Life insurance practice test 3

Health insurance counseling and advocacy program (HICAP) counselors can do all of the following except

Charge for their services.

Pick from the following choices the features of a long-term care policy that would have the highest premium: 1. Long benefit period 2. Short benefit period 3. Long elimination period 4. Short elimination period

1 & 4

The free look period for life insurance is:

10-30 days

Social security disability benefits are paid to persons expected to die or be disabled at least:

12 months

How many days of unpaid leave are allowed in one year under FMLA?

12 weeks

To meet the chronically ill trigger of a long term care policy, an individual must be unable to perform a minimum of:

2 activities of daily living

When applying for health insurance which of the following on the application is not an acceptable question to ask?

How do you think your health is these days

Which of the following is true regarding an irrevocable beneficiary?

If the irrevocable beneficiary permits, the policy owner may borrow from the cash values

In order to receive the principal sum benefit for death from a disability policy, the death must occur:

Within a specified number of days after injury

What rider doubles the face amount of the policy?

double indemnity rider

Exclusive agents:

generally represent only one insurer

When may a representation be withdrawn?

only before the insurance is in effect

A health insurance copayment is:

payment paid by the insured to the provider for services

All of the following statements about Medicare Part B are correct except it

pays for virtually all drugs prescribed by a physician

Why is having a large number of similar exposure units important to insurers?

the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums

The usual elimination (waiting) period for a disability income rider is

three to six months

Unless it is merely a statement of an expectation or a belief, a representation as to the future is considered which of the following?

to promise

Which of the following contracts provides benefits that fluctuate automatically with investment results?

variable life insurance

An insured bought a $150,000 non-participating whole life policy many years ago. She is 100 years old today. She has never borrowed from the policy, and has made all premium payments when due. The policy cash value is:

$150,000

How much employer-provided group term life insurance is exempt from income taxation?

$50,000

The california insurance code contains very specific regulations regarding the ability of a senior citizen to return a life insurance policy or annuity. The regulation: 1. Applies to group plans and individually issued policies equally. 2. Allows a senior citizen a minimum of 30 days to return a life or annuity contract to the insurer. They are entitled to a full refund of premium 3. Specifies a senior citizen as an individual who is at least 65 year of age as of the purchase date.

2 only

Group insurance law stipulates that an incontestability period be provided to the applicant. The time period is:

2 years

Group health plans obligated by the consolidated omnibus budget reconciliation act (COBRA) cover groups of at least

20 employees

An agent gets his license in 2017. He will need to complete ___ hours of continuing education for each 2-year license term.

24

As established by PPACA, an adult child may be covered by a parent's health insurance plan until what age?

26 years old

The initial enrollment period for Medicare Part B ends how many months after the 65th birthday month?

3 months

What is the free-look period (right to return) of a disability insurance policy issued to an individual who has attained the age 65 or older?

30 days

A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make?

60 payments

if a service provider is paid a fixed monthly fee in an HMO, what is this called?

Capitation

Within the scope of insurance contracts, what is "consideration?"

A monthly payment is made by the insured

Which distribution from an annuity would be subject to a penalty tax?

A single payment made to a taxpayer who is age 55

A basic life insurance policy illustration must include all of the following except

A statement that actual results will be as illustrated

An entity that provides the administrative services for employers, such as the documentation and recordkeeping for group insurance needs, is called:

A third party administrator

Under a disability insurance policy, an insured is eligible for a waiver of premium benefit:

After the first six months of disability

How is the insurance commissioner selected?

An election by the people

In insurance terms a representation can be considered:

An implied warranty

All of the occurrences listed below are examples of an insurable event as defined by the California Insurance Code EXCEPT

An insured suffers a financial loss in the state lottery

A person has a disability policy with the following definition of disability: "the inability to perform any occupation for which the insured is suited through education, training, experience or prior economic status." This is an:

Any occupation and is very restrictive

The insurer can do which of the following under noncancelable health insurance policy?

Cancel the policy for nonpayment of premium

Health maintenance organizations (HMOs) provide which of the following?

