LI Exam
The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy.
Decreases
A convertible term life insurance policy may be converted _____ time(s) for a permanent life policy based on the original or attained age.
1
A qualified health plan is any plan which provides coverage for the ______ Essential Health Benefits and provides a minimum actuarial value of 60%.
10
One of your clients just reinstated his health insurance plan. When is coverage effective for sickness and accident?
10 days for sickness, and immediately for accidental injuries
A Long-Term Care Rider provides up to what percentage of the policy's death benefits if the insured qualifies for long-term care benefits based on being chronically ill as defined in the rider?
100
A small group for health insurance in California is a single employer with ______ or fewer full-time equivalent employees (persons who work at least 30 hours per week).
100
An employer may require a former employee who has COBRA coverage to pay up to _____% of the premium.
102
Which Payment Option pays an income for the life of the annuitant or for a specified period, whichever is longest?
Life Income with Period Certain
Under Medicare Part B, ____________ refers to a nonparticipating provider that does not accept Medicare's assigned amount for services provided.
Non-assignment
Joe suffers a broken leg while on vacation. With Joe's HMO, he may seek medical care at which of the following?
The nearest emergency room
In California
The notice of the appointment must be filed with the Commissioner upon licensing the applicant or within 14 days of the appointment.
Which of the following is not a function of insurance?
It is designed to be used to protect the insured from dishonest acts
The applicant/insured wants a term life insurance policy that will last for 20 years and is willing to risk that the insurer is managing its financial affairs properly and is not concerned about the premium of the policy down the road so long as there is a cap on how much it can ultimately become, so the producer should show him/her a(n):
20 year indeterminate premium term life insurance policy; Indeterminate premium term can have the premium fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns
A policy is considered to have been received how many months after the date of issuance if premiums have been paid to date?
6
It is a violation to recommend that an insured of what age or older purchase an 'unnecessary replacement annuity'?
65
A producer must include their name and address on which of the following?
A policy summary;Only a policy summary requires that the producer disclose their name and address.
The Attending Physician's Statement (APS) is completed by:
An applicant's physician to provide information about the applicant's medical history
A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______.
Buyer's Guide
In a replacement transaction, all of the following are insurer duties and responsibilities, except:
Contact the client to assure that they understand the transaction;The Replacing Insurer's responsibilities include: upon receiving proper notification with the new application, the replacing insurer must notify the existing insurer of the planned replacement, maintain copies of the information regarding replacement for a specified period of time as mandated by the state
A group plan is designed to insure all of the following, except:
Creditors
Which of the following statements is true concerning the National Association of Insurance Commissioners?
Each commissioner may accept or not accept the recommendations that concern his or her state
Which of the following powers describes the authority stated in an agent's agency contract?
Express
The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party.
FCRA
An insurer organized in a state other than one in which it is authorized to do business is known as which type of insurer?
Foreign
The term 'mode' refers to the:
Frequency of premium payments
Applicants for life insurance must be given a disclosure that they will be tested for HIV/AIDS and have the opportunity to name which one of the following with whom a positive test result may be shared?
Health care professional
Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk.
Home office underwriter
An agent that enters into agreements with more than one insurer is which of the following?
Independent;The independent agent may represent many insurers at the same time.
If an individual faces the risk of economic loss in the event of property damage, this represents the principle of:
Insurable interest
The following are all true regarding risk management, except:
Insurance is designed to cover both intentional and unintentional losses
The MIB obtains its information from which of the following?
Insurers
What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS?
Insurers may refuse to issue a policy to individuals based on positive HIV test results
Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions?
Life Settlement
Which of the following medical reports cannot be used as the sole basis for rating or denying coverage to an applicant?
MIB
Disclosure or lack of disclosure in a statement that would change an insurer's decision to issue a policy for the same premium is considered:
Material
Which statement is false regarding 'materiality' in California?
Materiality of a representation is determined by different rules as compared to materiality of a concealment
Loading includes all of the following, except:
Mortality;The mortality rate is used to determine net premium. Loading are additional charges to net premium to derive gross premium.
A generic brochure was developed by the ________ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.
NAIC
Which of the following is included in Part I of a Life Insurance Application?
Name and Occupation;Part I of the application contains general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life insurance.
B was 42 when the life insurance policy was issued. 42 is referred to as the ______ age of the policy.
Original
Variable Whole Life has all of the following features, except:
Partial surrender are allowed; Partial surrenders are not allowed from a variable whole life policy.
In order to receive a policy dividend, the policy owner must own a __________ policy.
Participating;Participating policies are the only policies that may pay dividends to policyowners.
What is earned by a life insurer for each day a life insurance policy is in force?
Premiums
Self-insurance is an example of which of the following type of risk management?
Retaining the risk
All of the following are characteristics of a Mutual Insurance Company, except:
Stockholders have ownership
Which of the following best describes producer field underwriting?
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses;Probing beyond the stated questions in the application based upon the applicant's responses is field underwriting. The producer does not engage in any of the other listed activities.
Term Life Insurance
Term Insurance is pure protection (i.e. no cash value develops.) Its cost per thousand dollars of coverage is significantly lower initially than Permanent Insurance.
All of the following regarding convertible term life insurance is true, except:
The conversion can take place at any time; The right to convert the existing term policy to a permanent policy without evidence of insurability is only available during the conversion period specified in the contract.
All of the following are true of the group life insurance classification, except:
The coverage is usually written on a permanent basis providing a cash value as well as a death benefit; In group life insurance, the coverage is normally written on a renewable term basis providing no cash value or living benefits as are found in individual cash value policies.
A life insurance applicant pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect?
The date of the application or upon the completion of any required medical exam (whichever is later)
The intent of the Contract of Indemnity is best described by which of the following?
The insured's financial condition is the same as it was prior to the loss, with no intent of loss or gain
A producer provided a conditional receipt to an applicant who paid the first premium with the application. The applicant died before a policy was issued. If the insurer denies the claim, which party would have to prove the reasons for its actions if the claim was challenged?
The insurer
What does a material misrepresentation mean to an insurer?
The insurer may not have issued coverage if the correct information had been communicated
Who can change the premium on a fixed premium policy?
The insurer who issued the policy; With Fixed Premium, the premium amount is determined by the insurance company and while they do not have to be level, they cannot be changed by the policyowner
The Buyer's Guide to Life Insurance provides basic information concerning all of the following, except:
The interest rates of the different policies which are sold;The Buyer's Guide to Life Insurance provides basic information concerning life insurance, the different types of policies which are sold, and the comparative costs of each.
The human life value approach in determining the amount of life insurance someone needs takes into consideration all of the following, except:
The number of cars the insured and family members own
When an insurance policy is not clear, the court will usually interpret in favor of the insured because:
The policy is a Contract of Adhesion
A Surplus Lines Broker is best described as which of the following?
They place risks with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers; States regulate the procurement of business from nonadmitted carriers by regulating the brokers who place business with these carriers. These brokers are known as Surplus Lines Brokers.
Life insurance policy illustration requirements apply to which one of the following?
Traditional whole life insurance
Under Aleatory contracts the exchange of values may be:
Unequal
Flexible premium adjustable life is another name for:
Universal Life-Universal Life Insurance (UL) is also called 'Flexible Premium Adjustable Life Insurance.'
A Guaranteed No-lapse Rider is attached to what type of policy ensuring the policy will not lapse if the cash value is reduced to zero?
Universal life-A Guaranteed No-lapse Rider is attached to a universal life insurance policy and ensures the policy will not lapse if the cash value is reduced to zero.
A good example of Risk Reduction might be:
When one takes action to minimize the severity of a potential loss
All of the following are true of the Law of Large Numbers, except:
the prediction of individual losses is based upon past experience
To be permitted to operate as a Life Settlement Broker, a life insurance producer must be licensed as a life agent for at least:
1 year
The California Financial Information Privacy Act is sometimes known as:
Cal-GLBA
What must an insurance broker have in place in order to be able to receive, directly from an insured, any compensation or fees for services to be provided?
A Brokers Service Contract
Each agent who accepts an application for life insurance or annuity that involves replacement of any existing life or annuity policy must submit to the insurer:
A Notice Regarding Replacement
What is the name of the document that shows the cash accumulation in a life policy over a minimum of 20 years on both a 'guaranteed' (maximum cost of insurance, minimum interest credits) and a 'nonguaranteed' (current cost of insurance and interest credits assumptions) basis?
