Maryland Life and Health General Exam Simulator
What is an insurance contract that identifies individuals by relationship to a specific organization?
Group Insurance
Which of the following is NOT a dividend option for a life insurance policy?
Receiving the entire policy cash value
Which of these life insurance policies does NOT contain a cash value provision?
decreasing term life
When must insurable interest exist for a life insurance contract to be valid?
inception of the contract
Which of the following does NOT help determine group health insurance premiums?
income level of group members
Which of the following incidents would NOT be covered by an Accident Death and Dismemberment policy?
suicide
How is a collateral assignment used in a life insurance contract?
transfers specific ownership rights to a creditor
Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?
treaty reinsurance
Individuals who participate in an HMO plan are called
subscribers
First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty?
$10,000
An individual is insured under a major medical plan with a $1,000,000 lifetime benefit. The plan has a $500 deductible and an 80% coinsurance. If the insured suffers a $50,500 medical expense during the calendar year, what is the remaining lifetime benefit?
$960,000 $50,500 - $500 = $50,000 * 80% = $40,000 $1,000,000-$40,000 = $960,000
Medicare Part B excess charges are covered by
...
Qualified long-term care premiums are treated for tax purposes as
...
A "premature distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
10% tax penalty for early withdrawal
Medicare will cover a maximum of how many days per benefit period in a skilled nursing facility?
100 days
John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?
100% (funds withdrawn from an MEC are subject to last-first first-out (LIFO) tax treatment, which assumes that the investment or earning portion of the contract's values is withdrawn first)
Which of the following best describes the tax treatment of medical expense policies for the self-employed?
100% of medical expense plan premiums are tax deductible
The health insurance premiums paid for by each partner in a partnership is considered to be
100% tax deductible
What is the maximum Social Security Disability benefit amount an insured can receive?
100% of the insured's Primary Insurance Amount (PIA)
Bert's spouse passed away recently. Bert was covered under his spouse's group family health insurance plan but now is covered under COBRA. How much of the active-employee cost may be passed on to Bert for continued coverage?
102%
Part A Medicare includes coverage for all of the following services EXCEPT
120 days of skilled nursing facility care
Under HIPAA, medical plan late enrollees may be excluded for pre-existing conditions for a maximum of
18 months
How many employees must an employer have for the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to apply?
20 or more
Mary has a Health Savings Account (HSA). Distributions that have been made for anything other than qualified medical expenses are considered taxable and subject to a penalty of
20%
How long can an insurer legally defer paying the cash value of a surrendered life insurance policy?
6 months
Larry wants to purchase an individual disability income policy to provide continuous income while disabled. He is also covered by a two-month wage continuation benefit from his employer. What should the policy elimination period be for his individual policy?
60 days
At what age do most people become eligible for Medicare?
65
According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within ____ days of the member's eligibility date.
90 days
What is a major difference between private commercial insurers and HMO's?
An HMO combines medical care delivery and funding in one organization
Which is an accurate description of the premium in a graded premium life insurance policy?
Annual increases in premium for a stated number of years then remains level
A description of a qualified plan's insurance contract may be found in which ERISA reporting form?
Annual return/report (Form 5500) (Form 5500 is a disclosure document that employee benefit plans use to satisfy annual reporting requirements under ERISA)
If a disability income policy contains a cost-of-living adjustment rider, benefits must typically be increased
At least once per year from when benefits began
When does the insured stop making payments under a thirty-payment whole life policy?
At the time of death or 30 years after the policy's inception, whichever comes first
Which statement regarding the cash value of a whole life insurance policy is correct?
Available to the policyowner when policy has been surrended
A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?
Beneficiary receives $50,000 income tax-free
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
For employees covered in multiple states under a group health plan, jurisdiction rules cannot alter
COBRA laws
Which of the following is NOT an allowable exclusion for long-term care insurance policies?
Care for incurable conditions
Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions?
Conduit IRA (a holding tank for funds that originally came from a qualified plan and are on their way to another qualified plan)
An accident and health insurance policy's premium requirements are set forth in which of the following provisions?
Consideration clause
Jill has a group health plan with an employer that covers employees in more than one state. Which of the following aspects is NOT affected by the state regulatory jurisdiction established for this plan?
