Life and Health State Exam

What is Adhesion?

A contract offered on a take it or leave it basis by an insurer, in which the insured's only option is to accept or reject the contract. Any ambiguities will be settled in favor of the insured.

What is unilateral?

A contract that legally binds only one party to contractual obligations after the premium is paid.

A participating insurance policy may do which of the following? A: Pay dividends to the policy owner B: Provide group coverage C: Pay dividends to the stockholder D: Require 80% participation

A: Pay dividends to the policy owner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs

The reinstatement provision stipulates that losses resulting from sickness will be covered how long after the date of reinstatement? A: Same day as the reinstatement B: 10 days C: 30 days D: 90 days

B: 10 days Accidental injury is covered immediately, and loss resulting from sickness is covered 10 days after reinstatement.

An insured decides to replace his life insurance policy with one offered by a new insurer. After receiving the policy, he is unsatisfied with the provision and decides to return it. Within how many days must he return the policy in order to receive a full premium refund? A:15 B: 20 C: 60 D: None. Free-look provisions do not apply to replacement

B: 20

What happens to the face amount of a whole life policy if the insured reaches the age of 100? A: The cash value and the face amount are paid to the insured B: The face amount is paid to the insured C: It is paid to the insured's estate and the policy is terminated D: It is paid to the beneficiary in full

B: The face amount is paid to the insured

What is Indemnity?

To restore the insured to the same condition as prior to loss with no intent of loss or gain.

An insured severely burns her hand, but is not classified as disabled. Which of the following types of coverage would cover at least a portion of the insured's medical expenses? A: Medical Reimbursement Benefit B: Medical Expense Compensation C: Accidental Death and Dismemberment D: Partial Disability

A: Medical Reimbursement Benefit

Who would be the insured in business disability insurance? A: Key employee B: All employees C: The insurer D: The employer

A: Key employees

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? A: 4 B: 6 C: 10 D: 40

B: 6 credits

Which of the following best describes the type of care provided by HMOs? A: Major medical B: Fee-for-service C: Preventive D: Elective

C: Preventive

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if the notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's A: Ancestry B: Credit history C: Habits D: Prior insurance

A: Ancestry The Fair Credit Reporting Act regulates what information may be collected and how the information is used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.

If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for Medicare? A: Nothing B: Apply for coverage through the state C: Appear for a physical at the Social Security office D: Apply at a local Social Security office

A: Nothing Nothing needs to be done in this case. Medicare Part A and B will automatically be effective the month you turn 65.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A: Pay a reduced death benefit B: Pay the full death benefit C: Pay nothing; there was a misrepresentation on the application D: Pay the full death benefit and refund the excess premium

A: Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

A tax-sheltered annuity is a special tax-favored retirement plan available to A: Certain groups depending on factors such as race, gender or age. B: Certain groups of employees only C: Anyone D: Certain age groups only

B: Certain groups of employees only A tax sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit, charitable, educational, religious, other 501c(3) organizations, including all employees in public education).

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? A: Full benefits until the blindness lifts B: No benefits C: Full benefits D: Partial benefits

B: No benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because the insured's blindness was temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits.

Which of the following individuals must have insurable interest in the insured? A: Producer B: Policyowner C: Beneficiary D: Actuary

B: Policyowner Policy owner must have an insurable interest in the insured, i.e. in his/her own life if the policy owner and the insured is the same person, or in the life of a family member or business partner.

A 60-year old participant in a 401k plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? A: The amount distributed is subject to ordinary income tax B: The amount of the distribution is reduced by the amount of a 20% withholding tax C: No taxes are due since the plan participant is over age 59 1/2 D: There is a 10% early withdrawal penalty

B: The amount of the distribution is reduced by the amount of a 20% withholding tax Distributions from 401k plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum distributions begin (no later than age 70 1/2). Since the client actually took a distribution (instead of making a trustee-to-trustee rollover), the distribution is subject to a 20% withholding tax.

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? A: Nothing, since the insured was killed as a result of war B: The full death benefit C: The policy's cash value D: A refund of the premiums

B: The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? A: $8,000, tax on growth only B: $10,000, tax on growth only C: $10,000, no tax consequence D: $8,000, no tax consequence

C: $10,000, no tax consequence During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.

After a person's employment is terminated, it is possible to obtain individual health insurance after losing the group health coverage provided by the employer. Which of the following is NOT true? A: The employee can convert from group to individual within 31 days of termination. B: The premium of the individual policy can be higher than the original policy. C: By law, the new, individual policy must provide the same benefits as the group health insurance. D: Continuation of group coverage need not include dental, vision, or prescription drug benefits.

C: By law, the new, individual policy must provide the same benefits as the group health insurance. Terminated employees have 31 days to convert to an individual policy, without having to provide proof of insurability. The insurer can adjust the new, individual health policy's premium as it seems fit, as long as coverage is provided. The new policy could offer lesser benefits than the original group health policy.

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to polices that are competitively priced? A: Consumer price indices B: Policy cost indices C: Cost comparison methods D: Policy cost guides

C: Cost comparison methods Cost comparison methods are used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced.

Which component increases in the increasing term insurance? A: Interest on the proceeds B: Premium C: Death benefit D: Cash value

C: Death benefit Increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term.

All of the following are features and requirements of the Living Needs Rider EXCEPT A: The remainder of the policy proceeds is payable to the beneficiary at the insured's death B: It provides funds for medical and nursing home expenses to a terminally ill insured C: Diagnosis must indicate that death is expected within 3 years D: It is usually available at no additional charge

C: Diagnosis must indicate that death is expected within 3 years Result in death within 2 years

All of the following are dividend options EXCEPT A: Reduction of premiums B: Paid-up additions C: Fixed-period installments D: Accumulated at interest

C: Fixed-period installments Fixed-period installments is a settlement option, not one of the dividend options.

