagnostic tests, and physical therapy.

d) It pays for physician services, diagnostic tests, and physical therapy. For those who have purchased the coverage, Part B pays 80% of out-patient medical cost after a deductible has been met. Part B covers physician and outpatient hospital services, and other medical and health services, such as diagnostic tests, and physical therapy.

A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n): a) Underwriting gamble. b) Legal peril. c) Fiduciary risk. d) Legal hazard.

d) Legal hazard. Legal hazard is defined as a set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred.

Which of the following is the most common time for errors and omissions to occur on the part of an insurer? a) Policy renewal b) Underwriting c) Application process d) Policy delivery

d) Policy delivery Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur. The most common times for these errors are during the sales interview and policy delivery. It is essential to have proof of these interactions, in the events that an insured would sue the insurer.

What describes a situation when poor risks are balanced with preferred risks, and average risks are in the middle? a) Adverse selection b) Equitable spread of risk c) Ideally insurable risk d) Profitable distribution of exposures

d) Profitable distribution of exposures The profitable distribution of exposures is achieved when poor risks are balanced with preferred risks, and average risks are in the middle.

Which of the following is true regarding the regulation of providers? a) Only the Department of Insurance can be the regulator for insurance providers. b) There are no specifications on regulation of providers. c) Only health care service plan providers fall under the jurisdiction of the DOI. d) Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

d) Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. All entities that provide coverage designed to pay for health care providers' services and expenses must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

The price of insurance for each exposure unit is known as a) Consideration b) Insurable interest c) Premium d) Rate

d) Rate Rate is the price of insurance for each exposure unit. The rate helps determine the premium by multiplying it by the number of units of insurance purchased.

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

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

An insured committed suicide one year after his life insurance policy was issued. The insurer will a) Pay the policy's cash value. b) Pay the full death benefit to the beneficiary. c) Pay nothing. d) Refund the premiums paid.

d) Refund the premiums paid. If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to a refund of premium.

Which of the following is INCORRECT concerning a noncontributory group plan? a) They help to reduce adverse selection against the insurer. b) They require 100% employee participation. c) The employer pays 100% of the premiums. d) The employees receive individual policies.

d) The employees receive individual policies. The employer receives a master policy, and employees receive a certificate of insurance.

The limits of a health reimbursement account are set by a) State statutes. b) The insurer. c) Federal regulation. d) The employer.

d) The employer. Health Reimbursement Accounts have no statutory limit. Limits may be set by employer, and rollover at the end of the year based on employer discretion.

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 interest will become immediately taxable. b) The premiums will increase. c) The premiums will decrease. d) The interest will continue to accumulate tax deferred.

d) 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.

Which of the following best describes what the annuity period is? a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments

d) The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.

According to the California Insurance Code, all of the following are general powers and duties of the Commissioner of insurance EXCEPT a) To establish a program to investigate consumer complaints against insurers. b) To make public service announcements to inform consumers of toll free access to make inquiries. c) To prepare a written report detailing consumer complaints regarding insurers. d) To delegate the power to approve a settlement.

d) To delegate the power to approve a settlement. The Commissioner cannot delegate his/her authority to approve settlements. CIC 12921

Which of the following is true regarding the gender of the applicants in disability income insurance? a) Men, as they age, present a higher health risk and are more prone to disability. b) Gender is not a rating factor in disability income insurance. c) Aging men and women are both prone to disability and therefore are not insurable. d) Women, as they age, present a higher health risk and are more prone to disability.

d) Women, as they age, present a higher health risk and are more prone to disability. An applicant's gender affects his or her eligibility and rating in disability income insurance. While men statistically have shorter life expectancy, women tend to have more health problems as they mature, which makes them a higher health risk, and more prone to disability.