Continuation of coverage under COBRA
Linda is covered with long-term care insurance and has early-stage Alzheimer's. She is still able to reside in her home while receiving primary care, as opposed to moving into a nursing home. All of the following long-term benefits encourage home health care EXCEPT
Custodial care (custodial care is typically associated with the services provided at a nursing home)
Which annuity allows contributions to an IRA?
Deferred
Health Maintenance Organization (HMO) wellness programs may include each of the following EXCEPT
Diagnostic testing services
Which life insurance policy option allows the policyowner to have coverage equal to the net death benefit of the lapsed policy?
Extended term nonforfeiture option
A Policyowner fell behind on the premium payments of a whole life policy and it is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan?
Face amount minus the loan balance and past-due premium
when a ceding insurer transfers a portion of risk to an assuming insurer on a case by case basis, this process is referred to as
Facultative reinsurance
Emily is disabled. In order to become eligible for Social Security disability income benefits, she must be
Fully insured, according to Social Security
Which of the following statements is NOT true concerning the relationship between group health insurance plans and Medicare? (assuming the business has more than 20 employees)
Group health coverage is NOT available for workers over the age of 65
What is the name of the rider that provides an additional purchase option in a life insurance policy?
Guaranteed Insurability Rider
An organization that requires healthcare services to be provided by a network of physicians and hospitals is known as a(n)
HMO
Which of the following health plans pay benefits on a pre-paid basis?
HMO
A family counseling benefit is typically offered under which of these coverages?
Hospice care
Which of the following is NOT subject to the promise to pay in an insuring clause?
How the premium is calculated
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds could be forfeited
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?
If the interest rate falls below a specified level, the surrender charge is waived
When group benefits under COBRA have expired, a fully insured group policy can be converted to a(n)
Individual health policy After expiration of group benefits under COBRA, a fully insured group policy can be converted to an individual health insurance policy.
Which statement regarding the certificate of insurance is accurate?
It indicates evidence of an employee's insurance coverage
Ken is age 65 and has 2 years until he receives Social Security retirement benefits. At his current age, which is true about Medicare Part A Hospital Insurance coverage?
It is available through application to Social Security
Which of these is NOT a common life insurance nonforfeiture option?
Life income annuity
Skilled nursing facility expenses are sometimes covered by _____, but ONLY if the insured was hospitalized prior to entering the facility.
Medicare
Medicare Part A coinsurance payments are covered by
Medicare Supplement Plan A
Which of these is a type of private insurance that covers the cost-sharing amounts under Medicare?
Medicare supplement
Medicare Part B excess charges are covered by
Medicare supplemental insurance
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?
Minors are normally not capable of handling money in a reasonable manner
Which of the following health insurance plans charges a premium that cannot be increased?
Noncancelable
Which of the following is NOT an example of risk retention?
Not doing a business deal after deciding it would be too risky
Julie is an employee with a group health plan that contains the Mandatory Second Surgical Opinion provision. What is to be expected with this provision in place?
Out-of-pocket expenses are lower when a second surgical opinion is obtained as opposed to having only one
Which of the following can be defined as a cause of a loss?
Peril
Which of these plans allow a participant to choose either a network or non-network provider at the time when medical care is needed?
Point-of-service
Which of the following guidelines does NOT apply under the pregnancy provision of the Civil Rights Act?
Post-termination extensions of medical benefits must apply equally to pregnancy
The agreement in which hospitals and physician groups in a specific area contract with an insurance company to provide medical care at predetermined costs is
Preferred Provider Organization (PPO) (a collection of health care providers who offer their services to certain groups at prearranged prices)
How is the insured protected if a payor benefit rider is attached to the life insurance policy?
Premium payments are waived in the event the premium payor dies or becomes disabled
When must a producer provide disclosure about information practices to an applicant?
Prior to or at the time of signing the application
Which of these occurrences could improve an insurer's ability to reduce premiums?
Rate of earnings on investments increase
Which of the following would most likely purchase an immediate annuity?
Retiree having a lump sum to invest
What kind of arrangement gives the policyowner the right to change the beneficiary?
Revocable designation
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
Laura is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?
Sign an enrollment card
Ch 2 Health Insurance Providers Flashcards | Quizlet quizlet.com › Social Science › Business › Insurance If an individual would like to enroll in Medicare or seek public information about Medicare, which federal agency handles this?