As it pertains to group health insurance, COBRA stipulates that A: Terminated employees must be allowed to convert their group coverage to individual policies B: Group coverage must be extended for terminated employees up to a certain period of time at the employers expense C: Group coverage must be extended for terminated employees up to a certain period of time at the former employees expense D: Retiring employees must be allowed to convert their group coverage to individual policies.

C: Group coverage must be extended for terminated employees up to a certain period of time at the former employees expense COBRA requires employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for up to 18 months to 36 months. The employee can be required to pay up to 102% of the coverage's premium.

A Universal Life insurance policy has two types of interest rates that are called A: Fixed and Variable B: Minimum and Target C: Guaranteed and Current D: Option A and Option B

C: Guaranteed and Current The insurer credits the cash value in the policy with a current (non guaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.

Which of the following is true regarding health insurance? A: It provides death benefit coverage B: It only covers expenses related to health care C: It could provide payments for loss of income D: Disability coverage is excluded.

C: It could provide payments for loss of income Health insurance is a generic term, encompassing several types of insurance contracts, which, though related, are designed to protect against different risks. It provides coverage for expenses related to health care, loss of income and disability income.

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? A: Life annuity with period certain B: Increasing term C: Limited pay whole life D: Interest-sensitive while life

C: Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

In franchise insurance, premiums are usually A: Higher than individual policies or than group policies B: Higher than individual policies , but lower than group C: Lower than individual policies, but higher than group D: Lower than individual policies or group policies

C: Lower than individual policies but higher than group policies

All of the following are true regarding the Medical Information Bureau EXCEPT A: MIB reports contain previous insurance information B: Insurers may not refuse to accept an application solely due to information in an MIB report C: MIB reports are based upon information supplied by doctors and hospitals. D: MIB information is reported to underwriters in coded form

C: MIB reports are based upon information supplied by doctors and hospitals The information contained in MIB reports comes from the underwriting disclosures made by applicants to MIB member insurers prior to insurance applications

What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those in a straight whole life policy? A: Indeterminate premium B: Enhanced life C: Modified life D: Indexed life

C: Modified life Modified life policies were developed to attract young professionals who have a large financial investment in their education and training, but are starting their professional careers, they have limited resources to buy insurance. Modified life is a permanent policy, but in the early years, the premiums are similar to that of a term policy; in later years, the premiums are increased to build cash values and cause the policy to endow.

After a brief emergency room visit, an insured discovered that his plan required a larger copay for an out-of-network provider than for a local, in-network provider. Under the PPACA provisions, this is A: Reasonable and customary B: Part of the plan's benefit schedule C: Not permitted D: Counted as part of the insured's annual deductible

C: Not permitted Under PPACA, plans must not charge a copay amount that is greater for an out-of-network emergency service provider than for an in-network provider.

Death benefits payable to a beneficiary under a life insurance policy are generally A: Exempt from income taxation if under $7,000 B: Exempt from income taxation if over $7,000 C: Not subject to income taxation by the Federal Government D: Subject to income taxation by the Federal Government

C: Not subject to income taxation by the Federal Government When premiums are paid with after tax dollars, the death benefit is generally not subject to federal income taxation.

What term is used to describe when a medical caregiver contracts with a health organization to provide services to its members or subscribers, but retains the right to treat patients who are not members or subscribers? A: Restrictive rights B: Indemnity contract C: open panel D: Closed Panel

C: Open panel When a medical care giver contracts with a health organization to provide services to its members or subscribers, but retains the right to treat patients who are not members or subscribers; it is referred to as open panel

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of A: Loading B: Defamation C: Twisting D: Coercion

D: Coercion

Which of the following is NOT true regarding the accumulation period of annuity? A: It is the period during which the annuity payments earn interest B: It is the period over which the annuitant makes payments into an annuity C: It is also known as the pay-in period D: It would not occur in a deferred annuity

D: It would not occur in a deferred annuity The "accumulation period" is the period of time over which the annuitant makes payments into an annuity. This is the period of time during which the payments earn interest and grow tax deferred

Which statement is NOT true regarding Straight Life policy? A: The face value of the policy is paid to the insured at age 100 B: It usually develops cash value by the end of the 3rd policy year C: It has the lowest annual premium of the three types of Whole Life policies D: Its premium steadily decreases over time, in response to its growing cash value

D: Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? A: Joint annuity B: Cash refund annuity C: Straight life D: Joint and Survivor

D: Joint and survivor Under a joint settlement option, payments would stop at the first death, but under the joint and survivor, payment would continue until both recipients die. Usually, the surviving beneficiary receives 1/2 or 2/3 of the amount received when both beneficiaries were alive.

If a life insurance policy increases simnifically in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? A: Limited pay whole life policy B: Modified life insurance policy C: Single premium policy D: Jumping juvenile policy

D: Jumping juvenile policy While many policies provide a level death benefit, jumping juvenile policies provide a low face amount in the early years and then increase, usually by 5 times that amount, when the insured reaches an age specified in the policy (usually 21).

Medicare Advantage is also known as A: Medicare Part D B: Medicare Part A C: Medicare Part B D: Medicare Part C

D: Medicare Part C Medicare consists of Hospital insurance protection (part A), Medical insurance protection (part B), Medicare Advantage (part C) and Medicare Part D is "stand along" drug insurance policy for people who need the coverage and are eligible for Medicare Part A and/or Part B.

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A: Reciprocal B: Nonprofit service organization C: Stock D: Mutual

D: Mutual Funds not paid out after paying claims and other operating costs are returned to the policy owners in the form of dividends. If all funds are paid out, no dividends are paid.

Which of the following is the most common time for errors and omissions to occur on the part of the insurer? A: Policy renewal B: Underwriting C: Application process D: Policy delivery

D: Policy delivery Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur. The most common times for these errors are during the sales interview and policy delivery. It is essential to have proof of these interactions, in the events that an insured would sue the insurer.