A basic life insurance illustration
Regarding insurable interest which one of the following is false?
An insurable interest exists in cases where a financial or economic loss by the insured results in the event that the policy owner dies
In order to receive a stock dividend, the policyowner must own ____________.
Common stock of the insurer
Part A of Medicare pays for:
Hospital expenses
The policy loan amount cannot exceed the ____________.
Available cash surrender value
With credit life, who is normally the beneficiary?
The creditor
LTC policies
They are issued guaranteed renewable
Life insurance policy premiums establish a _________ in the policy for tax purposes.
Cost basis
An insured has a $25,000 annual renewable term life policy, originally purchased on her birthday, April 1st of last year. She forgot to pay the $250 renewal premium, and dies in an accident on April 15. The beneficiary will receive:
$25,000 less the earned premium due; If a death occurs during the grace period, only the earned premium may be deducted from the death benefit. The insurer cannot retain the entire annual premium, but is entitled to 15 days' premium (about $10.27 in this example). The beneficiary receives the balance of the death benefit.
Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit?
$255
The maximum amount of life insurance death benefit on any one insured life, regardless of the number of policies, covered by the California Life and Health Guarantee Association is:
$300,000
Furnishing false information to the Commissioner is subject to a civil penalty of $100,000 plus what amount per 30 days period of noncompliance?
$5,000
Q has a traditional whole life policy with a $10,000 face amount, a $5,000 cash value, and a $4,999 policy loan and loan interest outstanding. Q will forfeit the policy when the policy loan reaches ________ for failing to pay loan interest on a timely basis.
$5,000
Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it has $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be:
$50,000
Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax
$7,500
A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force. The base policy costs $750 and the rider is $50. What is the total premium annually the policyowner must pay to keep the policy in force?
$800
Individuals who have not been licensed life agents for the required time period who intend to transact life settlements must first complete at least how many hours of education on life settlement transactions?
15
Insurers must reply to a notice of loss within how many days of receiving it?
15
An agent will be required to retake a prelicensing course and pass the qualifying exam if a license is suspended for more than:
2 years
For a replacement policy of individual life insurance and annuities (other than variable contracts), the free look period is at least how many days?
20
Notice of claim is required within _____ days of loss.
20
Producer G took 28 hours of approved CE in the term preceding her last license renewal. How many hours will she need to complete at her next renewal term?
20
The applicant/insured wants a term life insurance policy that will last for 20 years and understands that the premium can be increased to a new premium level prior to the end of the term, so the producer should show him/her a(n):
20 year non-guaranteed level premium term life insurance policy
A Viatical Settlement is an agreement between a policyowner and a third-party buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less than how many months remaining life expectancy?
24
All licensed producers must complete how many hours of CE to renew their license?
24
The Insurance Code requires producers who meet with prospective clients age 65 and older in their homes for the purpose of transacting life insurance, annuities, or disability insurance products to provide a written notice of the first meeting at least how many hours in advance?
24
Small employers with _____ or fewer employees who average less than $50,000 in annual income may be eligible for federal premium tax credits of up to 50% of the employee premium for a health plan purchased through California's Small Business Health Options exchange (SHOP).
25
Federal law requires that every policy providing coverage for a dependent child extends coverage up to what age?
26
Consumer-driven health care allows individuals to use a _____-tiered approach to funding the costs of medical services and treatment.
3
Life Settlement proceeds will be sent to the owner within how many business days after the life settlement provider has received acknowledgment that ownership of the life insurance policy has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract?
3
How long, typically, is the reinstatement period from policy lapse?
3 years
Life and Disability Insurance Analyst must have a written agreement signed in advance stating the service to be performed for a fee, the amount of the fee and must be retained for:
3 years
In addition to the Metal Tiers, catastrophic plans are available in the individual market for those who are under age _____ or eligible for a hardship exemption because they cannot afford health insurance offered by a Health Exchange.
30
Under the Patient Protection and Affordable Care Act, the special enrollment period in the Small Business Health Options (SHOP) Marketplace lasts ______ days from the date of the qualifying event.
30
Upon receiving a request for records, insurers and/or agents must deliver the records to the Commissioner within how many days?
30
In the event that an organizational license terminates, the organization may continue to transact insurance under the former license if a new application for an organizational license is submitted within:
30 days
Most companies are required to extend benefits for up to _____ months when the individual is allowed less than that amount of coverage under COBRA.
36
An Essential Health Benefits package is required to provide coverage for at least one of _____ levels of coverage offered through all health exchanges.
4
There are ____ different 'Metal Plans' offered through the health insurance exchanges.
4; An Essential Health Benefits package is required by the ACA to provide coverage for at least one of four levels of coverage offered through all health exchanges. These coverage levels are known as 'Metal Plans.' The four Metal categories are bronze, silver, gold, and platinum.
Long-term care insurers in California must offer the insured the option of purchasing inflation protection that is not less favorable than an annual increase at a rate of not less than ______% of the original daily benefit, either at a fixed or compounding rate.
5
Under the California Insurance Code, Life and Disability insurance agents must maintain records in their place of business for at least _____ years and must be open to inspection or examination by the Commissioner at all times.
5
Which of the following is a typical benefit period for a group long-term disability benefit?
5 years; Group long-term disability is often characterized by benefit periods of 2 years, 5 years, to age 65, or lifetime.
Which of the following is a typical benefit period for a group short-term disability benefit?
52 weeks
Distributions from a Modified Endowment Contract (MEC) made on or after age _____ are not subject to any tax penalties.
59 1/2
Generally, an insurer may defer the granting of a policy loan for up to ______ months.
6
In a Medicare Supplement replacement sale, if the original policy has been in force for less than ______ months, the replacing insurer shall waive any time periods applicable to preexisting conditions to the extent that they have already been satisfied under the original policy.
6
To have Currently Insured status under Social Security, a worker must have at least _____ quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.
6
An individual purchased a fixed annuity with flexible premiums. When she annuitized the policy, she chose the Life Income 10-Year Certain option. What would the beneficiary receive if the annuitant dies 4 years after the annuity payout began?
6 more years of payments
A qualified health plan is any plan which provides coverage for the 10 Essential Health Benefits and provides a minimum actuarial value of ______%.
60
For annuities, a senior citizen is defined as an individual who is what age or older on the date of purchase of the policy?
60
Under the Legal Actions Mandatory Uniform Provision, an insured must wait at least _____ days after providing proof of loss before he or she can take legal action against the insurer.
60 days
Medicare Part B is optional and enrollment can be delayed when employer coverage is primary due to active employment of the individual at age:
65
When a life insurance policy does not pass the ______-pay test, it becomes classified as a MEC.
7
Under the California Annuity Suitability Education Requirements, a life-only agent who sells annuity products to individual consumers must complete an initial _____-hour training course prior to soliciting for sales.
8
The PPACA requires the medical loss ratio to be ______% for individual and small group plans.
80
Limited Accident Policy
A Limited Accident Policy provides specific benefits for specific injuries from specific causes.
long-term care policy
A Long-Term Care policy may only be cancelled by the insurer for nonpayment of premium.
Which of the following is an example of a collateral assignment?
A business using a life insurance policy to secure a bank loan; A collateral assignment is typically used when an insurance policy is used as collateral for a loan. This is a temporary assignment until the debt is paid in full.
Until yesterday, J. J. worked for his father's company and was covered by the company's large group health plan. He stopped working to go to college. He is 26 years of age and wants to keep the same coverage until he earns his degree in approximately 24 months. Which of the following statements is true?
A good option for J.J. is to exercise the COBRA option under his father's group plan
To be eligible for a group insurance plan, the group must be:
A natural group
Which of the following best describes an Annual Renewable Term Policy?
A policy with a level death benefit, but with increased premium at each renewal
Long-Term Care
A product designed to provide coverage for necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital is called:; Medicare Supplement covers acute care expenses and related post-hospitalization skilled nursing care only.
A Variable Annuity is different from a Fixed Annuity because it must be sold with which of the following documents?
A prospectus; A prospectus is a disclosure document that provides the prospective buyer with information about all fees, charges, expenses, and risks. It must be provided by the producer prior to sale of the variable annuity.
