Final Exam

In Alabama, what is the grace period for industrial life insurance policies with monthly premiums? Select one: a. 7 days b. 10 days c. 30 days d. One month

After the payment of the initial premium, industrial life insurance policyowners with monthly premiums are entitled to a grace period of 30 days. The correct answer is: 30 days

A peril is defined as: Select one: a. The unintentional decrease in value of an asset b. The cause of the loss and the event insured against c. Anything that increases the chance of a loss occurring d. The item insured in the policy

A peril is the cause of the loss and the event insured against. In life and health insurance, the perils are premature death, dependency during old age, accident, and sickness. The correct answer is: The cause of the loss and the event insured against

The minimum age to become a licensed insurance producer in Alabama is: Select one: a. 16 b. 18 c. 21 d. 25

A person must be at least 18 years of age to be eligible for an insurance producer license in Alabama. The correct answer is: 18

Which of the following is not true about adjustable life insurance? Select one: a. The face amount of the policy can be increased or decreased b. The premium amount can be increased or decreased c. The length of time that premiums are paid cannot be changed. d. The length of time that protection is in force can be changed.

Adjustable life insurance policies allow holders to modify the period of protection, increase or decrease the face amount, raise or lower the premium amount, and change the length of the premium payment period. The correct answer is: The length of time that premiums are paid cannot be changed.

In Alabama, what is the grace period for industrial life insurance policies with weekly premiums? Select one: a. 1 week b. 2 weeks c. 3 weeks d. 4 weeks

After the payment of the initial premium, industrial life insurance policyowners whose premiums are due weekly are entitled to a grace period of 4 weeks. The correct answer is: 4 weeks

The private insurance companies that make coverage and payment decisions regarding Medicare services provided by hospitals are called: Select one: a. Carriers b. Intermediaries c. Both of the above d. Neither of the above

Intermediaries make decision about services provided by hospitals, as well as skilled nursing facilities, home health and hospice. The correct answer is: Intermediaries

Marjorie has notified her insurance company that she has been in the hospital. The insurance company has furnished the form to file a claim. How long does Marjorie have to file proof of her loss? Select one: a. 10 days b. 30 days c. 60 days d. 90 days

Marjorie must file proof of loss within 90 days. The correct answer is: 90 days

All of the following plans may provide home health care, assisted living and custodial benefits, EXCEPT: Select one: a. A long-term care policy with the appropriate options b. A life insurance policy with a long-term care rider c. An annuity with long-term care waivers d. Medicare Part A and B

Medicare does not provide benefits for long-term care. To have these benefits available, an individual must have some form of independent long-term care coverage. The correct answer is: Medicare Part A and B

The payout option for an annuity is selected by the owner of the annuity. Which of the following is true? Select one: a. The accumulation period may also be described as a benefit period. b. Once the payout option is selected, it cannot be changed after payments begin. c. The settlement option can be changed within 5 years of annuitizing. d. None of the above

Once selected, the payout option for an annuity cannot be changed after payments begin. The correct answer is: Once the payout option is selected, it cannot be changed after payments begin.

For how many months are temporary producer licenses issued? Select one: a. 3 months b. 6 months c. 9 months d. 18 months

Temporary producer licenses are issued for a period of 6 months. The correct answer is: 6 months

A HMO must be examined once every: Select one: a. Year b. 2 years c. 3 years d. 5 years

A HMO must be examined by the commissioner every 3 years. The correct answer is: 3 years

Depending on the type of rider, policy benefits can be: Select one: a. Added to b. Taken away c. Both of the above d. None of the above

Depending on the type of the rider, a policyholder can add to, or take away policy benefits. The correct answer is: Both of the above

Which of the following is considered a reimbursement contract? Select one: a. Life insurance contract b. Disability income contract c. Major medical contract d. Accidental Death and Dismemberment contract

Except for major medical, the benefit is known before a claim occurs. Major medical will pay based on the covered loss, which is not known until the loss occurs. The correct answer is: Major medical contract

When comparing individual disability income policies with group disability income policies, group policies are generally: Select one: a. More costly and more restrictive b. More restrictive in terms of what constitutes a disability c. Made to have longer elimination periods d. Less costly and have more liberal benefits

Group plans usually have higher income limits and lower premiums. The correct answer is: Less costly and have more liberal benefits

Prostate screenings are covered by health benefit plans for men over age: Select one: a. 30 b. 40 c. 50 d. 60

Health benefit plans will cover prostate screenings for men over age 40. The correct answer is: 40

Coverage for newborns in policies that cover dependent childcare must provide coverage starting at what time? Select one: a. At birth b. When the child leaves the hospital c. When the child arrives home d. When insurance forms are filed

Policies that cover newborns must provide coverage at birth. The correct answer is: At birth

Which document describing the elements of a life insurance policy is provided to applicants? Select one: a. Outline of coverage b. Policy summary c. Buyer's guide d. Certificate of authority

The policy summary is a written statement describing the elements of the policy. The correct answer is: Policy summary

Which of the following is not an element of insurable risks? Select one: a. Large number of heterogeneous units b. Loss must be predictable c. Loss is definite and measurable d. Loss is not catastrophic.

This element of risk should read large number of homogenous units. The correct answer is: Large number of heterogeneous units

Jennifer has a $200,000 life policy. Her husband is a 50% beneficiary. Her son and daughter are beneficiaries with 25% each. Before she dies, she takes out a $100,000 loan, which is not repaid. What does her daughter get upon her death? Select one: a. $125,000 b. $50,000 c. $25,000 d. $10,000

$200,000 minus the $100,000 loan results in her husband receiving $50,000 and her son and daughter receiving $25,000 each. The correct answer is: $25,000

How long is the right to return period for long-term care policies in Alabama? Select one: a. 10 days b. 20 days c. 30 days d. 60 days

30 days Long-term care policyholders have a right to return of 30 days in Alabama

A grace period allows a certain number of days by contract for the insured to submit a premium. Except for weekly and monthly premium contracts, what is the usual grace period? Select one: a. 7 days b. 15 days c. 31 days d. 60 days

31 days is the usual grace period for all policies other than weekly premium policies, which have a grace period of 7 days, and monthly premium policies, which have a grace period of 10 days. The correct answer is: 31 days

As Howard was filling out his life insurance application, he questioned whom he should name as his primary and contingent (or secondary) beneficiaries. He decided to name his wife Helena as the primary beneficiary, and his son Collin as the contingent beneficiary. What is the most likely circumstance for Collin to receive the benefits of Howard's policy? Select one: a. Howard dies before Helena b. Collin receives the benefits from Howard's estate c. When Howard dies, Helena has already passed away d. When Howard dies, Helena has received benefits from another policy

A beneficiary is a person (or entity) entitled to death benefits paid by a life insurance policy. If Helena were alive when Howard dies, she would receive the death benefit. If Helena were no longer alive when Howard dies, Collin would receive the death benefit from Howard's policy. The contingent beneficiary can only receive the death benefit if the primary beneficiary dies before the insured. The correct answer is: When Howard dies, Helena has already passed away

A change of occupation provision will allow the insurance company to do any of the following at the time of claim, EXCEPT: Select one: a. Pay the benefits stated in the policy b. Increase the premiums for that individual c. Pay a reduced benefit for a higher risk occupation d. Require a doctor's statement confirming disability

A change of occupation will allow the insurance company to reduce benefits, but it will not be allowed to increase premiums on an individual basis. The correct answer is: Increase the premiums for that individual

Which of the following is not a qualifying condition that would allow payment of accelerated death benefits? Select one: a. A condition not requiring confinement in a hospital or nursing facility for the remainder of their life b. An illness that limits a life span c. A condition that without substantial medical intervention, the insured would die d. A condition that is self-inflicted

A condition that does not require confinement in a hospital or nursing facility would not qualify for the accelerated death benefits to be started. The correct answer is: A condition not requiring confinement in a hospital or nursing facility for the remainder of their life

A conditional contract depends on which of the following circumstances? Select one: a. Payment of benefits is predicated on a specific event or events occurring as outlined in the contract provisions. b. Payment of benefits is dependent on the condition of the insured at the time of claim. c. Payment is subject to the financial condition of the insurance company. d. All of the above

A conditional contract will not pay unless a specific condition is met or occurs. The correct answer is: Payment of benefits is predicated on a specific event or events occurring as outlined in the contract provisions.

An applicant for insurance may pay an initial premium with the application and receive a document called: Select one: a. Notice of execution b. Notice of inspection c. Conditional Receipt d. Notice of representation

A conditional receipt is given that does not guarantee coverage. The correct answer is: Conditional Receipt

Term life insurance policies are used to provide temporary insurance protection, usually for a specific amount of time. If an insured provides evidence of insurability at the end of a term and qualifies for reduced premiums rates, the insured has a(n): Select one: a. Convertible term policy b. Reentry term policy c. Renewable term policy d. Interim term policy

A convertible term policy allows the insured to convert his/her temporary protection policy to a form of permanent protection without having to provide proof of insurability. It is the reentry term that allows the insured to take out new coverage at a reduced rate, providing he/she can show proof of insurability. Renewable term is for a specific time and can be renewed without providing evidence of insurability. The premiums will go up because it is based on the insured's age. Interim term is coverage used when the insured is contemplating some sort of permanent insurance. Usually it has an automatically convertible feature. The correct answer is: Reentry term policy

Certain riders allow the insured to add people to the policy as additional insureds. Which of the following is a type of additional insured rider? Select one: a. Family term rider b. Payor rider c. Substitute insured rider d. Disability rider

A family term rider combines the spouse and the children's rider to cover the family. The payor rider provides for premiums to be paid if the payor of the premiums for a juvenile dies or becomes disabled. The substitute insurance rider is commonly used in business to exchange (substitute) one employee for another on a policy - as when an employee leaves the company and is replaced by another (new) employee. The correct answer is: Family term rider

During the accumulation phase of the annuity, the interest for a fixed annuity: Select one: a. Only has a guaranteed minimum b. Does not have a guaranteed minimum c. Is the current interest rate, plus a guaranteed minimum d. None of the above

A fixed annuity can have two levels of interest rates. The insurer can guarantee the current rate at the beginning of the calendar year, and also guarantee a minimum rate that is paid if the current rate falls below that level. The correct answer is: Is the current interest rate, plus a guaranteed minimum

The evidence a participant receives that he/she is enrolled in a group is a: Select one: a. Copy of the master group contract b. An individual policy c. A certificate of insurance d. A letter of coverage from the insuring company

A group certificate is the document that is issued notifying the participant that they are covered. The master contract is issued to the plan sponsor, and the individual participants do not receive a copy. The correct answer is: A certificate of insurance

A fixed annuity may offer any of the following income options, EXCEPT: Select one: a. A life income without refund at death b. A joint income for three individuals c. A 10 year certain d. An installment refund annuity

A joint annuity is for two people, not three. A joint income is primarily a plan for a couple. Life income with no refund is standard and most annuities are factored as a function of a life annuity. A year certain annuity is an annuity that will pay for the life of the annuitant, but if the annuitant dies before the period certain expires, the beneficiary will receive payments for the balance of that certain period. For example, an annuitant dies after 5 years' payments on a 10 year certain plan. The beneficiary will receive an additional 5 years' payment. An installment refund contract will guarantee that all principle deposited will be paid out. The correct answer is: A joint income for three individuals

Angelina purchased a policy with a face value of $100,000. She died 10 years later and the policy paid a death benefit of $50,000. Why? Select one: a. Her policy was a level term. b. Her policy was not renewed. c. Her policy was a decreasing term. d. Her policy was an increasing term.

A level term policy has a fixed face amount. This amount remains the same for the entire term of the policy. Her policy was a 20-year decreasing term policy. Because the amount of benefit paid was half of the original face value after 10 years - we can see that it decreased 50% over 10 years. The correct answer is: Her policy was a decreasing term.

What type of policy provides coverage for life, but the premiums are not due beyond age 65, has guaranteed premium, accumulates cash value and the coverage will never decrease? Select one: a. A limited pay life policy b. An endowment at age 65 policy c. A term to age 65 policy d. A variable life policy

A limited pay life plan is one that provides the same benefits as a standard whole life plan, but has a shorter premium paying period. The correct answer is: A limited pay life policy

Timothy has a plan that provides coverage for life, but the premiums are not due beyond age 65. It has guaranteed premium, accumulates cash value and the coverage will never decrease. Timothy has purchased: Select one: a. A limited payment life plan b. An endowment at age 65 plan c. A term to age 65 plan d. A variable life plan

A limited payment life plan is one that provides the same benefits as a standard whole life plan, but has a shorter premium paying period. Limited payment plans can range from single premium whole life to life paid up at a specified age, for instance age 65. The policy holder pays the approximate same premium, discounted for interest earnings, as he would for a whole life plan payable for life. The correct answer is: A limited payment life plan

A medical expense policy provides benefits for which of the following? Select one: a. Surgery expenses b. Diagnostic services c. In-hospital expenses d. All of the above

A medical expense policy provides for any expenses incurred while in hospital and surgery, and also covers certain outpatient expenses such as doctor's visits, diagnostic services, lab tests and such. The correct answer is: All of the above

When the policyholder sells, gives or pledges a policy as collateral, it is called: Select one: a. Incontestability b. Consideration c. Settlement d. Assignment

A policy assignment provision in a life insurance contract is one that permits the owner of the policy to sell, give or pledge the policy as collateral. Consideration - a requirement for a valid informal contract that is met when each party gives or promises to give something of value to the other party. Incontestability is the clause that prevents an insurer from denying a claim, except for nonpayment of premiums, after the policy has been in force for over 2 years. Settlement is how the proceeds of the policy are to be paid when the policy matures. The correct answer is: Assignment

A policy that only provides death protection if the insured dies within a time specified in the policy is called: Select one: a. Term insurance b. Limited pay life c. Adjustable life d. Economatic

A policy only provides death protection if the insured dies within a time specified in the policy is called term insurance The correct answer is: Term insurance

Which of the following is NOT a right of the owner of a life insurance policy? Select one: a. Changing the irrevocable beneficiary b. Implementing a verbally agreed change c. Borrowing funds before cash value exists d. All of the above

A policy owner cannot change an irrevocable beneficiary without the consent of the beneficiary. No verbal changes are allowed. A policy owner cannot borrow from the policy if there is no cash value. The correct answer is: All of the above

How long must a policy that covers maternity benefits provide for a hospital stay after a Caesarian Section? Select one: a. 48 hours b. 60 hours c. 72 hours d. 96 hours

A policy that provides maternity benefits must provide a hospital stay of 96 hours for a Caesarian Section. The correct answer is: 96 hours

Insurance companies use which of the following to limit claims from pre-existing disabilities or to control adverse selection? Select one: a. Elimination periods b. Probationary periods c. Recurrent disability clauses d. Reduced benefits

A probationary period excludes coverage for sickness before coverage begins such as six months. The correct answer is: Probationary periods

In Alabama, how many credit hours of continuing education can be carried over from one compliance period to the next? Select one: a. 12 hours b. 18 hours c. 24 hours d. 36 hours

A producer may carry over into the next biennial period a maximum of 24 credit hours towards their 24-hour requirement. The correct answer is: 24 hours

A disability plan that pays a benefit based on loss of earnings is considered which of the following? Select one: a. A non-cancellable plan b. A residual disability plan c. A rehabilitative plan d. A partial disability plan