An insurance agent proposed an individual health insurance policy that is guaranteed renewable. If the applicant accepts this policy, the insurer agrees that A: The company will change the premium rate based upon the insured's health only B: The premium rate cannot be changed for any reason C: The insured will always be able to pay the premiums D: The company will continue to renew the policy until the insured has reached age 65

D: The company will continue to renew the policy until the insured has reached age 65 As with a noncancellable policy, coverage is generally not renewable beyond age 65

What method is used to determine the taxable portion of each annuity payment? A: The excise ratio B: The annuity to age ratio C: The marginal tax formula D: The exclusion ratio

D: The exclusion ratio The ratio of the total investment in that contract to the expected return is developed to determine the portion of the annuity payment that will be taxable and nontaxable.

The Affordable Care Act requires all US citizens and legal residents to have qualifying health care coverage. This is known as A: The Insurance Marketplace B: Safe Harbor mandate C: Special enrollment D: The individual mandate

D: The individual mandate If the individual does not have qualifying healthcare, a tax penalty will be assessed, based on the individuals taxable income, number of dependents and joint filing status

How long is an open enrollment period for Medicare supplement policies? A: 6 months B: 1 year C: 30 days D: 90 days

A: 6 months An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B.

Which of the following would be a typical maximum benefit offered by major medical plans? A: $1 million B: $10 million C: $50,000 D: $500,000

A: $1 million Major medical plans have HIGH maximum benefits such as $1,000,000 or $2,000,000. Maximum benefits are usually lifetime maximums.

What is a risk retention group? A: An insurance organization that most often addresses a commercial casualty concern B: A group of people classified as having substandard risk C: A risk retention group addresses adverse selection by selecting insurable risks, and is always regulated by state authorities D: A purchasing group for employers who are unable to purchase insurance due to the size of the company

A: An insurance organization that most often addresses a commercial casualty concern

Kevin and Nancy are married; Kevin is the primary breadwinner and has a health insurance policy that covers both him and his wife. Nancy has an illness that requires significant medical attention. Kevin and Nancy decide to legally separate, which means that Nancy will no longer be eligible for health insurance coverage under Kevin. Which of the following options would be best for Nancy at this point? A: COBRA B: Apply for social security benefits C: Apply for coverage under the same group policy that covers Kevin D: Convert to an individual insurance policy with 31 days so she won't have to provide evidence of insurability

A: COBRA Dependents of employees are eligible to receive group health insurance under the employees plan. If death, divorce, or legal separation, the dependent will be eligible for COBRAA benefits for up to 36 months.

All of the following health insurance disability benefits are income tax free EXCEPT A: Employer-paid group disability B: Employee-paid group disability C: Key-person disability benefits D: Personally-owned individual disability insurance

A: Employer-paid group disability

Which of the following is NOT true regarding Life with Guaranteed Minimum annuity settlement option? A: It provides a higher monthly benefit than a pure life annuity B: It is a life contingent option C: The beneficiary receives the remainder of the principal amount upon the annuitant's death D: Payments can be made in installments and as a single cash refund

A: It provides a higher monthly benefit than pure life annuity With the Life with Guaranteed Minimum annuity settle option, if the annuitant dies before the principal amount (the amount he paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her bene. Pure life provides the highest monthly benefits for an individual annuitant.

B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following type of policies would be best for B? A: Modified Life B: Limited Term C: Limited Pay D: Interest-sensitive Whole Life

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

What is another term for a health insurance policy subscriber? A: Participant B: Underwriter C: Dependent D: Insured

A: Participant Participants or members = subscribers

What method do insurers use to protect themselves against catastrophic losses? A: Reinsurance B: Indemnity C: Pro rata liability D: Risk management

A: Reinsurance This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously.

Which of the following is NOT covered under Part B of a Medicare policy? A: Routine dental care B: Home health care C: Lab servies D: Physician expenses

A: Routine dental care Medicare Part B covers dental expense resulting from an accident only

HMOs are known as what type of plans? A: Service B: Health savings C: Consumer driven D: Reimbursement

A: Service Provides the services rather than the reimbursement

Children's riders attached to whole life policies are usually issued as what type of insurance? A: Term B: Variable life C: Adjustable life D: Whole life

A: Term Coverage expiring when minor reaches a certain age

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid off? A: The balance of the loan will be taken out of the death benefit B: The policy beneficiary receives the full death benefit C: The policy beneficiary takes over the loan payments D: The policy is rendered null and void

A: The balance of the loan will be taken out of the death benefit

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? A: The date of the medical exam B: The date of policy delivery C: The date of issue D: The date of application

A: The date of the medical exam Policy in effect the date of application or date of medical exam, whichever is later.

An insurance advertisement exaggerates the benefits of an insurance policy, due to human error at the insurer's advertising agency. Who will the Department of Insurance hold responsible for the exaggeration? A: The Insurer B: Inadvertent errors are not subject to any penalties C: The advertising agency D: The person who made the error

A: The insurer

Guaranteeing future dividends is considered to be an unfair or deceptive act known as A: Churning B: False financial statements C: Rebating D: Misrepresentation

D: Misrepresentation

Which of the following types of care could be provided at a community center? A: Skilled care B: Adult day care C: Respite care D: Intermediate care

B: Adult day care Adult day care is provided for functionally impaired adults on less than a 24 hour basis. It could be provided by a neighborhood recreation center. Care includes transportation to and from the center, a variety of health, social and related activities. Meals are usually included as part of the service

All of the following are true of Key Person disability income policy EXCEPT A: The income may be used to find a replacement for the key employee B: Benefits are considered taxable income to the business C: Premiums are not deductible to the business D: It is typically written to protect the company in the event a key employee becomes disabled and is unable to work

B: Benefits are considered taxable as income to the business

Which of the following is NOT true regarding an annuity certain? A: It is a short-term annuity B: Benefits will stop at the annuitants death C: It will pay until a fixed amount is liquidated D: There are no life contingencies

