Pre Licensing Exam Questions
A person becomes eligible for Medicare when: Select one: a. Part A is automatic for all persons reaching Age 65. b. Part B is only available for those who have reached the fully insured status. c. There are no exceptions to the age 65 rule. d. If a person retires at age 59 1/2, they may request a special exception.
a. Part A is automatic for all persons reaching Age 65. When a person reaches age 65 they become eligible for Medicare Part A, even if they continue to work.
The Patient Protection and Affordable Care Act allows dependent children to remain on their parents' insurance plan until what age? Select one: a. 22 b. 23 c. 25 d. 26
d. 26 The PPACA allows dependent children to remain on their parents' insurance plan until age 26.
As a disciplinary action, the Commissioner may assess penalties of: Select one: a. $100 to $500 b. $200 to $600 c. $400 to $800 d. $1000 to $5000
a. $100 to $500 The Commissioner may place on probation, suspend, revoke, refuse to issue or renew, or otherwise limit any license or certificate, as well as assess penalties of $100 to $500 as a disciplinary action.
In the claims payment provisions in a health policy, the standard time for a company to deliver a claim form once it has been notified of a loss is: Select one: a. 15 days b. 20 days c. 45 days d. 60 days
a. 15 days
A business may be the beneficiary on any of the following policies, EXCEPT: Select one: a. A group insurance policy of one of the employees b. A key man life insurance policy c. A policy used to fund a buy/sell agreement d. A policy used to fund an executive bonus plan
a. A group insurance policy of one of the employees A business is not allowed to be the beneficiary of a group plan that is designed to provide benefits for the employee's family.
What is a transaction in which a new policy or contract is to be purchased if an existing policy or contract has been lapsed, forfeited, or surrendered? Select one: a. A replacement b. A reinstatement c. A termination d. A dispensation
a. A replacement Replacement is a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be: lapsed, forfeited, surrendered, or partially surrendered, assigned to the replacing insurer or otherwise terminated.
To act as an insurer in the state of Maryland, an insurer must hold: Select one: a. A valid certificate of authority b. A valid certificate of insurance c. A license of insurance d. A producer's license
a. A valid certificate of authority To act as an insurer in the state of Maryland, an insurer must hold a valid certificate of authority issued by the Commissioner.
What type of life insurance policy has premiums guaranteed not to change, coverage never decreases, builds a cash account that is available for loans or surrender, and premium payments are required for life? Select one: a. A whole life policy b. A fully funded universal life c. An endowment policy d. A term policy
a. A whole life policy A whole life plan has all of the features listed above.
When should the agent notify his prospective client that a credit report might be requested? Select one: a. At the time the application is completed b. During the initial interview c. Only if a report is ordered d. At the time of policy delivery
a. At the time the application is completed As part of the application process, the applicant must be notified that a report may be ordered.
All of the following are true about a Medical Expense policy, EXCEPT: Select one: a. Available on a group basis only b. Covers both accidental and sickness losses c. Pays benefits outlined in the policy d. Covers both inpatient and outpatient expenses
a. Available on a group basis only A medical expense policy is a reimbursement policy that will pay based on a pre-set schedule of benefits. It is not restricted to groups.
What nonforfeiture option allows the policyowner to receive the policy's cash value? Select one: a. Cash surrender value b. Extended term c. Reduced paid-up insurance d. None of the above
a. Cash surrender value The cash surrender value allows the policyowner to receive the policy's cash value.
An HMO will stress all of the following, EXCEPT: Select one: a. Higher deductibles for curative services b. Low or no co-pay for doctor visits c. Screenings for potential health conditions d. Wellness as a lifestyle
a. Higher deductibles for curative services HMOs generally do not have deductibles, but they do assess co-pays in some cases.
Which of the following statements best describes how cash value in a life insurance policy is taxed? Select one: a. If the policy cash value is surrendered, the interest earned on the cash value is taxable as ordinary income. b. Cash value does not earn interest and is, therefore, not taxable. c. Cash value grows tax-free. d. None of the above
a. If the policy cash value is surrendered, the interest earned on the cash value is taxable as ordinary income. If the policy cash value is surrendered or endows, the interest is taxable as ordinary income.
