Insurance
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? k owns a whole life policy. if k wants an increasing death benefit to protect against inflation which should she chose of the following Dividend Options
"Paid-Up Additional Insurance
Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?
$2,100
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a
$25,000 individual whole life policy
An insured covered by a group Major Medical plan is hospitalized after sustaining injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the INSURED be responsible to pay with $11,000 in covered medical expenses?
$3,000. The correct answer is "$3,000". In this situation, the insured is responsible for $1,000 deductible + 20% of the remaining bill = $3,000.
C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?
$720
All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals before age 59 1/2
under the USA patriot act insurers are required to report receipt of cash payment in excess of ?
10,000
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100 An employer can have a maximum of 100 employees earning at least $5,000 to be eligible for a SIMPLE retirement plan.
a non-contributory plan requires_____________ participation of all eligible employees
100%
What is the maximum Social Security Disability benefit amount an insured can receive?
100% of the insured's Primary Insurance Amount (PIA)
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-pay life
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
With three partners in a business, how many life insurance policies would be required to insure a cross-purchase buy-sell plan?
6
The individual most likely to buy a Medicare Supplement policy would be a(n)
68-year old male covered by Medicare Medicare Supplements are available to those covered by Medicare.
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
A disability buy-sell plan
Which of these is an element of a Variable Life policy?
A fixed, level premium
What is Medicare?
A hospital and medical expense insurance program
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate
Which life insurance rider typically appears on a Juvenile life insurance policy?
A payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.
When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following?
A residual amount benefit A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.
Before a life insurance policy is issued, which of these components of the contract is required?
A signed application by the prospect. Applicant's signature on application
the option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
Under a Long Term Care policy, which benefit would be typically excluded or limited?
Alcohol rehabilitation
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
Which premium schedule results in the lowest cost to the policyowner?
Annual
When can a policyowner change a revocable beneficiary?
Anytime
any changes made on an insurance application requires the initials of whom
Applicant
Which of the following is the MOST important factor when deciding how much Disability Income coverage an applicant should purchase?
Applicant's monthly income
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
At the time of application
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion
A life insurance application must be signed by all of these EXCEPT
Beneficiary
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is?
Business Overhead Expense.
Many small business owners worry how their business would survive financially if the owner becomes disabled.
Business Overhead Expense.
Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the sale of a business?
Business owner becoming disabled
P loses an arm in a farm accident and is paid $10,000 from his Accidental Death and Dismemberment policy. This benefit is known as the
Capital Sum
Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of the current year's deducible?
Carryover provision
a whole life insurance policyowner does not have the right to
Change the grace period
a company that owns a life insurance policy on one of its key employees may do all the following except: Borrow against the cash value Change beneficiary Cancel policy Change the policy's interest rate
Change the policy's interest rate
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
A Key Employee policy is taken out by Company X on it's vice president. Ten years later, this employee leaves company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
Conditional
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Conditional receipt
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will?
Continue coverage but exclude the heart Condition.
All of the following statements about Major Medical benefits are true, EXCEPT: A) The deductible can be expressed as a fixed dollar amount B) The benefit period begins only after a specified amount of expenses have been accrued within the accumulation period C) Benefits are generally expressed as a percentage of eligible expenses D) Benefits have no maximum limit
D) Benefits have no maximum limit
a(n) ____________ term life policy is normally used when covering an insured mortgage balance?
Decreasing
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
Which of the following does Social Security NOT provide benefits for? Survivorship Dismemberment Disability Retirement
Disability
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?
Discourages overutilization of the insurance coverage
Which of the following does social security NOT provides benefits for
Dismemberment
Traditional individual retirement annuity (IRA) distributions must start by
Distributions from a traditional IRA must be made by April 1 following the year the participant turns age 70 1/2 or an excise tax will be assessed.
What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?
Dread disease insurance
Which of these is NOT a characteristic of a Health Reimbursement Arrangement (HRA)?
Employee funds the HRA entirely
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision.