B: Benefits will stop at the annuitants death

Which distribution(s) from a Modified Endowment Contract would be taxable as income at the time received to the extent that cash value of the contract immediately before the payment exceeds the investment in the contract? A: Both partial cash surrender and policy loan B: Neither partial cash surrender or policy loan C: Partial cash surrender D: Policy loan

B: Both partial cash surrender and policy loan To avoid the tax penalty a policy would need to simultaneously satisfy the cash value of guideline premium/corridor tests as well as the seven-pay test

The rider that may be added to Disability Income policy that allows for an increase in the benefit amount under certain conditions is called A: Residual benefits B: Cost of Living (COLA) C: Waiver of premium D: Double indemnity

B: Cost of Living (COLA) The purchasing power of fixed disability benefits may be eroded due to inflation and increase in the cost of living. This rider is used to protect against these trends by increasing the monthly benefits automatically once the insured has been receiving benefits for 12 months, if the cost of living increases.

Which of the following is correct regarding taxation of funds that accumulate in an Individual Retirement Account? A: Variable state taxes apply B: Funds accumulate tax-deferred C: A 10% federal tax is imposed D: When interest accumulates, the principal balance is taxed in proportion to the interest that is earned

B: Funds accumulate tax-deferred Tax-qualified annuities are used to accumulate IRA funds on a tax-deferred basis

All of the following are features of catastrophic plans EXCEPT A: Essential benefits B: High premiums C: Out-of-pocket costs D: High deductibles

B: High premiums Lower monthly premiums and high deductibles

Which of the following entities must approve all Medicare supplement advertisements? A: Consumer Protection Agency B: Insurance Commissioner or Director C: NAIC D: Federal Association of Insurers

B: Insurance Commissioner or Director

When a person applies for Medicare supplement insurance, whose responsibility is it to confirm that the applicant does not already have accident or sickness insurance in force? A: Agent B: Insurer C: State government D: Active physician

B: Insurer

What is franchise insurance? A: Blanket insurance B: It is health coverage for small groups whose numbers are too small to qualify for true group insurance C: It provides insurance for franchises, such as a restaurant or hotel chain D: It is group insurance

B: It is health coverage for small groups whose numbers are too small to qualify for true group insurance. Not group insurance, individual policies are issued for each participant.

Which of the following statements is NOT correct? A: Medicare Part B provides physician services B: Medicare Advantage must be provided through HMO's C: Medicare Advantage may include prescription dug coverage at no cost D: Medicare Part A provides hospital care

B: Medicare Advantage must be provided through HMO's Medicare Advantage offers expanded benefits for a fee through private health programs such as HMOs and PPOs

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A: Option A B: Option B C: Corridor option D: Variable option

B: Option B The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value

A producer in another state want to become a producer in Maryland. The other state gives the same privileges to Maryland producers wanting to be licensed in that state as it does to its own producers. Maryland therefore extends the privileges of its producers to the prospective producer of the other state. What is it called? A: Equal privilege B: Reciprocity C: Fair exchange D: Equality

B: Reciprocity

Which of the following is NOT a characteristic of a Managed Care Plan? A: Controlled access of providers B: Risk retention C: Comprehensive case management D: Preventative care

B: Risk retention Managed care plans do not retain the risk, but contract with a provider to serve their members

Who determines if a particular group of employees can be excluded from group health coverage? A: The Insurer B: The employer C: The employee union D: The Department of Insurance

B: The employer The employer can also specify how many hours are considered full time, and whether both salaried and hourly employees will be covered.

Which of the following is NOT true regarding variable life insurance and annuities? A: They are regulated by both the SEC and FINRA B: They are not regulated by the DOI C: Agents selling variable products must be registered with FINRA D: They are regulated by the State and Federal Government

B: They are NOT regulated by DOI

Insurance rates are regulated to the extent of all of the following EXCEPT A: They are not excessive B: They are in relation to the cost of living C: They are not unfairly discriminatory D: They are not inadequate

B: They are in relation to the cost of living

Which of the following terms is used to describe a person, other than a Viator, that enters into or effectuates a viatical settlement contract? A: Viatical settlement effectuator B: Viatical settlement provider C: Viatical settlement purchaser D: Viatical settlement broker

B: Viatical settlement provider

Under the mandatory uniform provision "Notice of Claim", written notice of a claim must be submitted to the insurer within what time parameters? A: Within 10 days B: Within 20 days C: Within 30 days D: Within 60 days

B: Within 20 days

Under the relation of earnings to insurance provision, an insurer is allowed to limit an insured's benefits to his or her average income over the last 2 years. What is the minimum benefit amount that can be provided? A: $50 per month B: $100 per month C: $200 per month D: $400 per month

C: $200 per month

How many year(s) after furnishing proof of loss does the insured have to take legal actions against the insurer? A: 1 B: 2 C: 3 D: 5

C: 3 60 days to 3 years

All of the following are examples of a policy replacement EXCEPT A: A policy is being taken as reduced paid-up or extended term B: An existing policy is being reissued with a reduction of cash value C: A Term policy is being converted to Whole Life D: An existing policy has lapsed or is surrendered

C: A term policy is being converted to a Whole Life policy Converting Term to permanent is not considered replacement

What document describes an insured's medical history, including diagnosis and treatments? A: Individual medical summary B: Comprehensive medical history C: Attending Physicians statement D: Physicians review

C: Attending Physicians statement Past diagnosis, treatments, length of recovery time and prognosis

When an insurer offers services like preadmission testing, second opinions regarding surgery and preventative care, which term would best apply? A: Claims reduction B: Claims discrimination C: Case management provision D: Cost reduction

C: Case management provision Include: controlled access of providers, large claim management, preventative care, hospitalization alternatives, second surgical opinions, preadmission testing, catastrophic case management, risk sharing and providing high quality of care

Which of the following is NOT considered to be a basic service, under a nonscheduled plan? A: Oral surgery B: Fillings C: Dentures D: Endodontics

C: Dentures There are two types of services under nonscheduled plans: basic and major. Basic services include treatments such as fillings, oral surgery, periodontics and endodontics. Major services include inlays, crowns, dentures and orthodontics.

