Insurance Exam Study

An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage?

$102 Employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.

What is the duration of the free-look period for Medicare supplement policies?

30 days

What is the period of coverage for events such as death or divorce under COBRA?

36 months

An applicant for an insurance license has failed his written examination. How many days must he wait before we can take another examination?

4 days

All of the following could own group life insurance EXCEPT

A group needing low-cost life insurance

When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by

A paramedic or examining physician at the insurer's expense

Modified Life

A whole life policy in which premiums are lower for the first three to five years and higher thereafter These policies were developed to make the purchase of a whole life insurance more attractive for individuals who have limited financial resources but will be able to afford higher premiums in the near future.

According to the reinstatement provision, if a policy is reinstated, which of these benefits would be covered immediately upon reinstatement?

Accidental injury

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

Ancestory

The LEAST expensive first-year premium is found in which of the following policies?

Annually renewable term

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called

Avoidance

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of Authority

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Contract of Adhesion

The type of policy that can be changed from one that does not accumulate cash value to the one that does is a

Convertible Term Policy

Which of the following types of insurance would be most suitable for mortgage protection?

Decreasing Term

Which of the following types of insurance policies is most commonly used in credit life insurance?

Decreasing term

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal Benefit Society

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is...

Fully insured

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

Has at least 50 members Group must have at least 100 members to make it eligible to buy group insurance

A Return of Premium term life policy is written as what type of term coverage?

Increasing

The type of term insurance that provides increasing death benefits as the insured ages is called

Increasing Term

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

Interest sensitive whole life policy

In Modified Life policies, what happens to the premium?

It is level at the beginning and increases after the first few years

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

Concerning Juvenile Life insurance, which of the following statements is INCORRECT?

Juvenile Life is classified as any life insurance purchased by a minor.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level Term

Variable Whole Life insurance is based on what type of premium?

Level fixed

Types of Term Life Insurance Coverage

Level, increasing and decreasing

Which of the following is an example of a limited-pay life policy?

Life paid-up at age 65

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower

All of the following are true regarding the issuance of group life insurance to labor unions EXCEPT

Members cannot be excluded from coverage on the basis of insurability

What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy?

Modified Life

B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B?

Modified Life would be best Modified Life charges a lower premium for the first few policy years and then a higher level premium for the remainder of the life of the policy. These policies were developed to make the purchase of a whole life insurance more attractive for individuals who have limited financial resources but will be able to afford higher premiums in the near future.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid.

Term Insurance

Provides the greatest amount of coverage for the lowest premium. Has no cash value

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

Reasonable exectations

What method do insurers use to protect themselves against catastrophic losses?

Reinsurance

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must

Respond to the consumer's complaint

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called

Single Premium whole life

Which of the following policies would be classified as a traditional level premium contract?

Straight life

Which of the following is called a "second-to-die" policy?

Survivorship life

Which of the following would be a qualifying event as it relates to COBRA?

Termination of employment due to downsizing

The formation and recommendation of model insurance legislation and regulations designed to bring uniformity from state to state is one of the purposes of

The NAIC

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage.

Which of the following are generally not considered when underwriting group insurance?

The insureds' medical history (Group life insurance is written on a group, not individual basis. Each individual completes an application that identifies the participant and beneficiary. Then, the group is judged based on its nature and past claim experience. Generally, medical questions are not necessary.)

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as

The policy contains sufficient cash value to cover the cost of insurance

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account.

A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?

The purpose of the group was to purchase life insurance

Which of the following best defines target premium in a universal life policy?

The recommended amount that keep the policy in force throughout its lifetime

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?

They can convert their coverage to permanent life insurance without evidence of insurability if requested within the time stated in the policy

What is the purpose of the Maryland Health Insurance Plan?

To provide health insurance to individuals who have been denied coverage

Under a 20-pay life policy

all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all the planned premiums are paid, the beneficiary will receive the face amount as a death payment

Return of premium (ROP) life insurance is

an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

Group insurance is written as

annually renewable term insurance

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

attained age

Joint life policies

cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Which component increases in the increasing term insurance?

death benefit

Premium rates on a joint life policy are

determined by averaging the ages of both insureds

Risk avoidance is

elimination of risk of loss by avoiding any exposure to an event that could give rise to such loss.

In group insurance, the master contract is for the ______________, and certificates of insurance are for _____________________________.

employer individual insureds

When converting rom group life to individual life insurance

evidence of insurability is not required

Joint life =

first to die

What type of premium do both Universal Life and Variable Universal Life policies have?

flexible

In insurance transactions, fiduciary responsibility means

handling insurer funds in a trust capacity

Courts will interpret any ambiguity in an insurance contract

in favor of the insured

Owner of an adjustable life policy has the following privileges

increasing or decreasing the premium changing the premium-pay period increasing or decreasing the face amount of coverage changing the period of protection

Whole Life Insurance provides

lifetime (permanent) protection and accumulates cash value

If an insured skips a premium payment on a universal life policy, the missing premium

may be deducted from the policy's cash value and the policy will NOT lapse.

National Association of Insurance Commissioners (the NAIC)

organization of insurance regulators that resolve insurance regulatory problems. They are active in the formation and recommendation of model legislation and regulations designed to bring uniformity from state to state and simplify the marketing of insurance.

Credit life insurance cannot

payout more than the balance of the debt

Survivorship life =

second to die (last survivor)

Three basic forms of whole life insurance

straight whole life, limited pay whole life and single-premium whole life

Level in level term insurance refers to

the death benefit, which does NOT change

Mortgage Protection Term (or Mortgage Redemption) policy

type of decreasing term insurance in which the face amount directly correlates with the amount of outstanding loan and length of time remaining on a mortgage