NWM Exam
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. the total premiums paid had totaled $16,000. what were the federal income tax consequences to the policyowner on receipt of the cash value? a) $16,000 was received as ordinary income and $4,000 as tax-free b) $20,000 was received as capital gain c) $20,000 was received as ordinary income d) $16,000 was received tax-free and $4,000 as ordinary income
$16,000 was received tax-free and $4,000 as ordinary income
Larry has a Major Medical Expense policy for his family with a $1,000 per family/per year deductible and an 80/20 coinsurance provision. If Larry's family files four claims of $400, $800, $100, and $700 in one year, how much will the insurance company pay? a)$500 b) $800 c) $1,000 d) $1,200
$800 - in this situation the insurer will pay $800. $400 + 800 + 100 + 700 = $2,000 the insurance company pays 80% of $1,000 (outstanding balance after deductible is paid) or $800
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? a) $950,000 b) $960,000 c) $989,500 d) $1,000,000
$960,000 $50,000 - $500 deductible = $50,000 $50,000 x 80% = $40,000. $1,000,000 lifetime benefit - $40,000 = $960,000 remaining
Which of these statements about traditional individual retirement accounts is accurate? a) 10% penalty is applied to withdrawals after age 59 1/2 b) withdrawals are normally tax-free to the recipient c) 10% penalty is applied to withdrawals prior to age 59 1/2 d) contributions are not tax deductible
10% penalty is applied to withdrawals prior to age 59 1/2 because an IRA is a qualified plan, it has the same rules for early withdrawal
Administrative actions taken against an agent must be reported to the state corporation commission within _ days of the final disposition a) 15 b) 20 c) 25 d) 30
30 an agent must report to the commission any administrative action taken against him/her by any governmental agency within 30 days of the final disposition
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
31 days
An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true? A) applicant can determine which items in the report to leave out B) insurer can obtain a copy of this report without the applicant's knowledge C) fee for the report is typically paid by the applicant D) applicant has a right to receive a copy of the report
Applicant has a right to receive a copy of the report
Which of these is NOT considered to be a cost connected with an individual's death? a) funeral expense b) tax liability c) business expenses d) probate costs
Business expenses - all of these are considered to be costs associated with an individual's death EXCEPT business expenses
An agent recently replaced an existing medicare supplement policy with a new policy. the agent's compensation for the new policy a) CANNOT exceed the renewal commission of the original policy b) CAN exceed the renewal commission of the original policy c) must equal the first year commission of the original policy d) is not regulated
CANNOT exceed the renewal commission of the original policy - compensation for a new medicare supplement policy that replaces an existing policy cannot exceed renewal commission of the original policy
To which of the following group plans do HIPAA rules NOT apply? a) PPOs b) Disability income c) HMOs d) Major medical
Disability Income HIPAA rules apply to PPOs, HMOs, and major medical plans
all of these duties that a producer may be required to perform when delivering an insurance policy EXCEPT acquire a statement of good health signature gather the initial premium review policy with applicant leave a conditional receipt with client
Leave a conditional receipt with the client (normally given prior to a policy being issued)
What kind of arrangement gives the policyowner the right to change the beneficiary? a) Contestable designation b) Incontestable designation c) Irrevocable designation d) Revocable designation
Revocable designation - a revocable beneficiary designation gives the policyowner the right to change the beneficiary
When does the producer give a premium receipt for a life insurance application? a) when the application has been approved b) when the initial premium has been paid with the application c) during the medical exam d) when the completed application has been collected
When the initial premium has been paid with the application
proceeds of a life insurance policy claim may be issued to a minor ONLY if a) the minor is at least 12 yrs of age b) the proceeds are immediately invested in US savings bonds and held until the child turns 18 c) a guardian has been appointed to receive proceeds on behalf of the minor d) the minor has completed an accredited money mgmt course
a guardian has been appointed to receive proceeds on behalf of the minor - proceeds of a life insurance policy claim may be issued to a minor ONLY if a guardian has been appointed to receive proceeds on behalf the minor
what does the term "field underwriting" refer to in the health insurance industry? a) a producer's contact with the applicant b) the interaction of an underwriter with the applicant c) the medical reports issued by the MIB d) an insurer conducting an investigative report
a producer's contact with the applicant - field underwriting refers to a producer accumulating information through contact with the applicant
disability income insurance normally excludes coverage for disabilities that arise from a) automobile accidents b) injuries sustained while traveling abroad c) occupational injuries d) active military duty
active military duty
An _ is a person appointed by an insurer that represents the company and presents policies on its behalf a) agency b) agent c) appointee d) designee
agent
