Insurance Exam Missed Questions
#16. When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) Equal to the original policy for as long as the cash values will purchase. b) In lesser amounts for the remaining policy term of age 100. c) Equal to the cash value surrendered from the policy d) The same as the original policy minus the cash value
a) Equal to the original policy for as long as the cash values will purchase. With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.
#4. The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a) Incontestability clause. b) Reinstatement clause. c) Insuring clause. d) Misstatement of Age clause.
a) Incontestability clause. If an insurer wishes to contest any statements on an application, they must do so within the first two years.
#45. The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) Interest only option b) Life income with period certain c) Joint and survivor d) Fixed amount option
a) Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.
The insurer may suspect that a moral hazard exists if the policyholder a) Is not honest about his health on an application for insurance. b) Is prone to depression. c) Is indifferent to activities that may be dangerous. d) Always drives over the speed limit.
a) Is not honest about his health on an application for insurance. Moral hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.
#116. In long-term care insurance, what type of care is provided with intermediate care? a) Occasional nursing or rehabilitative care b) Nonmedical daily care c) Daily care, but not nursing care d) Intensive care
a) Occasional nursing or rehabilitative care Intermediate care is nursing and rehabilitative care provided by medical personnel for stable conditions that require assistance on a less frequent basis than skilled care.
Units with the same or similar exposure to loss are referred to as a)Homogeneous .b)Catastrophic loss exposure. c)Insurable risks. d)Law of large numbers.
a)Homogeneous. The basis of insurance is sharing risk between a large homogeneous group with similar exposure to loss.
#114. Following an injury, a policyowner covered under Medicare Parts A & B was treated by her physician on an outpatient basis. How much of her doctor's bill will she be required to pay out-of-pocket? a) A per office visit deductible b) 20% of covered charges above the deductible c) 80% of covered charges above the deductible d) All reasonable charges above the deductible according to Medicare standards
b) 20% of covered charges above the deductible After the deductible, Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges.
#75. An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a) Second-to-Die b) Common Disaster c) Accidental Death d) Survivor Life
b) Common Disaster Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.
#62. In case of a loss, the indemnity provision in insurance policies a) Pays the insured as much as 95% of the loss. b) Restores an insured person to the same financial state as before the loss. c) Allows the insured to collect 20% more than the actual loss. d) Pays the insured a percentage of the loss above and beyond the loss.
b) Restores an insured person to the same financial state as before the loss. Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.
#12. In major medical insurance policies, when the insured's share of coinsurance reaches a certain amount, the insured is no longer obligated to pay it. This feature is known as a) Coordination of benefits. b) Stop-loss. c) Maximum benefits. d) Deductible.
b) Stop-loss. The stop-loss amount is the maximum amount that the insured pays out of pocket during the year. When the insured's out-of-pocket expenses reach the stop-loss, the insurance company then provides coverage at 100% of eligible expenses for the remainder of the year.
#125. Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are a) Subject to capital gains taxes. b) Tax deductible. c) Subject to personal income taxes. d) Post-tax dollars.
b) Tax deductible. Contributions to HSAs by individuals are deductible, even if the taxpayer does not itemize. Contributions by an employer are not included in the individual's taxable income.
#93. How do employer contributions to a Health Savings Account affect the insured's taxes? a) The employer contributions are deducted from the individual insured's tax calculations. b) The employer contributions are not included in the individual insured's taxable income. c) The employer contributions are taxed at the same rate as the Social Security tax rate. d) The employer contributions are taxed to the individual insured as earned income.
b) The employer contributions are not included in the individual insured's taxable income. HSA contributions made by an employer are not included in the determination of an individual's taxable income.
When a policy owner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called a)Stirpes designation .b)Class designation. c)Revocable designation. d)Irrevocable designation.
b)Class designation. A designation such as the child of the insured, or all children of the insured, or all current members of a group, is called a "class designation." The individuals need not be specifically named, since each who meet the qualifications of being included in the class will share in the benefit.
