ExamFX Fed Tax, Health Ins Basics, Indiv Health & Dis Ins

The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the

Insuring clause.

What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is an MEC

In a group prescription drug plan, the insured typically pays what amount of the drug cost?

Copayment

When must an IRA be completely distributed when a beneficiary is not named?

December 31 of the year that contains the fifth anniversary of the owner's death

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

An insurer would like to add a provision to its individual health insurance policies. This particular provision would be consistent with uniform provisions. Which of the following is true?

The provision would be allowed, as long as it is approved by the state.

Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within

90 days of a loss

Which concept is associated with "exclusion ratio"?

Annuities payments

If an applicant for a health insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge an extra premium.

Which of the following terms is used to name the non-taxed return of unused premiums?

Dividend

Which of the following is true regarding taxation of dividends in participating policies?

Dividend are not taxable

The provision in a health insurance policy that ensures that the insurer cannot refer to any document that is not contained in the contract is the

Entire contract clause

The insurance policy, together with the policy application and any added riders form what is known as

Entire contract.

In an optionally renewable policy, the insurer has which of the following options?

Increase premiums

Which type of a hospital policy pays a fixed amount each day that the insured is in a hospital?

Indemnity

Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer

In the event of loss, after a notice of claim is submitted to the insurer, who is responsible for providing claims forms and to which party?

Insurer to the insured

An insured is involved in a car accidents. After the accident is determined to be her fault, the police give her a breathalyzer test to determine whether or not she had been drinking alcohol before the accident. Her blood alcohol level is over the legal limit. What type of health benefits will her health insurance policy pay for her injuries if the policy includes the narcotics and intoxicants provision?

No benefits

An insured had paid only part of her total number of IRA premiums before she died. What effect will this have on the insured's estate?

Only the premiums paid will be included in the estate.

When an individual is covered under two health insurance policies that have duplicate benefits which could make a claim for benefits because of an injury or illness profitable, it is called

Overinsurance.

Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policy-owner?

Payment of Claims

Which renewability provision are you most likely to see on a travel accident policy?

Period of time

When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of bases?

Reimbursement

The expense for an autopsy covered under the physical exam and autopsy

The insurer

A policy with a 31-day grace period implies

The policy will not lapse for 31 days if the premium is not paid when due.

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

They can be changed only with the written consent of that beneficiary.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

$3,000

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequences of a direct transfer?

10,000, no tax consequence

At what age does an individual qualify for Medicare?

65

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income

Which of the following is NOT true of Section 1035 Policy Exchanges?

Any exchange made under Section 1035 of the Internal Revenue code must be completed with 30 days.

At what point must an Outline of Coverage be delivered?

At the time of application or upon delivery of the policy

Medicaid is sponsored by what kind of sources

Both state and federal

What is an important feature of a dental expense insurance plan that is NOT typically found in a medical expense insurance plan?

Diagnostic and preventive care

Why is it essential for an insurer to document all correspondence with an insured

Errors and omissions

In which of the following cases would a credit disability policy be issued?

If an individual is in debt to a specific creditor, payments will be made for him/her until the return to work.

Which of the following factors about the insured determines the amount of disability benefit that the insured will receive?

Income

Which benefits would a disability plan most likely pay?

Income lost by the insured's inability to work

An applicant buys a non-qualified annuity, but dies before the starting date. for which of the following beneficiaries would the contract's interest NOT be taxable?

Spouse

Which of the following groups would most likely be covered under a blanket accident policy?

Students at a public school

Regarding health insurance premiums, all of the statements are true EXCEPT

Substandard risks are not insurable and are always rejected.

A person steps off a street car and trips and breaks his ankle. This type of

Sudden and unforeseen.

What type of annuity activity will cause immediate taxation of the interest earned?

Surrendering the annuity for cash.

During accumulation period in a non-qualified annuity, what are the tax consequences of a withdrawal?

Taxable interest will be withdrawn first and the 10% penalty will imposed if under age 59 1/2.

Which of the following best describes taxation during the accumulation period of an annuity?

Taxes are deferred.

Which of the following may NOT be included in an insurance company's advertisement?

That its policies are covered by a state Guaranty Association

Which of the following is true about the requirement regarding HIV exams?

The applicant must give prior informed written consent.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable.

Which of the following is used to determine the annuity amounts that are not taxable?

Exclusion ratio

The agent is known as the "Field Underwriter" because of the information he or she gather for the insurer. This helps the insurer

Avoid adverse selection.

A man is injured while robbing a convenience store. How does his major medical policy handle the payment of his claim?

