My 215 pratice

Which of the following is not covered under Medicare hospital insurance benefits (Part A)? A. Physician's services B. Semiprivate room and board C. Home health care D. Skilled nursing facility care

Answer A is correct. Explanation: Under Medicare, physician's services are covered under Part B.

The distinguishing characteristic of variable life insurance is that A. The policy owner bears the investment risk. B. The amount of the premium increases annually. C. The policy is not subject to regulation. D. The insured can request changes in the face amount.

Answer A is correct. Explanation: With variable life insurance the amount of insurance does change automatically.

The law of large numbers states that A. Predictions become more accurate as the number of units being considered increases. B. Large losses are easier to predict than small losses. C. Small losses are the most predictable. D. All losses are equally predictable.

Answer A is correct. Explanation: According to the law of large numbers, predictions become more accurate as the number of units being considered increases.

All of the following are common characteristics of disability income insurance except A. The policies do not have any exclusions. B. Each contract defines the disabilities it covers. C. Benefits are usually paid in periodic installments. D. Disabilities caused by accidental injury or illness are covered.

Answer A is correct. Explanation: All insurance policies have exclusions.

Suppose an insurance contract contains inconsistent or contradictory provisions. Various parts of the contract are printed, typewritten, and handwritten. In seeking to determine the original intent, a court is likely to rely on A. The handwritten material first, then the typewritten, and then the printed B. The typewritten material first, then the printed, and then the handwritten C. The printed material first, then the typewritten, and then the handwritten D. All parts of the contract, giving equal importance to each

Answer A is correct. Explanation: Any handwritten material will be considered first because it probably reflects last minute revisions of the terms. After that the typewritten material will be considered and then the printed material.

The authority of an insurance agent, which is spelled out in the written words of the agency contract between the agent and insurer, is A. Express authority B. Apparent authority C. Implied authority D. Presumed authority

Answer A is correct. Explanation: Express authority is the authority spelled out in the written agency contract.

Each of the following is a typical characteristic of group life insurance except A. The master policy cannot be terminated. B. The plan has a conversion privilege. C. The plan has a grace period. D. Individual certificates are issued.

Answer A is correct. Explanation: The group policy owner always has the right to terminate the contract.

Which definition of total disability would be the most restrictive for an insured claiming benefits? A. The inability to perform the duties of any occupation B. The inability to perform all the duties of the insured's regular occupation C. The inability to perform some of the duties of the insured's regular occupation D. The inability to perform any one of the duties of the insured's regular occupation

Answer A is correct. Explanation: The inability to perform the duties of any occupation is the most restrictive because a person who could perform any work at all would not be entitled to benefits.

A contingent beneficiary designated in a life insurance policy is a person who will receive benefits if A. The insured dies because of a contingent cause specified in the policy. B. The insured dies when there is no surviving primary beneficiary. C. The primary beneficiary dies after the insured, before receiving payment. D. The only primary beneficiary designated is a minor.

Answer B is correct. Explanation: A contingent beneficiary will receive the proceeds if the insured dies when there is no surviving primary beneficiary.

All of the following are true about group life insurance except A. It may be written to include dependent coverage. B. Each individual insured receives an insurance policy. C. Coverage is usually available without medical exams. D. Group policy provisions include a grace period.

Answer B is correct. Explanation: A single master policy is issued to the group policyowner, such as an employer or labor union. Individual insureds or members receive certificates of insurance that summarize the benefits and rights under the contract.

An insured has purchased a $100,000 whole life insurance policy. After a period of years, the cash value of the policy has grown to $42,000. If the insured dies at this time, the beneficiary will receive A. $142,000 B. $100,000 c. $58,000 D. $42,000

Answer B is correct. Explanation: A whole life policy pays the face value on death at any time, regardless of the amount of cash value.