Which of the following is NOT a characteristic or a service of an HMO plan? a)Providing care on an outpatient basis b)Contracting with insurance companies c)Providing free annual checkups d)Encouraging early treatment
b)Contracting with insurance companies HMOs seek to identify medical problems early by providing preventive care. They encourage early treatment and whenever possible provide care on an outpatient basis rather than admitting the member into the hospital. Contracts are between the insured and the HMO, not an insurance company.
#73. Following hospitalization because of an accident, Bill was confined in a skilled nursing facility. Medicare will pay full benefits in this facility for how many days? a) 80 b) 3 c) 20 d) 100
c) 20 Following hospitalization for at least three days, if medically necessary, Medicare pays for all covered services during the first 20 days in a skilled nursing facility. Days 21 through 100 require a daily copayment.
#141. All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT a) Fully insured status. b) Waiting period of 5 months. c) Being age 65. d) Inability to perform any gainful work.
c) Being age 65. The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.
#68. A tax-sheltered annuity is a special tax-favored retirement plan available to a) Certain age groups only. b) Certain groups depending on factors such as race, gender, and age. c) Certain groups of employees only. d) Anyone.
c) Certain groups of employees only. A tax-sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).
#1. Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a) Aleatory contracts. b) Binding contracts. c) Contracts of adhesion. d) Unilateral contracts.
c) Contracts of adhesion. Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.
#12. Which of the following terms is used to name the nontaxed return of unused premiums? a) Interest b) Surrender c) Dividend d) Premium return
c) Dividend The return of unused premiums is called a dividend. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums.
#30. All of the following violations may result in an agent's imprisonment EXCEPT a) Knowingly obtaining information about a consumer under false pretenses. b) Engaging in the business of insurance after being convicted of breach of trust. c) Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction. d) Embezzling funds from the insurer.
c) Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction. While the agents are required to notify the department about any administrative action or criminal prosecution taken against them, that act alone will not result in imprisonment. All the others are violations that may be punished by imprisonment.
#108. Who is responsible for making sure that agents are properly trained in the use of the suitability standards for LTC policies? a) Each individual agent b) Guaranty Association c) Insurer d) Commissioner
c) Insurer All insurers that market long-term care insurance must develop and abide by suitability standards to determine whether the purchase or replacement of LTC insurance is appropriate for the applicant's needs. It is the insurer's responsibility to train its agents in the use of the suitability standards.
#27. Which type of care is NOT covered by Medicare? a) Respite b) Hospital c) Long-term care d) Hospice
c) Long-term care Hospice care, which includes respite care, and hospital care are included in Medicare Part A.
#23. Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a) The Guaranty Association b) Consumer Privacy Act c) The Fair Credit Reporting Act d) Unfair Trade Practices Law
c) The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.
Which of the following is NOT covered under Plan A in Medigap insurance? a) The 20% Part B coinsurance amounts for Medicare approved services b) The first three pints of blood each year c) The Medicare Part A deductible d) Approved hospital costs for 365 additional days after Medicare benefits end
c) The Medicare Part A deductible Medicare Supplement Plan A provides the core, or basic, benefits established by law. All of the above are part of the basic benefits, except for the Medicare Part A deductible, which is a benefit offered through nine other plans.
#78. An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy? a) The capital amount in monthly installments b) The principal amount in monthly installments c) The capital amount in a lump sum d) The principal amount in a lump sum
c) The capital amount in a lump sum Accidental Death and Dismemberment policies pay a capital amount (a percentage of the principal amount) for the loss of one limb or loss of sight in one eye. The principal amount is paid for death or often for the loss of 2 limbs or loss of sight in both eyes. Benefits are paid in a lump sum.
#19. The period of time immediately following a disability during which benefits are not payable is a) The grace period. b) The blackout period. c) The elimination period. d) The probationary period.
c) The elimination period. The elimination period is a waiting period, expressed in days, not dollars, imposed on the insured from the onset of disability until benefit payments commence.
