Comprehensive Exam

After enrolling in Medicare and purchasing a supplement, Rachel withdrew $2,000 from her HSA. She used $600 to pay her Medicare Supplement premium, $200 for out-of- pocket medical expenses, and the remaining $1,200 on a trip to celebrate her retirement. When preparing her taxes for the year, she discovered that:

$1,200 was subject to income tax Rachel must pay income tax on the $1,200, but not the 20% penalty, because she is at least 65 years of age, as indicated by the fact that she was eligible for Medicare, a Medicare supplement and retired.

Nathan is insured under a group disability plan which requires that he pay 1/3 of the premium. Nathan is currently drawing a $6,000 monthly benefit from the plan. How much of the $6,000 is subject to income tax?

$4,000 Since the employer pays 2/3 of the monthly premium, then 2/3 of the monthly benefit ($4,000) would be taxable as income to Nathan.

Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax?

$7,500 Jay is covered under a contributory plan in which the employer is contributing 75% of the premium, so 75% of the $10,000 benefit ($7,500) is subject to income tax.

What is the maximum allowable percentage of life insurance policy ownership an insured may transfer under an assignment?

100% Life insurance policies are permitted to contain a provision that allows the transfer or assignment of up to 100% ownership or rights of the policy, benefits, or proceeds.

Z elects the life refund settlement option for a $250,000 death benefit. Z lives long enough to recover $150,000 of the $250,000 death benefit. How much does his beneficiary receive?

100,000 With Life Refund, payments are made for the lifetime of the recipient. Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary, either in a lump sum (cash refund), or in installments (installment refund).

After passing the licensing exam in Texas, what is the maximum time an applicant has to submit an application to the Department of Insurance?

12 months To obtain a license, the applicant must submit an application within 12 months of passing the state exam.

If the Texas Department of Insurance addresses a reasonable inquiry made to an insurer, the insurer must respond in writing no later than how many days after receipt?

15 Any person receiving such an inquiry must respond to it in writing no later than 15 days after receipt, unless the person submits a written notice to the Department requesting additional time to respond.

In Texas, if a buyer's guide and the disclosure document are not provided at or before the time of application for a life insurance policy, how long is the applicant's free look period?

15 days If a buyer's guide and the disclosure document are not provided at or before the time of applicant, a free look period of at least 15 calendar days must be provided.

A typical life insurance application contains how many parts?

2 A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information.

COBRA applies to employers with:

20 or more employees COBRA states that employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents.

If a person discovers that a fraudulent insurance act has been committed in Texas, that person must file a written report with the Department's insurance fraud unit within how many days?

30 If any person discovers or reasonably suspects that a fraudulent insurance act has been committed, or will be committed, the person must file a written report with the Department's insurance fraud unit or the National Association of Insurance Commissioners within 30 days.

How many days' notice must the Commissioner give before holding a hearing regarding a request to contest a cease and desist order issued in Texas?

30 The Commissioner must give at least 30 days' advance notice of a hearing requested to contest a cease and desist order.

The Department of Insurance must examine each insurance company at least once every ______ years.

5 The Department will examine the insurer's financial condition and legal compliance at least every 5 years, and at any other time as necessary.

Under Nonforfeiture Law, a cash surrender payment may be deferred up to:

6 months Under Nonforfeiture Law, the insurer reserves the right to defer payment of any cash surrender value for a period of 6 months after demand for payment and surrender of the policy.

Which of the following is the correct number of days in the grace period for each premium mode?

7 days for weekly, 10 days for monthly, 31 for all others According to the Grace Period Provision (a Mandatory Uniform Provision), this is the correct response.

The Department may issue a temporary agent's license, valid for ______ days.

90 A temporary license may not be issued to a person who does not intend to apply for a license to sell insurance to the general public, and once issued, it is valid for 90 days.

Which of the following is an example of a collateral assignment?

A business using a life insurance policy to secure a bank loan A collateral assignment is typically used when an insurance policy is used as collateral for a loan. This is a temporary assignment until the debt is paid in full.

Which of the following does not describe an eligible group for group life insurance in TX?

A group consisting exclusively of persons related by marriage or blood Employer groups, labor unions, government entities including dependents, and creditor groups are eligible. A group consistently exclusively of persons related by blood or marriage is not an eligible group by itself.

Which of the following actions is an example of commingling?

