Insurance Questions Final
#33. An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? a) Nothing b) $50,000 c) $100,000 d) $200,000
$100,000 In joint life policies, the death benefit is paid upon the first death only.
Once it has been reasonably proven that a person has knowingly violated the Insurance Code regarding unfair methods of competition, the Department may impose a civil penalty of a) $1,000 for each violation. b) $2,000 for each violation. c) $3,000 for each violation. d) $5,000 for each violation.
$5,000 for each violation. Civil penalty for each intentional act of engaging in an unfair method of competition or practice is up to $5,000 per violation (not to exceed $50,000 in any 6-month period).
#133. An individual was just caught acting as an exclusive general agent - even though he is not properly licensed. Assuming that this occurred in a single day, what is the maximum penalty he faces? a) A second-degree misdemeanor and a $1,000 fine b) A third-degree felony and a $10,000 fine c) A second-degree felony and a $10,000 fine d) A third-degree misdemeanor and a $1,000 fine
A third-degree misdemeanor and a $1,000 fine In Pennsylvania, acting as a manager or exclusive general agent without proper licensing is punishable by a third-degree misdemeanor charge and a fine of up to $1,000 for each day of their offense.
#11. What documentation grants express authority to an agent? a) Agent's insurance license b) Fiduciary contract c) State provisions d) Agent's contract with the principal
Agent's contract with the principal The principal grants authority to an agent through the agent's contract.
#131. Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated? a) Variable annuity b) Annuity certain c) Fixed annuity d) Refund life
Annuity certain Annuity certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.
#34. When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered a) Controlled business. b) Adverse selection. c) Discrimination. d) Twisting.
Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
#146. What type of insurance would be used for a Return of Premium rider? a) Decreasing Term b) Annually Renewable Term c) Increasing Term d) Level Term
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.
#8. Which of the following does a producer NOT have the authority to do? a) Deliver policies b) Solicit insurance contracts c) Negotiate contracts of insurance d) Issue policies
Issue policies An insurance producer sells, solicits or negotiates contracts of insurance.
#34. An insured severely burns her hand, but is not classified as disabled. Which of the following types of coverage would cover at least a portion of the insured's medical expenses? a) Accidental death & dismemberment b) Partial disability c) Medical reimbursement benefit d) Medical expense compensation
Medical reimbursement benefit Medical reimbursement benefits help to pay medical costs for accidental injuries that are not considered to be disabling.
#15. The most the Insurance Guaranty Association will pay for net cash surrender values is a) $100,000. b) $250,000. c) $500,000. d) $1,000,000.
$100,000. The Insurance Guaranty Association will not pay more than $100,000 for net cash surrender and net cash withdrawal values.
#43. Circulating deceptive sales material to the public is what type of Unfair Trade Practice? a) False advertising b) Defamation c) Coercion d) Misrepresentation
False advertising This is considered to be false, deceptive or misleading advertising.
#41. 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) Estate conservation b) Life insurance proceeds c) State Education Waiver d) Viatical settlement
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.
#35. All of the following are beneficiary designations EXCEPT a) Specified. b) Tertiary. c) Contingent. d) Primary.
Specified. Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.
#41. In insurance transactions, fiduciary responsibility means a) Maintaining a good credit record. b) Being liable with respect to payment of claims. c) Commingling premiums with agent's personal funds. d) Handling insurer funds in a trust capacity.
Handling insurer funds in a trust capacity. An agent's fiduciary responsibility includes handling insurer funds in a trust capacity.
#5. Which of the following types of LTC is NOT provided in an institutional setting? a) Custodial care b) Skilled nursing care c) Intermediate care d) Home health care
Home health care Home health care is given in the home, but skilled nursing, intermediate, and custodial care may all be provided in an institutional setting.
#54. When an annuity is written, whose life expectancy is taken into account? a) Beneficiary b) Life expectancy is not a factor when writing an annuity. c) Owner d) Annuitant
The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.
#80. A noncontributory group disability income plan has a 30-day elimination period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive a) $14,000, none of which is taxable. b) $14,000, all of which is taxable. c) $12,000, none of which is taxable. d) $12,000, all of which is taxable.