#48. Which of the following is NOT a feature of a guaranteed renewable provision? a) Coverage is not renewable beyond the insured's age 65. b) The insured's benefits cannot be reduced. c) The insurer can increase the policy premium on an individual basis. d) The insured has a unilateral right to renew the policy for the life of the contract.
c) The insurer can increase the policy premium on an individual basis. Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.
#1. All of the following statements are true regarding installments for a fixed amount EXCEPT a) This option pays a specific amount until the funds are exhausted. b) The annuitant may select how big the payments will be. c) The payments will stop when the annuitant dies. d) Value of the account and future earnings will determine the time period for the benefits.
c) The payments will stop when the annuitant dies. Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. b) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. c) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. d) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.
c) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.
#18. Which of the following is an example of a producer's fiduciary duty? a) A duty to base all transactions upon the principle of Utmost Good Faith. b) The obligation to tell the truth to the best of one's knowledge c) The trust that a client places in the producer in regard to handling premiums. d) An obligation to state every known fact about the policy the producer is selling.
c) The trust that a client places in the producer in regard to handling premiums. An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.
#71. Which of the following is NOT true regarding Equity Indexed Annuities? a) They have guaranteed minimum interest rates. b) They are less risky than variable annuities. c) They earn lower interest rates than fixed annuities. d) The insurance company keeps a percentage of the returns.
c) They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
#124. Which provision states that the insurance company must pay Medical Expense claims immediately? a) Legal Actions b) Relation of Earnings to Insurance c) Time of Payment of Claims d) Payment of Claims
c) Time of Payment of Claims The Time Payment of Claims provision requires that claims will be paid immediately upon receipt of proofs of loss except for periodic payments, which are to be paid as specified in the policy.
#146. A producer didn't realize that he had committed an act in violation of the Insurance Code. How much would he probably be penalized? a) $0 b) $500 c) $1,000 d) $25,000
c) $1,000 Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000.
#26. What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? a) Insurance Request Form b) Request for Insurance c) Application d) Policy Request
c) Application An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a)Habits. b)Prior insurance. c)Ancestry. d)Credit history.
c)Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.
All of the following are true about group disability income insurance EXCEPT a)The waiting period starts at the onset of the injury or sickness .b)The longer the waiting period, the lower the premium. c)Coverage applies both on and off the job. d)Benefits are usually short-term.
c)Coverage applies both on and off the job. Employees who are injured on the job are covered by Workers Compensation insurance. Group disability income insurance is designed to cover employees only while they are off the job, so the coverage is considered to be nonoccupational in nature.
Which of the following will NOT be considered unfair discrimination by insurers? a)Cancelling individual coverage based on the insured's marital status b)Assigning different risk classifications to applicants based on gender identity c)Discriminating in benefits and coverages based on the insured's habits and lifestyle d)Charging applicants with similar health histories different premiums based on their ethnicity
c)Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a)Nonforfeiture option. b)Rollover. c)Settlement option. d)Nontaxable exchange.
c)Settlement option. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.
All of the following are considered unfair trade practices in the business of insurance EXCEPT a)Rebating. b)Defamation .c)Sharing commissions. d)Boycott.
c)Sharing commissions. Sharing commissions is allowed as long as both producers are properly licensed. All other choices are unfair trade practices.
Which of the following groups would most likely be covered under a blanket accident policy? a)Factory workers at the automobile assembly plant b)Independent contractors who work for a general contractor c)Students at a public school d)Office workers for a retail business
c)Students at a public school Blanket insurance is issued on those groups that have members that are constantly changing
Which of the following would help prevent a universal life policy from lapsing? a)Adjustable premium b)Corridor of insurance c)Target premium d)Face amount
c)Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? a)They provide information about a customer's character and reputation. b)The customer has no knowledge of this action. c)The customer's associates, friends, and neighbors provide the report's data. d)They provide additional information from an outside source about a particular risk.
c)The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a)The employer pays a bonus to a selected employee to fund the policy. b)It is considered a nonqualified employee benefit. c)The policy is owned by the company. d)Any type of insurance policy may be used.
c)The policy is owned by the company. The policy is owned by the employee.