A residual disability plan is a form that is written that relies more on loss of earning than inability to perform duties. The correct answer is: A residual disability plan

Riders and endorsements can be used to accomplish any of the following, EXCEPT: Select one: a. Modify the time limit for certain defense clause b. Provide additional benefits c. Restrict or eliminate benefits d. Increase premiums

A rider or endorsement may be used to change the benefits or premiums, but it may not be used to alter one of the core provisions of the contract. The correct answer is: Modify the time limit for certain defense clause

To prevent major illness devastation, a self-employed person might consider: Select one: a. A flexible spending account with no other insurance. b. A cancer plan with a health savings account c. A high deductible health plan in conjunction with a health savings account d. A hospital indemnity plan in conjunction with a flexible spending account

A self-employed person will be well served with a health savings account and a high deductible health plan. The correct answer is: A high deductible health plan in conjunction with a health savings account

Earl has deposited a large lump sum with an insurance company and he will begin receiving monthly payments next month. Earl has purchased: Select one: a. A flexible premium deferred annuity b. A single premium flexible annuity c. A single premium deferred annuity d. A single premium immediate annuity

A single premium immediate annuity allows the annuitant to receive an income immediately. Flexible premium and deferred annuities will allow annuitization some time in the future. There may be an age when annuitization is required. The income options with a single premium immediate annuity are the same as any other type of income annuity. The correct answer is: A single premium immediate annuity

Which policy would best suit someone who retires with a large amount of cash? Select one: a. Level term insurance b. Single premium whole life insurance c. Limited premium whole life insurance d. Continuous premium straight life insurance

A single premium whole life insurance would suit the insured's needs. The correct answer is: Single premium whole life insurance

Which of the following policies is a special risk policy? Select one: a. Dread disease b. Hospital indemnity c. Travel accident d. Cancer

A special risk policy will pay one benefit for a specific event. Once the travel accident policy pays for an accidental death, it will no longer be in force. The correct answer is: Travel accident

Which of the following is not an assignment whereby someone would transfer legal rights as the policyowner of a life contract? Select one: a. Collateral, partial, conditional assignment b. Total, complete, unconditional assignment c. Beneficiaries' assignment d. Absolute, voluntary, complete assignment

A total, complete, unconditional assignment does not exist in the insurance world. The correct answer is: Total, complete, unconditional assignment

A unilateral contract is: Select one: a. A contract that makes a promise or promises in exchange for a performance b. Implies inequality of bargaining power c. Allows the "little guy" some rights over the person writing the contract d. Insures that both parties are bound to perform

A unilateral contract makes promises for a performance. The correct answer is: A contract that makes a promise or promises in exchange for a performance

Which of the following statements is true about a waiver of premium rider? Select one: a. A waiver of premium rider can only be added to a regular life policy. b. A waiver of premium rider cannot be added to a term policy. c. A waiver of premium rider can be added to a term policy. d. A waiver of premium rider cannot be added to a life policy once the policy is approved.

A waiver of premium rider can be added to a term policy is a true statement. The correct answer is: A waiver of premium rider can be added to a term policy.

A universal life plan differs from a whole life plan in all of the following ways, EXCEPT: Select one: a. A whole life plan displays a detailed list of all mortality, expense and interest payments in the premium calculation. b. A universal life plan may have features that are not guaranteed. c. The cost of life insurance may vary from year to year on a universal life contract. d. The administrative expenses are a listed charge in universal life.

A whole life plan bundles all expenses and charges and they are not listed separately in the policy or any illustration. Universal life lists each component of the premium, which includes the cost of pure life insurance (mortality charge), the administrative expense and any cash accumulation after the first two expenses are accounted for. The cash account will also have a variable interest rate and the account may or may not have a guaranteed element involved. The correct answer is: The cost of life insurance may vary from year to year on a universal life contract.

What type of life insurance policy has premiums guaranteed not to change, coverage never decreases, builds a cash account that is available for loans or surrender, and premium payments are required for life? Select one: a. A whole life policy b. A fully funded universal life c. An endowment policy d. A term policy

A whole life plan has all of the features listed above. The correct answer is: A whole life policy

Which of the following statements is true about whole life policies? Select one: a. Also called permanent insurance b. Builds cash value c. Policy endows at age 100 d. All of the above

A whole life policy is called permanent insurance, builds cash value and the policy endows at age 100. The correct answer is: All of the above

All of the following are limited type policies, EXCEPT: Select one: a. Accident only b. Specified disease c. Physician expense d. Basic hospital expense

Accident covers death, dismemberment, disability or hospital and medical care caused by an accident. Specified disease covers diagnosis and treatment of a specifically named disease or diseases, such as cancer (also called dread disease). The correct answer is: Physician expense

Producers in Alabama must complete a minimum of how many hours of continuing education every 2 years to keep their licenses in effect? Select one: a. 12 hours b. 18 hours c. 24 hours d. 36 hours

Alabama producers must complete a minimum of 24 hours of continuing insurance education every two years in order to continue their license. The correct answer is: 24 hours

Group policies must include an option to convert from the group policy to an individual policy if: Select one: a. The individual loses coverage due to loss of employment b. The individual loses coverage because the master policy was cancelled c. Both of the above d. None of the above

All group life insurance policies must include a conversion privilege. If the master policy is cancelled, or the employee is terminated, the individual has the option to convert to an individual policy. The correct answer is: Both of the above

Tim has added an accidental death rider to his life insurance contract. He knows that he will be charged an additional premium for this coverage, but because he lives in a dangerous neighborhood, he thinks the coverage is a good idea. For which of the following will the insurer exclude the payment of benefits? Select one: a. Conducting an illegal activity b. Acts of war c. Flying an experimental aircraft d. All of the above

All insurers maintain a list of events and circumstances that void the insured's entitlement to the accidental death benefit. Death by illness, suicide, non-commercial aviation, war, and natural causes are generally not covered by the accidental death benefit. Death while under the influence of any non-prescribed drugs or alcohol are usually exempt, as well. Participating in illegal activities also exempt the insured from coverage. The correct answer is: All of the above

Term coverage has many applications, such as mortgage protection. It gives the insured the best "bang for their buck." It is not without its disadvantages, however. Which of the following is not a disadvantage of term insurance? Select one: a. It is pure death protection. b. It is generally not renewable after age 65 or 70. c. It becomes more expensive over time. d. None of the above

All of the items listed are disadvantages of term insurance. Although usually less expensive in the beginning, it becomes more and more expensive as the insured ages. Because it is generally not renewable after a certain age, betting on protection may be very difficult for the insured, once he/she attains that age. The correct answer is: None of the above

Samuel is explaining the exclusions in a life insurance policy to his new client. Which of the following is an exclusion that would be found in a life policy? Select one: a. Hazardous occupation b. War c. Suicide d. All of the above

All of the items listed are exclusions that would be found in a life insurance policy. The correct answer is: All of the above

A long-term care rider is a provision that can be added to a cash value life insurance policy. If the insured becomes confined to a nursing home, this rider would reimburse health care expenses. Certain optional benefits may also be provided such as: Select one: a. Hospice care b. Adult day care c. Cost of living expenses d. All of the above

All of the items listed can be optional long term care benefits. The structure of the benefits includes elimination periods of 10-100 days, benefits triggered by impaired daily living activities, and skilled, custodial and home health care. The correct answer is: All of the above

Which of the following is a difference between individual and group insurance policies? Select one: a. Individual policies are generally more expensive b. Group policies provide coverage for 2 or more people c. Group policies cover everyone regardless of risk d. All of the above

All of the statements are differences between individual and group insurance policies. The correct answer is: All of the above

What element of a legal contract is described by: "All parties to a contract must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol?" Select one: a. Consideration b. Agreement c. Competent parties d. Legal purpose

All parties to a contract must be of legal competence. The correct answer is: Competent parties

All periodic premium annuities are: Select one: a. Level premium b. Flexible premium c. Fixed d. Deferred

All periodic premium annuities are deferred annuities. Different deferral periods can be involved. Benefits may begin after the last premium payment or they can be deferred to a later date. Level premium is an arrangement in which premiums are paid in installments - often annually. Premiums can be paid monthly, quarterly, or semiannually. Flexible premium means the purchaser has the option to vary the amount of each premium payment - within preset guidelines. A fixed annuity is a type of annuity which provides a fixed, guaranteed accumulation or payout. The correct answer is: Deferred

Which of the following is a requirement for a limited policy? Select one: a. Be in large type b. Be read to the insured c. Have THIS IS A LIMITED POLICY on the first page d. Have a signed statement acknowledging the limitations of the coverage, by the insured

All states require that limited policies be labeled as such with THIS IS A LIMITED POLICY on the first page of the policy. The correct answer is: Have THIS IS A LIMITED POLICY on the first page

John has been in the hospital for five days. How long does he have to file a claim form and show proof of loss with his insurance company? Select one: a. 45 days b. 90 days c. 20 days d. 60 days

Although medical providers may file claims on your behalf, it is the responsibility of the insured to be sure the claims are filed within 90 days with a proper claim completed and valid receipts attached. The correct answer is: 90 days

Matthew has recently purchased a variable life insurance policy. In reading his prospectus, he sees that the various accounts have the same managers as some of the mutual funds he owns. Matthew should understand which of the following: Select one: a. The money manager co-mingles the funds from his and other variable life plans with their various mutual funds. b. The insurance company maintains separate accounts for each investment and they are not co-mingled with other assets. c. Matthew does not need to be concerned about the performance, as it will mirror the performance of the mutual fund of the same name. d. Matthew can withdraw his money at any time penalty free.

Always remember that the investments in a variable product are referred to as a separate account. While the name of the manager on the account may be the same as well known investment companies, the investments may not be exactly the same. The account will be managed by the same people and the same philosophy, but money flow and timing may cause the performance of a separate account to differ from the mutual fund managed by the same managers. The correct answer is: The insurance company maintains separate accounts for each investment and they are not co-mingled with other assets.

Insurance contracts are unique because they contain all of the following characteristics, EXCEPT: Select one: a. Contract of adhesion b. Ambiguity in a contract of adhesion c. Aleatory contract d. Unilateral contract

Ambiguities in contract of adhesion is a legal interpretation used by the courts. The correct answer is: Ambiguity in a contract of adhesion

What type of plan provides the benefits of self-insurance, but has an insurance company to administer the plan? Select one: a. Administrative services only contract b. Third Party Administrator with stop loss c. A Health Maintenance Organization d. A Preferred Provider Network

An administrative services only contract will be offered by an insurance company. The other choices are either non-insurance company programs or variations of fully insured programs as a benefit design choice within the plan. The correct answer is: Administrative services only contract

Who is a producer that represents the insured or purchaser of insurance? Select one: a. Agent b. Broker c. Solicitor d. All of the above

An agent is a producer who represents the insurer. A broker is a producer who represents the insured. Solicitors are licensed salespeople who work for an agent or a broker. The correct answer is: Broker

Factors that affect the risk classification when underwriting a life policy do not include which of the following? Select one: a. Marital status b. Age c. Gender d. Weight

An applicant's marital status is not normally a factor that affects the risk category when classifying an applicant for a life insurance policy. The correct answer is: Marital status

Mrs. Kupchock, who is 78 years old, has received the benefits of her husband's life insurance policy. Although she is quite frail, her agent has recommended that she invest the proceeds in an immediate annuity. Her grandson does not think it is her best option. Why? Select one: a. An immediate annuity is a suitable option for a healthy individual who probably will live longer than most people in his/her age group. b. Because her life expectancy is not very good, she will probably lose most of her investment. c. Both of the above d. None of the above

An immediate annuity would be suitable if she was healthy and stood a good chance of living for many years. The fact that she is frail, makes it her least suitable choice. Annuities can be a good choice if the chances of outliving the actuarial predictions are good. Because they guarantee income for life, annuities primary concern is longevity. The correct answer is: Both of the above

In an insurance policy valuable consideration is exchanged for: Select one: a. An expectation b. A promise of benefits c. A warranty d. A representation

An insurance policy is a contract where a promise of benefits to be paid is exchange for premium payments. The correct answer is: A promise of benefits

An insurance producer is defined as all of the following, EXCEPT: Select one: a. An individual who sells insurance b. An individual who solicits insurance c. An individual who negotiates insurance d. An individual who settles claims

An insurance producer is defined as a person who sells, solicits and negotiates insurance. Adjusters are insurance professionals who settle claims. The correct answer is: An individual who settles claims

In what type of life insurance policy will premiums increase each policy anniversary based on current age? Select one: a. Guaranteed premium term b. Annual renewable term c. Modified universal life d. Minimum premium life

Annual renewable term will maintain the same face amount, but premiums increase as the policy holder advances in age. The correct answer is: Annual renewable term

For those considering an immediate annuity, which of the following is not an advantage of this type of investment? Select one: a. Loan privileges b. Tax treatment c. Sheltering assets d. Creditor protection

Annuities have no loan privileges. Once the money is put into an annuity, the annuitant usually has no access to it. Because of the exclusion ratio, immediate annuities have very favorable tax treatment. Annuities can be used to shelter assets. Immediate annuities allow the annuitant to remove the funds from his/her estate (for Medicaid purposes). In most states a fixed immediate annuity cash value cannot be touched by creditors. The correct answer is: Loan privileges

An association is required to do all of the following to qualify for an association group plan, EXCEPT: Select one: a. The employer must pay all premiums in full for its employees. b. The association must have been in existence for at least two years. c. The association must be a natural group, not formed specifically to provide benefits. d. There must be at least 100 members.

Association group health plans may be contributory or noncontributory. An employer may pay premiums for these employees, but is not required to under the association rules. The correct answer is: The employer must pay all premiums in full for its employees.

Which of the following is not an example of a basic medical expense plan? Select one: a. Hospital expense b. Disability income c. Surgical expense d. Physicians' expense

Basic plans are sometimes supplemental plans and include all of those listed, except disability. The correct answer is: Disability income

Which of the following is not a way that annuities are like insurance? Select one: a. Annuities and insurance policies are sold by insurance companies. b. Annuities and insurance policies are contracts. c. Annuities and insurance policies involve some risk for the purchaser and the company. d. Annuities and insurance policies are guaranteed to provide retirement income.

Because both annuities and insurance policies involve some risk, there is little if any guaranteed. The correct answer is: Annuities and insurance policies are guaranteed to provide retirement income.

Steve bought a 20-year, $200,000 decreasing term policy in 2001 and a $500,000 whole life policy. Steve died in 2006. What were the total benefits payable to his beneficiary? Select one: a. $700,000 b. $650,000 c. $500,000 d. $200,000

Because he died after 5 years, the policy death benefit was worth $150,000. His whole life policy paid the full face value of $500,000 upon his death. The total paid to his beneficiary was $650,000. The correct answer is: $650,000

As Samantha considers her options to purchase life insurance, she looks at the advantages of a graded premium life policy. Which of the following is not an advantage of such a policy? Select one: a. In the beginning, a greater amount of the premium is applied to the death benefit, less to the cash value. b. The policy has a level death benefit as long as it remains in force. c. Once the premiums level off, they remain level for the remaining term of the policy. d. The initial premium is much lower than whole life insurance.

Because of the lower premium, cash values grow much more slowly, initially. A greater percentage of the premium in the initial years is applied to the death benefit, less is applied to cash values. This is a disadvantage of this type of policy. The correct answer is: In the beginning, a greater amount of the premium is applied to the death benefit, less to the cash value.

