Life and Health Michigan

What "jumps" in a jumping juvenile policy?

A "Jumping juvenile" policy will normally increase the face amount of insurance by a factor of five with no change in premium at the next anniversary after the child turns anywhere from age 21-25 (depends on the policy). Ownership of the policy also changes at the time to the child, who is now an adult.

A contingent beneficiary has the right to which of the following?

A contingent beneficiary has no interest in the policy proceeds if there is a surviving primary beneficiary. Contingent and primary beneficiaries do not share the death benefit. Only an irrevocable primary beneficiary has the right to interfere with certain of the owner's rights in a life insurance policy.

Which of the following is not true about life insurance applications?

A copy of the application will be included as part of the policy, and is therefore not confidential.

Dishonest tendencies that increase the probability of loss are what types of hazard?

A hazard increases the chance of loss and the three types are moral, morale, which is indifference or carelessness, and physical, which is a physical condition.

A "Joint and 1/2 Survivor" distribution option means which of the following statements is correct?

A joint and one-half annuity pays one-half of the total payment two or more annuitants were receiving when the contract was first annuitized. Payments continue until the last surviving annuitant has died.

How long after reinstatement will a health policy reinstate coverage for sickness?

A reinstated policy will immediately cover accidental injury and will begin to cover sickness 10 days after the reinstatement date.

A life insurance applicant's answers on the application indicate that they are in good health. In fact, the applicant actually has a disease that they are not aware of. The statement on the application is considered:

A representation

How long must a life insurer maintain files containing the advertisements it has used?

All advertisements must be maintained for at least 4 years.

All the following are correct regarding an annuity, EXCEPT:

An immediate annuity must start providing income within a year of the first premium payment.

Each of the following is an element of a legal contract, EXCEPT:

An insured should not profit from an insurance loss.

A producer must be ______ by an insurer in order to act as agent for that insurer.

Appointed

How many credit hours of CE must be devoted to ethics during each renewal period?

Each licensee must complete a minimum of 24 credit hours, 3 hours of which must be in ethics, of approved insurance continuing education (CE) courses every 2 years.

Insurers that incorporated in another state, but doing business in this state, are considered:

Foreign

Deliberate deception with intent to gain is the definition of:

Fraud

Which of the following statements correctly describes the difference between gross premium and net premium?

Gross premium is the total amount a person pays the insurer for his/her coverage. Net premium, sometimes called the "pure premium", does not include interest earnings or business expenses of the insurer.

A small employer is one that employs no more than how many employees?

In Michigan, a small employer is one who employs at least 2 but not more than 50 eligible employees on at least half of its working days.

Dividend options do not include which of the following choices?

Income for life is an annuity form of death benefit settlement option.

What is meant when life insurance policy becomes incontestable?

Incontestability means that the insurance company cannot use the statements in the original application for insurance as a reason to avoid paying death claims. The policy becomes incontestable after two years in most states.

Which of the following manufactures and issues insurance policies and contracts?

Insurance Companies

A_____________ insurance company is owned by its policyholders.

Its members also called policyholders, own a mutual insurance company.

Within how many days must a producer notify the Commissioner of a change of address.

Licensees must notify the Commissioner of any changes in mailing or electronic mail address within 30 days after the change.

Which of the following is not a limited line of insurance in Michigan?

Limited lines include Marine insurance, Credit insurance, Surety and fidelity insurance, Legal expense insurance, Livestock insurance, Malpractice insurance, and Plate glass insurance

Each of the following is a factor considered by an underwriter, EXCEPT:

Marital status is not an underwriting factor, but the nature of the risk is also considered.

Life insurance policy is a unilateral contract, because:

Only one party can be charged with breach of contract

Who is required to sign a completed application?

Only the applicant/insured and the producer's signatures are required in an application for insurance.

Producer B tells applicants that if they buy their insurance with her agency, she'll refund the first month's premium. This is an example of what Unfair Trade Practice?

Rebating is the offer of any rebate of premiums due, any special favor in dividends or other benefits, or any valuable consideration or inducement not specified in the policy.

What is the correct management term for minimizing the chance of loss?

Risk reduction

The spendthrift laws of each state protect life insurance proceeds against the claims of which of the following?

Spendthrift laws and policy provisions protect the death benefit from the claims of creditors of the deceased insured, the policyowner, and those creditors of any named beneficiary to whom the death benefit becomes payable. When death benefit principal is left with the insurance company, spendthrift laws prevent creditors from attaching that money, too.

Which of the following is not a feature of term life insurance?

Term life insurance has no cash value and is often referred to as providing pure protection. Compared to the same face amount of whole life insurance, term will cost less.

What is the face amount of insurance?

The face amount of insurance is the stated death benefit, and is referred to as the insurer's limit of liability- the most the policy will pay in the event of the insured's death.

The grace period in a life insurance policy is typically 31 days, which allows:

The grace period allows payment of the past due premium without a penalty or lapse in coverage. Any claim arising in the grace period in payable, but any unpaid premium will be deducted from the claim when paid.

In Michigan, what is the minimum grace period for life insurance policies?

The grace period for individual life insurance policies may not be less than 30 days.

An insurer replacing a life policy must notify the existing insurer of the proposed replacement within how many business days of receiving an application?

The replacing insurer's duties include notifying each insurer whose insurance is being replaced within 3 business days and, upon request, furnishing a copy of any proposals and comparison statements.

Which of the following could initiate the Accelerated Benefits Provision or Rider of a life policy?

A condition that is terminal

Which of the following statements regarding health insurance advertising is not correct?

A history of high or unique claim settlements may not be used by agents.

Under HIPAA, coverage may be nonrenewed for all of the following reasons, except:

All of the other choices are a basis for nonrenewal under HIPAA.

After how many years does an individual life policy become inconstestable?

An individual life insurance policy is incontestable after it has been in force during the lifetime of the insured 2 years from its date of issue except for nonpayment of premiums.

Each of the following must be included in an insurable risk, EXCEPT:

An insurable risk must also include a large number of groups with the same perils, affordable premiums, and the loss must be measurable.

Which of the following is not a core benefit in a Medicare Supplement policy?

Basic or (Core) Benefits in Medicare Supplement do not include coverage for LTC expenses.

Which of the following would be considered boycott or coercion?

Boycott and coercion mean a restriction of the market based on using a financial position or interrelated sales to extend control. Restricting market access based characteristics such as race is discrimination. The other actions cited are part of the sales and underwriting process.

The _________ has the power to issue rules and regulations to help enforce insurance laws.

Commissioner, Superintendent, or Director

In a credit life plan, who is the beneficiary?

Credit life insurance is a group form of life insurance that is owned by and benefits only the creditor in the event of the death of the borrower. It may be issued as an indeterminate amount of coverage, as for a credit card, or it may be single premium type of coverage in the form of decreasing term for a short term debt such as an automobile loan.

All of the following are correct regarding an employer group health insurance plan's eligibility requirements, EXCEPT:

Employees can only enroll during the open enrollment period and must follow any and all eligibility requirements in order to obtain coverage without having to prove insurability. Otherwise they may have to prove insurability if they attempt to enroll later.

If an individual is age 65 or over and continues to work, Medicare is usually the _________ insurer to any employer group health plan the individual participates in.

If an individual is age 65 or over and continues to work, Medicare is usually the secondary insurer to any employer group health plan the individual participates in.

When an individual pays the full cost of disability income insurance, a disabled employee's benefit will be __________.

Individual insurance premiums are not deductible and the benefits payable are not taxable.

The process of calculating life insurance net premium requires consideration of all of the following, except:

Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors.

ERISA requires which of the following?

Qualified plans must meet certain minimum standards

Credit Life insurance is usually what type?

Since the amount of the outstanding debt declines over time, decreasing term would make the most sense.

Optional Uniform Provisions are included in the contract at the _______ option.

The Optional Uniform Provisions are included at the insurer's option. However, if used, they must conform to that state's insurance code.

How do PPOs save consumers money?

The organizers and the providers agree upon medical service charges that are generally less than the providers would charge patients not associated with the PPO.

Examples of third-party ownership include all of the following, except:

Third-party ownership is when an applicant buys a policy on someone other than themselves.

Why were industrial policies written?

To offset funeral expenses

Notice of claim is required within _____ days of loss.

Under the Notice of Claim Provision (a Mandatory Uniform Provision), the insured is required to notify the insurer, in writing, within 20 days of any loss.

Which of the following is a type of rating that does not involve an extra premium being assessed?

With the lien plan, initially, only the premium would be refunded in case of death. The death benefit increases over time with the full face amount eventually payable. This is generally used with Senior Life Insurance plans to provide minimal benefits without a medical examination.

If funds are prematurely withdrawn from a Modified Endowment Contract (MEC) they are subject to a _____% penalty on any gains.

10

If an agent changes their residence or business address, they must notify the Department of Insurance within:

30 days is the standard for notification regarding an address change.

A Tax Sheltered Annuity may be established and funded by which of the following?

403(b) plans are established for nonprofit organizations.

The IRS allows for 'catch-up' IRA contributions for those age _______ and older.

50

A business Overhead expense policy, as a form of disability insurance provides payments for all of the following, EXCEPT:

A Business Overhead Expense policy will not pay the wages of the business owner. By paying the other expenses of the business, the business can remain financially stable until the owner is able to return to work.

All of the following are eligible to participate in a HR-10 Keogh Plan, except:

A Keogh plan allows participation by the sole proprietor and any of its eligible employees.

All of the following are correct regarding Key Person Insurance, except:

A Key Person Plan is intended to help a company recover from the loss of a key employee until a replacement is found.

Of the following, which can a home office underwriter solely use to determine insurability of an applicant based on age, medical history, and amount of coverage?

A Nonmedical Application is used for a policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. Health questions on the application are asked by the producer and are the only medical information required.

Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective?

A Single Premium Immediate Annuity involves payment of a single sum to the insurer with periodic payments commencing within one year of deposit of the sum.

A Small Employer is defined as any person, firm, corporation, partnership, or association that is actively engaged in business and has ______ employees or less.

A Small Employer is defined as any person, firm, corporation, partnership, or association that is actively engaged in business and has ______ employees or less.

A __________ is a contractual agreement that allows a company or person to buy one or more of the rights of ownership in a life policy on the life of another person, should the owner/insured become terminally ill.

A Viatical Settlement is negotiated with a person who is terminally ill and accomplished through absolute assignment.

A producer is explaining the concept of limited-pay life insurance to her client. Which of these statements is incorrect?

A basic concept of insurance premiums is that by paying less often, a person will pay less in premium. However, in cash value policies, because the payments are funding the cash value, the actual amount per payment in a limited payment policy will be higher as the number of payments is reduced. A 10-pay policy will have a higher premiums than a 20-pay policy, but the total of the 10 payments will be much less that the total of the 20 payments.

When a disability buy-sell is funded by the partnership, what is the tax liability?

A buy sell funded plan provides that premiums are not deductible, but benefits will be received by the business tax free.

A generic brochure was developed by the ________ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.

A buyer's guide is a generic brochure developed by the NAIC to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance, as well as comparative costs of each type of plan.

Which of the following statements best describes what we would define as being the co-pay provision in a health insurance policy?

A cost-sharing percentage is called 'coinsurance' not a co-pay, and the initial cost sharing amount is called a deductible.

A(n)__________ plan is when business partners buy life insurance policies on one another.

A cross purchase plan calls for the partners to buy life insurance policies on one another. An entity plan has the business entity buy life insurance plans on the business owners.

Which of the following plans provides employees with a fixed and known benefit at retirement, the amount of which generally depends upon length of service and highest attained salary?

A defined benefit plan provides employees with a fixed and known benefit at retirement, the amount of which generally depends upon length of service and highest attained salary.

Which of the following is a qualified retirement plan that bases an employee's retirement benefit upon length of service and highest attained salary?

A defined benefit plan usually bases the employee's retirement check on length of service and highest attained salary.

Which of these best describes a disability income rider?

A disability income rider pays monthly income to a totally disabled insured. The income is specified number of dollars per $1,000 of death benefit, which may be expressed as a percentage of death benefit. Waiver of premium allows the insured to avoid paying premiums when totally disabled. Money paid as income under a disability income rider does not affect the death benefit in any way.

A disability that presumed to result from the same or a related cause of prior disability is a _________.

A disability that was believed to have been resolved, but which returns within a stated period of time (such as 6 months) is known as a recurrent disability.

Basic health care expense plans are frequently referred to as "first dollar" plans. This means_______.

A first-dollar plan means that there is no deductible which must be satisfied by an insured before a claim is payable by the insurance company.

Which of the following is an insurance company that is organized under the laws of another state within the United States

A foreign insurer is not organized under the laws of the state in which it is writing insurance, whereas a domestic insurer is organized under the laws of the state in which is writing insurance.

A group life policy must contain a provision that, if the insurance for an insured terminates due to termination of employment, the person will be entitled to have issued to him/her, without evidence of insurability, an individual policy upon application within how many days of the termination date?

A group life policy must contain a provision that, if the insurance for an insured terminates due to termination of employment, the person will be entitled to have issued to him/her, without evidence of insurability, an individual policy upon application within 31 days of the termination date.

How may the premium in a guaranteed renewable policy be increased?

A guaranteed renewable policy must be renewed upon payment of the current premium. If the insurer wants to raise the premium for an individual insured, it must increase the premium for all insureds that are "similarly situated" - persons who are the same age, all the persons in the same state, all persons who own the same policy by "form number". Premium increases cannot be the result of an individual's claims history or change health status.

What is a High Deductible Health Plan?

A high deductible Health Plan is designated for those who are proactive about managing their health care expenses. By opting for this type of plan the premium savings can be substantial. If an insured stays healthy they also save out of pocket costs for health care such as for office visits, prescriptions, medical tests, etc. These savings can be used to fund Health Saving Account.

A lapsed life insurance policy may be reinstated for up to how many years following premium default?

A lapsed life insurance policy may be reinstated within 3 years of lapse, upon evidence of insurability and payment of arrears of all premium due, including interest.