With the cash refund option, when the annuitant dies, what would the beneficiary receive? a)Cash refund of the amount paid into the annuity b)Refund of principal plus interest c)The refund of the original amount minus payments already made d)The installment payments of the remaining premium
c)The refund of the original amount minus payments already made With the cash refund option, when the annuitant dies, the annuitant's beneficiary receives a refund of the original amount annuitized minus payments already made. This guarantees the return of the amount to purchase the annuity but it does not guarantee to pay any interest.
#120. Andy the producer violates the Insurance Code very intentionally, in order to substantially increase his commissions. How much would he likely be penalized? a) $1,000 b) $5,000 c) $10,000 d) $25,000
d) $25,000 Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000.
#139. The maximum fine for violating the Insurance Code is a) $1,000. b) $5,000. c) $15,000. d) $25,000.
d) $25,000. Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000.
#123. The death protection component of Universal Life Insurance is always a) Whole Life b) Adjustable Life c) Decreasing Term d) Annually Renewable Term
d) Annually Renewable Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
#129. A Universal Life Insurance policy is best described as a/an a) Variable Life with a cash value account. b) Whole Life policy with two premiums: target and minimum. c) Flexible Premium Variable Life policy. d) Annually Renewable Term policy with a cash value account.
d) Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
#39. What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur? a) Optionally renewable b) Noncancellable c) Guaranteed renewable d) Conditionally renewable
d) Conditionally renewable The conditionally renewable provision is very similar to the optionally renewable provision. The primary difference is that conditionally renewable policies may be canceled for specific conditions contained in the policy, but optionally renewable policies do not specify a condition or reason for cancellation.
#36. All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a) An offer of employment. b) Stocks, securities, or bonds. c) An offer to share in commissions generated by the sale. d) Dividends from a mutual insurer.
d) Dividends from a mutual insurer. Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
#20. Which of the following is considered to be a morale hazard? a) Smoking b) Working as a firefighter c) Engaging in illegal activities d) Driving recklessly
d) Driving recklessly Morale hazards arise from a state of mind that causes indifference to loss, such as carelessness.
#60. Which of the following regulatory authorities participated in creating the National Do Not Call Registry? a) SEC b) NAIC c) BBB d) FTC
d) FTC The Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) created the National Do Not Call Registry, allowing consumers to include their telephone numbers on the list to which solicitation calls cannot be made by telemarketers.
#35. As it pertains to group health insurance, COBRA stipulates that a) Retiring employees must be allowed to convert their group coverage to individual policies. b) Terminated employees must be allowed to convert their group coverage to individual policies. c) Group coverage must be extended for terminated employees up to a certain period of time at the employer's expense. d) Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense.
d) Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense. COBRA requires employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for up to 18 months to 36 months. The employee can be required to pay up to 102% of the coverage's premium.
#102. Most LTC plans have which of the following features? a) No elimination period b) Variable premiums c) Open enrollment d) Guaranteed renewability
d) Guaranteed renewability The benefit amount payable under most LTC policies is usually a specific amount per day, and some policies pay the actual charge incurred per day. Most LTC policies are also guaranteed renewable; however, insurers do have the right to increase the premiums.
#113. A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? a) Joint annuity b) Cash refund annuity c) Straight life d) Joint and survivor
d) Joint and survivor Under a joint settlement option, payments would stop at the first death, but under the joint and survivor, payment would continue until both recipients die. Usually, the surviving beneficiary receives 1/2 or 2/3 of the amount received when both beneficiaries were alive.