A producer deposits premium funds into their personal account Commingling is an unethical act of mixing personal funds with funds belonging to the insurance company. Depositing premium funds into a personal account is an example of commingling.

Part B of Medicare excludes which of the following medical expenses?

A regular dental checkup Part B does not cover routine dental services.

Which of the following is not a nonforfeiture benefit that is required to be offered in conjunction with a LTC rider?

Accumulate at interest Accumulate at interest is a settlement option, not a nonforfeiture option. An LTC policy must offer at least one nonforfeiture benefit option: reduced paid-up, extended terms, shortened benefit period, or another offer approved by the U.S. Secretary of Health and Human Services.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds?

Alice's estate With no surviving beneficiaries, the policy proceeds go to Alice's estate.

All states have adopted the Uniform Individual Accident and Sickness Policy Provision Law. If an insurer changes any of these provisions, they must make sure it does not:

Alter the minimum requirements of any provision The insurer must assure that any variation must be at least as favorable as the original wording, and no mandatory provision may be deleted if applicable to the coverage.

A license may be suspended or revoked in TX for which of the following?

An agent is actively engaged in soliciting insurance only to family members An agent will have a license suspended or revoked if only soliciting or writing insurance on family members.

The Attending Physician's Statement (APS) is completed by:

An applicant's physician to provide information about the applicant's medical history An Attending Physician's Statement (APS) is used in cases where the individual application and/or medical reports reveal conditions for which more information is required. The treating physician will provide information regarding the medical history of the applicant. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.

An insured owns a whole life policy that ends at age 100 and lives to be 100 years of age. Why does the insurer pay the face value to the insured?

An insured owns a whole life policy that ends at age 100 and lives to be 100 years of age. Why does the insurer pay the face value to the insured? Older Whole Life policies are structured to endow (i.e. mature) at age 100. At endowment, the cash value equals the death benefit. Policies written under the 2001 CSO Mortality tables endow at age 121.

Which of the following is considered false advertising?

An insurer exaggerates its dividends in statements published in a newspaper While all choices are considered violations, advertising only applies to untrue information placed before the public, such as in a newspaper.

Which of the following is the overall least expensive premium mode?

Annually The less frequent the mode of payment, the lower the overall cost.

A licensed life insurance agent in Texas can share commissions with which of the following?

Another licensed life insurance agent in Texas who assisted with the sale An insurer or agent may not pay to another person, or accept from another person, a commission or other valuable consideration unless such person holds a license to act as an agent in the same line of insurance in this state. Insurance counselors cannot charge a fee and get paid commission, and temporary licensees cannot get paid commission.

The Department may issue a temporary agent license to a/an:

Applicant who is sponsored for an appointment by an insurance company A temporary license will be issued to an applicant who meets specific requirements and is appointed by an agent, insurance company, or HMO.

Which of the following statements about continuing education is true?

At least 50% of continuing education hours must be completed in a classroom or classroom equivalent setting At least 50% of continuing education hours must be completed in a classroom or classroom equivalent setting. Licensees must complete 3 hours of ethics, 24 CE hours per person (not per license) and they must be completed BEFORE the expiration date.

Which type of policy determines benefits based on a relative value scale?

Basic surgical expense Basic surgical expense plans determine benefits based on either a surgical schedule or a relative value scale, which assigns a value to a procedure with the highest level of difficulty and benefits for all other covered procedures are based on a percentage.

The Texas Department of Insurance requires all licensees to:

Be honest, trustworthy, and reliable Since the relationship between licensees and the public is one of trust, the Department requires all licensees to be honest, trustworthy and reliable.

Which of the following is true of Medicare Part B?

Benefits are funded by a combination of taxes and premium dollars and coverage is elective Part B - Medical Insurance (Outpatient) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.

What type of disability income insurance provides funds to cover business expenses when the business owner becomes disabled?

Business overhead expense Business Overhead Expense provides the funds to cover the overhead expenses of a business when the owner becomes disabled. The benefits include expenses such as office rent, utilities, and employee labor. The owner cannot collect loss of income under this policy, however.

The HMO provider is paid a set fee per enrollee, known as a:

Capitation fee Typically, the HMO provider is paid a set fee, known as a capitation fee, per enrollee.

A transfer of legal right can be made by the owner of a life insurance policy through which of the following?

Collateral or absolute assignment The transfer of legal rights and benefits can be made through either a collateral assignment or an absolute assignment.