What must an insurance producer have in order to market variable annuities?

A licensed life agent also needs a securities license to be able to transact variable life or annuity contracts. Each of the other answer choices is an accurate statement but does not answer the question appropriately.

What does a long-term care rider do that a Living Needs (Terminal Illness) rider does not?

A long-term care rider provides an advance payment of the death benefit for the covered expenses of long-term care a chronically ill person may incur.

A (n) _____ is issued to the sponsor of the group, and employees receive an outline of coverage or other summary of benefits, which offers information about the plan's major benefit and principal exclusions.

A master policy is issued to the group sponsor while a certificate of insurance or policy summary is issued to the employees.

Unless an exception applies, a tax penalty is assessed for withdrawals from annuities of tax-deferred earnings prior to age ______.

A penalty of 10% is levied on withdrawals of tax-deferred earnings in order to discourage the use of annuities as short-term tax shelters.

A Medicare beneficiary enrolled in a Medicare Advantage plan may have any of these other insurance plans, EXCEPT:

A person enrolled in a Medicare Advantage plan cannot also have a Medicare Supplement plan.

One of the most important underwriting factors in disability income insurance is _________.

A person's occupational classification is one of the primary underwriting factors. When a person works in more than one occupational class, the one which poses the greater risk of disability will determine the classification for underwriting purposes.

An individual is approved for health insurance policy effective March 1. On March 4, the insured breaks his arm playing basketball with some friends, is treated at the local emergency room, and submits a bill for $2500 to his insurance company. On March 9, the insured decides to cancel the insurance and requests a refund of the $3000 annual premium he has paid. What will the insurance company do?

A policy cancelled during the free look period is void from the beginning, and no claims are payable. The insured must receive a full refund of the premium he paid, and must also retain liability for 100% of the expense for his broken arm.

A Disability Income Policy has a period of deductibility immediately following a disability during which time benefits are not payable. This period is called a(n):

A policy may state 6 months elimination period for sickness and immediate coverage or as little as 7 days in case of an accident. Although waiting period means the same thing, elimination period is the most correct term.

If a life insurance policy becomes a MFC, what was the cause?

A policy that does not pass the 7-Pay Test will be deemed a Modified Endowment Contract for the life of the contract.

Regarding disability income policies, which of the following benefit periods would have the lowest premium?

A policy that provides 6 weeks of benefits would be cheaper than a policy that provides 2 years of benefits. A long benefit period corresponds with a higher premium--a shorter benefit period means a lower premium.

What type of retirement plan is not required to have a vesting schedule, is not approved by the IRS, can discriminate in favor of highly compensated employees, and can benefit the employer?

A qualified plan is not allowed to have those features or requirements. Only a non-qualified plan can.

A ________ is usually treated as an insurance company liability.

A reserve is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.

A small employer:

A small employer has between 2-50 employees; it does not include sole proprietors. These employees must be eligible if they work 30 hours a week or more. The plans are renewable at the employer's option and may include an affiliation period.

Of the following, which best describes a Straight Whole Life Policy?

A traditional Straight Whole Life Policy has as its primary characteristic, fixed (i.e. guaranteed) premiums and death benefit over the life of the policy. It has substantial guarantees, but virtually no flexibility.

If money is paid when a change of ownership in a life insurance policy takes place, this is generally known as a ____________.

A transfer for value takes place when money is paid for a change in ownership.

If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds?

A trial application is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent, and the premium is paid. It is used when insurability and pricing are in doubt.

A primary purpose of key person life insurance is to do which of these?

A valuable employee with highly specialized knowledge or skills, or who adds significant value to the revenue/profitability of the company is a key person, and wages alone is not a criterion. The death of such a person can negatively impact the business operations. The company may use the death benefit proceeds for any purpose, but one of the most common use is to cover the expense of recruiting, hiring, and training a replacement, which may take months to accomplish.

What is the minimum requirement for currently insured status under the Social Security system?

A worker must be covered at least 6 quarters during the full 13-quarter period ending with the quarter in which the worker dies or becomes disabled.

What is the name of the rider (benefit) that, in the event of a claim, the policy normally pays double or triple the face amount if death was a result of an accident.

Accidental Death Benefit (Double or Triple Indemnity) is a benefit that is payable only if death occurs before a specific age and within 90 days of the accident. It does not add any additional values to the base policy.

In an AD&D policy, the capital sum provides benefits for which of the following losses?

Accidental Death and Dismemberment policies only provide benefits for death and loss of limbs or eyesight due to accidental causes. The policy will end whenever 100% of the principal sum is paid.

Accident and Health Insurance provides coverage for two major categories of perils. They are:

Accidental injury and sickness are the general perils insured. Intentional losses are excluded.

An insured should receive necessary claim forms within _____ days after notice of claim.

According to the Claim Forms Provision (a Mandatory Uniform Provision), the insured should receive the necessary claim forms within 15 days after notice of claim.

John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John?

According to the Intoxicants and Narcotics Provision (an Optional Uniform Provision), the insurer may deny coverage for John's injuries, making John liable for all expenses.

An insurer has the right to request a physical exam or an autopsy to determine its liability to pay benefits. This request may be made under which provision?

According to the Physical Exam and Autopsy Provision (a Mandatory Uniform Provision), the insurer, at its own expense, has the right to request a physical exam or autopsy where not prohibited by law.

What do ADLs trigger?

Activities of Daily Living (ADLs) are triggers used to begin Long-Term Care Insurance benefits.

Every LTC Policy that provides benefits of homecare or community-based services shall provide all of the following, except:

Acute care

If a client chooses to pay premiums other than annually, what can he or she expect?

Additional charges are included in modes other than annual to offset the lost interest earnings and the increased administration costs.

Which of the following is incorrect regarding the group underwriting process?

Adverse selection is a major underwriting concern for group contracts.

Certain disability and health care insurance products may be subject to specific advertising regulations. In general, insurance producers should do which of these?

Advertising should be restricted to the use of company-provided advertisements. A producer who wishes to create his/her own advertising must usually submit those ads for company approval before they may be used. If not approved, the ads cannot be used.

Sandra owns a Medical Expense Plan that contains a 60/40 Participation (Coinsurance) Provision and a $200 deductible. How much will Sandra and the insurer each pay under the coinsurance provision if Sandra's first medical claim for the year totals $10,200?

After Sandra has satisfied the deductible, the insurer would pay 60% of $10,000 or $6,000. Sandra would pay 40% of the $10,000 or $4,000, in addition to the $200 deductible for a total of $4,200.

XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction?

After a policy is issued, it must be sent to the producer, who will then deliver it to the insured.

W has a health insurance policy with an 80/20 coinsurance, a $1,000 deductible. If in January W goes into the hospital for an overnight stay, the bill coming to $2,000, what will W pay?

After satisfying the deductible ($1,000) the co-insurance kicks-in (20% x $1,000). The deductible plus the co-insurance is W's responsibility.

___________ is a cost sharing feature and is stated as a percentage of sharing between the insurer and the insured, such as 80/20.

After the annual deductible has been met, the coinsurance feature applies. Coinsurance is a cost sharing feature and is stated as a percentage of sharing between the insurer and the insured, such as 80/20, 70/30, 60/40. The insurer pays the larger amount.

All of the following activities could cause an insurance purchase to be treated asa STOLI, except:

After the investors have paid for the policy, they will change the ownership and beneficiary designations. The investors will also have to pay premiums to keep the policy in force. Upon death of the insured the investors will file a claim for the death benefit.

J makes a contribution to her IRA. All of the following information determines whether J's contribution is tax-deductible, EXCEPT:

Age may determine whether a contribution is allowed, but does not determine if it is deductible. All other choices determine if the contribution is deductible or nondeductible.

A client requests a Medical Expense Policy several months after you suggested the policy. The underwriter will most likely order which of the following?

Agents do not have authority to recommend or suggest any underwriting requirements. At most, the agent could inform underwriting that the applicant was previously offered an opportunity to apply for insurance and declined. This would likely result in the underwriter ordering an APS.

In order to be sold as a long-term care insurance policy, an insurance product must:

All LTC policies provide at least 12 months of coverage, and have a 30-day free look period. An automatic inflation rider at 5% compounded annually is only one of three acceptable standards.

Active duty members of the military are required to enroll in which TRICARE plan?

All active duty members must enroll in TRICARE Prime. There is no out of pocket cost for enrollment or services received from a participating provider or in a military treatment facility.

Which of the following statement applies to Medicare Select policies?

All buyers have the option to buy any available Supplement. They must receive an outline if coverage and certify that they understand the plan restrictions. Enrollees can go out of network in cases of emergency or if the service needed is not available through a network provider.

All disability policies cover _________ disabilities, which are those occurring outside work.

All disability policies cover nonoccupationally illnesses. Occupational policies also cover work-related disabilities, which is important for self-employed persons, highly paid employees, and persons with very specialized skills (such as physicians, accountants, engineers, attorneys).

All employer-paid premiums for amounts above $_________ of group life insurance are reported as taxable income to the employee.

All employer-paid premiums for amounts above $50,000 are reported as taxable income to the employee.

Sherman is the custodian at an elementary school and participates in its qualified retirement plan. This describes a:

All four responses are qualified plans, but the one specifically designed for employees of nonprofit organizations and public schools is the 403(b) Tax-Sheltered Annuity.

A life insurance premium is paid each month. The insurer then subtracts a mortality and expense charge from the policy's cash value. This best describes which of the following life insurance policies?

All premiums paid to a Universal Life Policy are placed in the policy's cash value account. The mortality charge (cost of protection) and expenses are then deducted from the cash value account.

Michelle's corporation chose a high-deductible health plan (HDHP) because it:

All such plans cover preventative costs, and HDHPs are not needed to establish an FSA. As for MSAs, they specifically for small business and the self-employed. HSAs are the only plan that meet the criteria of the question.

While life insurance may accumulate money that a person could use in retirement, none promise the same long term benefit of a non-qualified annuity, which is ____________.

Although both annuities and life insurance offer tax-deferred grown of principal, the long term benefit of an annuity is the lifetime income stream available at any time to the annuitant.

The two primary definitions of disability are " any occupation" and "own occupation." Which of these statements best describes the difference between the two definitions?

An "own occupation" policy is less restrictive because one must only be unable to perform the essential duties of their occupation at the time of disability. An "any occupation" would not pay benefits if the insured could perform the duties of any occupation for which he/she was suited by reason of education, training, or prior experience, and is considered more restrictive.

A systematic distribution of accumulated funds, either over one's life, or a specified period, is the definition of a(n):

An Annuitization Option usually involves a systematic series of distributions made in substantially equal amounts to an individual over his or her life, or a specific period. Annuitization Period is the payout phase of the annuity product, while the period during which deposits are made is the Accumulation Period.

Which of the following IRA transactions is subject to taxation?

An IRA Rollover places a 60 day limit on reinvesting into another IRA without tax consequences.

An IRA account owner may take an early withdrawal without penalty if the withdrawal is for any of these reasons, EXCEPT:

An IRA account owner may take an early withdrawal from an IRA without penalty in case of: death or permanent disability, up to $10,000 for the down payment on a first home, unreimbursed medical expenses or to pay health premiums, and qualified educational expenses.

What is an annuitant, in regard to an annuity policy?

An annuitant is the individual whose life the contract is based upon.

What advantage do persons have when applying for a Medicare Supplement insurance plan at the same time they are first eligible for Medicare?

An applicant may not be declined for insurance when applying for a Medicare Supplement insurance policy within the first 6 months after enrolling in Medicare Part B for the first time.

When Harry completed his insurance application, the agent discovered that he was under treatment for a chronic condition. In order to gather the necessary information, Harry's agent ordered a/an:

An attending physician's statement is ordered when the application reveals the presence of a chronic or other condition for which additional information regarding treatment and prognosis is required. A medical exam is ordered based on a variety of factors including the age, and condition of the applicant as well as the amount of coverage requested. A Medical Information Bureau report will be ordered on all applicants as a matter of course.

How much time after a qualifying event has occurred and notice is given of their right to continue insurance does an employee or dependent have to elect continuation of the group health plan under COBRA?

An election to continue the group health plan under the provisions of COBRA must usually be made within 60 days of the qualifying event. Only in the event that proper notice was not given may the election period be extended.

The exception to the rule concerning the non-deductibility of life insurance premiums is:

An employer may deduct 100% of the total group life premium it pays as a business expense, but the value of premiums for any employee's coverage in excess of $50,000 must be 'imputed' to the employee and income tax paid on that amount.

At the time of a life insurance policy delivery, a producer must provide which of the following?

An illustration or policy summary must be provided prior to or at the time a policy is delivered. If the policy is not the same as that which was illustrated previously, the client must be given a new illustration matching the policy that is issued. In practice, insurance companies include a matching illustration or summary with every policy approved for delivery.

In which One of the following situations would an insurance company most likely use an impairment rider?

An impairment rider excludes coverage for a specific ailment or condition that otherwise would be covered, so the applicant is still able to obtain coverage for other health care needs.

An individual life insurance policy is incontestable after it has been in force during the lifetime of the insured for what time period from its date of issue except for fraud in procurement and for nonpayment of premiums?

An individual life insurance policy is incontestable after it has been in force during the lifetime of the insured for 2 years from its date of issue except for fraud in procurement and for nonpayment of premiums.

If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?

An insurance company that accepts a portion of a risk for an insurance company is called a reinsurance company.

All of the following practices may never be used when advertising health insurance, except:

An insurer may use the endorsement of a group over which it has some control, as long as it discloses that control in its advertising

How many days after appointing an agent must an insurer notify Commissioner of the appointment?

An insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted.

How many days after appointing an agent must an insurer notify the Commissioner of the appointment?

An insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted.

How many days after terminating the appointment of an agent must an insurer notify the Commissioner of the termination? A 30

An insurer who terminates an appointment, employment, or other relationship of a producer must notify the Commissioner within 30 days after the effective date of the termination.