#46. All of the following are true regarding the Medical Information Bureau (MIB) EXCEPT a) MIB information is reported to underwriters in coded form. b) MIB reports contain previous insurance information. c) Insurers may not refuse to accept an application solely due to information in an MIB report. d) MIB reports are based upon information supplied by doctors and hospitals.
d) MIB reports are based upon information supplied by doctors and hospitals. The information contained in MIB reports comes from the underwriting disclosures made by applicants to MIB member insurers on prior insurance applications.
#33. Which of the following statements regarding conditional receipts is true? a) They guarantee the insurer will approve the application. b) They purchase temporary insurance, up to 6 months. c) They become part of the policy. d) They are temporary insuring agreements.
d) They are temporary insuring agreements. With a conditional receipt, insurance coverage is effective as of the date of the receipt, so long as the application is approved.
#99. An insured's disability income policy includes an additional monthly benefit rider. For how many years can the insured expect to receive payment from the insurer before Social Security benefits begin? a) 5 b) 3 c) 2 d) 1
d) 1 The additional monthly benefit rider stipulates that the insurer will pay benefits comparable to what Social Security would pay. After a year, the insurer ends the benefit and assumes that Social Security will begin benefit payment.
Existing and replacing life insurers are required to keep copies of all summaries, notices, and statements used in sales transactions until the conclusion of their next examination by the Insurance Department, or for a period of at least a)1 year b)2 years c)3 years d)5 years
d)5 years Louisiana insurance laws require insurers to keep such records for a minimum of 5 years.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a) misrepresentation. b)A required disclosure. c)A legal representation of the Association. d)An unfair trade practice.
d)An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation.
#92. Regarding Medicare SELECT policies, what are restricted network provisions? a) They determine who can be insured. b) They determine premium rates. c) They help avoid adverse selection. d) They condition the payment of benefits.
d) They condition the payment of benefits. A Medicare SELECT policy is a Medicare supplement policy that contains restricted network provisions - provisions that condition the payment of benefits, in whole or in part, on the use of network providers.
#54. In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? a) Unidirectional b) Aleatory c) Conditional d) Unilateral
d) Unilateral In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.
#52. When can a Long-Term Care policy deny a claim for losses incurred because of a pre-existing condition? a) Within 12 months of the effective date of coverage b) At any time c) At no time d) Within 6 months of the effective date of coverage
d) Within 6 months of the effective date of coverage A long-term care policy cannot deny a claim for losses incurred more than 6 months from the effective date of coverage because of a pre-existing condition.
#144. In health underwriting, it would be inappropriate to decline a risk using any of the following factors EXCEPT a) Mental illness. b) Genetic characteristics. c) Marital status. d) Blindness.
a) Mental illness. Insurers cannot decline a risk based on blindness or deafness, genetic characteristics, marital status, or sexual orientation. Mental illness is part of the prospective insured's physical condition and can be used in determining the underwriting decision.
#67. The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) One-year term option. b) Paid-up option. c) Accelerated endowment. d) Paid-up additions.
a) One-year term option. The dividend is utilized to purchase one-year term insurance
#66. An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and a) Pay a lower renewal premium by proving insurability. b) Change the type of insurance by proving insurability. c) Pay a lower renewal premium without evidence of insurability. d) Change the type of insurance without evidence of insurability.
a) Pay a lower renewal premium by proving insurability. To receive the lower renewal rate, the insured would have to provide proof of insurability.
#34. Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) Premiums are not tax deductible as a business expense. b) Premiums are tax deductible by the key employee. c) Premiums are tax deductible as a business expense. d) Premiums are taxable to the employee.
a) Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
#36. The Medicare supplement renewal commissions paid in the third year must be as high as the commission of which year? a) 1st b) 2nd c) 3rd d) 4th
b) 2nd The commission provided in renewal years must be the same as the commission in the second year and must be provided for no fewer than 5 renewal years.
#30. Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? a) Personal b) Adhesion c) Unilateral d) Conditional
b) Adhesion A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.
#138. What required provision protects against unintentional lapse of the policy? a) Reinstatement b) Grace period c) Assignment d) Payment of premiums
b) Grace period The grace period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of the grace period provision is to protect the policyholder against an unintentional lapse of the policy.
