WA State Health and Disability Insurance Exam QA
What do limited health policies cover?
A specified accident or disease
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
According to the Law of Agency, a principal is represented by whom?
Agent or Producer
Who is a field underwriter?
Agent/Producer
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
What type of group health insurance is used to provide accident coverage on a group of persons that are participating in a particular activity, when the individual insureds are unknown, and are covered automatically?
Blanket
What portion, if any, of the individual disability income policy benefits are taxed to the insured?
Disability benefits are not income taxable.
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, Foreign, and alien
What are the two types of expenses that are covered by health insurance?
Expenses related to health care, and expenses the compensate for loss of income.
What are the three types of agent authority?
Express, implied, and apparent
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
During the application process for health insurance, a producer is trying to obtain creditable information about the applicant that would help underwriters determine if the risk is insurable. In what role is the producer acting?
Field Underwriter
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
An insurance company that is formed under the laws of another state is known as what type of insurer?
Foreign
Conditions that increase the chance of a loss are known as what?
Hazards
What health policy provision prevents the insured from bringing a lawsuit against the insurance company for at least 60 days after proof of loss is provided?
Legal actions
Insurance is a contract that protects the insured from what?
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
What are the five characteristics of an ideally insurable risk?
Loss must be: 1) Due to chance 2) Definite and measurable 3) Statistically Predictable 4) Not catastrophic 5) Coverage cannot be mandatory
What entity provides underwriters with information concerning an applicant's health history?
MIB - Medical Information Bureau
Under an individual disability income policy, the benefits must be paid on at least what schedule?
Monthly
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
Morale
What health policy provision states to whom the claim benefits must be paid?
Payment of Claims
What is adverse selection?
People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.
In insurance, what is the term used for cause of loss?
Peril
What is the term for the causes of loss insured against in an insurance policy?
Peril
What renewability provision will most likely appear on a travel accident policy?
Period of Time
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
In health insurance, what is considered a sickness?
Sickness is a medical condition, disease or illness. Pays periodic benefits when an insured cannot work because of accident or injury. Covers the cost of medical treatments, physician's fees, hospitalization and other medical costs that ensue when the insured incurs an accidental injury or sickness.
What benefit is based on a primary insurance amount (PIA)?
Social Security Disability Benefit
Wagering on a sporting event is known as what type of risk?
Speculative
The insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent
Whose responsibility is it to inform an applicant for health insurance about the insurer's information gathering practices?
The agent
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent.
If an agent makes a correction on the application for health insurance, who must initial the correct answer?
The applicant
What is the entire contract in health insurance underwriting?
The application and the policy issued
What will determine the length of the grace period in a health insurance policy?
The mode of the premium payment
Who must sign a health insurance application?
The policy owner, the insured(if different), and the agent
If a health insurance policy has a 31-day grace period, what does that mean?
The policy remains in effect for 31 days after the premium is due and not paid
What is the primary purpose of disability income insurance?
To replace income lost due to a disability
For the purpose of insurance, what is risk?
Uncertainty of loss
During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?
Underwriting
In health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?
Unilateral
Under a credit disability policy, payments to the creditor will be made for the insurer until what point in time?
Until the period of disability ends or until the debt is repaid.
When can an irrevocable beneficiary be changed?
With the written consent of the beneficiary
Whom does an insurance agent represent?
insurance company
What type of risk is insurable?
pure risk
Who owns stock companies?
stockholders
What will happen to a health insurance policy if the premium has not been paid by the end of the grace period?
the policy will be cancelled
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?
$100000(in joint life policies, the DB is paid upon the first death only)
A noncontributory group disability income plan has a 30-day elimination period and offers benefits of $2000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive
$12000 - all of which is taxable.
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$200000
If a producer has been found guilty of any violations of the provisions of the Insurance Code, in addition to or instead of the suspension, revocation, or refusal to renew a producer's license, the Commissioner may levy a fine upon the licensee, up to
$5000 per violation or a maximum penalty of $55,000 if the violation is willful. Subsequent violations will lead to suspension or revocation of a license.
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50000
L has a major medical policy with a $500 deductible and 80/20 coinsurance. L is hospitalized and sustains a $2,500 loss. What is the maximum amount that L will have to pay?
$900 (deductible + 20% of the bill after the deductible [ 20% of $2000])
The minimum number of credits required for partially insured status for Social Security disability benefits is
(To be considered partially insured, a worker must have earned 6 credits during the 13-quarter period ending with the quarter in which the worker died.) (A majority of FICA tax is used to fund Social Security benefits.
Under which provision can a physician submit claim information prior to providing treatment?
*Under the prospective review or "pre-certification provision", the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.
If the insured pays a monthly premium for health insurance, how long would the grace period be on the policy?