How many days after terminating the appointment of an agent must an insurer notify the Commissioner of the termination?

An insurer who terminates an appointment, employment, or other relationship of producer must notify the Commissioner within 30 days after the effective date of the termination.

Annually renewable term life insurance's premiums increase every:

Annually renewable term life insurance premiums increase every year to reflect the increase in risk to the company.

A contract that is designed to accumulate value over time with the intent to distribute the funds over the lifetime of an individual is called _________.

Annuities are designated to liquidate accumulated assets rather than to create a sum of money as a direct benefit for another person. When an annuity is not already annuitized, it is subject to state insurance nonforfeiture laws, and the contract value must be paid to a beneficiary, to the owner, or to the owner's estate following the death of the annuitant.

All of the following are transactions that qualify as a 1035 exchange, except:

Annuities cannot be 1035 exchanged into a life insurance policy.

All of the following tax-free exchanges of life insurance and annuities are permitted, EXCEPT:

Annuities may not be exchanged for life insurnace.

If a policyowner of a life insurance policy accidently pays in premiums in excess of the MEC guidelines, the insurer can refund the excess within ______ days of the end of the contract year.

Any excess premium can be refunded by the insurer within 60 days after the end of the contract year.

An individual has secured a $12,000 loan from the bank to purchase a boat, which is scheduled for repayment in monthly installments over 48 months. Which life insurance would be most efficient at protecting the lender should the borrower die prior to retiring the debt?

Any of these types of life insurance could be used to pay the debt. However, because decreasing term would follow the loan balance be, it is said to be the most efficient.

If an application is submitted with a question left unanswered, which of the following should occur?

Any unanswered questions need to be answered before the policy is issued.

Applicants must consent to be tested and be informed that testing for ________ may determine insurability.

Applicants must consent to be tested for HIV and be informed that testing for HIV may determine insurability.

Which is not correct concerning a Blue Cross and Blue Shield Plan?

As both Blue Cross and Blue Shield Plans are fee for service programs, they pay the service provider, not the covered individual (i.e. subscriber). They are typically not-for-profit and provide both group and individual coverage.

Under a Key Employee Disability Income Policy, the employer is all of the following, except:

As in Key Employee or Key Person life insurance (Chapter 1), the employer is the owner, premium payor, and recipient of the proceeds. The key employee or person is the insured.

When may an employer deduct the premiums it pays for an employee's life insurance.

As long as the insurance death benefit is not payable to the employer when an employee dies, the premiums paid for the life insurance are deductible to the business.

When a whole life policy endows, what happens to the policy cash value?

At endowment, because the insured has not already died, a whole life policy's cash value will equal the face amount of insurance. The policy ends and the cash value is paid to he policyowner.

J took out a life policy when he was 35. It had a conversion feature that he exercised at age 45. Age 45 is referred to as his ____ age.

Attained age is the insured's age at any point in time, typically used at renewal or conversion.

Basic expense policies typically cover all of the following, except:

Basic expense policies (basic hospital, surgical and medical expense) typically do not cover routine vision (optometry) or dental care.

What are the tax ramifications when an annuity contract is owned by a corporation?

Because a corporation is a non-natural person, a corporate-owned annuity is not treated as an annuity for tax purposes . There is no tax benefit or deferral--earnings are taxed every year.

With a Life Income Payment Option, what happens at the annuitant's death?

Because all payments cease upon the annuitant's death, the amounts of the monthly income payments under this option are larger than under any other option.

Managed health care plans generally refer to covered persons as?

Because most HMO and PPO plans are operated by corporations that were organized specifically to provide health care benefits and do not offer forms of insurance, they tend to refer to covered persons as subscribers rather than insureds.

Answers to questions in applications for health and disability insurance are considered representations and not warranties. If an applicant later realizes he/she answered a question incorrectly, how many the answer be changed?

Because the application is the primary source of underwriting information. Once a policy is issued, the answers in the application may be used to deny or rescind coverage if determined to be material misrepresentation.

Which of these annuity distribution options promises the largest possible payment to a single annuitant?

Because the insurance company has no way of knowing how long the annuitant will live, and because the contract is created for the benefit of the annuitant, a life only option provides the largest possible payment. The insurance company is at greater risk of paying more than the principal value at the time of annuitization, so it pays a larger amount based on the life expectancy of the annuitant.

Which of the following business disability plans can create a taxable event:

Benefits received from the business overhead expense plan are taxable to the business owner and must be reported as income; however, to the extent that benefits are offset by deductions for payments made to others (to suppliers for inventory items, employees' salaries, taxes, rent, and other business expenses), only the net benefit is taxable as income.

Which of the following types of limited policies would a common carrier purchase to provide medical and surgical benefits in excess of any primary coverage?

Blanket plans are primarily sold to groups whose membership fluctuates to provide medical and surgical benefits in excess of any primary coverage.

Which of the following statements about blanket disability insurance coverage is correct?

Blanket policies are group policies, including employer groups, and do not require individual applications.

Which is true regarding the advertising of Accident and Sickness Insurance?

Both agent and insurer are accountable. Such words as all, complete, or comprehensive are prohibited. Sales talks and testimonials are considered advertising and are regulated activities.

Which is true regarding the advertising of Accident and Sickness Insurance?

Both the agent and the insurer are accountable for advertising content. Words such as all, complete, or comprehensive are not allowed. Sales talks and testimonials are considered advertising.

Medicare Supplement Policies:

Both the look back period for determining a pre-existing condition and the exclusion period are 6 months. Policies are guaranteed renewable, may not duplicate Medicare, and may either have their own outpatient drug benefit or be paired with a Part D plan.

Under which business-related use of Disability Income Insurance would the premiums be tax-deductible?

Business Overhead Expense Coverage is deductible as an ordinary business expense. Any benefits received would be taxable.

All of the following are generally the main business uses of life insurance, except:

Business uses of insurance often mirror individual needs - to cover the unexpected death of business partners, executives, and key employees by providing funds for the continuation of the business, not for the heirs of the decedent.

A flexible premium deferred annuity permits all of the following, EXCPET:

By definition, a flexible premium annuity allows the addition of more principal value at any time prior to annuitization of the contract. An annuity that begins payments to the annuitant within one month of policy issue is a Single Premium Immediate Annuity (SPIA)

Which of the following might be done to protect against adverse selection when underwriting group medical insurance?

By requiring a minimum percentage of the group to enroll, the risk is spread by possibly getting those of better health to participate along with those of poorer health.

When insurance advertisements include a comparison of similar accident and health insurance products, which of the following is not a major factor in the comparison?

Cash values

Which of the following is a reason why "class" designations of beneficiaries may be a problem?

Class designations of beneficiaries are intended to provide benefits to a number of unnamed persons but can be problematic when there is insufficient understanding about who is being named as a beneficiary. "All my children" does not clearly identify which children are included- the children of a former marriage, the current marriage, or both. Likewise, "my minor children" disregards the fact that children will eventually become adults, and can unintentionally exclude a child as a result.

Managed Health Care attempts to contain costs by controlling the behavior of participants in all of the following ways, except:

Comprehensive Case Management is employed as opposed to partial.

Which of the following is not a Mandatory Uniform Provision?

Conformity with State Statutes is an Optional Uniform Provision.

In a legal sense, an insurance premium is the insured's

Consideration

Consumer-driven health care allows individuals to use a _____-tiered approach to funding the costs of medical services and treatment.

Consumer-driven health care allows individuals to use a 3-tiered approach to funding the costs of medical services and treatment.

What percentage of employee participation is required for a contributory employer group plan?

Contributory plans require 75% participation.

Hicks Corp. wants to install a contributory group plan. It employs 200 people. How many employees must participate in order to install the plan?

Contributory plans require a participation percentage of 75%.

What is different about a corporate owned nonqualified annuity compared to an individually owned nonqualified annuity?

Corporate owned annuities must be associated with a qualified retirement plan for the corporation to avoid current income taxation. There are no interest rate limitations for annuities in the IRC. All annuities provide a death benefit guaranteed prior to annuitization; a corporate owner of an annuity will name itself as the beneficiary.

Which of the following provides advice about insurance policy terms and/or benefits for a fee?

Counselors are paid for their advice instead of effecting a transaction or settling a claim.

If the insurer issues a policy after receiving an application for health insurance in which preexisting conditions were inadvertently omitted, what would be the consequence to the insured's coverage if a preexisting condition caused a claim shortly after being issued?

Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank

What is the benefit of credit disability insurance plan?

Credit disability policies are typically written as a group form of insurance to creditors with at least 100 debtor accounts, and who add at least 100 new accounts annually. The policy usually provides for the payment of required minimum monthly payments for up to two years. The insured must be totally disabled according to the terms of the policy, which also specifies a minimum duration of disability that must be satisfied before the benefit begins.

A policy that only covers cancer is considered a:

Critical Illness, Dread Disease, or Limited Sickness Plans provide specific benefits for a specified sickness, such as Cancer Plans and Heart Disease Plans.

________ Insured under Social Security means that a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.

Currently Insured under Social Security means a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.

What is the main purpose that IRC section 1035 was enacted?

D To allow for continued tax-deferral on any gains in an existing policy when a policyowner moves into a new one

Which of the following are characteristics of universal life insurance policies?

Death benefits options are a key characteristic of all forms of universal life insurance. All UL policies permit the policyowner to make changes in both the amount and timing of premium payments, including making no payments at all, and the death benefit may be increased or decreased in accordance with the terms and provisions of policy.

All of the following causes of death are covered under an AD&D policy, except:

Death must be accidental to be covered under an AD&D policy. A stroke is considered a sickness.

Debit life insurance is classified as which of the following?

Debit life insurance is classified as industrial life or home service life insurance.

All of the following are classifications of substandard risks, EXCEPT:

Declined is an underwriting decision, not a classification. Special restrictions and higher premiums apply to these substandard risks.

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except:

Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.

Premiums paid by employees for group health insurance are only deductible to the extent the _____________.

Deductibility of health insurance and long term care insurance premiums is limited to the amount (with unreimbursed medical expenses) that exceeds 10% of adjusted gross income.

Producer A tells his clients, falsely, that a rival insurer does not pay claims in a timely fashion. This is an example of what Unfair Trade Practice?

Defamation includes making any false or maliciously critical statement regarding the financial condition of any person or business entity, with the intent to injure.

Dental plans are normally written with a stated annual maximum on the number of:

Dental plans normally state an annual maximum dollar benefit.

All of the following types of dental treatment are found in a dental insurance plan, EXCEPT:

Dental treatments available in dental insurance plans include: restorative, oral surgery, Endodontics, Periodontics, Prosthodontics, and orthodontics.

A disability income policy may provide a benefit for loss of time from employment in which of these ways?

Disability Income policies are designated to pay either a flat monthly amount of income or a stated percentage of verifiable pre-tax income.

The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following?

Disability policies may exclude coverage for illnesses for a short period of time (such as 7 to 10 days) after a new policy takes effect to avoid claims for preexisting conditions. Accidental injuries are never subject to a probationary period.

Employment-based plans are governed under which of the following federal acts?

ERISA is the federal law that governs the administration and operation of employee benefit plans, including health care and other welfare benefit plans.

Each agent must notify the Department of Insurance within how many days of a change in residence or business address?

Each agent must notify the Department of Insurance within 30 days of a change in residence or business address.

Each participant of a Lloyds association:

Each member is individually liable only for the particular risk they assume -- not all risks underwritten.

Every Health and Disability Income Policy must express the conditions and provisions for _______.

Each policy must express the conditions and provisions for renewal or continuation of coverage.

Electing a _____________ option for an annuity means that the annuitant will receive an income for life or for a temporary period of time.

Electing a settlement option for an annuity means that the annuitant will receive an income for life or for a temporary period of time.

Which of the following pertaining to most LTC policies is true?

Every Long-Term Care Policy must contain a renewal provision that is no less favorable to the insured than guaranteed renewable. The other choices are prohibited provisions.

Every Long-Term Care policy must provide a ______-day free look period from the date the policy is delivered.

Every Long-Term Care policy must provide a 30-day free look period from the date the policy is delivered.

All of the following are examples of cost containment and managed health care, except:

Experimental drug treatment is not a cost containment method.

Which type of producer authority is specifically stated in the producer's contract?

Express authority is the authority stated or written in the producer's or agent's contract.

Which of the following might be covered by an FSA, but not an HRA?

Eyeglasses are covered separately from major medical expenses.

Which statement is inaccurate regarding the Change of Occupation Provision?

Failure to notify the insurer of a change of occupation will not result in cancellation of the policy.

Which of the following would be considered twisting?

False and maliciously critical statements would be considered defamation. Rebating is always rebating, even in the course of a replacement.

To be considered terminally ill, federal law defines a terminal illness as one which is expected to result the person's death within how many months?

Federal law establishes 24 months as a person's maximum life expectancy to be defined as terminally ill. For the activation of an accelerated death benefit rider, and for the purpose of limiting such claims, insurance companies often define terminal illness as one which would result in death within 12 months.

If the beneficiary is concerned about a particular amount of cash flow each month, the _______ settlement option should be selected.

Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.

How does life insurance reduce financial loss upon the insured's death?

For a premium, the applicant can transfer a specific dollar amount of risk to the insurer, thereby reducing but not eliminating the entire risk.

Which of the following Is the reason why premiums paid on personal life insurance are not deductible?

For individuals, premiums are considered a personal expense and are not deductible. They are paid with after-tax dollars. This establishes a cost basis in the policy for tax purposes.

A person may not fund and HSA unless they also do which of these?

Funding an HSA is only permitted in a year in which the contributor is covered by a High Deductible Health Plan ("HDHP)

With a Profit Sharing Plan contributions must generally be made in at least ________ consecutive years.

Generally there must be contributions made to a Profit Sharing Plan 3 out of the last 5 years.

All the following qualify for Medicare Part A, except:

Generally, Medicare is intended for individuals age 65 and over. Individuals with certain medical conditions may also qualify at any age. Part A is premium-free for individuals covered by Social Security.

