Xcel Solutions: North Carolina Life and Health State - Exam Simulator 1 (Part I)

Comprehensive Major Medical policies usually combine:

Major Medical with Basic Hospital/Surgical coverage. A Comprehensive Major Medical Policy combines Basic Hospital/Surgical and Major Medical insurance.

A Disability Income policy that only the policyowner can terminate and which the rates will never go up is considered to be

Noncancellable. A Disability Income Policy that only the policyowner can terminate and on which the rates will never increase is a Noncancellable policy.

In order to sell a(n) ________ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA).

Variable. In order to sell a Variable Life policy, the producer must register with the Financial Industry Regulatory Authority (FINRA).

A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) ________ rate loan.

Variable. The interest rate on a Variable rate cash value loan may vary over time.

An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500. If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim?

$1,250. 3.5 months - 1 month elimination period = 2.5 months. 2.5 months X $500 monthly indemnity = $1,250.

An Accident/Health policyholder has __ days to return the policy and receive a full refund on premiums.

10. The policyholder has 10 days to return an Accident/Health Insurance Policy and receive a full refund on premiums.

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death and Dismemberment clause An AD&D clause provides benefits for death due to an accident or for the loss of one or more hands, feet, arms, legs, or loss of sight.

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

Establishes the needs of the individual and his dependents. Needs analysis is a method of life insurance planning which identifies the needs of an individual and the individual's dependents.

North Carolina insurance law permits which of the following practices?

Higher rates of male insureds for Life Insurance based exclusively on gender. It is permitted to charge higher premiums for male insureds because statistically men do not live as long as women.

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Inspection report. An inspection report may include information obtained by a telephone call to the proposed insured.

The provision that defines to whom the insurer will pay benefits to is called:

Payment of Claims. The Payment of Claims provision in a Health Insurance policy states to whom claims will be paid.

In North Carolina, which of the following MUST be delivered to a policyowner upon the sale of an individual life insurance policy?

Policy Summary and Buyer's Guide. An agent who sells an individual life insurance policy in North Carolina MUST deliver to the policyowner a Policy Summary and Buyer's Guide.

Which of the following statements is true about most Blue Cross/Blue Shield organizations?

They are nonprofit organizations. Most Blue Cross/Blue Shield organizations are considered to be nonprofit.

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds. A Variable Life Policy has investment values based instruments such as mutual funds, stocks, and bonds.

Medicaid was designed to assist individuals who are:

below a specific income limit. Medicaid was enacted to provide medical assistance to those whose income is below a specific limit.

The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n):

closed panel. A closed panel is when an HMO is represented by a group of physicians who are salaried employees and work out of the HMO's facility.

Non-occupational disability coverage is designed for:

employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation. Non-occupational disability coverage is designed for employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation.

One role of the Life and Health Guaranty Association is to

maintain public confidence in the promises of insurers. One of the roles of the Life and Health Guaranty Association is to maintain public confidence in the promises of insurers.

The premiums paid by an employer for his employee's group life insurance are usually considered to be:

tax-deductible to the employer. The amount an employer pays for his employee's life insurance is typically deductible to the business.

A Health Insurance Policy applicant unintentionally fails to list a previous visit to a neurologist. If the policy is issued and the insurer later decides to contest the policy, it must do so

within 2 years from the date of issue. In this situation, the insurance company must contest the policy within 2 years from the date of issue.

Chemical dependency treatment under a Group Health policy MUST include (over the life of the contract) a minimum benefit of

$16,000 Every Group Health Policy providing benefits for chemical dependency treatments must include a minimum benefit of $16,000 for the life of the contract.

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$2,500. In this situation, the maximum allowable IRA contribution is $2,500.

Which of the following issues new insurance coverage intended to replace an existing Life insurance policy?

Replacing insurer. The replacing insurer issues new life insurance coverage intended to replace an existing policy.

The __________ has the right to change a life insurance policy's beneficiary.

policyowner. The policyowner has the right to change a life insurance policy's beneficiary.

What is the maximum Social Security Disability benefit amount an insured can receive?