10 days
According to the state regulations pertaining to claims settlements, after receiving a notification of claim from an individual policyowner, the insurer must acknowledge that notice within
10 working days
How long must an agent maintain records sold in WA?
10 years
How many members must an association have to qualify for group insurance?
100 members
In group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense?
100%
When an individual life insurance policy is being replaced by an insurer using an agent, the policyowner must be given an unconditional right to a full refund of premiums if the policy is returned within
20 days
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 days
A health carrier that provides coverage for maternity services must provide the same coverage for newborns as for the mother for at least
3 months
How long is the open-enrollment period under an employer group health insurance plan?
30 days
What is the required free-look period for Medicare Supplment policies?
30 days
Within how many days from a pretrial hearing must insurance producers report to the Commissioner any criminal prosecutions brought against them?
30 days
How many parts does Medicare have?
4 (A,B,C,D)
Once an individual is licensed as an insurance producer for life or accident and health insurance, how many hours of training must the producer initially complete to sell long-term care insurance?
4-hours
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days
After approval by the National Association of Insurance Commissioners (NAIC), the current Buyer's Guide cannot be used for longer than
5 years or until next regular examination by the Commissioner.
According to the PPACA rules, what percentage of health care costs will be covered under a bronze plan?
60%
If a telemarketer wants to make an unsolicited sales call to a potential customer, what is the earliest time the telemarketer can call the prospect's residence?
8 am
Most health policies will pay the accidental death benefits if the death is caused by an accident and occurs within how many days?
90 days
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within
90 days of the loss
What are the most common penalties for violations of insurance statutes?
A cease and desist order, a fine, and license suspension or revocation.
When is the insurability conditional receipt given?
A conditional receipt is a document given to someone who applies for an insurance contract and has provided the initial premium payment. This receipt means that the person can only be insured if he or she meets the standards of insurability and is given approval by the insurance company.
In underwriting a substandard risk, which of the following is INCORRECT?
A discounted premium would be charged.
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
A foreign insurer
If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
A full death benefit
All of the following could own group life insurance EXCEPT
A group needing low-cost life insurance
Which of the following does the Insuring Clause NOT specify?
A list of available doctors
What is the permitted maximum interest rate on policy loans?
A maximum interest rate of not more than eight percent per annum
Which term describes an individual who is domiciled and licensed as a resident producer in a state other than Washington?
A nonresident producer is an individual domiciled and licensed as a resident producer in a state other than Washington.
What is the capital sum in Accidental Death and Dismemberment (AD&D) coverage?
A percentage of the principal sum
What is the capital sum in Accidental Death and Dismemberment(AD&D) coverage?
A percentage of the principal sum
A tornado that destroys property would be an example of which of the following?
A peril
Which of the following individuals will be eligible for coverage on the Health Insurance Marketplace?
A perm resident lawfully present in the US
Who is an insurance agent?
A person authorized to sell, solicit and negotiate insurance contracts
Which of the following would be required to be licensed as an insurance producer?
A salaried employee who advertises and solicits insurance
What must an insurer do who accepts an application from an agent who is not appointed by that insurer, if they subsequently will issue a policy based on that application?
Add the agents name to the company's list of approved agents.
If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following?
Adjust the benefit in accordance with the increased risk.
An insured misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued?
Adjust the claim benefit to reflect the insured's true age
In health insurance, when would an excess plan pay benefits?
After the primary plan has paid its full promised benefit, the excess plan will pay the balance.
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose.
What type of insurer is formed under the laws of another country?
Alien
In which Medicare supplemental policies are the core benefits found?
All Plans (A-N)
What is a warranty in an insurance contract?
An absolute true statement upon which the validity of the insurance contract is based
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the insurance contract is based.
What is the penalty for the insurer who fails to refund premiums within 30 days after the free-look period?
An additional ten percent penalty shall be added to any premium refund due which is not paid within thirty days of return of the policy to the insurer or insurance producer.
Who is considered a nonresident agent?
An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state
What documentation grants express authority to an agent?
An agents contract with the principal
In insurance terms a representation can be considered:
An express warranty
The minimum interest rate on an equity indexed annuity is often based on
An index like S&P's 500
Which of the following losses will be covered by a group medical expense policy?
An injury resulting from active military duty
What is the maximum period of time during which an insurer may contest fraudulent misstatements made in a health insurance application?
An insurer can contest a fraudulent misstatement as long as the policy is in force. No other statement or misstatement made in the application at the time of issue will be used to deny a claim after the policy has been in force for 2 years.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
An unfair trade practice
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's
Ancestry
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
Any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract is called a - Modified Endowment Contract.
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
According to the Time Limit on Certain Defenses provision in health insurance policies, when can an insurer contest fraudulent misstatements on a health insurance application?
Anytime while the policy is in force.
