Insurance Midterm 2

Exclusions are found in insurance policies for all of the following reasons EXCEPT A. to add coverage for certain perils B. some perils are not insurable. C. moral hazard problems would develop without certain exclusions D. coverage may be provided under another insurance contract.

A. to add coverage for certain perils

Which of the following statements is (are) true with respect to disability income insurance? I. A standard definition of disability is used in all disability income insurance policies. II. The longer the elimination (waiting) period in a disability income insurance policy, the higher the premium for the policy. A. II only B. I only C. neither I nor II D. both I and II

C. neither I nor II

All of the following factors must be considered in determining the interest-adjusted cost of cash value life insurance EXCEPT A. time. B. cash values. C. stockholder dividends. D. premium payments.

C. stockholder dividends.

All of the following are characteristics of medical expense plans currently offered EXCEPT A. coinsurance. B. annual and lifetime limits C. annual out-of-pocket limits. D. broad range of benefits.

B. annual and lifetime limits

All of the following eligibility requirements must be satisfied to collect Social Security disability-income benefits EXCEPT A. being disability insured. B. being injured on the job. C. serving a five-month waiting period. D. meeting the definition of disability.

B. being injured on the job.

Long-term care insurance policies include a provision that determines whether the insured is eligible to receive benefits. One example of this provision requires the insured to be unable to perform a certain number of activities of daily living in order to qualify for benefits. What is this policy provision used in long-term care insurance policies called? A. benefit period provision B. benefit trigger provision C. elimination period provision D. continuance provision

B. benefit trigger provision

Which of the following statements is (are) true with regard to defined benefit and defined contribution retirement plans? I. Prior to retirement, employees have a better idea of what their retirement benefit will be under defined benefit plans than under defined contribution plans. II. Defined benefit plans are more complicated and expensive to administer and fund that are defined contribution plans. A. II only B. both I and II C. I only D. neither I nor II

B. both I and II

Which of the following statements is (are) true with respect to endorsements and riders? I. Endorsements and riders are used to amend provisions of insurance contracts. II. If the endorsement or rider conflicts with terms in the underlying contract, the endorsement or rider takes precedence unless it conflicts with the law. A. II only B. both I and II C. I only D. neither I nor II

B. both I and II

Which of the following statements is (are) true with respect to workers compensation? Workers compensation provides unlimited medical benefits. Workers compensation is based on the principle of liability without fault. A. neither I nor II B. both I and II C. I only D. II only

B. both I and II

Many employers have converted their traditional defined-benefit plans to a newer type of plan. Under this type of plan, benefits are defined in terms of a hypothetical account balance, with actual retirement benefits dependent on the value of a participant's account value at retirement. This type of plan is called a(n) A. Keogh plan. B. cash-balance plan. C. profit sharing plan. D. Section 401(k) plan.

B. cash-balance plan.

In which section of an insurance contract will you find provisions that qualify or place limitations on the insurer's promise to perform? A. insuring agreement B. conditions C. exclusions D. definitions

B. conditions

All of the following statements are true with regard to defined benefit plans and defined contribution plans EXCEPT A. under a defined benefit plan, the employer bears the investment risk. B. employees are given a choice of where to invest funds under a defined benefit plan. C. defined contribution plans do not provide past service credits. D. determining the annual employer contribution is easier under a defined contribution plan than under a defined benefit plan.

B. employees are given a choice of where to invest funds under a defined benefit plan.

All of the following are characteristics of variable life insurance EXCEPT A. the cash value and death benefit vary with investment performance. B. flexible premium payments. C. cash values are not guaranteed. D. the policyholder selects where the cash value is invested.

B. flexible premium payments.

One type of consumer-directed health plan combines insurance, a health savings account (HSA), and a large level of retention by the employee. After an employee has paid a large out-of-pocket amount, then insurance which may include a coinsurance requirement is available. This type of plan is called a A. Blue Cross/Blue Shield health plan. B. high deductible health plan. C. defined contribution health plan. D. defined benefit health plan.