Which of the following is a major difference between a variable life policy and a universal policy? Select one: a. The cash values of a variable life policy are not guaranteed. b. A variable life contract is regulated as a security. c. The insurer is required to establish a separate account for variable products. d. All of the above

Because the cash values are linked to equity investments and securities, they are not guaranteed. This linking results in regulation as a security, and regulation by the SED. Premiums paid for a variable life policy must be placed in a separate account containing securities-based investments. The correct answer is: All of the above

Mrs. Conroe's policy lapsed. Her agent, Mrs. Acker, accepted her past due premiums and re-instated her policy. Since agents cannot usually reinstate policies, why it was allowed in this case? Select one: a. Mrs. Acker is a top agent. b. Mrs. Conroe was truly sorry that she had let the policy lapse. c. Mrs. Acker was allowed to accept late premiums in the past to reinstate policies. d. All of the above

Because the insurance company allowed Mrs. Acker to accept late premiums in the past for the purpose of reinstating a policy, they allowed it in this case. The correct answer is: Mrs. Acker was allowed to accept late premiums in the past to reinstate policies.

Surin Global has a group disability policy for its employees. They pay 70% of the premium, and Bobby their employee pays 30%; which of the following statements is CORRECT? Select one: a. Surin can deduct 70% of the premiums that it pays. b. Bobby can deduct the premiums for the 30% that he pays. c. Bobby will receive 100% of the benefits tax-free. d. Bobby will receive 70% of the benefits not tax-free and 30% of the benefits tax-free. TRH-511

Bobby will receive 30% of the benefit tax-free, but will have to pay taxes on the 70% that his employer pays. In a group disability policy, premiums are deductible for the employer, and benefits are taxable to the employee. If an employee pays a percentage, the benefits are tax-free for the part the employee pays. The correct answer is: Bobby will receive 70% of the benefits not tax-free and 30% of the benefits tax-free.

Universal life policies are similar to whole life in that they: Select one: a. Both provide death protection and cash value b. Both provide flexibility c. Both treat cash withdrawals as a partial surrender d. Both provide fixed and guaranteed benefits.

Both a whole life policy and a universal life policy provide death protection and cash value. The similarities end there. The universal life policies offer flexibility, but benefits are not fixed and guaranteed as they are in the whole life policies. Whole life policies do not treat cash withdrawals as partial surrenders. The correct answer is: Both provide death protection and cash value

A common life insurance provision is the ___________, which states that if there is insufficient proof to show order of death when the insured and beneficiary die in the same accident, it is presumed that the insured died last, and the proceeds are payable to the named contingent beneficiary. Select one: a. Uniform simultaneous death act b. Per capita and per stirpes c. Facility of payment d. Spendthrift clause

Both the uniform simultaneous death act and the common disaster provision state that when death of the insured and the beneficiary occur at the same time, it is presumed that the insured died last. This allows the benefits of the policy to be paid to the secondary beneficiary or the insured's estate - as opposed to the estate of the primary beneficiary. Per stirpes pertains to the beneficiary's living children getting equal shares of the benefits. Per capita is per person - meaning that policy proceeds are paid only to the named - living - beneficiaries. Facility of payment is a provision that allows the insurance company to select a beneficiary if the named beneficiary is deceased, a minor, or cannot be found. Spendthrift clause allows the insured to protect the proceeds of a policy from a beneficiary that spends lavishly. The proceeds are paid in something other than a lump sum, and protected from the beneficiary's creditors. The correct answer is: Uniform simultaneous death act

All of the following are true concerning Interest Sensitive Whole Life (ISWL), EXCEPT: Select one: a. The death benefit is guaranteed as long as premiums are paid. b. Policy loans are available. c. The policyholder will always know the amount of cash value available. d. The cash account accumulates tax free inside the policy.

By definition, the cash value of an interest sensitive policy will vary. There may be a minimum guarantee, but the final cash account will be determined by the actual interest credited from year to year. An interest sensitive plan will allow the policyholder to earn a market-based interest, but the minimum guarantees for the plan are generally lower than a standard whole life. The correct answer is: The policyholder will always know the amount of cash value available.

Which of the following is a common element, when it occurs, that allows an insurer to charge lower premiums? Select one: a. Only choosing healthy insureds b. Paying less commission to agents c. Higher interest earnings d. Not including overhead expense

C. Higher interest earnings Higher interest rates on premiums, which have been received and invested, can allow an insurance company to charge lower premiums.

Which of the following is not an element of the nonforfeiture value of a whole life insurance policy? Select one: a. The policyowner can withdraw some or all of the cash value from the policy. b. Cash withdrawn does not reduce the face value of the policy. c. Cash withdrawn reduces the cash value of the policy. d. The policyowner owns the cash value in the policy.

Cash withdrawn from a whole life policy DOES reduce the face value of the policy as well as the cash value of the policy. The correct answer is: Cash withdrawn does not reduce the face value of the policy.

How long do claimants of an individual health insurance policy have to notify the insurance company of a claim? Select one: a. 10 days b. 20 days c. 31 days d. 60 days

Claimants have 20 days to notify the insurer of a claim. The correct answer is: 20 days

Clarice is the owner of the life insurance policy on her husband Herb. Which of the following can she NOT do without Herb's consent? Select one: a. Change the designated revocable beneficiary b. Make a policy loan c. Increase the amount of the insurance d. Surrender the policy for its cash value

Clarice cannot increase the amount of the insurance without Herb's consent. The correct answer is: Increase the amount of the insurance

Coinsurance may do any of the following, EXCEPT: Select one: a. Provide insurance for multiple individuals b. Provide a cost sharing between the individual and the insurance company c. Mitigate risk d. Define which party will pay what portion of a medical bill

Coinsurance refers to the mechanics of how the policy pays benefits, not to provide insurance for multiple individuals. The correct answer is: Provide insurance for multiple individuals

Which of the following types of whole life policy offers flexible premium payments tied to interest rate fluctuations? Select one: a. Continuous premium whole life b. Limited payment whole life c. Current assumption whole life d. Economatic whole life

Continuous premium whole life, the most common type of whole life, has premium payments over the life of the insured up to 100 years of age. With a limited payment whole life policy, the entire policy is paid up at a specific age, usually a shorter period of time. Limited premium whole life policies have higher premiums because they are paid over a shorter period of time. Current assumption whole life offers flexible payments tied to interest rates. The premiums can be raised or lowered by the insurance company, usually annually. A term rider is part of the economatic policy that uses dividends to purchase additional paid-up insurance. The correct answer is: Current assumption whole life

On January 5, Paul submitted an application without the initial premium. The insurer requires a medical exam, which is completed on January 17. On January 22, the insurer issued the policy standard, and the producer delivers it on January 25. When is coverage effective? Select one: a. 5-Jan b. 17-Jan c. 22-Jan d. January 25, after the statement of good health is signed, and the initial premium is paid.

Coverage begins on January 25, after the statement of good health is signed, and the initial premium is paid. The correct answer is: January 25, after the statement of good health is signed, and the initial premium is paid.

Credit life insurance is a type of decreasing term insurance. It was designed to protect creditors in the event that the debtor dies. All of the following are true statements about credit life, EXCEPT: Select one: a. It can be written on both a group and an individual basis. b. The insurance premiums are often financed in conjunction with the item purchased. c. The number of insureds on the policy can range from 1-50. d. The policy does not have a conversion option.

Credit life policy provisions include that a certain level of insureds must be maintained (usually 100+). If the number of insureds drops below the specified level, the insurer may not insure new debtors. The correct answer is: The number of insureds on the policy can range from 1-50.

An annuity contract provides for all of the following, EXCEPT: Select one: a. Safe retirement income tool b. Forced savings account c. Payments for a fixed period or a lifetime d. A health plan

D. A health plan Depending on the type of annuity, it usually provides a safe retirement income tool, acts as a forced savings account, and has payments for a lifetime of a fixed period of time.

Which of the following would be a routine exclusion in a life policy? Select one: a. A military pilot dies flying a fighter plane b. A stunt rider dies trying to leap 25 buses on a motorcycle c. A medic dies in a war zone d. All of the above

D. All of the above All of the activities listed would routinely be excluded. That means the insurer would not pay a death benefit claim under these circumstances.

Which of the following is a settlement option that a life insurance policyowner can choose? Select one: a. Life income option b. Interest only option c. Fixed period option d. All of the above

D. All of the above All of the choices are settlement options available to policy owners.

The Commissioner of Insurance may: Select one: a. Write insurance laws b. Sentence a person to prison c. Run a campaign for senator d. Examine insurance companies

D. Examine insurance companies The Commissioner of Insurance does not write laws, cannot put a person in prison, nor can he hold a position with or become a member of any political committee. The Commissioner can conduct examinations of insurance companies.

All of the following are required provisions for health policies, EXCEPT: Select one: a. Grace Period b. Reinstatement c. Proof of loss d. Exclusions

D. Exclusions Listing exclusion is common practice, but it is not necessarily a standard provision.

An individual disability policy will be characterized in all of the following ways, EXCEPT: Select one: a. The benefit is a stated dollar amount based on a percentage of income per month. b. The premium is established by the insured's occupation and health status. c. The benefit may be paid annually. d. The company may be able to increase premiums.

Disability benefits are required to be paid no less than monthly. The correct answer is: The benefit may be paid annually.

All of the following are true statements about life insurance policy dividends, EXCEPT: Select one: a. Dividends are paid because the insurer overcharged on premiums. b. Dividends are paid on an annual basis c. Dividends are taxable d. All of the above

Dividends are not taxable, are usually paid once a year, and are really a return of overcharged premiums. The correct answer is: Dividends are taxable

Which of the following is not true about the accumulation of interest dividend option? Select one: a. The dividend earns a rate of interest specified in the policy. b. The option allows the insurer to retain the dividend. c. Dividends left to accumulate at interest are part of the policy's cash value. d. Policyowner can withdraw dividend tax-free.

Dividends left to accumulate at interest are NOT part of the policy's cash value. The other statements are true. The correct answer is: Dividends left to accumulate at interest are part of the policy's cash value.

Due process includes: Select one: a. Notice only b. Hearing only c. Both notice and hearing d. Cease and desist order only

Due process includes notice and hearing. The result of due process may or may not be a cease and desist order. The correct answer is: Both notice and hearing

In order to sell variable annuities, the sales person must be qualified. What is required to qualify to sell variable annuities? Select one: a. A specialty license from the state b. A "Blue Sky" license from the state c. An annuity license from the state d. Registration with FINRA and an insurance license from the state

FINRA (formerly NASD) regulates variable annuity products in addition to the state. It is usual to require a minimum of a Series 6 license, a state securities registration and an insurance license to sell variable annuities. Penalties are severe for improper registration. The correct answer is: Registration with FINRA and an insurance license from the state

Under what conditions will an insurer pay Melvin under the disability income rider attached to his life policy? Select one: a. Melvin has broken both of his legs. b. Melvin has an injury that has rendered him permanently and totally disabled. c. Melvin needs the money to pay his bills. d. Melvin's injuries will keep him in the hospital for at least 2 months.

First, Melvin must be totally and permanently disabled. Next, he must wait 3 to 6 months after the disability occurs (the normal waiting period) before the insurer will pay under the disability income benefit. The correct answer is: Melvin has an injury that has rendered him permanently and totally disabled.

Nick has paid a large lump sum of cash to the insurance company for an immediate fixed annuity. That money will be invested by the insurance company in what fund? Select one: a. A separate account for annuitants b. The company's general fund c. A private retirement account d. A real estate trust for retirees

Fixed annuity values are invested in the company's general fund. Since the annuity is an obligation of the general assets of the company, the general fund is where it is invested. The correct answer is: The company's general fund

Which type of health insurance policy is created for use by smaller groups who do not have enough eligible employees to qualify for a group health plan? Select one: a. Group health insurance b. Individual health insurance c. Blanket insurance d. Franchise insurance

Franchise insurance is intended for small groups that are too small to be eligible for group coverage. The correct answer is: Franchise insurance

Fraternal benefit societies are described by all of the following, EXCEPT: Select one: a. They provide insurance to their members. b. They can be religion-based. c. They include ethnic or charitable organizations. d. They include stock and mutual companies.

Fraternals are religious, ethnic or charitable organizations that provide insurance to their members. The correct answer is: They include stock and mutual companies.

Which of the following is not a characteristic of a group life insurance plan? Select one: a. Minimum participation standards b. Lower overall costs c. Individual selection of benefits d. Master policy for all employees

Group life insurance is available at lower rates than individual insurance because the administrative, operational and selling costs associated with group life insurance are less than those of individual plans. These savings are passed on to group policyholders in the form of lower premiums. The correct answer is: Individual selection of benefits

Pete is receiving disability benefits from his current policy, but is able to return to work part time. Pete may expect some benefits from any of the following features, EXCEPT: Select one: a. Residual Disability b. Partial Disability c. Income replacement d. Guaranteed Insurability

Guaranteed Insurability does not deal with types of disabilities. The correct answer is: Guaranteed Insurability

Under HIPAA an insurance company may look back how far on pre-existing conditions for a late enrollee? Select one: a. 6 months b. 12 months c. 18 months d. 24 months

HIPAA allows the insurance company to look back 18 months for pre-existing conditions for late enrollments. For new hires, it is 12 months. The correct answer is: 18 months

Which of the following is not true about HIPAA? Select one: a. Coverage is guaranteed to persons with at least 18 months of creditable coverage. b. Creditable coverage may reduce waiting periods and preexisting exclusions. c. The insurance is noncancellable. d. HIPAA established standards to protect an individual's health history.

HIPAA requires guaranteed renewability except in circumstances of nonpayment or fraud. All of the other statements are true. The correct answer is: The insurance is noncancellable.

HIPPA is federal legislation that deals with: Select one: a. Continuation of individual coverage beyond termination b. Providing credit for service under group plans c. Requiring employers to contribute to employee health plans d. Disabled individuals rights

HIPPA sets up standards for patient privacy. The release of medical information is tightly controlled under this regulation. In addition, employees receive credit for time served in qualified group plans to limit exposure to pre-existing condition retractions.