Group health plans usually cover:

Group health plans usually only cover nonoccupational injury and disease. Workers' Compensation Insurance is designed to cover job-related injury or disease.

Which of the following describes group life insurance?

Group insurance is underwritten as a single policy that covers many lives. A policy issued to an individual that covers all family members is still an individual policy. A group specifically formed for the purpose of obtaining insurance is not a valid group under state insurance laws.

Which of the following is a typical benefit period for a group long-term disability benefit?

Group long-term disability is often characterized by benefit periods of 2 years, 5 years, to age 65, or lifetime.

When Harold became no longer eligible for coverage under his employer's group benefit program, which of the following statements accurately reflects the conversion privilege defined by his group contract?

Group plans offer a 31-day conversion privilege. During that time, an employee can choose from among the available individual plants. COBRA refers to an extension of group benefits, not individual benefits. It is available under certain conditions, and is mandated by law, not the insurance contract.

Which of the following is not an exception to the requirement that small employer health plans be guaranteed renewable?

Guaranteed renewal is not required in cases of fraud or intentional misrepresentation; Nonpayment of premium; Noncompliance with minimum participation requirements; The small employer carrier ceasing to offer that particular type of coverage in the market; The sole proprietor or small employer moving outside the coverage area.

All are types of managed care plans, except:

HMOs, PPOs, and POSs are all types of managed care plans (i.e., those in which the insurer contracts with service providers in advance to control costs). A true indemnity plan is not managed health care.

Health Savings Accounts and Health Reimbursement Arrangements are both types of what form of health insurance?

HSAs and HRAs are two of the more popular Consumer-Driven health plan options available in America. HSAs allow individuals to set aside their own money on a pre-tax basis for later payment of health care expenses (employers can also contribute). HSAs can be either individual or group plans. HRAs are only group plans and are funded exclusively with employer contributions.

By eliminating an insurer's right to refuse to insure anyone under the Affordable Care Act, health insurance in America can essentially be referred to as ____________?

Health Insurance primarily in the individual market, will essentially be considered "guaranteed issue" as a result of the changes mandated by the PPACA. Coverage can still be denied as a result of material misrepresentation in the application for insurance or fraudulent claims.

When the employer pays some or all of the cost of health insurance for its employees, the annual amount of each employee's claims is _______.

Health insurance premiums paid by the insured's employer are deductible to the employer and not taxable to the employee. The benefits paid are not taxable to the employee because the employee did not derive any income benefit. Taxes, if any, would be paid by the service provider.

_______________ is the process of selection, classification and rating, and determining if someone is insurable.

Home office underwriting is the process of selection, classification and rating, and determining if someone is insurable.

A typical hospital indemnity insurance plan provides payment of benefits in which of the following ways?

Hospital indemnity plans provide stated cash benefits for each day an insured is confined in an acute care hospital. Benefits may be increased when the insured is confined in a specialized unit such as intensive care (ICU) or direct observation (DOU)

When a group insurance plan is identified as contributory, it means all of the following, EXEPT:

IN a contributory group insurance plan the employer is required to maintain at least 75% participation. Noncontributory group plans require 100% participation.

A Section 1035 Exchange is permitted in each of the following transactions, except:

IRC section 1035 does not authorize the exchange of an annuity policy for any kind of life insurance policy.

If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force.

If a client has a Waiver of Premium rider in effect, and if the insured becomes totally disabled, the company waives premiums for the duration of the disability. Therefore the policy remains in force.

The fine for knowingly violating a cease and desist order is what amount per infraction?

If a person knowingly violates a cease and desist order, the Commissioner may order a civil fine of up to $20,000 for each violation, or a suspension or revocation of the person's license, or both. Fines may not exceed an aggregate of $100,000.

All of the following are alternatives an insurer may have when asked to insure a substandard risk, EXCEPT:

If a policy is issued substandard, the insurer may charge a higher premium, limit the coverage, or attach an impairment rider which excludes specific conditions in the policy.

If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point?

If a policy is issued with a question unanswered, the contract will be interpreted as if the question had not been asked, and is therefore waived by the insurer.

If a policyowner unintentionally pays premiums in excess of the MEC guidelines, the excess premium can be refunded by the insurer within 60 days after the

If a policyowner unintentionally pays premiums in excess of the MEC guidelines, the excess premium can be refunded by the insurer within 60 days after the end of the contract year.

If an employee is age 65 and still working, which of the following statements is correct?

If an individual is age 65 or over and continues to work, Medicare is usually the secondary insurer to any employer group health plan the individual participates in. Employers who have 20 or more employees are required to offer the same health benefits, under the same conditions to employees age 65 or over and to employees' spouses who are age 65 or over, as offered to the younger employees and spouses.

All of the following statements regarding an insurance application are correct, except:

If attached to the policy, a copy of the application becomes part of the entire contract.

K owns a variable annuity with an assumed interest rate of 4%. If the actual performance of the separate account(s) is 3%, the effect on this month's income benefit check will be such that it:

If the actual return is lower than the AIR, the monthly annuity payment will be reduced. If the actual return is equal to the AIR, the monthly annuity payment will remain the same as the previous month. If the actual return is greater than the AIR, the monthly annuity payment will increase from the previous month.

What does it mean if dental benefits are scheduled?

If the dental policy offers scheduled benefits they are limited to specified maximums per procedure, with benefits usually lower than usual, reasonable, and customary.

Which of the following scenarios will cause the value of a life insurance policy death benefit to be included in the insured's estate?

If the policyowner and the insured are the same person, the death benefit will be included in the insured's estate.

The LMC Partnership has 3 partners and is concerned about what would happen to their $300,000 business if one of the partners should die. If they consider a buy-sell agreement, then each partner would have to buy a policy in the amount of $__________ on the other partners.

If there are 3 partners in a company valued at $300,000, then each would have a $100,000 interest in the company. Each partner would purchase a policy on the other partners, providing for a total of 6 policies (3x2 = 6). Each policy would be valued at $50,000 (6 x $50,000 =$300,000).

An employer's contribution to a SIMPLE plan is vested _________.

Immediately at 100%

Which of the following type of authority does the public assume an agent has when quoting insurance?

Implied authority is that which the public assumes the agent has if it is not written into the agent's agency contract.

Which of the following best describes 'Capital Liquidation' in an effort to meet an income objective?

In a capital liquidation strategy both principal and earnings are paid out over the anticipated time period in order to meet the income objective. Each payment would be the same as any investment earnings shortfall would be offset by principal liquidations.

Which of the following best describes 'Capital Retention/Conservation' in an effort to meet an income objective?

In a capital retention/conservation strategy only the investment earnings are paid out the principal is retained or conserved for future purposes. Each payment would fluctuate as it would be based on the earnings and no principal would be used to make up for any shortfalls.

What is "defined" in a defined contribution plan?

In a defined contribution plan, the employee chooses how much of his/her pay to contribute to the plan each payroll period. The employer deducts that amount from the employee's pay before income tax is calculated and remits that amount to the plan's custodian for the benefit of the employee.

In a long-term care policy transaction, when must the outline of coverage be provided to the applicant?

In a long-term care policy transaction an Outline of Coverage must be delivered to an applicant on the initial solicitation and prior to the presentation of the application form.

The employees of a corporation must each pay a portion of the premium for their group insurance. This means they are members of a _________?

In contributory plans ( those in which employees pay a portion of the premium), employers are generally required to maintain a minimum of 75% participation among eligible employees.

Regarding group health insurance, which is true?

In group health insurance, only the plan sponsor receives a copy of the Master Policy. Covered individuals receive a Certificate of Insurance. The plan sponsor is responsible for paying the premiums.

When underwriting group life, the underwriter treats the group as if it were:

In group insurance, the group as a whole is considered an individual, and issuance is based upon that whole. Having one uninsurable individual in a group will not cause a declination, but may increase the premium charged.

In a group life insurance plan, the employee has control over which of the following?

In group life insurance the sponsor of the plan (the employer) has control over all facets of the coverage and cost, but the choice of beneficiary is left to the participant (the employee). A group life plan may not benefit the sponsor of the plan.

Replacement of health or disability insurance generally require that the new policy must do which of these?

In most instances, the replacement of a health or disability policy must improve the insured's position, which could include increased benefits at reduced cost. However, replacing health or disability insurance only for the purpose of reducing the premium is not always a wise decision. A new policy that provides the same or increased benefits (with or without a change in premium) may include exclusions for preexisting conditions which would be covered by the existing policy, and the replacement might not be in an insured's best interest. A reduction in benefits without a corresponding reduction in premium (or with an increase in premium) is never in a person's best interest.

Which of the following Annuities would potentially be the most negatively impacted by the overall stock market falling in value?

In order to achieve the goal of wealth accumulation and offsetting the effects of inflation most if not all of a Variable Annuity separate account investments are based off of the stock market. None of the other annuities would lose value if the stock market 'crashed'.

A life insurance applicant pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect?

In the case of a Conditional Receipt, the coverage is effective as of the date of the application or upon the completion of any required medical exam, unless it is declined within a stipulated period.

What benefit does COBRA provide to employees when an employee is terminated?

In the event an employee is terminated for any reason other than gross misconduct, COBRA provides for continuation of the group health plan for the employee and his/her dependents for up to 18 months (29 months if a person is disabled at the time of the qualifying event). The employee can be required to pay up to 102% of the cost of the insurance. Life insurance is not covered under COBRA.

In the event total disability continues beyond a specified period of time, future premiums will not be required to be sent in to the insurer for the duration of the disability. This optional rider is called the _________ rider.

In the event total disability continues beyond a specified period, future premiums will be waived by the insurer for the duration of the disability with a waiver of premium rider.

All of the following are individual underwriting factors, EXCEPT:

Individual underwriting factors include age, gender, tobacco use, occupations and hobbies, physical condition, moral hazard, health history, and the plan applied for.

The Modified Endowment Contract (MEC) rules were put into place because:

Individuals were overfunding life insurance policies and using them as tax-free investment vehicles instead of a way to protect survivors against the financial cost of one's death

All of the following are true of a substandard risk, except:

Individuals whose risk factors do not measure up to underwriting standards are usually issued rated policies.

Industrial life insurance is typically sold in face amounts of:

Industrial Life policies provide benefits of $1,000 or less.

Industrial Life Insurance is also referred to as a:

Industrial life policies are also known as home service and debit policies where premiums are collected by a Debit Agent.

What is the requirement for inflation protection in a LTC policy?

Inflation protection must be offered to all LTC insurance applicants. It is not required to be purchased.

Which of the following is NOT a reason that insurers limit disability income benefits to a percentage of the insured's past earnings?

Insurers control expenses by operating efficiently, not by limiting benefits.

Which of the following manufactures and issues insurance policies and contracts?

Insurers issue insurance policies or contracts.

___________ manufacture and sell insurance coverage in the form of policies or contracts of insurance.

Insurers manufacture and sell insurance policies through agencies and producers to applicant/insureds.

For which of the following is coverage not required to be provided or offered under Medical Expense Insurance by most insurers?

Intentionally self-inflicted injuries are typically excluded by Medical Expense policies.

If dividends are left on deposit with an insurer to earn interest:

Interest paid by insurers on dividends left on deposit is taxable as income.

Which of the following is true concerning the Benefit Period of a LTC Policy?

It defines how long benefits will be paid, starting after the elimination period has been satisfied.

Charging different rates or providing different benefits to insured of the same actuarial class or hazard category is which of the following?

It is an unfair trade practice to change different rates for individuals of the same class and life expectancy for life and health insurance policies.

Charging different rates or providing different benefits to insureds of the same actuarial class or hazard category is which of the following?

It is an unfair trade practice to charge different rates for individuals of the same class and life expectancy for life and health insurance policies.

When a group member terminates employment, he or she has 31 days to purchase an individual policy without proof of insurability. This is referred to as the:

It is the Conversion Privilege, which affords a group member the right to purchase individual coverage without proof of insurability. The 31-day period also applies when COBRA continuation is exhausted.

John Doe, an insurance producer, would need to notify the Insurance Commissioner before doing business as all of the following, except:

John Doe may always do business as himself without notifying the Commissioner. The other names listed would be considered an 'assumed name', since the name of the entity would be distinct from his own.

A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal?

Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies.

The _________ branch is responsible for interpreting and determining the constitutionality of the statutes.

Judicial

All of the following are Optional Uniform Provisions, except:

Legal Actions is a Mandatory Uniform Provision. All other responses are Optional Uniform Provisions.

A personal use of life insurance does which of the following?

Life insurance is often described as creating an immediate estate. Annuities are designated to provide protection against living too long.

Universal Life is similar to Whole Life in all of the following ways, except:

Like ordinary Whole Life (WL), Universal Life (UL) Insurance features insurance protection and a savings element that grows on a tax-deferred basis. However, UL offers flexible premiums whereas WL does not.

A comprehensive Long-Term Care policy will provide benefits in each of the following settings, EXCEPT:

Long Term care does not pay the expenses connected with an acute care hospitalization.

Joan was told she could only expect about 70% of her weekly salary on a disability check if she was ever disabled. The reason for this is to reduce _________.

Malingering can be characterized as either a moral hazard (lying about one's disability) or a morale hazard (a person chooses not to work because they have some income available).

Which of the following is not an example of a cost containment measure?

Mandatory second opinions, utilization review and precertification are all considered cost containment measures. Replacement can apply to any policy that is cancelled when a new policy is issued and is not specific to managed care plans.

A last-to-Die policy would be the most appropriate recommendation for which of the following?

Married couples worried about estate taxes would be best served in most cases by a Last-to Die, or Survivorship, policy.

In order for a claimant to be eligible for _______ benefits, they must qualify based upon need.

Medicaid is a federal and state administered medical benefit program for persons, regardless of age, whose income and resources are insufficient to pay for health care.

How does Medicaid differ from Medicare?