Social Security Administration
If an individual would like to enroll in Medicare or seek public information about Medicare, which federal agency handles this?
Social Security Administration
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?
Taxed as ordinary income in the year received
When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for
Ten year term insurance for a person aged 55
which statement regarding the joint and survivor life insurance settlement option is NOT true?
The amount of each installment is larger than the single life income option
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
Which of the following is true regarding a person receiving a waiver of premium benefit?
The insured must be disabled for a period of time
Which of the following is a true statement regarding a Medicare Supplement policy purchased during the open enrollment period?
The policy will be issued regardless of health
A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death?
Total premiums paid plus the policy face amount
What is the face amount of a $50,000 graded health benefit life insurance policy when the policy is issued?
Under $50,000 initially, but increases annually until fully insured
Which of the following statements about universal life insurance is NOT true?
Universal life insurance normally has a minimum guaranteed cash value for duration of the policy
How do birthing centers reduce medical costs?
Using certified nurse midwives
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met.(A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect)
Medicare supplement insurance that provides a preventative medical care benefit will often cover
Yearly Physical Examinations
Which of these is NOT an advantage of term life insurance?
a cash benefit will be provided if the insured is alive at the end of the policy period
Medicare can be described as
a federal health insurance program for individuals over the age of 65 or permanently disabled
Short-term group disability income benefits are
a percentage of weekly earnings up to a stated maximum
Which of the following best describes a point-of-service (POS) plan?
a plan which combines indemnity plan features with those of an HMO
Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?
a portion of the payments paid to beneficiary comes from interest calculated on the proceeds of the policy
A prepaid dental plan has an agreement in place with a network of dentists which
accepts an established amount as payment in full for the dental services rendered
Mike recently lost sight in both eyes. He has a policy that pays a lump sum benefit for this injury. What type of insurance does Mike have?
accidental death and dismemberment
Which of the following is NOT covered by a comprehensive long-term care policy?
acute care
Which of the following statements accurately describes the "time limit on certain defenses"?
after a stated period, claims cannot be denied due to material misrepresentation on the application
An agent's authority to bind an insurer to an insurance contract may be granted in the
agent's contract and the insurance company's appointment
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
The elimination period of an individual disability insurance policy refers to the
amount of time a disabled person must wait before benefits are paid
An individual who purchases a modified life insurance policy expects
an improvement in future income
Which of the following is not a reason for a business to buy key person life insurance?
an increased pension liability if the key employee dies
Many deferred annuity contracts waive the surrender charge when the
annuitant dies or becomes disabled
Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of
apparent authority
In what situation could an insurance policy's coverage be modified?
applicant is a substandard risk
When there is a named beneficiary on a life insurance policy, the death benefits
are paid directly to the beneficiary without interference from the insured's creditors
Insurance is NOT characterized as which of the following?
as the number of insured increase the number of losses decrease
If a disability income policy contains a cost-of-living adjustment rider, benefits must typically be increased
at least once per year from when benefits begin
In the event of premium default, which life insurance provision will use the cash value to keep the policy in force?
automatic premium loan
The Coordination of Benefits provision is added to a group health plan in order to
avoid overinsurnance
Which of the following statements BEST describes a double indemnity provision in travel accident insurance?
benefits are doubles under certain circumstances state in the policy
Tim had an on-the-job accident and collects benefits from his individual disability income policy. Which factor could possibly reduce these benefits?
benefits he receives from workers compensation
A preferred provider plan and an indemnity plan are similar in what way?
both pay on a fee-for-service basis
A disabled business owner who has payroll and business expenses paid for has what kind of insurance policy?
business overhead expense
The guarantee of insurability option provides a long-term care policyowner the ability to
buy additional coverage at a later date
Which of the following types of insurers limits the exposures it writes to those of its owners?
captive insurer
Which of these is NOT a true statement of the war exclusion?
civil insurrections apply
Prepaid dental plans differ from most other types of dental plans in what way?
closed panel of dentists can only be used
The principal source of information concerning an applicant's identity, age, and marital status is found in the
completed applications
Chris has a single major medical contract which covers all medical expenses. His plan is considered to be
comprehensive (a single major medical contract which covers all medical expenses)
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)
contract of adhesion
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?
contract of utmost good faith
In what situation would disability income insurance premiums be a deductible expense?
