Life Insurance
S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct?
100% Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees.
How many consecutive months of coverage (other than in an acute care unit of a hospital) must LTC insurance provide in this state?
12 Long-term care policies, which can be marketed in the form of individual policies, group policies, or as riders to life insurance policies, provide coverage for individuals who are no longer able to live an independent lifestyle and require living assistance at home or in a nursing home facility. They must provide coverage for at least 12 consecutive months in a setting other than an acute care unit of a hospital.
Viatical settlements may be rescinding within what time period after the viator receives the proceeds?
15 days
How long is the incontestability period in group life insurance policies issued in Texas?
2 years Life insurance policies (individual and group) are incontestable after the policy has been in force for a period of 2 years.
An agent completed a CE course in 2019. Until what year must the agent keep the records of completion? A 2020 B 2023 C 2024 D 2029
2023 Producers must maintain records of completion of continuing education courses for 4 years from the date of the course completion.
What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating?
25 In this state, promotional materials, articles of merchandise, or gifts that have a redeemable value of $25 or less are not considered "valuable consideration," and therefore, are allowed.
The Patient Protection and Affordable Care Act mandates that insurers provide coverage for dependent children up to age of A18 B19 C21 D26
26
If an HMO policy is cancelled for nonpayment of the amounts due under the contract, how long of a notice must the insurer give the insured? A10 days B15 days C30 days D45 days
30 days
If an HMO policy is cancelled for nonpayment of the amounts due under the contract, how long of a notice must the insurer give the insured?
30 days When a policy is cancelled for nonpayment of premium, the insurer is required to provide a 30-day written notice to the insured.
Within how many days must an insured notify the insurer of a child's birth and pay any required fees? A60 days B90 days C180 days D31 days
31 days
If an insurance company offers Medicare supplement policies, it must offer which of the following plans? AA-J BA-N CA DA and B
A
If an insurance company offers Medicare supplement policies, it must offer which of the following plans?
A An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.
An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true? A The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date. B The judge will determine when the hearing will be held. C The hearing date can be set for any time within the next year, unless both parties agree to a later date. D The hearing must be set for exactly 10 days after the request is made.
A The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date. The hearing to show cause why the cease and desist order should not be affirmed or modified shall be held not later than the 10th day after the date of Commissioner receives the request for a hearing unless the parties mutually agree to a later date. (The cease and desist order remains in effect until the hearing is held.)
Most HMOs operate through what type of system? AA group enrollment system either at their place of employment or as a member of an association BIndividual fee-for-service system CIndividual subscribers DA group formed principally for the purpose of obtaining HMO coverage
A group enrollment system either at their place of employment or as a member of an association
Most HMOs operate through what type of system? AIndividual fee-for-service system BIndividual subscribers CA group formed principally for the purpose of obtaining HMO coverage DA group enrollment system either at their place of employment or as a member of an association
A group enrollment system either at their place of employment or as a member of an association
In order to establish or operate an HMO, a certificate of authority from the Commissioner is required. Which of the following does NOT need to be included in the certificate of authority? AA copy of the forms of evidence of coverage to be issued to enrollees BA list of proposed subscribers CA copy of the applicant's rules and regulations regarding internal affairs DA list of the names, addresses and official positions of those responsible for the applicant's affairs
A list of proposed subscribers
In order to establish or operate an HMO, a certificate of authority from the Commissioner is required. Which of the following does NOT need to be included in the certificate of authority? AA list of proposed subscribers BA copy of the applicant's rules and regulations regarding internal affairs CA list of the names, addresses and official positions of those responsible for the applicant's affairs DA copy of the forms of evidence of coverage to be issued to enrollees
A list of proposed subscribers
In order to establish or operate an HMO, a certificate of authority from the Commissioner is required. Which of the following does NOT need to be included in the certificate of authority?
A list of proposed subscribers A certificate of authority is necessary to operate an HMO. It is not likely that an organization would have predetermined subscribers.
Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain
A statement that is sufficiently clear to identify the insured and the nature of the claim. The Insurance Code requires that each policy must include, "Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible".
If an insurance company offers Medicare supplement policies, it must offer which of the following plans?
A. An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.
Which of the following is NOT covered under a long-term care policy?
Acute care in a hospital A long-term care policy may provide coverage for home health care, adult day care, hospice care or respite care. Acute care is not covered under a long-term care policy
Which of the following is the closest term to an authorized insurer? A Licensed B Legal C Admitted D Certified
Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
All of the following are examples of third-party ownership of a life insurance policy EXCEPT
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan.