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife The ex-wife is still the beneficiary of the policy, even though the policy owner was changed to his current spouse.
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.
Long Term Care policies will usually pay for eligible benefits using which of the following methods?
Expense incurred Most long-term care policies pay on a reimbursement (or expense-incurred) basis, up to the policy limits.
what does a face amount plus cash value value policy pay upon the insured's death
Face amount plus the the policy's cash value
Which of these is not a source of funding for social security benefits
Federal Government
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary responsibility
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?
Flexible Installment Deferred
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
an insured is past due on his life insurance premium but is still within the grace period, what would the beneficiary receive if the insured dies during this grace period
Full face amount minus any past due premiums
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements.
HMO
A medical care provider which typically delivers health services at its own local medical facility is known as a
Health Maintenance Organizations
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Her group health plan.( If the employer has more than 20 employees, the group health plan generally pays first.)
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Immediate annuity
a long term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 activities of daily living (ADL's)
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
In a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT
Insured
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards. How will the insurer likely consider this condition?
Insurer will likely treat as a pre-existing condition which may not be covered for one year(Correct.) This condition would likely be considered a pre-existing condition and may not be covered for one year.
Variable annuities may invest premiums in each of the following, EXCEPT : A- Money Market Securities B- Junk Bonds C- Inusurer's corporate business acct. D- common stock
Insurer's Corporate Business Account
which of the following claims are typically excluded from medical expense policies
Intentionally self-inflicted injuries
J was reviewing her Health Insurance policy and noticed the phrase "This policy will only pay for a semi-private room". This phrase is considered to be an...
Internal limit
A life insurance arrangement which circumvent insurable interest statues is called?
Inventor-originated life Insurance
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
Irrevocable beneficiary
k is insured under a life insurance policy owned by a third party, which of these statements are true
K has no ownership rights
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life income
Which of these would be considered a Limited-Pay Life policy?
Life paid-up at age 70 Limited pay whole life policies have level premiums that are limited to a certain period.
Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies?
Long-Term Care Long-Term Care policies are designed to provide nursing home benefits on an extended basis of at least twelve consecutive months.
Which of the following types of health coverage frequently uses a deductible?
Major Medical policy
Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year.
March 1
A policy owner is allowed to pay premiums more than once year under which provision?
Mode of premium
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
Which of these statements concerning an individual Disability Income policy is TRUE?
Normally includes an Elimination period
All of these statements concerning Settlement Options are true EXCEPT
Only the beneficiary may select Settlement options may be selected by the policy-owner
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:
P only (Benefits will be paid to P because P survived the accident and is the primary beneficiary.)
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to
P only benefits will be paid to P because P survived the accident and is the primary beneficiary.
under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?
PPO
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these describe a participating life insurance policy?
Policyowners are entitled to receive dividends
Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge are:
Representations
Which provision allows a portion of any used medical benefits to be restored following a particular amount of benefit has been used, or after the policy has been in effect for a particular period of time?
Restoration of used benefit
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
Risk Retention Group
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Post-tax dollar contributions are found in
Roth IRA investments
An immediate annuity consists of a
Single Premium
k has inherited a large sum of money. k purchases an annuity with this sum on july 1 and starts receiving payments on Aug 1st. These payments will continue until she and her spouse lives. which type of annuity did she purchase?
Single premium immediate joint and survivor Annuity.
The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?
Social Security Disability Income
Which of the following best described a warranty
Statement guaranteed to be true.
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight life annuity
which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income
What kind of life insurance product covers children under their parent's policy?
Term Rider
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider Term riders allow an applicant to have excess life insurance coverage.
A policy loan is made possible by which of these life insurance policy features?
The Cash value provision
Which of the following factors affects the amount of monthly disability benefits payable under Social Security?
The amount of the benefits available from other sources
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?
The insurer will rescind the policy, deny the claim, and recover all payments made
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The participating employee
Medicare is intended for all of the following groups EXCEPT
Those enrolled as full-time students
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
Group health plans typically contain a coordination of benefits provision. This provision's purpose is ?
