Life Exam 2

In reference to the standard Medicare Supplement benefits plans, what does the term standard mean?

All providers will have the same coverage options and conditions for each plan The term "Standard" implies that all providers will have the same coverage options and conditions for each plan

Who can provide skilled nursing care?

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

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider A single rider that provides coverage on every family member is called a "family rider"

What requirement provision protects against unintentional lapse of the policy?

Grace period The grace period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of the grace period provision is to protect the policyholder against an unintentional lapse of the policy

If the insured has the right to keep a long-term care insurance policy in force by making timely premium payments, and the insurer may not make any change to the policy or decline to renew it, the policy is

Guaranteed Renewable When a policy is guaranteed renewable, the insured has the right to keep the long-term care insurance in force by making timely payments of premium, and the insurer man not make any change to the policy or decline to renew it

What are the 2 types of Flexible Spending Accounts?

Health Care Accounts and Dependent Care Accounts

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

Incontestability clause If an insurer wishes to contest any statements on the application, they must do so within the first two years

Regarding long-term care coverage, as the elimination period gets shorter, the premium

Increases LTC policies also define the benefit period for how long coverage applies, after the elimination period. The benefit period is usually 2 to 5 years, with a few policies offering lifetime coverage. Obviously the longer the benefit period, the higher the premium will be; and the shorter the elimination period, the higher the premium will be

Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer If an insurer requests a medical examination, the insurer is responsible for the costs of the exam

Another name for a substandard risk classification is

Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium

What type of care is Respite Care?

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

Equity indexed annuities

Seeks higher returns Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy The interest credited under this option is TAXABLE, whether or not the policyowner receives it

Hospital indemnity/hospital confinement indemnity policy will provide payment based on

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

Which of the following best describes what the annuity period is?

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

A policy with a 31-day grace period implies

The policy will not lapse for 31 days if the premium is not paid when due A mandatory provision of life insurance requires that a grace period be provided. The grace period id the period of time after the premium due date in which premiums may still be paid before the policy lapses for nonpayment of the premium

Which of the following is true regarding Medicare supplement policies?

They must be at least guaranteed renewable Each Medicare supplement policy must be at least guaranteed renewable

What are Dependent Care Accounts used for

To help pay for dependent care expenses which make is possible for an employee and his or her souse, if applicable, to work

A medical Expense policy that established the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as

Usual, customary and reasonable The usual, customary and reasonable approach for determining insurance benefits is based upon the fees normally charged for specific procedures in the geographic location where the services are provided

Which of the following CANNOT be included along with illustrations used to sell life insurance?

Vanishing premium information Illustrations used to sell life insurance cannot use the term "vanishing premium" - or any similar term - that implies the policy becomes paid up

Which of the following products requires a securities license?

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

The main difference between immediate and deferred annuities is

When the income payments begin The main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year

What describes the specific information about a policy?

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

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a

Premium receipt When collecting the initial premium, the agent should issue the applicant a premium receipt

What is a Waiver of Premium

Provision that allows the insured not to pay premiums during a period of disability that has lasted for a particular length of time. A rider that can be added to a life insurance policy, and not something to be obtained from the applicant

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000 The triple indemnity accidental death rider obligates the company pay three times the face amount of the policy if the insurer dies as a result of an accident. The death must be accidental and not contributed to by any factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple death indemnity rider is void, but the beneficiary will still receive the policy's death benefit

L has a major medical policy with a $500 deductible and 80/20 coinsurance. L is hospitalized and sustains a $2500 loss. what is the maximum amount that L will have to pay?

$900 (deductible +20% of the bill after the deductible [20% of $2000]) L would first pat he $500 deductible; out of the remaining $2000, the insurer will pay 80% ($1600) and the insured will pay 20% (400)

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense?

100% For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense

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

20 days If the recipient of a Cease and Deist Order wants to contest or review the charges in court, the request must be made within 30 days of the order

within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested

How long must producer maintain records of continuing education course completion?

4 years Producers must maintain records of completion of continuing education courses for 4 years from the date of the course completion

What is the waiting period on the Waiver of Premium rider in life insurance policies?

6 months Most insurers impose a 6 month waiting period from the time of disability until the first premium us waived

To which of the following situations does the replacement regulation apply?

A whole life policy reissued with reduction in cash value Replacement means any transaction in which new life insurance or new annuity is to be purchased and it is known or should be known to the proposing producer that by reason of the transaction, existing life insurance or annuities have been or will be converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values. All other answer choices are also exceptions to the replacement rules

An individual licensed as an agent must notify the Texas Department of Insurance, on a monthly basis, of all the following EXCEPT

Any change in business name Agents must notify the Department of Insurance on a monthly basis of any change of the license holder's mailing address, any felony conviction of the license holder, or any administrative action taken against the license holder by financial or insurance regulator of Texas, another state, or the United States

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

Application The application contains most of the information used for underwriting purposed. This is why its completeness and accuracy are so crucial

The full premium was submitted with the application for the life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

As of the application date If the full premium was submitted with the application and the policy was issued (his/her own life policyowner and the insured is the same person), or in the life of a family member or a business partner

The classification "Small Employer" means any person or firm that during the preceding year employed how many employees?