Carly's grandfather wants to stop paying premiums on his life policy. If he wants coverage for the remainder of his life, which of the following options would provide this coverage? Select one: a. Term b. Extended term c. Reduced paid-up d. Endowment

He would select reduced paid-up which would provide coverage for the remainder of his life without any more premium payments. The policy would have a reduced face value based on no longer paying premiums. The extended term option would not provide coverage for life. The correct answer is: Reduced paid-up

If the Department has reason to believe a person is in violation of insurance laws, and such person requests a hearing, how much time does the Commissioner have to schedule and hold the hearing? Select one: a. 5 days b. 10 days c. 30 days d. 90 days

Hearings must be held within 30 days after receipt by the Commissioner of demand for hearing. The correct answer is: 30 days

If Karl's grandmother decides to exercise the accelerated benefit option of her life policy, which of the following is a responsibility of the insurer? Select one: a. Provide the policyholder with an illustration showing the effects on the death benefit b. Notify policyholder that the recipients eligibility for Medicaid could be affected c. Both of the above d. None of the above

If Karl's grandmother exercises her accelerated benefit option, the insurer must provide her with an illustration that demonstrates the effects on cash value, death benefit, premium payments, and loans. The illustration must also demonstrate affects on Medicaid eligibility. The correct answer is: Both of the above

Matt is a little short on cash and wants to access some of the cash in his life policy. A partial cash value distribution can be made. If he has the intention to repay the cash he takes out from his policy, it is considered a: Select one: a. Withdrawal b. Partial surrender c. Policy loan d. None of the above

If Matt intends to pay the money back, it is considered a loan. There is no legal requirement to pay it back, but interest is assessed by the insurer on the borrowed funds. Outstanding loans are deducted from the death benefit if the insured dies without repaying them. A withdrawal and partial surrender are presumed not to be repaid. They have the same impact on benefits. Withdrawals can be taxable, loans generally are not taxed. The correct answer is: Policy loan

When an insurance contract is a 'take it as is or leave it' situation, it is known as: Select one: a. Aleatory Contract b. Contract of Adhesion c. Unilateral Contract d. Conditional Contract

If a contract is issued without the possibility of negotiation, it is a contract of adhesion. The correct answer is: Contract of Adhesion

HIPAA recognizes time served under group plans to determine pre-existing condition restrictions. If a person is not covered, what is the maximum period they are allowed to go without coverage before the HIPAA requirements become void? Select one: a. 6 months b. 5 months c. 90 days d. 63 days

If a person is without creditable group coverage, including COBRA options, for 63 days the clock for creditable coverage starts again. With a 63 day lapse, the insurance company may apply pre-existing condition clauses without recognizing prior coverage. The correct answer is: 63 days

Under what situation will the terms of a policy be honored if fraudulent answers were given to the questions on the application for health insurance? Select one: a. He must keep the policy until the time for certain defenses expires. b. He will only be covered for accidents. c. His agent can rewrite the policy once the company discovers the fraudulent information. d. His policy will be cancelled when fraud is discovered.

If information is fraudulent, there is no time limit for the company to cancel the policy. The correct answer is: His policy will be cancelled when fraud is discovered.

If an insured commits suicide __________, the insurer will return the premiums to the beneficiary. Select one: a. After the initial 2 years b. Within 2 years c. After 3 years d. Within 5 years

If the insured commits suicide within the first two years of the policy, the insurance company will return the premiums paid to the beneficiary. The correct answer is: Within 2 years

A grace period is a component of every life insurance contract. The grace period is the amount of time, following the date that the premium is due, that the policy will remain in force. If the insured dies during the grace period, how will it affect the proceeds of the policy? Select one: a. No effect at all b. The policy is voided. c. The benefits are paid to the beneficiary, minus the outstanding premium. d. The insurer will wait until the premium is paid before distributing benefits.

If the insured dies during the grace period, the insurer would pay benefits, minus the outstanding premium. The correct answer is: The benefits are paid to the beneficiary, minus the outstanding premium.

When a minor child is the insured, which of the following is true about the payor rider? Select one: a. If the premium payor dies, premiums are waived until the insured child is a specified age such as 21 or 25. b. Premiums are waived if the minor child dies. c. Premiums are doubled if the minor child becomes disabled. d. None of the above

If the person responsible for paying the premium dies, the rider waives premiums until the insured child reaches a specified age such as 21 or 25. The correct answer is: If the premium payor dies, premiums are waived until the insured child is a specified age such as 21 or 25.

As with all investments, there are risks and rewards, advantages and disadvantages. All of the following are disadvantages of immediate annuities, EXCEPT: Select one: a. Once the annuity is purchased, there is no turning back - the annuitant loses access to the principal. b. The guaranteed income may be less than could be earned in another investment. c. If the annuitant does not outlive the actuarial predictions, substantial monies could be lost. d. In the event of a downturn in the market, the benefit payments remain level.

If there is a downturn in the market, the fact that the benefit payments do not go down is an advantage, not a disadvantage. All of the other items are considered disadvantages of immediate annuities. The correct answer is: In the event of a downturn in the market, the benefit payments remain level.

The Global Company is starting a marketing campaign to provide prospective applicants with the information needed to make a decision on whether or not to purchase an annuity. They must determine their target audiences. Which of the following would be most likely to purchase an immediate annuity? Select one: a. Newly married couple b. Man who received a settlement for injuries occurring from an automobile accident c. Couple about to adopt a baby d. All of the above

Immediate annuities are purchased with a single premium and they guarantee a level payment for the life of the annuitant. SPIAs (single premium immediate annuities) are often purchased when an individual comes into some money i.e., a settlement, inheritance, or life insurance proceeds. The annuity can be either single premium immediate, or single premium deferred. If the annuitant chooses the immediate option, the benefit payments begin within 12 months of purchase. If he/she selects the single premium deferred, it is purchased with a single premium, but the benefits are deferred to a later time. The correct answer is: Man who received a settlement for injuries occurring from an automobile accident

In Alabama, individual life insurance policies can be reinstated: Select one: a. Up to 1 year after premium default b. Up to 2 years after premium default c. Up to 3 years after premium default d. Up to 5 years after premium default

In Alabama, individual life insurance policies may be reinstated up to 3 years after the date of premium default. The correct answer is: Up to 3 years after premium default

In Alabama, the entire contract provision for life insurance policies consists of: Select one: a. The policy b. The application c. The policy and the application, if attached d. None of the above

In Alabama, the entire contract provision for life insurance policies consists of the policy and the application, if attached. The correct answer is: The policy and the application, if attached

What is the incontestability period for individual life insurance policies in Alabama? Select one: a. 6 months b. 1 year c. 2 years d. 3 years

In Alabama, the incontestability period for individual life insurance policies is 2 years. The correct answer is: 2 years

In a business overhead expense policy (BOE), which of the following is TRUE? Select one: a. Premiums are deductible, and benefits are tax-free. b. Benefits are tax-free, and premiums are not deductible. c. Benefits are taxed, and premiums are deductible. d. Premiums are not deductible, and the benefits are not tax-free.

In a business overhead expense policy (BOE), policy premiums are deductible, but the benefits are taxed. The correct answer is: Benefits are taxed, and premiums are deductible.

In a group disability policy, how are premiums and benefits treated for taxes? Select one: a. Premiums are deductible for the employer, and the benefits are taxable for the employee. b. Premiums are deductible for the employer, and the benefits are not taxable for the employee. c. Benefits are taxable for the employee, and the premiums are deductible for the employer. d. Benefits are not taxable for the employee, and the premiums are not deductible for the employer.

In a group disability policy, premiums are deductible for the employer, and benefits are taxable to the employee. The correct answer is: Premiums are deductible for the employer, and the benefits are taxable for the employee.

Any of the following will have an insurable interest in an insured, EXCEPT: Select one: a. An employer who wishes to protect himself against the loss of a key employee b. A wife who wants to be sure her children are secure in the event her husband dies c. An individual who wants to leave a charitable bequest d. Two friends who want to help the other person out in the event one dies.

In each of the first three examples, the person or entity is at risk for an economic loss in the event of the death of the insured. The correct answer is: Two friends who want to help the other person out in the event one dies.

The individual on whose life the annuity has been issued is the annuitant. If the annuitant is the contract owner, which of the following is a right and/or responsibility of the annuitant? Select one: a. The annuitant pays the premiums. b. The annuitant chooses the beneficiary. c. Both of the above d. None of the above

In most cases the annuitant is also the contract owner. The contract owner pays premiums and chooses the beneficiary. In the event that the annuitant is not the contract owner, he/she would not pay premiums nor would he/she select the beneficiary. The correct answer is: Both of the above

Under Social Security requirements, what is required for a worker to be considered fully insured? Select one: a. He/she must work 20 years. b. He/she must work 40 years. c. He/she must work 40 quarters. d. He/she must be at least 65 years old.

In order to be considered fully insured an employee must work 40 quarters. The correct answer is: He/she must work 40 quarters.

Is an insurance company required to return unearned premiums on a policy cancellation? Select one: a. Only if the insurance company initiates cancellation b. Only if the policy has a provision allowing this action c. In all cases where the insured has paid for coverage beyond the cancellation date d. Never

In the event of cancellation, the insurer must return the unearned portion of any premium paid. An insurance company is not allowed to charge for coverage it did not provide. The correct answer is: In all cases where the insured has paid for coverage beyond the cancellation date

Which of the following is usually sold as a cost-of-living rider to another policy? Select one: a. Increasing Term b. Reentry Term c. Interim Term d. Renewable Term

Increasing term provides an increasing face amount. The premiums are level. It is often sold as a cost-of-living rider to another policy. The correct answer is: Increasing Term

Individual MSP loss ratio must be no less than: Select one: a. 50% b. 65% c. 75% d. 85%

Individual MSP must have a loss ratio of at least 65%. The correct answer is: 65%

How long is the right to return period for individual health insurance policies in Alabama? Select one: a. 5 days b. 10 days c. 15 days d. 20 days

Individual health policies have a right to return of 10 days in Alabama. The correct answer is: 10 days

How does the pre-existing condition vary from individual to group policies? Select one: a. There is no difference. b. Individual pre-existing conditions are less restrictive. c. Group plans never have pre-existing conditions. d. Individual plans are usually more restrictive than group plans. R-RHG8009

Individual underwriting is always more restrictive than group underwriting. The correct answer is: Individual plans are usually more restrictive than group plans.

How long do COBRA benefits remain from the date employment is terminated? Select one: a. 6 months b. 12 months c. 18 months d. 24 months

Individuals may continue their group health coverage under COBRA for 18 months. Covered dependents are eligible for coverage up to 36 months if the insured's coverage is terminated due to death, divorce, the insured becomes eligible for Medicare or the dependent loses dependency status. The correct answer is: 18 months

Under HIPAA, a group plan may not exclude conditions that have been diagnosed or treated prior to employment, unless it is within 12 months before hire. That can be modified if the employee has been covered by another group plan during that time. Service under another group plan is referred to as creditable coverage. The correct answer is: 12 months

Individuals may continue their group health coverage under COBRA for 18 months. Covered dependents are eligible for coverage up to 36 months if the insured's coverage is terminated due to death, divorce, the insured becomes eligible for Medicare or the dependent loses dependency status. The correct answer is: 36 months

What requires that an individual have a valid concern for the continuation of the life or well being of the person insured? Select one: a. Insuring Clause b. Insurable interest c. Named insured d. All of the above

Insurable interest requires that an individual have a valid concern for the continuation of the life or well being of the person insured. The correct answer is: Insurable interest

Most life insurance policies have common exclusions. That means there are circumstances, conditions, etc. in which they are not obligated to pay benefits of a policy in force. Which of the following is not such an exclusion? Select one: a. Suicide b. Dangerous activity c. Aviation d. Sexual orientation

Insurance companies are not allowed to exclude people because of their sexual orientation. The suicide clause usually states that the company will not pay the face amount of the policy if the policyholder commits suicide within two years of purchase. In these cases, the only payment is a refund of premiums paid. The aviation exclusion usually states that the policy will not pay if the policyholder dies in a private plane crash as opposed to being a passenger on a commercial flight. The dangerous activity exclusion states that there will be no payment if the policyholder dies while participating in a certain activity, such as hang-gliding, rock-climbing, or auto racing. These exclusions are rare, however, as most companies will cover an individual at a higher rate if he/she regularly participates in these types of activities. Another common exclusion - the war exclusion states that the policy will not pay in the event that the policyholders death occurs as the result of a war. The correct answer is: Sexual orientation

Group life insurance has similar characteristics and also characteristics that are different from individual life policies. Which of the following is not a similarity that the two types of policies share? Select one: a. Proceeds are not taxable when received as a lump sum payment b. Both can deduct premium payments c. Premiums paid by a company are not considered income to an employee d. All of the above

It does not matter if the premiums for a group life policy are paid entirely by the employer or shared by the employer and employee, the employee cannot deduct the premiums. The employer can deduct the premium payments as a business expense. Lump-sum proceeds are not taxable from either a group or individual policy. Premiums are not considered income to the employee. The correct answer is: Both can deduct premium payments

Gregory recently purchased a one-year term insurance policy. At the end of the year, he can purchase an identical policy without having to show proof of insurability. Why type of policy did he purchase? Select one: a. Decreasing term b. Increasing term c. Renewable term d. Level premium term

It is a renewable term policy that allows the policyowner to purchase another identical policy at the end of the year without proving insurability. The correct answer is: Renewable term

There are two basic types of annuities - immediate and deferred. Which of the following is not a true statement about deferred annuities? Select one: a. A deferred annuity has annuity periods that begin sometime in the future. b. A deferred annuity can have a one-time premium payment. c. A deferred annuity payout period must begin within 12 months of purchase. d. A deferred annuity can have multiple premium payments.

It is an immediate annuity where benefit payments must begin within 12 months of purchase. With a deferred annuity the benefit payments are usually postponed to a later date, i.e., retirement. The correct answer is: A deferred annuity payout period must begin within 12 months of purchase.

What gives the insurance company the right to assume rights of the insured in order to sue a responsible third party when damages are inflicted on the insured? Select one: a. Concealment b. Warranties c. Subrogation d. Utmost good faith

It is subrogation that allows the insurance company to sue another party for injuries or damage to their insured. The correct answer is: Subrogation

A participating life policy refunds a portion of the premiums paid to the insured. These refunds are in the form of an annual dividend. Dividends are determined by the difference between the gross premiums paid, and the loss experience of the insurer. What option allows the policyholder to leave the dividends with the insurer to accumulate interest? Select one: a. Cash dividend option b. Accumulation at interest option c. Paid-up additions option d. Paid-up option

It is the accumulation at interest option that allows the policyholder to leave the dividends with the insurer to accumulate interest. The cash dividend option provides that dividends credited to the policyholder be paid with a check. The paid-up additions option allows the policyholder to purchased additional insurance which is added to the face amount of the policy. The paid-up option gives the policyholder the opportunity to pay the policy up early - using the dividends. The correct answer is: Accumulation at interest option

What option allows a contract owner to pay premiums periodically throughout the accumulation phase without any changes? Select one: a. Flexible b. Single c. Level d. Lump sum

It is the level premium option that allows the contract holder to pay the same premium periodically throughout the accumulation phase. The correct answer is: Level

Jeremy is in above average health, is quite physically active and has never smoked cigarettes. Which risk classification will Jeremy most likely be rated? Select one: a. Preferred b. Standard c. Substandard d. Declined

Jeremy is a non-smoker and has better than average health and leads a physically active lifestyle. He will most likely be rated as a preferred risk. The correct answer is: Preferred

Jim has a life policy with a face value of $250,000 and a total of $25,000 in loans and interest outstanding on the policy. He is killed in a skiing accident. With his double indemnity rider, how much in benefits will the policy pay? Select one: a. $225,000 b. $250,000 c. $475,000 d. $500,000

Jim's policy, with the double indemnity rider, has a death benefit of $500,000 (double $250,000). Subtract the outstanding policy loan of $25,000. The policy will pay $475,000. The correct answer is: $475,000

Karl is riding his bike when a dog jumps up at him and knocks both him and the bike to the ground. He breaks his wrist and must go to the hospital. This kind of peril is considered: Select one: a. Sickness b. Temporary c. Accidental d. Recurring

Karl could not have foreseen that a dog would chase his bike and knock him down. Therefore, him breaking his wrist is considered an accident. The correct answer is: Accidental

The Health Insurance Coverage Continuation Act regulates which of the following? Select one: a. Large companies with exclusions in their policy b. Establishing requirements for insurers who market to small employers with 20 employees or less c. The transition of individual employees from regular group benefits to Medicare d. Members switching from an HMO plan to a regular group medical plan R-RHG8002

Large employers are covered under COBRA, which requires that employees be allowed to continue group coverage when terminating employment. This act allows employees of small groups not covered by COBRA to continue coverage upon termination. The correct answer is: Establishing requirements for insurers who market to small employers with 20 employees or less

How long does an insurance company have to pay ordinary life insurance death benefits? Select one: a. 1 month from receipt of the death certificate b. 2 months from receipt of the death certificate c. 3 months from receipt of the death certificate d. 6 months from receipt of the death certificate

Life insurance claims must be paid no later than 2 months from receipt of the death certificate. The correct answer is: 2 months from receipt of the death certificate

Variable annuities have all of the following features, EXCEPT: Select one: a. Account values accumulate tax deferred. b. There are usually a variety of investment choices. c. Money can be withdrawn at any time without penalty. d. Optional riders are available for an extra charge.