A Universal Life Insurance policy is best described as a/an
Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
An individual licensed as an agent must notify the Texas Department of Insurance, on a monthly basis, of all of the following EXCEPT.
Any change in business name. Agents must notify the Department 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 a financial or insurance regulator of Texas, another state, or the United States.
In Texas, how is the Commissioner of Insurance placed in office? AAppointed by the Governor for a term of 4 years BAppointed by the Senate for a term of 2 years CBy election, at the same election when other state officials are chosen. DAppointed by the Governor for a term of 2 years
Appointed by the Governor for a term of 2 years
The full premium was submitted with the application for 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 as requested, the policy coverage effective date would generally coincide with the date of application.
An insured's premium increases as a result of her age. Which type of policy does she have? AAge-Based BAttained Age CAge-Oriented DIncreasing Term
Attained Age
An insured's premium increases as a result of her age. Which type of policy does she have?
Attained Age Attained Age policies allow the insurer to increase premiums as the insured ages.
Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health care?
Attending physician Home health care is care provided in one's home and could include occasional visits to the person's home by registered nurses, licensed practical nurses, licensed vocational nurses, or community-based organizations like hospice. Home health care might include physical therapy and some custodial care such as meal preparations.
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
Which of the following is NOT required to be stated in the outline of coverage provided with a long-term care policy? ABasic information about the insurance company BBasic information about supplementary policies CThe policy number DThe right to return the policy for a refund
Basic information about supplementary policies
To be eligible for tax credits under the ACA, individuals must have income that is what percent of the Federal Poverty Level? ABetween 100% and 400% BHigher than 300% CLess than 10% DBetween 10% and 100%
Between 100% and 400%
To be eligible for tax credits under the ACA, individuals must have income that is what percent of the Federal Poverty Level?
Between 100% and 400% Legal residents and citizens who have incomes between 100% and 400% of the Federal Poverty Level (FPL) are eligible for the tax credits.
HMOs that contract with outside physicians to provide health care service to their subscribers compensate those providers on a AFee-for-service basis BUsual, reasonable or customary basis CCapitation basis DMedicare allowable basis
Capitation basis
According to the provisions of the Patient Protection and Affordable Care Act, all of the following are required preventive care services EXCEPT AScreenings for autism and behavioral disorders in children. BCervical cancer exams for all women starting at age 40. CDiet counseling for adults. DWell-woman visits and counseling.
Cervical cancer exams for all women starting at age 40.
According to the provisions of the Patient Protection and Affordable Care Act, all of the following are required preventive care services EXCEPT
Cervical cancer exams for all women starting at age 40. Cervical cancer exams as a preventive service will only be available for women at higher risk. All the other services are required preventive care services.
When delivering a policy, which of the following is an agent's responsibility?
Collect payment at time of delivery The agent has the responsibility to deliver the policy to the insured and to collect any premium that may be due at the time of delivery.
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Common Disaster Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.
The gatekeeper of an HMO helps
Control specialist costs. Initially the member chooses a primary care physician, or gatekeeper. If the member needs the attention of a specialist, the primary care physician must refer the member. This helps keep the member away from the higher priced specialists unless it is truly necessary.
Which of the following is a specific dollar amount or a percentage of the cost of care that must be paid by an HMO member? ACost share BCopayment CDeductible DPremium
Copayment
Which of the following is a specific dollar amount or a percentage of the cost of care that must be paid by the member? APrepayment BContractual cost CCopayment DCost share
Copayment
Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?
Cost comparison methods Cost comparison methods are used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced.
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
Which of the following is NOT an example of insurable interest?
Debtor in creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? A. Defamation B. Undercutting C. Twisting D. Slandering
Defamation Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
The death benefit in a variable universal life policy
Depends on the performance of a separate account. The death benefit is not fixed, and may increase or decrease over the life of the policy depending on the investment performance of the underlying sub-account. It cannot, however, decrease below the initial face amount of the policy.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT
Dividends from a mutual insurer. Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
In a disability policy, the probationary period refers to the time
During which illness-related disabilities are excluded from coverage. The probationary period limits coverage on new policies for certain illness-related conditions.
Each HMO enrollee must be provided ABuyer's guide. BNondisclosure agreement. CCertificate of authority. DEvidence of coverage.
Evidence of coverage.