What provision establishes that if both the insured and the primary beneficiary die in the same accident, and it cannot be determined who died first, the insured will be presumed to have survived the beneficiary and proceeds will be paid to a named contingent beneficiary of the insured, or to the insured's estate?

Common Disaster Clause The Common Disaster Clause is designed to rule in such situations. If a contingent beneficiary is named and is alive, he or she receives the proceeds. Otherwise they are paid to the insured's estate.

When an individual is covered by more than one health plan and is injured, what provision determines which plan is that person's primary coverage?

Coordination of Benefits The Coordination of Benefits provision determines that a person's own employer-sponsored health plan is his/her primary coverage. However, if any plan fails to include a coordination of benefits provision, that plan would automatically be primary.

For a group health benefit plan issued in Texas, which of the following statements about chemical dependency coverage is true?

Coverage cannot be less favorable than coverage for physical illness Coverage for drug and alcohol treatment must be just as favorable as coverage provided for physical illness. Coverage must be subject to the same limits with respect to duration, dollar amount, deductibles, and coinsurance factors.

All states have adopted the Uniform Individual Accident and Sickness Policy Provision Law. If an insurer changes any of these provisions, it must make sure that the change does not:

Create a meaning that is less favorable to the insured than the original wording The insurer must assure that any variation must be at least as favorable as the original wording and no provision may be deleted.

________ Insured under Social Security means that a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age

Currently Currently Insured under Social Security means a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.

Level, decreasing and increasing term refer to which policy feature?

Death benefit The words level, decreasing and increasing as they apply to term insurance describe the death benefit, rather than the premium. Term life insurance has no cash value. Term life premiums can be level or increase, then never decrease.

Publishing or circulating information that is maliciously derogatory to the financial condition of an insurance company with the intent to injure is known as:

Defamation Defamation is the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance.

Edward applies for a disability insurance policy. He pays the initial premium at the time of application and receives a conditional receipt. Three days after the insurance company conducts a medical examination, but before it issues a policy, Edward suffers a stroke. Upon reviewing the results of his medical exam, the company discovers that Edward has been diagnosed with high blood pressure and atherosclerosis. Under the terms of the conditional receipt, the insurance company:

Denies the claim because the insurer would not have issued the policy as applied for as standard or better The insurer will deny the claim because they cannot issue the policy as written. If the insurer chooses to issue a policy, it will either be a rated/substandard policy or a standard policy with an exclusion for Edward's medical condition.

The owner of an annuity may do all of the following, except:

Determine the contract's interest credit The owner's rights begin at the time of purchase. An owner, who may also be the annuitant, may change the annuity date, beneficiary, and payout option.

The Commissioner may examine the records of an insurance company for the purpose of:

Determining solvency The primary purpose of examining the records of an insurance company is to review the financial condition of an insurer and determine solvency.

All of the following are common exclusions, except:

Driving Driving is not considered in and of itself an exclusion.

Concerning the Paid-Up Additions Dividend Option, all of the following are true, except:

Eventually, no more premiums will be due on the policy The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid in the future. Paid up additions do not eliminate need to pay premiums on the original policy.

Which of the following statements about continuing education is true?

Every licensee must complete 3 continuing education hours on the topic of ethics Each licensed individual must complete 3 continuing education hours on the topic of ethics during every license renewal period.

Which individual policy standard provision stipulates the conditions under which the insurer will not pay a claim while the policy was in force at the time of death of the insured?

Exclusions The exclusions provision specifies the conditions under which the insurer will not pay out a death claim if the insured dies while the policy is in force.

The State's __________ branch enforces the existing statutes that have been put in place.

Executive The State's executive branch enforces the existing statutes that have been put in place.

When an insurer relies on the prior claims history of the group to be insured in determining the rate to be charged, it is called:

Experience rating If an insurer bases premiums on the group's prior claims history, the coverage is said to be Experience Rated.

When a producer personally delivers a life insurance policy, they are responsible for doing which of the following?

Explain the policy policy benefits It is the producer's or agent's responsibility to deliver the policy, verify the insured has remained in good health (if the premium has not been paid), and explain the policy to be sure the insured understands the benefits, including endorsements and riders. A producer is not responsible for requesting a medical exam, explaining insurance laws, or collecting referrals.