$12,000, all of which is taxable. In noncontributory group health plans, the employer pays the entire cost, so the income benefits are included in the employee's gross income and taxed as ordinary income.
#17. Ray has an individual major medical policy that requires a coinsurance payment. Ray very rarely visits his physician and would prefer to pay the lowest premium possible. Which coinsurance arrangement would be best for Ray? a) 90/10 b) 50/50 c) 75/25 d) 80/20
50/50 After the deductible has been paid, the insurance company will pay a specified amount for a physician's visit, while the insured pays the remaining percentage. This is called "coinsurance". Plans will often be listed in a fraction format, with the first number representing the amount that will be paid by the insurer. The less the insurer must pay with coinsurance payments, the lower the premiums will be. Therefore, Ray should choose the 50/50 plan.
#143. A producer sold an insurance policy. Subsequently, his license was suspended. In this case, how much of the commission will the producer receive? a) Quarter b) None c) All d) Half
All An insurance entity or licensee cannot pay a commission or fee to a person if the person's license is suspended or revoked. However, a commission may be paid if the person was licensed at the time of the sale.
#94. In reference to the standard Medicare Supplement benefits plans, what does the term standard mean? a) Coverage options and conditions comply with the law, but will vary from provider to provider. b) All plans must include basic benefits A-N. c) Coverage options and conditions are developed for average individuals. d) All providers will have the same coverage options and conditions for each plan.
All providers will have the same coverage options and conditions for each plan. In reference to the standard Medicare Supplement benefits plans, the term "standard" implies that all providers will have the same coverage options and conditions for each plan.
#33. Under a Key Person disability income policy, premium payments a) Are made by the employee and are not tax-deductible. b) Are made by the employee and are tax-free. c) Are made by the business and are tax-deductible. d) Are made by the business and are not tax-deductible.
Are made by the business and are not tax-deductible. Premiums are nondeductible to the business; however, benefits are received tax-free by the business.
#1. Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? a) Any federal report b) Consumer report c) Inspection report d) Agent's report
Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
#2. Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report a) Are entitled to obtain a copy of the report from the party who ordered it. b) Must be advised that a copy of the report is available to anyone who requests it. c) May sue the reporting agency in order to get inaccurate data corrected. d) Must be informed of the source of the report.
Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
#21. Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? a) The Consideration Clause b) Assignment Rights c) Owner's Rights d) The Entire Contract Provision
Owner's Rights Policyowners can learn about their ownership rights by referring to the policy.
#25. Traditional IRA contributions are tax deductible based on which of the following? a) Owner's age b) IRA limit c) Owner's income d) How long the plan has been in force
Owner's income Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.
#33. Which of the following occupations would have the lowest disability insurance premiums? a) Police officer b) Personal Trainer c) Construction worker d) Stunt pilot
Personal Trainer The more hazardous an occupation is, the higher the insurance premiums will be. Therefore, because working as a personal trainer poses the least amount of risk, the premiums for this job would be the lowest.
#19. Insurance is the transfer of a) Loss. b) Hazard. c) Peril. d) Risk.
Risk. Insurance is a transfer of risk of loss from an individual or a business entity to an insurance company. Hazards are conditions that increase the probability of an insured loss occurring, and perils are causes of loss. Losses cannot be transferred.
#32. Underlying assets for variable annuity contracts must be maintained in what type of account? a) Separate account b) General account c) Fiduciary account d) Securities account
Separate account Underlying assets for variable annuity contracts need to be maintained in a separate account. Separate accounts are not part of the insurer's own portfolio and can hold investments that stand to earn a higher return.
#23. Which of the following entities must approve all continuing education courses in this state? a) The NAIC b) The appointing insurer c) The State Board of Education d) The Commissioner
The Commissioner All continuing education programs and courses must be approved by the Commissioner.
#148. All of the following statements about equity index annuities are correct EXCEPT a) The interest rate is tied to an index such as the Standard & Poor's 500. b) They invest on a more aggressive basis aiming for higher returns. c) The annuitant receives a fixed amount of return. d) They have a guaranteed minimum interest rate.
The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.