Each HMO enrollee must be provided ANondisclosure agreement. BCertificate of authority. CEvidence of coverage. DBuyer's guide.
Evidence of coverage.
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
Fraternal benefit society Fraternal insurers operate on the basis of a lodge or charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? AReciprocal association BFraternal benefit society CMutual company DStock company
Fraternal benefit society Fraternal insurers operate on the basis of a lodge or charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.
How long is a newborn covered without notification to the insurer? AA newborn is not covered without notification to the insurer. BFrom the moment of birth, and the insurer must be notified within 31 days CFrom the time labor has begun, and the insurer must be notified within 31 days DFrom the moment of birth, and the insurer must be notified within 90 days
From the moment of birth, and the insurer must be notified within 31 days
In an HMO, a Primary Care Physician is called a AProducer. BSubscriber. CGatekeeper. DPreferred provider.
Gatekeeper.
In an HMO, a Primary Care Physician is called a ASubscriber. BGatekeeper. CPreferred provider. DProducer.
Gatekeeper.
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 AIrrevocable. BPermanent. CConditional. DGuaranteed renewable.
Guaranteed renewable.
Which of the following statements is CORRECT concerning the relationship between Medicare and HMOs?
HMOs may pay for services not covered by Medicare. The advantages of an HMO or PPO for a Medicare recipient may be that there are no claims forms required, almost any medical problem is covered for a set fee so health care costs can be budgeted, and the HMO or PPO may pay for services not usually covered by Medicare or Medicare supplement policies, such as prescriptions, eye exams, hearing aids, or dental care.
An insured becomes disabled at age 22 and can no longer work. She meets the definition of total disability under Social Security. What other requirement must the insured have met to receive Social Security disability benefits?
Have accumulated 6 work credits in the past 3 years To qualify for disability benefits under Social Security, the disabled person must have earned a certain amount of work credits. A maximum of 4 work credits can be earned each year. The amount of credits required varies by age. Persons disabled before the age of 24 can qualify for Social Security Benefits with only 6 work credits earned in the 3 years prior to the start of the disability.
#67. What are the 2 types of Flexible Spending Accounts?
Health Care Accounts and Dependent Care Accounts There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account to help pay for dependent care expenses which make it possible for an employee and his or her spouse, if applicable, to work.
What are the 2 types of Flexible Spending Accounts?
Health Care Accounts and Dependent Care Accounts There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account to help pay for dependent care expenses which make it possible for an employee and his or her spouse, if applicable, to work.
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? AIllegal until endorsed by the Guaranty Association BLegal, provided that the other insurers are paid royalties for the usage of their names CIllegal under any circumstances DLegal, provided that the information can be verified
Illegal under any circumstances
How soon from a notice of cancellation may an HMO terminate coverage for misconduct detrimental to the delivery of services? AImmediately B10 days C15 days D20 days
Immediately
Issue age policy premiums increase in response to which of the following factors?
Increased benefits
Issue age policy premiums increase in response to which of the following factors? AInflation BAge CIncreased benefits DIncreased deductible
Increased benefits
Issue age policy premiums increase in response to which of the following factors?
Increased benefits The premiums of issue age policies can only increase in response to an increase in benefits.
All advertisements are the responsibility of the
Insurer. The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.
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.
Which of the following is correct about a group health insurance policy? AIt cannot exclude coverage for VA hospital treatment. BIt cannot provide coverage for handicapped children. CIt cannot exclude coverage from an occupational accident. DIt cannot exclude newborn children from coverage.
It cannot exclude newborn children from coverage.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium. In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.
Which of the following statements is NOT correct concerning the COBRA Act of 1985?
It requires all employers, regardless of the number or age of employees, to provide extended group health coverage. COBRA Act applies to only employers with 20 or more employees.
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount. The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.
The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as
Legal actions. This mandatory provision requires that no legal action to collect benefits may be started sooner than 60 days after the proof of loss is filed with the insurer. This gives the insurer time to evaluate the claim.
If a dental plan is integrated, it is combined with what type of plan?
Medical Integrated plans allow for dental plans to be included in a medical plan, providing coverage for both under a single contract. Sometimes the deductibles are merged, but this does not have to be the case.
All of the following are grounds for cancellation of an HMO plan EXCEPT AMisconduct. BMisstatement of age on the application. CNonpayment of premium. DNot residing in the HMO service area.
Misstatement of age on the application.
