Life Insurance Important TERMS

Elaine's Basic Hospital Expense policy has a $500 per day limit for room and board in a hospital for a maximum of 5 days. Elaine got sick and had to spend 3 days in the hospital at $650 a day. How much will Elaine have to pay to cover the rest of her room and board charges?

$450

An employee has a Flexible Spending Account (FSA) with a $5,000 annual benefit. This year the employee used $3,000. What would be the amount of the benefit available to the employee next year?

$5,000

An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive

$70,000.

Under the common accident provision, how many deductibles would be paid if five family members covered under the same major medical policy are injured in the same accident?

1

A Medicare supplement policy must have a free-look period of at least

30 days

How long is the grace period for an individual life insurance policy in California?

60 Days

The entire contract includes all of the following EXCEPT

A buyer's guide.

The policyowner has an option to pledge the life insurance policy as collateral for a bank loan. This is called

A collateral assignment.

According to the life insurance replacement regulations, which of the following would be an example of policy replacement?

A policy is reissued with a reduction in cash value.

An individual is approaching retirement age and is concerned about having proper coverage should he have to be placed in a Long-Term Care (LTC) facility. His agent told him that LTC policies would provide necessary coverage at all of the following levels EXCEPT

Acute.

If an insured dies, and it is discovered that the insured misstated his/her age or gender, the life insurance company will

Adjust the death benefit to what the premium would have purchased at the actual age or gender.

All of the following could qualify as a group for the purpose of purchasing group health insurance EXCEPT

An association of 35 people.

Which of the following indicates the person upon whose life the annuity income amount is determined?

Annuitant

When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?

As a fiduciary

A comprehensive medical expense insurance policy combines which of the following coverages in a single contract?

Basic hospital and surgical coverage with major medical

A dentist is off work for 4 months due to a disability. His dental assistant's salary would be covered by

Business Overhead Insurance.

When long term care insurance covers care in a person's home or in a skilled or residential facility, the policy may be labeled

Comprehensive.

HMO members pay a small fee when they see their primary care physician. This fee is called a

Copay

Which of the following terms refers to the nontaxable portion of each annuity benefit payment?

Cost base

All of the following are ways to handle risk EXCEPT

Elimination.

The "stop-loss" feature on a major medical policy is intended to

Establish a maximum amount of out-of-pocket expense that an insured will have to pay for medical expense in a calendar year.

All of the following statements about agents are true EXCEPT

Exclusive agents work for themselves.

The notice about policy cancellation delivered to senior consumers must include all of the following information EXCEPT

Explanation of where the premiums have been invested.

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?

Extended term

The presumptive disability provision assumes that the insured is totally disabled upon loss of all of the following EXCEPT

Feeling.

At what point would an automatic premium loan be generated?

Following the grace period

An insurer that operates for one or more social, educational, charitable, benevolent, or religious purposes for the benefit of its members is known as a

Fraternal insurer.

In order for an alumni association to be eligible to purchase group health insurance for its members, all of these statements must be true EXCEPT when the association

Has been active for five years minimum.

Slippery floors, reckless driving, or providing false information are examples of

Hazards.

Hazards are conditions or situations that

Increase the likelihood of a loss occurring

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss. What is this concept called?

Insurable interest

Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance?

Insurance application

Which portion of a nonqualified annuity payment is taxable?

Interest earned on principal

Which of the following is provided by skilled medical personnel to those who need occasional medical assistance or rehabilitative care?

Intermediate care

Which of the following statements is NOT true regarding HICAP?

It exists to assist seniors who are not qualified to receive Social Security or Medicare.

An annuitant pays the annuity premium on the 14th of each month. Which of the following best describes this arrangement?

Level

A policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. This type of transaction is called a/n

Life settlement.

Which of the following riders provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years?

Living Needs Rider

Per the California Insurance Code, the best definitions of "shall" and "may" are

Mandatory and permissive.

What is the primary difference between Medigap and Medicare SELECT policies?