When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as what? A: Liquidity B: Life settlement C: Estate conservation D: Estate creation

C: Estate conservation

All of the following are places where care can be administered for a medical plan EXCEPT: A: Surgicenters B: Urgent care centers C: Eye centers D: Doctor's office

C: Eye centers

What does "level" refer to in level term insurance? A: Cash value B: Interest rate C: Face Amount D: Premium

C: Face amount

Which act was introduced to reduce the cost of health care by utilizing preventive care? A: Medical Freedom Act B: HIPAA C: HMO Act of 1973 D: Employee Retirement Income Security Act (ERISA)

C: HMO Act of 1973

Medicare Part B covers all of the following EXCEPT: A: Home health visits B: Outpatient hospital visits C: Long-term care services D: Doctor's services

C: Long-term care services

Credit disability insurance will pay A: A lump sum to the insured if the insured becomes disabled B: A percentage of the insured's gross income while the insured is disabled C: Monthly payments until the insured recovers or the loan is paid off D: A lump sum to the beneficiary if the insured dies

C: Monthly payments until the insured recovers or the loan is paid off Paid to creditor

When may HIV-related test results be provided to the MIB? A: When given authorization by the patient B: Only when the test results are negative C: Only if the individual is not identified D: Under all circumstances

C: Only if the individual is not identified

A medical insurance plan in which the health care provider is paid a regular fixed amount for providing care to the insured and does not receive additional amounts of compensation dependent upon the procedure performed is called A: Reimbursement plan B: Fee-for-service plan C: Prepaid plan D: Indemnity plan

C: Prepaid plan Under a prepaid plan, the heath care providers are paid for services in advance, whether or not any services are provided. The amount paid to the provider is based upon the projected annual cost as determined by the provider.

While repairing the roof of his house an insured accidentally falls off and breaks his arm and sustains a head injury that results in total blindness of both eyes. his policy contains an Accidental Death and Dismemberment rider. What is the extent of benefits that he will receive? A: 50% of the principal B: Reciprocal Amount C: Principal Amount D: Capital Amount

C: Principal amount Full amount, known as the principal amount. Percentage of the principal amount is the capital amount.

A policy owner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policy owner should have her husband named as the A: Primary B: Irrevocable C: Revocable D: Secondary

C: Revocable

An Insured is anxious to get treatment for a health condition, and is convinced that a specialist is needed to cure the condition. If the insured has a PPO plan, which of the following is true? A: The insured can visit a specialist in-network without consulting a primary care but the out-of-pocket cost will be greater without the referral B: The insured will have to pay all costs for the specialist out-of-pocket if a referral is not obtained C: The insured can select any specialist, but non-network specialists will have higher out-of-pocket costs D: The insured must visit a primary care physician who will provide a referral to a specialist if the condition requires one.

C: The insured can select any specialist, but non-network specialists will have higher out-of-pocket costs

All of the following are characteristics of group health insurance plans EXCEPT A: Employers may require the employees to contribute to the premium payments B: The benefits under a group plan are more extensive than those under individual plans C: The parties that hold a group health insurance contract are the employees and the employer D: The cost of insuring an individual is less than what would be charged for comparable benefits under an individual plan

C: The parties that hold a group health insurance contract are the employees and the employer

According to the "Common Disaster" clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? A: The estate of the primary beneficiary and the contingent beneficiary split benefits equally B: The insured died before the primary beneficiary C: The primary beneficiary died first D: The deaths occurred at the same time

C: The primary beneficiary died first So the proceeds go to the contingent beneficiary.

The term "illustration" in a life insurance policy refers to A: A depiction of policy benefits and guarantees B: Pictures accompanying a policy C: Charts and graphs D: A presentation of non guaranteed elements of a policy

D: A presentation of non guaranteed elements of a policy

Which of the following is true regarding pre-existing condition coverage as mandated by the Patient Protection and Affordable Care Act? A: All health plans are required to waive pre-existing conditions limitations only for the insured age 65 or older B: Pre-existing conditions exclusions will remain in place C: Pre-existing conditions are subject to limitations that may vary from insurer to another. D: All health plans must cover the insured without regard to pre-existing conditions.

D: All health plans must cover the insured without regard to pre-existing conditions

Which of the following coverages are required in Maryland on individual and group policies? A: Mammogram care B: Home Health care C: Child Wellness care D: All of the above

D: All of the above

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A: Legal purpose B: Contract of adhesion C: Acceptance D: Consideration

D: Consideration Consideration is something of value that each party gives to the other.

A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will A: Remain the same B: Decrease over time C: Reduce to the pre-surrender value D: Continue to increase

D: Continue to increase

Which of the following statements is correct concerning taxation of long-term are insurance? A: Benefits may be taxable as ordinary income B: Premiums may be taxable as income C: Premiums are not deductible in any case D: Excessive benefits may be taxable

D: Excessive benefits may be taxable Regardless of whether or not the insured can deduct individual long-term care premiums, the benefits are received income tax free by the individual. Excessive benefits as determined by statute are taxable as ordinary income.

Which of the following is NOT a government insurance program? A: Old-age, Survivors and Disability Insurance (SS) B: Medicare C: Medicaid D: Federal Deposit Insurance Corporation (FDIC)

D: Federal Deposit Insurance Corporation (FDIC) Funded by premiums paid on deposits in covered financial institutions. The others are funded in whole or in part by taxes.

Contributions to Roth IRA's are A: Tax deductible B: Always subject to a 6% tax penalty C: Paid with pre-tax dollars D: Not tax deductible

D: Not tax deductible Excess contributions subject to a 6% tax penalty.

