Life & Health License Test Texas Exam FX

In a direct rollover, how is the money transferred from one plan to the new one?

From trustee to trustee

If an HMO subscriber no longer meets plan eligibility requirements. When can the insurer cancel coverage?

Immediately.

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring clause

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

Interest only option

What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is an MEC.

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

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

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder.

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

Revocable beneficiary

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

Settlement option.

Which rider is often used in business life insurance policies when the policyowner needs to change the insured under the policy?

Substitute insured rider

what rider is often used in business life insurance policies when the policyowner needs to change the insured under the policy?

Substitute insured rider The substitute insured rider, or change of insured rider, allows the policyowner to change the insured listed under the policy, subject to insurability. This rider is often used in business life insurance policies.

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner

What is NOT true regarding a Variable Universal Life policy

The death benefit is fixed

Which of the following describes the tax advantage of a qualified retirement plan

The earnings in the plan accumulate tax deferred.

Which of the following describes the tax advantage of a qualified retirement plan?

The earnings in the plan accumulate tax deferred.

All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT

The employer can receive a current tax deduction for any contributions made to the plan.

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

The employer is the owner and beneficiary.

Which of the following is INCORRECT concerning a noncontributory group plan?

The employer receives a master policy, and employees receive a certificate of insurance.

health insurance grace period

The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

The Affordable Care Act requires all U.S. citizens and legal residents to have qualifying health care coverage. This is known as

The individual mandate.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

The policy is owned by the company.

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

What is the purpose of settlement options?

They determine how death proceeds will be paid.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third-party ownership

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?

Viatical settlement

If a claimant is to bring a recovery action against an insurance company for a loss claimed under a policy, the action must be brought

Within 2 years.

Consideration Clause

a consideration clause specifies that both parties to the contract must give some valuable consideration. The payment of the premium is the consideration given by the applicant

An agent selling variable annuities must be registered with

a person must be registered with the FINRA (formerly NASD) because variable annuities are considered to be securities and hold a securities license in addition to a life agent's license in order to sell variable annuities.

Continuation Provision in Medicare

must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts. also known as a "Renewal Provision" must be captioned and appear on the first page of the policy.

Automatic premium loan

protects the insured from an unintentional policy lapse due to a nonpayment of premium

All long-term care policies or certificates issued in this state must be guaranteed

renewable or noncancellable.

All of the following are business uses of life insurance EXCEPT

Funding against general company financial loss.

In life insurance policies, cash value increases

Grow tax deferred.

Variable Life insurance is based on what kind of premium?

Level fixed

two terms are associated directly with the premium

Level or flexible

Anyone who violates the Insurance Code of Texas may be fined up to

$25,000.

In a replacement situation, all of the following must be considered

Benefits, Exclusions, Limitations.

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a

Buy-sell agreement.

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision

Common Disaster

what happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated.

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a

Cross-purchase plan.

Which of the following terms is used to name the nontaxed return of unused premiums?

Dividend

disability policy, the probationary period refers to the time

During which illness-related disabilities are excluded from coverage.

Physical Exam and Autopsy provision

allows the insurer to examine the insured as much as is reasonably necessary while the claim is being processed, provided that the insurer pays the expenses.

Commissioner of Insurance

can issue a temporary, 90-day life insurance agent's license.

Rebating

defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.

Attained Age policies

allows the insurer to increase premiums as the insured ages.

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

100% participation of members is required in noncontributory plans.

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?

2 years

If an HMO policy is cancelled for nonpayment of the amounts due under the contract, how long of a notice must the insurer give the insured?

30 days

The Commissioner of Insurance issues a Cease and Desist Order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request?

30 days

The employee usually has a period of ? days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

31

What is the number of credits required for fully insured status for Social Security disability benefits?

40

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days

The minimum number of credits required for PARTIALLY insured status for Social Security disability benefits is

6 credits.

What is a specific dollar amount or a percentage of the cost of care that must be paid by an HMO member?

A copayment is a specific dollar amount or a percentage of the cost of care that must be paid by the member. For example, the member may be required to pay $5 or $10 for each office visit.

Most HMOs operate through what type of system

A group enrollment system either at their place of employment or as a member of an association

Most HMOs operate through what type of system?

A group enrollment system either at their place of employment or as a member of an association

what must be delivered along with the policy in a life insurance policy

A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain

A statement that is sufficiently clear to identify the insured and the nature of the claim. The Insurance Code requires that each policy must include, "Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible".

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

First-dollar basis

Another term used to describe "no deductible"

Misrepresentation

Making false or misleading statements with the intent to defraud another misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

Where in the policy must the HMO insurer provide information about the HMO's name, address, and toll-free number?

On the face page

what explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy

Owner's Rights

If an insurance company offers Medicare supplement policies, it must offer which plan?

Plan A An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.

Universal life policy

The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

Presumptive Disability plans

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.

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

They are tax free to terminally ill insured.

Which of the following is NOT an example of a business use of Life Insurance?

Workers Compensation

Dental expense insurance

a form of medical expense health insurance that covers the treatment, care and prevention of dental disease and injury to the insured's teeth. An important feature of a dental insurance plan which is typically not found in a medical expense insurance plan is the inclusion of diagnostic and preventive care (teeth cleaning, fluoride treatment, etc.).

Time of Payment of Claims

a provision states that the insurance company must pay Medical Expense claims immediately

Reinstatement provision

a provision where an insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided.

relative-value approach

a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery.

Convertible Term Policy

a type of policy that can be changed from one that does not accumulate cash value to the one that does

Certificate of authority

an insurer obtain in order to transact insurance within a given state All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.

Limited Pay Whole Life premiums

are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

impairment rider

excludes a specified condition from coverage, therefore, reducing benefits. An insurance company will not charge extra for a rider that reduces benefits.

convertible term policy

has a provision that allows the policyowner to convert to permanent insurance.

Both equity indexed annuities and fixed annuities

have a guaranteed minimum interest rate.

Nonforfeiture values

include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

Business Overhead Expense (BOE)

insurance sold to small business owners for the purpose of reimbursing the policyholder for various business overhead expenses during a period of total disability. Expenses such as rent, utilities, and employee salaries are covered.

Policy backdating.

is not a mandatory provision; in fact, backdating a policy more than 6 months is prohibited.

Group health insurance policies

must cover everyone in the group, regardless of age, health history, and occupation. Because of this blanket coverage, the group as a whole is assessed for insurability. The size, average age, gender ratio, persistency, and industry of the group are considered, along with other factors, when determining premiums. Groups can be reassessed annually in order to adjust premium amounts.

unilateral contract

only one of the parties to the contract is legally bound to do anything.

Notice of Claim Provision

spells out the insured's duty to provide the insurer with reasonable notice in the event of a loss.

interest-only option

the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

During partial withdrawal from a universal life policy, which portion will be taxed?

the interest earned on the withdrawn cash value may be subject to taxation.

elimination period

the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims

In a group health policy, a probationary period is

the waiting period new employees must satisfy before becoming eligible for benefits.

Upon receipt of a written proof of death and the right of the claimant to the proceeds, the insurer must pay death claims

within 2 months.