Which of the following types of agent authority is also called "perceived authority"?
Apparent
All of the following are valid reasons for the insurance commissioner to deny the application for an insurance license, except:
Applicant lacks integrity
What is the term used for a written request for an insurer to issue an insurance contract based on the provided information?
Application
How can an AD&D policy be written?
As a rider to a health insurance policy, or as a separate policy
Records of an agent or broker must be available to the commissioner, how often?
At all times.
When a policy is replaced, replacing insurers must maintain a replacement register regarding that policy for
At least 3 years
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require?
Attending Physician Statement
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be
Authorized
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be
Authorized - or admitted into the state as a legal insurer
If an insurer holds a Certificate of Authority, it is known as what type of insurer?
Authorized or admitted
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
Automatic premium loan
What are usual/reasonable and customary charges based on?
Average charge for a given procedure in the specific geographic area
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called
Avoidance
What type of health insurance is sold to small business owners to reimburse them for the overhead expenses?
BOE - Business Overhead Expense insurance
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by a name
All of the following information about a customer must be used in determining annuity suitability EXCEPT
Beneficiary's Age
Which of the following is not true of Disability Buy-Sell coverage?
Benefits are considered taxable income to the business.
An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?
Benefits that are attributable to employer contributions are fully taxable to the employee as income. In a plan funded entirely by the employer, income benefits are included in the employees gross income and taxes as ordinary income.
What type of licensee represents the insured?
Broker
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy
Which of the following options best depicts how the eligibility of members for group health insurance is determined?
By conditions of employment
How is Part B Medicare funded?
By monthly premiums and from the general revenues of the federal government
Which of the following would NOT be considered an exception to the National Do Not Call List?
Calls from outside the US
What is the name of the act by the insured to voluntarily give up insurance?
Cancellation
If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?
Cease and Desist order
What document is required for an insurance company to transact insurance?
Certificate of Authority
What do individual insureds receive as proof of their group health coverage?
Certificate of Insurance
How will changing one's occupation to be more hazardous affect the health insurance policy in force?
Claim benefits will be reduced to what the premium would have bought for a more hazardous occupation
What provision provides for the sharing of expenses between the insured and the insurance company?
Coinsurance
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT
Collect any premium due
A producer who fails to segregate premium monies from his own personal funds is guilty of
Commingling
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common disaster clause
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application.
What are producers required to do in order to renew their license?
Complete continuing education hours and pay a renewal fee.
What type of health insurance plans cover all accidents and sicknesses that are not specifically excluded in the policy?
Comprehensive Plans
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment
When an agent accepts premium from the insured and uses the money for personal gain, it is considered
Concealment
What health policy provision allows the insurer to non-renew health coverage if certain events occur?
Conditionally renewable
What health policy provision allows the insurer to nonrenewal health coverage if certain events occur?
Conditionally renewable
A legally acceptable attempt by an existing insurer to persuade their client to continue an existing life insurance policy in force when a written communication is received from a replacing insurer is called
Conservation
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration - The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?
Consumer report
Health contracts are prepared by insurers and must be accepted by the insured on an 'as is' basis. This described what aspect of a health insurance contract?
Contract of Adhesion
What are the tax implications for contributions to a Health Savings Accounts by the individual insured?
Contributions are tax deductible
If the insureds share in the cost of health insurance premium with the employer, this would be known as what type of group health plan?
Contributory
What are the five basic characteristics of managed care plans?
Controlled access to providers Comprehensive case management Preventive Care Risk Sharing High Quality Care
What is the main difference between coinsurance and copay?
Copay is a set dollar amount; coinsurance is a percentage of the expenses.
According to the entire contract provision, what document must be made part of the insurance policy?
Copy of the original application
The rider that may be added to a Disability Income policy that allows for an increase in the benefit amount under certain conditions is called
Cost of Living (COLA)
If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?
Defamation
When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of
Defamation
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation Period
If a licensee wants to terminate their license:
Destroy the original license.
What type of disabilities will be covered by occupational coverage?
Disabilities that result from accidents or sicknesses that occur on or off the job.
A waiver of premium provision may be included with what type of health insurance policies?
Disability Income
How are individually-owned disability income benefits taxed once received by the insured?
Disability benefits are not taxed; they are received income tax free
What type of health insurance covers partners or corporate officers of a closely held business?
Disability buy-sell
Which agreement specifies how a business will transfer hands when one of the owners dies or becomes disabled?
Disability buy-sell
Under what employer-provided plan are the benefits taxable to an employee in proportion to the amount of premium paid by the employer?
Disability income
Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?
Discrimination
Which of the following is considered a qualifying event under COBRA?
Divorce
What is the term for a period of time immediately following a disability during which benefits are not payable?