To avoid a duplication of benefit payments
R becomes disabled and owns an individual disability income policy. When is R eligible to receive disability benefits?
Upon Satisfying the elimination period requirement
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
Variable
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable Universal Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
Disability policies do NOT normally pay for disabilities arising from which of the following?
War
Which of these is considered a statement that is assured to be true in every respect
Warranty
At what point does an informal contract become binding?
When consideration is provided by one of the parties to the contract.
When must insurable interest exist for a life insurance contract to be valid?
When the application is made. Inception of the contract.
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first.
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life policy with an Other Insured Rider
what kind of life policy either pays the face value upon the death or when the insured reaches age 100
Whole life
All students attending a large university could be covered by
a blanket policy
Which provision is NOT a requirement in a group life policy?
accidental
Which of the following is NOT included in an annuity contract Nonforfeiture benefit Free-Look period Beneficiary AD&D rider
an Accidental Death & Dismemberment (AD&D) rider.
to be eligible for social security disability benefits an employee must be unable to perform
any occupation
Group/voluntary long-term care policy premiums are typically deducted from the employee's income and
are less costly as compared to individual long term care coverage
T is the policyowner for a life insurance policy with an irrevocable beneficiary designation. If T wishes to change the beneficiary. T must obtain the permission of the?
beneficiary
The guarantee of insurability option provides a long-term care policyowner the ability to
buy additional coverage at a later date In long-term care insurance, the guarantee of insurability option provides the insured with the ability to purchase additional insurance at a later date without evidence of insurability.
A Health Reimbursement Arrangement MUST be established
by the employer
All individuals covered under a group contract will receive a
certificate
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation T coverage is
conditional, depending on the insurer's underwriting guidelines
the incontestable clause allows an insurer to
contest a claim during the contestable period
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be
converted to an individual permanent policy at an individual rate
Dividends payable to a policyowner are
declared by the insurance company
a combination of Whole Life and ______________ term insurance is referred as an Family income policy.
decreasing
Medicare part a and b do not pay for
dental work
What is The purpose of the USA Patriot Act
detect and deter terrorism
t purchased a 100 000 single premium straight life annuity 5 years ago. he has received monthly payments since the inception of the annuity. when T dies the insurance company
does not have to make any further payments
Non-occupational disability coverage is designed for
employees who suffer none-work related disabilities, since work related disabilities are covered by Workers' compensation.
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
extra premium
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
The reason for a business having a Business Overhead Expense Disability Plan is to cover
fixed business expenses
M completes an application for health insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT: policy is delivered free-look period has expired an insurance company issues policy the initial premium is collected
free-look period has expired
With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's
gross income of time of purchase
basic medical expense insurance
has lower benefit limits than Major Medical insurance
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
if the primary beneficiary dies before the insured's death
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
if the primary beneficiary dies before the insured's death.
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased.
which of these types of coverage is best described as a short term medical policy
interim coverage.
What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?
irrevocable beneficiary
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid
mandatory income tax withholding on the transfer amount
J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?
nonoccupational coverage.
When a policy pays dividends to its policyholders, it is said to be
participating
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies? The policyowner (investor) benefits upon the death of the insured.
policyowner
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a
profit-sharing plan
What is the consideration given by an insurer in the consideration clause?
promising to pay a death benefit to a named beneficiary.
Decreasing term life insurance is often used to
provide coverage for a home mortgage
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S died 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
return of premium rider
The investment gains from a Universal Life Policy usually go toward
the cash value
A noncontributory group term life plan is characterized by:
the entire cost of the plan is paid for by the employer
A Business Disability Buyout plan policy is designed
to pay benefits to the Corporation or other shareholders
Life and health insurance policies are
unilateral contracts
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
upon completion of the application.
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured.
the part of life insurance policy guaranteed to be true is called an?
warranty