All of the following are grounds for cancellation of an HMO plan EXCEPT AMisstatement of age on the application. BNonpayment of premium. CNot residing in the HMO service area. DMisconduct.
Misstatement of age on the application.
An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply?
No coverage will apply, since the injury could have been foreseen. An accidental means clause states that if the insured meant to do whatever caused their injury, no coverage applies since the resulting injury should have been foreseen.
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 premiums.
Which of the following documents must be provided to the policyowner or applicant during policy replacement?
Notice Regarding Replacement During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.
An applicant is discussing his options for Medicare supplement coverage with his agent. The applicant is 65 years old and has just enrolled in Medicare Part A and Part B. What is the insurance company obligated to do?
Offer the supplement policy on a guaranteed issue basis Once a person becomes eligible for Medicare supplement plans, and during the open enrollment period, coverage must be offered on a guaranteed issue basis.
Where in the policy must the HMO insurer provide information about the HMO's name, address, and toll-free number? AAnywhere in the document as deemed appropriate by the insurer BIn the policy appendix CIn the buyer's guide DOn the face page
On the face page
Where in the policy must the HMO insurer provide information about the HMO's name, address, and toll-free number? AOn the face page BAnywhere in the document as deemed appropriate by the insurer CIn the policy appendix DIn the buyer's guide
On the face page
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
Owner's Rights Policyowners can learn about their ownership rights by referring to the policy.
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
A participating insurance policy may do which of the following?
Pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.
Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policyowner?
Payment of Claims The Payment of Claims provision states that the claims must be paid to the policyowner, unless the death proceeds need to be paid to a beneficiary.
Who might receive dividends from a mutual insurer?
Policyholders
All of the following are requirements for an individual to be licensed EXCEPT APay the appropriate fees. BProvide a financial statement. CBe at least 18 years of age. DPass the licensing examination.
Provide a financial statement. An applicant for a license must be at least 18 years old, pass the state exam (within the last 12 months), pay the appropriate fees and provide an application before a license can be issued. A financial statement of the individual is not a requirement to be licensed.
Insurers may change which of the following on a guaranteed renewable health insurance policy?
Rates by class On a guaranteed renewable health insurance policy, the insurer may increase premiums on a class basis only and not on an individual policy.
All of the following are true regarding rebates EXCEPT A Rebates are only allowed if specifically stated in the policy. B Rebating can be anything of economic value, given as an inducement to buy. C Dividends are not considered to be rebates. D Rebates are allowed if it's in the best interest of the client.
Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.
For which of the following actions can an agent's license be suspended or revoked?
Rebates of premiums The Commissioner will suspend or revoke an existing license, or deny a new license for any of the following reasons: willful violations of state insurance laws, intentional material misstatements in the license application, and rebates of insurance premiums, among other offenses.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
All of the following are to be included in the application for a certificate of authority to act as an HMO EXCEPT AFinancial records of the organization applying. BRecords of previous insurers. CA map of the geographic area to be served. DA schedule of charges for the first 12 months.
Records of previous insurers.
According to the state nonforfeiture law for life insurance policies, insurers must offer at least one of the following nonforfeiture options EXCEPT
Reduction of premium Reduction of premium is not a nonforfeiture option (it's a dividend option). The other answer choices are the required nonforfeiture options in life insurance policies issued in this state.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.
An insured wants to name her husband as the beneficiary of her health policy. She also wishes to retain all of the rights of ownership. The insured should have her husband named as what type of beneficiary?
Revocable If her husband is named as the revocable beneficiary, the insured would be the policyowner and could make changes to the contract. Her husband would receive any death benefit.
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.
What is the best way to change an application?
Start over with a fresh application Most companies require that the app be filled out in ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best is to simply start over with a fresh application. If that is not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.
All of the following are unfair claims settlement practices EXCEPT
Suggesting negotiations in settling the claim.
Which of the following would help prevent a universal life policy from lapsing?
Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Which of the following would be required to obtain a Certificate of Authority? AAgents BEnrollees CSubscribers DThe HMO
The HMO
Which of the following would be required to obtain a Certificate of Authority? AThe HMO BAgents CEnrollees DSubscribers
The HMO
Which of the following would be required to obtain a Certificate of Authority?
The HMO In order to establish or operate a health maintenance organization, a certificate of authority from the Commissioner is required.
If an applicant does not receive a copy of the new insurance policy, who would be held responsible?
The agent It is the responsibility of the agent to deliver the policy.