Elimination Period
If an agent converts premium he collects for his personal use, the agent can be charged with
Embezzlement
What are the tax implications for employer contributions to Health Reimbursement Accounts?
Employer contributions are tax deductible as business expenses
What types of groups are eligible for group health insurance?
Employer-sponsored and association-sponsored groups
How often are producers in this state required to pay license renewal fees?
Every 2 years
Under a typical health insurance policy, claims that result from injuries while the insured was intoxicated or under the influence of drugs are generally
Excluded
What benefits are provided by Medicare Part C?
Expanded benefits for a fee through private insurance programs such as HMO's or PPO's.
The authority granted to an agent through the agent's contract is referred to as
Express powers are written into the contract between the insurer and the agent
All of the following violations may result in an agent's imprisonment EXCEPT
Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction.
An act which requires a reporting agency to take action if a consumer complains about inaccurate information is:
Fair credit act
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
False advertising
According to the Dept of Insurance, fraudulent is considered
Felony
The requirement that agents not commingle insurance monies with their own funds is known as
Fiduciary responsibility - money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.
During the application process for health insurance, a producer is trying to obtain creditable information about the applicant that would help underwriters determine is the risk is insurable. In what role is the producer acting?
Field underwriter
How many pints of blood will be paid for by Medicare Supplement core benefits?
First 3 pints
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed period
How long do short-term disability group plans pay benefits?
For a period of less than 2 years
Every health care service provider that issues group policies for hospital or medical expense must offer the contract holder an option to include a contract provision granting persons who become ineligible for coverage under the group contract the right to continuing the group benefits
For a period of time and at a rate agreed upon
For what reason can a temporary license be issued?
For continuation of business in case the licensed producer dies or becomes disabled
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
Fraternal Benefit Society
What health policy provision allows the insured a period of time to examine the policy and determine whether or not to keep it?
Free-look period
When are newborns covered in individual health insurance policies?
From the moment of birth
If a policyowner returns the life insurance policy to the insurer within 10 days of policy delivery, the policyowner is entitled to
Full refund
All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT
Fully insured status
The death benefit under the Universal Life Option B
Gradually increases each year by the amount that the cash value increases.
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis?
Guaranteed
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
Guaranteed insurability rider
Which of the following would pay covered claims when an insurance company becomes insolvent?
Guaranty Association
In a group health policy, a probationary period is intended for people who
Have a pre-existing condition at the time they join the group
What are the two types of Flexible Spending Accounts?
Health Care accounts and dependent care accounts.
Who is allowed to work with non-admitted carriers when insurance cannot be found in the ordinary market?
Health only agents
In order to be eligible for coverage by an HSA, an individual must also be covered by what type of health plan?
High Deductible Health Plan ( HDHP)
What type of hospital policy pays a fixed amount each day that the insured is in the hospital?
Hospital indemnity
What are the three types of basic medical expense insurance?
Hospital, surgical, and medical
Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to
If no beneficiary has been named, payment proceeds are to be paid to the deceased insured's estate. Claims other than death benefits are to be paid to the insured or the insured's estate, unless otherwise assigned by the insured.
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
Illegal under any circumstances.
According to the Reinstatement provision, once a lapsed policy is reinstated, how soon will coverage be available for accidents?
Immediately
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied - It exists because not every single detail of an agents authority can be written in a contract
Any person who transacts insurance without a license is punishable with a Class B felony. If the Commissioner has reason to believe that any person has violated this rule, the Commissioner may do any of the following EXCEPT
Impose a prison sentence of no more than 6 months
An insured is receiving hospice care. His insurer will pay for painkillers but not for an operation to reduce the size of a tumor. What term best fits this arrangement?
In a cost-containment setting, daily needs and pain relief are provided for hospice patients, but curative measures are not.
In which of the following locations would skilled care most likely be provided?
In an institutional setting
A typical Accidental Death & Dismemberment policy covers all of the following losses EXCEPT
Income
How are benefits received by the business from a key person disability insurance?
Income tax free
How are the benefits of group accidental death and dismemberment policy received?
Income tax free
Under a fully contributory health plan, how are benefits received by the employee?
Income tax free
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity- the principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.
In group insurance, who is issued a certificate of insurance?
Individual insured
According to the insurance code, what must appear in a notice of claim form given to an insured?
Information regarding the Arson Bureau
What types of injuries and services will be excluded from major medical coverage?
Injuries caused by war, intentionally self-inflicted injuries, injuries covered by workers compensation, regular dental/vision/hearing care, custodial care, and elective cosmetic surgery.
Medicare Part A will pay for what types of services?
Inpatient hospital care Skilled nursing facility care Home Health Care Hospice Care
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
What do individuals use to transfer their risk of loss to a larger group?
Insurance
In general, who can be excluded from producer licensing and examination requirements?
Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities include administrative, executive or clerical).
