Exam Practice Questions
If an insurance company offers Medicare supplement policies, it must offer which of the following plans?
A An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.
A producer's license must be renewed
Biennially. A producer's license may be renewed biennially (every 2 years).
Which of the following does a producer NOT have the authority to do?
Issue policies An insurance producer sells, solicits or negotiates contracts of insurance.
What is the civil penalty for the first violation of the Pennsylvania Insurance Fraud Prevention Act?
$5,000 The civil penalty for violation the Pennsylvania Insurance Fraud Prevention Act is up to $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation.
For how many days of skilled nursing facility care will Medicare pay benefits?
100 Treatment in a skilled nursing facility is covered in full for the first 20 days. From the 21st to the 100th day, the patient must pay the daily copayment. There are no Medicare benefits provided for treatment in a skilled nursing facility beyond 100 days.
A tax-sheltered annuity is a special tax-favored retirement plan available to
Certain groups of employees only. A tax-sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?
Consumer Report
Health coverage becomes effective when the
First premium has been paid and the application has been approved If the premium has been paid, coverage becomes effective when the company underwriter approves the application.
Which provision allows a person to return a Medicare supplement policy within 30 days for a full premium refund?
Free Look Period
Which of the following is the term used when a person in a fiduciary position has used assets in manner for which they were not intended such as the wrongful taking or use of money belonging to another?
Misappropriation of funds "Misappropriation of funds" is the term used when a person, in a fiduciary position, has used funds in manner for which they were not intended such as the wrongful taking or use of money belonging to another.
Which of the following statements is true concerning the creditors of the deceased insured?
The creditors have rights to the proceeds if they can show evidence of valid assignment.
Regarding Medicare SELECT policies, what are restricted network provisions?
They condition the payment of benefits of benefits
An applicant is discussing his options for Medicare supplement coverage with his agent. The applicant is 65 years old and has just enrolled in Medicare Part A and Part B. What is the insurance company obligated to do?
offer the supplement policy on a guaranteed basis
Under the Accidental Death and Dismemberment (AD&D) coverage, what type of benefit will be paid to the beneficiary in the event of the insured's accidental death?
Principal Sum
A domestic insurer issuing variable contracts must establish one or more
Separate Accounts
The part of Medicare that helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care and hospice care, is known as
Medicare Part A
What type of care is Respite care?
Relief for a Major Care Giver Respite Care is designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the care giver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.
The mode of Premium Payment
This provision addresses the frequency of premium payments (monthly, quarterly, semiannually or annually), and to whom the premiums are payable. The more frequent the payment, the greater the cost. The policyowner has the right to change the premium mode.
Which of the following long-term care benefits would provide coverage for care for functionally impaired adults on a less than 24-hour basis?
Adult Day Care
Once it has been reasonably proven that a person has knowingly violated the Insurance Code regarding unfair methods of competition, the Department may impose a civil penalty of
$5,000 for each violation. Civil penalty for each intentional act of engaging in an unfair method of competition or practice is up to $5,000 per violation (not to exceed $50,000 in any 6-month period).
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000 The face of the term policy would be the SAME as the face amount provided under the whole life policy.
The most the Insurance Guaranty Association will pay for net cash surrender values is
100,000 The insurance guarantee association will not pay more than 100,000 for net cash surrender and net cash withdrawal values
An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage?
102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.
Once a mail-order solicitation has been filed, how long may it be used?
2 years Mail-order solicitations, that have been filed, may be used for 2 years.
How long must insurers maintain the evidence from the agent that a disclosure statement about a life insurance policy was delivered to the applicant?
3 Years These certifications must be maintained for either 3 years or until the next regular examination - whichever is later.
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
All of the following could own group life insurance EXCEPT
A group needing low-cost life insurance. Groups purchasing group life insurance must be formed for a reason other than purchasing insurance.
An insured misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued?
Adjust the claim benefit to reflect the insured's true age The Misstatement of Age provision says that if a client has misstated her age, whether intentional or unintentional, they will adjust the benefit being paid. It doesn't matter when the mistake was found.
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
Bail-Out Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.
Which of the following is a feature of a variable annuity?
Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.
A man is still employed at age 65 and is now eligible for Medicare. He wants to know what health insurance coverage he is eligible to receive. Which of the following options are available to him?
Both Group Health and Medicare If a person is still employed at the age of 65, he or she may choose to either continue group coverage and defer Medicare until retirement, or switch to Medicare. The employer cannot provide incentives for switching to Medicare.
Which of the following would NOT be considered an exception to the National Do Not Call List?
Calls based from outside of the United States Calls from outside the United States are not an exception to the National Do Not Call List.
When the Commissioner suspects that a person is violating an insurance law or other regulation, what can be issued that would order the person to stop committing the act of violation?
Cease and desist
In a group prescription drug plan, the insured typically pays what amount of the drug cost?