Claim is denied if his policy contains Illegal Occupation provision.

What statement best describes the free look provision?

It allows the insured to return the policy with 10 days for a full refund of premiums if dissatisfied for any reason.

The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as

Legal actions.

A policy-owner is reading a statement on the first page of his health insurance policy, which says "this is a limited policy." What is the name of this statement?

Limited Policy Notice

When may an insurer require an insured to provide genetic information?

Never

Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss?

Notice of Claim

Insurers may change which of the following on a guaranteed renewable health policy?

Rate by class

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

Section 1035 Policy Exchange

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

Settlement option.

Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to

The insured

A group blanket health policy is best suited for which of the following?

A summer camp

The First Street Church plans to sponsor a summer camp for the youth of their congregation. They would like to purchase insurance that would pay benefits should one of the youth get injured while participating in the camp activities. The type of policy they would likely need is a

Blanket

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

An insurer wishes to compare the information given in an insurance application with previous insurance applications by the same applicant but for different companies. What organization can help the insurer accomplish this?

The Medical Information Bureau

Which of the following will NOT be covered under an individual health insurance policy?

The applicant's house help

Which of the following groups would probably be covered by blanket insurance?

A university's sports team

Which is true regarding the Uniform Individual Accident and sickness Policy Provisions Law?

Provisions may be reworded by the insurer.

A health insurance policy may cover all of the following risks EXCEPT

War-related injuries.

The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have?

Accident-only

Which of the following statements is TRUE concerning whole life insurance?

Lump-sum death benefits are not taxable.

Death benefits payable to a beneficiary under a life insurance policy are generally

Not subject to income taxation by the Federal Government.

If an IRA annuitant pays the entire fund's premiums before her death, what effect will this have on her estate when she dies?

The entire value of the premiums and benefits will be included.

Which of the following statements regarding conditional receipts is true?

They are temporary insuring agreements.

Health insurance underwriting is best defined as

Selection, classification, and rating of risks.

In respect to the consideration clause, which of the following is consideration on the part of the insurer?

Promising to pay in accordance with the contract terms

When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on

$11,000

Which of the following does the Insuring Clause NOT specify?

A list of available doctors

An insured carries health insurance with two different providers and is covered on an expense incurred basis. He has an appendectomy and files the claims to both insurers. Neither company is notified in advance that the insurer has other coverage. What should each insurer pay?

A proportionate amount.

All of the following are correct about the required provision s of a health insurance policy EXCEPT

A reinstated policy provides immediate coverage for an illness.

Which of the following information regarding an insured is NOT included in an Investigative consumer Report, which requested by an underwriter?

Medical History

Which of the following is NOT a feature of a guaranteed renewable provision?

The insurer can increase the policy premium on an individual basis.

Ann insured notifies the insurance company that he has become disabled. What provision statement that claims must be paid immediately upon written proof of loss?

Time of Payment of Claims

Under the Physical Exam and Autopsy provision, how many time can an insurer have the insured examined, at its own expense, while a claim is pending?

Unlimited

An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What provision allows for this?

Unpaid premium

How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company?

Within 90 days or as soon as reasonably possible, but not to exceed 1 year

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is

A Modified Endowment Contract.

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

Tax deductible.

All of the following are true regarding the Medical Information Bureau (MIB) EXCEPT

MIB reports are based upon information supplied by doctors and hospitals.

Which of the following is an example of a peril covered in an accident and health insurance policy?

Sickness

What method is used to determine the taxable portion of each annuity payment

The exclusion ratio

Which is NOT true regarding an insured who is considered to be a standard risk?

The insured may have to pay slightly higher premiums.

An insurance advertisement exaggerates the benefits of an insurance policy, due to human error at the insurer's advertising agency. Who will the Department of Insurance hold responsible for the exaggeration?

The insurer

An insurer hires a representative to advertise its company at a local convention. The representative lies about the details of some of the policies, in an attempt to secure more business for the company. who is responsible for the representative's claims?

The insurer

The free-look provision allows for which of the following?

A right to return the policy for a full premium refund

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following?

Adjust the benefit in accordance with the increased risk

While a claim is pending, an insurance company may require

An independent examination as often as reasonably required.

Most insurers issue health insurance policies for delivery in many states. Because each state regulates and mandates the requirement for policies delivered to their residents, instead of having a policy form for each state, the insurer attaches

Conformity with State Statues provision

A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective?

Immediately

Life insurance death proceeds are

Generally not taxed as income.

In life insurance policies, cash value increases

Grow tax deferred.