100% of the insured's Primary Insurance Amount (PIA). The MAXIMUM Social Security Disability benefit an insured may receive is equal to 100% of the insured's Primary Insurance Amount (PIA).

A group health policy's approved premium rate is guaranteed by the insurer for an initial period of at LEAST __ months.

12. Approved premium rates for group health insurance shall be guaranteed by the insurer for an initial period of not less than 12 months.

A proof of loss is required to be submitted within ___ days after the date of loss.

180. Written proof for any loss must be given to the insurance company within 180 days..

A terminated employee must have been covered for at LEAST __ month(s) under a Group Health Insurance policy immediately prior to termination in order to be eligible for continuation of coverage.

3. Continuation of group health coverage is only available to those employees who were covered under a group plan for a minimum period of 3 months prior to the date of termination.

An eligible employee has a MAXIMUM of ___ days after their first day of employment to be added to group health coverage.

90. Employees shall be added to the master group coverage no later than 90 days after their first day of employment.

In North Carolina, an agent obtains his/her license from the

Commissioner of Insurance. Insurance agents MUST obtain a license from North Carolina's Commissioner of Insurance.

Which of the following BEST describes a Hospital Indemnity policy?

Coverage that pays a stated amount per day of a covered hospitalization.

K has an Accidental Death and Dismemberment (AD&D) insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

Daughter. With a common disaster provision, a policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion. Exclusions are specified hazards listed in a policy for which benefits will not be paid.

What does a Face Amount Plus Cash Value Policy pay upon the insured's death?

Face amount plus the policy's cash value. A Face Amount Plus Cash Value Policy is a contract that promises to pay at the insured's death the face amount of the policy plus a sum equal to the policy's cash value.

What is considered a valid reason for small businesses to insure the lives of its major shareholders?

Fund a buy-sell agreement. Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.

All of these statements about the Waiver of Premium provision are correct, EXCEPT:

Insured must be eligible for Social Security disability for claim to be accepted. Receiving Social Security disability benefits is not a requirement to be eligible for the Waiver of Premium.

A catastrophic illness would be best covered by which of the following health insurance plans?

Major Medical. Major Medical health insurance coverage is best suited for meeting catastrophic illness expenses.

When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following?

Residual disability. A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.

The circulation of written literature that is maliciously critical of an insurer's financial condition is called

defamation. Circulation of any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of an insurer is known as defamation.

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the:

marital deduction. The transfer of a decedent's IRA account balance to a surviving spouse qualifies for the Unlimited Marital Deduction, which generally exempts the transfer from estate taxes.

The Commissioner of Insurance has notified an insurer that an Individual Health Policy form does not comply with North Carolina laws. The insurer may

not issue the form in connection with any new application. If an insurer has been notified by the Commissioner of Insurance that an individual Health Policy form does not comply with the state's laws, the insurer may not issue the form in connection with any new application.

A Limited-Pay Life policy has:

premium payments limited to a specified number of years. In a Limited-Pay Life policy, premium payments are limited to a specified number of years.

The law doesn't prohibit a lender from refusing to accept a binder as evidence of insurance, as long as the refusal is:

reasonable. The law doesn't prohibit a lender from refusing to accept a binder as evidence, as long as the refusal is reasonable.

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide. The purpose of a Suicide provision is to protect the insurer against the purchase of a policy in contemplation of suicide.

A non-contributory plan requires ____ participation of all eligible employees.

100%. The percentage of eligible employees participating in a non-contributory plan is required to be at 100%.

N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is:

$1,250. After the 30-day Elimination period has been satisfied, the total benefit paid on this claim is $1,250 ($500+$500+$250).

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?

100. An employer can have a maximum of 100 employees earning at least $5,000 to be eligible for a SIMPLE retirement plan.

A life insurance contract may NOT be voided by the insurance company beginning ___ year(s) after the policy's issue date.

2. After a policy has been in force for two years, the insurance company cannot contest the validity of the policy for any reason other than failure to pay the premiums.

An agent must complete ___ biennial continuing education credit hours to maintain his/her license.

