Life & Health Insurance Law

Ellen submitted a life insurance application to her insurer without payment of the initial premium. What is the application submission considered?

d. an invitation to the insurer to make an offer

If a life insurance policy purports to provide coverage that is not actually provided, a suit can be brought against the insurer for what type of transgression?

d. breach of contract

What does "to subrogate" mean?

d. to substitute

Arthur collaterally assigned his $200,000 life insurance policy to Big Banks, Inc. as security for a $50,000 loan. When Arthur died four years later, he had reduced the loan principal by $10,000. How much, if any, death benefit would be received by Big Banks, Inc.?

c. $40,000

John assigned his life insurance policy to his son. What role does John play in the assignment?

c. He is the assignor.

Why is ambiguity in the terms of a life insurance policy normally decided in favor of the policyowner rather than the insurer?

c. because it is a contract of adhesion

Which of the following result(s) from a life insurance policy's failure to meet the statutory definition of life insurance contained in IRC § 7702?

c. both I and II

What regulatory agency oversees ERISA-authorized self-insured employer plans?

d. Department of Labor

In order for a small employer to be eligible for the small employer premium credit, the employer must employ fewer than _____ full-time employees.

b. 25

A full-time employee means an employee who is employed on average at least _____ hours per week or ____ hours per month.

b. 30, 130

Which of the following types of statement made by a party to a contract becomes a part of the eventual contract?

b. II only

What was the commercial philosophy with respect to product liability in the early 20th century?

b. Let the buyer beware.

Alan was a key executive for his employer, who maintained a $1 million key-person life insurance policy on Alan's life. When Alan retired, his employer gave him the policy, which then had a cash value of $50,000. What tax treatment results from the absolute assignment of the policy to Alan?

b. The absolute assignment of the policy is deemed compensation to Alan equal to the policy's cash value at the time of assignment

Sharon's life insurance policy's death benefit is $100,000, and her cash value is $40,000. What is the net amount at risk under her policy?

c. $60,000

Individuals whose household income places them between less than 133 percent and ___ percent of the federal poverty guidelines may receive a federal tax credit or subsidy to enable them to purchase health care coverage.

c. 400

What is required before someone may purchase a life insurance policy on the life of another person?

c. The purchaser must have insurable interest in the other's life.

How did ERISA enable employers to establish health plans at potentially lower cost?

c. by permitting employers to self-insure

Which of the following is correctly characterized as an arrangement under which group benefits are provided to employers with a small number of employees?

c. multiple employer welfare arrangement

All of the following are goals of insurance regulation EXCEPT:

c. to ensure protection is provided at the lowest premium

apparent authority

Authority that is not provided by contract nor intended by the insurer but which appears to the client to be given to the agent based upon the agent's believable statements.

Helen's agent contract states that she is "authorized to solicit applications for insurance on behalf of MegaMutual." What is the type of authority she has been granted by virtue of the contract language?

b. express authority

When may an insurer refuse to accept an assignment of health insurance benefits to a health care provider?

b. never

Insurance always involves which of the following?

b. risk transfer

What is the term for the person to whom a life insurance policy is assigned in an absolute assignment?

b. the assignee

Audrey's life insurance policy is a modified endowment contract. How much income, if any, would she need to recognize if she took a $5,000 withdrawal from the policy when the policy's values were as follows?

c. $2,000

absolute assignment

A complete transfer of the policyowner's right, title and interest to the assignee; the former policyowner retains no rights to the policy. As such, the assignee stands in the shoes of the former policyowner with respect to any rights in the policy and becomes, in fact, a party to the contract with the insurer.

adhesion, contract of

A contract drafted by one party and offered on a take-it-or-leave-it basis, with little opportunity for the other party to bargain terms, price, or other elements.

aleatory contract

A contract in which one party can receive a benefit that is completely out of proportion to what he or she is giving. Receipt of the disproportionately large benefit, however, is contingent on the occurrence of a chance event.

agent

The party who acts for another.

When a person applies for life insurance on his own life, who may he or she designate as a beneficiary for the death benefit?

b. anyone

A material misrepresentation made on an application for a life insurance policy is one that would have caused the insurer, had it known the truth, to decline the risk or to accept the risk only on other terms.

a. True

In addition to a family relationship, which of the following may constitute an insurable interest for life insurance?

a. a monetary interest

What is assigned in an absolute assignment of a life insurance policy?

a. all right, title, and interest in the policy

Arthur purchased health care coverage through an insurance exchange during an open enrollment period. For which of the following may the insurer charge Arthur a higher premium than other enrollees who are the same age?

a. smoking

Peter is Audrey's insurance client. After regularly receiving late payment notices indicating his insurance premium was late, Peter informed Audrey that he employed others to monitor his insurance and did not wish to receive further late premium payment notices. When his warehouse was destroyed by fire, it was determined that his policy had lapsed and that he had not received a late payment notice. What defense is the insurer likely to offer for its refusal to pay the claim?

a. waiver

Jim's universal life insurance contract does not meet the statutory definition of life insurance contained in IRC § 7702. What would be his taxable income from the contract if last year's cash value was $20,000, this year's cash value was $25,000, $500 was taken from the cash value to pay the cost of insurance, and he paid $5,000 in premiums?

b. $500

Carol's universal life contract does not meet the statutory definition of life insurance. How much income must her beneficiary recognize from the death benefit if the policy values are as follows at the time of Carol's death?

b. $7,500

The problem of unauthorized insurance entities has resulted, in part, from the "pre-emption" clause. In which of the following does the pre-emption clause appear?

a. ERISA

Which of the following statements correctly characterizes the role of insurable interest in a life insurance policy?

a. Insurable interest is required to exist only at the inception of the policy.

Phil's life insurance policy is considered a modified endowment contract. What can he do to change that characterization?

a. Nothing; the characterization of a life insurance policy as a MEC cannot be changed.

Peter's universal life insurance policy is a modified endowment contract with values as shown below. If he took a $10,000 loan from the policy, how much, if any, income would he be required to recognize?

d. $10,000

Joe's Food Shack, a for-profit employer, employed ten full-time employees in 2020. What is the maximum health insurance premium credit for which it may be eligible?

d. 50 percent

Which of the following is deemed to constitute transacting insurance? I. soliciting the purchase of insurance II. issuing an insurance contract III. providing service to a policyowner

d. I, II and III

Which of the following is correct concerning the system of justice known as common law?

d. It is derived from customs and usage rather than statute.

What type of agent authority is not specifically provided for under a contract but is intended by the insurer to be granted?

d. implied authority