B. high deductible health plan.

Lynn, age 32, would like to purchase permanent life insurance. She is concerned that premiums may become a burden after she retires. Given her coverage preferences, which of the following life insurance policies is the best policy for Lynn to purchase? A. renewable term insurance B. limited-payment whole life insurance C. ordinary whole life insurance D. endowment life insurance

B. limited-payment whole life insurance

Which of the following statements is (are) true with respect to the human life value approach? I. The human life value approach considers all sources of income that the family receives. II. The human life value approach does not consider the time value of money-future cash flows are not discounted back to present value. A. II only B. neither I nor II C. I only D. both I and II

B. neither I nor II

Prior to the passage of the Affordable Care Act, health insurers could deny coverage for medical impairments that were present prior to the effective date of the coverage. For adults, starting on January 1, 2014, insurers may no longer exclude these impairments. What are these impairments called? A. hereditary diseases B. pre-existing conditions C. probationary exclusions D. dread diseases

B. pre-existing conditions

Under which nonforfeiture option will permanent life insurance coverage be in force after the nonforfeiture option is exercised? A. fixed-amount option B. reduced paid-up insurance C. extended term insurance D. cash value option

B. reduced paid-up insurance

All of the following benefits are payable through the Social Security program EXCEPT A. disability benefits. B. unemployment benefits. C. survivor benefits. D. retirement benefits.

B. unemployment benefits.

All of the following were major health care problems in the U.S. that led to the passage of the Affordable Care Act EXCEPT A. waste and inefficiency in the medical system. B. universal access to medical care. C. rising health care expenditures. D. harmful insurer practices.

B. universal access to medical care.

Jack is afraid that if he quits his job, he will lose the pension contributions that his employer has been setting aside for him for the past 12 years. An employee's right to pension contributions if employment terminates prior to retirement is known as A. nonforfeiture options. B. vesting. C. pension integration. D. minimum funding.

B. vesting.

Dale and his wife Jenny are legally separated. The couple owns a vacation cabin. Dale purchased a $25,000 property insurance policy on the cabin. Unaware that Dale had purchased this coverage, Jenny purchased a $50,000 property insurance policy on the cabin. While both policies were in force, a $12,000 covered property loss occurred. The insurers agreed to settle the claim on a pro rata basis. What is each insurer's liability? A. Dale's insurer pays $12,000 and Jenny's insurer pays nothing. B. Dale's insurer pays nothing and Jenny's insurer pays $12,000. C. Dale's insurer pays $4,000 and Jenny's insurer pays $8,000. D. Dale's insurer pays $3,000 and Jenny's insurer pays $9,000.

C. Dale's insurer pays $4,000 and Jenny's insurer pays $8,000.

Which of the following statements is (are) true with respect to profit sharing plans? I. Contributions to profit sharing plans can be discretionary or based on profitability. II. Employers can make unlimited annual contributions to profit sharing plans. A. II only B. neither I nor II C. I only D. both I and II

C. I only

Which of the following statements is (are) true with respect to the tax treatment of life insurance? I. A beneficiary who receives life insurance proceeds in a lump-sum does not have to pay income tax on the life insurance proceeds. II. Premiums paid by an individual for a life insurance policy on her own life are a tax-deductible expense. A. neither I nor II B. both I and II C. I only D. II only

C. I only

Which of the following statements is (are) true with respect to universal life insurance? I. Universal life insurance provides premium payment flexibility for the policyholder. II. Universal life insurance permits the policyholder to select where the cash value is invested. A. both I and II B. II only C. I only D. neither I nor II

C. I only

Which of the following statements is (are) true about the insuring agreement? I. The insuring agreement provides a description of the property or activity to be insured. II. The insuring agreement can be written on an "open-perils" basis or on a "named-perils" basis. A. neither I nor II B. I only C. II only D. both I and II

C. II only

From an economic perspective, "premature death" is defined as death of a family head A. before both parents have died. B. before reaching life expectancy. C. before reaching age 65. D. with outstanding financial obligations.