#10. An agent is in the process of replacing the insured's current health insurance policy with a new one. Which of the following would be a proper action? a) The old policy should stay in force until the new policy is issued. b) There should be at least a 10-day gap between the policies. c) Policies must overlap to cover pre-existing conditions. d) The old policy must be cancelled before the new one can be issued.
The old policy should stay in force until the new policy is issued. The agent must make sure that the current policy is not cancelled before the new policy is issued.
#16. In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a) The amount of insurance. b) The type of investment. c) The length of coverage. d) The premium.
The type of investment. Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
#104. Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a) They are tax free to terminally ill insured. b) They are always taxable to chronically ill insured. c) They are always taxed. d) There is a 10% penalty for early distribution of the death benefit.
They are tax free to terminally ill insured. When accelerated benefits are paid under a life insurance policy, they are received tax free by terminally ill insured, and tax free up to a limit for chronically ill insured.
#41. Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? a) Travel expenses for family to come to the funeral b) Debt cancellation c) Day care d) Vacation travel expenses
Vacation travel expenses There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Vacation travel expenses are most likely to be considered a luxury and not a need.
#132. Who effectuates viatical settlement contracts? a) Lending institutions b) Physicians c) Viatical settlement brokers d) Viatical settlement providers
Viatical settlement providers Viatical settlement providers are the people/entities who enter into or effectuate a viatical settlement contract, other than the viator. The viator is the person who sells the insurance policy to the provider.
#38. 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? a) $25 b) $25.50 c) $100 d) $102
$102 The 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.
#1. An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a) $20,000 b) $25,000 c) $50,000 d) The face amount will be determined by the insurer.
$50,000 The face of the term policy would be the same as the face amount provided under the whole life policy.
#26. An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer? a) $0 b) $500 c) $1,000 d) $2,000
$500 Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs.
#116. What is the shortest possible elimination period for group short-term disability benefits provided by an employer? a) 0 days b) 30 days c) 60 days d) 90 days
0 days If an employer provides short-term disability benefits for its employees, the elimination period can be nonexistent, and the benefits can last as long as two years. The benefit typically spans 70-80% of the insured's income.
#12. 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
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.
#60. In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective? a) 100% b) 75% c) 50% d) 25%
100% One hundred percent of eligible employees must participate in a non-contributory health insurance plan for the plan to become effective.
#30. To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan? a) 63 days b) 18 months c) 5 years d) 12 months
18 months Under HIPAA regulations, to be eligible to convert health insurance coverage from a group plan to an individual policy, the insured must have 18 months of continuous creditable health coverage.
#6. A producer has successfully completed 52 hours of continuing education (CE). How many hours can the producer apply to her current reporting period, and how many hours can she carry toward the next reporting period? a) 26 hours will be applied to the current reporting period, and the remaining 26 can be applied to the period immediately following. b) Only 24 hours of the 52 earned may applied to this reporting period. c) 24 hours will be applied to the current reporting period, and 24 can be applied to the period immediately following. d) 24 hours will be applied to the current reporting period, and 28 can be applied to the period immediately following.
24 hours will be applied to the current reporting period, and 24 can be applied to the period immediately following. Excess hours accumulated during the 2-year period may be carried forward only to the next 2-year period. A maximum of 24 hours may be carried forward.
#108. Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a) 3 days b) 5 days c) 10 days d) 14 days
3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
#76. If an insurer terminates a producer's appointment, the Commissioner must be notified within how many days? a) 10 b) 30 c) 60 d) 90
30 Every insurer authorized to transact business in Pennsylvania must notify the Insurance Department of all appointments and terminations of appointments of producers in the format and within the time frame required by the Commissioner. Termination of appointment shall be provided to the department in writing on an approved form or through an approved electronic process within 30 days following the effective date of the termination.
#90. Licensees must make a report of any action taken against them in another jurisdiction or by another governmental agency in Pennsylvania within how many days of the final disposition of the matter? a) 10 b) 30 c) 60 d) 90
30 Licensees must make a report, of any action taken against them in another jurisdiction or by another governmental agency in Pennsylvania within 30 days of the final disposition of the matter.
#28. Within how many days must a producer respond to an inquiry from the Commissioner? a) 3 days b) 10 days c) 15 days d) 30 days
30 days Licensees are required to provide a written response to a Department's inquiry within 30 days.