According to the Pregnancy Discrimination Act of 1978, employers must treat pregnancy in the same manner as a) any other medical disability b) a suspension c) an unpaid holiday d) a pre-existing condition
any other medical disability
in what situation could an insurance policy's coverage be modified? a) applicant is a preferred risk b) applicant is a substandard risk c) applicant is a standard risk d) applicant is uninsurable
applicant is a substandard risk
Which statement regarding the cash value of a whole life insurance policy is correct? a) can be borrowed against, starting in the policy's fifth year b) cash value accumulation is based on the performance of a separate investment account c) available to the policyowner when policy has been surrendered d) starts growing with the initial premium
available to the policyowner when the policy has been surrendered - cash value is available to policyowners when policies are surrendered
which statement regarding the life insurance premium for a children's rider is true? a) decreasing premium as each child becomes an adult b) premium remains the same no matter how many children c) increasing premium as additional children are born d) no premium is normally charged for a children's rider
b) premium remains the same no matter how many children
a domestic insurance company in Virginia MUST a) be formed under virginia insurance laws b) own real estate in virginia c) write insurance on risks located only in virginia d) honor the charter of the National Association of Insurance Commissioners (NAIC)
be formed under Virginia Insurance laws
What is the federal income tax liability of a death benefit paid from a health insurance policy to a named beneficiary? a) benefits are not taxable b) benefits are partially taxable c) benefits are tax-deferred d) benefits are fully taxable
benefits are not taxable - federal income taxes will not likely be applied to death benefits paid to the beneficiary of an insured under a health insurance company
The Change of Occupation provision in a Disability Income policy states that, in the event the insured changes to a less hazardous occupation, which of the following may apply? a) benefits will remain the same in the event of a covered claim b) premiums cannot be adjusted c) benefits can be increased in the event of a covered claim d) benefits can be reduced in the event of a covered claim
benefits can be increased in the event of a covered claim - in the event the insured changes to a less hazardous occupation, the change of occupation provision states that benefits can be increased in the event of a covered claim
The guarantee of insurability option provides a long-term care policyowner the ability to a) buy additional coverage at a later date b) add the insured's spouse at a later date c) pay the same premium for life d) cancel the policy at anytime
buy additional coverage at a later date in long-term care insurance, the guarantee of insurability option provides the insured with the ability to purchase additional insurance at a later date without evidence of insurability
A source of supplemental income for a life insurance policyowner can be derived from the - cash value - payor benefit - consideration - face amount
cash value
An agent does NOT need to notify the bureau of insurance of a a)change of address b) name change c) change in financial status d) felony conviction
change in financial status - all of these must be reported to the bureau of insurance EXCEPT 'change in financial status'
A prospective client was intimidated by an agent to purchase an insurance contact. the agent could be found guilty of a) coercion b) rebating c) defamation d) sliding
coercion - a licensee who attempts to intimidate a prospective insured is guilty of coercion
An accident and health insurance policy's premium requirements are set forth in which of the following provisions? a) insurance clause b) entire contact clause c) consideration clause d) premium mode
consideration clause - the consideration clause sets for an accident and health insurance policy's premium requirements
Which statement is true about a permanent disability under workers compensation coverage? a) employee is expected to return to work within 6 months b) coverage includes nonoccupational injuries c) employee is expected to make a full recovery d) coverage excludes nonoccupational injuries
coverage excluded nonoccupational injuries workers comp only covers work-related injuries and illnesses
Any employee insured under a group life insurance plan is normally a) given a master certificate b) covered on a noncontributory basis c) required to show proof of insurability d) covered with term life insurance
covered with term life insurance
which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy? a) prevents the policy from lapsing in the event of total disability b) premiums waived by the insurer do not have to be repaid by the policyowner c) policy's cash value would still increase as policy premiums are being waved d) it allows a policy loan to cover premium payments if the policyowner becomes totally disabled
d) it allows a policy loan to cover premium payments if the policyowner becomes totally disabled
what action may the Bureau of insurance take when it finds that a license applicant is not competent or untrustworthy? a) report the information to the attorney general b) decline to issue the license c) place the applicant on probation d) refuse to renew the license for five years
decline to issue the license - if the bureau of insurance finds that a license applicant is not competent or trustworthy, it may decline to issue the license
The affordable care act's premium rating process includes each of the following EXCEPT a) age b) tobacco use c) zip code d) employment status