D. with outstanding financial obligations.

Janice insured a building valued at $200,000 for $150,000 under a property insurance policy that included an 80 percent coinsurance provision. If a $32,000 insured loss occurs, how much will Janice collect from her insurer, assuming no deductible? A. $30,000 B. nothing C. $25,000 D. $32,000

A. $30,000

All of the following are reforms included in the Affordable Care Act EXCEPT: A. Insurers are permitted to use annual and lifetime benefit limits. B. Young adults are permitted to remain on their parents' health coverage until age 26. C. Not allowing insurers to rescind health insurance policies if there was an unintentional error on the application. D. Insurers must payout at least a specified percentage of premiums in medical claims and medical claims expenses.

A. Insurers are permitted to use annual and lifetime benefit limits.

Bill borrowed Linda's car with her permission. Both Bill and Linda have automobile liability insurance with a $100,000 bodily injury liability limit. While driving Linda's car, Bill negligently caused an accident. The accident victim was awarded $80,000 in damages. How will this claim be settled, assuming that the policy written by Linda's insurer is primary and Bill's insurance coverage is excess? A. Linda's insurer will pay the entire $80,000 claim. B. Bill's insurer will pay the entire $80,000 claim C. Each insurer will pay $40,000 to settle the claim. D. Neither insurer is liable as duplication of insurance voids coverage

A. Linda's insurer will pay the entire $80,000 claim.

Which of the following is a measure of the rate of return on the savings portion of a cash value life insurance policy? A. Linton yield B. net payment cost index C. surrender cost index D. traditional net cost

A. Linton yield

Paula, a 42 year-old surgeon, purchased disability income insurance. The policy defined disability as "the inability to perform the duties of your own occupation" for the first two years. After two years, disability is defined as "inability to perform the duties of any occupation for which you are reasonably suited by education, experience, and training." The policy would replace three-fourths of lost income after a six-month elimination period, with benefits payable until age 65. Recently, Paula was severely injured in an automobile accident in which her hands were crushed and had to be amputated. Which of the following statements is true regarding the benefits that Paula will receive under her disability income policy? A. Paula qualifies for benefits for at least two years. B. The policy will replace one hundred percent of Paula's lost income. C. Paula will receive disability benefits for life, no matter how long she lives. D. Benefits under the policy will begin immediately.

A. Paula qualifies for benefits for at least two years.

Employers with 100 or fewer employees and who do not maintain another qualified retirement plan are eligible to establish a type of pension that is exempt from most nondiscrimination and administrative rules. Such plans are called A. SIMPLE plans. B. 401(k) plans. C. 403(b) plans. D. Keogh plans.

A. SIMPLE plans.

Curtis purchased medical expense insurance. The policy has a calendar-year deductible of $500 and 80-20 coinsurance. Curtis was hospitalized with a covered illness on January 23rd. This hospitalization was his first claim under the major medical policy for the calendar year. His covered medical expenses were $20,500. How much of this amount will the insurer pay, and how much will Curtis be required to pay? A. The insurer will pay $16,000 and Curtis will pay $4,500. B. The insurer will pay $20,000 and Curtis will pay $500. C. The insurer will pay $15,900 and Curtis will pay $4,600.your answer is incorrect D. The insurer will pay $16,900 and Curtis will pay $3,600.

A. The insurer will pay $16,000 and Curtis will pay $4,500.

Which of the following statements is true regarding health savings accounts (HSAs)? A. To establish an HSA and receive favorable tax treatment, you must be covered by a high-deductible health plan. B. HSA contributions are not tax deductible. C. There are no annual contribution limits to HSAs. D. If money remains in the HSA at the end of the year, it is forfeited to the federal government.

A. To establish an HSA and receive favorable tax treatment, you must be covered by a high-deductible health plan.

All of the following statements about traditional IRAs are true EXCEPT A. Traditional IRA contributions are always tax deductible. B. A participant must have taxable income during the year in order to make a traditional IRA contribution.your answer is incorrect C. Distributions from traditional IRAs funded exclusively with pre-tax dollars are taxed as ordinary income. D. Even if an individual is covered by an employer-sponsored pension plan, his or her traditional IRA contribution may be tax deductible if his or her modified adjusted gross income is below a specified level.