Which of the following can surrender a deferred annuity contract? A: Only the insurance company for nonpayment of premiums B: The beneficiary at the owners death C: Deferred annuity cannot be surrendered D: Only the annuity owner

D: Only the annuity owner At surrender the owner receives the value of the annuity minus a surrender charge.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable? A: Charitable organization B: Dependents C: Annuitant D: Spouse

D: Spouse

To what organization must all admitted insurers belong to? A: The Maryland Insurers association B: The Commissioner's association C: The Maryland Insurance Department association D: The Guaranty Association

D: The Guaranty Association Condition of their license.

What is the exclusion ratio used to determine? A: The premium amounts to be included in taxes B: The interest base and the payout base C: The benefit amounts to be paid to the annuitant D: The annuity benefit to be excluded from taxes

D: The annuity benefit to be excluded from taxes

An insured loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will she most likely receive? A: The principal amount in a lump sum B: The capital amount in monthly installments C: The principal amount in monthly installments D: The capital amount in a lump sum

D: The capital amount in a lump sum

All of the following are true of Multiple Employer Trust (MET), EXCEPT A: METs allow small employers an opportunity to band together and purchase insurance at a lower group rate B: The trusts are formed by insurers, agents, brokers, or third party admins, who are called sponsors C: The sponsor develops the plan, sets the underwriting rules and administers it D: The employee has a right of conversion upon leaving the group coverage

D: The employee has a right of conversion upon leaving the group coverage

An individual purchase a Medicare supplement policy in March and decided to replace it 2 months later. His history of coronary artery disease is considered a pre-existing condition. Which of the following is true? A: Coronary artery disease coverage will be permanently excluded from his new policy B: In replacement, pre-exisiting conditions must be waived, so sickness relating to the disease will be covered upon the policy's effective date. C: Because this is the new policy, the pre-existing condition waiting period starts over. D: The pre-exisiting condition waiting period fulfilled in the old policy will be transferred to the new policy, the one picking up where the old one left off.

D: The pre-existing condition waiting period fulfilled in the old policy will be transferred to the new policy, the new one picking up where the old one left off. All types of waiting and elimination periods are carried over, not restarted, since that time was served with the original policy.

Who is required to inform applicants about information gathering practices? A: The state government B: The insurer C: No one. The applicant must ask. D: The producer

D: The producer

All of the following statements about Medicare supplement insurance policies are correct EXCEPT A: They cover Medicare deductibles and copayments B: They supplement Medicare benefits C: They are issued by private insurers D: They cover the cost of extended nursing home care.

D: They cover the cost of extended nursing home care

All of the following are requirements for life insurance illustrations EXCEPT A: They may only be used as approved B: They must identify non guaranteed values C: They must differentiate between guaranteed and projected amounts D: They must be part of the contract

D: They must be part of the contract An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list non guaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as A: Implied warranty B: Utmost good faith C: Reasonable expectations D: A warranty

D: utmost good faith

In disability income insurance, the own occupation definition of disability applies A: As long as the individual is unable to work B: For the first 2 years of a disability C: During the waiting period D: During the elimination period

B: For the first 2 years of a disability The own occupation definition of disability usually applies to the first 24 months after a loss.

Which of the following is true regarding a modified guaranteed annuity? A: It provides a level benefit payment B: The owner is guaranteed a fixed interest rate for a specific period of time. C: The insurer bears all the market risk of changing interest rates. D: There are no penalties for a premature surrender of the annuity.

B: The owner is guaranteed a fixed interest rate for a specific period of time. Under a modified guaranteed (market value adjusted) annuity, the insurer guarantees a competitive interest rate for a specific period (the longer the period, the better the guaranteed rate). At the end of the period, the owner has the option of taking the accumulated cash value or reinvesting the values at a new interest rate.

Unlike the traditional whole life policy, a variable whole life policy does NOT guarantee the A: Fixed premium B: Minimum death benefit C: Cash value D: Maturity date

C: Cash value

Based on Human Life Value approach, which of the following is NOT used to calculate an individuals life value? A: Effect of inflation on income over time B: Predicted needs of the family after the insured's death C: Insured's current and future income D: Insured's annual expenses

B: Predicted needs of the family after the insured's death The Human Life Value approach to determining the value of an individuals life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

Which of the following statements regarding Business Overhead Expense polices is NOT true? A: Any benefits received are taxable to the business B: Leased equipment expenses are covered by the plan C: Benefits are usually limited to six months D: Premiums paid for BOE are tax-deductible

C: Benefits are usually limited to six months BOE insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as regular income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits to the employer are not protected.

Licenses expire every 2 years on A: December 31 of odd-numbered years B: The anniversary of the issuance C: The last day of the insurance producer's with month D: January 1

C: The last day of the insurance producer's birth month Producer licenses are issued for 2 years and expire the last day of the insurance producer's birth month.

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have? A: Securities B: Stock C: Variable D: Term

C: Variable Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. if a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.

Annually renewable term policies provide a level death benefit for a premium that A: Decreases annually B: Remains level C: Fluctuates D: Increases annually

D: Increases annually Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments? A: It is paid out as dividends B: It is used to fund executive bonuses C: It is used to increase the death benefit D: It is used to lower premiums

D: It is used to lower premiums Because insurers receive premiums before they must pay out benefits, they can invest the premium money and use the interest to lower premium amounts charged to insureds.

An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen? A: The PPO will not pay any benefits at all. B: The insured will be required to pay a higher deductible C: The PPO will pay the same benefits as if the insured had seen a PPO physician D: The PPO will pay reduced benefits

D: The PPO will pay reduced benefits The group health plan will not pay pay the full amount charged by the non-PPO doctor.

Which of the following is correct regarding BOE insurance? A: Premiums are tax deductible B: Benefits received are received tax free C: Benefits received are taxable income to the employee D: Premiums are not tax deductible

A: Premiums are tax deductible The premiums paid for BOE insurance is tax deductible to the business as a business expense. However, the benefits are received taxable to the business as income.

