Chapter 20 Exam: California Laws and Ethics Pertinent to Insurance
The free-look period for life insurance policy owners age 60 or older is __________. A) 10 days B) 15 days C) 30 days D) 60 days
C) 30 days
Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)? A) pregnancy B) adoption C) traveling overseas with a spouse D) attending to the serious health condition of a parent
C) traveling overseas with a spouse
An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n) _____________. A) felony B) misdemeanor C) unfair method of competition D) unauthorized trade practic
C) unfair method of competition
A person who asserts a right of recovery under an insurance policy is called A) tertiary B) claimant C) insured D) agent
B) claimant
In California, an insurer organized under the state laws of Oregon is called a(n) A) unauthorized insurer B) foreign insurer C) alien insurer D) domestic insurer
B) foreign insurer
Which of the following acts is NOT a Federal offense committed by an insurance agent? A) Embezzlement B) Insurance fraud C) Misrepresentation on an insurance application D) Falsity records
C) Misrepresentation on an insurance application
The California Insurance Code allows an individual how many days to cancel a life policy for a full-refund? -Up to 10 days -Between 15 and 20 days -Between 1 0 and 30 days -Between 30 and 45 days
-Between 1 0 and 30 days
Both the Federal and state governments jointly finance which health insurance entitlement program? -Medi-Cal -MRMIP -Medicare -Social Security
-Medi-Cal Note: Medi-Cal is a health entitlement program jointlyfinanced by the Federal and state governments.
Anyone employed in California to assist an insurance agent intransacting insurance is called an insurance -assistant -solicitor -manager -consultant
-solicitor
An insurer that has been found using higher rates based on race,religion, or ethnicity is said to be engaging in -unfair discrimination -rebating -twisting -defamation
-unfair discrimination Note: It is an illegal practice to unfairly discriminateagainst a person in any way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the issuance of life insurance policies, which is based on mortality. Also, no insurer or agent may cancel or refuse to underwrite or renew a particular insurance risk based on race, color, creed, sex, sexual orientation, or blindness of an applicant or policyholder.
The California Insurance Code defines "policy" as a(n) -accepted offer -promissory arrangement -written contract -written quotation
-written contract Note: A "policy" as described by the CaliforniaInsurance Code is a written contract in which one party promises to indemnify another against loss that arises from an unknown event.
When an insurer has met the qualifications necessary to transact business in California, it is said to be A) admitted B) valid C) authorized D) qualified
A) admitted
According to PPACA, what is a health benefits exchange? A) an entity to which individuals and small businesses can have access to affordable health coverage B) an entity where existing policies can be converted to newer policies C) an entity that provides tax credits to employers for providing health insurance to their employees D) an entity that offers affordable health coverage to only those with low incomes
A) an entity to which individuals and small businesses can have access to affordable health coverage
How long must a policy be in force before an insurer is prohibited from denying claims based on misstatements made on the health policy application? A) 3 years B) 2 years C) 5 years D) 6 years
B) 2 years
What is the purpose of the Pre-Existing Condition Insurance Plan (PCIP)? A) PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions B) PCIP was created by the State of California for people rejected by private health insurers due to pre-existing conditions C) PCIP was created by the PPACA for low income individuals hoping to obtain health insurance D) PCIP was created by the State of California for low income individuals hoping to obtain health insurance
A) PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions
What is the insurance term the State of California uses for an insurer that is eligible to transact business in this state? A) Admitted B) Eligible C) Authorized D) Valid
A) Admitted Note: The insurance term for an insurer which has met the conditions required to transact business in the State of California is "admitted".
Which of the following is NOT considered to be an unfair claims settlement practice? A) Advising a claimant to hire an attorney B) Failing to provide a reasonable basis for the denial of a claim upon request C) Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims D) Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue
A) Advising a claimant to hire an attorney Note: Directly advising a claimant to hire an attorney is not an unfair claims settlement practice.