In general, who can be excluded from producer licensing and examination requirements?
Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities include administrative, executive, or clerical)
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?
Insured Contingent Beneficiary
What is the 'own occupation' disability?
Insured's inability to perform duties of his or her current job or an occupation for which the insured is educated and trained
Which statement regarding insurable risks is NOT correct?
Insureds cannot be randomly selected.
In the agent/insurer relationship, who is considered the principal?
Insurer
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer
Who is responsible for paying the cost of a medical examination required in the process of underwriting?
Insurer
Insurance contracts are agreements between which two parties?
Insurer and policyowner
What entities make up the Medical Information Bureau?
Insurers
Why is it essential for an insurer to document all correspondence with an insured?
Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur.
All of the following are true about variable products EXCEPT
Interest Only
In long-term care insurance, what type of care is provided with intermediate care?
Intermediate care is nursing and rehabilitative care provided by medical personnel for stable conditions that require assistance on a less frequent basis than skilled care.
All of the following actions by a person could be described as risk avoidance EXCEPT
Investing in the stock market
The mode of premium payment
Is defined as the frequency and the amount of the premium payment.
Which of the following best describes a misrepresentation?
Issuing sales material with exaggerated statements about policy benefits
What statement best describes the free look provision?
It allows the insured to return the policy within 10 days for a full refund of premiums if dissatisfied for any reason.
According to the telemarketing sales rules, what are the permissible calling hours for telemarketing calls?
It establishes standards of conduct for telemarketing calls: Telemarketers can't call you before 8 a.m. or after 9 p.m. Telemarketers must promptly tell you the identity of the seller or charitable organization and that the call is a sales call or a charitable solicitation.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
Which of the following best describes annually renewable term insurance?
It is a level term insurance
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
It is a percentage of the cash value and decreases over time.
Why should the producer personally deliver the policy when the first premium has already been paid?
It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.
What type of health insurance policy provides an employer with funds to train a replacement if a valued employee becomes disabled?
Key person disability
What type of health insurance would pay for hiring a replacement for an important employee who becomes disabled?
Key-person disability insurance
Which two terms are associated directly with the premium?
Level and Flexible
When advertising on the internet, an agent/broker must provide the following, except:
License Number
What does "liquidity" refer to in a life insurance policy?
Liquidity in life insurance refers to how easily you can get cash from your life insurance policy. - cash value
An applicant who receives a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
Lump sum
A health insurance plan which involves financing, managing, and delivery of health care services and involves a group of providers who share in the financial risk of the plan or who have an incentive to deliver cost effective service, is called
Managed care plan
In group insurance, what is the name of the policy?
Master Policy
All of the following statements concerning Medicaid are correct EXCEPT
Medicaid is a state funded program that provides health care to persons over age 65, only
What is another name for Medicare Advantage plans?
Medicare Part C
What is another name for Medicare Supplement plans?
Medigap
Under the Affordable Care Act, which classification applies to health plans based on the amount of covered costs?
Metal level classification.
A producer is selling a client a Variable Life Insurance policy and as an inducement shows the client a projection based upon shares or dividends paid on a similar policy. This is
Misrepresentation
If an insurer advertises material that exaggerates the dividends that a policy pays, what kind of illegal act is it committing?
Misrepresentation
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation
What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?
Misrepresentation
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report.
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company
When a mutual insurance company changes to a stock insurance company, it is referred to as
Mutualization
With whom are policy forms filed?
NCCI(National Council on Compensation Insurance
Which of the following best describes gross annual premium?
Net premium plus expenses (Gross annual premium is net premium plus expenses (loading).)
Commissioner of Insurance is an office for:
No time period specified
Can Alzheimer's disease be excluded from coverage under a long-term care policy?
No, organic cognitive disorders, such as Alzheimers or Parkinsons must be covered.
Does group health insurance require medical examinations?
No, the underwriter evaluates the group as a whole, rather than each individual member.
Death benefits payable to a beneficiary under a life insurance policy are generally
Not subject to income taxation by the Federal Government
An applicant for an insurance license had another professional license revoked. What would the commissioner do?
Nothing. It didn't involve insurance.
What health policy provision defines the insured's duty to provide the insurer with reasonable notice in the event of a loss?
Notice of claim
Who many share in the commission from the sale of a life insurance policy?
Only producers properly licensed for the type of insurance transaction.
Who is involved in completing the agent's report?
Only the agent
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?
Only written statements can be considered fraud
What health policy renewability provision allows the insurer to terminate coverage for any reason, and to increase the premiums for any class of insureds?
Optionally renewable
A producer did not do his research and placed insurance coverage through an unauthorized insurer. When this becomes known, what may the Commissioner do?
Order a policy replacement
When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value?
Outstanding loans and interest
What Medicare part helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care and hospice care?