Medicaid is a federal-state partnership that provides health care to persons whose income are under 138% (percentage dependent on Medicaid expansion) of the Federal Poverty Level.

Which of the following will cover the cost of inpatient blood transfusions after the first 3 pints?

Medicare Part A includes coverage while the insured is hospitalized for blood transfusions after the first 3 pints of blood.

Which of the following statements is not true?

Medicare Part A only pays inpatient hospital expenses and, under certain circumstances, will also pay for skilled nursing care, home health care and hospice care.

Which statement is incorrect concerning Part B of Medicare?

Medicare Part B does not cover prescription drugs at all. Part A would cover them but only while hospitalized. All other possible answers are correct concerning Medicare Part B.

With _______, the patient must pay 20% of covered charges plus the deductible.

Medicare Part B pays 80% of allowable charges after the annual deductible is met.

Which of the following requires an annual deductible and coinsurance?

Medicare Part B requires an annual deductible and coinsurance. Part A hospital requires a deductible per benefit period and a daily copayment. Neither Medicaid nor Long-Term Care have deductibles or coinsurance features.

Which of the following is not a government-sponsored plan of health care?

Medicare Supplement plans are available from commercial insurance companies and are not government-sponsored.

Mona let her permanent policy lapse. She discovered there was $2,498 in cash value remaining in the policy and decided to pay off some of her credit card debt. She exercised which Nonforfeiture Option?

Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.

The factors necessary for an insurer to calculate a Net Premium are:

Mortality Rate - Rate of Interest Assumed = Net Premium.

Which of the following would likely be treated as a common exclusion found in most health insurance policies?

Most health insurance policies exclude war and acts of war, self-inflicted injuries, aviation, active military service, and overseas residence. Retired pilots and retired military members are not excluded from coverage.

Which Act was implemented in order to protect consumers from questionable Medicare Supplement Policy marketing practices?

NAIC Model Law requires all Medicare Supplement policies to be standardized.

Newborn children are covered under health insurance plans beginning_________?

Newborn children are automatically covered during the first 31 days following their birth. To continue coverage under group or individual policy, the primary insured/subscriber must formally apply for coverage for the child before 31 days have elapsed and pay any additional premium required. The child cannot be declined for insurance at that time.

All of the following are characteristics of Franchise Insurance, except:

No Master Policy or Certificates of Insurance are issued as compared to formal group insurance. Although a group is being written, it is through individual policies.

No assignment of a policy will be binding on the insurer, unless:

No assignment of the policy will be binding on the insurer unless it is in writing and received at the insurer's home office. The insurer is not responsible for determining the validity of the assignment.

Which of the following would not be a situation in which the annuity premium dollars would qualify for an income tax deduction for the premium payor?

Non-qualified annuities are purchased with after-tax dollars therefore are not eligible for any up-front income tax deductions. Qualified plans will count annuity premium dollars as pre-tax contributions which would then allow for a tax deduction.

In noncontributory group health plans, how many eligible employees must be covered by the plan?

Noncontributory plans (in which the employer pays the full cost) must cover 100% of eligible employees.

Accident and health insurance policy exclusions typically include all of the following, except:

Nonoccupational injuries are covered. Job related or occupational injuries are typically excluded as they are covered by Workers' Compensation.

Normally, when the insurer determines that the insured is an acceptable risk, the insurer will send the policy to the ____________

Normally, the insurer will mail the issued policy to the producer for delivery so that if any outstanding premium is due, it can be collected, if a statement of good health is required, it can be obtained, and any questions the applicant has about the policy can be answered.

How often may a person perform a rollover from one IRA to another?

Once every 12 months

One of the changes to take effect the following passage of the PPACA was to allow children to remain covered under the parent's policy to age:

One of the first changes in health care mandated by the PPACA was extending the availability of coverage for children to age 26 under their parents' health insurance policy.

A_______________ policy has a death benefit that can increase or decrease over time based on stock market performance, but with guaranteed minimum death benefit, a choice of subaccounts in which cash value may be allocated, and a fixed premium.

Only Variable Life, also known as Variable Whole Life, has all of these characteristics. Variable Universal Life does not adjust the death benefit in relation to stock market performance. Equity Indexed Universal Life does not permit allocation of cash value in stock-based funds. There is no such thing as Investment Grade Whole Life.

A producer must include their name and address on which of the following?

Only a policy summary requires that the producer disclose their name and address.

Which of the following is FALSE regarding Settlement Options?

Only the interest would be taxed to the beneficiary, not the principal.

Which of the following is an optional provision for health insurance policies In Michigan?

Other optional provisions include other insurance, misstatement of age, conformity with state statutes and illegal occupation.

Which of the following is an optional provision for health insurance policies in Michigan?

Other optional provisions include other insurance, misstatement or age, conformity with state statues and illegal occupation.

Which of the following is not covered with Medicare Part A?

Outpatient care is covered under Medicare Part B.

Which of the following is not grounds for license revocation?

Over insuring a risk is not grounds for license revocation.

The Insurance Commissioner of Michigan had grounds to suspend P's Michigan insurance license when he discovered that:

P's license would be revoked if he were convicted of criminal activity, and the loss of license after the 90-day grace period is a surrender, not a suspension or forcible revocation. As for business taxes, receiving the benefit of a state license depends on meeting state requirements.

The primary reason persons choose to enroll in a PPO plan instead of HMO is usually_________?

PPO patients are not limited to only those providers in the PPO's network. They may seek the services of any licensed provider anywhere in the US. Although it may be necessary for a procedure to be pre-authorized before a claim will be paid, it does not matter where the procedure is performed.

Part 2 of the application consists of all of the following information, except:

Part 2 of the application contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, and age and causes of their death.

Which of the following is not provided under Part A of Medicare?

Part A of Medicare is Hospital Insurance, mainly providing inpatient coverage. Part B of Medicare is Medical Insurance, under which outpatient services are covered.

Which of the following is true of Medicare Part B?

Part B - Medical Insurance (Outpatient) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.

Which of the following is included in Part II of a Life Insurance Application?

Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of family members and causes of death of deceased relatives.

Which of these modes would result in the insured paying the least annual outlay for life insurance?

Paying premiums on an annual basis is always the least costly premium mode. Paying premiums monthly is usually the most expensive mode. Although some insurers may offer a discount for automatic monthly bank drafts, not all do, so this is not an acceptable choice. Payroll deduction is not a "mode".

When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit:

Pays income tax on any gains at his or her own income tax rate

A partial withdrawal is permitted on which of the following policies?

Policies on a universal life platform allow for partial withdrawals.

Under what circumstance would a policy loan in a life insurance policy be taxable?

Policy loans and unpaid loan interest are subject to taxation if the loan amount exceeds the cost basis (the Cost Basis is the amount of premiums paid into the policy less any dividends or withdrawals previously taken) in the contract in the event the policy lapses or is surrendered for its cash value. Surrender charges, if any may be applied as an offset to cost basis.

Policy loan provisions include all of the following, EXEPT:

Policy loans do not automatically reduce the death benefit in a policy. If an outstanding loan exists at the time of death, the amount of the loan will then reduce the benefit paid to the beneficiary.

The prior medical conditions for which the applicant has received, or should have received, medical advice or treatment within a specified period before the effective date of a policy are called:

Pre-existing conditions are those that are recognizable as existing before a policy is in effect.

Small employer plan preexisting conditions may not be excluded for any longer than _____ months.

Preexisting conditions may not be excluded for any longer than 1 year.

Which of the following best describes the general tax rules regarding individual disability health insurance plans?

Premiums are not deductible, the benefits are not taxable

The Insuring Clause under an individual A&H policy would contain all the following, except:

Premiums or rates would be part of the Consideration Clause. All of the other answers would be part of the Insuring Clause.

Steve Borden, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision:

Presumptive Disability is where a loss is presumed to be total and permanent due to loss of sight, hearing, speech or loss of two limbs.

All of the following are scenarios in which an insured would automatically qualify for total disability benefits whether or not they could actually continue working EXCEPT:

Presumptive disability includes loss of used of any two limbs, total and permanent blindness, and loss of speech, or hearing.

All of the following statements are true regarding Long-Term Care policies, except:

Prior confinement in a hospital cannot be a condition for coverage or payment.

Which of the following terms and definitions do not match?

Probationary Period - specified period of time before coverage goes into effect for pre-existing conditions.

According to the Proof of Loss provision, how long does an insured have under normal circumstances to furnish the insurer with evidence of a claim?

Proof of loss is required within 90 days of the loss.

Regarding penalties that may be imposed on a Michigan licensee, which statement is TRUE?

Rebating is a misdemeanor, and the Commissioner may summarily suspend a license if protecting the public requires it. The 10-day preliminary notice is a notice of the Commissioner's intent to call a hearing, not notice of the hearing itself. The actual notice of hearing is 15 days.

An employer may require a former employee who has COBRA coverage to pay up to _____% of the premium.

Recipients of COBRA coverage will be required to pay premiums to the employer. Employers may require a former employee or his/her surviving spouse to pay up to 102% of the premium.

Jim decided to participate in his employer's group dental coverage after the initial eligibility period expired. Which of the following may the insurer do?

Reduce benefits for up to 1 year

All of the following are Settlement Options, except:

Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option.

Which of the following are ways that the insurer can issue disability income coverage for a substandard risk?

Reduced benefits, higher premiums, and elimination of coverage for known risks (preexisting health conditions, vocational/avocations risks) are three of the ways in which insurers deal with substandard risk.

A lump sum of money is placed into an account from which the annuitant will draw periodic benefits beginning more than a year from the date of purchase. This describes a:

Regardless of how it is funded, by definition a deferred annuity does not begin its income stream for at least 13 months. Typically, the deferral period is many years, not just one.

All of the following are correct regarding regulatory jurisdiction over group insurance, except:

Regardless of which state's law governs the contract, the policy must provide benefits as required by each state in which an employee works or resides.

What is the primary advantage to the policyowner in the reinstatement of a life insurance policy?

Reinstatement restores the policy to its original condition as if it were never lapsed. Even though the policy is reinstated at a later age, the original issue premium is all that the insurer will require.

Which provision is an Optional Uniform Provision?

Relation of Earnings to Insurance is an Optional Uniform Provision. The other choices are Mandatory Uniform Provisions.

What is the purpose of respite care benefit in a Long-Term Care policy?

Respite care benefits provide the individual primarily responsible for the care of a disabled person in a home care setting with a break from their duties. It will pay for a substitute caregiver or for the disabled person to be placed in an institutional setting for a short period of time

All of the following are true in general about riders, except:

Riders are provided for a specified period of time as stated in the policy. It is typical for a rider to end at a specified age (such as the insured's age 65).

After Robert signed up for Medicare, he withdrew $2,000 from his HSA. He used $600 for his Medicare Supplement premium, $200 for out-of-pocket medical expenses, and the remaining $1,200 on a trip to celebrate his retirement. Later on, when he paid his taxes for the year, he discovered that:

Robert paid income tax on the $1,200, but not the 20% penalty, because he was at least 65 years of age, as indicated by the fact that he was on Medicare and retired.

A Roth IRA is unique for which of the following reasons?

Roth retirement plans are funded with after-tax (nondeductible) money. Under current tax law, distributions are received tax-free, including all gains.

HMOs usually require patients to select a _____________ as the person who will oversee and direct their basic health care in most cases.

Selecting a primary care physician (PCP) is generally a requirement when a person enrolls in an HMO. If a PCP is not designated, the HMO will assign the persons to a physician located close to the place of residence. A PCP may be changed as often as desired, but the change only becomes effective on the first day of the month following a requested change.

An organization that pays benefits to the providers of health care, rather than to the insured, is known as what type of provider?

Service providers pay benefits to the providers of health care rather than to the insured. Service providers includes Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point-of-Service plans (POSs).

Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except:

She will be converting her group term life to an individual permanent policy.

Which of the following is a typical benefit period for a group short-term disability benefit?

Short-Term Disability Income plans are characterized by maximum benefits for periods of rather short duration, such as 13, 26, or 52 weeks.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Alice dies, so who receives the policy proceeds?

Since Claire outlived Bill and Alice, then Claire is next in line to receive the policy proceeds.

Which of the following is the least important when it comes to determining the cost of the group life insurance plan?

Since evidence of insurability is not usually required, the health of each member of the group is not used when determining premiums of the group.

Nathan is insured under a group disability plan which requires that he pay 1/3 of the premium. Nathan is currently drawing a $6,000 monthly benefit from the plan. How much of the $6,000 is subject to income tax?

Since the employer pays 2/3 of the monthly premium, then 2/3 of the monthly benefit ($4,000) would be taxable as income to Nathan.

A 67- year old individual works for a large company and plans on working until at least age 70. The individual signed up for Medicare at age 65 and the employer has a group health insurance plan. If a loss occurs, how will the claim be handled?

Since the individual is currently employed by a company with more than 20 employees, over 65, and the company has a health insurance plan, the primary payor will be the company health insurance plan. Medicare will take on the secondary payor role.

Under which of the following business-related plans are benefits taxable as income to the owner?

Since the premium is deductible, the benefits received are taxable.

Which of the following plans could generate a taxable event to the recipient?

Since the premiums are deductible, the benefit is taxable.

In addition to language similar to the any occupation definition of total disability, Social Security's definition of disability also includes which of the following statements?

Social Security definition of disability includes the statement about unable to perform any substantial gainful activity, which makes qualifying for SSDI benefits difficult in many cases.

_____________ means ensuring that an annuity addresses a prospective owner's needs and financial objectives at the time of the sale.

Suitability means ensuring that an annuity addresses a prospective owner's needs and financial objectives at the time of the sale.

________insurance allows for insurance coverage to be obtained when not available from admitted carriers.

Surplus Lines

Warren and Wilma have a joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a:

Survivor or second-to-die policies cover two lives and pay proceeds only when the second insured dies.

All of the following are primary plans, EXCEPT:

TRICARE for Life is similar to a Medicare Supplement, and it is secondary to Medicare. All of the other plans are designed to be primary plans.