corporation paying for group disability income coverage for its employees
Reductions in coverage are one feature of ____ in Health insurance policies
cost containment
Jerry has an indemnity plan which covers dental expenses. Typically, these type of plans
cover preventative care once every six months
What does the rehabilitation benefit cover in a disability income policy?
covers the approved cost of the rehabilitation necessary to help a disabled insured return to work
Which of the following is NOT an intended use of an annuity?
create new funds upon the death of a wage-earner
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners
cross-purchase agreement
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up?
decreases
What effect does interest income have upon insurance premiums?
decreases premium
In what way is a life insurance policy affected by an accelerated benefit payment?
decreases the death benefit
Which of the following is generally a form of group credit life insurance?
decreasing term insurance
Individuals covered with employer-paid group health plans will normally receive tax-free benefits under all of these plans EXCEPT
disability income
For purposes of Disability Income insurance, earned income would include all of the following EXCEPT
dividends
An HMO prescription drug plan is generally characterized by
drugs dispensed through participating pharmacies
In long-term care insurance, what is the length of time for which claims will be paid?
elimination period
Which of the following would permit an insurer to delay a covered disability policy claim?
elimination period
When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT
employee benefits
Which of the following statements BEST describes employer contributions for employer provided health insurance?
employer contributions are deductible
Notice of information practices must be given to a policyholder at least
every three years
Which statement concerning an adjustable life insurance policy is FALSE?
evidence of insurability is required when there is a change in premium
The difference between a doctor's actual charges and the amount approved by Medicare is referred to as a(n)
excess charge (the amount above and beyond what Medicare approves for a specific procedure/doctor visit)
Employer-paid qualified long-term care insurance premiums are typically
excluded from the employee's gross income
An officer for a corporation takes out numerous unsecured loans from the company's qualified retirement plan. Which of these rules is the plan in violation of?
exclusive benefit rule
How are benefit payments from individually-owned medical expense policies treated for tax purposes?
exempt from income taxes
The powers directly given to a producer in an agency contract are called
express
An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?
fixed amount
Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this?
fixed life annuity with period certain
Major Medical policies are typically characterized by which of the following?
flat deductible
What are premiums for group credit life insurance based on?
flat rate unrelated to the borrower's age
Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?
fluctuate with changes in the cash account
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
fund a buy-sell agreement
Kyle is an insured who disregarded an accident and health insurance policy provision that requires him to seek a second surgical opinion. What will the end result be?
he may be reimbursed for the surgical procedure at a reduced benefit level
Lamont has a point-of-service plan and is seeking to obtain health services outside the network. What will likely be the end result?
higher out-of-pocket costs
A medical fee schedule shows the amount an insurer will pay for a given procedure. This amount is considered to be the
highest amount payable
A family counseling benefit is typically offered under which of these coverages?
hospice care
An annuity which starts paying monthly benefits within a month after issuance is called a(n)
immediate annuity
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?
implied authority
Which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has passed?
incontestable clause
The type of health insurance in which underwriting procedures are the most restrictive is
individual
All of these are considered features of whole life insurance EXCEPT
initial premium is lower than for an equivalent amount of term insurance
Which of these procedures is NOT designed for ambulatory care centers?
inpatient surgery
Who must sign a rider attached to a health insurance policy in order for it to be valid?
insured and producer
Which of these statements reflects an accurate portrayal of Medicare SELECT
insured uses preferred providers in exchange for paying lower premiums
When premiums are determined, one factor would be the expenses of the
insurer
Which statement is INCORRECT about the interest-only settlement option in a life insurance policy?
interest on proceeds must be paid by the beneficiary
Which of these statements is NOT true regarding a cash value loan against a life insurance policy?
interest payments made by policyowner are deductible
In what way are insurance policies said to be aleatory?
involves the potential for the unequal exchange of value
The death proceeds of a credit life insurance policy are typically paid to the
lender
How much is normally paid to a policyowner in a life (viatical) settlement?
less than the death benefit
A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?
less than the face amount
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
less than the policy's face amount
During the early years of a whole life insurance policy, the cash value will normally be
less than the total premiums paid
What type of premiums are associated with individual mortgage protection life insurance policies?
level premiums
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
Group life insurance is typically issued as
level term insurance
what is another term used for a "pure" life annuity?