An agent licensed in Texas is moving to Kansas. Which of the following applies? AThe agent must inform all clients of the move and recommend a new agent. BAny of the agent's policies written in the 3 months leading up to the move will be reviewed by the Commissioner. CThe agent must refrain from writing insurance policies until after the move. DThe agent has 30 days to notify the Department of Insurance of the new address.
The agent has 30 days to notify the Department of Insurance of the new address. If an agent licensed in Texas moves from to another state, the agent has 30 days to file new address with the insurance department.
Which of the following information will be stated in the consideration clause of a life insurance policy?
The amount of premium payment The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.
Under the ACA, health insurance can no longer be underwritten based on which of the following factors? AThe applicant's tobacco use BThe applicant's health condition CThe applicant's family composition DThe applicant's age
The applicant's health condition
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.
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured. A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
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.
An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy?
The capital amount in a lump sum Accidental Death and Dismemberment policies pay a capital amount (a percentage of the principal amount) for the loss of one limb or loss of sight in one eye. The principal amount is paid for death or often for the loss of 2 limbs or loss of sight in both eyes. Benefits are paid in a lump sum.
All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT
The employer can receive a current tax deduction for any contributions made to the plan. Employers do not receive a current tax deduction for any contributions made to a nonqualified plan. The plans are legal; however, they do not qualify for any favorable tax treatment under the IRS rules.
All of the following information must be included in the evidence of coverage for an HMO plan EXCEPT AHMO's toll-free telephone number. BThe insurance agent's name and license number. CA schedule of benefits. DExamples of information to appear in the blanks.
The insurance agent's name and license number.
Which of the following is NOT a feature of a guaranteed renewable provision?
The insurer can increase the policy premium on an individual basis. Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.
A temporary license holder can receive a commission from a sale made to all of the following EXCEPT AAn accountant at a rival insurance company. BThe license holder's family doctor. CThe license holder's sister-in-law. DThe license holder's spouse's best friend.
The license holder's sister-in-law. A temporary license holder sale to a family member or an individual the temporary license holder has an employment or business relationship with will not pay commission.
The insuring clause of a disability policy usually states all of the following EXCEPT
The method of premium payment. The insuring clause, usually on the first page of the policy, is the general statement that defines the insurance agreement and identifies the insured and the insurance company and states what kind of loss (peril) is covered.
Hospital indemnity/hospital confinement indemnity policy will provide payment based on
The number of days confined in a hospital.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application. Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
The policy will not be affected. In insurance, fraud is the intentional misrepresentation of material information that is crucial when deciding whether or not to write a contract for an applicant. If an insurer finds that an applicant has committed fraud, it can void the contract, provided that the discovery occurs within the first two years of the effective policy date. In this particular instance the applicant did not commit intentional fraud.
Which of the following is TRUE about nonforfeiture values?
They are required by state law to be included in the policy. Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
All of the following statements apply to temporary licenses EXCEPT
They may be renewed. Temporary licenses may be granted up to 90 days without examination to applicants who complete a 40 hour training course before applying for the license or within 14 days after applying for the license. A temporary license cannot be renewed.
Which of the following is true regarding Medicare supplement policies? AThey must have at least a 15-day free-look period. BThey must contain a minimum of Plans A and B. CThey must be available to those aged 60 and over. DThey must be at least guaranteed renewable.
They must be at least guaranteed renewable.
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.
Which provision states that the insurance company must pay Medical Expense claims immediately?
Time of Payment of Claims The Time Payment of Claims provision requires that claims will be paid immediately upon receipt of proofs of loss except for periodic payments, which are to be paid as specified in the policy.
According to the rights of renewability rider for cancellable policies, all of the following are correct about the cancellation of an individual insurance policy EXCEPT
Unearned premiums are retained by the insurance company. This rider allows the insurer to cancel the policy at any time, or at the end of the policy period. Any unearned premium must be returned to the policyholder. If the insurer cancels, the unearned premium will be returned on a pro rata basis.
A medical expense policy that establishes 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.
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
Upon the submission of a death claim under a life insurance policy, when must the insurer pay the policy benefit?
Within 2 months Upon receipt of a written proof of death and the right of the claimant to the proceeds, the insurer must pay death claims within 2 months.
#6. All of the following are correct about the required provisions of a health insurance policy EXCEPT
a) A reinstated policy provides immediate coverage for an illness. Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.