Part A
What part of Medicare is known as hospital insurance?
Part A
What Medicare part will cover lab services or diagnostic tests?
Part B
What part of Medicare is known as medical insurance?
Part B
Who is eligible for Part B Medicare?
Part B is optional, and is offered to everyone who enrolls in Part A
What Medicare part provides a prescription drugs benefit?
Part D
Prior to purchasing a Medigap policy, a person must be enrolled in which of the following?
Parts A and B of Medicare
A participating insurance policy may do which of the following?
Pay dividends to the policyowner. Based upon actual mortality cost, interest earned, and costs.
Which of the following is another term for the accumulation period of an annuity?
Pay in period *The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.
An insured pays her Major Medical Insurance premium annually on March 1. Last March she forgot to mail her premium to the company. On March 19, she had an accident and broke her leg. The insurance company would
Pay the claim; accident occurred during the grace period
Who qualifies for Medicare coverage?
People age 65 or older, or anyone who has been entitled to Social Security disability income benefits for 2 years, or who has chronic kidney disease
Which of the following information regarding an insured is NOT included in an Investigative Consumer Report, which is requested by an underwriter?
Personal Habits
According to the PPACA metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that?
Platinum
Who might receive dividends from a mutual insurer?
Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.
What is the term used for a condition for which the insured has received diagnosis, care or treatment during a specific period of time prior to the health policy issue?
Pre-existing condition
Under what type of care do insurers negotiate contracts with health care providers to allow subscribers have access to health care services at a favorable cost?
Preferred Provider Organization(PPO)
When health care insurers negotiate contracts with health care providers or physicians to provide health care services for subscribers at a favorable cost, it is called
Preferred Provider Organization(PPO)
After the elimination period, a totally disabled insured qualified for benefits from a disability income policy that has a waiver of premium rider. What will happen to the premium that was paid into the policy during the elimination period?
Premium will be refunded.
What is the tax advantage of the employer paying premiums for its employees for disability income insurance?
Premiums are deductible as a business expense
Which of the following do the Standard and Preferred risk categories share?
Premiums are not elevated
In what type of health plans are providers paid for services in advance, regardless of the services provided?
Prepaid plans
Who issues Medigap policies?
Private insurers
A producer has established a separate account for premiums collected on life insurance policies sold by the producer. Who is entitled to the interest earned on the deposits in the separate account?
Producer
Who can usually be granted a temporary license?
Producer's spouse or designee in case the licensed producer dies or becomes disabled
Issuers of disability insurance policies that provide hospital or medical expense coverage on an expense-incurred or indemnity basis to persons eligible for Medicare must do which of the following?
Provide to all applicants the pamphlet 'guide to health insurance for people with medicare.'
What is a presumptive disability provision?
Provision found in most disability income policies that specifies the conditions that will automatically qualify for full disability benefits
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating
S offers to refund his client's first premium payment in exchange for purchasing a life insurance policy. S is guilty of
Rebating
How can an HMO member see a specialist?
Referral by the primary care physician
In medical expense contracts, what is the term that describes the payment method when the insured is responsible for paying the medical expenses, and then the insurer pays directly to the insured?
Reimbursement
When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis?
Reimbursement
What health policy provision describes the insured's right to cancel coverage?
Renewability provision
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate.
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?
Return of Premium
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
What does the free-look period allow the insured to do?
Return the policy for a full refund of premium within a specified time period(usually 10 days)
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature.
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability?
Sexual orientation
According to the Dept of Insurance, which term means 'mandatory'?
Shall
According to the Dept of Insurance, which term means 'permissive'?
Shall
Which of the following is an example of a peril covered in an accident and health insurance policy?
Sickness
What is another name for Old Age, Survivors, and Disability Insurance Benefits?
Social Security
The term "producer" refers to any person appointed by an insurer to
Solicit applications for insurance on its behalf
Which of the following describes an insurer who has enough financial resources only to provide for all it's liabilities and for all reinsurance of all outstanding risks.
Solvent
What entity regulates workers compensation benefits?
State Government
Which of the following types of risk will result in the highest premium?
Substandard risk
if an insurer intends to rely on an an applicants answers to health questions in an application to determine eligibility for coverage, then
Such questions must be clear and precise.
Which of the following is called a "second-to-die" policy?
Survivorship life
Group disability income insurance premiums paid by the employer are
Taxable to the employee
Which of the following may NOT be included in an insurance company's advertisement?
That its policies are covered by a state Guaranty Association
Who must be notified of a producer's change of address?
The Department of Insurance (commissioner/director/superintendent)
Which of the following entities established the Do-Not-Call Registry?
The Federal Trade Commission
An insurer is on the verge of bankruptcy and can no longer pay the claims to its insureds. Which of the following will make sure that the insureds receive their money?