According to the California Insurance Code, which of the following is NOT an example of an insurable event? A) An insured suffers a financial loss in the state lottery B).A guest is injured by a fall from the insured's driveway C) An insured is sued for unintentional slander of another person D) An insured is admitted to the hospital for delivery of a newborn
A) An insured suffers a financial loss in the state lottery
Which entity has jurisdiction over health care coverage providers? A) Department of Insurance B) HiCap C) MRMIP D) California Life and Health Guarantee Association
A) Department of Insurance
What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? A) Incontestability clause B) Free-look provision C) Grace period provision D) Subrogation
A) Incontestability clause Note: Insurers are prohibited from denying claims orrescinding a policy based on misstatements in a life, accident, or disability policy application after the policy has been in force for two years. The is called the incontestability clause.
Which word implies permissiveness according to the California Insurance Code? A) May B) Indemnity C) Admitted D) Shall
A) May
People with low income can be provided with medical assistance through which program? A) Medi-Cal B) Social Security C) HSA D) Medicare
A) Medi-Cal Note: Medi-Cal is California's Medicaid health care program, designed to provide medical assistance to people with low incomes.
What is required after a life agent sells an insurance policy to anapplicant without being appointed by the insurer? A) Notice of appointment must be submitted to the Commissioner B) Notice of appointment must be submitted to the insurer C) Penalty is assessed to the insurer and life agent D) Application is automatically turned away
A) Notice of appointment must be submitted to the Commissioner Note: If a life agent sells an insurance policy on behalf of an insurer without an appointment, the insurer must submit a notice of appointment to the Commissioner within 14 days.
When intentional concealment is involved, what course of action is the injured party entitled to? A) Rescission of the contract B) Punitive damages C) Reduction in premium D) Nothing
A) Rescission of the contract Note: Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance.
In what order are people on the MRMIP waiting list allowed to enroll? A) based on the date an individual's application is received B) priority is given to California residents C) based on the individual's date of birth D) priority is given to those with the most serious health issues
A) based on the date an individual's application is received
Before an insurer is allowed to test an individual for HIV, what must be completed? A) consent form B) policy summary C) buyer's guide D) certification form
A) consent form
According to the California Insurance Code, what is "insurance"? A) contract B) A transfer C) A hazard D) An agreement
A) contract Note: According to the California Insurance Code, "insurance" is a contract to indemnify against loss.
According to the California code governing claim settlement practices, which of the following is NOT considered to be an act of unfair discrimination? (On test) A) denial of a claim based on reckless behavior B) denial of a claim based on sexual orientation C) denial of a claim based on color D) denial of a claim based on blindness
A) denial of a claim based on reckless behavior
Which of the following does the California Insurance Code NOT require an insurance policy to specify? A) insurer's financial rating B) policy period C) premium D) what or who is being insured
A) insurer's financial rating
Which of the following does the California Department of Insurance (CDI) have NO jurisdiction over? A) medicare B) health maintenance organizations C) preferred provider organizations D) life and health insurance companies
A) medicare
According to section 1729.2 of the California Insurance Code, which of these does NOT qualify as "background information?" A) misdemeanor charges filed, not resulting in a conviction B) a breach of fiduciary duty C) a filing of felony criminal charges in state or federal court D) an administrative action regarding a professional or occupational license
A) misdemeanor charges filed, not resulting in a conviction
MRMIP is a A) state program that offers health coverage to California residents who are not able to obtain coverage due to pre-existing conditions B) state program that assists single parents obtain affordable health coverage for their children C) Federal program that offers health coverage to California residents who are not able to obtain coverage due to pre-existing conditions D) Federal program that gives tax credits to help offset the cost of health insurance
A) state program that offers health coverage to California residents who are not able to obtain coverage due to pre-existing conditions Note: MRMIP is California's insurance program for people with serious health problems /pre-existing conditions who are not able to buy individual health insurance.