Copayment Under a group drug prescription plan, the insured typically pays a copay, and the insurer pays the balance. There is generally a limit to the quantity of drugs that can be purchased at one time.
In disability income insurance, the time between the onset of an injury or sickness and when benefits begin is known as the
Elimination period. On disability income insurance, the time between the onset of an injury or sickness and the time benefits begin is known as the waiting or ELIMINATION PERIOD
Lietuya Insurance Company has issued 150 viatical settlement contracts but does not hold the proper certifications to legitimately conduct business. Which of the following terms best describes Lietuya's business practices?
Fraudulent Viatical settlement act Illegally issuing viatical settlement contracts, falsifying records and applications, and otherwise deliberately withholding or misrepresenting information about viatical contracts is considered to be a FRAUDULENT VIATICAL SETTLEMENT ACT
What option allows the insured to periodically increase benefit levels without providing evidence of insurability?
Guarantee of insurability Guarantee of insurability option allows the insured to periodically increase benefit levels without providing evidence of insurability. The amount is usually limited to allowing a 5% compounded annual increase.
All of the following are licensing requirements for a business entity, EXCEPT
Having all employees complete continuing education courses once every 2 years. When applying for insurance producer licenses, business entities must have: At least 1 designated licensee, in good standing with the Department; Apply for licensure in the same lines of authority held by the designated licensees; Have not committed any prohibited acts; be owned, operated, and managed by persons possessing general fitness, competence, and reliability; And pay all applicable fees.
A Return of Premium term life policy is written as what type of term coverage?
Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?
Individual There are two main types of annuities arrangements: group and individual. Group contracts can be obtained through an employer. If that option is not available, individuals could obtain an individual annuity, which, as the name implies, is available for purchase and ownership solely by individuals.
An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments?
It is used to lower premiums. Because insurers receive premiums before they must pay out benefits, they can invest the premium money and use the interest to lower premium amounts charged to insureds.
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?
It will decrease the benefits paid to the beneficiary. Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.
An insured does not have to pay coinsurance or deductibles on a full-series mouth x-ray, but does have to pay a deductible to get his cavities filled. Which dental plan does he have?
Nonscheduled Diagnostic and preventative services are generally not subject to coinsurance or deductibles in nonscheduled plans, but basic and major services are.
If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for Medicare?
Nothing Nothing needs to be done in this case. Medicare Part A and B will automatically be effective the month you turn 65.
Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss?
Notice of claims
What term is used to describe when a medical caregiver contracts with a health organization to provide services to its members or subscribers, but retains the right to treat patients who are not members or subscribers?
Open Pannel When a medical care giver contracts with a health organization to provide services to its members or subscribers, but retains the right to treat patients who are not members or subscribers, it is referred to as open panel.
Under which of the following organizations are the practicing providers compensated on a fee-for-service basis?
PPO PPO is a contract on a fee-for-fee basis
With respect to the Consideration Clause, which of the following would be considered consideration on the part of the applicant for insurance?
Payment of Premium The (2) types of consideration on the part of an insurance applicant are 1.) Payment of premiums 2.) Representations on the application.
Which of the following methods to designate a beneficiary literally means "by the head?"
Per Capita
If an individual is covered by a policy that includes an Accidental Death & Dismemberment rider, what term describes the maximum benefits he will receive if he loses sight in both eyes as a result of a fire?
Principal sum If the insured dies, the insurer pays the full amount, also known as the "principal sum". Principal sum will most likely be paid out if the insured loses sight in both eyes or loses two limbs. If the insured lives but loses a hand or foot or the sight in one eye, the insured will be paid a percentage of the principal sum, called the "capital sum."
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?
Pure Life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
All of the following are true regarding rebates EXCEPT
Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as
Rebating. Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
An insured wants to name her husband as the beneficiary of her health policy. She also wishes to retain all of the rights of ownership. The insured should have her husband named as what type of beneficiary?
Revocable If her husband is named as the revocable beneficiary, the insured would be the policyowner and could make changes to the contract. Her husband would receive any death benefit.
Which of the following components of dental insurance does NOT require the payment of a deductible?
Routine and preventative maintenance
After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?
Surrender Charge If a deferred annuity is surrendered prematurely, a SURRENDER CHARGE is imposed. The charge is generally a percentage that reduces over time until it ends.
Which of the following is NOT covered under Plan A in Medigap insurance?
The Medicare Part A deductible Medicare Supplement Plan A provides the core, or basic, benefits established by law. All of the above are part of the basic benefits, except for the Medicare Part A deductible, which is a benefit offered through nine other plans.
A life insurance policy does NOT have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy?
The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy DOES NOT HAVE THAT EXCLUSION, the benefits are paid to the beneficiary, as if the insured died of any other cause.
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education. The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.
Which of the following statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans. Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
The primary beneficiary predeceases the insured
The Termination of marital property rights may be reversed for all of the following reasons EXCEPT
The spouse named as beneficiary has obtained or consented to a final decree or judgment of an annulment, divorce or separation. The termination of marital property rights may not be reversed if the spouse named as beneficiary has obtained or consented to a final decree or judgment of annulment, divorce or separation.