Like a fixed annuity, a variable annuity will permit tax-deferred accumulation of assets. There is generally a wide choice of sub-accounts to meet the owner's risk profile. Withdrawing money prior to age 59 and one half or before the surrender period has expired may generate both tax consequences and surrender fees. The newer versions of variable annuities do allow for riders to be attached that provide a variety of benefits, but they add extra fees to the plan. The correct answer is: Money can be withdrawn at any time without penalty.

Which of the following statements concerning a Medicare Supplement plan are true? Select one: a. An individual must qualify for Medicaid to be eligible for these policies. b. An insurance company must be affiliated with Medicare to sell supplement policies. c. Medicare supplements are typically available when a person reaches age 59 1/2 and up. d. An insurance company must have a certificate of authority to market Medicare Supplements.

Like any policy, an insurance company must have a certificate of authority from the state where they are selling a policy in order to market that product. The correct answer is: An insurance company must have a certificate of authority to market Medicare Supplements.

A major medical expense plan: Select one: a. Is provided only through a group plan b. Supplements Medicare c. Has large lifetime benefit maximums d. Never has a deductible

Major medical is designed to have substantial lifetime maximums to provide protection for the much larger medical bills. The correct answer is: Has large lifetime benefit maximums

How is Medicaid funded? Select one: a. Payroll taxes from the employed b. Employer taxes based on payroll c. Part of Medicare d. Jointly funded by individual states and the federal government

Medicaid is a form of welfare and is funded by the federal government and the individual states. The states administer the program in their locale. Rules and qualifications may vary due to differences in the states. The correct answer is: Jointly funded by individual states and the federal government

To limit over insurance, an insurance company will coordinate with benefits the insured receives from all of the following, EXCEPT: Select one: a. Company wage continuation programs b. Workers' Compensation benefits c. Medicaid d. Social Security

Medicaid is a needs tested program that provides benefits for indigent people for health care. It does not provide an income benefit for its participants. The correct answer is: Medicaid

Which of the following is true about Medicare/Medicaid and Medicare supplements? Select one: a. They can provide nursing home benefits needed for aging. b. Medicare and Medicare supplements can provide nursing home benefits from an injury for 6 months. c. They all provide nursing home benefits. d. None of the above

Medicare pays for nursing home care that is related to a covered illness or injury - not for aging. Medicare and Medicare supplements can provide nursing home benefits, but the coverage is limited and usually does not extend beyond 100 days and only if it follows hospital confinement. The correct answer is: None of the above

When an insurer is determining how much premium to charge for a life insurance policy, the insurer considers all of the following, EXCEPT: Select one: a. Morbidity b. Mortality c. Earnings d. Expenses

Mortality, interest earnings, and expenses are all considerations when determining a life insurance premium. Morbidity is the rate at which accident, sickness or disability will occur - and is a determination when calculating health insurance premiums. The correct answer is: Morbidity

Which of the following statements is true about conditions to reinstate a lapsed life insurance policy? Select one: a. On a reinstatement, the policyowner does not need to provide proof of insurability. b. The premiums will start up again at the time of the reinstatement. c. The policy has been expired no more than 3 years d. Policy loans and interest are forgiven.

Most states allow reinstatement up to 3 years after the lapse of a policy. The correct answer is: The policy has been expired no more than 3 years

Most life policies have exclusions. The most common exclusion in a life policy is: Select one: a. Flight on a commercial airline b. Suicide c. Flight on a private jet d. Illegal acts

Suicide is always excluded in a life policy. The correct answer is: Suicide

If Megan wants to select a Medigap plan with an out-of-pocket limit of less than $2,500, she should choose: Select one: a. Medigap Plan I b. Medigap Plan J c. Medigap Plan K d. Medigap Plan L

Medigap Plan L Medigap Plan L is a partial coverage plan with an out-of-pocket limit of $2,310.

Which of the following is not a mandatory provision in a health and accident policy? Select one: a. Entire contract b. Incontestability c. Misstatement of age d. Grace period

Misstatement of age is an optional provision. If the insured's age is misstated, premiums are adjusted when the error is discovered. The correct answer is: Misstatement of age

What type of life insurance policy offers the same guarantees as traditional whole life insurance with a lower initial premium that remains level for the first five years of the policy? Select one: a. Ordinary life b. Adjustable life c. Equity-indexed life d. Modified life

Modified life is a life insurance policy that offers the same guarantees as traditional whole life insurance with a lower initial premium that remains level for the first five years of the policy. The correct answer is: Modified life

All of the following are major factors in the determination of premiums for life insurance, EXCEPT: Select one: a. Interest earnings b. Mortality c. Marital status d. Expenses

Mortality the rate at which a specific population dies, interest earnings, and expenses incurred by the insurer all are major factors for determining premiums. Marital status is not a major factor. The correct answer is: Marital status

Mr. Baker has a chronic medical condition. What will his risk classification be and how will his premium be affected? Select one: a. Mr. Baker's risk classification will be preferred. His premium will be higher. b. Mr. Baker's risk classification will be standard. His premium will be lower. c. Mr. Baker's risk classification will be substandard. His premium will be higher. d. Mr. Baker will be denied coverage.

Mr. Baker's risk classification will be substandard. His premium will be higher. The correct answer is: Mr. Baker's risk classification will be substandard. His premium will be higher.

Naomi is the tertiary beneficiary on her uncle's life insurance policy. Under what circumstances would she collect the benefits of the plan? Select one: a. When the primary beneficiary dies b. When the secondary beneficiary dies c. When both the primary and secondary pre-decease the tertiary beneficiary d. None of the above

Naomi would collect benefits if both the primary and the secondary beneficiaries die before she does. The correct answer is: When both the primary and secondary pre-decease the tertiary beneficiary

The nonforfeiture option is designed to protect the policyholder from losing their entire investment if a policy is cancelled or surrendered. Which of the following is not a nonforfeiture option? Select one: a. Non-participating b. Cash surrender value c. Reduced paid up insurance d. Extended term insurance

Non-participating pertains to policy dividends. Cash surrender value is an option for the policyholder to surrender the policy for the cash value. The value increases each year that the policy remains in force. When the policy is surrendered, it is returned to the insurance company, and they have 6 months to pay the cash value to the insured. Reduced paid up insurance gives the policyholder the option to use the cash value of the policy to purchase a single premium contract of the same form (i.e., 20-pay life, ordinary life, etc.) as the original policy. The face amount of the coverage will be less, but no premium payments will be required. Extended term option offers an extended term policy in place of the cash value policy. The policyholder can ask the insurer to use the existing cash value to purchase term insurance - equal to the face amount of the original policy. The correct answer is: Non-participating

What does the wording 'non-participating' on a health policy mean? Select one: a. The policy participates in the surplus of the insurance company. b. The policy will qualify for a premium refund if claims do not exceed premiums. c. No dividends are payable. d. Dividends will only be paid if declared by the board of directors.

Non-participating policies do not pay dividends for any reason. The correct answer is: No dividends are payable.

The owner of an annuity can stop making premium payments during the accumulation period without losing the value that has accumulated in the annuity. The right to the cash value that has accumulated in the annuity is called the: Select one: a. Nonforfeiture option b. Flexible option c. Withdrawal option d. Fixed payout option

Nonforfeiture options are available for deferred annuities. If the contract owner chooses to surrender the annuity before the payout phase begins or to stop making premium payments, two nonforfeiture options are available: 1. Surrender - the entire amount of premiums paid into the annuity, minus the surrender charges and prior withdrawals, will be refunded in a lump-sum; or 2. Annuitize - the contract based on the amount of cash accumulated at that point. The correct answer is: Nonforfeiture option

All of the following are true concerning Workers' Compensation laws, EXCEPT: Select one: a. All states require employers to have Workers' Compensation Insurance. b. Workers' Compensation provides benefits for employees who have been injured, become ill or died as a result of workplace issues. c. Many states have pools from which employers can purchase coverage. d. Premiums for Workers' Compensation vary by industry classification and actual employer experience.

Not all states require the employer to have Workers' Compensation insurance, but they all have laws concerning Workers' Compensation. Not having Workers' Compensation insurance does not relieve the employer of liability for on the job injuries. The correct answer is: All states require employers to have Workers' Compensation Insurance.

Claire has a policy with a payor provision and a 9 year old child. What happens if the child becomes disabled? Select one: a. The premiums stop. b. Nothing happens. c. The premiums are waived until the child is 21. d. The face amount becomes payable.

Nothing happens. The payor provision is for the adult that is paying the premium for the policy. The correct answer is: Nothing happens.

Maggie's life policy has lapsed. There are several ways she can recover some of the value of her policy. Which of the following is NOT a non-forfeiture option? Select one: a. One-year term b. Reduced paid-up c. Extended term d. Cash surrender

Of the selections, a one-year term is not a nonforfeiture option. The correct answer is: One-year term

A qualified retirement plan differs from a non-qualified retirement plan in all of the following ways, EXCEPT: Select one: a. Contributions to a non-qualified plan are deductible on a current basis. b. Qualified plans have specific rules on participation and non-qualified plans do not. c. Highly compensated employees may be limited by qualified plans and non- qualified plans do not have the same limits. d. Qualified plans are subject to annual discrimination tests and non-qualified plans are not.

One of the primary features of a non-qualified plan is that contributions are not deductible on a current basis. There is a specific set of rules concerning eligibility, participation, contributions and discrimination that must be followed on a qualified plan for it to maintain its status. There is considerable latitude with non-qualified plans that does not exist with qualified plans. The correct answer is: Contributions to a non-qualified plan are deductible on a current basis.

If an insured has a claim when he discovers that his age was misstated on the policy application, what will be the probable action of the insurance company? Select one: a. The company will cancel the policy and return all premiums paid. b. If the premium is too much, the company will refund the difference. If it is too little, the company will bill for the difference. c. The claim will be adjusted to reflect the correct age. d. The company will issue a new policy with the correct age and adjust the premium going forward.

One of the standard policy provisions is a misstatement of age provision. This allows the insurance company to adjust a claim to reflect the correct age without further action. The correct answer is: The claim will be adjusted to reflect the correct age.

Samantha purchased a universal life policy when the death benefit in the policy was $200,000. With a current cash value of $50,000, she has selected death benefit option B. How much is her current death benefit? Select one: a. $50,000 b. $150,000 c. $200,000 d. $250,000

Option B of a universal life policy provides for the death benefit to equal the face amount plus the cash value. The premiums are higher if the policyowner selects this option. The correct answer is: $250,000

The payor rider is sometimes added to a life insurance contract on a juvenile. The purpose of the rider is to make sure that the coverage on the juvenile does not lapse if the adult (the person responsible for paying premiums) becomes disabled or dies. Which of the following is not true about the payor rider? Select one: a. There is no added premium for this rider. b. The premiums can be waived until the juvenile reaches a specified age. c. The premiums can be waived until the maturity date of the contract. d. The insurance remains in force even if the premiums are not paid.

Payor rider is important if you are buying a policy on a juvenile (child). By taking this rider the payor (person that is making the premium payments) makes sure that in case of his/her unfortunate death/ dismemberment, before the premium payment term ends, the premiums are waived and the policy remains in force. The correct answer is: There is no added premium for this rider.

The Clark family's insurance policy lapsed when Mr. Clark was out of work. The policy was not surrendered for its cash value. Under what conditions can the policy be reinstated? Select one: a. Proof of insurability may be required b. All back premiums need to be paid c. It has not been more than three years since the policy lapsed d. All of the above

Reinstatement is usually possible if it has not been more than three years, proof of insurability is provided, back premiums are paid and it was not surrendered for its cash value. It is advantageous to reinstate a lapsed policy as opposed to purchasing a new policy because the age of the insured when the policy was first issued is used - resulting in a lower premium. The incontestability clock would start again on a reinstatement. The correct answer is: All of the above

Nathan incurs a $5,500 hospital bill. His major medical plan has a $500 deductible. Expenses beyond the deductible are payable at 80%, not to exceed $2,000 out-of-pocket expense. Nathan had $400 of charges that he paid before entering the hospital. How much will his insurance company pay towards his hospital bill? Select one: a. $4,320 b. $3,600 c. $4,400 d. $4,000

Remember the question is how much will the insurance company pay. $5,500 - $100 (what is left of the deductible) = $5,400 x .80 = $4,320 The correct answer is: $4,320

Which of the following is a benefit of a qualified retirement plan? Select one: a. Employers can deduct contributions for each participant. b. Contributions, and earning on the contributions are tax deferred until withdrawn. c. Transferring the contributions into a different IRA can further defer taxes. d. All of the above

Retirement plans that meet the requirements of the Internal Revenue Code Section 401(a) and ERISA (Employee Retirement Income Security Act) are tax qualified, thus eligible for favorable tax treatment. All of the items listed are benefits of a qualified retirement plan. The correct answer is: All of the above

All of the following correctly describe risk pooling, EXCEPT: Select one: a. Loss sharing spreads risk by sharing the possibility of loss over a small number of people. b. Risk pooling transfers risk from an individual to a group. c. Risk pooling allows a large number of people to be insured for a small amount of money. d. Each member of the group shares in the losses of the group, and is promised a future benefit.

Risk pooling spreads risk by sharing the possibility of loss over a large number of people. The correct answer is: Loss sharing spreads risk by sharing the possibility of loss over a small number of people.

Why are STOLI arrangements ethical dilemmas? Select one: a. Because the insured receives a lump-sum payment from a third party when the policy is sold to the stranger/investor b. Because life insurance cannot be sold to third parties c. Because the investor/stranger does not have an insurable interest in the insured d. All of the above

STOLI and IOLI arrangements are ethical dilemmas because the investor or stranger does not have insurable interest in the continued life and well being of the insured. They want the insured to die very soon, so that they will receive the policy death benefits. The correct answer is: Because the investor/stranger does not have an insurable interest in the insured

Which of the following does not fall in the private insurer category? Select one: a. Self-insurers b. Stock companies c. Mutual companies d. Noncommercial organizations

Self-insurers retain their own risk and are not considered private insurers. The correct answer is: Self-insurers

How benefits are paid to a beneficiary upon death in a life policy is a: Select one: a. Settlement Option b. Nonforfeiture Option c. Dividend Option d. Beneficiary designation

Settlement Options are how a beneficiary can receive the death proceeds. The correct answer is: Settlement Option

Margaret began receiving monthly benefits from her annuity in November of 2011. In May of 2012, her aunt passed away and she received an inheritance. She would like to provide a guaranteed income stream for twenty years. What are her options? Select one: a. She can add to her current annuity. b. She can purchase a life annuity certain. c. She can purchase a refund life annuity. d. She can purchase a life annuity - no refund.