Both of the above

An insurer classifies the insured according to their occupation. If the insured has more than one occupation, what will the insurance company technically do?

Classify the insured atvthe occupation which reflects the highest hazard

Which of the following is considered ordinary life insurance?

Continuous Premium Whole Life

As defined by the california insurance code, "insurance" is a:

Contract

Medicare supplement policies sold and issued to supplement Medicare coverage, can be issued in which of the following ways?

Core benefits only

A worker dies while he is credited with six quarters of the last 13 quarter period. What status does the worker have under social security?

Currently insured

Self-funding of employee benefit plans cannot be used for

Death benefits

The face amount of a mortgage redemption life insurance policy

Decreases to match the principal amount owed under a mortgage loan

Which policy is a savings instrument designed to first accumulate funds and then systematically liquidate those funds?

Deferred annuity

Disability income insurers carefully consider a potential insured's occupation as an underwriting factor because of the:

Degree of risk of those in that occupation

What would be the insurance commissioner's most likely course of action if an applicant for an insurance license had a previous application for a professional license denied for cause by any licensing authority within 5 years of the date of the filing?

Deny the application without a hearing

The ability to earn a living is often thought of as a person's most important asset. Which type of insurance covers this situation?

Disability income insurance

Employee Retirement Income Security Act of 1974 (ERISA) regulates group health insurance in the area of

Disclosure and reporting

A policyowner has the right to change all of the following except the

Dividend schedule

Under the consolidated omnibus budget reconciliation (COBRA), which of the following is a qualifying event?

Divorce

All of the following are valid reasons for the insurance commissioner to deny an applicant a valid license except when the applicant

Does not have a california business address

The federal act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is:

ERISA

The doctrine of "utmost good faith" applies to the business of transacting insurance. Which of the following is an example of its application?

Each party is entitled to rely upon the representation of the other party

From the description below, identify which one is a term policy.

Each year the premium increases as the insured grows older. After several years the coverage and premiums end simultaneously. Cash value is not created

In accidental death and dismemberment insurance, which of the following would not be considered accidental?

Employee requires abdominal surgery after food poisoning in the lunch room

What type of annuity has a minimum fixed interest rate and can also achieve stock-market-like gains?

Equity indexed annuity

If an applicant has been convicted of a misdemeanor and that misdemeanor is later expunged pursuant to california penal code section 1203.4, which of the following is true?

Even though the misdemeanor conviction was expunged, the applicant must still disclose the conviction on the application for an insurance license.

A self-insured group qualifies for stop-loss coverage after claims:

Exceed a specified limit in a set period of time

What is used to determine the amount of an annuity distribution that is exempt from taxation?

Exclusion ratio

Common life insurance policy riders include all of the following except

Extended term

Life insurance settlement options include all of the following, except:

Extended term option

Wellness benefits under a health maintenance organization (HMO) typically include all of the following, except:

Fluoride treatments

Which of the following is not one of the common personal uses for life insurance?

Funding a buy/sell agreement

All of the following acts are grounds for license revocation except

Holding a non-resident's license

What information can a party to a contract of insurance be allowed not to communicate according to california law?

Information which the other party already knows

From the choices below, select the best description of a speculative risk.

Involving the possibility of a gain in addition to the uncertainty of loss

What happens to a license after the death of a natural person who holds a valid insurance license?

It always terminates

All of the following are associated with accident insurance except:

It covers loss of time away from the job because of an accident as well as illness

How would a "pure" risk be best described?

Losing some pay from work because of an injury

Any situation that presents the possibility of a loss is known as:

Loss exposure

Name the program that is run by the state of california but funded by the federal government.

Medicaid

After receiving care by a physician, how is a patient notified of Medicare's decision to cover it?

Medicare Summary Notice (MSN)

What would a person be guilty of who refuses to submit books and records to the commissioner?

Misdemeanor

Which component of a life insurance premium is based on the insured's age and gender?

Mortality

A schedule illustrating the probabilities of death each year for life insurance is called

Mortality table

What uses the law of averages to determine life rates?