24. An agent must complete 24 biennial continuing education credit hours to maintain his/her license.

Before an insurer can increase the rates for individual accident and health policyowners, the insurer must provide written notice at least ___ days before the effective rate increase.

30. An insurer must provide written notice at least 30 days before the effective date of a rate increase.

In North Carolina, a health policy that is paid on a quarterly basis requires a grace period of

31 days. North Carolina law requires that the minimum grace period on a health insurance policy paid on a quarterly basis is 31 days.

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

50%. Distributions must be made by April 1 following the year the participant turns age 70 1/2 or a 50% excise tax will be assessed on the amount that should have been withdrawn.

A life policy loan in North Carolina cannot charge a fixed rate of interest higher than

8%. The maximum fixed interest rate permitted on a life policy loan is 8%.

When can a policyowner change a revocable beneficiary?

Anytime. With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.

Which of the following medical expenses does Cancer insurance NOT cover?

Arthritis. Cancer insurance typically covers all of these medical expenses except for arthritis. 1) Chemotherapy 2) Radiation treatment 3) Physician visit

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion. A student pilot can pay standard premium costs for her life insurance policy with the addition of an aviation exclusion.

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

Claim will be denied. In this situation, the insurance company will deny the claim, as the policy would have lapsed due to nonpayment by September 15.

Which of the following reimburses its insureds for covered medical expenses?

Commercial insurers. Commercial insurance companies function on the reimbursement approach. Policyowners obtain medical treatment from whatever source they feel is most appropriate and submit their charges to their insurer for reimbursement.

What is one of the requirements for an applicant to become licensed as a North Carolina accident and health insurance agent?

Complete at least 20 hours of instruction approved by the Commissioner of Insurance. All individual applicants for licensing as agents shall furnish evidence to the Commissioner of successful completion of at least 20 hours of instruction for each license.

Which of the following consists of an offer, acceptance, and consideration?

Contract. Offer, acceptance, and consideration are all elements of a contract.

When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?

Contributory. Group plans where employees pay a portion of the premiums are called contributory plans.

What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

Convertible Term. Convertible term provides temporary coverage that may be changed to permanent coverage without evidence of insurability.

Which of the following types of insurance is exempt from the Rules Governing Life Insurance and Annuity Replacements?

Credit Life. Credit Life is exempt from the Rules Governing Life Insurance and Annuity Replacements.

K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

Daughter. With a common disaster provision, a policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing Term. The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.

A group life insurance policy can be converted to an individual whole life policy under which circumstance?

Employment termination. Termination of employment is a circumstance under which a group life insurance policy can be converted to an individual policy.

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

Entire Contract Provision. The entire contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract.

Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?

Guaranteed insurability rider. A guaranteed insurability rider guarantees the insured the option of purchasing additional amounts of disability income coverage at predetermined times without requiring the insured to provide evidence of insurability.

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n):

Immediate annuity. Immediate annuities start providing income payments usually starting within 30 days from the purchase date.

When must insurable interest exist for a life insurance contract to be valid?

Inception of the contract. Insurable interest must only exist at the inception of the contract.

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000. All withdrawals from a qualified retirement plan are taxable as current income. In addition, any withdrawals made before age 59 1/2 is subject to an additional tax penalty of 10% of the amount withdrawn.

How does an indexed annuity differ from a fixed annuity?

Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index. An indexed annuity differs from a fixed annuity in that indexed annuity owners may receive credited interest tied to the fluctuations of the linked index.

Which of these actions should a producer take when submitting an insurance application to an insurer?

Inform insurer of relevant information not included on the application. One of the actions a producer should take when submitting an application is to advise the insurer of any other relevant information not contained in the application.

A sole proprietor may use this plan ONLY if the employees of this business are included.

Keogh Pension Plan. A Keogh Plan may be used by a sole proprietor only if the employees of the business are included.

An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?

Key Person Life Policy. An architecture firm that would suffer financially from the death of a project manager should purchase a Key Person Life Policy.

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?

Level. A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable.

Which of the following is NOT a limited benefit plan?

Life insurance policy. All of these are limited benefit plans EXCEPT life insurance policies. 1) Dental policy 2) Critical illness policy 3) Cancer policy

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):

Living Benefit. The Accelerated Death Benefit provision in a life insurance policy is also known as a "Living Benefit".