Which of the following plans is designed for employees of non-profit organizations, which includes schools and other 501(c)(3) entities

Tax-Sheltered Annuity (TSA)

Josh is a concert pianist and earns a very good living with his talent. He was in a car accident and broke his arm. His disability is considered:

Temporary Disability occurs when the insured suffers a disability and is expected to recover fully. Temporary disability may be total or partial, depending on the person's ability to work or not. A professional pianist with a broken arm would not be able to perform, and would be considered totally disabled for a temporary period of time.

All of the following are riders that can provide for additional temporary coverage on a new or existing policy, except:

Term riders require that the policyowner have an insurable interest in the person covered under the rider. Neighbors don't qualify.

Regarding COBRA, which of the following is not true?

Termination of employment other than for gross misconduct allows former employees and their dependents a maximum of 18 months of continuation.

What is "fixed" in a fixed annuity?

The "fixed" portion of a fixed annuity is the interest crediting rate, which may change at the discretion of the insurance company, but not less than the guaranteed minimum. A fixed annuity also promises a fixed payment to the annuitant when the contract is annuitized.

Sharon, age 64 is getting ready to file her taxes. Which of the following statements regarding the deductibility of her various, personally-owned health insurance policies is true?

The 10% threshold is a floor. Only amounts above the floor can be deducted.

Amy owns her own individual Medical Expense Policy. Which of the following is true about the taxation of her premiums and medical expenses?

The AGI threshold for determining the deduction for unreimbursed medical expenses and premiums is 10%.

The _________ include bathing, continence, dressing, eating, toileting, and transferring.

The Activities of Daily Living (ADLs) include bathing, continence, dressing, eating, toileting, and transferring.

The Age Discrimination in Employment Act (ADEA) affects both the short- and long-term group disability benefits for people employed after age _______.

The Age Discrimination in Employment Act (ADEA) affects both the short- and long-term group disability benefits for people employed after age 65.

All of the following would be eligible to have their prelicensing requirements waived by the Commissioner except an applicant who:

The Commissioner may waive the exam or prelicensing requirements for an applicant who applies for a limited license, has been a licensed insurance producer within the preceding 12 months, has obtained the CPCU, CLU, CIC or other professional designations, or has an associate's, bachelor's, or master's degree with a concentration in insurance from an approved institution.

An insurer who terminates an appointment, employment, or other relationship of a producer must notify:

The Commissioner must be notified within 30 days.

Which of the following Medicare Supplement policies have Core Benefits?

The Core Benefits found in Plan A must be found in all plans.

The federal law that governs the rights of plan participants and beneficiaries of most employer-sponsored benefit plan is?

The Employee Retirement Income Security Act defines the manner in which most employee benefit plans must be administered. Plans operated by federal, state, and local government agencies are generally exempt from the provisions of ERISA.

Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of the:

The Fair Credit Reporting Act is the only one in the list which may have jurisdiction over information gathered for underwriting purposes.

A federal regulation called the ______________ protects consumer privacy.

The Fair Credit Reporting Act protects consumer privacy by ensuring that data collected by companies on a person is confidential, accurate, relevant, and used for a proper purpose.

The main purpose of requiring a Gatekeeper is to:

The Gatekeeper (or Primary Care Physician) monitors health care needs and helps to control costs by not recommending unnecessary services (including referrals to other physicians and specialists).

All of the following are characteristics of Home Service (Industrial) Insurance, except:

The Grace Period under industrial policies is 4 weeks, not 10 days.

The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except:

The Guaranteed Purchase Option (Guaranteed Insurability, Future Increase) Rider guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc., the insured may purchase additional monthly benefits, if income justifies it, without proof of insurability. Rates are based on attained age.

The HIV Consent Form specifies which types of individuals may receive __________.

The HIV Consent Form specifically addresses who may receive test results, most often it is the insured's doctor.

In determining the proper amount of life insurance coverage for an insured, the ________ approach measures the projected future earnings and the value of the insured's services in the event of his or her premature death.

The Human Life Value Approach concerns itself with the replacement of future earnings and the value of the insured's services in the event of premature death.

Which rider would eliminate coverage for a preexisting condition?

The Impairment Rider eliminates coverage for pre-existing conditions, but at the same time may make insurance available for an otherwise uninsurable person.

The Medical Information Bureau (MIB) is formed by:

The MIB is a member-owned corporation that operates on a not-for-profit basis in the United States and Canada. The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies.

The National Association of Insurance Commissioners (NAIC):

The NAIC does not have legal authority over insurance regulation, but promotes uniformity in the interpretation of insurance legislation and regulation.

Anna is seeking a Medicare Supplement Policy. An agent has explained that all supplements must contain some of the same items. Which of the following is false?

The NAIC regulation states that the Buyer's Guide and Outline of Coverage be provided at the time of application. (Note: Some states have stricter requirements as to when these documents must be provided.)

The Needs Analysis Approach always assumes the death of the insured to be:

The Needs Analysis Approach always assumes the death of the individual to be immediate, and assesses various factors to calculate all financial needs caused by an immediate death.

A firm with 50 employees replaces its existing group health plan. With regard to ongoing existing claims, the replacing insurer will be:

The No Loss-No Gain law (a.k.a. the Hold Harmless Agreement) establishes mandatory risk transfer.

The annuity pay-in period is also referred to as the ________ period.

The Pay-In Period is considered the accumulation period, during which taxes are deferred. Accumulation periods are found within deferred annuities.

If a change or correction must be made on the application for insurance, which of the following applies?

The Producer can make the change and have the insured initial the change

Harry was hospitalized and in a coma for 6 months. When does proof of loss for this claim have to be submitted?

The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must provide proof of the loss within 90 days of the loss, or within in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity. Since Harry was in a coma for 6 months, it would not have been possible for him to file a claim within the 90-day time period.

In a replacement transaction, all of the following are insurer duties and responsibilities, except:

The Replacing Insurer's responsibilities include: upon receiving proper notification with the new application, the replacing insurer must notify the existing insurer of the planned replacement, maintain copies of the information regarding replacement for a specified period of time as mandated by the state.

Which of the following definitions does not match the term?

The Return of Premium Rider provides for a refund of the entire or some part of the premium (not cash value) based upon favorable claim activity over a specified period.

The Social Security Death Benefit is payable to the ____________.

The Social Security Death Benefit is payable to the surviving spouse or minor children if they meet certain requirements.

The primary categories of Social Security Benefits provided are:

The Social Security System provides Retirement, Death, and Survivor benefits.

Before telephoning a prospect for the first time, a producer must do which of the following?

The TCPA requires that no unsolicited phone call be made to any phone number listed in the national Do Not Call list managed by the Federal Trade Commission (the list must not be more than 31 days old)

A Taft-Hartley Trust would be formed to provide health and welfare benefits to which of these employees?

The Taft-Hartley Act was enacted to limit the power of labor unions in the workplace.

When an individual is covered by a three-tiered, consumer driven health plan, the second source or tier of payment usually comes from a/an:

The Tier 1 source is usually a pre-tax plan, which may often cover less than the deductible of an associated High Deductible Health Plan. The participant covers such gaps with out-of-pocket funds.

A viatical settlement is made between a purchaser of a person's life insurance policy and ___________.

The Viatical life settlement laws which have been adopted by the states are intended to protect terminally ill person from exploitation. They must not obtain a lesser benefit than they could obtain on their own by taking a loan or cash surrender from their life insurance company or through a living needs provisions or rider in their policy.

The 'Appeal Rights' required by the Affordable Care Act apply to:

The ability to appeal is the ability to appeal a judgment regarding the applicability of benefits to a specific situation. It is similar to the ability to appeal benefit denials in an HMO.

Which of the following items does not become part of the insurance contract as defined in the entire contract clause?

The agent's report is neither part of the application, nor part of the insurance contract. The agent's report is a confidential communication between the agent and the insurer.

All of the following are true regarding credit life, except:

The amount of insurance benefit must not exceed the total amount of indebtedness.

Which of the following statements is FALSE regarding Credit Life Insurance?

The amount of the coverage is dependent upon the amount of indebtedness, not the duration of the loan.

Eileen's health insurance had a $500 deductible and 80% / 20% coinsurance. Her first claim of the policy year amounted to $1,000, of which she paid $600. How much was her coinsurance?

The answer is $100. The other $500 she paid covers her policy deductible.

Which one of the following is the initial source of underwriting information?

The application is the starting point for underwriting. It is considered a vital document because it is usually attached to and made part of the contract. It also contains the signatures of the agent, the insured, and the owner if different from the insured. It is usually the application that determines which other sources may be needed.

The Michigan Life an Health Insurance Guaranty Association will pay the obligations of an insolvent insurer up to what amount for a single claim for LTC benefits?

The association's liability is equal to the insurer's contractual obligation had it not become insolvent, up to $300,000 per life for disability income or LTC.

The Michigan Life and Health Insurance Guaranty Association will pay the obligations of an insolvent insurer up to what amount for a single claim for LTC benefits?

The association's liability is equal to the insurer's contractual obligation had it not become insolvent, up to $300,000 per life for disability income or LTC.

The Michigan Life and Health Insurance Guaranty Association will pay the obligations of an insolvent insurer up to what amount for a single claim for hospital and surgical benefits?

The association's liability is equal to the insurer's contractual obligation had it not become insolvent, up to $500,000 per life for basic hospital, medical and surgical insurance benefits.

What is the name of the person named in the annuity contract to potentially receive any residual benefits?

The beneficiary is the individual or person named in the contract to potentially receive benefits if the owner and/or annuitant die prior to annuitization or if the settlement option selected offers any residual benefit after the annuitant's death.

Which of the following terms best describes the maximum length of time that disability income benefits will be paid to the disabled insured?

The benefit period determines the amount of time a benefit will be paid. Benefits are limited by the policy's elimination period, duration of benefit, definition of disability, and any age limitations.

Which of the following disability income benefit periods will result in the highest premium?

The benefit period is the time period the insured is eligible to receive payments after the elimination period has been met. The benefit period may be written for a specified number of years (2, 5, or 10 years), to age 65, or for life. The longer the potential benefit period, the higher the premium

The widow or widower's Social Security blackout period lasts until a surviving, non-remarried spouse reaches age ________.

The blackout period ends at age 60.

Which of the following will be covered under a business owner expense (business overhead) policy?

The business overhead expense policy is designed to cover overhead such as rent, utilities, and employee's wages upon the disability of the owner. It will not cover the owner's wages, loss of profit, or disabled employee wages

All of the following would be eligible to have their prelicensing requirements waived by the Commissioner except an applicant who:

The commissioner may waive the exam or prelicensing requirements for an applicant who applies for limited license, has been a licensed insurance producer within the preceding 12 months, has obtained the CPCU, CLU, CIC or other professional designations, or has an associate's, bachelor's, or master's degree with a concentration in insurance from an approved institution.

The insurer's consideration is __________ while the applicant's consideration is ________.

The consideration clause states what each party exchanges in the contract. The policyowner must pay something of value (premium) in exchange for the insurer's promise to pay the benefits. Policies are issued in consideration of the application and the payment of premium(s).

What can an employee do in order to obtain coverage when they have a pre-existing condition and find that their job was just eliminated?

The conversion privilege allows eligible employees the option to convert from the group plan into an individual plan without having to prove insurability so long as they act within 30 days.

All of the following are characteristics of Credit Life Insurance, except:

The creditor (not the debtor) is normally both the policyowner and beneficiary.

David withdrew the money from his tax-deductible Traditional IRA and reinvested it 90 days later in another IRA. Which of the following statements is true regarding this transaction?

The distribution from the former IRA is fully taxable, as the transaction was not completed within the 60-day rollover window to avoid any taxes and penalties.

An insured purchases a disability income policy with a 90 day elimination period. If a disability lasts 100 days, the insured would be entitled to receive benefits for:

The elimination period acts like a time deductible. The insured would be eligible to receive 10 days of benefit payments. Of the 100 days he was disabled, the first 90 are eliminated, leaving the remaining 10 days eligible for claim payment.

The elimination period in disability income insurance policy:

The elimination period is the period for which an insured must be disabled before benefits begin. Benefits begin only after this period of time is satisfied.

Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the:

The elimination period is the period of time between the onset of a disability, and the time the insured is eligible for benefits. It can be thought of as a deductible period for the policy.

The employee or the beneficiary must notify the employer within ______ days if they elect to continue coverage under COBRA.

The employee or the beneficiary must notify the employer within 60 days if they elect to continue coverage under COBRA.

The Master Policy for a group life plan goes to the employer. What does the employee receive?

The employees in a group life plan receive a certificate of insurance that describes a benefit, identifies the insurance company and policy and certificate numbers, and provides information about changing beneficiaries or filing a claim.

When an annuitant annuitizes their annuity that has a cost basis in it, the amount of the income benefit payment subject to tax is determined by using the:

The exclusion ratio allows the annuitant to account for the cost basis overtime so that the initial payments are not 100% taxable until all cost basis has been fully accounted for.

In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer.

The existing insurer is the insurer who has a policy subject to replacement.

The _______ date is the date on which the insurance coverage ends.

The expiration date is when the coverage ends, the effective date is when it begins. Conversion and continuation allow it to remain in effect.

When Robert suffered a disabling injury, he received disability income benefits under the terms of his employer-sponsored disability insurance policy. He was still receiving benefits when his employer switched carriers. The process of determining how benefits applied immediately after this change was governed by which of the following provisions?

The extension of benefit assigns claims to the insurance in force when the claim occurred, despite any later replacements. Coordination applies when two policies apply simultaneously, and conversion applies when the status of the individual changes, not the policy. COBRA continues benefits when an employee is terminated.

All of the following licenses require a licensing fee of $10 per year, except:

The fee for a Surplus lines producer is $100 per year.

Regulations governing replacement of life insurance policies would apply to which of the following policy types?