employment status employment status is not included in the ACA's premium rating process
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. this attached agreement is called a(n) a) extension b) endorsement c) sanction d) restriction
endorsement - an endorsement is a written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. sometimes called a rider
The application is part of the annuity contract according to the a) conversion provision b) free-look provision c) entire contract clause d) incontestable period
entire contract clause the entire contract clause is a required provision for life insurance and annuities contracts
Death benefits from a life insurance policy are normally considered to be a) exempt from federal income tax b) subject to the cost recovery rule c) subject to attachments from the insured's creditors d) subject to the value-added tax
exempt from federal income tax - life insurance death proceeds that are paid to a named beneficiary are generally exempt from federal income tax
the "notice to buyer" on the first page of each long-term care policy delivered in virginia a) explains that some long-term care costs may not be covered b) provides the addresses of approved long-term care facilities c) states the possible disadvantages of replacing coverage d) states the cost of the coverage
explains that some long-term care costs may not be covered
which of the following is considered an unfair claims settlement practice? a) refusing to pay persons bringing false or fraudulent claims b) offering to settle a claim by arbitration c) failure to investigate or pay legitimate claims d) using intimidation in order to restrain or monopolize the business of insurance
failure to investigate or pay legitimate claims
major medical policies are typically characterized by which of the following? a) corridor deductible b) flat deductible c) probationary period d) first dollar coverage
flat deductible
The "use it or lose it" rule applies to a) medical savings accounts b) health savings accounts c) health reimbursement accounts d) flexible savings accounts
flexible savings accounts use it or lose it rules means that unused funds not used in a flexible savings account by the end of the plan year can be forfeited to the employer
An annuity contract may be returned for a full refund during the
free look period
How long does one premium payment cover in a single premium whole life policy? a) until the policy's first renewal date b) one month c) one year d) full life of the policy
full life of the policy - one premium payment covers full life of the policy in a single premium whole life policy
Most Medicare Supplement information used by an insurer must be approved by the State. Which of the following types of information does NOT require State approval? a) billboard advertisements paid for by the insurer b) brochures issued by the insurer c) radio advertisements approved by the insurer d) government publications
government publications can be used without prior state approval
Dan owns a disability income insurance policy which provides ONLY nonoccupational coverage. Which of the following circumstances would likely NOT be covered under his plan? a) he is injured in an automobile accident while driving to work b) he suffers third-degree burns while on vacation c) he falls from the roof of his personal residence while replacing shingles d) he falls and breaks his hip at work
he falls and breaks his hip at work
Terry receives long-term physical therapy at her residence. What type of insurance would cover this service? a) home health care b) long-term disability income c) nursing home d) respite care
home health care home health care covers long-term physical therapy or nursing services provided at the insured's residence
A policyowner has just borrowed from a life insurance policy's cash value. Which of these statements is true? a) in the event of death, the loan amount is deducted from the policy proceeds b) the policy lapses if not repaid within 5 years c) a policyowner must prequalify for the loan to determine creditworthiness d) interest on the loan amount is prohibited
in the event of death, the loan amount is deducted from the policy proceeds - if a life insurance policyowner borrows the cash value of a policy, the amount of the loan outstanding is deducted from the policy proceeds
The ___ is required to notify the state corporation commission in the event of appointment termination a) producer b) insurer c) underwriter d) insured
insurer an agent's cancellation of appointment must be reported to the commission by the insurance company
Ken is age 65 and has 2 years until he receives Social Security retirement income benefits. At his current age, which is true about Medicare Part A Hospital Insurance coverage? a) it is available through application to Homeland Security b) it is available through application to social security c) he is automatically enrolled through his employer d) he is not eligible until he starts receiving social security retirement income
it is available through application to social security
In regards to health insurance, what is meant by the term "primary policy"? a) it is the first policy purchased by the insured b) it is the policy that will pay up to its limit before any other policy pays c) it is the policy with the fewest exclusions d) it is the policy with the highest limit of coverage
it is the policy that will pay up to its limits before any other policy pays primary policy refers to the policy that will pay up to its limits before any other policy pays
The initial premium for a life insurance policy is typically paid in what way? a) the applicant mails it the insurer after the policy has been approved b) it is typically obtained by the producer and forwarded to the insurer c) it is typically forwarded to the insurer by the applicant d) the producer pays it from any commissions received