#35. For how long is an insurance company allowed to defer policy loan requests? a) 30 days b) 60 days c) 6 months d) 1 year
6 months Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.
#5. What is the waiting period on a Waiver of Premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months
6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.
#47. How many eligible employees must be included in a contributory plan? a) 100% b) 50% c) 75% d) 90%
75% At least 75% percent of eligible employees can be included in a contributory plan. Both the employees and the employer contribute to premium payments.
#30. All of the following are correct about the required provisions of a health insurance policy EXCEPT a) Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. b) A grace period of 31 days is found in an annual pay policy. c) The entire contract clause means the signed application, policy, endorsements, and attachments constitute the entire contract. d) A reinstated policy provides immediate coverage for an illness.
A reinstated policy provides immediate coverage for an illness. Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.
#46. An individual was just caught acting as an exclusive general agent - even though he is not properly licensed. Assuming that this occurred in a single day, what is the maximum penalty he faces? a) A second-degree misdemeanor and a $1,000 fine b) A third-degree felony and a $10,000 fine c) A second-degree felony and a $10,000 fine d) A third-degree misdemeanor and a $1,000 fine
A third-degree misdemeanor and a $1,000 fine In Pennsylvania, acting as a manager or exclusive general agent without proper licensing is punishable by a third-degree misdemeanor charge and a fine of up to $1,000 for each day of their offense.
#37. 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.
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.
In a replacement situation, all of the following must be considered EXCEPT Assets. Benefits. Limitations. Exclusions.
Assets In a replacement situation the agent must be careful to compare the benefits, limitations and exclusions found in the current and the proposed replacement policy.
What document describes an insured's medical history, including diagnoses and treatments? a)Individual Medical Summary b)Comprehensive Medical History c)Attending Physician's Statement d)Physician's Review
Attending Physician's Statement An Attending Physician's Statement (APS) is the best way for an underwriter to evaluate an insured's medical history. The report includes past diagnoses, treatments, length of recovery time, and prognoses.
#36. The state Insurance Code identifies all of the following as prohibited acts that can cause suspension, revocation or denial of an insurance producer license EXCEPT a) Committing any misdemeanor. b) Failing to pay state income taxes. c) Failing to pay child support obligations. d) Committing a felony or its equivalent.
Committing any misdemeanor. Only the commission of misdemeanors that involve the misuse or theft of money or property belonging to others will affect the maintenance or obtaining of an insurance producer license.
#37. 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
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.
#47. If an employee terminates her employment, which of the following provisions would allow her to continue health coverage under an individual policy, if requested within 31 days? a) Conversion b) Replacement c) Grace period d) Renewability
Conversion Conversion provisions are required by law. It allows terminated employees to convert their group health coverage to individual insurance without evidence of insurability, within a specified amount of time, and for eligible reasons.
#48. Which of the following is NOT fundable by annuities? a) A person's retirement b) Estate liquidation c) Death benefits d) Cash accumulation for any reason
Death Benefits Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
#16. Which of the following is NOT considered to be a basic service, under a nonscheduled plan? a) Endodontics b) Oral surgery c) Fillings d) Dentures
Dentures There are two types of services under nonscheduled plans: basic and major. Basic services include treatments such as fillings, oral surgery, periodontics, and endodontics, while major services include treatments such as inlays, crowns, dentures and orthodontics.
#22. Which of the following authorities monitors the financial strength of insurers? a) Financial Industry Regulatory Authority (FINRA) b) Insurance companies c) Department of Insurance d) National Association of Insurance Commissioners (NAIC)
Department of Insurance The Commissioner and the Department of Insurance are charged with monitoring the financial strength and integrity of insurers authorized to conduct business in Pennsylvania in order to determine whether the continued operation of any insurer might be financially hazardous to policyholders, creditors, or to the public in general.
#118. 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
Driving recklessly Morale hazards arise from a state of mind that causes indifference to loss, such as carelessness.
#22. All of the following violations may result in an agent's imprisonment EXCEPT a) Engaging in the business of insurance after being convicted of breach of trust. b) Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction. c) Embezzling funds from the insurer. d) Knowingly obtaining information about a consumer under false pretenses.