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract. In most cases, insurers require that a guardian be appointed in the Beneficiary clause of the policy or that a guardian be designated in the will.

Under what condition may a lender require the purchase of insurance as a condition of making a loan?

Only if the borrower is not restricted in his/her choice of insurers. A lender may require the purchase of insurance as a condition of making a loan ONLY if the borrower is not restricted in his/her choice of insurers.

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor clause. A Payor clause ensures that premiums will be waived for a Juvenile Life policy if the policyowner becomes disabled.

Which statement is correct regarding the premium payment schedule for whole life policies?

Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured. With whole life insurance, premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death.

Which of these options can an individual use their medical flexible spending account to pay for?

Prescription drugs. Prescription drugs are an allowable expense when paid for by a medical flexible spending account.

T is covered by two health insurance plans: a group plan through his employer and his spouse's plan as a dependent. Under the Model Group Coordination of Benefits provision, when T files a claim, his employer's plan is considered the:

Primary carrier. In double coverage situations, the insurer covering the employee who has the claim is called the primary insurance company. The primary company must pay as much of the claim as the policy limits permit.

Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?

Reimbursement. When benefits are paid to a policyowner covered under a Hospital Expense policy, the policy is known as reimbursement.

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable. With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.

Which of the following statements BEST describes dental care indemnity coverage?

Services are reimbursed after insurer receives the invoice. Dental care indemnity plans reimburse services only after the carrier receives the bill.

P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA benefits, which of the following statements is TRUE?

She DOES need to provide evidence of insurability. Under COBRA, conversion of group accident and health coverage to an individual policy does not require evidence of insurability. However, this only applies during the COBRA period. Once COBRA laws expire, enrollment in an individual policy requires evidence of insurability.

The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?

Social Security Disability Income. Social Security Disability Income pays benefits that are based on a percentage of an individual's Primary Insurance Amount (PIA).

Which of the following is an effort to influence a person to buy an insurance product from you?

Soliciting. Soliciting is an effort to influence a person to buy an insurance product from you.

Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?

The maximum amount considered eligible for reimbursement by an insurance company under a health plan. Usual, customary, and reasonable (UCR) charges are the maximum amount the insurer will consider eligible for reimbursement under a health insurance plan.

S is a life insurance policyowner and enters into a written agreement to receive immediate cash in exchange for the sale and transfer of her life insurance policy. This agreement is referred to as a(n)

Viatical Settlement. A written agreement to provide a Life Insurance Policy holder immediate cash in exchange for the sale and transfer of a Life Insurance Policy is a Viatical Settlement.

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to. The ownership clause in a life insurance policy is a provision that indicates who is the policyowner and provides a general description of the owner's rights.

When can a lapsed individual life insurance policy be reinstated?

Within 5 years. Lapsed individual life insurance may be reinstated at any time within 5 years.

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

additional Whole Life coverage at specified times. A guaranteed insurability option in a Whole Life Policy permits the policyowner to purchase, without evidence of insurability, stated amounts of Whole Life insurance at specified times.

A Cost of Living rider gives the insured

additional death benefits. The Cost of Living rider can be purchased with many different types of life insurance. This type of coverage is designed to help you hedge your bets against inflation. For example, if you purchase this rider, your policy is going to increase in value if inflation increases.

A Term Life rider offers the insured

additional life coverage. A Term Life rider offers the insured additional life coverage.

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

adhesion. A contract of adhesion is a contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording. Insurance policies are contracts of adhesion and, as such, are construed strictly against the party writing them (i.e., the insurer).

Additional coverage can be added to a Whole Life policy by adding a(n):

decreasing term rider. A decreasing term rider can add additional coverage to a whole life policy.

An insurance company formed under North Carolina laws is referred to as a(n)

domestic company. Insurers organized under the laws of North Carolina are called domestic companies.

Basic Medical Expense insurance:

has lower benefit limits than Major Medical insurance. Basic Medical Expense insurance typically has lower benefit limits than Major Medical insurance.