When an individual purchases insurance, what risk management technique is he or she practicing?
Transfer Insurance is a transfer of the risk of financial loss from a covered peril from the insured to the insurance company.
How soon after the due date should the insurer pay the agent appointment fees?
Within 30 days The annual appointment fee must be paid within 30 days of the bill.
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name. A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.
When the insured initiates the cancellation of a policy, the unearned premium will be refunded on a
Short rate basis. When a policy is cancelled at the insured's request, the amount of returned unearned premium will be calculated on the short rate table that the insurer has filed with the insurance department. This allows the insurer to retain some of its cost of issuing the policy and providing service.
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.
Viatical settlement brokers represent
The Viators or Insured
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
the death benefit can be increased by providing insurability
A producer has successfully completed 52 hours of CE. How many hours can the producer apply to her current reporting period, and how many hours can she carry forward to the next reporting period?
24 hours for this period, 24 hours for the next, and the remaining four will NOT be allowed to be carried over
Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to
10 Years Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?
2.5% The company promised a guaranteed minimum rate of interest.
If an insurer terminates a producer's appointment, the Commissioner must be notified within how many days?
30 Every insurer authorized to transact business in Pennsylvania must notify the Insurance Department of all appointments and terminations of appointments of producers in the format and within the time frame required by the Commissioner. Termination of appointment shall be provided to the department in writing on an approved form or through an approved electronic process within 30 days following the effective date of the termination.
A producer licensed in Pennsylvania must notify the Insurance Department of any change of address in his or her residence or business address within how many days?
30 Every producer licensed in Pennsylvania must notify the Insurance Department in writing, within 30 days, of any change of address in his or her residence or business address. The producer must also notify all the entities for which the producer holds an appointment.
In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
5 If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
If a licensed person is moving to Pennsylvania, he or she may become licensed as a resident if they submit a completed application within how many days of establishing residence in Pennsylvania with proof of licensing from their prior home state?
90 Nonresident producers may become resident producers if they submit a completed application within 90 days of establishing residence in Pennsylvania with proof of licensing from their prior home state.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.
Which of the following would NOT be considered a misrepresentation on the part of the insurer?
Backdating policies to secure a lower premium for the insured It is illegal to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, or the payment of dividends. Demonstrating conservative returns in the illustrations would not be a violation.
A person applying for a manager or exclusive general agent license must meet all of the following criteria EXCEPT
Be responsible for at least 25% of total commissions collected by the office that he or she manages. Those applying for a manager or exclusive general agent license must be: -Be found sufficiently fit, competent and reliable by the Department of Insurance; -Have paid all applicable fees; -Have an authority to act on the insurer's behalf.
An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?
Benefits that are attributable to employer contributions are fully taxable to the employee as income. Group disability income premium payments are considered tax deductible by the business as an ordinary business expense. In a plan funded entirely by the employer, income benefits are included in the employee's gross income and taxed as ordinary income.
An applicant for an individual health policy failed to complete the application properly. Before being able to complete the application and pay the initial premium, she is confined to a hospital. This will not be covered by insurance because she has not met the conditions specified in the
Consideration Clause
A health insurance policy that pays a lump sum if the insured suffers a heart attack or stroke is known as
Critical Illness
All of the following are features and requirements of the Living Needs Rider EXCEPT
Diagnosis must indicate that death is expected within 3 years. The Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within ***2 years***
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business
Implied Implied authority is not written in the agent's contract but is required in order for the agent to conduct business. Implied authority exists because not every single detail of an agent's authority can be written in a contract.
Annually renewable term policies provide a level death benefit for a premium that
Increases Annually Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.
Which of the following best describes the difference between Pure Life and Life with Guaranteed Minimum settlement options?
Life with Guaranteed Minimum will pay the remaining principal to the beneficiary. Life With the Life with Guaranteed Minimum, if the annuitant dies before the principal amount (the amount he paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Under the Pure Life option, the payments cease upon the annuitant's death regardless of the amount of the principal paid out.
If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?
Lump sum Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.
A guaranteed renewable health insurance policy allows the
Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class. Coverage is guaranteed, but rates can be adjusted for the entire class.
Paul is a producer in Ohio and wants to become a producer in Pennsylvania. The Commissioner will waive certain examination requirements, provided that Ohio would waive these same requirements if a Pennsylvania producer sought licensure in Ohio. What term is used to describe this phenomenon?
Reciprocity "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Pennsylvania.
An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen?
The PPO will pay reduced benefits. The group health plan will not pay the full amount charged by the non-PPO doctor.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?
The policyowner can specify the way proceeds are split in the policy. The owner of a life insurance policy may name any individual as a beneficiary for the policy proceeds. The owner may name more than one individual, in which case the individual beneficiaries will split the benefit by the percentage specified in the policy.