All of the following are examples of risk retention EXCEPT: A: Self-insurance B: Premiums C: Deductible D: Copayments

B: Premiums

J transferred his life insurance policy to his son two years before his death. Which of the following is true? A: Because the policy has been transferred, it will not be included in J's taxable estate B: The entire face value of the policy will be included in J's taxable estate C: The interest portion of the policy will be included in J's taxable estate D: The unpaid premiums on the policy will be deducted from J's taxable estate.

B: The entire face value of the policy will be included in J's taxable estate If a policy owner transfers or gives away a life insurance policy within 3 years prior to his/her death, the entire face amount of the policy will be included in his or her taxable estate.

An insurer or producer may NOT knowingly employ an individual to act in a fiduciary capacity if that individual has been convicted of a felony or crime of moral turpitude within the past A: Year B: 5 years C: 10 years D: 15 years

C: 10 years

A health insurance company can refuse coverage solely for which of the following reasons? A: Sickle-cell trait in applicant B: Gender of applicant C: Marital status of applicant D: Applicants past medical history

D: Applicants past medical history Based upon the past health history, an insurer may restrict coverage for certain conditions by the use of a rider, or they may reject the application entirely.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? A: The policy premiums will remain level for 20 years B: If the insured dies before the policy expired, the beneficiary will receive $100,000 C: The policy will expire at the end of the 20 year period D: At the end of 20 years, the policy's cash value will equal $100,000

D: At the end of 20 years, the policy's cash value will equal $100,000 Term policies do not develop cash values.

All of the following are true regarding rebates EXCEPT A: Rebates are allowed if it's in the best interest of the client B: Rebates are allowed if specifically stated in the policy C: Rebating can be anything of economic value, given as an inducement to buy D: Dividends are not considered to be rebates

A: Rebates are allowed if it's in the best interest of the client A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

An insured committed suicide one year after his life insurance policy was issued. The insurer will A: Refund all premiums paid B: Pay the policy's cash value C: Pay the full death benefit to the beneficiary D: Pay nothing

A: Refund all premiums paid If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to refund of premium.

All of the following statements are TRUE concerning Debtor groups EXCEPT A: The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. B: The debtors eligible for insurance under the policy shall all be the debtors of the creditor(s) C: The premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both. D: An insurer may exclude any debtors as to whom evidence of insurability is not satisfactory to the insurer.

A: The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor

Which of the following is correct about Medicare? A: The program is divided into four parts (A-D) B: Part B is available to the insured at no cost C: It is a federal program for welfare recipients D: The program provides complete medical care at no cost

A: The program is divided into four parts (A-D) Medicare has four parts: Part A covers hospital expenses; Part B covers doctor expenses; Part C allows people to receive all of their health care services through available provider organizations; and Part D for prescription drug coverage.

A producer's license can be reinstated retroactively if it has been expired A: It can only be reinstated prospectively B: For less than 1 year C: For no longer than 60 days D: For more than 60 days, but less than 1 year

C: For no longer than 60 days

What is the benefit of choosing extended term as a nonforfeiture option? A: It can be converted to a fixed annuity B: It has the highest amount of insurance protection C: It matures at age 100 D: It allows for coverage to continue beyond maturity date

B: It has the highest amount of insurance protection Under this option, the insurer uses the cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase

When an application for life insurance is taken that replaces an existing life insurance policy, the applicant must be given a "disclosure statement". The disclosure statement must include all of the following EXCEPT A: Date of application B: Premium mode C: Producer's name D: Insurer's name

B: Premium mode A disclosure statement must include the producer and insurance company's name, the date of application, the type and amount of insurance and the amount of premium, but not the premium mode.

Another name for a substandard risk classification is A: Elevated B: Rated C: Controlled D: Declined

B: Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.

Insurers may change which of the following on a guaranteed renewable health insurance policy? A: No changes are permitted B: Rates by class C: Coverage D: Individual rates

B: Rates by class On a guaranteed renewable health insurance policy, the insurer may increase premiums on a class basis only and not on an individual policy

All of the following are beneficiary designations EXCEPT A: Primary B: Specified C: Tertiary D: Contingent

B: Specified Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.

Which of the following is an example of a producer being involved in an unfair trade practice of rebating? A: Making deceptive statements about a competitor B: Telling a client that his first premium will be waived if he purchased the policy today C: Inducing the insured to drop a policy in favor of another one when it's not in the insured's best interest D: Charging a client a higher premium for the same policy as another client in the same insuring class

B: Telling a client that his first premium will be waived if he purchased the policy today Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and the acceptance of rebate are illegal.

An insurer has been found guilty of participating in the unfair claims settlement practices. The Commissioner may order all of the following EXCEPT A: The payment of appropriate policy limits B: The payment of the actual economic damage C: A fine up to 3 times the amount of economic damage D: Restitution to each claimant who suffered economic damage.

C: A fine up to 3 times the amount of economic damage The restitution may not exceed the amount of the actual economic damage, subject to the policy limits.

The two types of assignments are A: Complete and partial B: Complete and proportionate C: Absolute and collateral D: Absolute and partial

C: Absolute and collateral Absolute assigns the entire policy. Collateral assigns a part or all of the benefits.

Which of the following is NOT required to be appointed by the insurer? A: Nonresidential producer B: Producer who sells only life insurance C: Broker D: Agent

C: Broker Producers, in addition to obtaining a producer license, must be appointed by at least one authorized insurance company. Producers who act as brokers, however, do not need the endorsement of an insurance company.

Which of the following is NOT a goal of risk retention? A: To increase control of claim reserving and claims settlements B: To fund losses that cannot be insured C: To minimize the insured's level of liability in the event of loss D: To reduce expenses and improve cash flow

C: To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured; to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

The paid-up addition option uses the dividend A: To reduce the next year's premium B: To accumulate additional savings for retirement C: To purchase a smaller amount of the same type of insurance as the original policy D: To purchase a one-year term insurance in the amount of the cash value

C: To purchase a smaller amount of the same type of insurance as the original policy The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

When a whole life policy lapses or surrenders prior to maturity, the cash value can be used to A: Purchase a term rider attached to the policy B: Pay back all premiums owed plus interest C: Receive payments of a fixed amount D: Purchase a single premium policy for a reduced face amount.