A. Traditional IRA contributions are always tax deductible.

During the funding period, variable annuity premiums are used to purchase A. accumulation units. B. annuity units. C. exclusion units. D. guaranteed death benefits.

A. accumulation units.

Which of the following statements is (are) true with regard to retirement plans for the self-employed (Keogh plans)? I. Sole proprietorships and partnerships can establish Keogh plans. II. The tax advantages enjoyed by qualified corporate plans also apply to Keogh plans. A. both I and II B. neither I nor II C. II only D. I only

A. both I and II

In an effort to attract workers during a tight labor market, ABC Company decided to alter its employee benefit plan. Under the new plan, employees are offered a wide variety of benefits and are permitted to select the benefits that best meet their specific needs. This type of plan is called a A. cafeteria plan. B. mass merchandising plan. C. defined benefit plan.your answer is incorrect D. contributory plan.

A. cafeteria plan.

One life insurance policy provision permits the policyholder to pledge certain rights in the life insurance policy to secure a loan. This provision is called a(n) A. collateral assignment. B. policy loan provision. C. absolute assignment. D. entire contract clause.

A. collateral assignment.

Some term insurance policies permit the policyholder to exchange the policy for a cash value policy without having to demonstrate insurability. Such term insurance policies are described as A. convertible. B. ordinary. C. decreasing. D. renewable.

A. convertible.

Group medical expense plans usually include a provision that specifies how claims will be settled if more than one group health plan covers the claim. For example, a man may be covered under both his own group plan and under his wife's group plan. This provision is called a A. coordination-of-benefits provision. B. predetermination-of-benefits provision. C. probationary period provision. D. managed care provision.

A. coordination-of-benefits provision.

Frank is collecting Social Security old-age benefits. Frank just learned that his monthly benefit will be increased in January to maintain the purchasing power of the benefit. This change in benefits is called a(n) A. cost of living adjustment. B. means test provision. C. earnings test provision. D. delayed retirement credit.

A. cost of living adjustment.

Both unemployment insurance and workers compensation plans may take the past loss history of an employer into consideration when determining insurance premiums. This practice is called A. experience rating. B. class rating. C. manual rating. D. retrospective rating.

A. experience rating.

Eric purchased a cash value life insurance policy six years ago. He forgot to pay the premium that was due last week. Eric's coverage is still in force because of which life insurance policy provision? A. grace period provision B. reinstatement provision C. entire contract clause D. incontestable clause

A. grace period provision

One life insurance policy provision specifies that the insurer cannot deny payment to the beneficiary because of concealment or misrepresentation if the life insurance policy has been in force for two years during the insured's lifetime. This provision is the A. incontestable clause. B. entire contract clause C. ownership clause. D. assignment clause.

A. incontestable clause.

All of the following are ways in which workers compensation benefits may be funded EXCEPT A. insuring through the federal worker's compensation fund. B. purchasing coverage from a private insurer. C. purchasing insurance from a state workers compensation fund. D. self-insuring workers compensation.

A. insuring through the federal worker's compensation fund.

The gross estate can be reduced by a number of deductions before estate taxes are assessed. One deduction is the value of property that is passed to a surviving spouse. This property is taxed later when the surviving spouse dies. This deduction is called A. marital deduction. B. probate deduction. C. unified credit. D. estate tax credit.

A. marital deduction.

Which of the following statements is (are) true with respect to the characteristics of social insurance programs? I. Social insurance benefits are based on individual equity rather than social adequacy. II. Social insurance benefits are available only if a means (needs) test is satisfied. A. neither I nor II B. I only C. both I and II D. II only

A. neither I nor II

All of the following are nonforfeiture options EXCEPT A. paid-up additions. B. extended term insurance. C. reduced paid-up insurance.your answer is incorrect D. cash value.

A. paid-up additions.

Some group insurance plans require new employees to satisfy a period of one to three months before they can participate in the group insurance plan. This time period is called a(n) A. probationary period. B. waiting period. C. eligibility period. D. elimination period.