life income
What is covered under a limited accident and health insurance policy?
limited perils and amounts
Joe is a life insurance policyowner who has failed to pay interest on his policy loan. What will result from this nonpayment?
loan amount is increased to reflect the amount of interest due
Care coverage is typically found in a(n)
long term care policy
Custodial care is normally covered under
long-term care insurance
The annuitant in a single premium deferred annuity (SPDA)
makes only one premium payment
A MET third-party administrator may NOT perform which of the following functions?
marketing the plan
Which of the following relationships demonstrates insurable interest in the absence of economic interest?
marriage partners
Which of the following statements accurately describes the financial impact of total disability?
may be worse than the financial impact of death
A life policy that has premiums that are lower than normal during the early years is called
modified life
Periodic health claim payments MUST be made at least
monthly
All of the following are covered under most dental plans EXCEPT for
mouth cancer
Medicaid will pay for nursing home expenses under what condition?
must have financial need (Medicaid is a federal and state funded program for those whose income and resources are insufficient to meet the cost of necessary medical care)
Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?
national origin
specialty care is provided by which of the following health maintenance organization (HMO) providers?
neurologist
Medicare Supplement insurance requires an individual to be at least how old for open enrollment?
no minimum age
When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld?
none
An agent whose actions exceed the authority granted by contract is
not backed by the insurer
Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for additional benefit payments will be derived primarily from funds that were
not distributed to life annuitants who died before life expectancy
Which element of a contract constitutes a definite and unqualified proposal by one party to another?
offer
All of these statements correctly describe an aleatory contract EXCEPT
only one party makes any kind of legally enforceable offer
Most prepaid dental plans cover
oral examinations
The authority to change the beneficiary in an individual annuity lies with the
owner
Which type of deductible must be satisfied again for each illness or accident in a major medical plan?
per-cause (a deductible that is assessed for each new sickness or accidental injury)
A life insurance guaranteed insurability rider gives the insured the right, without proving insurability, to
periodically purchase additional insurance
A life insurance policy's contingent beneficiary is the
person who receives the death benefits if the primary beneficiary dies before the insured
Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)
policy loans
What happens to a life insurance policy when the policy loan balance exceeds the cash value?
policy will no longer be in force
The standard provisions of an accident and health insurance policy require that the
policy, endorsements, and attached papers constitute the "entire contract"
Dividends from a mutual insurance company are paid to whom?
policyholders
A disability income insurance policy was recently issued with a rating. What does this mean?
policyowner will be charged an additional premium
What typically changes at the re-entry option date found in some term life policies?
premium (re-entry gives the insured the opportunity to provide evidence of insurability at the end of the term to qualify to renew the policy at a lower premium)
Which statement regarding the life insurance premium for a children's rider is true?
premium remains the same no matter how many children
Alan is an enrollee of a health maintenance organization (HMO) which uses a gatekeeper system. If there ever comes a time when he needs emergency health services, what should he do?
proceed to the nearest emergency room
A certificate of coverage for a group health policy is best described as
proof of coverage for the employee
The dental specialty which deals with the replacement of missing teeth is called
prosthodontics
A Medicare Supplement policy is required to do which of the following?
provide a 30 day free-look period
Which of the following would NOT be a reason for purchasing life insurance on a child's life?
provide benefits for the child if the parents die
Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?
provide supplemental income in 35 years
Which of these statements is NOT a characteristic of the law of large numbers?
rates can be calculated to compensate for losses (law of large numbers states that larger groups provide better loss predictions, the high the exposure the more likely the event can be predicted)
What effect can a long-term care benefit rider have on a life insurance policy?
reduced death benefit
Which of the following statements BEST describes the HIPAA portability rules for an individual who changes from one group medical plan to another?
reduces or eliminates any pre-existing conditions excluded under the new plan
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
reimbursement
How can an insurance company minimize exposure to loss?
reinsuring risks
A life insurance policy's waiver of premium rider has the ability to
relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will
remain a constant dollar amount for the duration of the annuity period
Which of the following is NOT a basic underwriting action for accident and health insurance?
removing uniform policy provisions
What is considered the accounting measurement of an insurance company's future obligations to its policyowners?
reserves
The inability to perform SOME of the duties of one's own occupation is known as a
residual disability
What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?
