Chapter 7: (Health)

P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax? $20,000 $14,000 $6,000 $0

$0

Which mode of payment is NOT used by health insurance policies? Monthly premium Annual premium Single premium Semi-annual premium

Single premium

Which of the following statements about the classification of applicants is INCORRECT? Substandard applicants are never declined by underwriters Substandard applicants are occasionally declined by underwriters Preferred risk applicants typically have better premium rates than standard risk applicants An applicant can be classified as substandard risk because of a hazardous job

Substandard applicants are never declined by underwriters

Pre-hospitalization authorization is considered an example of... managed care PPO care Medicaid Major Medical insurance

managed care

Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy? Issue the policy with a diabetes exclusion Issue the policy with an altered Time of Payment of Claims provision Issue the policy with a rating Decline the applicant

Issue the policy with an altered Time of Payment of Claims provision

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company

T is receiving $3,000/month from a Disability Income policy in which T's employer had paid the premiums. How are the $3,000 benefit payments taxable? Benefits are taxable to T Benefits are tax-free to T Benefits are partially taxable to T Benefits are taxable to T's employer

Benefits are taxable to T

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? Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company Cross off his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company Deposit the check in to his personal account, use the funds to purchase a cashiers check, and send the new cashiers check back to the insurance company

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

A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take? Send the initial premium back to the applicant Send a notice to the applicant that the coverage was declined Send a notice to the MIB that the applicant was declined Send a notice to the agent that the applicant was declined

Send a notice to the MIB that the applicant was declined

Which of the following BEST describes how pre-admission certifications are used? Used to assist in underwriting Used to prevent nonessential medical costs Used to minimize hospital lawsuits Used to help process claims

Used to prevent nonessential medical costs