Under a Basic Medical Expense policy, what does the hospitalization expense portion cover?

hospital room and board. The hospitalization expense of a Basic Medical Expense policy pays for hospital room and board.

When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is:

income. When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is income.

Defamation occurs when an agent makes a false statement intended to

malign another insurer. Defamation is an unfair trade practice involving false, maliciously critical, or derogatory statements intended to injure a person or company engaged in the insurance business.

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:

mandatory income tax withholding on the transfer amount. There is no federal tax withholding involved in a transfer of funds from one qualified plan into another. Rollovers, however, involve a 20% withholding. Once the rollover takes place to the new custodian, the remainder of the distribution is made.

An agent will be personally liable for claims originating from any insurance policies

sold by the agent for companies NOT authorized to conduct business in North Carolina. An agent will be personally liable for claims originating from any insurance policies sold by the agent for companies NOT authorized to conduct business in North Carolina.

If an agent is found to be incompetent, untrustworthy, or financially irresponsible, the Commissioner of Insurance may

suspend, revoke, or refuse to renew the agent's license. If the Commissioner of Insurance finds that a licensed person has used fraudulent, coercive, or dishonest practices or has proved to be incompetent, untrustworthy, or financially irresponsible, the law allows the Commissioner to suspend, revoke, or refuse to renew the agent's license.

An individual who purchases a Life annuity is given protection against:

the risk of living longer than expected. A Life annuity offers protection against the risk of living longer than anticipated.

An agent inducing an insured to lapse, forfeit, or surrender insurance through misrepresentation is committing the illegal act of

twisting. Twisting is inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance.

How long does an individual have to "rollover" funds from an IRA or qualified plan?

60 days. In IRA's and qualified plans, the time limit for rollover funds is 60 days, or the funds could be subjected to income taxes and a penalty tax.

Which of the following statements about noncontributory employee group life insurance is FALSE?

A minimum number of employees is required to participate. Noncontributory employee group life insurance plans must cover ALL eligible employees at all times. True Statements: 1) All eligible employees must be covered. 2) No evidence of insurability required. 3) Must have conversion rights.

What does the insuring agreement in a Life insurance contract establish?

An insurer's basic promise. The insuring agreement in a Life insurance contract establishes the basic promise of the insurance company.

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):

Anti-Money Laundering violation. When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for an Anti-Money Laundering violation.

When does a Probationary Period provision become effective in a health insurance contract?

At the policy's inception. The probationary period begins when a policy goes into effect. During this period, no benefits will be paid under the policy.

A Major Medical policy typically contains a provision that requires the insurer to pay only part of a loss, while the balance is paid by the insured. This provision is called

Coinsurance. The provision in a Major Medical policy that requires the insurance company pay only part of a loss and the insured to pay the balance is known as coinsurance.

Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?

Commercial insurer. Commercial health insurance companies use the reimbursement approach, which allows policyowners to seek medical treatment then submit the charges to the insurer for reimbursement.

XYZ insurance Company would like to begin conducting business in NC. Before XYZ can issues or deliver a Health policy, the form, classifications of risks, and premium rates MUST be filed with the

Commissioner of Insurance Before an insurance policy is issued or delivered, the form, classification of risks, and premium rates must be filed with the Commissioner of Insurance.

XYZ insurance Company would like to begin conducting business in North Carolina. Before XYZ can issue or deliver an insurance policy, the form, classification of risks, and premium rates MUST be filed with the

Commissioner of Insurance. Before an insurance policy is issued or delivered, the form, classification of risks, and premium rates must be filed with the Commissioner of Insurance.

Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurer has the right to change the premium rate for the overall risk class?

Guaranteed Renewable. The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specified age. These usually have increasing premiums.

Which of the following MUST be included with the continuation of coverage of a group Hospital, Surgical, and Major Medical policy?

Hospital expenses. Continuation of coverage of a group Hospital, Surgical, and Major Medical Policy MUST include hospital expenses.

Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year. Z will become eligible to receive benefits starting on:

March 1. The elimination period is the period of time between the onset of a disability, and the time you are eligible for benefits. It is best thought of as a deductible period for your policy. After a 30-day Elimination period, Z will become eligible for receiving benefits on March 1.