How much time before coverage is in effect for a Medicare supplemental policy that replaces another Medicare supplemental policy that was held for 1 year? Select one: a. Immediately b. 30 days c. 60 days d. 90 days
a. Immediately If the policy is replacing a policy that has been in effect for more than 6 months, there is no probationary or waiting period. It is effective immediately.
An insurance adviser must have what type of license? Select one: a. Insurance adviser b. Insurance producer c. Insurance agent d. Insurance advisers are not required to be licensed.
a. Insurance adviser No person may act as an insurance adviser unless so authorized by an insurance adviser license.
The principal losses related to accident and health insurance are: Select one: a. Loss of income from disability and medical expenses from the cost of medical treatments, physician's fees, hospitalization and prescriptions b. Loss of earning power caused by premature death c. Loss of retirement income caused by prolonged life d. All of the above
a. Loss of income from disability and medical expenses from the cost of medical treatments, physician's fees, hospitalization and prescriptions The principal types of losses dealt with in accident and health insurance are medical expenses and loss of income caused by disability.
Factors that affect the risk classification when underwriting a life policy do not include which of the following? Select one: a. Marital status b. Age c. Gender d. Weight
a. Marital status An applicant's marital status is not normally a factor that affects the risk category when classifying an applicant for a life insurance policy.
When is maternity coverage available on a family health plan? Select one: a. Maternity coverage is effective immediately. b. There is a 90-day wait for maternity coverage. c. There is a 9-month wait for maternity coverage. d. There is a one-year wait for maternity coverage.
a. Maternity coverage is effective immediately. Under the uniform law, maternity coverage will be effective immediately upon policy issue.
Riders and endorsements can be used to accomplish any of the following, EXCEPT: Select one: a. Modify the time limit for certain defense clause b. Provide additional benefits c. Restrict or eliminate benefits d. Increase premiums
a. Modify the time limit for certain defense clause A rider or endorsement may be used to change the benefits or premiums, but it may not be used to alter one of the core provisions of the contract.
An insurance company whose main responsibility is to make money for its policyholders is called a: Select one: a. Mutual insurance company b. Stock insurance company c. Health maintenance organization (HMO) d. Preferred provider organization (PPO)
a. Mutual insurance company It is a mutual insurance company that answers to the policyholders. The mutual company focuses on providing maximum benefits to the policyholders and considers long-term safety of its investments.
Which of the following statements is true regarding key person disability income insurance? Select one: a. Premiums are not tax-deductible, but benefits are received tax-free. b. Premiums are tax-deductible, but benefits are taxable. c. Premiums are tax-deductible and benefits are tax-free. d. Premiums are not tax-deductible and benefits are taxable.
a. Premiums are not tax-deductible, but benefits are received tax-free. A business cannot deduct the premiums for key person disability income insurance, but the benefits are received tax-free.
Medical providers are paid on a capitation basis in which of the following dental plans? Select one: a. Prepaid dental b. Comprehensive c. Basic d. Comprehensive and basic
a. Prepaid dental Prepaid dental plans operate similarly to HMOs, where medical providers are paid on a capitation basis.
Martin's employer group health plan provides primary coverage for his end stage renal disease for 30 months, after which Medicare provides: Select one: a. Primary coverage b. Secondary coverage c. Tertiary coverage d. No coverage
a. Primary coverage Employer group health plans must provide primary coverage to individuals with end stage renal disease (ESRD) for 30 months, after which Medicare provides primary coverage.
When must an insurer's rates be filed with the Commissioner? Select one: a. Prior to usage b. Within 3 days after first usage c. Within 7 days after first usage d. Within 30 days after first usage
a. Prior to usage All insurer's rates must be filed with the Commissioner prior to usage and must be approved.
The rehabilitation benefit differs from partial disability in the following way: Select one: a. Rehabilitation requires a period of total disability and usually provides a benefit for a specified time to transition back to work. b. Partial disability will provide a graded benefit based on a time factor. c. Rehabilitation will be available for an unlimited time up to the policy maximum. d. All disability policies have a rehabilitation provision.
a. Rehabilitation requires a period of total disability and usually provides a benefit for a specified time to transition back to work. A rehabilitation benefit is specifically designed to help a disabled employee return to work. A disability benefit pays a reduced benefit based on employer pay for the partial work.