The nonforfeiture option that provides coverage for the shortest duration is:

Extended Term Extended Term provides the most amount of coverage for the least amount of time. Reduced Paid-Up provides the least amount of coverage for the longest period of time. Convertible Term and Automatic Premium Loan are not nonforfeiture options.

Regarding Medicare Part B, which of the following is not true?

For citizens over the age of 65, there is no additional premium or cost Part B - Medical Insurance (Physicians, Surgeons, and Outpatient expenses) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.

An insurer authorized to do business in State A, which was incorporated in State B, is considered what type of insurer in State A?

Foreign The insurer would be domestic in State B and foreign in State A.

According to the Texas Insurance Code, an insurance company incorporated in New Mexico is a(n):

Foreign insurer A company incorporated in another state, such as New Mexico, is considered a foreign insurer.

Right to Examine is the same as:

Free Look Period Right to Examine, the Free Look Period, and the Owner's (or Insured's) Right of Rescission are all terms that means the same thing. A policy returned during the Free Look period is void, no claims are payable, and all premiums paid are refunded.

All of the following statements about life insurance policy provisions are correct, except:

If a policy lapses due to unpaid premiums, it may only be reinstated up to 2 years after lapse All life insurance policies that provide nonforfeiture benefits must include a provision that states if the policy lapses due to unpaid premiums, the policy may be reinstated within 3 years.

A temporary agent license may be issued in Texas:

If the agent is sponsored for an appointment by an insurer To receive a temporary license, an individual must submit an application that has a certificate signed by an agent, insurer, or HMO stating they want a temporary license to be issued to the individual. Before receiving the temporary license, the individual must also pay a nonrefundable fee and complete 40 hours of supervised training.

If an insured in Texas has dependents covered under their group life insurance policy, which of the following statements would be true?

If the insured dies, the dependents may continue their benefits A group life insurance policy that provides benefits for dependents of an insured may provide for continuation of any part of those benefits after the death of the insured individual. The amount of insurance on the life of the spouse or a child may not exceed the amount of insurance for which the insured is eligible under the policy.

With respect to advertising requirements in Texas, all of the following are allowable unless the insurer:

Includes the terms investment, savings plan, or profit sharing An advertisement may not include the terms savings, investment, investment plan, profit, profit sharing, interest plan, or other similar terms that imply that the product advertised is something other than life insurance or an annuity.

An insurer in Texas is required to provide information regarding a fraudulent claim to all of the following upon request, except:

Insurance agent Any government agency, including the Commissioner, local law enforcement agency, and the attorney general, may require information from an insurer who must provide the information within 15 days from receiving the written request. An insurance agent or the insured to not have the authority the require such information.

Mandatory uniform provisions found in health insurance policies are designed to protect the:

Insured The mandatory uniform provisions are designed to protect the insured's interests.

Optional uniform provisions found in health insurance policies are designed to protect the:

Insurer Optional Uniform Provisions are designed to protect the insurer.

Optional Uniform Provisions are included in the contract at the _______ option.

Insurer's The Optional Uniform Provisions are included at the insurer's option. However, if used, they must conform to that state's insurance code.

Ultimately, insurability of an applicant is determined by the

Insurer's home office underwriter Underwriting is the process of determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged. It is ultimately the home office underwriter's responsibility to determine if an individual meets the underwriting requirements of the insurer.

The MIB obtains its information from which of the following?

Insurers The primary purpose of the Medical Information Bureau (MIB) is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for coverage.

What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS?

Insurers may refuse to issue a policy to individuals based on positive HIV test results Insurers are required to maintain strict confidentiality of personal information obtained through testing and to obtain informed consent before testing for HIV. Unfair discrimination is never permitted.

Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability?

Insuring Clause The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.

A medical or physical exam requested by the underwriter to determine insurability:

Is performed by a licensed professional and includes checking vital statistics and routine lab work A medical exam is paid for by the insurer and does not require written consent under the FCRA. A written statement from the applicant's doctor explaining treatment for a preexisting condition is an attending Physician's statement. The medical exam is completed by usually a registered nurse or a paramedical professional and includes checking vitals, height, weight, and collecting blood and urine samples.

What is an impairment rider?

It excludes specific conditions that normally would cause the entire policy to be declined An impairment rider is a rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.

Which of the following is true concerning a Medical Expense Policy covering dependents?