Mortality table

In determining the rates to charge for life insurance premiums, a company will use:

Mortality, interest, expenses

During the disability elimination period:

No benefits are payable

If a policy has a 90-day elimination period when will a check be cut?

On the 121st day

Patrick attends a large university as a student. One of his student benefits is that he has blanket health insurance coverage. What would be a correct statement about Patrick's insurance?

Patrick is not individually identified on the policy, rather it insured an entire "class" of insureds

In no life insurance, the only measure of liability is the amount:

Payable as provided in the policy

Choose the correct statement about a cost of living rider. The policy owner:

Pays an additional premium for the extra protection the rider provides and will see the face amount of the contract increase according to the increase of the index

In life insurance, the loss of a key employee is considered a:

Personnel loss

Which type of loss is a business exposed to death, retirement, resignation, or disability of a key employee?

Personnel loss exposure

Employee Retirement Income Security Act of 1974 (ERISA) requires plan sponsors to provide participants with:

Plan descriptions and benefit statements

Which of the following coverages is not one of the three traditional benefits of a group basic medical expense plan?

Private nursing expense

Loss retention is an effective risk management technique when all of the following conditions exist EXCEPT the

Probability of loss is unknown

Which of the following statements about the HICAP program is FALSE? HICAP:

Provides assistance for a fee based upon ability to pay

In disability insurance, several riders are available for insureds to purchase. The "return of premium" rider:

Provides for the return of a percentage of premiums paid at periodic intervals, provided the insured has made no claims

How would a 'peril' best be defined?

Reason for the loss

In regards to representations, which of the following is correct?

Representations are statements made to the best of one's knowledge

A disability policy, described as "guaranteed renewable" is one where the insurance company:

Reserves the right to change the premiums, but may not change any of its terms

The principle of indemnification is best described as:

Restoring an individual to a condition they enjoyed in the past, thus making them whole

The basic feature of an indemnity plan is that the participants:

Select a provider and submit claims to the insurance company

An employee has just received a huge bonus check. She uses the bonus money to buy an annuity that will immediately begin paying $400 a month to her. This is called a

Single-premium immediate annuity

What kind of insurance pays medical benefits only in the event the insured suffers from one stipulated disease?

Specified disease

Hospice care is for:

Terminally ill persons

When a licensed agent submits a renewal application with applicable fee on or before the expiration date:

The agent will be able to operate for up to 60 days after the specified expiration date

A person invests $10,000 in a single premium annuity and another $10,000 in a certificate of deposit (CD). Both pay 10% interest annually. The person is in a 31% income tax bracket. For 40 years, this person does not touch his annuity and reinvests all income from the CD at 10%. Which of the following statements is true?

The annuity would be worth several hundred thousand more because of the tax deferral of the earnings

Insurance companies have an obligation to pay death benefits to:

The beneficiary upon the death of the insured

A child born or adopted after a family policy is issued has what effect on the policy?

The child will have term insurance coverage under the same contract

All of the following statements regarding variable life insurance are true, except:

The insurance company assumes the investment risk

The CIC (ca insurance code) requires property insurance policies specify all of the following, except:

The insured's address

Which of these statements is not true with regard to insurers and policies that provide Medicare supplement coverage?

The insurers are prohibited from any exclusion for all preexisting conditions

Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:

The master policy holder

Sharon is comparison shopping disability income policies. Sharon finds two nearly identical policies offered by the same insurance company with exactly the same premium and terms. The only difference is that one is issued as non-cancelable, and the other guaranteed renewable. Which should she buy?

The non-cancelable policy

A variable annuity applicant requests that the premium be immediately invested in a stock portfolio. The policy is returned to the insurer within the cancellation period. What is the applicant entitled to receive?

The policy amount value on the date the policy was received by the insurer

All of the following statements about survivorship life insurance are true, except:

The policy face amount is paid out only upon the death of the first insured to die

Identify the "activity of daily living" not associated with triggering events for long term care policies. The inability:

To talk on the telephone

The life analyst is allowed to charge a fee for services provided as long as it is stated in writing in advance of performing the service. Each of the following must be included in this written agreement, except:

The services which will be performed and provided, but for which no fee will be charged.