A type of long-term care insurance benefit designed to provide nonprofessional family caregivers a brief rest period by paying for short-term professional home health care is called: Select one: a. Respite care benefit b. Custodial care benefit c. Chronic care benefit d. Adult day care benefit
a. Respite care benefit Coverage for respite care allows the insured to be temporarily moved to a nursing facility or pays for a substitute caregiver to provide care in the insured's home for short periods, so the family can rest from caregiving activities.
What is designed to provide an alternate market for Maryland residents rejected by an insurer or otherwise unable to obtain coverage from an insurer based on medical history or condition? Select one: a. The Maryland Health Insurance Plan b. The Commissioner's Wellness Trust c. The NAIC Wellness Alliance d. The Commonwealth Wellness Association
a. The Maryland Health Insurance Plan The Maryland Health Insurance Plan is designed to provide an alternate market for Maryland residents rejected by an insurer or otherwise unable to obtain coverage from an insurer based on medical history or condition.
Which of the following is usually the owner of the annuity? Select one: a. The annuitant b. The insurance company c. The beneficiary d. All of the above
a. The annuitant The annuitant is the insured - or person on whose whole life the annuity contract has been issued. The annuitant is usually also the owner of the annuity.
When the only logical beneficiary is a minor, all of the following options are available, EXCEPT: Select one: a. The benefits can go directly to the estate of the insured. b. A trust can be established. c. The insurance company can hold the proceeds until the minor comes of age. d. A guardian can be appointed.
a. The benefits can go directly to the estate of the insured. In the event that the only logical beneficiary for a life policy is a minor, the guardian, trust and insurance company holding the proceeds are all options available.
Which of the following is a true statement about the waiver of premium rider? Select one: a. The disability must be permanent and total. b. The disability cannot be the result of an accident. c. The disability must not be permanent. d. The disability must not be total
a. The disability must be permanent and total. In order for the waiver of premium rider to take effect, the disability of the policyholder must be permanent and total.
What is the penalty specified by the Patient Protection and Affordable Care Act for each employee for eligible businesses that do not provide health insurance? Select one: a. $1,000 b. $2,000 c. $3,000 d. $5,000
b. $2,000 If a business does not provide insurance and if one or more employees receive federal insurance subsidies, the business will pay $2,000 per employee (minus the first 30).
All of the following are one of the four main components of an insurance contract, EXCEPT: Select one: a. Insuring clause b. Adhesion c. Policy conditions d. Exclusions
b. Adhesion The four main components of an insurance contract include: policy face, insuring clause, policy conditions, and exclusions. Adhesion is a characteristic of insurance contracts.
All Health insurance plans must provide coverage for breast cancer screening in accordance with the latest screening guidelines issued by the: Select one: a. American Medical Association b. American Cancer Society c. NAIC d. Federal government
b. American Cancer Society All Health insurance plans must provide coverage for breast cancer screening in accordance with the latest screening guidelines issued by the American Cancer Society.
Shelly has an injury that is covered on her long-term disability policy. The injury occurred at work. How will her claim be handled by the insurer? Select one: a. It will be denied. b. Benefits will be reduced. c. Benefits will be paid fully. d. None of the above
b. Benefits will be reduced. Because the injury was occupational, the benefits paid will be reduced by benefits received through Workers' Compensation and/or Social Security.
All of the following are true about Roth IRAs, EXCEPT: Select one: a. The contributions are the same as a traditional IRA. b. Contributions are tax deductible. c. The withdrawals are tax-free. d. Contributions are limited to a person with an income less than $105,000 to $120,000.
b. Contributions are tax deductible. Contributions to Roth IRAs are not tax-deductible.
What is the time period when the children are young and financially dependent upon their parents? Select one: a. Preretirement period b. Family dependency period c. Blackout period d. Support period
b. Family dependency period The family dependency period demands the most income because children are financially dependent on their parents.
What are the basic qualifications to qualify for a Social Security disability benefit? Select one: a. Have the proper insured status, be unable to perform the duties of your current occupation and be disabled for at least 5 months b. Have proper insured status. Be unable to work at any job. Have a disability that is expected to last one year or more or result in death, and be disabled for at least 150 days c. Be injured on the job, have the proper insured status and be disabled 5 months or more d. Be injured off the job, have proper insured status and be disabled for 150 days or longer
b. Have proper insured status. Be unable to work at any job. Have a disability that is expected to last one year or more or result in death, and be disabled for at least 150 days Social Security disability requires that a worker must have the proper insured status, have a disability that prevents them from working at any job, and have a disability that is expected to last for one year or result in death. Finally, the elimination for benefits is 5 months or 150 days.