According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwillfully commits an unfair method of competition? A) 1000 B) $5,000 C) 7000 D) 10000
B) $5,000
How long must a policy be in force before an insurer is prohibited from denying claims based on misstatements made on the health policy application? A) 1 year B) 2 years C) 3 years D) 4 years
B) 2 years
When selling a long term care insurance rider to an applicant, a life agent must take into consideration all of these factors, EXCEPT A) Ability to pay B) Attending physician's statement C) Needs of the client D) Goals of the client
B) Attending physician's statement Note: During the solicitation of a long term care insurance rider, a life agent must consider all of these EXCEPT an attending physician's statement.
When handling premiums for an insured, an agent is acting in which capacity? A) Adhesion B) Fiduciary C) Conditional D) Aleatory
B) Fiduciary Note: an agent is acting as an insurance agent, broker, solicitor, life agent, or bail agent acts in fiduciary capacity when handling premiums or return premiums.
The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount? A) 50% of its stock value B) Its paid-in capital C) $10,000,000 D) Amount determined by the Insurance Guarantee Association
B) Its paid-in capital Note: In order to be solvent, an insurer must not only be able to provide for its liabilities and reinsure capital risks, but must also possess additional assets equivalent to the required paid-in capital.
Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct? A) Jim is not required to disclose the conviction on his insurance license application B) Jim must still disclose the conviction on his insurance license application C) Only convictions that have been expunged within the last 3 years need to be reported on an insurance license application D) Only expunged felonies are required to be reported on an insurance license application
B) Jim must still disclose the conviction on his insurance license application Note: Pursuant to California Penal Code Section 1203.4, you are required to report a conviction that was later expunged.
MRMIP stands for A) Minor Risk Medical Insurance Program B) Major Risk Medical Insurance Program C) Major Rehabilitation Medical Indemnity Plan D) Minor Rehabilatioon Medical Insurance Plan
B) Major Risk Medical Insurance Program Note: MRMIP stands for Major Risk Medical Insurance Program and is a program designed to provide health insurance for individuals who cannot obtain health coverage on the open market because of their medical conditions.
According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium? A) Guarantee B) Materiality C) Absolute D) Warranty
B) Materiality Note: Materiality is relevant information that would probably influence an insurer's assessment of a proposed contract.
How many "activities of daily living" must an insured be UNABLE to perform in order to meet the chronically ill requirement of a Long-Term Care policy? A) Minimum of one activity of daily living B) Minimum of two activities of daily living C) Minimum of three activities of daily living D) Minimum of four activities of daily living
B) Minimum of two activities of daily living
What effect did the Pregnancy Discrimination Act have on the health industry? A) Pregnancy qualifies a women for paid leave from work B) Pregnancy must be treated as any other medical condition C) Pregnancy benefits can no longer be forced on employers D) No effect on the health industry
B) Pregnancy must be treated as any other medical condition
Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors? A) medical record keeping assistance B) charge a fee C) assist in policy evaluation D) assist in understanding medicare supplements
B) charge a fee
According to the PPACA, the medical enrollment tier that has 80% actuarial value is called ______. A) platinum B) gold C) silver D) bronze
B) gold
Which of the following is NOT a valid reason to replace an existing long-term care policy? A) new policy has better benefits B) new policy has higher premium with fewer benefits C) new policy has lower premium D) insured's condition has materially improved
B) new policy has higher premium with fewer benefits
Any changes in background information that occur after a producer application has been submitted or a license has been issued MUST be reported to the Insurance Commissioner within ____________. A) 10 days B) 20 days C) 30 days D) 40 days
C) 30 days
What is an "insurance broker" according to California Insurance Code? A) A person who offers or attempts to negotiate life settlement contracts between an owner and providers B) A person authorized to assist a broker or agent in transacting insurance. C) A person compensated for transacting insurance on behalf of another person with an insurer D) A person who requires a license and charges a fee to review an insured's existing life or disability policy.
C) A person compensated for transacting insurance on behalf of another person with an insurer
How is an agent's first year commission calculated for a replacement long-term policy? A) Based on the new policy's annual premium B) based on the original policy's annual premium C) Based on the difference between the new and original policy annual premiums D) The new policy's commission minus a penalty
C) Based on the difference between the new and original policy annual premiums
Where must you specifically reside to qualify for MRMIP? A) North America B) United States C) California D) California and its reciprocal states
C) California Note: You must be a resident of California to participate in MRMIP.