A qualified pension plan must meet ___________ requirements.
A qualified plan must meet the requirements of the Employee Retirement Income Security Act (ERISA).; ERISA
If no initial premium is paid, the application is considered:
A trial application
What are the two types of life insurance assignments?
Absolute and collateral
If no money is involved when the ownership of a policy changes, this is referred to specifically as a(n) __________.
Absolute assignment
When a life insurance policy's ownership is changed from the original owner to a new owner without payment, this is known as a(n) ___________.
Absolute assignment; When a life insurance policy's ownership is changed from the original owner to a new owner, this is known as an absolute assignment when no money is involved.
Which type of rider pays out a capital sum in case an insured loses a limb or their eyesight?
Accidental Death and Dismemberment; The Accidental Death portion of the rider pays out a principal sum. The dismemberment part pays out a capital sum. The capital sum is paid when there is a loss of limb, eyesight, fingers, or toes.
Typical exclusions or restrictions found in an accelerated death benefit include all of the following, except:
Accidental injury while at work; The accelerated death benefit cannot contain exclusions or restrictions that are not also exclusions or restrictions in the policy, such as, suicide, intentional self-inflicted injury, war, or engaging in illegal occupations or activities.
The period of time from the first deposit into an annuity to the selection of a settlement option is considered the ___________ period.
Accumulation
Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage.
Actual loss experience of the group
`The __________ value of a health plan equals the percentage of the total average costs that a plan pays for Essential Health Benefits.
Actuarial
If the annuitant dies during the annuity or payout phase, the remaining value in the account will be:
Added to the deceased annuitant's estate for valuation
If the Insurance Commissioner has reason to believe that a producer has engaged in unfair competition, he/she is required to:
Advise the producer that he/she is entitled to a public hearing
When can a policyowner make a change in the policy's coverage or other benefits if an irrevocable beneficiary has been named?
After the irrevocable beneficiary dies
income benefit payments are based on
Age, gender, settlement option selected, and dollar amount used to purchase the income payment benefit are all used in determining the amount of the income benefit payment.
A Child Rider that is added to an insured's permanent policy includes which of the following features?
All children (beyond 14 or 15 days of age) are covered, and the rider may be converted to permanent coverage at a specified age without evidence of insurability
All of the following are true in general about riders, except:
All riders are provided for as long as the policy is in effect; Riders are provided for a specified period of time as stated in the policy. It is typical for a rider to end at a specified age (such as the insured's age of 65).
A type of PPO that requires a subscriber to seek treatment from a limited number of network providers where use of a primary care physician and referral to a specialist are not required is called:
An Exclusive Provider Organization (EPO)
G is concerned about the future and living a comfortable retirement. Which of the products listed below is ideally suited to help G prepare for his retirement goal?
An annuity; An annuity is designed to provide a steady stream of income to an individual, typically upon retirement. It protects against outliving one's retirement income by providing an income for life.
As specified by the California Insurance Code, a group policy must allow for the adjustment of premium or amount of insurance payable in the event of:
An employee misstating his/her age
A policy is issued with a rider. Years later the policyowner would like to drop the rider in order to save some money. Who has the authority to effect that policy change?
An executive officer of the insurer; Any policy changes or modifications must be in writing and signed off at the home office by an executive officer. A producer cannot change, alter, modify, or waive any policy provisions.
What will cause the time period of the fixed amount settlement option to be extended?
An increase in interest credited; Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.
A Medicare beneficiary may enroll in a Medicare Advantage plan when they are first eligible for Medicare or during the _____________ Period, where a person may change to another Medicare Advantage plan or switch from Original Medicare to a Medicare Advantage Plan.
Annual Election
Dividends if declared are paid __________.
Annually
The cost of living rider automatically increases monthly benefits, including after the onset of a disability:
Annually
A 22-year-old applicant for life insurance has a limited budget for premiums. Which of the following policies would provide for the highest face value, for the lowest premium amount?
Annually Renewable Term
The __________ is the person on whose life the annuity contract's income benefit is based.
Annuitant
All of the following terms are the same regardless of if the policy is life insurance or an annuity, except:
Annuitant; The annuitant in an annuity is the equivalent of the insured in a life insurance policy.
The period of time over which distributions of the accumulated balance is made to the annuitant is referred to as the:
Annuitization Period
'any occupation' total disability
Any occupation total disability is more restrictive and harder to qualify for benefits.
In California, every person has an insurable interest in the life and health of all of the following, except:
Any person who agrees to be insured
Which of the following is a true characteristic of a Variable Universal Life policy?
As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium;
Reimbursement benefits may be paid directly to the medical providers under which condition?
Assignment of benefits
When must required disclosures be provided to a life settlement contract applicant?
At the time of the application
Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?
Automatic Premium Loan; The Automatic Premium Loan Provision enables the insurer to borrow automatically from the policy's cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.
Which of the following provisions is NOT a standard provision?
Backdating a policy is a prohibited provision, other than to conserve age.
Benefits that may be received monthly under Social Security
Benefits that may be received monthly under Social Security include retirement benefits as early as age 62 for workers and their spouses, and survivor's benefits for children up to age 18 (19 if still in school) and for widows and widowers as early as age 60
Accident and Sickness Insurance
Both agent and insurer are accountable. Such words as all, complete, or comprehensive are prohibited. Sales talks and testimonials are considered advertising and are regulated activities.
How does life insurance reduce financial loss upon the insured's death?
By transferring the risk to the insurer
California residents can obtain financial assistance in obtaining healthcare insurance coverage
California residents can obtain financial assistance in obtaining healthcare insurance coverage through Medi-Cal Assistance, Advanced Premium Tax Credits, and Cost-Sharing Reductions.
The ___________ provision deals with expenses that did not satisfy the previous year's deductible, were incurred in the last 3 months of that year, and are used towards satisfying the current year's deductible.
Carryover
If the insured of a Whole Life policy is on claim with a Waiver of Premium rider, what happens to the cash values?
Cash value and dividends are not affected; Under a Waiver of Premium rider, cash value and dividends continue as if normal premium payments have been made.
LTC policy
Chemical dependency would not be excluded if it results from the administration of drugs under a physician's prescription and direction.
___________ is a cost sharing feature and is stated as a percentage of sharing between the insurer and the insured, such as 80/20.
Coinsurance
Managed Health Care
Comprehensive Case Management is employed as opposed to partial.
concealment
Concealment involves the failure to communicate known information or information material to a risk. An inadvertent or intentional incorrect answer is a misrepresentation, not a concealment, even if committed by the agent without the insured's knowledge. Failure to communicate an upcoming trial for a traffic offense is a concealment of material information, even though the answer may be technically correct.
An individual policy obtained through a group conversion will have higher premiums because the:
Conversion policy will be issued at the attained (current) age of the insured; There is a conversion period in which the employee may, upon termination of eligibility and without evidence of insurability, convert group benefits to an individual policy however premiums will be higher because the conversion policy will be issued at the attained (current) age of the insured.
Which provision of group health plans is used to determine primary and secondary coverage when an insured is covered by more than one insurance plan?
Coordination of Benefits
Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as:
Cost Containment Provisions
Generally, the ________ is the amount of premiums paid into the policy less any dividends or withdrawals previously taken.
Cost basis
If the insurer issues a policy after receiving an application for health insurance in which questions regarding preexisting conditions were left blank, what would be the consequence to the insured's coverage if a preexisting condition caused a claim shortly after the policy was issued?
Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank
If a policy requires the payment of an additional premium for the continuation of coverage for a newborn, the insurer must be notified within 31 days of the ______.
Date of birth
Universal Life provides for an increasing death benefit only if the applicant chooses:
Death Benefit Option B; Option B pays the face amount stated in the contract that is level term, plus any cash values accumulated over the years. This provides for an increasing death benefit.
A group plan is normally owned by any one of the following, except:
Debtors;A group insurance plan is normally owned by an employer, creditor, or association.
Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except:
Declined;Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.
As the cash value increases in a traditional whole life policy, the net amount at risk ____________, but the face amount of the policy would remain the same.
Decreases; As the cash value increases, the net amount at risk decreases, but the face amount of the policy would remain the same.
Credit life insurance is a special form of what type of term life insurance?