The following types of policies are exempt from replacement regulations: Replacements by the same insurer that issued the existing policy; Credit life insurance administered by group-type methods; Group life insurance policies; Policies is issued in connection with a pension, profit sharing, individual retirement account or other benefit plan qualifying for an income tax deduction of premiums; Nonconvertible term policies which cannot be renewed and which would expire within 5 years.

A warranty is defined as which of the following?

The fourth element of a legal contract is a competent party or someone that has the legal capacity to enter into a legal contract.

The free look period for a long-term care insurance policy is how many days?

The free look period for a long-term care insurance policy is 30 days.

In Michigan, the Free Look period for LTC polices is set at 30 days?

The free look period for an LTC policy is 30 days.

In Michigan, the Free Look period for LTC policies is set at ____ days?

The free look period for an LTC policy is 30 days.

In Michigan, the Free Look period for life policies is set at how many days?

The free look period in Michigan is 10 days.

In Michigan, the Free Look period for life policies is set at how many days?

The free look period of Michigan is 10 days.

The grace period for individual life insurance policies is not less than how many days?

The grace period for individual life insurance policies is not less than 30 days.

All of the following are true regarding industrial life insurance, except:

The grace period is 4 weeks in length with the method of settlement upon death being lump sum.

All of the following are required uniform provisions in individual health insurance policies, EXCEPT:

The grace period, entire contract clause, and reinstatement provision are considered mandatory provisions while the change of occupation is an optional provision.

What is the conversion privilege required on all group life insurance policies sold in the state of Michigan?

The group insurance conversion privilege lasts for 31 days.

Under the Do Not Call Registry, telephone solicitation calls before _____ or after _____ are prohibited.

The hours during which calling is prohibited are before 8 a.m. and after 9 p.m.

If a universal life policy with the increasing death benefit option has an initial face amount of $75,000 and cash value of $10,000, the actual death benefit would be:

The increasing death benefit option (Option B) of a universal life policy equals the face amount of the policy plus the cash value accumulated.

An individual jumps off a roof and breaks his leg. Which of the following statements is correct?

The individual jumping off a roof was a conscious decision and intentional. Breaking his leg would be considered an accident.

For the most part, the highest authority for insurance regulation is:

The individual states

An applicant for life insurance realizes several days later that she may have answered a question about health issue incorrectly. She should do which of the following?

The insurance company is entitled to have the most correct information available before it approves a person for insurance. Incorrect information in the application may only be changed before the policy is issued.

The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party.

The insurance company must meet requirements under the FCRA when gathering information about an applicant from a third party.

Who pays for any reports of Medical Exams required as part of the underwriting process for insurance?

The insurance company pas for any reports or medical exams required as part of the initial underwriting.

The insured covered under a group disability policy must apply for the conversion policy within how many days after the termination of the group coverage?

The insured covered under a group disability policy must apply for the conversion policy within 30 days after the termination of the group coverage.

A business owner buys a life policy on his own life. He may be all of the following EXCEPT:

The insured may not be the beneficiary of his own policy. The owner and the applicant may also be the insured.

An employee must apply for conversion from group life to individual life within how many days after the group coverage terminated?

The insured will be entitled, without evidence of insurability, to an individual policy upon application within 31 days of the termination date.

An insured is covered under a major medical plan where she works. The plan has a $300 deductible, 80/20 co-insurance, and a $5,000 stop-loss including deductible. A severe injury is suffered and the total covered cost for the treatment is $28,000. How much will the insurance company cover?

The insured will pay $5,000 since this is the stop-loss in the contract. The insurance company will pay the balance of $23,000. The insurance company picks up 100% of the costs after insured satisfies the deductible and co-insurance up to the total out of pocket amount of $5,000.

An insured owns a disability income policy that has a waiver of premium rider in the event he/she suffers a total disability. 5 years after the issuance of the policy, the insured suffers a disability and is unable to work for 18 months before returning to work. The rider has a 3 month waiting period. Which of the following best describes the benefits of the waiver of premium rider?

The insured would have had to have paid the first three months premium until he/she was on claim, then the company would have refunded those premiums and waived the rest of the premiums while he was still on claim.

All of the following statements about the future increase option rider are true EXCEPT:

The insured's current earned income must warrant the additional coverage applied for on the option date otherwise it will not be issued. This is to guard against overinsurance.

All of the following are factors that are taken into consideration when using the Human Life Value approach in determining the proper amount of life insurance coverage, except:

The insured's educational background is not a factor when using the HLV approach to determine the amount of life insurance needed.

Which of the following provisions commence at the time of the delivery of the policy to the insured?

The insured/owner has the right to examine the policy for 10 days (this may vary by state) after receipt of delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove date of receipt.

In a STOLI/IOLI transaction, what are the insureds basically doing?

The insureds are basically selling their mortality to another for up-front cash.

The burden of proof falls on the _________ to establish issued policies were in fact delivered to the applicant.

The insurer has the burden of proving that an issued policy was delivered.

If an accelerated death benefit is in effect, how often must the insurer provide a report showing the amount paid and the amount of the remaining benefit?

The insurer is required to provide the report monthly.

When must an insurer provide a Medicare Supplement Buyer's Guide and an Outline of Coverage?

The insurer must provide a Medicare Supplement Buyer's Guide and an Outline of Coverage at the time of application.

An insured took out a disability income policy while working in a low hazardous occupation. When filing a claim for disability income benefits, after a job related accidental injury, the insurance company discovered the insured changed jobs 2 years prior to the loss. The new job would have been classified as more hazardous. The insurance company will most likely:

The insurer will pay only the amount of benefit that the insured would have been able to purchase, with the premium already paid, for the more hazardous job, so his benefit will be reduced accordingly.

Which of the following is not a required objective of an insurer's information security program?

The insurer's responsibility is safeguarding consumer privacy involves administrative, technical, and physical safeguards for the protection of customer information. Prosecution of violators is the responsibility of law enforcement.

The insuring agreement in a life insurance policy states which of the following?

The insuring agreement is the basic promise to pay the benefit described in the policy when a claim is proved. In Life insurance, a true certified copy of the death certificate is valid proof of death.

All of the following are situations in which the insurer is obligated to pay out a death benefit after the insured has died, except:

The insuring clause states that the policy must be in force. A policy that has overdue premiums unpaid will cause the policy to lapse which means no coverage was in effect.

Clayton is asking his life insurance producer about any potential taxation issues related to his $100,000 personal Whole Life policy. All of the following are TRUE, except:

The interest on policy loans is not tax-deductible.

B was 42 when the life insurance policy was issued. 42 is referred to as the ______ age of the policy.

The issue (original) age of the insured is the age on the policy issue date. The attained age is the insured's age at any point in time typically used at renewal or conversion. The effective date is the date when insurance coverage begins, and the expiration date is the date in which insurance coverage ends.

What is the typical time limit on life expectancy for a Viatical Settlement candidate?

The life expectancy of a Viatical Settlement candidate is normally two years or less.

What is the maximum annual contribution to an FSA, which is allowed by law?

The limit is $2,550 per year.

The only time a policy loan is taxable is in which of the following situations?

The loan is not taxed as long as the policy is in force. If the policy lapses with a loan outstanding, the excess over cost basis becomes taxable as ordinary income.

Sam wants to know at what age he should annuitize in order to receive the highest monthly income benefit payment:

The longer Sam waits to annuitize his annuity, the higher each monthly income benefit payment will be because of the shorter expected payout period.

What is the main purpose that IRC section 1035 was enacted?

The main purpose of section 1035 is to allow for the continuation of tax-deferral from an old policy into a new policy.

Which statement concerning individual health policy renewal provisions is most correct?

The more favorable a renewal provision is to the insured, the higher the premium will be. A noncancellable policy will cost the most because its premium cannot be changed in the future.

Loading includes all of the following, except:

The mortality rate is used to determine net premium. Loading are additional charges to net premium to derive gross premium.

Once the gross amount of dollars required to fund an insured's needs has been determined using the needs analysis approach, what is the next step?

The next step is to subtract any assets available to fund financial needs after death. This reduces the amount of life insurance required.

A life Insurance policyowner receives an annual dividend. One option for this dividend is to use it to offset the annual obligation to the insurer. What is this option called?

The obligation the policyowner has to the insurer is the premium. Under the Premium Reduction Dividend Option, the dividend payable is used to reduce the current year's premium. Any excess could be used according to the other dividend options.

A person may contribute to a Traditional IRA if they ________.

The only requirement is taxable income. (Prior to January 1, 2020, persons age 70½ or older were prohibited from contributing.)

All of the following are a prohibited form of advertising, except:

The other responses reflect prohibited forms of advertising.

The owner of an annuity may do all of the following, except:

The owner's rights begin at the time of purchase. An owner, who may also be the annuitant, may change the annuity date, beneficiary, and payout option.

Which of the following should be put in place by two business partners who want to be assured that the business will not be lost should either one of them become disabled?

The partners should put in place a Buy-Sell Agreement funded by a Disability Policy that would provide the funds needed to buy out the interests of either partner should one of them become totally disabled.

The period within which to reinstate a lapsed life insurance policy is how many years?

The period within which to reinstate a lapsed life insurance policy is 3 years.

A "level term" policy means that the ___________ remains the same throughout the lifetime of the policy.

The policy proceeds are also known as the death benefit or face amount of insurance. In term life, at each renewal the premium will increase based on the age of the insured. The pure cost of insurance is gross premium minus the insurer's expenses and profit and without adjustment for interest earnings on reserves.

When can a policyowner make a change in the policy's coverage or other benefits if an irrevocable beneficiary has been named?

The policyowner may not change an irrevocable beneficiary unless the beneficiary dies or provides written consent for the change. If an irrevocable beneficiary is named, the owner may not make changes to the policy that affect the coverage or benefits without consent of the beneficiary.

The life insurance policy cost basis consists of:

The premiums paid in

Proceeds from a buy-sell agreement are received ___________.

The premiums payable for a buy-sell agreement are not tax deductible, therefore the benefit is received income tax free.

Harry and Sally were equal partners in a catering business worth $400,000. They entered into a buy-sell agreement that provided funding whether one of them died or was disabled. The annual premium for each of the disability insurance policies was $2,000. All of the following statements are correct, except:

The premiums would not be deductible since the non-disabled partner would individually receive the benefit from a disability policy that he or she individually owns.

One of the purposes of a Buy-Sell agreement is which of these?

The primary purpose of a buy-sell agreement is to acknowledge the partners' commitment to the business, how the business is valued, and what will happen to the business if one or more of the owners were to die or become disabled.

A replacing insurer must assume liability for paying ongoing existing claims under which law?

The process being described is mandatory risk transfer accomplished by a Hold-Harmless Agreement or No Loss-No Gain legislation.

Which of the following is required to sign the application for insurance?

The producer and the applicant must sign the application. If the applicant and insured are different, then both must sign as well as the producer.

A producer has each of the following responsibilities to the Insurer, EXCEPT:

The producer is responsible to the insurance applicant to promptly forward premiums to the insurer, recommend the best protection, gain knowledge of the applicant's insurance needs and current insurance coverage, and serve the applicant's best interest.

Which of the following individuals represents the insurance company when selling an insurance policy?

The producer or agent is licensed to represent the insurance company when transacting insurance business.

Which one of the following regarding insurable interest is false?

The proposed insured not the Insurance Commissioner's permission is required when a third party with insurable interest wants to purchase insurance on that proposed insured.

Which provision in a health insurance plan is used to avoid overinsurance when a person is covered by more than one plan?

The purpose of the Coordination of Benefits provision is to prevent overinsurance. The 'COB' provision appears in both group and individual health policies.

What is the purpose of a probationary period in a disability income policy?

The purpose of the probationary period is to limit the insurance company's claims liability to accidental injuries only during the first 10-30 days of the policy (as stated in the policy). Losses due to illness is the probationary period are considered as being caused by a preexisting condition.

For what type of provider are services covered in or out of a network by a combination of a medical expense plan and/or an HMO?

The question describes a POS (Point-of-Service) plan. POS plans were developed to include a larger number of providers than HMO plans

All of the following are characteristics of a 403(b) plan, except:

The question describes a Tax-Sheltered Annuity (TSA) plan whereby a teacher participates through a deduction from his or her pay. Earnings grow tax-deferred, but employees cannot make direct payments into the retirement fund.

When group health insurance is being replaced, ongoing claims under the former policy must continue under the new policy, overriding any preexisting condition exclusion. This is a requirement under which of the following?

The question describes the No Loss-No Gain legislation, sometimes called a Hold-Harmless Agreement.

Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability.

The question describes the Residual Disability provision.

Monte has a health care plan whereby if he stays within the network, benefits are paid as an HMO. However, if he goes outside the network, benefits are paid from the medical expense portion of the plan subject to high deductibles and copayments. Monte is covered by a:

The question describes the characteristics of a Point-of-Service Plan, which offers a combination of medical expense and HMO benefits.

Which policy utilizes a Corridor Deductible after Basic Medical Expense Coverage benefits have been exhausted and before Major Medical benefits begin?

The question describes the characteristics of a Supplemental Major Medical Policy.

COBRA is a federal law requiring employers with _____ or more employees to provide the option of continuing the employee's existing health coverage for dependents for up to _____ months following qualifying events.

The question specifies coverage for dependents (36 months), not the employee (18 months).

Rank the following renewability provisions in order from least favorable to most favorable in terms of benefit to an insured:

The renewability provisions in order from lowest to highest in terms of benefit to an insured/policyowner are: cancellable/nonrenewable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancelable.

Barry has just been hired by OPQ Corporation and finds that he cannot enroll for coverage under OPQ's group health insurance plan for 30 days. This 30-day period is known as a:

The specified period of time set by the employer before an employee is eligible to enroll for group benefits is known as a Probationary Period. It usually is 30 days in length but could be up to 90 days.

When a group is covered by a MET, who is issued the Master Policy?

The sponsor develops the plan, sets the underwriting rules, and administers the plan, but the trust is the Master Policyowner.

When the owner and annuitant is the same person, a spouse beneficiary is permitted what choice under the Internal Revenue Code if the annuitant dies prior to annuitizing the contract?