#7. In a basic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible?
a) Corridor The basic expense policy will provide coverage on a first-dollar basis (no deductible). After the limits of the basic policy are exhausted, the insured must pay a corridor deductible before the major medical coverage will pay benefits. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage.
In a basic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible?
a) Corridor The basic expense policy will provide coverage on a first-dollar basis (no deductible). After the limits of the basic policy are exhausted, the insured must pay a corridor deductible before the major medical coverage will pay benefits. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
a) Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
#9. In a Disability Income policy, all of the following are considered presumptive disabilities EXCEPT
a) Loss of one eye. The definition of a presumptive disability varies by company, but generally includes a total loss of sight, speech, hearing or the use of any two limbs.
In which Medicare supplemental policies are the core benefits found?
a) All plans The benefits in Plan A are considered to be core benefits and must be included in the other types. Therefore, all types contain the core benefits offered by Plan A.
In a relative value system of determining coverage for a given procedure, what term describes the total amount payable per point?
b) Conversion factor In order to determine the amount payable for a given procedure, the assigned points (relative value) of 200 are multiplied by a conversion factor. This conversion factor represents the total amount payable per point. For example, if the conversion factor is $10 and the point value is 200, the policy would pay $2,000 for the procedure (200 x 10).
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
b) Equal to the original policy for as long as the cash values will purchase. With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.
#3. In which of the following instances would the premium be tax deductible?
b) Premiums paid by an employer on a $30,000 group term life insurance plan for employees As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
b) Warranty A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations. Representations are statements that are true to the best of the applicant's knowledge.
Which of the following individuals could legally receive commissions from the sale of a life insurance policy? AAn employee for a life insurance company who is not licensed BA life and health insurance counselor CA licensed life insurance agent DA licensed insurance consultant
c A licensed life insurance agent To receive commissions, agents must be licensed in the line of insurance being sold.
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?
c) $9,800 In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.
Which of the following provisions states the insurer's right to change premium amounts?
c) Continuation Provision The Renewal Provision, also known as a "Continuation Provision", must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.
Which of the following is TRUE regarding the annuity period?
c) 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.
The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as
c) Legal actions. This mandatory provision requires that no legal action to collect benefits may be started sooner than 60 days after the proof of loss is filed with the insurer. This gives the insurer time to evaluate the claim.
#1. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
c) Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.
All of the following are true regarding a decreasing term policy EXCEPT
c) The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.
The paid-up addition option uses the dividend
c) To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
Which of the following is a specific dollar amount or a percentage of the cost of care that must be paid by an HMO member? APremium BCost share CCopayment DDeductible
copayment
Which of the following is a specific dollar amount or a percentage of the cost of care that must be paid by the member? APrepayment BContractual cost CCopayment DCost share
copayment
An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage?
d) $102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.
Which of the following is the closest term to an authorized insurer?
d) Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
#15. Which of the following riders would NOT increase the premium for a policyowner?
d) Impairment rider The impairment rider excludes a specified condition from coverage, therefore, reducing benefits. An insurance company will not charge extra for a rider that reduces benefits.
Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is
d) Monthly. If a claim involves disability income benefits, the policy must pay those benefits not less frequently than monthly. In all other cases, the company may specify the time period of 45 or 60 days for payment of claims.
How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company?
d) Within 90 days or as soon as reasonably possible, but not to exceed 1 year The "proof of loss" provision states the claimant must submit a proof of loss within 90 days; however, if it is not possible to comply, the time parameter is extended to 1 year. The one-year limit does not apply if the claimant is not legally competent to comply with this provision.
At what age may an individual make withdrawals from an HSA for nonhealth purposes without being penalized?
d) 65 After age 65, a withdrawal from an HSA used for a nonhealth purposes will be without a penalty, although taxed.
Which of the following riders would NOT increase the premium for a policy owner?
impairment rider
Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance? APracticing attorney BInsurance agent CCertified public account DExecutive in business administration
insurance agent The Commissioner must have at least 5 years of experience in one of the following occupations: an executive in the administration of business or government, a practicing attorney, or a certified public accountant.
All advertisements are the responsibility of the
insurer. The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them.
Where in the long-term care policy must the insurer state the renewal provision? AIn the Provisions and Exclusions section BIn the policy appendix CAnywhere the insurer deems appropriate DOn the first page
on the first page
Company Y had 20 employees on staff last year. Which of the following terms most precisely labels the company's group insurance classification? ASmall employer BClass B CLarge group DSmall group
small employer