Decreasing
Credit Life insurance is usually what type?
Decreasing Term; Since the amount of the outstanding debt declines over time, decreasing term would make the most sense.
What type of annuity is designed to start benefit payments many years from now and subjects the owner to investment risk?
Deferred variable; A deferred variable annuity exposes the annuity holder to investment risk with income benefit payments starting more than one year after purchase.
The owner of an annuity may do all of the following, except:
Determine the contract's interest credit; The owner's rights begin at the time of purchase. An owner, who may also be the annuitant, may change the annuity date, beneficiary, and payout option.
Before taking an application for an annuity, it is important to:
Determine the suitability of the product to the intended purchaser
An insurance transaction includes any of the following, except:
Determining rates; Insurance transaction includes solicitation, negotiation, execution, and transaction required to execute the contract such as collecting premiums and settling claims. An agent does not determine rates.
In a policy summary all of the following must be shown as being guaranteed, except:
Dividends
dividends
Dividends are declared under participating policies. They are not guaranteed, and if received, the dividend itself is generally not taxable. They can be withdrawn any time there is an accumulation.
A(n) ___________ insurer is organized in the laws of California.
Domestic
If Charlotte wishes to cash out her annuity at age 58 after having it for over 20 years, what should she know about prior to doing it?
Due to her age, she will face both income taxes and tax penalties.
Which of the following is consistent with group health underwriting?
Each member of the group is covered regardless of his or her health history
One of the benefits of an annuity in regards to taxes is:
Earnings are tax deferred during the accumulation phase; While earnings are tax deferred during the accumulation phase, taxes do get paid eventually. The amount of tax is dependent upon not only the recipients tax bracket but also how much of the payment received represents tax deferred earnings, including death benefits
Beth has a contract stating she must be disabled for 3 months before benefits will begin to be paid. This 3-month period is known as the
Elimination Period
Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the:
Elimination Period
With a managed health care plan all _________ care must be covered as if it were provided on an in-network basis.
Emergency
Under the PPACA, employers with more than 50 employees that don't provide an affordable health plan that provides the minimum essential benefits will be required to pay an __________ penalty if the government has to subsidize at least one employee's individual plan purchased through an exchange.
Employer Shared Responsibility
Group Life Insurance
Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income.
Group Life Insurance
Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable incomee
If a policyowner unintentionally pays premiums in excess of the MEC guidelines, the excess premium can be refunded by the insurer within 60 days after the ________.
End of the contract year
When the life insurance policy's cash value equals the face amount of the policy and the proceeds are paid to the policyowner, this is known as the policy's _________.
Endowment
Once issued, if the application is attached to the policy itself, it then becomes part of the ___________.
Entire contract; To be regarded a part of the contract, the application for insurance must be included with the rest of the policy. It may not be incorporated 'by reference'.
Under the Patient Protection and Affordable Care Act, minimum health standards are identified as ________ Health Benefits:
Essential
Part A of Medicare is known as:
Hospital Insurance
Generally, corporations can use annuities to fund all of the following, except:
Estate creation; Corporations may use annuities to provide pensions for employees, funding nonqualified deferred compensation plans or qualified retirement plans, and even to structure payments from liability settlements, known as structured settlements.
All of the following are correct regarding renewable term insurance, except
Evidence of insurability is required to renew the policy; Evidence of insurability is not required upon renewal. As long as the premium continues to be paid, the policy will renew until the expiration date and the premiums will increase based on attained age.
When an annuitant annuitizes their annuity that has a cost basis in it, the amount of the income benefit payment subject to tax is determined by using the:
Exclusion ratio
______________ are conditions stipulated in the contract for which the insurer will not provide coverage.
Exclusions
In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer.
Existing
All of the following are Dividend Options, except:
Extended term; Extended Term is a nonforfeiture option, not a dividend option.
The ________ is the amount payable to the beneficiary upon death of the insured named in a life insurance policy.
Face amount
COBRA
Federal law mandates that employers with 20 or more employees provide a COBRA option. Termination of employment provides only 18 months of continuation. Qualifying events for dependents only (not employees) permit continuation up to 36 months.
A producer gathers information about the applicant for the insurer in order to avoid adverse selection. This is considered to be:
Field underwriting
____________ is the initial step of the total process of insuring a health risk.
Field underwriting
If the beneficiary is concerned about a payout for a particular period of time, the _______ settlement option should be selected.
Fixed Period
Unless the owner specifically directs that the premium be invested in the mutual funds underlying the variable contract, during the free look period, the premium may be invested only in
Fixed-income investments and money market funds; During the 30 day cancellation period, the premium for variable annuities may be invested only in fixed-income investments and money market funds, unless the owner specifically directs that the premium be invested in the mutual funds underlying the variable contract.
If the premium can fluctuate at the policyowner's discretion, meaning it can be increased, decreased, or even skipped at any premium due date, what premium paying method was used?
Flexible
If funds are prematurely withdrawn from a Modified Endowment Contract (MEC) they are subject to a _____% penalty on any gains.
For withdrawals of any gains from a MEC prior to age 59 1/2 there is a 10% tax penalty that applies.
Right to Examine is the same as:
Free Look Period:
In order to obtain Medicare Part A premium free the enrollee must be:
Fully insured under Social Security
Factors which must be considered prior to the sale of an annuity to a senior include all of the following about the purchaser except his/her:
Gender; Factors which must be considered prior to the sale of an annuity to a senior include, but not are not limited to, the purchaser's financial status, tax status, and investment objectives.
The _________ Enrollment Period provides an open enrollment period from January 1 to March 31 each year for those who did not enroll in Medicare Part B when they first became eligible.
General
Medicare Part B
Generally pays 80% of covered physician, surgeon, and outpatient hospital expenses, with a monthly premium and annual deductible
Which of the following best defines the 'Cost Recovery Rule'?
Generally, the difference between the amount of cash value received and the amount of premium paid in is subject to income tax upon surrender
The _________ is the time period provided after the premium due date before a policy lapses.
Grace period
For those individuals who have health issues, which of the following would be an insurance plan to consider?
Group
Group insurance
Group insurance normally covers nonoccupational injury or disease. Workers' Compensation Insurance is designed for occupational injury and disease.
All of the following must be included in a whole life policy, except:
Guaranteed dividend table; Dividends represent a 'refund of unused premiums' when mutual insurers have a surplus (profit). Dividends are not guaranteed. Cash value accumulates as the policyowner pays premium over the years. The cash surrender value must be stated in the contract if the owner wishes to cancel the policy, and Extended Term is a Nonforfeiture option that must be offered.
Small group health insurance for all eligible employees is issued based on which of the following?
Guaranteed issue on a standard basis
Qualified pension and profit-sharing plans were created by Congress to:
Help employees accumulate assets for retirement and provide tax advantages for contributions made by employers
All of the following are characteristics of Term Insurance, except:
High premium outlay in the early years;Term Insurance is characterized by a low initial premium outlay when the insured is young and increases as the insured's age advances.
By requiring a minimum medical loss ratio, an insurance company provides greater value to its policyholders when a ________ percentage of premiums is used for healthcare costs versus administrative expenses or profits.
Higher
Where is the best place for patients that are at home but cannot fully provide for all their needs with care provided by a visiting nurse or home health aide?
Home Health Care
IRC Section 1035
IRS Section 1035 covers like kind exchanges of insurance contracts. Permitted exchanges include Life > Life, Life > Annuity, Annuity > Annuity. Life insurance or annuity contracts may also be exchanged for certain long-term care contracts.
Section 1035
If an existing policy has a surrender charge, it is still applied. The new policy requires evidence of insurability, and new surrender charges will apply to the new policy if it has them.
When would a life insurance policy loan be subject to income taxation?
If the policy lapses when there is a policy loan outstanding which is in excess of the policy's cost basis
Mr. & Mrs. Smith received monthly benefits from their annuity, and upon Mr. Smith's death, Mrs. Smith receives a reduced amount. What annuity payment option did they choose?
Life Income Joint and Survivor; The Payment Option that would continue to pay a reduced amount to Mrs. Smith is Joint and Survivor.
The LMC Partnership has 3 partners and is concerned about what would happen to their $300,000 business if one of the partners should die. If they consider a buy-sell agreement, then each partner would have to buy a policy in the amount of $__________ on the other partners.