She cannot add to her current annuity. She can, however, purchase another annuity. A life annuity certain provides income for a guaranteed period of time, without regard to whether or not the annuitant is alive. A refund life annuity pays the annuitant for life. If the annuitant dies soon after the annuity period begins, the undistributed principal is refunded to the beneficiaries. A life annuity, no refund pays benefits for the life of the annuitant with no obligation following the death of the annuitant. This option pays the highest monthly income because it is based only on life expectancy. If the annuitant dies early, much of the value is surrendered to the insurance company. The correct answer is: She can purchase a life annuity certain.

If Louise wants to provide her beneficiary with equal payments for a specific period of time using the proceeds of her life insurance, she would select which of the following options? Select one: a. Installment plan b. Fixed period c. Fixed amount d. Life with period certain

She should choose the fixed period option. The insurer will come up with a figure that is consistent each month, and make it last for an exact period of time. The correct answer is: Fixed period

Frank has set up a monthly payment from his fixed annuity. He knows that he will receive $2,000 per month until his death. Frank's family has a history of living well into their 90s. What is Frank's biggest risk if he lives that long? Select one: a. Running out of money b. Inflation c. Insurance company insolvency d. Choosing another option

Since Frank will most likely live longer than average, he will collect more money than average. Inflation will most likely erode Frank's purchasing power over time, making it more difficult for him to meet monthly expenses. The bright side is that Frank will always be guaranteed his monthly check and there are guaranty associations in every state to assure he will receive his benefit. It is rare that an insurance company will allow a change in income options once one is elected. The correct answer is: Inflation

Which nonforfeiture option(s) may be selected for a rated whole life insurance policy? Select one: a. Cash only b. Reduced paid-up only c. Reduced paid-up or cash d. Reduced paid-up or extended term

Since Jacob has a rated policy, his insurer will not offer him the extended term nonforfeiture option. He may choose the reduced paid-up or cash options. The correct answer is: Reduced paid-up or cash

To have an approved presentation of a variable annuity the prospect must receive which of the following documents? Select one: a. A prospectus and an approved illustration b. A sample policy and an approved illustration c. An outline of all expenses and charges separate from the sample policy d. A financial report from the insurance company and a sample policy

Since a variable is considered a securities product, regulations require that the prospect receive a full prospectus at the time of the sale. The prospectus will have information about expenses, mortality charges, investment sub-account expenses, surrender charges and other pertinent information. An approved illustration may contain projected results, but it must also have an illustration if investment accounts perform poorly over time. The correct answer is: A prospectus and an approved illustration

All of the following are true about Social Security Disability Benefits, EXCEPT: Select one: a. Disability income benefits are paid to the covered worker in the amount of the primary insurance amount (PIA) after a five-month waiting period. b. Social Security disability benefits are only available prior to the age of 65. c. Social Security does not pay partial disability or short-term disability benefits. d. Social Security benefits are available to workers if they had coverage at any time.

Social Security disability benefits are only available to covered workers who are fully insured at the time of disability. The correct answer is: Social Security benefits are available to workers if they had coverage at any time.

Carl is unable to work due to a medical condition. He has been confined to his home for four months and wants to begin the process for filing a disability claim with Social Security. All of the following are true, EXCEPT: Select one: a. He should wait until he has completed 5 months of waiting. b. He should be eligible for Medicare before he applies. c. His disability should prevent him from working at all. d. He should expect to be disabled for 12 months or more.

Social Security disability benefits are paid after a five-month waiting period. The disability must be total and expect to last twelve months. Being eligible for Medicare is not one of the criteria. In fact, Social Security disability benefits become retirement benefits when a person reaches age 65. The correct answer is: He should be eligible for Medicare before he applies.

Which of the following is an example of a government insurance program? Select one: a. Social Security b. Blue Cross c. Lloyd's Associations d. All of the above

Social security is an example of a government insurance program. The correct answer is: Social Security

What kind of insurance policy covers a sports team's players during practice and games? Select one: a. A loss of income policy b. A medical expense policy c. A limited health policy d. A blanket policy

Sports teams often take out a blanket policy (a type of group limited policy) to cover the athletes during events related to the team. The correct answer is: A blanket policy

Which of the following is not a common classification underwriters use for risk? Select one: a. Standard b. Special c. Substandard d. Preferred

Standard, preferred, substandard and declined are the common classification ratings. There is no rating called special. The correct answer is: Special

Which of the following is the program that provides health insurance coverage to active and retired members of the uniformed services? Select one: a. Medicare b. Medicaid c. Social Security d. TRICARE

TRICARE provides health insurance coverage to active duty and retired members of the uniformed services and their dependents. The correct answer is: TRICARE

Valerie is looking at types of insurance to enhance her retirement. Which of the following should she NOT consider in planning her retirement? Select one: a. Term insurance b. Endowment c. Whole life d. Current Assumption Whole life

Term is not considered a retirement plan policy. Term is used to cover a need for a fixed period of time. There is no cash value at the end of the term. The correct answer is: Term insurance

To protect a policyholder from an inadvertent lapsing of a contract, the automatic premium loan (APL) provision may be added to a cash value life policy. Which of the following statements is not true about this provision? Select one: a. It can be applied for at any time. b. The policy will lapse if there is not enough cash value to cover the premium payment. c. Reinstatement is not available if the policy lapses for lack of payment. d. Outstanding loan amounts are deducted from the death benefit.

The APL provision usually must be requested at the time of the original policy application. The policy will lapse if there is insufficient cash to cover the premium payment and if the policy lapses for this reason, it cannot be reinstated. Any outstanding policy loans are deducted from the death benefit. The correct answer is: It can be applied for at any time.

How is the Alabama Commissioner of insurance chosen? Select one: a. By popular vote b. Appointed by the governor c. By application d. None of the above

The Alabama Commissioner is appointed by the governor. The correct answer is: Appointed by the governor

What is the maximum the Alabama Life and Disability Insurance Guaranty Association will pay a beneficiary if the insured dies and the insurer becomes insolvent? Select one: a. $300,000 b. $500,000 c. $600,000 d. $1,000,000

The Alabama Life and Disability Insurance Guaranty Association will pay up to a maximum of $300,000 for all benefits of one person. The correct answer is: $300,000

The Commissioner is required to examine all licensed insurers in Alabama at least once every: Select one: a. 2 years b. 3 years c. 4 years d. 5 years

The Commissioner is required to conduct an examination of every licensed insurer at least once every 5 years. The correct answer is: 5 years

How many mandatory provisions are in the NAIC model law for health insurance contracts? Select one: a. 5 b. 11 c. 12 d. 15

The NAIC developed the Uniform Individual Accident and Sickness Policy Provisions Law also known as the model health insurance policy provisions. There are 12 mandatory provisions and 11 optional provisions. The correct answer is: 12

Karl's grandmother has been diagnosed as being in end-stage renal failure. What provision of her life policy will giver her access to funds for rent, food and necessary medical services? Select one: a. Accelerated benefits b. Disability income c. Cost of living d. Waiver of premium

The accelerated benefits provision/rider allows the insured tax free access to policy death benefits when the insured is suffering from a terminal or severe chronic illness. These funds are commonly used for rent, food and medical services. The disability income rider waives premium payments when the policyowner is totally disabled and also provides the policyowner with an income each month. A cost of living rider helps to guard against inflation eroding the benefits of a policy. The insured can increase the amount of insurance without providing proof of insurability. The waiver of premium rider provides that if the insured becomes totally (and permanently) disabled, the premium payments are waived and the insurance contract remains in force. The correct answer is: Accelerated benefits

Short-term disability riders are called: Select one: a. Social insurance supplement riders b. Additional monthly benefit riders c. Impairment riders d. Hospital confinement riders

The additional monthly benefit (AMB) rider provides benefits during the first 6 - 12 months of the claim. The correct answer is: Additional monthly benefit riders

For a single premium deferred annuity, what is the time between the purchase date and the date when benefits begin? Select one: a. Annuity phase b. Accumulation phase c. Premium determination d. Benefit phase

The annuity phase is the time when the cash value of the annuity is converted to income payments. The accumulation phase is the time when the contract owner pays premiums, the time between the purchase date and the date when benefits begin. Premium determination deals with factors on how much premium is to be charged. The term benefit phase, is not used with annuities. The correct answer is: Accumulation phase

The applicant's statements on an insurance application are considered: Select one: a. Representations b. Warranties c. Rescission d. Subrogation

The applicant's statements on the application are considered representations. The correct answer is: Representations

Which of the following statements about the automatic premium loan provision of a whole life policy is NOT true? Select one: a. Using the provision prevents the risk of inadvertent lapse. b. Its use causes dividends to be withheld c. If premiums are missed, the automatic premium loan provision uses cash values. d. Using the provision preserves insurability

The automatic premium loan provision does not cause dividends to be withheld. The correct answer is: Its use causes dividends to be withheld

Ron and Jack are partners. The business assignment of their life insurance policies was made to protect which of the following? Select one: a. The beneficiary from the claims of creditors b. The insurance company from fraudulent claims c. The financial interest that the lender has in the insured d. The ability of the insureds to maintain their insurability

The business assignment of a life insurance policy is made to protect the lender's financial interest in the insured. This assignment insures that if the insured dies before the loan is paid off, the lender will be paid. The correct answer is: The financial interest that the lender has in the insured

What nonforfeiture option allows the policyowner to receive the policy's cash value? Select one: a. Cash surrender value b. Extended term c. Reduced paid-up insurance d. None of the above

The cash surrender value allows the policyowner to receive the policy's cash value. The correct answer is: Cash surrender value

The cash value in a whole life policy is held in the insurance company's: Select one: a. Cash value account b. Separate account invested in government bonds c. General account d. Separate account for that class of policies

The cash value of a whole life policy is held in the company's general account. That means the money is co-mingled with other assets and the investments for that account are usually subject to state and/or federal regulation. When a policyholder makes a loan, for instance, on a whole life plan, the money is loaned from the general fund, and not the cash value of the policy. The correct answer is: General account

Which of the following may be an optional provision under the Uniform Provisions Law? Select one: a. Physical exam b. Change in occupation c. Entire contract d. Time limit to file claims

The change of occupation provision is an optional provision. The other provisions are mandatory. The correct answer is: Change in occupation

Ms. Swanson has a $75,000 mortgage and assigns a $150,000 policy. The assignee and the mortgagee received a check payable to them jointly. What is this agreement called? Select one: a. Partial assignment b. Absolute assignment c. Collateral assignment d. Divisible assignment

The collateral assignment is used when a check is to be paid jointly to both parties. The correct answer is: Collateral assignment

The person that receives the proceeds of a life insurance policy if the primary beneficiary predeceases the insured is called the: Select one: a. Irrevocable beneficiary b. The tertiary beneficiary c. The revocable beneficiary d. The contingent beneficiary

The contingent beneficiary is person that receives the proceeds of a life insurance policy if the primary beneficiary predeceases the insured. The correct answer is: The contingent beneficiary

Continuous premium, limited premium and single premium are types of whole life policies. Which of the following is indicative of a continuous premium method? Select one: a. It has immediate cash value. b. It is also called 20-pay life. c. It has the lowest cost over the life of the insured. d. It has the lowest annual premium.

The continuous premium whole life has the lowest annual premium, and requires that payments be made for the longest period of time. The cash value grows slowly with a continuous premium policy. It is a single premium whole life policy that has immediate cash value, and the lowest cost over the life of the insured. A limited pay whole life is also called 20-pay life. The correct answer is: It has the lowest annual premium.

The NAIC insurance model includes how many optional standard provisions for health insurance contracts? Select one: a. 10 b. 11 c. 12 d. 13

The current law includes 11 optional provisions. The correct answer is: 11

The NAIC insurance model includes how many mandatory standard provisions for health insurance contracts? Select one: a. 10 b. 11 c. 12 d. 13

The current law includes 12 mandatory provisions. The correct answer is: 12

The group contract for a large company that employs a number of people in different states will be delivered to any of the following, EXCEPT: Select one: a. Where the company is incorporated b. The principal offices of the employer c. Where the insurance company is located d. Where the most employees are located.

The determination for the delivery of a group contract is where the policyholder does most of its business. Where the insurance company is located has nothing to do with where a policy may be delivered. The correct answer is: Where the insurance company is located

Daniel has a disability income rider on his life policy. With a disability income rider: Select one: a. The insurer pays Daniel a specified amount each month. b. The income continues for the duration of the disability. c. There is a waiting period before benefits are paid. d. All of the above

The disability income rider pays a specified amount each month - based on the face amount of the policy. The income continues for the length of the disability, after waiting period requirements have been fulfilled. The disability must meet the insurer's criteria for total and permanent, and is usually determined by a physician approved by the insurer. The correct answer is: All of the above

The clause that prevents the insurance company from acting unilaterally to change a policy is: Select one: a. Time limit for certain defenses b. The insuring clause c. The entire contract clause d. Incontestable clause

The entire contract clause does not allow either the insurance company or the insured to make unilateral changes to the terms of the contract. The correct answer is: The entire contract clause

Which provision prevents an agent or a company from changing the insurance contract after it is issued? Select one: a. The insuring clause b. The entire contract clause c. The legal actions clause d. Time limit for certain defenses

The entire contract clause protects the insured from a unilateral contract change by either the producer or the underwriting company. The correct answer is: The entire contract clause

In a life insurance policy, the entire contract clause provides that all statements made by the insured, in the application are: Select one: a. Representations b. Warranties c. Permission to amend the policy d. All of the above

The entire contract clause provides that statements made by the insured, in the application are considered representations. The correct answer is: Representations

Which of the following does NOT occur because an insured died during the grace period of a policy? Select one: a. The insurance company is relieved of any responsibility to pay a benefit. b. The face amount of the policy is paid to the beneficiary. c. The interest due on the overdue premium is deducted from the benefit. d. The overdue premium is deducted from the paid benefit.

The face amount of the policy is paid to the beneficiary. The correct answer is: The insurance company is relieved of any responsibility to pay a benefit.

Using the facility of payment clause in a policy, the insurance company may pay an amount up to the maximum limit to which of the following? Select one: a. The people who appear to be entitled to it b. The insured's estate c. Directly to a medical provider without proper assignment d. None of the above

The facility of payment provision states benefits are payable to an individual who is related to the deceased insured by blood or marriage. The limit in this amount is usually less than $3,000. The correct answer is: The insured's estate

Helen and Mark have purchased a policy to cover both of their lives. They know that there are benefits and also disadvantages of such a policy. Which of the following is not something that would be regarded as a benefit of a joint policy? Select one: a. Premiums and face value cannot be changed. b. Premiums usually are lower than for two separate policies. c. The policy can be written as whole life or term life. d. The premiums are usually lower. RLPV6020

The fact that the premiums and face value of the policy cannot be changed are regarded as drawbacks of a joint life policy. Another drawback is that the premiums are an average of the ages of the two policyholders which could result in the younger policyholder paying more than he/she would if they took out an individual policy. The correct answer is: Premiums and face value cannot be changed.