It will continue to cover a 25-year-old child who is habitually unemployed Policies providing dependent coverage must allow coverage for any child, even if married, up to age 26 ('through age 25'). Newborns are covered from birth.

All of the following are Optional Uniform Provisions, except:

Legal Actions Legal Actions is a Mandatory Uniform Provision. All other responses are Optional Uniform Provisions.

Which of these is a Mandatory Uniform Provision?

Legal Actions The only choice which is a Mandatory Uniform Provision is Legal Actions. All other responses are Optional Uniform Provisions.

A married couple is interested in an annuity settlement option that will guarantee them both an income for as long as they live, an amount which reduces to 2/3 of that initial amount after one of them dies. What should they select?

Life Income Joint and Survivor The Life Income Joint and Survivor Settlement Option pays a periodic benefit until the last surviving recipient dies. However, depending upon which survivor option is chosen (e.g. joint-and-full, joint-and-2/3, joint-and-1/2), the benefit paid following the first death could be different.

Jasmine has deposited $100,000 into a single premium immediate annuity. If Jasmine were to die before receiving $100,000 in payments, the balance of the $100,000 would be paid to her sister. Jasmine has selected the:

Life Income with Refund Option If Jasmine dies prior to receiving an amount equal to the total of all payments made into the annuity and the balance of that amount is refunded to a beneficiary either in a lump sum or in installments, she has chosen Life Income with Refund.

Which of the following products provides an immediate lump sum in the event of premature death?

Life insurance Of these options, only life insurance provides an immediate lump sum upon death.

Burt named Liz as his beneficiary; however, he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits?

Liz the beneficiary determines which option she would like to have If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.

Any policy designed to provide coverage for not less than 12 consecutive months for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital is the definition of:

Long-Term Care The question gives the definition of Long-Term Care.

Interest earned on premiums paid to an insurer helps to ________ the premiums charged.

Lower Interest earned on premiums assists in premium rate reduction.

If a life insurance policy does not pass the 7-pay test, it will be deemed a(n) _________.

MEC When a life insurance policy does not pass the 7-pay test, it will be deemed a MEC.

In a replacement transaction, which of the following is a duty of the replacing insurer?

Maintain copies of the notice regarding replacement for 5 years The replacing insurer must maintain copies of the notice regarding replacement for 5 years from the date of notification or the date of the next regular examination, whichever is later. All the other options are the responsibility of the replacing agent.

Which of the following is not a duty of the Commissioner?

Make state insurance laws The Commissioner must enforce state insurance laws, not establish them.

Which of the following is not a duty the Commissioner must administer?

Make state insurance laws The Commissioner must enforce state insurance laws, not establish them.

Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as:

Managed Care Provisions They are included as Managed Care Provisions or sometimes referred to as Cost Containment Provisions.

The Texas Commissioner has the authority to examine the books, records, and correspondence of all the following, except:

Medical examiners The Commissioner has the authority to examine the books, records, and correspondence of all licensees but not medical examiners.

H has an individual standalone vision plan, in addition to his health insurance. During an annual examination, it is discovered that H has cataracts. Which plan will cover the cost of the treatment for cataracts?

Medical expense insurance Medical expenses incurred from disease or injuries to the eye, such as cataracts, are excluded from coverage under this policy but are covered under medical expense insurance.

What prohibited trade practice is committed if an agent provides misleading information regarding guaranteed dividends, terms, advantages, or disadvantages of a policy?

Misrepresentation Misrepresentation involves a false statement made to a policyholder about a policy to induce the policyholder to lapse, cancel, or surrender an existing policy.

Which type of insurance company is owned by its policyholders?

Mutual insurer A mutual insurer is owned by its policyholders.

Which Act was implemented in order to protect consumers from questionable Medicare Supplement Policy marketing practices?

NAIC Model Law NAIC Model Law requires all Medicare Supplement policies to be standardized.

Members of the ___________ include state and territorial insurance commissioners or regulators.

National Association of Insurance Commissioners (NAIC) The NAIC is made up of all the state and territorial commissioners or regulators.

Provisions and clauses, unlike riders, are included in the contract for:

No additional charge Provisions and clauses, unlike riders, are included in the contract for no additional charge.

If Mr. Stanley is injured while attempting to escape from the police after committing a bank robbery, his A & H coverage will probably pay:

Nothing Since Mr. Stanley is injured while committing an illegal act, the Illegal Occupation/Act Provision (an Optional Uniform Provision) provides the insurer's right to deny liability.