At least 2 and not more than 50 Classification rules established by the Insurance Code state that "Small Employer" means any person or firm that during the preceding year employed at least 2 and not more than 50 persons

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

Buy-sell agreement Buy-sell agreements are used to contractually establish the intent of someone else to purchase the business upon the insured's death, and to set a value (purchase price) on a business. Life insurance is used to fund the buy-sell agreement. Any type of life insurance may be purchased to provide the necessary funds for the agreement. Insurance can be used to either fully or partially fund the buy-sell agreement

Which of the following is true regarding inpatient hospital care for HMO members?

Care can be provided outside the service area The HMO provides the member with inpatient hospital care, in or out of the service area. The services may be limited for treatment of mental, emotional or nervous disorders, including alcohol or drug rehabilitation or treatment

According to the provisions of the Patient Protection and Affordable Care Act, all of the following are required preventative care EXCEPT

Cervical Cancer exams for all women starting at age 40 Cervical cancer exams as a preventative service will only be available to women at higher risk. All other services are required preventative care services: Screenings for autism and behavioral disorders in children Diet counseling for Adults Well-woman visits and counseling

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge a higher premium The premium rate will be adjusted to reflect the insurer's increased risk

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional A conditional contract required both insurer and policy owner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner

The purpose of managed care health insurance plans is to

Control health insurance claims expenses. Managed care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan

Which of the following is TRUE about credit life insurance?

Creditor is the policyowner In credit life insurance, the creditor is the policy owner and the beneficiary; the debtor is the insured

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

Cross-purchase plan In a cross-purchase plan each partner involved purchases insurance on the life of each of the other partners

Which of the following types of insurance policies is most commonly used in credit life insurance?

Decreasing Term Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor, it is usually written as a decreasing term insurance

A guaranteed renewable disability insurance policy

Is renewable at the insured's option to a specified age Guaranteed renewable means that the insured has the right to keep the policy until a specific age; however, while the insurer cannot increase the rates on an individual basis, the insurer can increase the rates for all insureds by class

Why is an equity indexed annuity considered to be a fixed amount?

It has a guaranteed minimum interest rate While equity index rates earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection Under this option the insurer uses the policy cash value to convert term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long as a period as the amount of cash value will purchase

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for

In which of the following situations is it legal to limit coverage based on marital status?

It is never legal to limit coverage based on marital status Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits

Which of the following is TRUE regarding the annuity period

It may last for the lifetime of the annuitant The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected

An insured advertises a health policy that is covered by the Life and Health Insurance Guaranty Association. The advertisement includes a short list of benefits and approximate rates. The end of the advertisement includes statement that protection is provided by the guaranty association. which of the following is true?

Mentioning the Guaranty Association in advertisement is considered unfair trade practice It is considered an unfair trade practice to advertise protection by the Insurance Guaranty Association when selling any product that is covered by the association

An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. which of the following has the insurer done by this point?

Neither approved the application nor issued the policy When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premium

What is a Health Care Account used for?

Out of pocket health care expenses

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions When this option is selected, the annual dividend acts as a single premium each year to buy additional amounts of insurance, based on the insured's currently attained age

All of the following are true regarding insurance policy loans EXCEPT

Policy loans can be made on policies that do not accumulate cash value The policy loan option is only found in policies that contain cash value

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

Signed waiver of premium The policy does not go into effect until the premium has been collected. If the premium was not collected at the time of the application, the producer may also be required to get a Statement of Good Health form the applicant at the time of policy delivery.

Company Y had 20 employees on staff last year. Which of the following terms most precisely labels the company's group insurance classification?

Small employer "Small Employer" means any person, firm, corporation, partnership or association that during the preceding calendar quarter, employed not less than 2 not more than 50 eligible employees

An insured has endured multiple surgeries and hospitalizations for an illness during the last few months. Her insurer no longer bills her for medical expenses. Which of the following allows for that?

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

Which of the following would an accident-only policy NOT ocver?

Surgery to repaid wrist damaged by tendonitis Accident-only policies cover medical costs caused by accidents, not sickness. Because the wrist was damaged by a sickness, not an accident, the policy would not cover any medical claims relating to the surgery or the condition itself

Which of the following is called a "Second-to-Die" policy?

Survivorship life Survivorship life (also referred as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age

The premiums paid by the employer in a business life insurance policy are

Tax deductible by the employer The premiums that an employer pays for life insurance on an employee, whereby the policy is for the employee's benefit, are tax deductible to the employer as a business expense

The initial amount of credit life insurance may NOT exceed

The amount to be repaid under the contract The initial amount of credit life insurance may not exceed the total amount repayable under the contract of indebtedness

Under the ACA, health insurance can no longer be underwritten based on which of the following factors?

The applicant's health condition When health insurers set their premium rates, they are only permitted to base those rates on 4 standards: geographic rating area, family composition, age, and Tobacco use

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid?

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

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

The cash value available to the policyowner Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

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

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam If the company acknowledges receipt of premium with a conditional receipt, the policy is in effect on the date of the application or the date of the medical exam (whichever is later), provided that the applicant is found insurable at the rate applied for

Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to

The insured Payments for loss of life benefits are to be made to the designated beneficiary. If no beneficiary has been named, payment proceeds are to be paid to the deceased insured's estate. Claims other than death benefits are to be paid to the insured or the insured's estate, unless otherwise assigned by the insured

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

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