The spouse-beneficiary may adopt the annuity as his/her own. As the owner, he/she may name a new annuitant and/or beneficiary, or assign ownership to another person for value.

The insurance industry is primarily regulated at the _________ level.

The states have primary responsibility for regulating the insurance industry.

The "time limit of certain defenses" generally terminates the insurance company's right to avoid a claim more than ________ years from the date of policy issue.

The time limit on certain defenses provisions limits the time period the insurance company has to contest a claim to less than 2 years.

To reduce its exposure to claims from a substandard disability risk, an insurer may take all of the following actions, except:

The underwriter might utilize a Full Exclusion Rider when a certain condition is more likely to result in claims.

Which insurance company department accepts the insurance risk?

The underwriting Department is responsible for evaluating the acceptability of a risk and, once accepted, determines the actual rate to be charaged.

The waiting period from the start of a disability to be eligible to apply for Social Security disability is:

The waiting period to apply for Social Security is 5 full months from the start of a qualified disability.

If an annuitant withdraws funds from their annuity prior to age 59 1/2 what is the tax consequence?

The withdrawal that represents earnings will be taxed along with a 10% tax penalty.

Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized?

The younger ages receive the smaller payments because they can be paid out for a longer period of time. Females also receive smaller income checks due to a longer life expectancy.

Typically, how many days can elapse before an overdue premium will cause a policy to lapse?

There is a grace period for late premiums. Typically it is 30 days (or one month) during which coverage will remain in effect.

What differences exist between the treatment of sole proprietors and partners when it comes to the taxation of medical expense insurance?

There is no difference. Neither a partnership nor a sole proprietorship is separately taxable from their owners; therefore, the owners do not have access to a separately purchased plan as they would from a corporation--which would be taxed separately on its income.

Which of the following is not a prerequisite to apply for a producer's license in Michigan?

There is no requirement other than an applicant possess a diploma or degree.

Which of the following is not a prerequisite to apply for a producer's license in Michigan?

There is no requirement other than an applicant prosses a diploma or degree.

Interest only, life income with period certain, lump sum, and life income only are all forms of which of the these life insurance policy options?

These are all forms of settlement options-how the beneficiary will receive the policy proceeds. Nonforfeiture options are concerned with cash value.

If an employee does not enroll during open enrollment and they still want coverage, what happens?

They must provide evidence of insurability unless they wait until the next open enrollment period.

All of the following are examples of third-party ownership, EXEPT:

Third-party ownership exists when the insured and the owner of the policy are different persons.

Gary participates in a group long-term care insurance program through his employer. The employer pays for a standard level of coverage for all employees, and Gary pays for an additional voluntary amount of coverage. In all, Gary's employer pays two thirds of the cost and Gary pays the remaining one third of the cost. If Gary makes a claim under this policy, what percentage of his benefits would be taxable based on the premium structure?

This is a long-term care insurance plan, not disability insurance. The tax-status of benefits does not depend on who pays the premium.

Which of the following statements is a required provision in all individual health insurance policy?

This statement reflect the Time Limit on Defenses clause, which I required. The other statements reflect uniform provisions which are optional.

All of the following would be considered the replacement of a life insurance policy, except:

This transaction is not considered a replacement because the policy owner is exercising a contract option. She is dealing with the same insurer that sold her the original policy; and the value is not being decreased.

All of the following groups are exempt from the Affordable Care Act's requirement to purchase coverage, EXCEPT:

Those who must pay MORE than 9.5%, even after subsidies, are exempt.

Timothy is the insured/owner of a universal life insurance policy and is concerned that in the event of disability, the policy might lapse. Which rider would keep the policy from lapsing if he became disabled?

Tim has a Universal Life Policy which needs to have enough cash value in it in order to pay the monthly cost of insurance. If he is disabled, the Waiver of Cost of Insurance will keep the policy in force.

Which provision states that the insurance company must pay claims immediately?

Time of Payment of Claims (a Mandatory Uniform Provision) stipulates that claims are to be paid immediately upon written proof of loss.

In order for a worker to be qualified for all of the benefits available from Social Security how many credits must be earned?

To be eligible for SS all benefits and be considered fully insured, a worker must have earned 40 credits.

An employee is considered full time and eligible for small employer medical expense insurance if he or she works a minimum of ________ hours per week.

To be eligible to enroll in a small employer medical expense insurance plan, an individual must work a minimum of 30 hours per week.

For an employee to be eligible to participate in an employer's group health insurance plan, he/she must be considered full-time and work a minimum of _____ hours as established by the Affordable Care Act.

To be eligible, an employee must be considered full-time and work a minimum of 30 hours as established by the Affordable Care Act.

How many credit hours of continuing education must a producer complete to maintain his/her license during each renewal period?

To maintain a producer's license, each licensee must complete a minimum of 24 credit hours of approved insurance continuing education courses every 2 years.

Which of the following is true of traditional commercial insurers?

Traditional commercial insurers market reimbursement contracts that pay directly to the insured.

An insurance contract

Transfers risk from the insured to the insurer

Which of the following is correct pertaining to underwriting a group health policy?

Typically, large group policies are reevaluated annually on the basis of claims. This is known as 'experience rated,' and the prior year's claims will be a significant factor in establishing the next year's premiums, and could result in non-renewal, if permitted. Smaller groups may be 'community rated,' and evaluated in comparison to similar-sized groups. In all cases, the average age of the group is a premium consideration.

The HMO provider is paid a set fee per enrollee, known as a:

Typically, the HMO provider is paid a set fee, known as a capitation fee, per enrollee.

The terms "usual, customary, and reasonable" refer to which of the following?

UCR is the method by which medical health insurers evaluate and pay claims for services provided to a patient. What is UCR in the local network may be more or less than the cost of the same services in another part of the US and in not event will a claim be paid above 100% of the actual expense.

Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options?

Under Life Income Joint and Survivor, payments would continue until the death of the second person to die.

A Single Premium Immediate Annuity (SPIA) begins paying out its benefit:

Under an SPIA, the idea is to have income begin immediately. There is essentially no accumulation period, and benefits begin within 1 year of the issue date.

From the insured's perspective, which of the following types of disability coverage would be the most restrictive as to qualifying for benefit payments?

Under any occupation, an insured is disabled if he/she cannot perform the duties of any occupation for which he/she is suited by reason of education, training, or prior experience. This is more restrictive than if an insured is unable to perform the essential duties of his/her own occupation.

Determining, acceptable risks is the primary responsibility of the_____

Underwriter

Which Term refers to a contract in which only one party is legally bound to contractual obligations after the premium is paid?

Unilateral Contract

What is the insured's responsibility with regard to notifying the insurance company of a loss under a disability policy?

Unless reasonably prevented from doing so, an insured must notify the insurance company of a claim in writing 20 days of the loss. In practice, the insured's physician or the hospital makes the notification for the insured, but it remains the responsibility of the insured.

Which of the following statements about a Roth IRA is FALSE?

Unlike a traditional IRA, contributions to a Roth IRA are not tax-deductible.

Kirk has just reinstated an individual A&H policy that had lapsed and wants to know how soon coverage will be in effect for any accident or sickness. You, the agent, would say:

Upon reinstatement, accidents are covered immediately, and sickness after 10 days. This prevents insureds from reinstating a policy when they are already sick.

J buys a life insurance policy specifically intending for the death benefit to be used to cover estate taxes. What is the correct term for using life insurance in this way?

Using life insurance proceeds to pay estate taxes is a means of "conserving" the estate for the heirs.

Which statement is incorrect regarding HMOs?

Usually optical services, physical therapy, and dental care are supplemental and offered as an option.

Which of the following Annuities is generally not backed by the insurer's general account assets?

Variable Annuities are supported for the most part by the separate accounts selected. The only exception is if the Variable Annuity offers and the policyowner selects to place all or a portion of the policy values in the fixed account.

If an annuity uses units instead of dollars to determine the value of the policy, then it is a(n) _________ annuity.

Variable Annuities are valued and paid in terms of units, rather than dollars. Upon annuitization, accumulation units are converted to annuity units, and the income is paid on the value of the annuity units.

Which annuity is the only one regulated by the SEC, FINRA, and State insurance departments?

Variable annuities are regulated by the SEC, FINRA, and State insurance departments.

Generally, which of the following Annuities is not designed to guarantee the principal value of the policy in stable interest rate environments?

Variable annuities have no minimum guarantee of interest or gains, and may lose value in a declining market.

J has been insured with XYZ Insurance Company for many years. J's policy includes an accidental death benefit if death occurs within 90 days of an accident. J has an accident, and dies 91 days later. XYZ Company chooses to pay the accidental death benefit even though they are not legally bound to do so. This is an example of:

Waiver is the voluntary surrender of a legal right or privilege. When an insurer decides not to enforce a contract condition, they are "waiving" their right to enforce it.

Traditional individual retirement account owner withdraws funds and takes the check to place into a new IRA. How much will the original IRA custodian withhold for taxes?

When IRA withdrawals are not directly rolled over, instead a check is sent to the account owner, the distributing IRA custodian must withhold 20%.

Which of the following allows reimbursement benefits to be paid directly to medical providers?

When a policy pays on a reimbursement basis, benefits are paid directly to the insured. The exception to this is if the insured assigned benefits to the provider(s), in which case they would then be paid directly to the provider.

When determining an appropriate amount of life insurance, a producer takes into consideration the existing mortgage and other debt, future education expenses for the client's children and continuing income for his surviving spouse. This approach is known as:

When a producer takes into account a variety of factors related to lost future income, he/she is using a needs approach.

Unless an exception applies, life insurance proceeds are income taxable in which of the following circumstances?

When a transfer of ownership takes place while the insured was alive

When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place?

When an application accompanies the initial premium, the applicant is making an offer to the insurer. Before acceptance can take place, an offer must first be made. The insurer accepts the offer when the policy is issued.

If an insured changes occupations and the new occupation is in a higher risk class that the former occupation, what does the change of occupation provision allow the insurance company to do in the event a disability claim is presented but the insured failed to inform the insurer of the change?

When an insured fails to notify the insurance company of a change in occupational to a higher risk classification and suffers a covered loss, the insurance company's only course of action is to reduce the benefit payable in relation to the premiums actually paid compared to the higher premium which should have been paid.

When calculating premium of life insurance policies, insurers assume all of the following, except:

When calculating premium rates, life insurers assume that: premiums are paid in advance of the period of coverage, premiums will be invested and earn interest and claims are paid at the end of a year. Insurers assume that the average life expectancy of each group will materialize.

What law provides the right of employees to continue health insurance coverage when changing employers by removing any restrictions against waiting periods and coverage in a new group health plan, as long as the employee has had creditable coverage?

When covered under group health plan, the Health Insurance Portability and Accountability Act (HIPPA) provides an employee and his/her dependents with the right to enrollment in a new employer's group health plan at the earliest possible moment when an employee begins new employment within 63 days of leaving the former group plan.

An applicant for accident and health insurance works two jobs. Which of the applicant's jobs will be used to underwrite the policy?

When one has two occupations, the most hazardous is used for rating, regardless of hours worked or experience in each.

When are LTC premiums deductible for an employer:

Whenever an employer pays for an employee's LTC, the premium is deductible, regardless of whether it is a group or individual policy. The LTC policy's status as qualified or non-qualified may impact the taxability of the benefits, but not the deductibility of the premiums.

All of the following may be excluded from coverage under a Long-term Care insurance policy, except:

While Cirrhosis is associated with alcoholism, the law prohibits exclusions based on certain physical diseases. Mental nervous conditions do not include Alzheimer's or other related diseases.

All of the following are common exclusions found in dental insurance plans, EXEPT:

While emergency dental treatment is covered it can be limited in benefit amount if treatment is obtained outside the plan's service area.

cause Anne is covered through a traditional HMO, she does not have the required HDHP needed to establish and fund an HSA.

While there are some exceptions to the general rule, premiums paid for employer sponsored group disability income insurance policies are deductible, the benefits are income taxable.

Which of the following is not considered an Unfair Trade Practice?

While there is an unfair trade practice called misrepresentation, representation is simply the assertion of a material fact on a policy application.

Which of the following is not considered an Unfair Trade Practice?

While there is an unfair trade practice called misrepresentation, representation is simply the assertion of material fact on a policy application.

Tom is the beneficiary and is concerned about both running out of money during his lifetime and at the same time leaving funds behind to the insurer. Looking for some time period guarantee, Tom should consider the _________ settlement option.

With Life Income Period Certain, payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. If the recipient dies prior to the end of the period certain, the payments continue to another person until the end of the period certain.

Sam is totally disabled and receiving benefits while attending an insurer-approved vocational training program. Which of the following guarantees the continuation of benefits while Sam participates in the training program and remains totally disabled?

With Rehabilitation benefits, total disability benefits are continued as long as the insured is actively participating in the training program and remains totally disabled.

All of the following are TRUE regarding a Variable Annuity, except:

With Variable Annuities, upon annuitization, the number of units remains level, but the unit values fluctuate based upon the separate account(s) selected.

Within how many days of occurrence, a licensed agent must report any disciplinary action by the insurance regulatory agency of any other state or territory of the United States; each disciplinary action on an occupational license held by the licensee; each judgment or injunction entered against the licensee involving fraud, deceit, misrepresentation, or violation of any insurance law?

Within 30 days of occurrence, a licensed agent must report any disciplinary action by the insurance regulatory agency of any other state or territory of the United States; each disciplinary action on an occupational license held by the licensee; each judgment or injunction entered against the licensee involving fraud, deceit, misrepresentation, or violation of any insurance law.

Most group Disability Income contracts are offered on a(n):

Workers' Compensation is designed to cover occupational or job-related accidents and disease, so the group plan would be designed to cover nonoccupational disabilities.

Which of the following individuals is not eligible to establish a Health Savings Account?

cause Anne is covered through a traditional HMO, she does not have the required HDHP needed to establish and fund an HSA.