If there are 3 partners in a company valued at $300,000, then each would have a $100,000 interest in the company. Each partner would purchase a policy on the other partners, providing for a total of 6 policies (3x2 = 6). Each policy would be valued at $50,000 (6 x $50,000 =$300,000).
Disability insurance underwriters are concerned about the probability of:
Illness or injury
During the accumulation phase of an annuity, if the contract owner dies and the annuitant is someone other than the owner, the value of the annuity is:
Included in the owner's estate for valuation
Proceeds from a buy-sell agreement are received ___________.
Income tax free
What type of term life insurance policy has a policy premium that can fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns?
Indeterminate-Indeterminate premium term can have the premium fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns.
The Modified Endowment Contract (MEC) rules were put into place because:
Individuals were overfunding life insurance policies and using them as tax-free investment vehicles instead of a way to protect survivors against the financial cost of one's death
A STOLI transaction is best defined as which of the following?
Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash
Which of the following is a requirement in order for a third-party ownership policy to be issued by a life insurance company?
Insurable interest must exist between the policyowner and the insured
Mandatory uniform provisions found in health insurance policies are designed to protect the:
Insured
A person applying for coverage through an indemnity provider is known as a(n):
Insured; An insured is a person applying for coverage through an indemnity provider.
In California, any person that manufactures and sells insurance coverage by way of insurance policies or contracts may be an:
Insurer;Insurers manufacture and sell insurance coverage by way of insurance policies or contracts.
Benefit Period of a LTC Policy?
It defines how long benefits will be paid, starting after the elimination period has been satisfied.
24-Hour Care Coverage in California
It is designed to be a seamless system to provide both occupational and nonoccupational coverage It is designed to lower the cost of Workers' Compensation and health insurance coverage for employers in California Life agents desiring to sell the coverage are required to obtain 4 hours of Continuing Education credits in Workers' Compensation Insurance NOt to be life insurance
If the insurer cancels an individual health plan, what happens to the unearned premium?
It is refunded on a pro rata basis
How does an Option A death benefit feature of a Universal Life policy work?
It pays out the policy's face amount; Option A in a Universal Life Insurance policy pays out a level death benefit, while Option B pays out an increasing death benefit, the face amount plus the cash values.
John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John?
John is liable for all expenses; According to the Intoxicants and Narcotics Provision (an Optional Uniform Provision), the insurer may deny coverage for John's injuries, making John liable for all expenses.
The Payment Option that pays an income to two annuitants while both are living, and stops upon the death of the first annuitant, is which of the following?
Joint Life
W and Z are annuitants of an annuity. W dies and Z receives 1/2 of the amount coming into their household when both were alive. They must have elected which of the following settlement options?
Joint and 1/2 Survivor; In a Joint and Survivor annuity, benefits are payable to 2 annuitants while both are living. Upon the death of the first annuitant, survivor benefits continue, either paying the full amount or reduced to 2/3 or 1/2 for the survivor's income until the survivor dies.
An individual jumps off a roof and breaks his leg. Which of the following statements is correct:
Jumping off the roof was intentional and breaking his leg was an accident
Key Employee Life
Key Employee Life Insurance is designed to indemnify a company against the loss of a key employee. The employer has an insurable interest in the key employee, and is the owner, premium payor and beneficiary. The premiums are not tax deductible, and the death benefit is federal income tax free.
Withdrawals from a non-qualified annuity prior to annuitization are taxed on a ___________ basis.
Last-in, first out (LIFO)
What is the term for the increase in predictability of the loss when the number of similar units of risk increase?
Law of Large Numbers
Which of these is a Mandatory Uniform Provision?
Legal Actions
Which provision is a Mandatory Uniform Provision?
Legal Actions; The only response that is a Mandatory Uniform Provision is Legal Actions. All of the other responses are Optional Uniform Provisions.
Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options?
Life Income Joint and Survivor
The annuity settlement option that pays out the highest monthly income for as long as the annuitant lives, and leaves no residual value upon the annuitant's death, is the:
Life Income Option
Jasmine has deposited $100,000 into a single premium immediate annuity. If Jasmine were to die before receiving $100,000 in payments, the balance of the $100,000 would be paid to her sister. Jasmine has selected the:
Life Income with Refund Option
Fred owns a 40-Pay Life Policy. He designated his wife, Ethel, as primary beneficiary. Upon Fred's death, Ethel receives a set amount for life. Fred chose which Settlement Option?
Life Income; Life Income guarantees payment for the lifetime of the recipient. Extended term is a nonforfeiture option.
Which of the following death benefits is paid out to the beneficiary income tax free?
Life insurance when the insured dies while the policy is in force
A life insurance applicant wants a combination of savings and insurance protection with guarantees. If the applicant is willing to pay premiums only until the age of 65, at which time the policy is fully paid-up, which of the following should he/she purchase?
Limited Pay Whole Life-Age to age 65; A life policy payable to age 65 is a limited payment policy. If the insured does not die within the limited premium period, premiums cease because the policy is fully paid up (i.e. no more premiums are due). Death always results in the payment of the policy proceeds as long as the policy is in force. Cash values build as in any other Ordinary Whole Life policy.
Identified actions the Commissioner may take against an insolvent insurer.
Liquidation,Seizure of property, books and records, and capital accounts,Conservation; not explusion
Burt named Liz as his beneficiary; however, he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits?
Liz the beneficiary determines which option she would like to have; If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.
The two categories of Group Disability Income policies are:
Long-Term and Short-Term
Which is not considered one of the basic benefits required of all HMOs?
Long-term care
Property & Casualty Broker-Agent also licensed as a Life-Only or Accident & Health agen
Mandatory CE requirements can result in a producer completing more than the 24 hours of required continuing education needed to renew a license. There is no requirement to complete CE in each line of licensing.
The annuity product which features fixed interest rate guarantees, combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions, is known as:
Market Value Adjustment
The Individual Exchange and Small Business Health Options Exchange (SHOP) will screen for and enroll individuals in _______ if they are eligible for those programs based on income compared to the Federal Poverty Level.
Medi-Cal
In order for a claimant to be eligible for _______ benefits, they must qualify based upon need.
Medicaid
Medicare Part B
Medical Insurance (Outpatient) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.
This type of policy covers various expenses that an insured may incur due to a routine accident or sickness.
Medical expense
Under the PPACA, insurers must provide health insurance to any person, regardless of:
Medical history or current state of health
Medi-Cal pays for ________ health care including: physician visits, hospital and nursing home care, home health care, laboratory and x-ray services, prescriptions, medical equipment, ambulance services, eyeglasses, prenatal care, preventive care, and hospice.
Medically necessary
Under Medicare Part B, the amount a doctor or supplier that accepts assignment can charge a patient is the:
Medicare-approved amount
When a producer, agent, or broker makes a false statement about the benefits or the nature of an insurance policy, the person is guilty of:
Misrepresentation
Misstatement of age on the application
Misstatement of age would not avoid a claim, but could cause a reduced benefit to be paid. The Insurance With Other Insurers, Illegal Occupations and Actions, and Intoxicants and Narcotics are each optional provisions that could allow an insurer to avoid liability for a claim
Under the PPACA, eligibility for premium tax credits or eligibility for Medi-Cal is determined on the basis of:
Modified Adjusted Gross Income (MAGI)
If an accelerated death benefit is in effect, how often must the insurer provide a report showing the amount paid and the amount of the remaining benefit?
Monthly
Medicare pays the Medicare Advantage plan provider a ________ capitation fee (roughly equivalent to the combined Part A and Part B premiums) to oversee the health care services of the enrolled participants.
Monthly
The chart that shows the chance of a disability at any given age is called a:
Morbidity Table
A Board of Directors, elected by the policyholders, directs the company operations in which type of insurer?
Mutual
Applicants must complete and submit a Long-Term Care Personal Worksheet, as developed by the _______, which will be used to determine suitability.
NAIC
Under what conditions can a producer alter, change, modify or waive any policy provisions?
Never
Under what conditions can a producer alter, change, modify or waive any policy provisions?
Never; A producer cannot alter, change, modify or waive any policy provisions.