Combination plans are intended to be representative of the needs of the insured. One such plan is called the ______________ , which combines ordinary life and level term insurance. It provides monthly income for a stated period of 10, 15, or 20 years, or to an age, as selected by the insured. Select one: a. Family income policy b. Family maintenance policy c. Family protection policy d. Endowment policy

The family income policy, not commonly sold, combines whole life and decreasing term. The family maintenance policy combines ordinary life and level term and does provide an income stream for a designated number of years of a designated age. The family protection policy consists of whole life on the breadwinner, and convertible term on the spouse and children. The correct answer is: Family maintenance policy

Which life insurance settlement option uses an annuity to pay policy proceeds in which the payment amount is specified instead of a period of time? Select one: a. Interest only b. Fixed-amount installment c. Life income d. Period certain

The fixed-amount installment option uses an annuity to pay the policy proceeds, but the payment amount is specified instead of period of time. The correct answer is: Fixed-amount installment

What is a life insurance settlement option that uses an annuity to pay policy proceeds to the beneficiary for a set number of years? Select one: a. Period certain b. Fixed-amount installment c. Life income d. Interest only

The fixed-period, or period certain, installment option uses an annuity to pay the policy proceeds to the beneficiary for a certain number of years. The correct answer is: Period certain

Annuities have a variety of payout options. These options provide the annuitant with choices on how the annuity settlement will occur. All of the following are annuity payout options, EXCEPT: Select one: a. Cash (lump sum) b. Annuity certain c. Flexible payment d. Refund life annuity

The flexible payment is not an annuity payout option. The most common options are: 1. Cash (lump sum) where the annuitant receives the value of the annuity in one payment. Only the interest earned on the principal is taxable upon receipt. 2. Annuity certain is income for a fixed time period as opposed to one's entire life. 3. Refund life annuity insures that the full value of the annuity will be paid to someone. The annuitant will receive income for life and then the beneficiary will receive the balance of premiums, plus interest (minus benefits already paid). 4. Life annuity is a payout option that guarantees income that the annuitant cannot outlive. The correct answer is: Flexible payment

The 10-day free look period gives the insured the opportunity to look over a policy to decide if he/she is satisfied that it meets their requirements. When does the free look period begin? Select one: a. When the policy is issued b. When the application is made c. When the policy is physically delivered d. When the first claim is filed

The free look period begins when the policy is physically delivered to the insured. The correct answer is: When the policy is physically delivered

April completed her insurance application on the 9th of August. She paid her initial premium on the 10th of August. The insurance company issued the policy on the 16th of August. Her agent delivered the policy on the 17th of August. The insurer has a 15-day free look provision. When does she need to return the policy if she decides she does not want to purchase it, and wants her premium refunded? Select one: a. September 15th b. September 10th c. September 2nd d. August 31st

The free look period starts when the policy is delivered. If April decides against purchasing the policy, she must return it by September 2nd. (15 days from when it was delivered) in order to get a full refund. The correct answer is: September 2nd

Time limit on Certain Defenses is typically 2 years. At some point the insurance company must accept the risk that is outlined in the policy unconditionally, except for fraud. The correct answer is: A defined period of time after a policy is issued that an insurance company may deny a claim and voids a policy because of a material misstatement by the insured

The grace period is 31 days if in an Individual Health Policy if the premiums are paid yearly. The correct answer is: 31 days

How long is the grace period of an Individual Health Insurance Policy in which the premiums are paid weekly? Select one: a. 7 days b. 10 days c. 30 days d. 31 days

The grace period is 7 days if in an Individual Health Policy if the premiums are paid yearly. The correct answer is: 7 days

Which of the following is not a characteristic of the guaranteed insurability rider? Select one: a. The insurance is based on the age of the insured when the option is exercised. b. The insurance can be purchased at any time. c. The amount that can be purchased is equal to the face of the original policy or $10,000 whichever is less. d. The additional insurance can be purchased at three-year intervals. LF76015 Feedback

The guaranteed insurability rider (GIR), sometimes referred to as the future increase option, permits the policyowner to buy additional permanent life insurance coverage at specific points in time in the future (i.e. marriage, births, etc.) without requiring the insured to provide proof of insurability. The correct answer is: The insurance can be purchased at any time.

Mrs. Olsen worries that her health may deteriorate in the future. She wants to provide adequate coverage for herself and her family. Which rider should she consider for her life policy? Select one: a. Payor rider b. Disability income rider c. Guaranteed insurability rider d. Waiver of premium rider

The guaranteed insurability rider allows a policyholder to purchase additional life insurance coverage in the future without providing evidence of insurability. The rider provides specific dates on which additional life insurance policies can be bought. The older the insured gets, the fewer dates he/she has to purchase more life insurance. In some instances, after a certain age, the rider may not be able to be purchased or added. The guaranteed insurability rider could be considered a worthwhile investment to include in a life insurance quote if Mrs. Olsen worries that her health might change. The correct answer is: Guaranteed insurability rider

Dominic has decided to cash in his life policy. How soon must the cash surrender values become available to him? Select one: a. 1 month b. 60 days c. 6 months d. 1 year

The insurance company has six months to make the cash available to him. The correct answer is: 6 months

Once a company has furnished a claim form within the proper time frame, the insured has how much time to provide proof of loss to the insurance company? Select one: a. 15 days b. 20 days c. 45 days d. 90 days

The insured has 20 days to notify the company of a loss, but they have 90 days from the time they receive the claim form to provide details (medical bills, etc.) of the loss to the insurance company. The correct answer is: 90 days

How long can an insurance company delay payment of a cash surrender? Select one: a. The insurer must pay immediately. b. 30 days c. 60 days d. 6 months

The insurer can delay payment of a cash surrender for six months. The correct answer is: 6 months

Level premium term provides a level face amount with level premiums during the policy period. In order to provide this protection, the insurer: Select one: a. Charges premiums that are higher in the early years b. Pays a smaller commission to the agent c. Takes a lesser percentage of the profits on the policy d. Charges other policyholder more to balance its income

The insurer charges a premium that would be considered higher than average, so that the premiums will balance with the premiums that would be lower than average as the insured ages. The correct answer is: Charges premiums that are higher in the early years

Seth has notified his insurance company that he has a claim. The insurance company must furnish a claim form within how many days to comply with the governing provisions? Select one: a. 15 days b. 21 days c. 10 days d. 30 days

The insurer, upon receipt of the notice, must furnish the forms for filing proof of loss. If the forms are not provided within 15 days, the claimant will be deemed to have complied with the policy's requirements for proof of loss upon submitting written proof of the occurrence, as well as the character and the extent of the loss for which claim is made. The correct answer is: 15 days

The front page of all insurance policies must contain which of the following? Select one: a. A list of riders b. Insuring clause c. Incontestable clause d. Consideration clause

The insuring clause is a statement of the policy particulars, including what the insurance company is responsible for, what they will do, and how claims will be handled. The insuring clause is always on the front page of the policy. The correct answer is: Insuring clause

All of the following are required in a legal contract, EXCEPT: Select one: a. Acceptance b. Legal purpose c. Invitation to offer d. Consideration

The invitation to offer is not required in a legal contract. The correct answer is: Invitation to offer

Which of the following is not likely to be covered under a dread disease policy? Select one: a. Flu b. Heart disease c. Cancer d. Parkinson's

The least likely of these to be covered under a dread disease policy is the flu. Prognosis for recovery from the flu is usually good. The correct answer is: Flu

Premium payments for life insurance are made in advance. Typically they are paid to the insurer's home office or to the agent. The premium payment mode defines the timing of the payments. Usually the payment mode with the best economy is: Select one: a. Monthly b. Quarterly c. Bi-annually d. Annually

The less frequently the insurance company has to process premium payments, generally, the more economical the payments. If the annual premium on a policy is $480, the bi-annual premium might add up to $490, the quarterly premiums might add up to $500 and the monthly premiums might add up to $520 per year. The correct answer is: Annually

Which of the following is part of the loss of earnings test for disability? Select one: a. Inability to perform duties of the insured's own occupation for 2 to 5 years b. Inability to perform the duties of any suitable occupation c. Both of the above d. None of the above

The loss of earnings test for disability includes both the inability to perform duties of the insured's own occupation for 2 to 5 years and the inability to perform the duties of any suitable occupation. The correct answer is: Both of the above

Insurance companies use 5 major factors to determine annuity premiums. All of the following are common factors used to determine premiums for annuities, EXCEPT: Select one: a. The age of the annuitant b. The sex of the annuitant c. The payment guarantee to the annuitant d. The marital status of the annuitant

The marital status of the annuitant is not a factor in premium determination. The five factors used to determine annuity premiums are: the annuitant's age and sex, the assumed interest rate, the periodic income amount and payment guarantees, and also, company expenses (or load). The age is important for the insurer to determine how long it will be obligated to make payments to the annuitant. Example: If Sally wants to receive $500/month for life beginning at age 65 and Kim wants to receive $500/month beginning at age 60, if all other things are equal, the insurer will charge Kim a higher premium than Sally, because they will be paying for a longer period of time. The reason that the annuitant's sex is a factor is because statistically women live longer than men. If the annuitant is a woman, the premium is higher because she is expected to live longer and will receive income payments for a longer period of time. If Sally and John purchase annuities with all things being equal, Sally's premium will be higher. The third factor used is the assumed rate of interest. Insurance companies invest premium dollars and earn interest on their investments. The insurers estimate the amount of interest their invested premium dollars will earn. The fourth factor is the amount of periodic income to be paid and payment guarantees that the insurer made (i.e., a 10-year period certain). A higher amount of income and/or a longer payment period will be cause for a higher premium. Virtually all life policies and annuities include a factor that helps pay the insurer's operating expenses. Premiums have this factor loaded into them. The correct answer is: The marital status of the annuitant

When considering a variable annuity, the prospect should review all of the following, EXCEPT: Select one: a. The mortality charge b. The expense charge c. The investment fee for each separate account d. The expected return for each separate account

The mortality, expense and investment fees will have a bearing on the account results. Returns are net of expenses. A higher expense ratio will cause lower net return or create a situation where the money manager must accept a higher risk. Since the accounts are not guaranteed, there is no assurance what the future return might be on any given sub-account.

What guarantee states that if the policyholder discontinues payment of premiums, the policyholder can have access to the cash value of the policy? Select one: a. Policy loan provision b. Conversion option c. Nonforfeiture provision d. Settlement option

The nonforfeiture provision protects a policyowner from losing their investment. If a policy is cancelled, surrendered or premiums are not paid, the nonforfeiture provision provides the policyholder access to the cash value of the policy. The correct answer is: Nonforfeiture provision

Which of the following is required for the conversion/exchange to take place in a convertible term policy? Select one: a. It requires that premiums be paid on time. b. It requires a background check. c. It requires a reduction in the face value of the policy. d. It requires that the premiums remain the same.

The only requirement for a convertible term policy to be exchanged or converted to a permanent policy is that the premiums on the term policy have been paid in a timely manner. The correct answer is: It requires that premiums be paid on time.

When setting up a policy, the policyholder chooses how he/she wants the benefits to be paid when the policy matures. Which of the following is not a settlement option available to most policyholders? Select one: a. Fixed amount option b. Fixed period option c. Paid-up additions option d. Life income option

The paid-up addition option is a dividend option. The fixed amount option is used if the primary consideration is the amount of time during which policy proceeds are liquidated. A fixed amount of income is designated to be paid at fixed intervals until funds are gone. The fixed period option involves liquidation of proceeds over a period of years - paid even if the beneficiary dies. Proceeds are paid in equal installments over a fixed period of time. The life income option is where distribution of proceeds is based on life contingencies. They are like a life annuity and serve much the same functions. The correct answer is: Paid-up additions option

Which of the following is a characteristic of a joint life insurance policy? Select one: a. The premiums are always a lot lower. b. The payout can help with estate taxes. c. The joint life policy only pays when the both parties have died. d. All of the above

The payout can definitely help with estate taxes that were on hold until both parties died. The correct answer is: The payout can help with estate taxes.

The Entire Contract Provision' states: Select one: a. The producing agent will have a copy of the contract on file for the insured's inspection by appointment. b. The policy along with all attached riders and endorsements and other papers constitutes the entire contract between the policyholder and the company. c. All specific rules and regulations and procedures concerning the policy are maintained in the insurance company's home office. d. The policy delivered to the insured is a brief summary and the full contract in on file with the insurance commissioner's office.

The policy along with all the attachments constitutes the entire contract. The correct answer is: The policy along with all attached riders and endorsements and other papers constitutes the entire contract between the policyholder and the company.

At what point does an insurance policy become incontestable, even if fraud is evident? Select one: a. 1 year b. 2 years c. 5 years d. Never, if fraud is involved

The policy is incontestable when it has been in force for 2 years. The correct answer is: 2 years

When Jack and Jill divorced, the court ordered that Jack name Jill beneficiary of his insurance. He may not change this, even if he remarries unless Jill gives her permission. Jill is: Select one: a. A court ordered beneficiary b. An irrevocable beneficiary c. A primary beneficiary d. A special class of beneficiary

The policy owner may not change an irrevocable beneficiary without the beneficiary's written consent. The correct answer is: An irrevocable beneficiary

Charlie is purchasing a life insurance policy. The policy summary is usually given to the purchaser at the time of: Select one: a. Application b. Delivery c. Point of sale d. Underwriting

The policy summary is usually given to the purchaser at the time of delivery. The correct answer is: Delivery

If an insured becomes permanently and totally disabled, a waiver of premium rider on their life insurance contract would allow coverage to remain in force, without payment of premiums, during the period of the disability. Which of the following is not true about a waiver of premium rider? Select one: a. The premium charged for the waiver does not increase cash value of the policy. b. The disability must always occur prior to age 75. c. The premiums are waived retroactively after the insured has completed the required waiting period. d. All of the above

The premium for the waiver of premium disability rider does not increase cash value of the policy. Premiums are waived retroactively when the waiting period has been met. Most insurance companies specify the disability that must occur before the insured is 60 or 65 years of age. The correct answer is: The disability must always occur prior to age 75.

Charles and Rick have started an electronics business. Their business is young and their cash flow is tight. What is the primary advantage of them purchasing a modified premium whole life policy? Select one: a. It is guaranteed renewable. b. They are able to purchase a larger policy than traditional whole life. c. They are able to add term riders. d. It has a level premium.

The primary advantage of modified premium whole life is that you get more for you money in the initial phase. Modified whole life is often used early in the life of a business, to supplement retirement, and to protect family and mortgage. The correct answer is: They are able to purchase a larger policy than traditional whole life.

What happens if an estate is named as a beneficiary on a life policy? Select one: a. Proceeds are included in the gross estate. b. Proceeds are divided equally to relatives. c. Proceeds are tax-free. d. All of the above

The proceeds are included in the gross estate when an estate is named as a beneficiary on a life policy. The correct answer is: Proceeds are included in the gross estate.