To terminate an agent's appointment in Texas, the insurer must:

Notify the Texas Department of Insurance of the termination of appointment The insurer must notify the Texas Department of Insurance of the termination of appointment, which does not cancel or terminate the license.

When a producer receives an application for life insurance that is completed and signed, but without premium payment, when does coverage start?

On the date the policy is delivered and premium collected The policy will go into effect upon delivery and collection of the premium. Coverage is not effective until both parties have provided the required consideration.

Coordination of Benefits is a provision designed to reduce ________ when an insured is covered under multiple health plans.

Overinsurance Overinsurance means having more than 100% of a claim paid. This could happen if a person were covered by more than one health plan.

After the blackout period has ended, the widow or widower may receive a Social Security income benefit based on the ___________.

PIA of the deceased spouse The widow or widower may receive a Social Security income benefit based on the PIA of the deceased spouse.

Which of the following is not a way to access the money accumulated in a traditional ordinary permanent life insurance policy?

Partial surrender Partial surrenders are typically available only on universal life insurance types of policies.

If a Texas agent fails to complete their continuing education on time, which of the following is required for license renewal?

Pay a fine of $50 per hour up to $500 for any deficient hours and complete continuing education hours within 90 days of license expiration If an agent does not complete their continuing education requirement prior to license renewal, they must pay a $50 fine per credit hour up to $500 and complete the delinquent CE hours within 90 days of license expiration.

If an insured dies during the policy's grace period, the insurer will:

Pay the death benefit, less the amount of premium due The policy is in force during the grace period and if death occurs during the grace period, the insurer pays the death benefit, minus any premiums or loans due.

All of the following are TRUE regarding qualified plans, except:

Plans can discriminate in favor of highly compensated employees In an ERISA-qualified plan, there can be no discrimination in favor of highly compensated employees.

A medical condition that was treated prior to the effective date of a policy is a:

Pre-existing Condition A pre-existing condition is one in which medical treatment was obtained or should have been obtained by the applicant prior to the effective date of the policy.

Case managers do all of the following, except:

Providing the necessary care A case manager may be assigned to a case to determine the appropriate course of action for an insured. The case manager may require a referral or a second opinion before approving a procedure. The case manager will also manage the utilization review of a subscriber's stay in the hospital.

The early withdrawal tax penalty on an IRA account may be waived in all of the following circumstances, EXCEPT:

Purchase of a vacation home There is an exception of up to $10,000 for first-time home buyers. A vacation home would not qualify as a first home.

For which of these policies is the individual allowed to deduct the premiums they pay that exceeds 7.5% of their adjusted gross income?

Qualified Long-Term Care The premiums paid for individual qualified LTC policies that exceed 7.5% of adjusted gross income may be tax deductible

Penelope received benefits from her disability policy and went back to work. After 30 days she found she was not able to work and began to immediately receive her disability payments. Which of following provisions made this possible?

Recurrent Disability Provision The question defines the Recurrent Disability Provision.

Which provision is an Optional Uniform Provision?

Relation of Earnings to Insurance Relation of Earnings to Insurance is an Optional Uniform Provision. The other choices are Mandatory Uniform Provisions.

The face amount of an Ordinary Whole Life Policy _________ over the life of the policy.

Remains the same The face amount is the same as the death benefit and is the amount payable to the beneficiary upon the insured's death. Over the life of the policy it remains level.

Guaranteed Renewable means:

Renewable with adjustable premiums, by classification only The Guaranteed Renewable Provision does allow the insurer to adjust premiums upon renewal, but by class only, not on an individual basis. A class of insureds is based on age or other uniform, nondiscriminatory method.

The Guaranteed Renewable Provision states that the policy is:

Renewable with premiums that may be increased for entire classes of insureds The Guaranteed Renewable Provision allows the insurer to adjust premiums upon renewal, but by classification only, not for particular individuals.

The Texas Commissioner has all the following powers, except:

Revoke a license prior to a hearing The Commissioner can conduct investigations, issue a cease and desist order, and administer oaths, but cannot revoke a license without a hearing.

Individual Term policies are generally stand-alone policies, but may be written with other types of policies as a(n):

Rider Through a rider, term coverage may be added to a Permanent Policy. Generally, a Term Rider cannot be added to a Term Policy, but some companies allow it to be added as a child rider, spouse rider, or other insured rider.