Medicare SELECT policies contain restricted network provisions.

Cash Value guarantees in a whole life policy are called

Nonforfeiture values.

Only the agent is involved in completing the agent's report. The agent's statement is

Not included in the "entire contract".

Which of the following best describes a presumptive disability?

One that is severe enough that the insured automatically qualifies for full disability benefits

Insurance contracts are unilateral in nature. What does that mean?

Only one party makes a promise.

The needs approach to calculating the amount of life insurance needed is based on

Predicted needs of a family after the premature death of the insured.

The frequency and the amount of the premium payment are known as what?

Premium mode

On an Accidental Death and Dismemberment (AD&D) policy, the death benefit payable is known as the

Principal sum.

All of the following are true of annually renewable term insurance EXCEPT

Proof of insurability must be provided at each renewal.

The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT

Purchase of a new home.

Variable insurance and variable annuities are regulated by

SEC, FINRA and Departments of Insurance.

Once the initial benefit limit in Medicare Part D is reached, how is the beneficiary affected?

The beneficiary is then responsible for a portion of prescription drug costs.

All of the following are advantages of a qualified retirement plan EXCEPT

The income at retirement is tax free.

Which of the following is NOT true regarding term health coverage?

The owner may renew the policy for a specified term.

Which of the following bears the investment risk in a variable life insurance policy?

The policyowner

If an applicant submits the initial premium with an application, which action constitutes acceptance?

The underwriters approve the application.

Which of the following is true regarding taxation of accelerated benefits paid under a life insurance policy?

They are received tax free.

Medicare is a health insurance program for all the following individuals EXCEPT

Those with low income and low assets.

What is the purpose of a disability buy-sell agreement?

To allow the business buyout in case of the owner's disability

What is the purpose of a benefit schedule?

To state what and how much is covered in the plan

Considering the principles of liquidity, how would the policyowner use today's cash values in a life insurance policy?

Use it for emergency expenses

Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy?

Warranty

Which of the following types of insurance policies would perform the function of cash accumulation?

Whole life

Who makes up the Medical Information Bureau?

insurance companies

In some cases, in order for an insurer to legally disclose privileged information to appropriate sources, the insured must sign an authorization form. What is the maximum amount of time that can legally pass between the completion of the form and the disclosure of information?

1 year

What is the written document called in which insurance coverage is set forth?

The contract

All of the following are characteristics of group health insurance plans EXCEPT

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

All of the following are true of the Survivorship Life policy EXCEPT

The premium is based on the age of each insured.

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?

The primary beneficiary died before the insured.

Wagering on a sporting event is an example of what type of risk?

Speculative

What is the exclusion ratio used to determine?

The annuity benefit to be excluded from taxes

Which of the following is NOT an indicator of a competent party?

Business profession

In addition to participation requirements, how does an insurer guard against adverse selection when underwriting group health?

By requiring that the insurance be incidental to the group

Which of the following is true of the taxation of cash values in a business life insurance policy?

Cash values grow tax deferred.

Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination?

Charging the insured higher premiums based on their race

Regarding health insurance, all of the following are tax-deductible EXCEPT

Employee paid group disability income.

A 25-year old full-time student is living off a trust fund. Why would he NOT qualify for an IRA?

He does not have earned income.

All of the following are features of catastrophic plans EXCEPT

High premiums.

A representation in an insurance contract qualifies as a(n)

Implied warranty.

The policyowner chooses the annual mode for the payment of the life insurance premium. For the year, the owner will pay

Less as compared to the other payment modes.

What does an annuity protect the annuitant against?

Living longer than expected

An insured purchased a health insurance policy with a renewability clause that states the policy is "Guaranteed Renewable." This means that as long as the required premiums are paid, the policy will continue until the insured

Reaches age 65.

An insured recently had a new home built and insisted on having smoke detectors installed in multiple places in the house. What method of handling risk is the insured using?

Reduction

Which of the following is a daily nursing and rehabilitative care that can only be provided by medical personnel, under the direction of a physician?

Skilled care