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.
#27. Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a) Children's rider b) Additional insured rider c) Family term rider d) Spouse rider
Family term rider A single rider that provides coverage on every family member is called a "family rider".
#29. If an insurer changes a form that it uses to transact insurance, it must do which of the following? a) Nothing, as long as the insurer has a Certificate of Qualification. b) File the form with the Commissioner for approval c) File the form with the NAIC for approval d) Submit it to the Department of Insurance so it can be kept in the insurer's official records
File the form with the Commissioner for approval All forms, including changes to previously approved forms, must be filed with the Commissioner. The Commissioner will approve or disapprove the form. If 30 days after the form is filed no action is reported, the insurer can assume that the form is approved.
#7. How many pints of blood will be paid for by Medicare Supplement core benefits? a) Everything after first 3 b) 1 pint c) First 3 d) None; Medicare pays for it all
First 3 Medicare supplemental policies cover costs of deductibles and coinsurance for Parts A and B. Since Medicare will not pay for the first 3 pints of blood, a Medicare Supplement plan will cover that. This is considered to be a core benefit.
#19. A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? a) Indemnity b) Guaranteed c) Noncancellable d) Nondiscriminatory
Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.
#97. An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Guaranteed insurability option b) Dividend options c) Guaranteed renewable option d) Nonforfeiture options
Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
All of the following are licensing requirements for a business entity, EXCEPT a) Applying for a license in the same lines of authority as held by licensed designees. b) Having all employees complete continuing education courses once every 2 years. c) Demonstrating general fitness, competence, and reliability. d) Maintaining on staff at least 1 licensed person in good standing.
Having all employees complete continuing education courses once every 2 years. When applying for insurance producer licenses, business entities must have at least 1 designated licensee, in good standing with the Department; apply for licensure in the same lines of authority held by the designated licensees; have not committed any prohibited acts; be owned, operated, and managed by persons possessing general fitness, competence, and reliability; and pay all applicable fees.
#9. What type of insurance would be used for a Return of Premium rider? a) Decreasing Term b) Annually Renewable Term c) Increasing Term d) Level Term
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.
#40. State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT a) Offering benefit certificates or securities in return for purchasing insurance. b) Inviting prospective clients to the grand opening of the company's new office. c) Issuing or delivering insurance company stock in return for purchasing insurance. d) Promising returns and profits from the purchase of insurance.
Inviting prospective clients to the grand opening of the company's new office. Inducement is an illegal practice. It involves offering anything of value to a prospective client that is not specified in the policy as an incentive to buy insurance. Stock, bonds, benefit certificates, dividends or profits could be used as inducement.
#23. What is the benefit of choosing extended term as a nonforfeiture option? a) It matures at age 100. b) It allows for coverage to continue beyond maturity date. c) It can be converted to a fixed annuity. d) It has the highest amount of insurance protection.
It has the highest amount of insurance protection. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.
#14. All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a) The payments are not guaranteed for life. b) The insurer determines the amount for each payment. c) It is a life contingency option. d) It will pay the benefit only for a designated period of time.
It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
#4. All of the following statements are true of a Combination Dental Plan EXCEPT a) It covers diagnostic and preventive care on the usual, customary, and reasonable basis. b) It uses a fee schedule for other dental services. c) It is also known as the Superimposed Plan. d) It is basically a combination of a scheduled and nonscheduled dental plan.
It is also known as the Superimposed Plan. A combination plan is basically a combination of the scheduled and nonscheduled plan. The combination plan covers diagnostic and preventive services on the usual, customary and reasonable basis but uses a fee schedule for other dental services.
#26. Which of the following is INCORRECT concerning Medicaid? a) It pays for hospital care, outpatient care, and laboratory and X-ray services. b) The federal government provides about 56 cents for every Medicaid dollar spent. c) It is solely a federally administered program. d) It provides medical assistance to low-income people who cannot otherwise provide for themselves.
It is solely a federally administered program. Medicaid is assistance program for persons with insufficient income and/or resources to pay for health care. States administer the program that is financed by federal and state funds.