The provision that states that both the printed contract and a copy of the application form the contract between the policy-owner and the insurer is called the

Entire contract.

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

Free of federal income taxation.

What phase begins after a new policy is delivered

Free-look period

In a direct rollover, how is the money transferred from one plan to the new one?

From trustee to trustee

An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?

He will have to pay a penalty if he is younger than 59 1/2.

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

Income tax on distribution and no penalty.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums.

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?

$8,000, 60 days

An insured pays a monthly premium of $100 for her health insurance. What would be the duration for the grace period under her policy?

10 days

A policy-owner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. The nontaxable transaction is called

1035 exchange.

Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain

A statement that is sufficiently clear to identify the insured and the nature of the claim.

Which of the following statements is NOT true, regarding health insurance policy provisions?

All additional provisions written by insurers are cataloged by their respective states.

An insured has medical insurance coverage through 2 different providers, both covering the same expenses on an expense-incurred basis. Neither company knows in advance that the insured has coverage through any other insurers. The insured submits a claim to both insurers. How should the claim be handled?

Each insurer should pay a proportionate share of the claim.

Under a typical health insurance policy, claims that result from injuries while the insured was intoxicated or under the influence of drugs are generally

Excluded

A producer is acting in what capacity when he or she is trying to obtain creditable information about an applicant for health insurance?

Field underwriter

When Linda suffered a broken hip, she notified her agent, in writing, within 12 days of the loss. However, her agent did not notify the insurance company until 60 day after the loss. Which of the following statements correctly explains how this claim would be handled?

The insurer is considered to be notified since the notification to agent equals notification to the insurer.

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?

The interest will continue to accumulate tax deferred.

An insured is upset that her new health insurance policy was delivered to her by certified mail and not through her agent. Which of the following is true?

There is nothing wrong with this form of policy delivery.

Which of the following is true regarding limited health insurance policies?

They only cover specific accidents or diseases.

Health coverage becomes effective when the

First premium has been paid and the application has been approved.

Which of the following expenses is NOT covered by a health insurance policy?

Funeral

A health insurance plan that covers all accidents and sicknesses that are not specifically excluded from the policy is referred to as a

Comprehensive plan

J transferred his life insurance policy to his son two years before his death. Which of the following is true?

The entire face value of the policy will be included in J's taxable estate.

When is the insurability conditional receipt given?

When the premium is paid at the time of application

When would life insurance policy proceeds be included in the insured's taxable estate?

When there are any incidents of ownership at the time of death

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

The amount of distribution is reduced by the amount of a 20% withholding tax.

Which of the following is INCORRECT regarding whole insurance?

Policy loans are tax deductible.

Rose bought three policies from the same insurer. Her benefits have exceeded the maximum allowed by the insurer. Which of the following will happen?

Pro rata benefit reduction.

Which document is used to assess risk associated with an applicant's lifestyle and character?

Investigative Consumer Report

Which of the following is true regarding health insurance?

It could provide payments for loss of income.

Which of the following entities has the authority to make changes to an insurance policy?

Insurer's executive officer

What is the best way to change an application?

Start over with a fresh application

Where would Long-term care services be rendered?

A nursing home or one's own home

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

When an insured purchased her disability income policy, she misstated her age to the agent. She told the agent that she 30 years old, when in fact, she was 37. If the policy contains the optional misstatement of age provision

Amounts payable under the policy will reflect the insured's correct age.

What is the term used for applicant's written request to an insurer for the company to issue a contract, based on the information provided?

Application

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested?

At the time of application

Most insurers issue health insurance policies for delivery in many states. Because each state regulates and mandates the requirement for policies delivered to their residents, instead of having a policy from for each state, the insurer attaches

Conformity with State Statutes provision.

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 group policy used to provide accident and health coverage on a group of persons being transported by a common carrier, without naming the insured persons individually is called

Blanket Policy

Which provision allows the policyholder a period of time, while coverage is in force, to examine a health insurance policy and determine whether or not to keep it?

Free Look Period

An applicant for health insurance has not had a medical claim in 5 years. He exercises daily and does not smoke or drink. What classification do you assume the applicant would receive from his inusrer?

Preferred

The insuring clause of a disability policy usually states all of the following EXCEPT

The method premium payment.

Which of the following will vary the length of the grace period in health insurance policies?

The mode of the premium payment

Hospital indemnity or hospital confinement indemnity policy will provide payment based on

The number of days confined in a hospital.

Under credit disability policy, until what point will payments to the creditor be made for the insured?

Until the disability ends or the debt is satisfied, whichever is sooner