A. probationary period.

Under the needs approach of determining the amount of life insurance to purchase, one consideration is providing income to the surviving spouse and children during the one- or two-year period following the breadwinner's death. This period is called the A. readjustment period. B. accumulation period. C. blackout period. D. dependency period.

A. readjustment period.

All of the following are optional methods of settlement after the insured has died EXCEPT A. reduced paid-up insurance. B. cash (lump sum). C. fixed-period option. D. life income option.

A. reduced paid-up insurance.

Unemployment insurance benefits are paid during periods of A. short-term involuntary unemployment. B. long-term involuntary unemployment. C. short-term voluntary unemployment. D. long-term voluntary unemployment.

A. short-term involuntary unemployment.

All of the following life insurance policies develop a cash value EXCEPT A. term life insurance. B. whole life insurance.your answer is incorrect C. universal life insurance. D. variable life insurance.

A. term life insurance.

All of the following are characteristics of profit sharing plans EXCEPT A. there are no annual limits on the amount contributed to an employee's account. B. the employer's cost is not affected by the age and number of covered employees. C. profit sharing plans offer greater flexibility in employer contributions than do other qualified plans. D. profit sharing plans encourage employees to work more efficiently.

A. there are no annual limits on the amount contributed to an employee's account.

One health insurance policy provision states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim because of a misstatement in the application. This provision is called the A. time limit on certain defenses provision. B. renewal provision. C. preexisting conditions clause. D. grace period provision.

A. time limit on certain defenses provision.

Gerald paid $45,000 for an immediate annuity. Gerald's insurer will pay him $500 per month for as long as he lives. Gerald's life expectancy is 15 years. For tax purposes, what is Gerald's exclusion ratio for this annuity? A. 66.7% B. 50.0% C. 45.0% D. 40.0%

B. 50.0%

Which of the following statements is (are) true with respect to group life insurance? I. Most group life insurance in force is term insurance. II. Evidence of insurability is required, especially if the group is large. A. both I and II B. I only C. II only D. neither I nor II

B. I only

Which of the following statements is (are) true with respect to group disability income plans? I. Short-term disability plans typically replace 100 percent of lost income. II. Long-term disability plans usually use a dual definition of disability that considers the employee's own job initially, and later considers any job for which the employee is reasonably suited. A. neither I nor II B. II only C. I only both I and II

B. II only

Which of the follow statements is true with regard to the Affordable Care Act? A. The Act requires that insurers must allow young adults to remain on their parents' insurance plan until age 30. B. The Act provides a tax credit for a portion of a small employer's premium cost. C. The Act permits insurers to exclude pre-existing conditions that were present prior to implementation of the Act. D. The Act restricts annual benefit limits to $250,000 and lifetime benefit limits to $500,000.

B. The Act provides a tax credit for a portion of a small employer's premium cost.

Which statement is true with respect to Medicare? A. All individuals who retire before the full retirement age are eligible immediately for Medicare benefits. B. Part A of Medicare pays for physician and surgeon fees. C. Part B of Medicare is not funded through a payroll tax; instead, beneficiaries pay monthly premiums in exchange for Part B benefits. D. Medicare pays 100 percent of hospital and physicians' fees.

C. Part B of Medicare is not funded through a payroll tax; instead, beneficiaries pay monthly premiums in exchange for Part B benefits.

Elaine was diagnosed with a terminal illness. Her doctor said that her only chance of survival is an experimental treatment. The treatment is expensive and is not covered by Elaine's health insurance. Which life insurance policy provision will permit Elaine to use the life insurance proceeds before she dies to pay for her medical care? A. accidental death benefit rider B. cost of living rider C. accelerated death benefits rider D. guaranteed purchase option

C. accelerated death benefits rider

What is the earliest age at which workers and their spouses can receive actuarially reduced Social Security old-age benefits? A. age 65 B. age 60 C. age 62 D. age 59.5

C. age 62

Which of the following statements is (are) true regarding annuities? I. Insurers pool the risk of excessive longevity when offering life annuities. II. An annuity can provide a lifetime income that cannot be outlived. A. I only B. II only C. both I and II D. neither I nor II

C. both I and II

Which of the following statements is (are) true with respect to life insurance policy loans? I. Interest must be paid on life insurance policy loans. II. If a policy loan has not been repaid when the insured dies, the outstanding loan balance is deducted from the proceeds paid to the beneficiary. A. II only B. I only C. both I and II D. neither I nor II

C. both I and II

The first step in shopping for life insurance is to A. shop around for a low-cost policy. B. decide what type of life insurance is best for you. C. determine whether you need life insurance. D. estimate the amount of life insurance you should purchase.