A change of occupation provision will allow the insurance company to do any of the following at the time of claim, EXCEPT: Select one: a. Pay the benefits stated in the policy b. Increase the premiums for that individual c. Pay a reduced benefit for a higher risk occupation d. Require a doctor's statement confirming disability
b. Increase the premiums for that individual A change of occupation will allow the insurance company to reduce benefits, but it will not be allowed to increase premiums on an individual basis.
What life insurance policy provides a blend of the benefits of traditional whole life and universal life? Select one: a. Credit life b. Interest-sensitive whole life c. Variable whole life d. Industrial life
b. Interest-sensitive whole life Interest-sensitive whole life is a mixture of traditional whole life and universal life.
When an agent or insurer does not truthfully explain the terms, benefits, limitations, or exclusions of an insurance policy, or makes untrue statements of fact or law, or fails to state material facts or other disclosures as required by law, this is: Select one: a. Defamation b. Misrepresentation c. Twisting d. False financial statements
b. Misrepresentation Misrepresentation is when an agent or an insurer misrepresents the terms, benefits, limitations, or exclusions of a policy. The agent or insurer makes untrue or misleading statements of fact or law, and fails to state material facts or other disclosures as required by law.
All of the following are non-forfeiture options, EXCEPT: Select one: a. Surrender for cash value b. Paid up additions c. Extended term insurance d. Reduced paid-up insurance
b. Paid up additions Paid up additions is a dividend option for a participating life policy.
If a producer does not routinely make prompt remittance of clients' premiums, they may have to maintain a: Select one: a. Fiduciary account b. Premium trust account c. Joint Premium account d. Institutional account
b. Premium trust account Producers who do not make prompt remittance to the insured may deposit funds into a premium trust account, an account from which withdrawals may not be made except for payment of premiums to principals, transfer to another account with the principal's consent.
Most states require an HMO to provide all of the following services, EXCEPT: Select one: a. Emergency services b. Prescription drugs c. Physician services d. Preventive services
b. Prescription drugs While most HMO plans will provide access to prescription drugs, they are usually not providing this service as part of their certificate of authority. They do so for competitive reasons.
HIPAA is federal legislation that deals with: Select one: a. Continuation of individual coverage beyond termination b. Providing credit for service under group plans c. Requiring employers to contribute to employee health plans d. Disabled individuals rights
b. Providing credit for service under group plans HIPAA sets up standards for patient privacy. The release of medical information is tightly controlled under this regulation. In addition, employees receive credit for time served in qualified group plans to limit exposure to pre-existing condition retractions.
A deferred annuity with a decreasing term life insurance rider is a: Select one: a. Life annuity b. Retirement income annuity c. Annuity certain d. Tax-sheltered annuity
b. Retirement income annuity A retirement income annuity provides both a death benefit (with a decreasing term rider), and the annuity's surrender value if the annuitant dies before retirement.
Which of the follow statements concerning the payment from a non-qualified annuity is correct? Select one: a. Since this is a non-qualified plan, all payments are 100% tax free. b. Since this is a non-qualified plan only a portion of the payment will be taxable. c. Since this is a non-qualified plan all the income received will be taxable. d. If the income is below a certain threshold, Jack is not required to report it.
b. Since this is a non-qualified plan only a portion of the payment will be taxable. A formula called the exclusion ratio causes part of the annuity payment to be tax free and part to be taxable.
An adjustable life policyowner may do any of the following, EXCEPT: Select one: a. Pay varying premiums each year b. The premium will vanish after 7 years c. Pay a minimum amount as long as he funds the mortality cost d. Pay a higher premium if he wants to build cash faster
b. The premium will vanish after 7 years The premiums will not vanish in 7 years. The other options apply to adjustable life policies.
The dependent child age limit for individual and group health insurance policies covers a dependent, unmarried child up to the age of: Select one: a. 22 b. 23 c. 25 d. 26
c. 25 The dependent child age limit for individual and group health insurance policies covers a child up to the age of 25 as long as the child is a dependent of the insured and is unmarried.