responsible for acts by the producer that are authority only
What kind of arrangement gives the policyowner the right to change the beneficiary?
revocable designation
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group
Which of the following describes the act of insuring a risk against possible loss?
risk transfer
What does a fixed life annuity offer protect against?
savings depletion due to longevity
Third-party administration has become fairly common in accident and health insurance due to the growth of
self-funding of benefits
Which of these factors does NOT influence an applicant's need for life insurance?
self-maintenance expenses
Assets that back the non-guaranteed values of variable life insurance products are held in which account?
separate account set up by the insurer
When issuing disability income coverage on a substandard risk, an insurance company may
shorten the benefit period
which life insurance policy provision prohibits beneficiary from "commuting, encumbering, withdrawing or assigning" any portion of the proceeds prior to actual receipt from the company?
spendthrift
An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as?
surrender charge
How does the cost for a survivorship policy compare to the cost of combining two separate individual life insurance policies?
survivorship life policy is lower
If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally
tax deductible to the business
The interest credited to the cash values of personally-owned non-qualified annuities is considered
tax-deferred
Under a key person disability income policy, benefits will be received as
tax-free income to the business
Which of the following statements is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
the account can be rolled into the surviving spouse's IRA
Which statement concerning the Entire Contract provision in an individual accident and health insurance policy is TRUE?
the agent doesn't have the authority to change the policy or waive its provisions
Which factor determines the maximum disability income benefit that can be purchased by an applicant?
the applicant's income
What is payable to the policyowner if a whole life policy is surrendered prior to its maturity date?
the cash value
All of these statements concerning group credit life insurance are false EXCEPT
the face amount is based on the outstanding loan balance
Medicare Part A does NOT provide coverage for
the first 3 pints of blood
The insured's consideration given for a health insurance policy is
the first premium payment and the application
What would be considered an advantage of purchasing term life insurance?
the initial premium is lower compared to an equivalent amount of whole life coverage
Which statement regarding a fixed period settlement option is correct?
the installment payment amount is determined by the total number of installments
Under the Law of Agency, the principal is considered to be
the insurer (the agent)
Who may terminate coverage under a cancelable health insurance policy?
the insurer or the insured
Which of these is a typical result of a concurrent review?
the length of time spent in the hospital is monitored
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
the marital reduction
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
the participating employee
What is considered the collateral on a life insurance policy loan?
the policy's cash value
Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate?
the premium to purchase the coverage comes from the policy's cash value
A material change in a modified endowment contract (MEC) results in
the seven pay test, adjusted for cash value, applies again
How is an insured's accident and health claim handled by an insurer if it occurs during the policy's grace period?
the unpaid premium may be subtracted from the reimbursement
Under HIPAA requirements, eligibility for the pre-existing conditions exclusion waiver under new coverage is lost if
there is a break in coverage of more than 63 days
The major medical deductible carryover period normally applies to expenses incurred during the last ___ months of the plan year.
three
When does the owner's contractual rights begin under an individual annuity contract?
time of purchase
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
A business becoming incorporated is an example of risk
transfer
A hold-harmless clause is an example of risk
transfer
Typically, states will permit the grouping of two or more small employers in the same industry for obtaining group health insurance at a favorable rate. This grouping of employers is known as a multiple employer
trust
In an individual retirement account (IRA), rollover contributions are
unlimited by dollar amount
When does interest income for a flexible premium deferred annuity get reported for federal income taxes?
upon receiving distributions from the contract
Extended term option
uses the policy's cash value to purchase a level term insurance policy in an amount equal to the original policy's face value, for as long a period as the cash value will purchase
Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?
variable universal life
A policyowner with a terminal illness who sells his life insurance policy to a third party is called a
viator
Which of the following best describes the presumptive disability provision?
waives the typical total disability requirements
A contract is considered void in all of the following situations EXCEPT
when consideration is unequal
Under what circumstance does an accident and health insurer have the right to request an autopsy?
when not prohibited by state law
Which event triggers a deferred annuity to start making benefit payments to the annuitant?
when the contract is annuitized
When would evidence of insurability be required for a person already covered with a variable universal life policy?
when the death benefit is increased
When does the producer give a premium receipt for a life insurance application?
when the initial premium has been paid with the application
a policyowner is permitted to take out a policy loan on a whole life policy at what point?
when the policy has a cash value