Which of the following statements is correct regarding an employer/employee group health plan?

The employer receives a master policy and the employees receive certificates. Under an employer/employee group health plan the employer receives a master policy and the employees receive certificates.

The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is:

Time Limit on Certain Defenses. This provision limits the period during which an insurer can deny a claim based on a misstatement made by the insured.

If a dispute arises over an insurance contract, the agent who sold the policy is considered to represent the

company. If a dispute arises over an insurance contract, the agent who sold the policy is considered to represent the insurance company.

T circulated false statements that were maliciously critical of an insurer's financial condition. T may be found guilty of

defamation. A person who issues false written or oral statements that are maliciously critical of the financial condition of an insurance company may be found guilty of defamation.

An agent who illegally discounts insurance premium is said to be engaged in

rebating. An agent involved in illegally discounting insurance premium is said to be engaged in rebating.

The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:

the cost. The cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.

Under a Graded Premium Whole Life policy,

the premium increases each year during the early years of the contract and remains the same after that time. With a graded premium whole life policy, the premium increases each year during the early years of the contract (usually five years) and remains the same after that time.

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?

Irrevocable beneficiary. An irrevocable designation may not be changed without the written consent of the beneficiary.

For which of the following expenses does a Basic Hospital policy pay?

Hospital room and board. A Basic Hospital policy pays expenses for hospital room and board, as well as other miscellaneous medical expenses incurred during hospitalization.

According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?

Monthly. The time of payment for claims is usually specified in different policies as 60 days, 45 days, or 30 days. However, if the claim involves disability income benefits, the benefits must be paid not less frequently than monthly.

Which of the following is TRUE about a qualified retirement that is "top heavy"?

More than 60% of plan assets are in key employee accounts. A plan is considered to be top heavy if more than 60% of plan assets are attributable to "key employees" as of the last day of the prior plan year.

R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?

Residual Disability. A residual disability benefit is usually a percentage of the total disability benefit for periods when the insured is unable to perform some of the duties of his/her occupation.

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification. Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.

Group/voluntary long-term care policy premiums are typically deducted from the employee's income and,

are less costly as compared to individual long term care coverage. The premiums on a group/voluntary policy are usually deducted from an employee's wages and are generally lower than the premiums on an individual policy.

Under a Graded Premium policy, the premiums

are lower during the policy's early years. A Graded Premium life policy provides for annual increases in premiums for a constant face amount of insurance during a defined preliminary period, with the purpose of making initial payments more affordable. The premium increases each year during the early years of the contract (usually five years) and remains the same after that time.

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

at future dates specified in the contract with no evidence of insurability required. This rider provides specific dates on which additional life insurance policies can be bought without providing proof of insurability.

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):

Accidental Death and Dismemberment rider (AD&D). An Accidental Death and Dismemberment (AD&D) rider provides an additional death benefit for a limited period of time at the lowest possible cost.

Which of the following is an important underwriting principle of group life insurance?

Everyone must be covered in the group. An important underwriting principle of group life is that all or a large percentage of persons in the group must be covered by the insurance.

An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider?

Long term care. A long term care rider is triggered by the insured's inability to perform two or more activities of daily living.

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called:

Reinstatement. In cases where a policyowner wishes to reinstate a lapsed policy, the reinstatement provision allows the policyowner to do so with some limitations.

Which of these provisions require proof of insurability after a policy has lapsed?

Reinstatement. Most insurers require evidence of insurability be provided upon reinstatement of a lapsed policy.

D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?

Residual Benefit clause. A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company.

Which of the following is considered an element of a Variable Life Policy?

Underlying equity investment. One characteristic of a Variable Life policy is it contains an underlying equity investment.

Which of the following BEST describes how pre-admission certification is used?

Used to prevent nonessential medical costs. Pre-admission certification is used to prevent unnecessary medical costs.

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met. A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.

According to the Affordable Care Act (ACA), a dependent child's eligibility status is determined by

age. Under the Affordable Care Act, dependent children are covered up until age 26.