A Single Premium Immediate Annuity (SPIA) begins paying out its benefit:
No later than within 1 year; Under an SPIA, the idea is to have income begin immediately. There is essentially no accumulation period, and benefits begin within 1 year of the issue date.
A _______ Option protects the policyowner against total loss of benefits in the event of a lapsed policy.
Nonforfeiture; Nonforfeiture Options are found in life insurance policies that generate a cash value, and protect the owner against total loss of that cash value, if the policy should lapse or is cancelled.
Accident and health insurance policy exclusions typically include all of the following, except:
Nonoccupational injuries
In a group health policy as specified by the California Insurance Code, the validity of the policy can be contested for ____________ regardless of how long it has been in force.
Nonpayment of premiums
Under an annuity with a Joint Life Payment Option, what will the survivor receive upon the death of the first annuitant?
Nothing; The Joint Life Payment Option ceases all distributions at the first death of any of the annuitants. This would not be the case if a Life Income Joint and Survivor Option were chosen.
A life agent who offers for sale, or sells any financial product based on its treatment under the Medi-Cal program must provide, in writing, a disclosure entitled
Notice Regarding Standards for Medi-Cal Eligibility; A life agent who offers for sale, or sells any financial product based on its treatment under the Medi-Cal program must provide, in writing, a disclosure entitled 'Notice Regarding Standards For Medi-Cal Eligibility'.
A Child Rider is attached to a parent's life insurance policy. When the oldest child reaches the maximum age, what will be required if that child wants to convert to his/her own policy?
Notify insurer, proof of insurability is not required, and pay the first premium
In Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's:
Occupation
Three years ago, Charles purchased a health policy from the QRS Company; he has purchased two additional contracts from the same insurer since. Each contract contains the Other Insurance With This Insurer Provision. What happens if Charles has a claim?
Only one policy will pay, the premiums for the other contracts will be returned
Settlement Options
Only the interest would be taxed to the beneficiary, not the principal.
Under the Patient Protection and Affordable Care Act, a(n) ______ enrollment period is the length of time during which any eligible person may enroll in a Qualified Health Plan offered through a health insurance exchange.
Open
HMOs are established as either ________, which means the doctor can work with anyone, including HMO members, or ________, which means the doctor can only work with HMO members.
Open panel, closed panel
H owns a nonqualified variable annuity that has a separate account invested in the stock market. If H withdraws funds from the annuity, the earnings on the withdrawal will be taxed as:
Ordinary income
Which provision is an Optional Uniform Provision?
Other Insurance With This Insurer
Only the _________ can surrender an annuity.
Owner
Similar to life insurance, this party has all of the rights in the annuity contract. This party is referred to as the:
Owner
For what type of provider are services covered in or out of a network by a combination of a PPO and/or an HMO?
POS
In general, which of the following Medicare plans does not require additional premium?
Part A
Which of the following is true of Medicare Part B?
Part B - Medical Insurance (Outpatient) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.
partial disability
Partial disability is an inability to perform one or more of the regular duties of an occupation. The benefit may be related to the percentage of lost wages, or a flat 50% of a total disability benefit. The contract will detail the maximum benefit period.
Covered California must meet all federal requirements established under the:
Patient Protection and Affordable Care Act
In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined a
Payor Benefit (Waiver of Payor Premium); A Payor benefit rider waives the policy premium in the event of the death or total disability of the premium payor. Usually found in policies covering children to the child's age 21 or 25.
Under the Family and Medical Leave Act, an employer must maintain the employee's existing level of health coverage (including family or dependent coverage) under a group health plan during the period of, provided the employee
Pays his or her share of the premiums
An insurer has the right to request a physical exam or an autopsy to determine its liability to pay benefits. This request may be made under which provision?
Physical Exam & Autopsy
The free look period provisions apply to which one of the following situations?
Policies issued in connection with a new purchase or a replacement purchase
referred Provider Organizations (PPOs) are an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in:
Preferred Provider Organizations (PPOs) are an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in:
Beth owns a 20-Pay Life participating policy. She has decided that the dividends should be applied toward future premiums. Which Dividend Option did she choose?
Premium Reduction;The Dividend Option that allows the dividends to be applied toward the next premium due is Premium Reduction.
The cost basis of a life insurance policy is __________.
Premiums paid less dividends or withdrawals
What is the main purpose that IRC section 1035 was enacted?
The main purpose of section 1035 is to allow for the continuation of tax-deferral from an old policy into a new policy.
Steve Borden, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision:
Presumptive Disability; Presumptive Disability is where a loss is presumed to be total and permanent due to loss of sight, hearing, speech or loss of two limbs.
Managed Care Organizations that offer a Medicare Advantage Plan require the subscriber to select a _____________ to manage health care needs.
Primary Care Physician
Medicare Part D plans are offered by:
Private insurers
The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following?
Probationary period
Normally, when the insurer determines that the insured is an acceptable risk, the insurer will send the policy to the ____________.
Producer
Probing beyond the stated questions contained in the application as part of the field underwriting process is the responsibility of the:
Producer
When an applicant does not accept the offer of inflation protection for a long-term care insurance policy the:
Producer must obtain a signed statement that the applicant has been made aware of and rejects the inflation protection benefit
The replacement rules apply to which one of the following?
Proposed life insurance that is to replace life insurance issued by a different insurer;Replacement rules does not apply to credit life insurance, group life insurance or annuities, conversion of an existing policy, or proposed life insurance that is to replace life insurance issued by the same insurer.
A(n) ________ health plan is any plan which provides coverage for the 10 Essential Health Benefits and provides a minimum actuarial value of 60%.
Qualified
When a producer offers a prospective insured a portable dishwasher as a bonus for purchasing a policy, he/she could be guilty of:
Rebating
The nonforfeiture option that provides protection to age 100 is:
Reduced Paid-Up; With Reduced Paid-Up, the Present cash value is used to buy a single premium, permanent paid-up policy of a reduced face amount. Coverage will continue to age 100.
An insured, whose policy is in force, intentionally kills herself 7 months after purchasing the policy. How much will the insurer pay?
Refund of premiums paid only; Suicide within 2 years of policy issue is a common exclusion in life insurance (the time can vary by state). Only premiums paid are refunded.
ERISA
Regarding ERISA employer-sponsored employee retirement and welfare and benefit plans an annual financial report must be filed with the IRS.
exclusions and limitations that apply to disability income policies
Regular fare-paying passengers on a commercial airline; Common exclusions and limitations that apply to disability income policies include aviation (pilots and crew).
Sam is totally disabled and receiving benefits while attending an insurer-approved vocational training program. What provision guarantees the continuation of benefits while Sam participates in the training program and remains totally disabled?
Rehabilitation
In a replacement sale all of the following are producer responsibilities, except:
Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction;Reimbursing the applicant for any surrender charges that may be incurred is not permitted, but may indicate an improper replacement.
What type of contract do commercial insurers traditionally market?
Reimbursement
An individual owns a variable annuity. Upon annuitization, the number of Annuity Units on which the benefit amount is based will __________ from month to month.
Remain the same
The face amount of an Ordinary Whole Life Policy _________ over the life of the policy.
Remains the same
Which of the following term policies costs the most, all other factors being equal?
Renewable and convertible; The more features a policy has, the more it will cost the consumer.
Guaranteed Renewable means:
Renewable with adjustable premiums, by classification only
Replacement coverage
Replacement Coverage is benefits provided by a succeeding carrier.
By signing an insurance application for disability insurance, the applicant is:
Representing that statements made on the application are true
Which of the following is not within an agent's authority?
Representing the insured in an insurance transaction
Which of the following might be done to protect against adverse selection when underwriting group medical insurance?
Require a minimum percentage of the group to enroll
A firm with 50 employees replaces its existing group health plan. With regard to ongoing existing claims, the replacing insurer will be:
Required to continue paying them under the No Loss-No Gain law
Which of the following is not a factor in premium determination?
Reserves;Premiums are based on expected mortality, interest, and expenses.
Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability.
Residual Disability
individual health policy renewal provisions
The more favorable the renewal provision to the insured, the higher the premium
A court reporter develops arthritis making it impossible to continue this employment. The reporter now has other employment at a reduced salary and receives a monthly benefit from an insurance contract due to which of the following policy provisions?
Residual Disability; Residual Disability recognizes one's ability to continue to work, but at a reduction of earnings.