it is typically obtained by the producer and forwarded to the insurer
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? a) nothing b) more than the face amount c) less than the face amount d) full face amount
less than the face amount
After the extended term life nonforfeiture option is chosen, the available insurance will be a) increasing term for a stated period of time b) level term for a stated period of time c) decreasing term for a stated period of time d) renewable term for a stated period of time
level term for a stated period of time - under the extended term life insurance nonforfeiture option, the available insurance is level term for a stated period of time. the amount of coverage is the same as the original face amount
an agent must hold which of the following licenses to sell variable life insurance policies? a) limited lines license b) securities license c) life license d) life, variable, and securities license
life, variable, and securities license - required for an agent to market variable life insurance products
What action can an insurer take to discourage malingering and false disability claims? a) the insurer can selectively refuse a disability claim for specific diseases b) the probation period can be increased for specific injuries c) limit the amount of benefits an insured can receive from two disability policies with the same insurer d) a premium rating can be given to an insured with more than one policy with the same insurer
limit the amount of benefits an insured can receive from two disability policies with the same insurer - to discourage malingering and false claims for disability, an insurer sets limits on the amount of benefits an insured can collect from two disability policies with the same insurer
Rick the agent handles insurance premiums in an untrustworthy manner. his actions could find him guilty of a) subrogation b) an unfair claims settlement practice c) acting in good faith d) not acting as a fiduciary
not acting as a fiduciary - if an agent mishandles insurance premiums, he/she may be found guilty of not acting as a fiduciary
Which of these is NOT an unfair claims settlement practice? a) refusing to pay claims without conducting a reasonable investigation b) compelling insureds to initiate a lawsuit by offering less on insurance claims c) offering to settle a claim by arbitration d) failing to acknowledge and act promptly with respect to insurance claims
offering to settle a claim by arbitration - all of these are unfair claim settlements except for offering to settle a claim by arbitration
The authority to change the beneficiary in an individual annuity lies with the a) annuitant b) owner c) beneficiary d) administrator
owner the power to change the beneficiary in an individual annuity lies with the owner
A life insurance policy's contingent beneficiary is the a) primary person who receives the death benefits if the insured dies b) person who receives the death benefits if the primary beneficiary dies before the insured c) person who receives the death benefits if there is no named beneficiary d) person whose approval is needed before a beneficiary designation is changed
person who receives the death benefits if the primary beneficiary dies before the insured
if an insured dies during the grace period without having paid the premium, how much will the insurer pay? a) policy's face amount b) total premiums paid will be returned c) policy's face amount minus any premiums due d) nothing
policy's face amount minus any premiums due - if an insured dies during the grace period and the premium has not been paid, the policy benefit is payable. However, the premium amount due is deducted from the death benefits paid to the beneficiary
A guaranteed renewable provision allows a) discrimination of individuals who have an increased loss experience b) premiums that may not be increased beyond contractual requirements c) premiums which can only be increased per rate class d) cancellation of the policy at the insurer's discretion
premiums which can only be increased per rate class
A cease and desist order issued against an agent a) prohibits a specific practice listed in the order b) permits the suspension or revocation of the agent's license immediately c) can only be issued by the attorney general d) voids all agent appointments
prohibits a specific practice listed in the order - a cease and desist order allows the prohibition of any activity listed in the order
The State Corporation Commission is empowered to perform each of the following acts EXCEPT a) examine domestic insurance companies b) prosecute agents who violate state insurance laws c) monitor insurer solvency d) issue cease and desist orders
prosecute agents who violate state insurance laws - prosecuting agents who violate state insurance laws is NOT a duty of the commission
The inability to perform SOME of the duties of one's own occupation is known as a a) recurrent disability b) total and permanent disability c) residual disability d) presumptive disability
residual disability - a residual disability results in the inability to perform some of the duties of one's own occupation
an example of an endodontic treatment is a - bridge - crown - filling - root canal
root canal endodontics is the branch of dentistry dealing with diseases of the dental pulp. root canals would be an example
Once a child is born and covered under a health insurance plan, any reduction in benefits on the newborn is a) allowed under specific conditions b) allowed in any situation c) strictly prohibited d) prohibited only under high-deductible plans