A producer must report a change of address to the Commissioner within: Select one: a. 15 days b. 21 days c. 30 days d. 31 days
c. 30 days A producer must notify the Commissioner within 30 days after a change of address.
A viatical transaction is used for which of the following: Select one: a. A person who is weary of paying life insurance premiums b. An older person who wants to increase income using home equity c. A chronically ill insured who needs to sell his life insurance policy to a third party to settle medical and other bills prior to death d. A person who wishes to gain from his life insurance investment
c. A chronically ill insured who needs to sell his life insurance policy to a third party to settle medical and other bills prior to death A viatical sale properly executed involves a person who is terminally or chronically ill who needs cash to pay medical or other bills prior to death.
The tendency for poorer than average risks to seek out insurance is the definition of: Select one: a. Indemnity b. Reinsurance c. Adverse selection d. Coinsurance
c. Adverse selection Insurers must minimize adverse selection, which is defined as the tendency for poorer than average risks to seek out insurance.
Who has the responsibility of determining if an applicant has an existing policy? Select one: a. Family b. Commissioner c. Agent d. Insured
c. Agent It is the responsibility of the agent to determine if the applicant has an existing policy.
The entire individual life insurance contract includes: Select one: a. Application only b. Policy only c. Application and policy d. Application, policy and Buyer's guide
c. Application and policy The policy, along with the application, constitutes the entire insurance contract.
The period of time that must elapse from the onset of a disability before an insured can collect benefits is called: Select one: a. Elimination period b. The time deductible c. Both of the above d. None of the above
c. Both of the above Most disability policies have a 90-day elimination (time deductible) period.
Universal life policies allow the policyowner to: Select one: a. Take out a policy loan b. Withdraw cash c. Both of the above d. None of the above
c. Both of the above Similar to whole life policies, as long as there is cash value in the account, universal life policies allow the policyowner to take out policy loans and withdraw cash.
Which of the following is part of the loss of earnings test for disability? Select one: a. Inability to perform duties of the insured's own occupation for 2 to 5 years b. Inability to perform the duties of any suitable occupation c. Both of the above d. None of the above
c. Both of the above The loss of earnings test for disability includes both the inability to perform duties of the insured's own occupation for 2 to 5 years and the inability to perform the duties of any suitable occupation.
What unfair trade practice manipulates through the prospect of something desirable? Select one: a. Twisting b. Churning c. Coercion d. Intimidation
c. Coercion Coercion generally manipulates through the prospect of something desirable.
All of the following are false regarding the tax consequences of Roth IRAs, EXCEPT: Select one: a. Once the plan participant reaches age 59 1/2, taxes on distributions are no longer imposed. b. Contributions are tax-deductible. c. Contributions are made with taxed dollars; however, interest grows tax-free. d. Contributions and interest are tax-free.
c. Contributions are made with taxed dollars; however, interest grows tax-free. Roth IRAs have qualified tax-free distributions that may be made before the plan participant is 59 1/2, and all distributions made after the age of 59 are tax-free.
When an employer pays all premiums for a group disability income policy the benefits are: Select one: a. Taxable for the first year of disability b. Taxable after the first year of disability c. Fully taxable d. Not taxable
c. Fully taxable When the employer pays the entire cost of group disability income premiums, benefits are 100% taxable to the employee.
During the accumulation phase of the annuity, the interest for a fixed annuity: Select one: a. Only has a guaranteed minimum b. Does not have a guaranteed minimum c. Is the current interest rate, plus a guaranteed minimum d. None of the above
c. Is the current interest rate, plus a guaranteed minimum A fixed annuity can have two levels of interest rates. The insurer can guarantee the current rate at the beginning of the calendar year, and also guarantee a minimum rate that is paid if the current rate falls below that level.
All of the following are LTC nonforfeiture benefits, EXCEPT: Select one: a. Cash value b. Reduced paid-up c. Life annuity d. Extended term insurance
c. Life annuity LTC nonforfeiture benefits do not include life annuities.