#12. Which of the following is true about the premium on the children's rider in a life insurance policy? a) It decreases when the oldest child reaches the age of 21. b) It increases when a newborn baby is added to the policy. c) It decreases when an adopted child is added to the policy. d) It remains the same no matter how many children are added to the policy.
It remains the same no matter how many children are added to the policy. The premium does not change on the inclusion of additional children; it is based on an average number of children.
#19. Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary? a) It will not affect the benefits paid to the beneficiary. b) It will reduce the benefits by 70%. c) It will increase the benefits paid to the beneficiary. d) It will decrease the benefits paid to the beneficiary.
It will decrease the benefits paid to the beneficiary. Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.
#45. Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a) Whole Life b) Ordinary Life c) Joint Life d) Decreasing Term
Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
#20. Every insurer marketing Long-Term Care insurance must establish marketing procedures to ensure all of the following EXCEPT a) LTC policies are marketed effectively to prospective insureds. b) Comparisons of policies are fair and accurate. c) Excessive insurance will not be sold. d) Every reasonable efforts is made to identify an applicant's other insurance.
LTC policies are marketed effectively to prospective insureds. All insurers marketing long-term care policies must establish these procedures. Additionally, companies must have marketing guidelines to insure that excessive insurance is not sold or issued.
#18. 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? a) Term to specified age b) Ordinary life policy c) Limited pay whole life d) Level term
Level term A 20-year term policy is written to provide a level death benefit for 20 years.
#37. Which type of Medicare policy requires insureds to use specific healthcare providers and hospitals (network providers), EXCEPT in emergency situations? a) Medicare Part A b) Preferred c) Medicare SELECT d) Medicare Advantage
Medicare SELECT Medicare SELECT policies require insureds to use specific healthcare providers and hospitals, except in emergency situations. In return, the insured pays lower premium amounts.
#12. If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for Medicare? a) Nothing b) Apply for coverage through the state c) Appear for a physical at the Social Security office d) Apply at a local Social Security office
Nothing Nothing needs to be done in this case. Medicare Part A and B will automatically be effective the month you turn 65.
#78. Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds? a) Cancellable b) Guaranteed renewable c) Optionally renewable d) Conditionally renewable
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.
#6. Which document helps ensure that full and fair disclosure is provided to the recipient of a policy? a) Statute of Limitations b) Outline of Coverage c) Benefit Limitations d) Policy Summary
Outline of Coverage The Outline of Coverage is created to ensure full and fair disclosure to the recipient of a new policy. This document can be released at the time of application or upon delivery of the policy.
#124. An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? a) Pay a decreased death benefit b) Sue for the right to not pay the death benefit c) Pay the death benefit d) Refuse to pay the death benefit because of the misstatement on the application
Pay the death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.
#42. Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a) Payor Benefit b) Jumping Juvenile c) Juvenile Premium Provision d) Waiver of Premium
Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.
#65. Which of the following do the Standard and Preferred risk categories share? a) Possible modifications to include expanded coverage b) Permanent coverage c) Premiums are not elevated. d) More medical evaluations are required.
Premiums are not elevated. The "standard" rating indicates that an individual represents a similar level of health and lifestyle quality as other members of the same age cohort. These individuals do not need special policy restrictions or are required to pay higher premiums. Those in the "preferred" category often have to pay smaller premiums than those who are in the "standard" category.
#35. What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered? a) Contestable period b) Elimination period c) Grace period d) Probationary period
Probationary period Probationary period is the period of time after a policy is in effect before claims arising out of an illness are covered. This is to prevent adverse selection, persons waiting until they have been exposed to a cause of loss before purchasing coverage.
#40. A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a) Proof of insurability is not required. b) Medical exam c) Her parents' federal income tax receipts d) Medical exam and parents' medical history
Proof of insurability is not required. If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.
#40. When an employee is still employed upon reaching age 65 and eligible for Medicare, which of the following is the employee's option? a) Enroll in Medicare when eligible; otherwise, Medicare benefits will be forfeited. b) Wait until the next birthday to enroll c) Remain on the group health insurance plan and defer eligibility for Medicare until retirement d) Enroll in Medicare, while the company must provide additional retirement benefits
Remain on the group health insurance plan and defer eligibility for Medicare until retirement If an employee is still employed upon reaching age 65, federal laws require keeping the employee on the group health insurance rolls and deferring their eligibility for Medicare until retirement. The employee has the right to reject the company's plan and elect Medicare but the company can offer no incentives for switching to Medicare.