#56. What type of insurance would be used for a Return of Premium rider? a) Annually Renewable Term b) Increasing Term c) Level Term d) Decreasing Term
b) Increasing Term The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary.
#37. Which of the following is correct regarding credit life insurance? a) It has a maximum term of 20 years. b) It insures the life of a debtor. c) It is purchased on an installment basis. d) It insures the life of a creditor.
b) It insures the life of a debtor. Credit life insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.
#149. During replacement of life insurance, a replacing insurer must do which of the following? a)Send a copy of the Notice Regarding Replacement to the Department of Insurance b)Obtain a list of all life insurance policies that will be replaced c)Guarantee a replacement for each existing policy d)Designate a new producer for a replaced policy
b) Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.
#55. Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds? a) Guaranteed renewable b) Optionally renewable c) Conditionally renewable d) Cancellable
b) Optionally renewable The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy for any reason on the date specified in the contract (usually a renewal date). Furthermore, this provision allows the insurer to increase the premium for any class of optionally renewable insureds.
#94. Insurers may change which of the following on a guaranteed renewable health insurance policy? a) No changes are permitted. b) Rates by class c) Coverage d) Individual rates
b) Rates by class On a guaranteed renewable health insurance policy, the insurer may increase premiums on a class basis only and not on an individual policy.
#43. The Federal Fair Credit Reporting Act a) Prevents money laundering. b) Regulates consumer reports. c) Protects customer privacy. d) Regulates telemarketing.
b) Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
#23. How do employer contributions to a Health Savings Account affect the insured's taxes? a) The employer contributions are deducted from the individual insured's tax calculations. b) The employer contributions are not included in the individual insured's taxable income. c) The employer contributions are taxed at the same rate as the Social Security tax rate. d) The employer contributions are taxed to the individual insured as earned income.
b) The employer contributions are not included in the individual insured's taxable income. HSA contributions made by an employer are not included in the determination of an individual's taxable income.
#90. What happens if a deferred annuity is surrendered before the annuitization period? a) Deferred annuities cannot be surrendered prior to the annuitization period. b) The owner will receive the surrender value of the annuity. c) The owner will only receive a refund of premium. d) The insurer can only apply the surrender value toward another annuity.
b) The owner will receive the surrender value of the annuity. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.
In which of the following situations is it legal to limit coverage based on marital status? a)Divorce within the last six months of applying for insurance b)It is never legal to limit coverage based on marital status. c)Excessive number of divorces, as defined by the Insurance Code d)Legal separation during the application process
b)It is never legal to limit coverage based on marital status. Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? a)Address b)Sexual orientation c)Age d)Occupation
b)Sexual orientation It would be considered unfair discrimination to ask an applicant for their sexual orientation, as well as using sexual orientation as a rating factor to determine insurability.
#91. An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay? a) $10,000 b) $7,500 c) $5,000 d) $0
c) $5,000 Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? a) 10 days b) 3 days c) 5 days d) 7 days
c) 5 days Consumers must be advised that they have a right to request additional information concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.
#81. The benefits for individual disability plans are based on a) The number of employees of the company. b) A percentage of the worker's income. c) A flat amount. d) The employer's net worth.
c) A flat amount. Group disability plans usually specify the benefits based on a percentage of the worker's income, while individual policies usually specify a flat amount.
This state provided for a temporary license for all of the following EXCEPT a)A producer's disability. b)A producer's time in the military service. c)A producer's retirement. d)The death of a producer.
c) A producer's retirement. A temporary license is not available for a producer's retirement.
#21. The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have? a) Accidental Death b) Comprehensive c) Accident-only d) Restrictive
c) Accident-only Accident-only policies cover medical benefits related to an accident. Medical conditions related to sickness are not covered.
#107. If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a) Habits. b) Prior insurance. c) Ancestry. d) Credit history.
c) Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.