Life insurance policies with cash value provide the insured with immediate availability of funds, referred to as: Select one: a. Survivor protection b. Viatical settlements c. Liquidity d. Estate conservation
c. Liquidity Life insurance policies with cash value provide the insured with immediate availability of funds, referred to as liquidity
After Michelle filed her income taxes, she received a check from the insurance company that reimbursed her for some of the expenses she deducted. What is the tax situation for these benefits? Select one: a. Michelle can ignore any tax issues, since health insurance benefits are paid on a tax free basis. b. Michelle should consult with her tax adviser to see if she can avoid further tax. c. Michelle should file an amended return, since reimbursed medical expenses do not count toward the 10% threshold. d. Michelle should return the check to the insurance company to have it reissued in the correct tax year.
c. Michelle should file an amended return, since reimbursed medical expenses do not count toward the 10% threshold. Michelle had taken a deduction for medical expenses for which she was later reimbursed. She will be required to file an amended return to reflect this reimbursement.
A group health plan's rates may be affected by any of the following, EXCEPT: Select one: a. Experience of the group (claims vs. premium) b. Stability of the group c. Mortality tables d. Morbidity tables
c. Mortality tables Mortality tables deal with life expectancy.
All of the following are true about the accumulation period of an annuity, EXCEPT: Select one: a. The principal earns interest. b. The interest earned by an annuity is not taxed as with other types investments. c. Once the contract is made, the owner cannot make changes. d. The annuitant can earn interest on their interest.
c. Once the contract is made, the owner cannot make changes. The owner can make changes during the accumulation period.
Which plan is most likely to have a pre-negotiated discount with various medical providers? Select one: a. HMO b. TPA c. PPO d. ASO
c. PPO By definition, a PPO contracts with medical providers for a pre-determined discount for services provided.
Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? Select one: a. Accumulation at interest b. One-year term c. Reduction of premium payments d. Paid-up additions
c. Reduction of premium payments The reduction of premium payments option allows the policyowner to use the dividend to offset the cost of a future premium payment.
Sam failed to enroll his spouse in his group health plan when she was eligible. What must be done to enroll her late? Select one: a. Give the spouse credit for time served under the other plan and let her enroll b. Require her to wait until the anniversary of the group plan c. Require a completed health statement and use an accept or reject method to determine eligibility d. Offer COBRA since she has lost coverage as a result of a reduction in hours
c. Require a completed health statement and use an accept or reject method to determine eligibility A late enrollment for a group plan will usually require a health statement and the insurance company will have the right to accept or reject the applicant.
All of the following are true statements concerning accelerated living benefit riders , EXCEPT: Select one: a. The premiums are typically waived upon payment of the accelerated benefit. b. The insured has a condition that will result in death in 24 months or less (certified by a physician) c. The benefit paid is taxable as normal income d. The benefits reduce the death benefit.
c. The benefit paid is taxable as normal income The benefits are not taxable.
The clause that prevents the insurance company from acting unilaterally to change a policy is: Select one: a. Time limit for certain defenses b. The insuring clause c. The entire contract clause d. Incontestable clause
c. The entire contract clause The entire contract clause does not allow either the insurance company or the insured to make unilateral changes to the terms of the contract.
Which of the following is not true about HSAs? Select one: a. An individual must be enrolled in a high-deductible health plan. b. Funds are not subject to income tax when deposited. c. The funds do not roll over to the next year. d. The funds can be used to pay for qualified medical expenses without tax liability or penalty.
c. The funds do not roll over to the next year. Funds in an HSA account can be rolled over and accumulated from year to year. The other statements are all true about HSA participation.
Which of the following is not a consideration in replacing a health policy? Select one: a. Pre-existing conditions b. New waiting periods c. The location of the insurer d. Coverage and benefits
c. The location of the insurer Producers must take care that the replacement of an existing policy is for the insured's benefit. The location of the insurer is not an issue.
Which of the following statements is true about conditions to reinstate a lapsed life insurance policy? Select one: a. On a reinstatement, the policyowner does not need to provide proof of insurability. b. The reinstated policy will use the insured's attained age at the time of the reinstatement. c. The policy has been expired no more than 3 years d. Policy loans and interest are forgiven.
c. The policy has been expired no more than 3 years Most states allow reinstatement up to 3 years after the lapse of a policy.