C. determine whether you need life insurance.

Disability income insurance uses a special type of deductible. No benefits are paid during the initial period of disability (e.g. two weeks, a month, five months, etc.). What is this type of deductible, which is expressed in time rather than in dollars, called? A. aggregate deductible B. corridor deductible C. elimination (waiting) period D. the calendar year deductible

C. elimination (waiting) period

One funding instrument that is used to accumulate funds for pension plans is an arrangement in which an insurer promises to pay a specified interest rate for a number of years on a lump sum deposit. This funding instrument is called a(n) A. separate investment account. B. Section 401(k) account. C. guaranteed investment contract. D. trust fund plan.

C. guaranteed investment contract.

All of the following statements concerning group insurance underwriting are correct EXCEPT A. insurance should be incidental to the formation of the group. B. benefits should be automatically determined to preclude individual selection of benefits. C. it is best to have few people joining or leaving the group. D. a minimum percentage of eligible employees must participate in the plan.

C. it is best to have few people joining or leaving the group.

Annette purchased a life annuity at age 65 and started to receive monthly payments from the insurer. Annette's monthly payments consist of all of the following EXECPT A. unliquidated principal of annuitants who die early. B. interest earnings.your answer is incorrect C. life insurance proceeds from annuitants who live too long. D. premium payments.

C. life insurance proceeds from annuitants who live too long.

Len would like to purchase life insurance. Just before he left to see his agent, Marcy, his wife, said, "Be sure to consider participating coverage." A participating policy is a policy that A. allows premiums to be paid quarterly or monthly B. permits the proceeds to be paid in a manner other than lump-sum C. pays policyholder dividends D. has a cash value

C. pays policyholder dividends

Bob and Tonya are supporting their children, ages 4 and 2. Bob's father is also financially dependent upon Bob and Tonya. This type of family is called a(n) A. blended family. B. traditional family.your answer is incorrect C. sandwiched family. D. single-parent family.

C. sandwiched family.

Variable annuity owners pay a number of fees and expenses. One expense that is levied is forfeiture of a percentage of the account balance if the annuity is terminated in the early years. This fee is typically seven percent of the account balance in the first year, declining one percent per year for the next six years. This fee is called the A. mortality and expense risk charge. B. investment management change. C. surrender charge. D. administrative charge.

C. surrender charge.

Which of the following statements is (are) true regarding life insurance policyholder dividends? I. Life insurance policies that pay dividends to policyholders are called participating policies. II. Life insurance policyholder dividends are guaranteed. A. neither I nor II B. both I and II C. II only D. I only

D. I only

Which of the following statements is (are) true with respect to the Roth IRA? I. Roth IRA contributions are tax deductible. II. Roth IRA contributions accumulate income tax-free and qualified distributions are not taxable if certain requirements are met. A. I only B. both I and II C. neither I nor II D. II only

D. II only

To which of the following distributions from a traditional Individual Retirement Account (IRA) before age 59 1/2 does the 10 percent penalty tax apply? A. a distribution resulting from the disability of the IRA owner B. a distribution used to pay qualified higher education expenses C. a distribution resulting from the death of the IRA owner D. a distribution in the form of a lump-sum payment

D. a distribution in the form of a lump-sum payment

Which of the following statements is (are) true with respect to the traditional net cost method of determining the cost per thousand of cash value life insurance? I. The traditional net cost per thousand per year can be a negative number. II. The traditional net cost method ignores interest that could have been earned on the premiums by investing them elsewhere. A. I only B. II only C. neither I nor II D. both I and II

D. both I and II

One type of life insurance is a nonparticipating whole life policy in which cash values are based on the insurer's present mortality, investment, and expense experience. An accumulation account is used to reflect the cash value of the policy, and a fixed death benefit and maximum premium level are stated at the time the policy is issued. This type of life insurance is called A. modified life insurance. B. universal life insurance. C. variable life insurance. D. current assumption whole life.