The provision in a life insurance contract which states that the entire agreement between the insurer and the insured is contained in the contract, including the application if attached, insuring agreements, exclusions, conditions, declarations and endorsements is called the: Select one: a. Insuring clause b. Entire contract clause c. Consideration clause d. All of the above

The provision in a life insurance contract that states that the entire agreement between the insurer and the insured is contained in the contract, including the application if attached, insuring agreements, exclusions, conditions, declarations and endorsements is called the entire contract clause. The insuring clause states that in consideration for the payment of a premium, the insurer agrees to provide life insurance protection for the insured. The consideration clause states that the insurance protection is provided in consideration of the application made by the insured and the payment of the initial premium. The premium payment and representations made in the application are the insured's consideration. The promise to pay the benefits is the insurer's consideration. The correct answer is: Entire contract clause

An insured has received a claim form from the insurance company and has completed the form with proper documentation of the loss. How much time does the insurance company have to pay the claim? Select one: a. 20 days b. 30 days c. 45 days d. 60 days

The provision states that all claims for losses will be paid at least monthly. The correct answer is: 30 days

What is the primary purpose of the Payor Rider? Select one: a. The payor rider pays the premiums on a spouse's policy if he/she becomes disabled. b. The payor rider pays the premiums on a policy for a child in the event the person paying the premium dies or becomes disabled. c. The payor rider pays an income to the insured if he/she becomes disabled. d. All of the above

The purpose of the payor rider is to insured that the premiums are paid on a policy on a child if the individual paying the premiums dies or becomes disabled. The correct answer is: The payor rider pays the premiums on a policy for a child in the event the person paying the premium dies or becomes disabled.

Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? Select one: a. Accumulation at interest b. One-year term c. Reduction of premium payments d. Paid-up additions

The reduction of premium payments option allows the policyowner to use the dividend to offset the cost of a future premium payment. The correct answer is: Reduction of premium payments

Joan asked her agent when will she have benefits if she reinstates a lapsed health policy. Her agent would be correct if he told her: Select one: a. 10 days for accidents and 30 days for sickness b. Immediately for accidents and 10 days for sickness c. 30 days for either sickness or accident, but there would be a new pre-existing condition period d. 30 days for accidents and 60 days for sickness

The reinstatement provision states that a reinstated policy will cover accidents immediately, but will not cover sickness until 10 days have passed. The correct answer is: Immediately for accidents and 10 days for sickness

Samantha wants to purchase life insurance, but her funds are limited at this time. Her agent has recommended a whole life policy that starts out with a premium that is lower than usual. The premium increases every year for a specified number of years. This type of policy is called a: Select one: a. Modified life policy b. Graded premium life policy c. Universal life policy d. Variable whole life policy

The scenario described by Samantha's agent fits a graded premium life policy. The advantage is that she can get into the policy for a relatively low premium (similar to a term premium). The disadvantage is that in the long run, the insurance may cost her more. This type of policy is sometimes referred to as a graduated premium life insurance policy. The correct answer is: Graded premium life policy

Don's life insurance policy was delivered to him on September 10th. In order to get a full premium refund, he must return the policy to his agent no later than: Select one: a. September 15th b. September 20th c. September 30th d. October 1st

The specified time for a full refund for a new life policy is at least 10 days. If he returns the policy by September 20th, he will get his refund. The correct answer is: September 20th

A clause that protects a beneficiary from creditors coming after the proceeds of a policy is called which of the following? Select one: a. Beneficiary protection clause b. Insuring clause c. Incontestable clause d. Spendthrift clause

The spendthrift trust clause protects the beneficiary by leaving the proceeds with the insurer. A creditor of the beneficiary cannot make claims against money held by the insurer. This does not apply to lump sum proceeds. The correct answer is: Spendthrift clause

A claim has been filed on a timely basis. The insurer has requested further proof of loss. How long does the insured have to furnish the proof? Select one: a. 60 days, up to one year b. 60 days, up to 5 years c. 90 days, up to 1 year d. 90 days, up to 5 years

The standard time frame is 90 days, but the insured may have up to one year if it's not reasonable to obtain the proof in 90 days. In no event, except in the absence of legal capacity, may proof of loss be submitted later than one year from the date proof of loss was initially required. The correct answer is: 90 days, up to 1 year

Which of the following riders would be used to protect an organization should something happen to a key employee? Select one: a. Guaranteed insurability rider b. Substitute insurance rider c. Annuity rider d. Accidental death benefit rider

The substitute insurance rider allows the policy to remain in force when an employee changes jobs, is disabled, or retires and a new employee is "substituted" on the policy. The correct answer is: Substitute insurance rider

Which of the following is true about term riders? Select one: a. The payor rider is a type of term rider. b. The insurer has a limit to the maximum sum assured under a term rider. c. The term rider builds cash values. d. All of the above

The term rider is a pure insurance product and is therefore a low-cost benefit. Insurance companies thus have a limit to the maximum sum assured under this rider. The correct answer is: The insurer has a limit to the maximum sum assured under a term rider.

A war clause exclusion can be enforced at which of the following times? Select one: a. During wartime b. At the insurer's discretion c. Always d. Never

The war clause exclusion is enforced during wartime. The correct answer is: During wartime

Annuities offer various premium payment options. Which of the following is not an annuity premium payment option? Select one: a. Flexible premium b. Indexed premium c. Level premium d. Single premium

There is no such thing as an indexed premium. The payment options for annuities are: Flexible premium -multiple premiums are paid into the annuity; both the amount and frequency of the payments are flexible, but normally must fall within certain guidelines set up by the insurer. Level premium -multiple premiums are paid into the annuity prior to the start of benefits and the premium is level (i.e., the same amount) throughout the entire accumulation phase. Single premium -a single (lump sum) payment can be used to purchase an annuity. The correct answer is: Indexed premium

What is the waiting period under the waiver of premium rider before the first premium will be waived? Select one: a. 30 days b. 60 days c. 3 or 6 months d. 1 year

There is usually a waiting period of 3 or 6 months once the policy owner becomes disabled before the first premium will be waived. The waiver would then continue for the duration of the disability. The correct answer is: 3 or 6 months

"Time limit on Certain Defenses" refers to: Select one: a. A stated period of time in which the policy must be in force before the insurance company can defend itself against losses claimed b. A defined period of time after a policy is issued that an insurance company may deny a claim and voids a policy because of a material misstatement by the insured c. A statement that allows the insurance company the right to void the policy at any time after issue for misstatements of fact on the application d. Limits the time that an insured can file legal action over a claim payment

Time limit on Certain Defenses is typically 2 years. At some point the insurance company must accept the risk that is outlined in the policy unconditionally, except for fraud. The correct answer is: A defined period of time after a policy is issued that an insurance company may deny a claim and voids a policy because of a material misstatement by the insured

Which of the following means lying in order to induce policy replacement? Select one: a. Twisting b. Boycott and coercion c. Rebating d. Malicious statements

Twisting is lying in order to induce policy replacement. The correct answer is: Twisting

The longest pre-existing period for conditions that occurred prior to employment under HIPAA is: Select one: a. 6 months b. 12 months c. 18 months d. 24 months

Under HIPAA, a group plan may not exclude conditions that have been diagnosed or treated prior to employment, unless it is within 12 months before hire. That can be modified if the employee has been covered by another group plan during that time. Service under another group plan is referred to as creditable coverage. The correct answer is: 12 months

Jim applies for reinstatement after his health policy lapses. He submits all requirements, including the premiums. He hears nothing further from the company. This policy is in effect: Select one: a. When 30 days have passed without notification b. When his agent binds the contract c. Automatically in 45 days if the company takes no action d. Only when the company notifies him he has coverage

Unless the company takes action to the contrary, his coverage is deemed to be effective in 45 days. The correct answer is: Automatically in 45 days if the company takes no action

Arnold has purchased an Adjustable Life plan. His agent has told him that he may do all of the following, EXCEPT: Select one: a. Pay varying premiums each year b. Quit paying premiums after 7 years when they vanish. c. Pay a minimum amount as long as he funds the mortality cost d. Pay a higher premium if he wants to build cash faster

Using the term vanishing premium is not legal. While it may be possible to fund a life policy to eliminate premiums over time, that feature is not guaranteed and it depends on a number of factors that may change after the illustration has been prepared. As an example: Interest rates were much higher in 1995 than they are in 2012. That change in interest rates can create a substantial difference in what might be available in the policy in later years. The correct answer is: Quit paying premiums after 7 years when they vanish.

Randall's company has taken out a life insurance policy on a key employee - John. John is the insured, but the company is the owner of the policy. What rights does John have as the insured? Select one: a. Choice of premium mode b. Beneficiary designation c. Take out a policy loan d. None of the above

Usually the owner and the insured are the same, but not always. The company is the owner. In this case, the insured has none of the rights listed. It is the policyowner that maintains all of the rights. The correct answer is: None of the above

What is the traditional probationary (waiting) period for coverage from a Medicare supplemental policy to be in effect? Select one: a. Immediately b. 30 days c. 60 days d. 90 days

Usually the waiting or probationary period is 30 days. The correct answer is: 30 days

Riders are available to help the insured customize their life insurance contract to fit their individual needs. All of the following are common riders, EXCEPT: Select one: a. Waiver of premium b. Accelerated death benefit c. Variable life d. Return of premium

Variable life is a type of life insurance contract - not a rider. Waiver of premium is a popular rider that serves as a type of disability insurance for those under age 60 or 65. If the insured becomes disabled during the term of the policy and cannot pay premiums, a waiver-of-premium rider ensures that the policy will be maintained by the insurer through the policy term. The provision continues as long as the insured remains disabled or until the policy term expires. The accelerated death benefit rider is designed to anticipate cases such as terminal illness involving high medical costs, whether in a hospital stay or in hospice care. This rider allows the insured to collect some or all of the payout while still alive - to provide for care and living expenses. The return of premium rider is as close as you can get to a money-back guarantee. Some or all of the insureds premiums will be returned if the insured survives the policy's term. The premiums are significantly higher up front. The correct answer is: Variable life

A variable life plan must be a type of universal life because: Select one: a. The mortality tables are different than those used for whole life. b. The face amounts are always higher than those for whole life. c. The accumulation accounts must be separated from general company assets. d. The internal accumulation on a variable product is taxable.

Variable products have separate accounts by regulation. Since the value of a variable separate account can fluctuate, this is a risk the policy must assume. The theory is that over a long term an equity account will develop more value, which may or may not occur. The separate account is the primary reason why there is no variable whole life product available, since by definition, the assets in a whole life plan are held in the company's general account. The correct answer is: The accumulation accounts must be separated from general company assets.

If Carol opts to no longer pay the premiums on her $100,000 whole life policy and exchanges it for an extended term policy, what will be the face value of the term insurance policy? Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000

When Carol exchanges her whole life policy for an extended term policy the amount of term insurance is equal to the original policy amount. The correct answer is: $100,000

Mary has reached age 65 and she wants to begin a monthly income on her fixed annuity. She has funded her plan with after-tax contributions, and she wants to know what her tax liability will be going forward. Her agent explains that her tax will be calculated using: Select one: a. Income averaging b. Morbidity tables c. Tax rates based on her age d. The exclusion ratio

When a person annuitizes a non-qualified annuity, part of the money returned is considered principal and part is considered earnings. The exclusion ratio is used to determine which part of the payment will be excluded from income tax liability. Once that number is calculated, it remains constant. The correct answer is: The exclusion ratio

A variable annuity has each of the following features, EXCEPT: Select one: a. Accumulation units in the accumulation phase b. Annuity units in the income phase c. A minimum guaranteed income benefit d. Varying sub-accounts or investment

When a variable annuity is in the accumulation phase, the investment units are referred to as accumulation units. When the owner wishes to begin taking income they become annuity units. Neither has a guaranteed value. While the newer versions of variable annuities have riders that will provide a guaranteed income, that is not a standard feature. Generally, it is better to assume that variable annuities do not have guarantees. The correct answer is: A minimum guaranteed income benefit

Max and Janet were killed simultaneously. Max had a life policy with Janet as the primary beneficiary. How will the proceeds from the policy be disbursed? Select one: a. The proceeds were disbursed to their children. b. The proceeds were disbursed to Max's estate. c. The proceeds were disbursed to the contingent beneficiary. d. The proceeds went back to the insurance company.

When the insured and the primary beneficiary die at the same time, the proceeds are paid to the contingent beneficiary. The correct answer is: The proceeds were disbursed to the contingent beneficiary.

All of the following government programs provide health insurance protection, EXCEPT: Select one: a. Medicare b. Medicaid c. OASDI d. Food Stamps

While food stamps are a government program, it will not provide health benefits to participants. The other plans will provide benefits to those who are eligible for the benefits provided. The correct answer is: Food Stamps

Which of the following is not a benefit of a policy that covers 2 people? Select one: a. Premiums are usually lower than they would be if 2 policies were purchased. b. Often the underwriting is more lenient. c. If there is a big age difference, the premiums for both are lower. d. All of the above

With a joint life policy, the insured's ages are averaged to determine premiums. If there is a large age difference, the younger person could probably get a better (lower) premium if he/she purchased insurance separately. The correct answer is: If there is a big age difference, the premiums for both are lower.

All life policies require that some sort of beneficiary be named. Usually it is a person, but it can also be an estate, trust, charity, church, or a company. A beneficiary that can be changed at any time is a revocable beneficiary. An irrevocable beneficiary, however, cannot be changed so easily. All of the following statements are true about irrevocable beneficiaries, EXCEPT: Select one: a. The beneficiary cannot be changed without written consent. b. The policyowner makes premium payments. c. The policyowner retains the right to borrow against the policy. d. All of the above

With an irrevocable beneficiary designation, the policyowner cannot borrow against the policy without the consent of the irrevocable beneficiary. Irrevocable beneficiaries are common in divorce settlements, and also in some cases with private loans for business ventures and mortgages. The person or company lending the money can require that insurance be in place to cover the debt and is named as an irrevocable beneficiary to insure that no changes are made to the life policy without their consent. The correct answer is: The policyowner retains the right to borrow against the policy.

Benefits of Workers' Compensation insurance include all the following, EXCEPT: Select one: a. Medical b. Rehabilitation c. Disability d. Long-term care

Workers' Compensation benefits include medical, disability income, death and rehabilitation benefits. There is no provision for long-term care. The correct answer is: Long-term care

Which of the following is true about the automatic premium loan rider? Select one: a. The rider is quite expensive. b. The insured initiates the process after the grace period. c. The rider gives the company the right to borrow against the policy's cash value. d. The insured does not have to repay the loan.

Your answer is correct The rider does give the insurer the right to borrow against the policy's cash value. The correct answer is: The rider gives the company the right to borrow against the policy's cash value.

One of the most common types of life insurance is the whole life insurance policy. Which of the following is a typical characteristic of a whole life policy? Select one: a. The premiums remain level for the entire period that the policy is in force. b. Whole life policies have a guaranteed cash value. c. The face amount of the policy does not change while the policy is in force. d. All of the above

Your answer is correct All of the items listed are characteristics of a typical whole life insurance policy. The correct answer is: All of the above

Randall purchased a 20-year family maintenance policy when he was 30 years old. He died at age 40. How many years will benefits be paid to his beneficiaries? Select one: a. None, because he died before the policy matured b. 10 years c. 20 years d. 25 years

Your answer is incorrect In a family maintenance policy, the benefits would be paid for 20 years from when the death occurs. The correct answer is: 20 years

An agent who wants to qualify to sell variable life plans must: Select one: a. Seek an exemption from the state to endorse his license b. Secure a license from FINRA, as well as the state c. Secure a license from FINRA, which supersedes the state d. Test for a special state variable product license

Your answer is incorrect To offer variable products, an agent must be licensed from both the state and FINRA (formerly NASD), because variable plans are regulated as securities. Failure to do either could result in some very harsh penalties. The correct answer is: Secure a license from FINRA, as well as the state