D: Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.

Which of the following insurance options would be considered a risk-sharing arrangement? A: Stock B: Mutual C: Surplus lines D: Reciprocal

D: Reciprocal When insurance is obtained through a reciprocal insurer, the insured's are sharing in the risk of loss with other subscribers of that reciprocal.

Which of the following is NOT provided by an HMO? A: Services B: Financing C: Patient Care D: Reimbursement

D: Reimbursement Traditionally the insurance companies have provided the financing while the doctors and hospitals provided the care. The HMO concept is unique in that the HMO provides both the financing and the patient care for its members. The HMO provides benefits in the form of services rather than in the form of reimbursement for the service.

Equity indexed annuities A: Are more risky than variable annuities B: Are security instruments C: Invest conservatively D: Seek higher returns

D: Seek higher returns Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500

Which of the following would provide an underwriter with information concerning an applicant's health history? A: A medical examination B: The agent's report C: The inspection report D: The Medical information Bureau

D: The Medical Information Bureau An agent's report and inspection report provides personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

Which of the following refers to "own occupation" disability? A: Insured business owner is unable to perform the duties of any related business B: Insured is unable to perform duties of the occupation for which he/she was educated and trained C: Insured is unable to perform duties of any occupation D: Insured business owner is unable to perform the duties of his/her own business

B: Insured is unable to perform duties of the occupation for which he/she was educated and trained

Premium payments for personally-owned disability income policies are A: Eligible for tax credits B: Tax deductible C: Tax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions D: Not tax deductible

D: Not tax deductible Premiums for personally owned individual disability income policies are not deductible.

The subject of a fraud is valued at $500. The person who committed that fraud is guilty of A: A felony B: A misdemeanor C: A minor violation D: A crime

A: A felony Anyone convicted of insurance fraud, in which the subject is valued at $300 or more, is guilty of a felony. If less than $300, guilty of a misdemeanor.

Which of the following is an example of prosthodontics care? A: Bridgework B: Crowns C: Fillings D: Braces

A: Bridgework On dental insurance, prosthodontic care covers bridgework, orthodontics for braces, and crowns and fillings are covered under restorative care.

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? A: Fraternal B: Stock C: Mutual D: Reciprocal

B: Stock Only stock insurance companies are owned and controlled by stockholders

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is the money placed? A: Forwarded to an investor B: Each contract's separate account C: The annuity owner's account D: The insurance company's general account

D: The insurance company's general account Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

Which of the following Life Insurance policies would be considered interest sensitive? A: Adjustable life B: Whole life C: Increasing term D: Universal life

D: Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (non guaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.

When would a 20-pay whole life policy endow? A: At the insured's age 65 B: After 20 payments C: In 20 years D: When the insured reaches age 100

D: When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premiums, however, completely paid off in 20 years.

As deductible amounts increase, premium amounts change in what way? A: Decrease B: Increase C: Remain the same D: Either increase or decrease

A: Decrease If deductibles increase, premiums decrease in response.

The gatekeeper of an HMO helps A: Determine which doctors can participate in an HMO plan B: Control specialist costs C: Determine who will be allowed to enroll in an HMO program D: Prevent double coverage

B: Control specialist costs Initially the member chooses a primary care physician or gatekeeper. If the member needs the attention of a specialist, the PCP must refer the member. This helps keep the member away from the higher priced specialists unless it is truly necessary.

Which of the following is TRUE about class designation? A: Beneficiaries must be part of the insured's immediate family B: It is not allowed C: It determines the succession of beneficiaries D: Beneficiaries are not identified by name

D: Beneficiaries are not identified by name A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.

What is the goal of the HMO? A: Providing free health services B: Limiting the deductibles and coinsurance to reduce costs C: Providing health services close to home D: Early detection through regular checkups

D: Early detection through regular checkups The goal of the HMO is early detection so members are encouraged to participate in regular checkups. In this way the HMO hopes to catch disease in its earliest stages when treatment has the greatest chance for success.

In health underwriting, it would be inappropriate to decline a risk using any of the following factors EXCEPT A: Blindness B: Mental illness C: Genetic characteristics D: Marital status

B: Mental illness Insurers cannot decline a risk based on blindness or deafness, genetic characteristics, marital status or sexual orientation. Mental illness is part of the prospective insured's physical condition and can be used in determining the underwriting decision.

Which term describes a situation in which people who are the most likely to have claims are also the most likely to seek insurance? A: Adverse selection B: Insurable interest C: Double indemnity D: Law of large numbers

A: Adverse selection The concept of adverse selection means that the people who are most likely to have claims are also the most likely to seek insurance. This concept is used primarily in the process of underwriting, when insurers decide which applicants to cover, insurers try to minimize adverse selection as much as possible.

Who can make changes to the policy once it is in effect? A: An executive officer of the insurer B: The insured C: The policy owner D: The agent

A: An executive officer of the insurer Any changes made to a policy must be endorsed and attached to the policy over the signature of an authorized officer of that insurer. No other individual has the authority to make changes or waive policy provisions.

A Medicare supplement plan must have at least which of the following renewal provisions? A: Guaranteed renewable B: Conditionally renewable C: Non-renewable D: Non-cancelable

A: Guaranteed renewable

Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is A: Within 45 days B: Weekly C: Biweekly D: Monthly

D: Monthly If a claim involves disability income benefits, the policy must pay those benefits no less frequently than monthly. In all other cases, the company may specify the time period of 45 or 60 days for payments of claims.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A: Jumping juvenile B: Juvenile Premium Protection C: Waiver of premium D: Payor benefit

D: Payor benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.