#91. Variable Whole Life insurance is based on what type of premium? a) Flexible b) Graded c) Level fixed d) Increasing
c) Level fixed Variable Whole Life insurance is a level fixed premium investment-based product.
#104. Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? a) Viatical settlement b) Estate conservation c) Life insurance proceeds d) State Education Waiver
c) Life insurance proceeds There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Daycare is considered to be among these expenses.
An insured purchased an insurance policy 5 years ago. Last year, the insured received a dividend check from the insurance company that was not taxable. This year, the insurer did not send a check. From what type of insurer did the insured purchase the policy? a) Nonprofit service organization b) Stock c) Mutual d) Reciprocal
c) Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.
#77. The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) Accelerated endowment. b) Paid-up additions. c) One-year term option. d) Paid-up option.
c) One-year term option. The dividend is utilized to purchase one-year term insurance.
#46. Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? a) Medical history b) Sex c) Race d) Age
c) Race Age, medical history, and sex provide sound statistical data for determining the probability of loss. Race, religion, sexual orientation, etc., are some of the factors that cannot be used because there is not sound statistical data to show that they effect the probability of loss; therefore, they are considered to be discriminatory.
An insured receives an annual life insurance dividend check. What term best describes this arrangement?a)Reduction of Premium b)Annual Dividend Provision c)Accumulation at Interest d)Cash option
d)Cash option The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.
A producer in another state wants to become a producer in Louisiana. The other state gives the same privileges to Louisiana producers wanting to be licensed in that state as it does to its own producers. Louisiana, therefore, extends the licensing privileges to the prospective producer of the other state. What is this called? a)Fair exchange b)Controlled business c)Subrogation d)Reciprocity
d)Reciprocity "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Louisiana.
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? a)Taxes must be paid in full .b)Employer's matching contribution can be 50% of employee's salary. c)75% of employee's contributions are taxed .d)They are tax deferred until withdrawn.
d)They are tax deferred until withdrawn. Taxation is deferred on both contributions and earnings until funds are withdrawn.
A producer's license has been revoked for a violation of the Insurance Code. When can the producer apply for a new license? a)5 years after the revocation b)Never: once a license is revoked, producers cannot get licensed again c)2 years after the revocation d)Within 1 year of the revocation
d)Within 1 year of the revocation If a producer license has been revoked, the producer may file another license application within 1 year from the effective date of revocation, or within 5 years from the date of final court order if judicial review of revocation is sought.
#90. If an individual already receives Social Security disability benefits, what would they need to do to qualify for Medicare Part A once they reach age 65? a) Nothing b) Apply for coverage through the state c) Submit a physical examination to the Centers for Medicare & Medicaid Services d) Apply for coverage through the Social Security Administration
a) Nothing Nothing needs to be done in this case. If an individual already receives Social Security disability benefits, they are automatically qualified for Medicare Part A and B after turning 65.
#101. What is the fine for using an unapproved assumed name by a producer? a) $250 b) $500 c) $1,000 d) $5,000
a) $250 An insurance producer using a name that has not been approved will be subject to a fine up to $250.
#41. A Universal Life Insurance policy is best described as a/an a) Annually Renewable Term policy with a cash value account. b) Variable Life with a cash value account. c) Whole Life policy with two premiums: target and minimum. d) Flexible Premium Variable Life policy.
a) Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
#106. All of the following information about a customer must be used in determining annuity suitability EXCEPT a) Beneficiary's age. b) Tax status. c) Financial experience. d) Annual income.
a) Beneficiary's age. To ensure suitability of annuity products, producers must obtain relevant information about the consumer's age, income, financial status, tax status, financial experience and objectives. Beneficiary's age is not a suitability factor.
#6. What is the time period called during which the surviving spouse of the insured does not receive Social Security income benefits? a) Retention of capital b) Probationary period c) Blackout period d) Waiver of premium
c) Blackout period Blackout period begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60. No benefits are paid during this time.