D. current assumption whole life.

In which part of an insurance contract would you find information about the property or activity to be insured? A. exclusions B. conditions C. insuring agreement D. declarations

D. declarations

Some insurers offer a fixed, deferred annuity that allows the annuity owner to participate in the growth of the stock market and also provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term. Such an annuity is called a(n) A. life income with guaranteed payments annuity. B. installment refund annuity. C. variable annuity. D. equity-indexed annuity.

D. equity-indexed annuity.

The minimum coverage requirements for qualified pension plans are designed to prevent discrimination. In the context of employee benefits, discrimination refers to slanting benefits to favor A. one gender versus another gender. B. more highly educated employees versus less highly educated employees C. certain ethnic and religious groups versus other employees. D. highly-compensated employees versus lower paid employees.

D. highly-compensated employees versus lower paid employees.

In determining the taxable estate, all of the following may be deducted from the gross estate of the deceased EXCEPT A. funeral costs. B. charitable bequests. C. probate costs. D. interest income.

D. interest income.

Bob and Jasmine Davis are a married couple who are both 67 years old. Bob and Jasmine purchased an annuity covering both of their lives. The settlement option will provide payments until Bob and Jasmine are both deceased. The settlement option Bob and Jasmine selected is a(n) A. cash refund option. B. life income with guaranteed payments option. C. installment refund option. D. joint-and-survivor annuity option.

D. joint-and-survivor annuity option.

Marcus is analyzing a life insurance policy. He calculated the future value of the premiums that he would pay over 20 years, then he subtracted the future value of the expected policyholder dividends over 20 years. Next, he converted the resulting value to an annual cash outflow while taking into consideration the time value of money. Finally, he divided the annual outflow by the number of thousands of dollars of coverage to arrive at a cost per thousand. Marcus calculated the A. traditional net cost per thousand per year. B. yearly rate of return using Belth's method. C. Linton Yield. D. net payment cost per thousand per year.

D. net payment cost per thousand per year.

Most group dental insurance plans include a provision specifying that if the cost of care is above a specified amount, the dentist must submit a treatment plan to the insurer. The insurer specifies what will be covered under the plan. This information is shared with the employee who then decides whether to proceed with the treatment. This provision is called a A. relative-value schedule provision. B. coordination-of-benefits provision.your answer is incorrect C. flexible spending account provision. D. predetermination-of-benefits provision.

D. predetermination-of-benefits provision.

Shelton Manufacturing Company (SMC) employs over 5,000 workers. All of the company's operations are conducted in the same city. Shelton's group health insurance expenditures have increased significantly in recent years. To contain costs, SMC entered into an agreement with Community Hospital (CH). Under the agreement, CH will provide services to SMC employees at a discounted rate. SMC will provide a financial incentive for its employees to use CH. Although workers are not required to use CH, the reimbursement rate for care provided by CH is higher than if another hospital is used. What is this type of managed care plan called? A. point-of-service plan B. cafeteria plan C. health maintenance organization D. preferred provider organization

D. preferred provider organization

All of the following are defects of the traditional net cost method EXCEPT A. the method may show that life insurance is free. B. the time value of money is ignored. C. the method assumes that the policy will be surrendered. D. the cash value of the policy is not considered.

D. the cash value of the policy is not considered.

Deductibles are used for all of the following reasons EXCEPT A. to reduce premiums. B. to eliminate small claims C. to reduce moral and attitudinal hazard. D. to reduce loss control efforts.

D. to reduce loss control efforts.

Sheila would like to purchase a cash value life insurance policy. She is concerned, however, that if she becomes disabled she will be unable to pay the premiums as they come due. What provision can Sheila add to her policy to address this concern? A. accelerated death benefits rider B. guaranteed purchase option C. reinstatement provision D. waiver-of-premium rider

D. waiver-of-premium rider