Under what conditions would the premiums on a group life policy be tax deductible? Select one: a. The policy is under a buy-sell agreement. b. The policy is to perpetuate the business. c. The policy is a necessary business expense. d. The policy is required by law.
c. The policy is a necessary business expense. Usually when an employer purchases group term life insurance for employees, the premiums are considered a necessary business expense and are tax deductible.
Which of the following is true about policy loans? Select one: a. There is no consequence if they are not paid back. b. They are not subject to interest. c. They are subject to interest. d. All of the above
c. They are subject to interest. Policy loans are subject to interest. If the loans are not repaid, the amount of the loan, plus interest reduces the policy face amount.
All of the following exchanges would qualify under Section 1035 of the Internal Revenue code, EXCEPT: Select one: a. Annuity for another annuity b. Life insurance policy for another life insurance policy c. Vacant land for another piece of vacant land d. Endowment for another endowment
c. Vacant land for another piece of vacant land Exchanging a piece of vacant land for another piece of vacant land does not qualify under the Section 1035 rule as an exchange that would not have tax implications for a gain or loss.
A modified endowment contract (MEC) differs from a standard life contract in which of the following ways? Select one: a. The cash value accumulates on a tax deferred basis for both contracts. b. Death benefits are income tax free. c. Withdrawals and loans may be subject to tax in a Modified Endowment Contract. d. A modified endowment contract is funded at a higher level than a standard contract.
c. Withdrawals and loans may be subject to tax in a Modified Endowment Contract. Withdrawals are subject to a first in/ first out, making any gains taxable.
Violation of Maryland insurance laws and regulations is subject to a fine up to: Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000
d. $100,000 In addition to any greater penalty provided under the law, violation of Maryland insurance laws and regulations is subject to a fine up to $100,000.
For a non-contributory plan, how many of the employees must be offered coverage under the group? Select one: a. 75% b. 80% c. 90% d. 100%
d. 100% A non-contributory plan is based on the employer paying the full cost of the program, which means 100% of the employees must be covered.
If a person is terminated from employment how much time do they have to convert from a group life insurance policy to an individual life insurance policy? Select one: a. 10 days b. 15 days c. 30 days d. 31 days
d. 31 days All group life insurance policies must contain a provision that if an insureds coverage ceases because of termination of employment, the insured will be entitled to have an individual policy of life insurance issued to him without having to show evidence of insurability. The insured must submit an application for conversion within 31 days of the termination of their initial group insurance policy.
The Commissioner must conduct examinations of insurers at least every: Select one: a. 2 years b. 3 years c. 4 years d. 5 years
d. 5 years The Commissioner is may examine and investigate individuals or entities as deemed necessary, but must conduct examinations at least every 5 years.
An annuity contract provides for all of the following, EXCEPT: Select one: a. Safe retirement income tool b. Forced savings account c. Payments for a fixed period or a lifetime d. A health plan
d. A health plan Depending on the type of annuity, it usually provides a safe retirement income tool, acts as a forced savings account, and has payments for a lifetime of a fixed period of time.
Typical health policies do not provide benefits for which of the following? Select one: a. A condition covered by Workers' Compensation b. An injury covered under a government plan c. An injury sustained in the commission of a felony d. All of the above
d. All of the above All of the items listed are typically excluded from health policies.
Insurance contracts pay for losses on an: Select one: a. Indemnity basis b. Cash payment basis c. Valued basis d. All of the above
d. All of the above Insurance contracts pay for losses on an indemnity, valued or cash basis.
Which of the following is an annuity payout option? Select one: a. Period certain b. Life annuities c. Cash refund annuity d. All of the above
d. All of the above Period certain (income for a fixed time period), life annuities (income for life), cash refund annuity (income for life and benefits to a beneficiary) are all common annuity payout options.
Replacement is not always the best option for the insured because: Select one: a. A new policy could required the applicant to prove insurability b. A new incontestable period will start with the issuance of the new policy. c. The premiums for the new policy could be higher. d. All of the above
d. All of the above The items listed are all considerations for an applicant when he/she is considering replacing an existing policy.
Because it is less expensive, term insurance has which of the following drawbacks? Select one: a. It has no living benefits b. It is an expensive tool if looked at for the long term. c. The nature of the policy could leave the insured with no life insurance protection when he/she needs it the most. d. All of the above.
d. All of the above. Term insurance has no living benefits and it is expense if looked at for the long term.