An insurance policy issued in California may be called a comprehensive long-term care insurance policy if benefits are provided for A) Respite care only B) Home care only C) Institutional (nursing facilities) and home care D) Loss of life
C) Institutional (nursing facilities) and home care
According to the California Insurance Code, who is responsible for submitting a life agent's appointment? A) Life agent B) Commissioner C) Insurer D) State
C) Insurer
The California Insurance Code has authorized standards for names used by life insurance agents. Which of the following, if any, are automatically acceptable for Lance Manyon, a holder of the CLU designation? A) Lance Manyon Insurer B) Lance Manyon Best But Insurance Company C) Lance Manyon Insurance Services D) Manyon Indemity Company
C) Lance Manyon Insurance Services
What type of license is required for an individual who charges a fee to review an insured's existing life insurance policy? A) Adjuster B) Life and disability counselor C) Life and disability analyst D) Life agent
C) Life and disability analyst Note: A life and disability insurance analyst license isrequired to review an insured's existing life or disability policy for a fee.
Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? A) Prior approval B) File and use C) Prior approval D) State approval
C) Prior approval Note: A prior approval state requires that an insurance company receives approval for a new insurance rate before it is sent to the public
Which of the following does NOT have to be included on life insurance policy illustrations? A) Age of the insured B) Name of the agent C) Statement that all values and benefits are guaranteed D) Name of the insurer
C) Statement that all values and benefits are guaranteed Note: Not all benefits and values are guaranteed in life insurance policies. Some have nonguaranteed values which must be described in the illustration.
Why is a life insurance policy's delivery date important? A) The probationary period begins on the policy delivery date B) The elimination period begins on the policy delivery date C) The free-look period begins on the policy delivery date D) The grace period begins on the policy delivery date
C) The free-look period begins on the policy delivery date Note: The California Insurance Code gives an individual between 1 0 and 30 days to return a life policy for cancellation. This free-look period begins on the policy delivery date.
Under the California Insurance Code, a licensee's license number must be printed at what size on all price quotes, business cards, and printed material? A) minimum 8 point font B) Small print added as a footnote at the bottom of the material C) The same size print as the licensee's phone number, fax number or address D) There are no requirement for the license number to be printed on any printed material
C) The same size print as the licensee's phone number, fax number or address
What does the term "indemnity" mean as it pertains to insurance? A) To over- insure B) To award punitive damages C) To make whole D) To assume risk
C) To make whole
According to PPACA, how long can an adult be covered as a dependent under their parents' insurance plan? A) Up to age 18 B) Up to age 21 C) Up to age 26 D) Up to age 30
C) Up to age 26
An insurance company entitled to transact business in California is called a(n) A) authorized carrier B) permitted carrier C) admitted carrier D) valid carrier
C) admitted carrier
An agent's attempt to stop the replacement of an existing life insurance policy is known as A) preservation B) prevention C) conservation D) concealment
C) conservation Note: An agent's attempt to stop the replacement of an existing life insurance policy is known as conservation.
An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n): A) adjuster B) analyst C) life agent D) insurance solicitor
C) life agent
A representation may be altered or withdrawn A) anytime with the applicant's initials B) anytime with the insurer's approval C) only before the insurance is in effect D) only after the policy has been issued
C) only before the insurance is in effect
Kimberly is an employee on leave under the Family and Medical Leave Act (FMLA). What will happen to her group health coverage? A) she will have to purchase short-term health coverage through the State while on leave B) her coverage will be temporarily suspended while she is on leave C) she continues to be enrolled during the leave D) she will be forced to convert her group plan to an individual plan
C) she continues to be enrolled during the leave
All of these are reasons the Commissioner may disapprove a licensee's request to use a fictitious name EXCEPT ________. A) the name is too similar to a name already filed and in use by another licensee B) the use of the name may mislead the public in any respect C) the name is the licensee's actual name D) the name states, infers or implies that the licensee is an insurance company
C) the name is the licensee's actual name
ABC Insurance Company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and $20,000 for physical therapy treatments. ABC later discovers this was a fraudulent claim. How much may the insured be fined? A) $65,000 B) $85,000 C) $150,000 D) $170,000
D) $170,000
According to the PPACA, an adult can be covered by a parent's health care plan until what age? A) Age 18 B) Age 21 C) Age 25 D) Age 26
D) Age 26
Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to A) Fine B) Suspension C) Denial D) All of these
D) All of these
Life insurance surplus must be distributed to policyowners at what frequency? (Important) A) Monthly B) Quarterly C) Semi-annually D) Annually
D) Annually Note: Life insurance surplus must be distributed to policyowners annually in a participating policy.