Which type of LTC coverage is designed to provide relief for the primary caregiver of a long-term care patient?
Respite Care
What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and initial premium collected?
Return the policy to the insurer with a letter of explanation
Which risk management type shifts the risk of loss to a larger homogeneous group?
Risk Transfer
An agreement by an employer to continue a key employee's salary upon retirement, death or disability as long as the employee continues employment during the term of the agreement is called a:
Salary continuation plan
Which type of plan is set up for the sponsor to pay claims from its own resources?
Self-funded
The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the insurer, this sub-account is a part of what is also known as the:
Separate Account
PPOs differ from HMOs in that PPOs do not have:
Separate physical facilities
An organization that pays benefits to the providers of health care, rather than to the insured, is known as what type of provider?
Service; Service providers pay benefits to the providers of health care rather than to the insured. Service providers includes Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point-of-Service plans (POSs).
Which measure could an underwriter use to reduce the risk when underwriting a Disability Income Policy?
Shorten the benefit period and increase the elimination period
Medicare Advantage Plans offered through PPOs do not require a Primary Care Physician or referrals and allow the subscriber to choose out-of-network providers with:
Significantly higher out-of-pocket expenses or reduced coverage limits; Medicare Advantage Plans offered through PPOs do not require a Primary Care Physician or referrals and allow the subscriber to choose out-of-network providers with significantly higher out-of-pocket expenses or reduced coverage limits.
noncontributory group life
Since no proof of insurability is required on the part of the plan participants, the insurer looks at the group collectively, factoring a number of variables.
If an annuity is purchased in December and monthly benefits begin in January of the following year, what type of annuity is it?
Single Premium Immediate Annuity; The question addresses when the actual receipt of benefits from an annuity begins. When benefits begin within a year of the issue date, this is referred to as 'immediate'.
Which of the following would always be considered a Modified Endowment Contract?
Single Premium Whole Life; Single Premium Whole Life would always be a MEC as it would always fail the 7-Pay Test.
Which of the following annuities does not have a traditional accumulation phase?
Single premium immediate
an annuity can be classified based on its premium funding method
Single, Flexible, and Periodic are the ways in which an annuity is classified based on premium payment.
Under the Patient Protection and Affordable Care Act, a(n) _______ enrollment period is the length of time during which a person may enroll in a Qualified Health Plan outside of open enrollment if a qualifying life event, such as marriage, divorce, or the birth of a child, takes place.
Special
Group blanket insurance covers a group of individuals whose membership changes frequently, such as students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people while being exposed to a(n) _______ risk:
Specific
Once the out-of-pocket limit has been reached, the _________ provision kicks in and the policy will cover 100% of covered losses for the balance of the year.
Stop-loss
If a lump sum from a lawsuit, a lottery winning, or inheritance, is used to purchase a guaranteed lifetime income. It is referred to as a ___________.
Structured settlement
If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds?
Submit a trial application
What must insurers use to gather required information and producers must receive product-specific training for each annuity they market to seniors before they may even market the annuity?
Suitability questionnaires; Insurers must use suitability questionnaires to gather the required information and producers must receive product-specific training for each annuity they market to seniors before they may even market the annuity.
All producers who market and sell long-term care policies must be trained in the company's:
Suitability standards for solicitation and sales
In California, Arthur wants to personally place business with RTS Insurance Company who is a nonadmitted carrier. The only way Arthur can rightfully place such business is if he seeks a:
Surplus Lines Broker's License
A person licensed to write insurance coverage with non-admitted insurers when such coverage cannot be placed with an admitted insurer is a(n):
Surplus lines broker
___________ are allowed as a way to access the annuity policies values without having to elect a settlement option while still maintaining the policy in force.
Systematic withdrawals
K needs funds and needs to maintain the life insurance she has at the same time. Which of the following should K do with her traditional whole life policy?
Take out a policy loan; A policy loan may be made from a cash value policy once there is sufficient cash value to borrow against. In most policies, cash value must be made available to borrow against after 3 years.
If an annuitant withdraws funds from their annuity prior to age 59 1/2 what is the tax consequence?
Tax and 10% penalty tax on the withdrawal that represents earnings
A permanent policy is surrendered for its cash value, and that sum is greater than the amount of premiums paid in. How is the excess taxed?
Taxed as ordinary income
Who has jurisdiction over all that provide coverages designed to pay for health care providers' services and expenses?
The California Department of Insurance (CDI)
Which provision requires the application, the contract itself and any riders to be attached to establish a complete contract?
The Entire Contract Provision
facility of payment clause
The Facility of Payment Clause allows the Insurer to pay to a relative or anyone it deems entitled to the benefits in the absence of a designated beneficiary.
If the annuity policyowner and annuitant are the same person and the designated beneficiary is the annuitant's spouse, what happens if the annuitant dies during the accumulation phase?
The IRS code allows for the surviving spouse to become the new owner and tax deferral continues; If death occurs during the accumulation period, all rights of ownership are assumed to include tax deferment.
Paid-Up Additions Dividend Option
The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid in the future. Paid up additions do not eliminate need to pay premiums on the original policy.
State Disability Insurance (SDI)
The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income.
How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy?
The ability to invest the cash values in various separate accounts; The policy has a variable component, meaning that the cash values can be invested outside of the insurer's general account in various separate accounts.
Fixed Annuity
The actual rate of interest credited will be based on the state-published interest rate index
If Robert wishes to cash out his annuity at age 70 after having it for over 40 years, what should he know about prior to doing it?
The amount of tax-deferred earnings will now become taxable
The cost basis of a life insurance policy is __________.
The basis is premiums paid less dividends or withdrawals.
Death benefits are paid to the estate of the policyowner/insured in which of the following situations?
The beneficiary is the estate
Credit Disability Insurance
The benefit may not exceed the total amount of debt or the amount of the monthly payment.
taxation of health insurance
The benefits received from a group Disability Income Policy paid entirely by the employer are fully taxable as income to the employee
With a conditional coverage receipt issued by the agent, the coverage is in effect:
The date of application, if it is accompanied by premium, or date of a completed medical exam, if required
If dividends are left on deposit with an insurer to earn interest:
The dividend is tax-free, but the interest is taxable
COBRA
The employee or beneficiary must notify the employer within 60 days if he/she wants to continue the coverage.
Randy has a preexisting condition for which coverage has been excluded since his Medicare Supplement Policy became effective 4 months ago. If Randy were to replace his Medicare Supplement Policy, what could be said about the preexisting condition under the new policy?
The exclusion will be waived to the extent it has already been satisfied under the original policy
group life insurance plan
The greatest advantage of group life conversion is that evidence of insurability is not required. The insurance company requires conversion to a permanent policy, which will be more costly.
Which of the following scenarios will cause the value of a life insurance policy death benefit to be included in the insured's estate?
The insured is also the policyowner; If the policyowner and the insured are the same person, the death benefit will be included in the insured's estate.
When an insured is discharged from the military, what happens to health insurance coverage that was in place prior to being called up for active military service?
The insured will be permitted to resume coverage and premiums without any waiting periods
The change of occupation provision in a disability income policy is designed to protect which party if the insured changes occupations without notifying the insurer?
The insurer
When an accident and health policy is terminated, how are covered expenses that were incurred while the policy was still in force handled?
The insurer must pay for those expenses
What is the name of the clause which is the insurer's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the insured died while the policy was in force?
The insuring clause
Which of the following statements about Equity Indexed Life insurance is TRUE?
The interest credited to the policy is based off of the performance of a stock market index like the S&P 500
potential taxation issues
The interest on policy loans is not tax-deductible.
absolute assignment
The owner, and only the owner, possesses all of the rights in the policy, one of which is the right to assign. When a policy is used to collaterize a loan it is referred to as a temporary or collateral assignment.
What is an annuitant, in regard to an annuity policy?
The party whose life the policy's benefits are based on
If a life insurance policy lapses due to nonpayment of premium, then reinstatement requires:
The payment of back premiums, plus interest, and proof of insurability
Policy Loan Rate
The policies with fixed interest loan rates usually have a maximum interest rate of 8%.
Which statement is true for BOTH Universal Life and Whole Life?