strictly prohibited - in VA, reducing benefits for a newborn child under an accident and health plan is prohibited in any form
an agent may be personally liable if he or she engages in acts a) that are an unfair practice b) that are not part of the agency or agent contract c) that are derogatory concerning a competitor d) detrimental to the industry
that are not part of the agency or agent contract
Which statement is true concerning the entire contract provision in an individual accident and health insurance policy is TRUE? a) the agent can waive policy provisions and change the policy with the insurer's consent b) the agent has the authority to waive the policy's provisions under certain conditions c) the agent has the authority to change the policy under certain conditions d) the agent does not have the authority to change the policy or waive its provisions
the agent doesn't have the authority to change the policy or waive its provisions
What is payable to the policyowner if a whole life policy is surrendered prior to its maturity date? a) the loan value b) the cash value c) the face amount minus any past due premiums and outstanding loans d) nothing
the cash value - the cash value is the amt payable the policyowner when a whole life insurance policy is surrendered before maturity
The insured's consideration given for a health insurance policy is a) the first premium payment and the application b) the initial premium payment only c) the application d) the initial premium and an investigative report
the first premium payment and the application - the consideration clause in health insurance usually lists the insured's consideration given for the policy as the initial premium payment and the application
An insured, age 67, is covered under a disability income policy. What will the insurer normally require in order for the insured to continue coverage? a) the insured must submit to a physical examination on annual basis b) the insured must be actively at work for a specified number of hours per week c) the insured must remain in the same occupation d) the insured must continue working for the same employer
the insured must be actively at work for a specified number of hours per week - disability income policies require the insured to be actively working if coverage extends past age 65
the optionally renewable provisions allows what party to cancel the contract? a) the policyowner b) the insured c) the insurer d) either the insurer or policyowner
the insurer
Who may terminate coverage under a cancelable health insurance policy? a) the insured only b) the insurer only c) the insurer or the insured d) an officer of the insurer
the insurer or the insured - coverage under a cancelable health insurance policy may be terminated by either the insured or the insurer
James is covered with health insurance by two different insurers. The "insurance with other insurers" provision in an individual health insurance policy allows an insurer to pay benefits to the insured on a pro-rata basis when a) the policy's maximum lifetime benefit level has been paid b) the policy is beyond the incontestable period c) the insurer was not notified prior to the claim that the insured has other health coverage d) the policy is beyond the free-look period
the insurer was not notified prior to the claim that the insured has other health coverage - the "insurance with other insurers" provision in an individual health insurance policy allows an insurer to pay benefits to the insured on a pro-rata basis when the insurer was not notified prior to the claim that the insured has other health coverage
The Virginia life, accident, and sickness insurance guaranty association protects an insured in the event of a) high inflation b) disability c) unemployment d) the insurer's insolvency
the insurer's insolvency the VA life, accident, and sickness guaranty association is used to rehabilitate insolvent (financially incapacitated) insurers
a life insurance policy advertisement may contain a) references of protection guaranteed by the Virginia life accident, and sickness guaranty association b) false information c) mention of the commission endorsing this product d) the insurer's name
the insurer's name - the insurer's name is permitted in an advertisement for an insurance policy
Who is the beneficiary in a life insurance policy? a) the person designated to have control over the nonforfeiture options b) the stated person or entity who is designated to receive the death proceeds c) the person responsible for payment of policy premiums d) the stated person whose life is insured in the insurance contract
the stated person or entity who is designated to receive the death proceeds
What is the primary reason for the State Corporation Commission's examination of an agent's insurance records? a) to determine an agent's sales quota b) to determine an agent's solvency c) to determine compliance with state insurance laws and regulations d) to determine an agent's renewal status
to determine compliance with state insurance laws and regulation
Misrepresenting pertinent policy provisions relating to coverage after a loss is a) A concealment in insurance application b) An unfair claims settlement practice c) An unfair discrimination between individuals d) A violation of the principle of adhesion
unfair claims settlement practice
when does interest income for a flexible premium deferred annuity get reported for federal income taxes? a) never b) after the principal has been exhausted c) upon receiving distributions from the contract d) during the accumulation phase
upon receiving distributions from the contract the portion of the annuity payment that represents interest-earned is taxable. the portion that represents the return of principal is not taxed