What is an insurance solicitor authorized to do? A) Settle life insurance claims B) Manage an insurance agency C) Solicit insurance D) Help an agent or broker sell insurance
D) Help an agent or broker sell insurance
Which of the following is NOT protected under the California Life and Health Guarantee Association? A) Policyowners B) Insureds C) Primary beneficiaries D) Insurers
D) Insurers Note: All of these are provided protection through the California Life and Health Guarantee Association except for insurers.
Which of the following is NOT a primary objective of insuranceregulation? A) Insurance Code enforcement B) Licensing agents C) Protect policyowners D) Interpret policy provisions
D) Interpret policy provisions
Which of the following is NOT an accurate description of Access for Infants and Mothers Program (AIM)? A) Eligibility is based on income B) Low-cost health care coverage for pregnant women C) Only women who have private insurance plans with a maternity-only deductible or co payment greater than $500 are eligible D) Only women who have private insurance plans with a maternity-only deductible or co payment greater than $1,500 are eligible
D) Only women who have private insurance plans with a maternity-only deductible or co payment greater than $1,500 are eligible Note: All of these statements are true regarding the AIM Program EXCEPT "Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible". AIM is available to women who have private health insurance plans with a maternity-only deductible or copay greater than $500.
According to the California Insurance Code, how is the word "may" interpreted? A) Irrevocable B) Mandatory C) Voluntary D) Permissive
D) Permissive
Insurance agents and brokers must make their insurance records available to the Commissioner ____________. A) only during the first month of the year B) only during the last month of the year C) only at the agent/broker's convenience D) at all times
D) at all times
In California, the elderly can receive information about health related issues from? A) Medi-cal B) medicare C) major risk medical insurance program (MRMIP) D) health insurance counseling and advocacy program (HiCAP)
D) health insurance counseling and advocacy program (HiCAP)
What does a life settlement broker represent? A) insurance company B) life agent C) private firm D) individual wanting to sell their life policy to a third party
D) individual wanting to sell their life policy to a third party
The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is A) $25 per appointment B) $50 per appointment C) $75 per appointment D) no cost
D) no cost Note: HiCap services are mandated by Federal and State laws and are free and unbiased.
What does the term "illustration" mean when used in the phrase "life insurance policy illustration," according to the California Insurance Code? A) publication designed to help an applicant reach an informed decision about which coverage is appropriate B) a copy of the sales materials used in an insurance transaction C) a copy of the terms given for the free-look period D) presentation of policy features that includes non-guaranteed elements
D) presentation of policy features that includes non-guaranteed elements
Which of the following is NOT considered to be an act of insurance solicitation? A) an agency sending out direct mail for a promotion B) an agent giving a rate quotation C) airing a television commercial recommending an insurance product D) publishing a magazine where one of the advertisers is an insurer
D) publishing a magazine where one of the advertisers is an insurer
The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT _________. A) whole life B) immediate annuities C) disability D) self-funded plans
D) self-funded plans
Pete is a life insurance agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of? A) fiduciary misappropriation B) rebating C) mishandling D) theft
D) theft
Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n) __________. A) illegal transaction B) immediate annuity C) deferred annuity D) unnecessary replacement
D) unnecessary replacement