The Life & Disability Insurance Guaranty Association
What type of licensee represents the insurance company?
The agent
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The agents
Which of the following information will be stated in the consideration clause of a life insurance policy?
The amount of premium payment
Which of the following would qualify as a competent party in an insurance contract?
The applicant has a prior felony conviction
Which of the following is true about the requirements regarding HIV exams?
The applicant must give prior informed written consent
If an insurer decides to obtain medical information from different sources in order to determine the insurability of an applicant, who must be notified of the investigation?
The applicant.
The insured on a health policy misstated his age on the insurance application. If the misrepresentation is discovered, what will happen to the policy?
The benefit amount payable under the policy will be adjusted to the insured's correct age.
Which of the following is NOT a characteristic of a group long-term disability plan?
The benefit period may be to age 65
With key person disability insurance, who pays the policy premiums?
The business (employer)
An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy?
The capital amount in a lump sum
Peril is most easily defined as
The cause of loss insured against. Perils are the causes of loss insured against in an insurance policy.
A person requests that an insurance company quit sending him e-mail solicitations. According to the law, the company has 10 days to stop e-mailing the complainant. However, the company sends him four more e-mails after that time limit has expired. Which of the following is true?
The company will be asked to cease business operations for 10 days.
What is a birthday rule in a coordination of benefits provision?
The coverage of the parent whose birthday is earlier in the year is considered primary
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
The customer's associates, friends, and neighbors provide the report's data.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability
An insured with Medicare Part D has reached the initial benefit limit and must now pay a portion of prescription drugs costs. What is the term for this gap in coverage?
The donut hole
The period of time immediately following a disability during which benefits are not payable is
The elimination period is the time immediately following the start of a disability when benefits are not payable. The elimination period in a disability income policy serves the same purpose as a deductible.
Who are the parties in a group health contract?
The employer and the insurer
If an individual is covered by Medicare, and is also covered by his employer's health plan, which plan would be considered primary?
The employer plan.
In health insurance, the policy itself and the insurance application form what?
The entire contract
In health insurance, the policy itself and the insurance application form what?
The entire contract.
If a policyowner returns the policy to the insurer or to the agent within 10 days after delivery, which of the following would be true?
The entire premium will be refunded
Which of the following would NOT fall into the category of costs associated with death?
The expense of a vacation for surviving family members
According to the insurance code, an insurance policy must specify all of the following Except.
The financial rating of the insurer
How are excess funds in an employee's health savings account (HSA) handled?
The funds can be carried forward to the next year.
Why is having a large number of similar exposure units important to insurers?
The greater number insured, the greater the amount of premiums collected to help cover losses.
Who chooses a primary care physician in an HMO plan?
The individual member
Who decides which optional provisions would be included in a health policy?
The insurance company
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
The insured may choose to convert to term or permanent individual coverage
How does someone quality for Social Security disability income benefits?
The insured must have the proper insured status (such as fully insured), meet the definition of disability, and satisfy the waiting period.
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to
The insured's estate
What does the amount of disability benefit that an insured can receive depend on?
The insured's income at the time of policy application.
Who pays the expense for an autopsy under the physical examination and autopsy provision?
The insurer
Who is responsible for the costs associated with the examination of insurers?
The insurer who is being examined.
In long-term care (LTC) policies, as the benefit period lengthens, the premium
The longer the benefit period, the higher the premium will be.
Which of the following is true regarding elimination periods and the cost of coverage?
The longer the elimination period, the lower the cost of coverage. - the elimination period is a period of days which must expire after onset of an illness or occurrence of an accident before benefits will be payable.
Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic
Which of the following is not a characteristic of an insurable risk?
The loss must be catastrophic.
How do insurers determine the cost for a group health policy?
The main variables are the ratio of men and women in the group, and the average age of the group.
According to the Coordination of Benefits provision, if both parents have coverage for a child from their employers' policies, which policy will pay first?
The order of payment will be determined by the birthday rule: the coverage of the parent whose birthday is earlier in the year will be considered primary
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio. The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.
What is a probationary period in group health insurance?
The period of time that must lapse before an employee is eligible for group health coverage
A policy with a 31-day grace period implies
The policy remains in force without penalty for 31 days even though the premium due has not been paid.
How long does any person receiving written notification of the Commissioner's order have to respond and request a hearing?
The presiding officer issues a written decision within 90 days of receiving all the evidence and closing the hearing. The decision includes findings of fact, conclusions of law and a final order.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?
The proceeds will be split evenly between the two beneficiaries.
The Commissioner may disapprove an HMO agreement form under all of the following circumstances EXCEPT
The purchase is solicited by advertising
Which is true about a spouse term rider?
The rider is usually level term insurance
If a group health policy covers individuals that reside in more than one state, which state has jurisdiction over the group policy?
The state in which the policy was delivered.
Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy?
The substitute insured rider, or change of insured rider, allows the policyowner to change the insured listed under the policy, subject to insurability.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
Which of the following is an example of a producer's fiduciary duty?
The trust that a client places in the producer in regard to handling premiums
Which of the following statements regarding conditional receipts is true?
They are temporary insuring agreements.
All of the following are requirements for life insurance illustrations EXCEPT
They must be part of the contract
What is the purpose of COBRA
To allow continuation of health insurance coverage for terminated employees
To whom may a certificate of authority be issued?
To an insurer authorized to transact business in this state
What is the role of the gatekeeper in an HMO Plan?
To control costs for the services of specialists
What is the purpose of managed care health insurance plans?
To control health insurance claims expenses.
What is the purpose of Medicare Supplement Plans?
To fill the gaps in Medicare coverage
Why do HMOs encourage members to get regular checkups?
To help catch health problems early when treatment has the greatest chance for success (i.e. preventative care)
What is the purpose of a cease and desist order?
To prevent a producer or insurer from further violating laws for transacting insurance
What is the purpose of the coinsurance provision in health insurance policies?
To prevent overutilization of the policy benefits.
Which of the following is NOT the purpose of HIPAA?
To prohibit discrimination against employees based on their health status
What is the purpose of respite care in long-term care insurance?
To provide relief for a major caregiver (usually a family member)
What is the primary purpose of disability income insurance?
To replace income lost due to a disability.
What is the purpose of a buy-sell agreement for health insurance policies?
To specify how the business will pass between owners when one of them dies or becomes disabled
What type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
Twisting
How many eligible employees must be included in a contributory plan?
Under a contributory group plan, you are expected to pay part of the premium for group life insurance. To avoid adverse selection, the insurer typically requires that at least 75 percent of eligible employees participate in the plan.
What is a fee-for-service health plan?
Under a fee-for-service plan, providers receive payments for each service provided
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
Universal Life
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal Life
Which of the following products requires a securities license?
Variable Annuity
Which of the following insurance policies are exempt from the Life Insurance Policy Illustration guidelines?
Variable Life Insurance
When is the initial enrollment period for Medicare Part A?
When an individual first becomes eligible for Medicare, starting 3 months before turning age 65 and ending 3 months after the 65th birthday
What must happen when an individual policy or annuity has been personally delivered to the policyowner?
When an individual policy or annuity is delivered by hand to the policy owner, a delivery receipt must be signed & state the date the contract was received.
In forming an insurance contract, when does an acceptance usually occur?
When an insurer approves a prepaid application
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
When may an agent transact for an insurance company?
When the appointing company signs.
When may an insured deduct unreimbursed medical expenses paid under a long-term care policy?
When the expenses exceed a certain percentage of the insured's adjusted gross income. In either medical expense insurance policies or long-term care insurance policies, unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income.
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted.
When should an agent obtain a Statement of Good Health from the insured?
When the premium was paid upon policy delivery and not at the time of application.
When can the Commissioner or Director examine insurers?
Whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)
When can the commissioner or director examine insurers?
Whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)
Which of the following insurers are owned by stockholders?
Which of the following insurers are owned by stockholders?
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable
Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?
Withdrawn amounts are taxed on a last in, first out basis.
Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce
Without receiving written consent from an insurance regulatory authority
What type of insurance covers an employee who is hurt on the job?
Workers compensation
Can an insured who belongs to a POS plan use an out-of-network physician?
Yes, but the copays and deductibles may be higher
How does a member of an HMO see a specialist?
You will need a referral from your PCP to see a specialist (such as a cardiologist or surgeon) except in emergency situations. Your PCP also must refer you to a specialist who is in the HMO network. PPO: You do not need a referral to see a specialist.
At what age do individuals qualify for Medicare?
age 65
What are activities of daily living (ADLs)?
bathing, skin, nail, and hair care, mouth care, and assistance with walking, eating, and drinking, dressing, transferring, and toileting
How are HMO territories typically divided?
geographic areas
Health Savings Accounts (HSAs) are designed to
help people with high-deductible health plans save money tax-free to pay for deductibles and copayments, among other qualified medical expenditures.
Which of the following is true of a PPO?
its goal is to channel patients to providers that discount services
What are the four types of workers compensation benefits?
medical income rehabilitation death benefits
An applicant for health insurance has not had a medical claim in 5 years. He exercises daily and does not smoke or drink. What classification do you assume the applicant would receive from his insurer?
preferred
What is the main principle of an HMO Plan?
preventive care
Pertaining to insurance, what is the definition of a fiduciary responsibility?
promptly forwarding premiums to the insurance company.
Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to
shall be fined as provided in this title or imprisoned not more than 5 years, or both.