Which life insurance dividend option does not increase a policy's cash value? Select one: a. Accumulate at Interest b. Paid-up insurance c. Paid-up additions d. Cash payment
d. Cash payment With the cash payment dividend option, the policyholder is sent a check for the amount of the dividend, which does not increase the policy's cash value.
Any of the following transactions will be subject to federal income tax consequences in a modified endowment contract (MEC), EXCEPT: Select one: a. Policy loans b. Policy withdrawals c. Partial withdrawals d. Death proceeds
d. Death proceeds Death benefits are the only payment not effected by the federal law regarding modified endowment contracts.
Which type of health insurance policy is created for use by smaller groups who do not have enough eligible employees to qualify for a group health plan? Select one: a. Group health insurance b. Individual health insurance c. Blanket insurance d. Franchise insurance
d. Franchise insurance Franchise insurance is intended for small groups that are too small to be eligible for group coverage.
What is/are the nonguaranteed elements of an insurance policy? Select one: a. Policy summary b. Policy face c. Policy terms and conditions d. Illustrations
d. Illustrations In the field of insurance, illustrations are defined as depictions that explain the complex and nonguaranteed aspects of a policy.
Matthew had to go to the emergency room for an X-ray. The hospital submitted a claim to his insurance carrier and they paid the hospital's fee for an X-ray. What type of plan does Matthew have? Select one: a. HMO b. PPO c. POS d. Indemnity
d. Indemnity Matthew has an indemnity plan that reimburses medical providers for each service received, on a case-by-case basis.
All of the following plans may provide home health care, assisted living and custodial benefits, EXCEPT: Select one: a. A long-term care policy with the appropriate options b. A life insurance policy with a long-term care rider c. An annuity with long-term care waivers d. Medicare Part A and B
d. Medicare Part A and B Medicare does not provide benefits for long-term care. To have these benefits available, an individual must have some form of independent long-term care coverage.
In determining life premiums, the actuary uses all of the following factors, EXCEPT: Select one: a. Mortality b. Investment returns c. Expense ratios d. Morbidity
d. Morbidity Morbidity is a table used in calculating accident and health premiums.
Any of the following is considered advertising for a health insurance company, EXCEPT: Select one: a. Magazine or newspaper publications b. Material used to recruit new agents c. Prepared sales talks d. Morbidity tables
d. Morbidity tables Morbidity tables are used to determine rates for health products.
Which of the following is NOT an Essential Health Benefit? Select one: a. Maternity care b. Substance use disorder services c. Rehabilitative services d. Nursing home care
d. Nursing home care Essential Health Benefits (EHB) include the following treatments: maternity and newborn care, substance use disorder services, and rehabilitative services. Nursing home care is not an Essential Health Benefit.
Mark names his wife and children as beneficiaries on his life policy. They would not be considered: Select one: a. Irrevocable beneficiaries b. Contingent beneficiaries c. Primary beneficiaries d. Other insureds
d. Other insureds Mark's wife and children could be primary, contingent or irrevocable beneficiaries.
Which of the following is true about immediate annuities? Select one: a. They cannot be purchased with one payment. b. They can begin payouts within two years of the first premium payment. c. They have annuity periods that are sometime (defined in the contract) in the future d. They do not have an accumulation period.
d. They do not have an accumulation period. They do not have an accumulation period, and payouts must begin within one year of the first premium payment.
A beneficiary may choose any of the following methods to receive life insurance proceeds, EXCEPT: Select one: a. Single payment in cash b. Life income installments c. Fixed amount installments d. Variable installments based on a specific stock index
d. Variable installments based on a specific stock index A life insurance company may not engage in at risk investments for life insurance proceeds.
Which of the following statements is not true regarding viatical settlements? Select one: a. The portion of the death benefit the viator receives in a viatical settlement ranges from 50 to 80 percent of the death benefit. b. A terminally or chronically ill insured can sell their life insurance policy to a third party in exchange for payment of a large portion of the death benefit. c. In a viatical settlement, the third party that purchases the insured's life insurance policy is termed the viatical settlement provider, and the insured is termed the viator. d. Viatical settlements are a type of life insurance contract.
d. Viatical settlements are a type of life insurance contract. Viatical settlements are completely separate from life insurance contracts.