In Texas, an agent's license expires on the _____ anniversary of the date the license was issued.

Second An insurance license will expire on the second anniversary of the date it was issued.

Which of the following is not transacting insurance?

Selling stocks, bonds, and mutual funds Transacting insurance involves activities relating to the business of insurance. Stocks, bonds, and mutual funds are not insurance products.

_________ Options allow for the distribution of the life insurance death benefit, to the named beneficiary or contract owner, as the situation warrants.

Settlement A Settlement Option dictates a mode of payment to a beneficiary (e.g. Fixed Amount, Fixed Period, Life Income, etc.) The owner may choose Settlement Option for a beneficiary that may not be changed by the beneficiary.

Which of the following annuities does not have a traditional accumulation phase?

Single premium immediate An immediate annuity essentially does not have an accumulation period and is used to generate immediate income. Income is generated within a year of the issue date.

Medicare is available to individuals who have been receiving ______________ benefits for 24 months.

Social Security Disability Medicare is available to individuals regardless of age if they have received Social Security disability benefits for 24 months.

Under the Entire Contract provision, all of the following may be part of the agreement between the insured and the insurer, except:

Statements made to the applicant by the producer during the application process The Entire Contract Provision (a Mandatory Uniform Provision) stipulates that the policy, a copy of the application, and any riders or endorsements constitute the entire contract between the insurer and insured.

An insurance company that is incorporated and has its capital divided into shares is a:

Stock insurer A stock insurer is an incorporated insurer that has it's capital divided into shares of stock.

Stock insurance companies are owned by:

Stockholders The ownership of stock insurance companies rests with the stockholders.

Which of the following types of coverage has a corridor deductible?

Supplemental major medical A Corridor Deductible is used between the Basic Plan (when the limits of coverage are exhausted) and the start of coverage under the Supplemental Major Medical policy. The Corridor Deductible is the specified expense the insured must personally incur before the supplemental benefits begin.

In Texas, when the Commissioner cancels or revokes the authorization of an insurer, they may also do all of the following except:

Suspend the Certificate of Authority for up to 5 years When the Commissioner cancels or revokes the authorization of an insurer, they may also suspend the Certificate of Authority, but only for a period of up to 1 year.

An insurance agent does NOT owe a fiduciary duty to:

The Insurance Commissioner An agent owes a fiduciary responsibility to its insurer, insurance applicants, insureds, but not to the Insurance Commissioner (or other agents).

Which of the following statements is accurate concerning the changing of an irrevocable beneficiary?

The beneficiary may be changed only with the written consent of the present beneficiary Once an irrevocable beneficiary has been declared by the owner of the policy, the beneficiary designation can then be changed only with the irrevocable beneficiary's prior written consent. An irrevocable beneficiary has a vested interest in the policy benefits.

All of the following regarding convertible term life insurance is true, except:

The conversion can take place at any time The right to convert the existing term policy to a permanent policy without evidence of insurability is only available during the conversion period specified in the contract.

Which of the following statements about policy roles is TRUE?

The insured and the policyowner are usually the same, but not necessarily The applicant, insured, and owner might all be different parties. Policy changes are only required to be approved by the policyowner.

After a life insurance policy has been in force for 5 years the insured dies. During the claims process, the insurer discovers that the insured did not disclose material health information that had it known, would have caused the application to be rejected. What can the insurer do at this point in time?

The insurer must pay out the death benefit of the policy to the named beneficiary After the policy has been in force for 2 years, except for cases of nonpayment of premium, meaning the policy has lapsed, the insurer cannot contest any claim. The policy has become incontestable.

If an insured has a policy with 80/20 coinsurance, how is payment split?

The insurer pays 80% and the insured pays 20% Coinsurance is a cost sharing feature and is stated as a percentage, such as 80/20, of sharing between the insurer and the insured; The insurer pays the larger percentage.

Joe suffers a broken leg while on vacation. With Joe's HMO, he may seek medical care at which of the following?

The nearest emergency room Since Joe's broken leg would qualify as an emergency, his HMO would pay for necessary services at the nearest emergency room.

How is Variable Whole Life different from Variable Universal Life?

The policy has a guaranteed minimum face amount Generally speaking, Variable Whole Life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a Variable Universal Life policy has no guaranteed death benefit.