#39. When the insured initiates the cancellation of a policy, the unearned premium will be refunded on a(n) a) Extended term basis. b) Pro rata basis. c) Per occurrence basis. d) Short rate basis.
Short rate basis. When a policy is cancelled at the insured's request, the amount of returned unearned premium will be calculated on the short rate table that the insurer has filed with the insurance department. This allows the insurer to retain some of its cost of issuing the policy and providing service.
#32. Which two terms are associated directly with the way an annuity is funded? a) Immediate or deferred b) Renewable or convertible c) Single payment or periodic payments d) Increasing or decreasing
Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.
#91. Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called a) Underwriting. b) Suitability. c) Client protection. d) Approval.
Suitability. Insurance producers must adhere to the concept of suitability by ensuring that, to the best of their belief, the purchase, sale or exchange of a policy is in the best interest of the insured.
#95. Which of the following is true about the requirements regarding HIV exams? a) Prior informed oral consent is required from the applicant. b) HIV exams may not be used as a basis for underwriting. c) The applicant must give prior informed written consent. d) Results may be disclosed to the agent and the underwriter.
The applicant must give prior informed written consent. A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.
#11. Which of the following is NOT a feature of a guaranteed renewable provision? a) The insured has a unilateral right to renew the policy for the life of the contract. b) Coverage is not renewable beyond the insured's age 65. c) The insured's benefits cannot be reduced. d) The insurer can increase the policy premium on an individual basis.
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.
#88. What is the advantage of reinstating a policy instead of applying for a new one? a) The face amount can be increased. b) The cash values have gained interest while the policy was lapsed. c) The original age is used for premium determination. d) Proof of insurability is not required.
The original age is used for premium determination. The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.
#24. What happens if a deferred annuity is surrendered before the annuitization period? a) The owner will only receive a refund of premium. b) The insurer can only apply the surrender value toward another annuity. c) Deferred annuities cannot be surrendered prior to the annuitization period. d) The owner will receive the surrender value of the annuity.
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.
#48. If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? a) The insurer may deny coverage later, because of the information missing on the application. b) The policy will be interpreted as if the insurer waived its right to have an answer on the application. c) The policy will be interpreted as if the insured did not have an answer to the question. d) The policy will be void.
The policy will be interpreted as if the insurer waived its right to have an answer on the application. Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.
#14. An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? a) The policy will be reduced to an extended term option. b) The policy will terminate when the loan amount with interest equals or exceeds the cash value. c) The insurer will increase the interest rate on the loan and charge a penalty. d) The insurer will not permit the policyowner to take out any more loans.
The policy will terminate when the loan amount with interest equals or exceeds the cash value. In most policies, failure to pay back a loan will result in termination of the policy if the total amount of the loan and accrued interest equals the cash value.
#11. Which is true about a spouse term rider? a) Coverage is allowed for an unlimited time. b) The rider is decreasing term insurance. c) Coverage is allowed up to age 75. d) The rider is usually level term insurance.
The rider is usually level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.
#13. 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.
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.
#41. The paid-up addition option uses the dividend a) To accumulate additional savings for retirement. b) To purchase a smaller amount of the same type of insurance as the original policy. c) To purchase a one-year term insurance in the amount of the cash value. d) To reduce the next year's premium.
To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
#26. Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Equity Indexed Universal Life b) Variable Universal Life c) Universal Life - Option A d) Universal Life - Option B
Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
#75. Which of the following is a key distinction between variable whole life and variable universal life products? a) Variable whole life has a guaranteed death benefit. b) Variable universal life is regulated solely through FINRA. c) Variable whole life allows policy loans from the cash value. d) Variable universal life has a fixed premium.
Variable whole life has a guaranteed death benefit. Variable universal life insurance may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit.
#103. How soon after the due date should the insurer pay the agent appointment fees? a) Immediately b) Within 10 days c) Within 30 days d) Within 60 days
Within 30 days The annual appointment fee must be paid within 30 days of the bill.