Qualifying events that would result in eligibility for coverage continuation under COBRA include all of the following except:

The termination of an employee for gross misconduct

What does the statement "life insurance creates an immediate estate" mean?

The total death benefit is paid whenever the insured dies

Which of the following is incorrect regarding life insurance benefit settlements?

They must be decided at the time of application.

What is the purpose of "key person" insurance?

To cover decreased business earnings due to the death of a key employee

Which of the following best defines risk?

Uncertainty of financial loss

The policyowner, age 50, has been paying the premiums on his whole life policy for fifteen years. He needs the equivalent of one-third of his policy's cash value for two years. He wants to continue to have the same amount of life insurance protection and he can afford to continue to pay the policy's premium. Which of the following would appear to be his BEST course of action?

Use the policy loan provision to borrow money from the policy, but keep making the premium payments to keep the policy in force.

Medical expense insurance policies have various ways of determining the amount that will be paid in benefits. One approach is to pay on the basis that costs are affected by like services provided by health care professionals in the same local geographical area. What is this concept called?

Usual, customary and reasonable (UCR)

A product provides annuity benefits that may vary according to any separate account or accounts maintained by the insurer. This describes:

Variable annuity

When an insured becomes totally and permanently disabled, her condition triggers a provision that keeps the policy in force even though the insured stops making premium payments. This is a/an:

Waiver of premium provision

What factor determines the difference between deferred and immediate annuities?

When annuity benefit payments begin

All of the following statements about the election of a life insurance policy's settlement options are true, except:

When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate

The insured files a claim with his health insurer on June 8th. The insured did not pay the premium on the due date of June 1st because he didn't want the policy anymore. Will the insurer pay this claim?

Yes. The claim falls within the grace period.

In the absence of a coordination of benefits clause, all of the following circumstances might result in recovery of more than 100% of actual health care expenses except:

a worker's medical plan includes a carryover deductible provision.

A participating life insurance policy is defined as a contract that

allows the policyowner to receive a share of surplus in the form of policy dividends.

A type of contract, which is considered a savings instrument used for accumulating investment funds for the purpose of eventually receiving those through a systematic program of withdrawal is a/an:

an annuity

Collateral assignments on life policies are most often used for:

bank loans

Which party has rights in a life insurance policy only after the death of the insured?

beneficiary

Insurer and the insured share covered losses. This is called:

coinsurance

Any attempt by an existing insurer or their agent to dissuade a policy owner from replacing an existing life insurance or annuity contract is known as:

conservation

Which of the following is not an example of cost sharing in a health insurance policy?

coordination

The group medical plan provision that applies when a claimant has coverage under more than one plan is known as

coordination of benefits

In medical expense insurance, what serves the same purpose as the elimination period in disability income insurance?

deductible

Provisions in a disability income policy include all of the following EXCEPT

deductible and coinsurance amounts

Medicare Part A will send a statement to which of the following?

insured

The person whose life is covered by a life policy is the:

insured

In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:

key person insurance

The likelihood of incurring disease or disability at any given time is:

morbidity

When are parties to a contract required to communicate information solely based on personal judgment for a matter in a question?

never

Choose the best beneficiary designation for the following case: The children are to receive equal shares of the benefit. If any of the children die before the insured does, the insured wishes the remaining children receive the deceased child's share equally divided among them.

per capita

Which risk classification carries the lowest premium?

preferred

A health maintenance organization (HMO) plan contains costs by promoting:

preventative care

The price of insurance for each exposure unit is called the:

rate

One important method of dealing with risk is to avoid it. All of the following describe risk avoidance except the insured:

recognizing that his driving skills are deteriorating and therefore increasing the liability limit on his auto policy

Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:

replacement

Which health insurance provision protects an insured from the expense of a catastrophic illness?

stop loss

The direct response distribution of insurance utilizes all of the following to promote the sale of insurance except

telephone call from an agent