Which of the following is false regarding provisions for life policies?

The policy may not include a provision for reinstatement A life policy must have a provision that provides for reinstatement of the policy within 3 years.

All of the following are correct regarding the coverage of a cancer policy, except:

The policy will only provide benefits for losses covered on an underlying medical expense policy This coverage will provide for experimental treatments and other losses that traditional insurance excludes.

For a life insurance policy issued in Texas, which of the following statements is true?

The premiums must be paid for 3 years before the insured qualifies for a policy loan A policyowner is able to take a policy loan from the policy only if the policy is in force, the premiums for the policy have been paid for 3 years, and the policy is properly assigned. Failure to pay the policy loan does not void the policy until the total amount owed equals or exceeds the policy's cash value.

What happens to a spouse or child rider just prior to it expiring?

The spouse or child has a conversion option Both spouse and child riders will also provide a conversion provision permitting the spouse or child to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy (or upon reaching age of majority for the child covered under a child rider).

On a variable universal life policy what is the difference between the cash value and the cash surrender values?

The surrender charge The difference between the cash values and the cash surrender values is the surrender charge which provides an incentive for the policyowner to maintain the policy and allows for the insurer to recoup any policy issuance costs.

How is the funding for Social Security provided?

Through FICA taxes that are paid by both employers and employees Both the employer and employee fund Social Security through paying FICA taxes. Self-employed persons pay the entire amount.

In Texas, commissions may be paid:

To a licensed agent for the sale of insurance to a non-related individual An agent may not receive an additional fee, except a legally permissible reimbursement or payment, for services from the same client. A commission may not be paid to the holder of a temporary license on a sale made to an individual with whom the licensee has a family, employment, or business relationship. An insurer may pay a commission only to a licensed agent.

An agent's license can be suspended for which of the following reasons?

Transacting insurance with only family members An agent who only transacts insurance with its family members is guilty of controlled business. An agent must have the intent to engage in business in which, in any calendar year, at least 25% of the total volume of premiums is derived from persons other than the business controlled by the agent.

A partial disability is defined as an individual:

Unable to perform one or more duties of his/her occupation Partial Disability is a disability resulting in an inability to perform 1 or more of the regular duties of an occupation. The benefit usually pays up to 50% of a total disability benefit for 3 to 6 months.

False advertising, misrepresentation, and defamation are all examples of which of the following?

Unfair Methods of Competition Rebating, fraud, unfair comparison, and boycott, coercion, intimidation are also considered Unfair Methods of Competition, or Unfair Trade Practices.

When will a primary care physician refer a HMO member to a specialist?

Usually after all other treatments have been exhausted A Specialist or Referral Physician will treat a HMO member if the Primary Care Physician has made a referral, usually after all other treatments have been exhausted.

Timothy is the insured/owner of a universal life insurance policy and is concerned that in the event of disability, the policy might lapse. Which rider would keep the policy from lapsing if he became disabled?

Waiver of Cost of Insurance Tim has a Universal Life Policy which needs to have enough cash value in it in order to pay the monthly cost of insurance. If he is disabled, the Waiver of Cost of Insurance will keep the policy in force.

If an insured is concerned about being unable to pay the premiums on his or her whole life policy in the event of a total disability, which of the following riders should be added to the policy?

Waiver of Premium The Waiver of Premium Rider would waive premiums for a disabled insured. If the insured also wanted to replace income due to disability, then he or she would purchase the Waiver of Premium/Disability Income Rider.

An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted?

When the insurer issues a policy An application accompanied by a premium check is a legal offer. Policy issuance is a legal acceptance. In other words, the offer is not accepted until the insurer issues a policy.

P has had some health issues over the years and is not confident he will qualify for standard issue insurance. If P completes an application and submits it to the insurance company without paying the premium up-front, coverage will take effect

When the policy is delivered to P and the premium is paid An insurance applicant who does not wish to pay the premium up front can still apply for coverage. If the applicant is ultimately considered an acceptable risk, coverage would not take effect until the policy is delivered by the agent and the premium is paid

Harry was hospitalized and in a coma for 6 months. When does proof of loss for this claim have to be submitted?

Within 1 year, unless he suffers legal incapacity The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must provide proof of the loss within 90 days of the loss, or within in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity. Since Harry was in a coma for 6 months, it would not have been possible for him to file a claim within the 90-day time period.