The policy is supported by the insurer's general account; Both are supported by the insurer's general account--in other words, neither uses a separate account. The other answer options are only true for Universal Life, not Whole Life.
An insured's spouse bought a whole life policy 15 years ago and it has accumulated a cash value of several hundred dollars. Who has the right to change beneficiaries and access the cash value?
The policyowner
All of the following are characteristics of Universal Life Insurance, except:
The policyowner can choose which investment(s) to place the cash values into from those available; The policyowner can pay any amount of premium at any time subject to policy limitations and can request an increase (if proof of insurability is provided) or decrease in the face amount. Costs for coverage are deducted monthly from the cash values.
The free look period for individual life insurance and annuities begins as of the date:
The policyowner signs an Acknowledgement of Delivery Receipt
All of the following are correct pertaining to Decreasing Term, except:
The premium declines throughout the term of the policy; A decreasing term policy has a death benefit that reduces over a defined number of years, but the premium remains the same in all years.
Which of the following statements is correct regarding a Waiver of Premium Rider on a participating whole life policy?
The premiums are waived until either the insured recovers from the disability, the policy achieves paid-up status, or the insured dies; The policy continues as it would have had the premiums been paid: dividends are paid, cash values accumulate and the death benefit is not reduced. However, the owner/insured must resume premium payments when they are no longer disabled. Once the policy achieves paid-up status, no further premiums are due
Which of the following best describes the consideration on the part of an insurer?
The promise to pay in the event of a covered claim
Which one of the following must be communicated in an insurance contract?
The risks insured against
(AMB) rider
The short-term benefit of the additional monthly benefit (AMB) rider can supplement either a government or private benefit plan.
If a policyowner of a convertible term life insurance policy exercises his/her right to convert, which of the following will happen?
The term policy will be replaced by a permanent life insurance policy
To reduce the risk of insuring a substandard disability applicant,
The underwriter might add, not remove, exclusions for conditions that appear certain to result in claims
The insurer's consideration is __________ while the applicant's consideration is ________.
Their promise to pay the claim / The amount and frequency of premiums paid
Which of the following is the reason why premiums paid on personal life insurance are not deductible?
They are considered a personal expense
All of the following are true regarding annuities, except:
They are similar to life insurance; Annuities are used primarily to provide a steady stream of income to an individual, typically upon retirement. They are designed to protect against outliving one's retirement income by providing lifetime income. And they can liquidate an estate over the lifetime of an annuitant. Although both annuities and life insurance are mortality-based products, they have opposite purposes: annuities are designed to distribute an estate, while life insurance is designed to create an estate.
All of the following regarding revocable beneficiaries is true, except:
They have rights in the policy just like any other party to the contract; The policyowner may change a revocable beneficiary at any time. This beneficiary does not have a vested interest in the policy. Most named beneficiaries are revocable and have no rights.
Why are dividends not taxable as income when paid out to a participating policyholder?
They represent a return of a portion of the premium paid
Which provision states that the insurance company must pay claims immediately?
Time of Payment of Claims
Social Security Disability benefits
To be 'fully' insured for Social Security Disability benefits, an individual must have 40 quarters of credit and the disability must last 12 months, or be expected to result in death. In addition to satisfying the 5-month waiting period, the person must be unable to perform 'any substantial gainful activity.'
To be fully insured for Social Security, generally a person must have worked and paid into the Social Security system for a minimum of ______ years.
To be fully insured for Social Security, the requirement is to accumulate 40 credits or 10 years of work paying social security taxes. A maximum of four credits may be earned in one calendar year of employment.
What is the intent of the suicide clause?
To discourage individuals from purchasing an insurance policy while contemplating suicide
What is the primary purpose of the reinstatement provision?
To put a policy back in force as if it had never lapsed; Reinstatements are designed to put a policy back in force as if the lapse never occurred. Upon reinstatement, a new Incontestability clause takes effect, since a new application is required.
Why would someone 1035 exchange their existing policy?
To seek higher returns, lower costs, and/or increased benefits
Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________.
Total disability
Josh is a concert pianist and earns a very good living with his talent. He was in a car accident and broke his arm. His disability is considered:
Total, temporary
If money is paid when a change of ownership in a life insurance policy takes place, this is generally known as a ____________.
Transfer for value
Causing a person to give up an existing contract through surrender, lapse, or other forfeiture is known as:
Twisting
What is it called if an agent or insurer recommends the replacement or conservation of an existing policy by use of a materially inaccurate presentation or comparison of an existing contract's premiums, benefits, dividends, and values?
Twisting
Entity Purchase Plan form of a Buy-Sell Agreement
Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is the owner, premium payor, and beneficiary of a policy written upon each of the partners or shareholders who are the insureds.
An agent's appointment
Under the California Insurance Code, an agent's appointment remain in effect until cancellation or expiration of the license or the filing of a notice of termination by the appointing insurer.
Under the California insurance code
Under the California insurance code an insurer is entitled by law to rescind a policy in the case of material misrepresentation.
PPACA
Under the Patient Protection and Affordable Care Act, copayments, coinsurance, or deductibles for preventive care and medical screenings were eliminated.
Individual mandate provisions
Under the Patient Protection and Affordable Care Act, minimum essential coverage is a standardized list of required coverages that must be present in a health insurance policy in order for the IRS to consider the policy satisfactory to meet the individual mandate provision.
An insured is hospitalized for at least 3 days. How long will Medicare pay for confinement in a skilled nursing facility?
Up to 100 days
Many insurers pay benefits based on the average fee charged in a geographical area. This is referred to as:
Usual Customary and reasonable
Which of the following policies offers the least guarantees?
Variable Universal Life
Which of the following policies requires a producer to have both a life and securities license to sell?
Variable Universal; Both Variable Life and Variable Universal Life require a securities and life license to sell. A securities license is not required for Adjustable Life, Universal Life, or Equity-Indexed Life.
Which annuity is the only one regulated by the SEC, FINRA, and State insurance departments?
Variable annuities are regulated by the SEC, FINRA, and State insurance departments.
Which annuity has its income benefit payments related to an assumed interest rate (AIR)?
Variable;
Which of the following is not a fixed type of an annuity?
Variable; A variable annuity is not a fixed type of annuity since it is supported by the separate account and not the general account.
Which of the following annuities offers the best opportunity to offset the effects of purchasing power loss over the long-run?
Variable; Since variable annuities are directly tied to the performance of the underlying separate account(s), this annuity has the best chance of maintaining purchasing power as it has no caps, spreads, or administrative fees associated with Indexed annuities and returns include dividends.
Generally, which of the following Annuities is not designed to guarantee the principal value of the policy in stable interest rate environments?
Variable; Variable annuities have no minimum guarantee of interest or gains, and may lose value in a declining market.
If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force.
Waiver of premium rider
Unless an exception applies, life insurance proceeds are income taxable in which of the following circumstances?
When a transfer of ownership takes place while the insured was alive
When is an entity buy-sell agreement plan used?
When the entity buys life insurance on each of the owners
For life and health insurance, when must an insurable interest exist?
When the insurance takes effect; For life insurance an insurable interest need only exist at the time the insurance takes effect, not the time of claim.
Blackout
When the youngest child reaches age 16, the widow's/widower's blackout period begins.
An insured forgets to pay his insurance premium. Instead of the policy lapsing, the premium is paid by the company. This would suggest that a __________ policy was purchased.
Whole Life; Only cash value policies can provide for missed premium payments to be paid with the policy's cash value through an automatic premium loan.
Accident and Health policies provide coverages for all, except:
Workers' Compensation claims; Workers' Compensation is a form of casualty insurance contract, and can only be written with a Property/Casualty license. It is not a disability policy written by Accident and Health insurers.
The Commissioner will prepare a rate guide for Medicare supplement insurance contracts available on or before the date of the fall Medicare annual open enrollment every:
Year
Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses the Life Income with Refund Payment Option when he annuitizes the policy. After receiving $1,000 each month for 80 months, Harry suddenly dies. How much will his beneficiary, his wife Lucille, receive?
Zero; A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected.
When group health insurance is being replaced, ongoing claims under the former policy must continue under the new policy, overriding any preexisting condition exclusion. This is a requirement under which of the following?
the No Loss-No Gain legislation, sometimes called a Hold-Harmless Agreement.
Precertification
when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered