VA Health and Life Insurance
Beth pays her permanent life insurance policy for 16 years. She loses her job, is unemployed for two years, and surrenders her policy to pay bills. Which of the following will Beth learn about nonforfeiture benefits under her policy? a) Her policy will contain some nonforfeiture benefit. b) If she would have chosen the nonforfeiture benefit with an additional cost at the inception of the policy, she would receive some cash value in her policy. c) Whether or not the policy has nonforfeiture benefits depends on the amount of premium she paid. d) There is no requirement for a nonforfeiture benefits feature in life insurance policies, and her policy does not have this feature.
a) Her policy will contain some nonforfeiture benefit. At all times, the policyowner owns cash value. If the policy lapses or is surrendered, the policyowner cannot be deprived of the cash value. That is, cash value cannot be forfeited to the insurance company. Therefore, all permanent policies include nonforfeiture options.
Stephan purchases an individual health benefit plan. Will his thyroid condition be covered under the plan? a) It depends on his policy, which may have pre-existing conditions limitations or restrictions. b) Yes, because limitations and exclusions on pre-existing conditions are not permitted. c) Only if the insurer is unaware of his pre-existing condition. d) No; pre-existing conditions are never covered.
a) It depends on his policy, which may have pre-existing conditions limitations or restrictions. Most health insurance policies contain pre-existing condition limitations or restrictions, and these are determined by state statute.
Cindy's health insurance policy provides maternity benefits but excludes coverage for involuntary complications of pregnancy. Cindy is insured under which of the following? a) Medicaid b) a group policy c) a managed care plan d) her employer's self-funded health-care plan
a) Medicaid Health insurance policies that provide maternity benefits must have a provision that they do not exclude, reduce, or otherwise limit coverage, deductibles, or coinsurance provisions specifically with respect to involuntary complications of pregnancy. However, this requirement does not apply to Medicare or Medicaid patients.
Group life insurance can be provided through a group insurance contract or through a) a trustee of the employer fund b) a close corporation formed to disburse funds to deceased employees c) a sole proprietorship formed by the business owner expressly to pay benefits to deceased employees d) an agents' association formed to collect premiums and disburse them to employees who die.
a) a trustee of the employer fund As in estate planning, a trustee would manage the transfer of funds for the payment of claims to individual members of the group plan.
All of the following are means of regulation for the insurance business EXCEPT: a) agency regulation b) state regulation c) federal regulation d) industry self-regulation
a) agency regulation Agencies are not permitted to regulate themselves. Regulation of insurance is now principally in the hands of the individual states, though the federal government and the industry itself have roles in this regulation.
ABC Insurance Company fires Producer Renee. She continues to interview prospects, make sales presentations with company materials, and collect premiums, which she deposits in her personal account. Which of the following types of authority have her "prospects" relied on when paying what they believe to be premiums? a) apparent authority b) actual authority c) implied authority d) express authority
a) apparent authority Apparent authority is not intended to be granted to the agent by the insurer. However, it is the authority that appears to exist from the perspective of the customer or other third parties.
Which formula is used to determine the taxable portion of fixed annuitized income payments? a) exclusion ratio b) investment in the contract formula c) aggregation formula d) investment ratio
a) exclusion ratio The exclusion ratio is used to determine the amount of each annuity payment that is taxable and nontaxable.
The three factors included in calculating life insurance premiums are which of the following? a) mortality, interest, and expenses b) mortality, morbidity, and expenses c) age, mortality, and interest d) age, mortality, and expenses
a) mortality, interest, and expenses Actuaries base traditional life insurance premiums on mortality, or the incidence of death among a given group; interest, or the amount of earnings the insurer can expect from its premium investments; and expenses the insurer incurs in the course of business.
Margo applies for a $250,000 universal life insurance policy. During the underwriting process, the insurer determines that she fits its guidelines for policy issue without any special restrictions. What type of risk is Margo considered? a) standard b) substandard c) preferred d) rated
a) standard A person classified as a standard risk fits the insurer's guidelines for policy issue without any special restrictions. Such applicants have a standard, or normal, medical history. Most insurance applicants fall within this category.
Sam and Elena were married and had purchased a life insurance policy that covered both their lives. Sam died on June 1. One year later, Elena died, and the policy proceeds were paid to her son as beneficiary. Which type of policy did Sam and Elena own? a) survivorship life b) family life c) spousal life d) joint life
a) survivorship life Survivorship life insurance policies insure more than one person but pay the death benefit only when the second insured dies. In these policies, premiums are lower than they would be for two comparable single-life policies.
All of the following entities mandate the size of a group health insurance plan EXCEPT: a) the state's attorney general b) the IRS c) the group's home state d) the insurer underwriting the plan
a) the state's attorney general The IRS, the state insurance office, and the insurer all have a say in the qualifying size of a group plan. The state's attorney general is not involved.
Janice's accidental death and dismemberment policy will pay a $10,000 benefit for the loss of one arm and a $30,000 benefit for the loss of one eye. On which basis is Janice's policy written? a) valued b) reimbursement c) indemnity d) preferred
a) valued Health insurance policies can be either reimbursement contracts or valued contracts. A reimbursement contract bases its benefit payments on the loss actually suffered. Valued contracts pay a pre-set sum. Disability income and accidental death and dismemberment policies are valued contracts.
Catherine, age 45, purchased a life insurance policy with a single $100,000 premium payment, causing the policy to be deemed a MEC. Eight years later, the policy's current cash value is $120,000. What are the tax consequences if Catherine withdraws $25,000 from the MEC to pay for her son's college education? a) The entire $25,000 is subject to income tax and a 10 percent penalty tax. b) $20,000 of the withdrawal is subject to income tax and a 10 percent penalty tax. c) The entire $25,000 is subject to a 10 percent penalty tax. d) $20,000 of the withdrawal is subject only to a 10 percent penalty tax.
b) $20,000 of the withdrawal is subject to income tax and a 10 percent penalty tax. MEC withdrawals are treated on a LIFO (last-in, first-out) basis, which means that they are considered to be distributions of interest earnings first. Only after all interest has been distributed (and taxed) are amounts distributed from a MEC deemed a nontaxable return of invested premium. In addition, distributions of earnings taken before the owner's age 59½ are generally subject to a 10 percent tax penalty.
What is the absolute limit of protection afforded by the Virginia Insurance Guaranty Association for any one person? a) $500,000 b) $300,000 c) $250,000 d) $100,000
b) $300,000 The Virginia Insurance Guaranty Association cannot be liable for more than $300,000 in total for any one individual.
A key provision of a viatical settlement is that the insured must be terminally ill. This means that the insured's life expectancy is generally not longer than how long? a) 12 to 24 months b) 48 to 60 months c) 6 to 10 years d) 11 to 15 years
b) 48 to 60 months A person with a life expectancy of no more than 48 to 60 months is generally considered terminally ill for purposes of a viatical settlement.
Following a Medicare supplement policy's effective date, a pre-existing conditions exclusion cannot exclude claims for more than what length of time? a) 3 months b) 6 months c) 12 months d) 18 months
b) 6 months Insurers cannot exclude claims based on pre-existing conditions for more than six months after the effective date of a Medicare supplement policy.
t the age of 56, Carmen opens a Roth IRA. What is the earliest age at which she can take a withdrawal of earnings from her account without being subject to tax or penalty? a) 59 b) 61 c) 62 d) 70
b) 61 Roth IRAs require a minimum holding period of five years, regardless of the owner's age when the account is opened. In this case, Carmen would have to wait five years, or until she's 61, to be able to take a withdrawal of earnings without tax or penalty.
The maximum annual rate of interest that life insurers in Virginia can charge on a policy loan is: a) 12 percent b) 8 percent c) 6 percent d) 2.5 percent
b) 8 percent Interest charged for a policy loan cannot exceed 8 percent per year.
Able has been diagnosed with a terminal illness. After responding to an advertisement, he signs an agreement under which he will receive part of the death benefit of his life insurance policy in exchange for transferring ownership of the policy. Who (or which) of the following is the viator in this scenario? a) the person placing the advertising b) Able c) the insurance company d) the new owner of the policy
b) Able The viator owns a life insurance policy (or the certificate holder under a group policy) and enters into a viatical settlement contract.
Zenith Insurance Co. terminated Jeff's appointment as its agent on March 31. It must mail a copy of the termination notice to him by what date? a) April 7 b) April 15 c) April 30 d) May 1
b) April 15 When an insurance company terminates an agent's appointment, it must mail a copy of the termination notice to the agent within 15 days. Within 30 days of receiving this notice, the agent may file comments on the termination with the Commission and the insurer, which become part of the Commission's file on the agent.
Zenith Insurance Co. terminates Luke's appointment as its agent on March 31. He wants to comment on the termination. He may do so before what date? a) May 1 b) April 30 c) April 15 d) April 7
b) April 30 When an insurer terminates an agent's appointment and gives notice to the agent, the agent may comment on the termination within 30 days of receiving the notice. These comments become part of the Commission's file on the agent.
Chester and his wife, Nellie, established a 529 plan for their daughter and contributed $5,000 to her account this year. Six months later, they withdrew $20,000 to pay for their daughter's college tuition. Which statement is correct? a) Chester and Nellie can take an income tax deduction for their contribution. b) Chester and Nellie do not have to pay tax on the distribution. c) Chester and Nellie must pay tax only on the earnings portion of the withdrawal. d) Chester and Nellie can take an income tax deduction for their withdrawal.
b) Chester and Nellie do not have to pay tax on the distribution. Funds withdrawn from a Section 529 plan (and the interest earned on those funds) are not taxable. To escape taxes, these funds must be used for qualifying college expenses, such as tuition, fees, room and board, and books. Although contributions are not federally tax deductible, some states may allow contributions to be deducted for state tax purposes.
Maureen is licensed to broker viatical settlements in Virginia. She wishes to renew her license. To do so, she must apply for renewal and pay the required fee no later than a) January 1 b) June 1 c) July 1 d) On the anniversary date of her license
b) June 1 A viatical settlement broker must apply to renew a license and pay the required fee by June 1 every year. License are renewed on July 1 unless they were terminated, suspended, or revoked on or before June 30. Failure to apply for renewal by June 1 will cause the license to expire on June 30.
Lia is an appointed agent of Zenith Insurance Co. On March 1, she is convicted of stealing premium funds. Zenith terminates her appointment. It must notify the Commission of the termination no later than what date? a) April 1 b) March 31 c) March 15 d) March 2
b) March 31 An insurer that terminates an agent's appointment must notify the Commission within 30 calendar days if the agent willfully violated the insurance laws.
Edgar is insured under a $1 million life insurance policy and dies during the grace period. What happens if Edgar had not yet paid the premium when he died? a) The death benefit will be paid and no deduction will be made for the premium owed. b) The amount of premium due is subtracted from the policy proceeds paid to the beneficiary. c) The death benefit will be paid after the premium owed plus a 10 percent penalty is charged against the policy. d) The death benefit will be paid and the beneficiary must pay the premium that is owed.
b) The amount of premium due is subtracted from the policy proceeds paid to the beneficiary. During the grace period, the policy remains in force. In the event that death occurs during the grace period while the premium remains unpaid, the unpaid premium is generally deducted from the death benefit proceeds.
Sara has a waiver of premium rider attached to her life insurance policy in the event she becomes disabled. When she suffers a stroke, she learns that she must wait four months before her waiver of premium benefit takes effect. Which of the following best explains the reason for the wait? a) She purchased an inexpensive rider. b) The four months represents the waiting period. c) She has probably not paid her premiums on time. d) This is a penalty for her particular disability.
b) The four months represents the waiting period. Most waiver of premium riders require that the insured be totally disabled for four to six months before the waiver begins. This period is known as the waiting period.
Sandra, an agent, is selling a health insurance policy that will replace an existing one. When must she give the Notice Regarding Replacement of Accident and Sickness Insurance to the applicant? a) before she takes the application b) before the policy is delivered c) after she collects the initial premium d) when she first communicates with the applicant
b) before the policy is delivered If replacement is involved, the insurer or agent must give the applicant the Notice Regarding Replacement of Accident and Sickness Insurance before the policy is delivered. The notice confirms the applicant's intent to terminate existing health insurance and replace it with a policy issued by the replacing insurer.
Pamela invested $120,000 in a fixed deferred annuity over the past ten years and will annuitize the contract next year when she retires. Which of the following must Pamela know to calculate the amount of her annuity income that will be subject to tax? a) capital gains tax rate b) expected return c) rate of return d) income tax bracket
b) expected return To determine the amount of the annuity income that will be taxable, Pamela must know the amount of her investment in the contract as well as the expected return, which is the total amount that she can expect to receive as income payments under the contract.
Multiple employer welfare arrangements (MEWAs) come in two forms. These are which of the following? a) fully vested and partially vested b) fully insured and self-insured c) contributory and noncontributory d) group funded and self-funded
b) fully insured and self-insured Fully insured MEWAs are formed by two or more employers. Self-insured MEWAs must get a state-issued certificate of authority and follow reporting guidelines similar to insurance companies, and they must have at least five employers and 200 employees.
An insurer cannot disclose information from an insured's medical records unless it gets the insured's written consent in which of the following circumstances? a) to enable the insurer to complete the underwriting process b) to provide the information to another insurer c) to determine the insured's benefit eligibility d) to prevent insurance fraud
b) to provide the information to another insurer In general, an insurer or agent cannot disclose information from an insured's medical records unless the insured consents in writing. However, consent is not needed when the information is disclosed to complete an insurance transaction for the insured, to determine eligibility for benefits, or to prevent criminal activity, fraud, or material misrepresentation.
If the Commission sets a date for a hearing on a suspected violation of the insurance laws or regulations, it must give the party charged with the violation at least how many days' notice before the hearing? a) 21 b) 14 c) 10 d) 7
c) 10 If the Commission suspects that a person has violated the insurance laws or regulations, it can set a hearing date that is at least ten days after the Commission notifies the person.
An individual may continue group health insurance coverage after termination from a group plan for at least how many days? a) 30 b) 60 c) 90 d) 180
c) 90 An individual must be allowed to continue coverage under an existing group health plan for at least 90 days following termination from the group plan, and without having to provide evidence of insurability.
Which of the following statements about Virginia's Family Access to Medical Insurance Security plan is CORRECT? a) Eligible families pay a small fee to enroll in the plan. b) Eligible families pay a low annual premium. c) A small co-payment is usually required for health care services. d) All preventive services are provided at a low cost.
c) A small co-payment is usually required for health care services. Eligible families do not have to pay to enroll in FAMIS, and no premium is required. Co-payments are low, usually no more than a few dollars, and some preventive services are provided without charge.
Derek submits an insurance application to ETC Insurance Co. on August 1. He is not appointed by the company. ETC must either reject the application or appoint Derek its agent no later than what date? a) August 2 b) August 15 c) August 31 d) September 1
c) August 31 If an agent submits an insurance application to an insurer but is not appointed by that insurer, the insurer has 30 calendar days within which to either reject the application or notify the Commission that it is appointing the agent to represent it.
In which of the following ways are medical savings accounts similar to health savings accounts? a) Both are typically used by large companies. b Both help fund tax-free medical expenses. c) Both combine a high-deductible health insurance plan with a tax-advantaged savings account. d) Both offer the same contribution limits each year.
c) Both combine a high-deductible health insurance plan with a tax-advantaged savings account. Medical savings accounts and health savings accounts both offer a high-deductible health insurance plan with a tax-advantaged savings account. The main difference between MSAs and HSAs is the amount that constitutes the maximum deductible and the maximum annual out-of-pocket costs.
Over the life of a deferred annuity contract, how are the surrender charges affected? a) Charges will remain level. b) Charge will increase. c) Charges will decrease. d) Charges will fluctuate based on the contract value.
c) Charges will decrease. The surrender charge is a percentage of the accumulated value of the annuity account. A 5 percent surrender charge on accumulated value of $20,000 would be a surrender amount of $1,000. As the charge decreases, so does the amount.
Which of the following is a correct statement about long-term care insurance? a) It must provide coverage for skilled nursing care only. b) It may not provide coverage for home health care. c) It cannot be canceled because of the insured's age. d) It may not include inflation protection.
c) It cannot be canceled because of the insured's age. Long-term care insurance policies cannot be canceled, nonrenewed, or otherwise terminated because of the insured's age or the deterioration of the insured's mental or physical health.
Beverly owns a small manufacturing business. Her sister, Rose, is her assistant, and Beverly could not run the business without her. Beverly would like to purchase key employee disability insurance to provide relief in the event Rose suffers a disability. Which of the following will this policy provide? a) It will double the owner's salary to compensate for the extra work she will be required to do in the absence of the key employee. b) It will pay the key employee's wages to the employee during disability. c) It will pay cash benefits to the employer if a key employee becomes disabled. d) It will guarantee that the business will maintain its profit level after the key employee becomes disabled.
c) It will pay cash benefits to the employer if a key employee becomes disabled. Key employee disability insurance is short term because it is assumed that a capable replacement can be found within one to two years. The benefit amount considers the income of the key person, the replacement costs associated with hiring and training a capable replacement, and the key person's contribution to the company's earnings.
Liam takes out a life insurance policy on his own life and names his son, Brian, as the irrevocable beneficiary. The policy has accumulated considerable cash value, and Liam wants to take out a loan against it. Which of the following statements is correct? a) Liam has the rights to the policy, so he can take a loan using the policy as collateral. b) Liam must withdraw Brian as the beneficiary before he can take the loan. c) Liam cannot take a loan without Brian's consent. d) A loan can be made against the policy, but both Liam and Brian will be co-borrowers.
c) Liam cannot take a loan without Brian's consent. A policyowner cannot make a policy loan or surrender any part of the cash value of the policy without the consent of the irrevocable beneficiary, and the irrevocable beneficiary can be removed only with his or her signed consent.
Ed became totally disabled in a car accident and is now eligible for Social Security disability benefits. At what point will benefits begin? a) immediately b) within three months c) after five months d) after nine months
c) after five months A person who is eligible for Social Security disability benefits is subject to a waiting period before benefits are paid. This waiting period is five full consecutive months following the start of a disability. During this time, benefits are not paid, and the person must remain totally disabled.
A person who violates the Virginia insurance laws can, in addition to paying a fine, be ordered to pay restitution to a harmed party for all of the following EXCEPT: a) the actual loss incurred b) unfair discrimination in setting the premium c) failure to pay a disputed claim d) overcharging a premium
c) failure to pay a disputed claim The Commission can order restitution to a harmed party for the amount of the actual loss suffered if the loss resulted from an overcharged premium or unfair discrimination in setting the premium. Restitution is not ordered while a claim is disputed.
Gene is seriously injured in a car accident while on vacation. His employer-sponsored group disability plan begins paying benefits but reduces the amount paid by the benefits he receives under an individual disability policy. Which type of policy is Gene most likely covered by? a) group short-term disability plan b) group occupational plan c) group long-term disability plan d) group partial disability plan
c) group long-term disability plan Long-term group disability plans are usually both occupational and nonoccupational. Such policies provide benefits regardless of whether the disability was related to the job. However, the benefit is usually reduced by income from other sources, such as individual disability policies and government benefits.
All of the following can deduct the full cost of their qualified long-term care insurance premiums, subject to the age-based limits, EXCEPT: a) Marion, whose business is formed as a sole proprietorship b) members of a tax-consulting partnership business c) group participants whose premiums are paid by their employer d) Fran, the president and CEO of Beautiful Baskets, LLC
c) group participants whose premiums are paid by their employer Sole proprietors, partners, and limited liability company (LLC) owners can deduct all of the premiums for their qualified long-term care policies, subject to the age-based limits.
Mr. Jones is covered under Medicare Advantage, which includes a private fee-for-service (PFFS) plan. What does PFFS provide for? a) prescription drug and durable equipment charges b) ambulance services c) payment of traditional Medicare services, plus certain additional services d) rehabilitative services
c) payment of traditional Medicare services, plus certain additional services PFFS pays the Medicare private plan and then determines which additional services it will cover and what share of expenses the Medicare beneficiary will pay toward those services.
The 1980 CSO Table is a common mortality table that insurers use to calculate life insurance premiums. What is this table based on? a) the risk of death due to poor health in a target population b) the current rate of death per 100,000 people c) the mortality experience of U.S. insurance companies between 1970 and 1975 d) the rate of death over a five-year period among an insured population
c) the mortality experience of U.S. insurance companies between 1970 and 1975 The 1980 CSO Table reflects the mortality experience of all U.S. insurance companies between 1970 and 1975. However, some large insurers utilize their own mortality table.
Why would a large corporation choose to self-insure rather than buy an insurance policy from an insurance company? a) to avoid having to comply with individual state laws b) to cover against an occasional but high-severity loss c) to insure against frequent but low-severity losses d) for tax abatement purposes
c) to insure against frequent but low-severity losses A large company that is willing and financially able to assume certain risks can self-insure by creating a reserve fund and using that money to pay claims. This type of system is used for frequently occurring claims such as workers' compensation or pension plans
Harold has short-term disability income policy. Were he to become disabled, benefits would typically be payable for no more than a) 6 months b) one year c) two years d) 5 years
c) two years Benefits in short-term disability income policies are limited to less than 2 years. Those with benefit periods longer than 2 years are considered long-term DI policies.
Jill was insured under a group health insurance plan through her employer. She loses her job and now wants to buy an individual health policy. She may buy this policy without evidence of insurability if she applies for it a) within 30 days of receiving notice of termination b) within 30 days of the last premium payment c) within 31 days of leaving the group plan d) within 31 days of leaving her employer
c) within 31 days of leaving the group plan A person insured under a group health insurance plan and whose coverage is terminated must have the option to buy an individual health insurance policy without evidence of insurability unless the group coverage ended because the group plan was terminated. The person must apply for and pay the first premium within 31 days of leaving the group plan.
Tony's individual health insurance policy contains a cancelation provision. If the insurer decides to cancel the policy, it must provide Tony with how much notice before doing so? a) 10 days. b) 15 days. c) 30 days. d) 45 days.
d) 45 days. The optional cancelation provision enables an insurer to cancel the policy at any time with 45 days' notice. The insurer must still pay any outstanding claim that the insured submitted to the company before the policy was canceled.
Billie quits her job on March 15 and goes to the mountains for a four-month retreat. When she returns, she takes another job and submits a health insurance claim relating to a condition that she has had for several years. How will the insurer respond? a) It will deny the claim saying that Billie cannot submit a claim for six months. b) It will pay the claim because Billie is officially covered. c) It will pay the claim saying the exclusion period is waived. d) It will deny the claim because of a break in coverage of more than 63 days.
d) It will deny the claim because of a break in coverage of more than 63 days. Health insurance plans are required to waive any pre-existing limitations if the insured was covered by qualifying previous coverage without an interruption for more than 63 days. In this case, Billie had a break in coverage of more than 63 days, so the claim will be denied.
Which of the following is most likely to be covered under Sheila's health insurance policy? a) liposuction after she loses a large amount of weight b) an experimental treatment for her migraine headaches c) genetic testing after nine family members are diagnosed with cancer d) a diagnostic mammogram when her screening mammogram warrants it
d) a diagnostic mammogram when her screening mammogram warrants it Most health insurance policies exclude coverage for cosmetic surgery, experimental treatments, and genetic testing.
Rhonda has accumulated value in her life insurance policy. She has no children and has heard that a life settlement provider may be interested in buying her policy. How much can she expect to receive if she sells her interest in the policy? a) the policy's actual cash value b) the amount of premiums she has paid c) the policy's death benefit d) a percentage of (but less than) the policy's death benefit
d) a percentage of (but less than) the policy's death benefit The agreement between a life insurance policyowner and a life settlement provider governs the compensation paid in return for the owner's present or future interest in any portion of the policy. Compensation to the owner is typically more than the premiums paid or the policy's cash value and is less than the policy's expected death benefit.
The Notice Regarding Replacement of Accident and Sickness Insurance does all of the following EXCEPT a) confirms the applicant's intent to lapse existing health insurance. b) cautions that the new policy may not immediately cover pre-existing conditions. c) cautions that the new policy may not fully cover pre-existing conditions. d) advises the applicant to seek advice from the replacing agent.
d) advises the applicant to seek advice from the replacing agent. The notice states that the applicant is entitled to advice about the replacement from the existing (not the replacing) insurer or agent, and that such advice may be in the applicant's best interests.
What is technical term for that portion of an insurance company's earnings that is available for distribution to policyowners in the form of policy dividends? a) cash value b) reserves c) bonus d) divisible surplus
d) divisible surplus The divisible surplus is the portion of an insurance company's earnings that is available for distribution to policyowners. The surplus is distributed after accounting for liabilities, reserves, capital, and expenses.
Group health insurance plans can be issued in Virginia to all of the following groups EXCEPT: a) employers b) associations c) creditors d) families
d) families In general, group health insurance plans can be issued to employers, creditors, labor unions and similar employee organizations, multiple employer welfare arrangements, and associations.
All of the following are optional provisions that insurers may or may not include in all health insurance policies EXCEPT a) change of occupation b) misstatement of age c) illegal occupation d) legal action
d) legal action Individual health insurance policies may include certain optional provisions, including a change of occupation, misstatement of age, and illegal occupation provision. A legal action provision is mandatory in health insurance policies.
Bailey owns a $1.2 million life insurance policy and received a $200 check when Best Insurers declared a dividend on its participating policies. How will this dividend payment be treated for income tax purposes? a) fully taxable b) partially taxable c) partially taxable as capital gain d) not taxable
d) not taxable Life insurance dividends are considered to be a return to owners of participating policies of unearned premiums they paid on their policies. The dividends are basically premium amounts that were more than what the insurer required to cover the costs of its liabilities and operations. For that reason, policy dividends are not taxable when they are paid in cash to a policyowner.
Brenda assures a prospect that if the insurance company fails to cover claims due to insolvency, the Virginia Insurance Guaranty Association will cover the claim. This kind of assurance is a) recommended when dealing with new clients. b) a good business practice for all agents. c) strictly regulated by the Commission. d) prohibited in all cases.
d) prohibited in all cases. An insurer or agent cannot use the existence of the Virginia Insurance Guaranty Association to advertise, sell, or induce the purchase of insurance.
Under contract law, an applicant's statements on an application for insurance are considered to be which of the following? a) guaranteed as factual b) taken on good faith c) warranties d) representations
d) representations An applicant's statements on an application for insurance are considered representations and not warranties.
All of the following are standard permanent exclusions found in life insurance policies EXCEPT: a) war b) aviation c) hazardous occupations and hobbies d) suicide
d) suicide A risk that is excluded from coverage means that it is not covered and that the policy's benefit will not be paid if death results from that risk. A suicide clause only restricts coverage until after a certain amount of time has passed, typically two years, and then death by suicide is covered.
Dan and Stan are 50 years old and bought the same type of life insurance policy from the same company, with the same coverage. Stan is partially blind and pays a higher premium than Dan. This may indicate a case of: a) sound underwriting b) twisting c) defamation d) unfair discrimination
d) unfair discrimination Unfair discrimination can arise when an insurer charges an individual a different rate for the same coverage because of blindness, partial blindness, or mental or physical impairments.
Under a Section 1035 exchange, how many contracts can be exchanged for a single contract? a) one b) two c) three d) unlimited
d) unlimited The number of contracts that can be exchanged for one contract under a 1035 exchange is unlimited. However, all contracts involved must have all the same insureds and have the same owner.
Virginia insurance agent's license is valid for how long? a) one year b) two years c) for as long as the agent has an appointment d) until it is terminated, suspended, or revoked
d) until it is terminated, suspended, or revoked A Virginia insurance agent's license is valid until it is terminated, suspended, or revoked by the Bureau of Insurance.
Pretext interviews are permitted in all of the following circumstances EXCEPT a) when investigating criminal activity. b) when a material misrepresentation was made. c) when investigating a fraudulent claim. d) when gathering personal information.
d) when gathering personal information. A pretext interview cannot be used to collect information from a person or institution involved in an insurance transaction. However, a pretext interview is permitted when investigating a claim in which criminal activity, fraud, material misrepresentation, or nondisclosure is suspected.
John receives his license to be a viatical settlement broker on March 1. If he wishes to continue transacting viatical settlements, he will need to renew the license every a) five years b) three years c) two years d) year
d) year Viatical settlement broker licenses are valid for one year before they are due for renewal.