The cash surrender value of a whole life insurance policy will equal the face amount of coverage A. On the insured's 65th birthday B. If the insured lives to be age 100 C. On the date final payment is made under any limited payment plan D. On any date that total premiums paid exceed the amount of insurance

Answer B is correct. Explanation: A whole life policy will mature and the cash value will equal the face amount when the insured reaches age 100.

All of the following are true about dependent coverage under a group health insurance policy except A. Generally, eligible children must be under a specified age. B. All dependents must be related to the insured by blood or marriage. C. The insured worker's parents may qualify as dependents. D. Disabled children may be covered beyond the limiting age.

Answer B is correct. Explanation: Adopted children and other dependents may be eligible for coverage.

If a life insurance policy loan is made and the insured person dies before it is repaid, the beneficiary will receive A. The cash value, minus the outstanding loan amount B. The death benefit, minus the outstanding loan amount C. The full face value of the policy D. Nothing

Answer B is correct. Explanation: In such cases the insurer will pay the death benefit minus any outstanding loan amount and interest on the loan.

In life insurance, a return of premium rider is A. Decreasing term insurance added to an underlying policy B. Increasing term insurance added to an underlying policy C. A guarantee that premiums will be returned if the insured commits suicide D. A guarantee that if the policy is surrendered, premiums will be returned

Answer B is correct. Explanation: Increasing term insurance is needed to cover the growing premium payments over time.

The owner of a life insurance policy does not have to be the insured person. A policy owner is the person responsible for paying the premium and has a number of legal rights. A policy owner has all of the following rights except A. The owner may designate or change a beneficiary. B. The owner may change the person who is insured. C. The owner may select settlement options. D. The owner may assign or transfer the policy to a new owner.

Answer B is correct. Explanation: The owner of a policy does not have the right to change the person who is insured.

A group major medical policyholder that provides benefits on a self -funding basis may limit its total liability for claims by purchasing A. Supplementary coverage B. A stop-loss contract C. Coinsurance D. A deductible

Answer B is correct. Explanation: The term for this type of agreement that caps obligations is stop-loss.

A life insurance policy that provides whole life insurance for the breadwinner plus minimal amounts of term life insurance for a spouse and each dependent child is often referred to as a A. Family maintenance policy B. Family protection policy C. Family income policy D. Family split-life policy

Answer B is correct. Explanation: This is an example of a family protection policy.

It is illegal for an agent to pay, allow, give, offer, or promise to a prospective insurance buyer any return of premiums, any special favor or advantage, or anything of value not specified in the insurance contract, as an inducement to buy insurance. This illegal practice is known as A. Twisting B. Rebating C. Coercion D. Defamation

Answer B is correct. Explanation: This is an example of rebating.

Not all disabilities are covered by social security disability benefits. To be covered, a disability must be serious enough to be expected to be fatal or to last at least A. 6 months B. 12 months C. 18 months D. 24 months

Answer B is correct. Explanation: To be covered under social security, a disability must be serious enough to be expected to be fatal or to last at least 12 months.

When a group life insurance plan is written on a contributory basis, the group plan must insure at least A. 90% of the eligible group members B. 75% of the eligible group members C. 65% of the eligible group members D. 50% of the eligible group members

Answer B is correct. Explanation: Under state law, when covered employees under a group life insurance policy contribute any part of the premium, the policy must insure at least 75% of the eligible group members.

An insurance policy is a legal contract. Each of the following elements is necessary for formation of a valid contract except A. Consideration B. Competent parties C. Signatures of each party D. Agreement

Answer C is correct. Explanation: Consideration, competent parties, and offer and agreement are required to form a legal contract. Signatures of the parties are not required, because oral contracts are binding.

All of the following are true about a coordination of benefits provision in group health insurance policies except A. It establishes which plan pays first. B. It is designed to prevent overcompensation for incurred losses. C. It coordinates benefits under all available group and individual policies. D. It limits benefits when insurance is provided under more than one plan

Answer C is correct. Explanation: Coordination of benefit provisions applies only to group insurance plans. Any benefits under individual policies are not affected.

Under contract law, the payment of money in exchange for a service would be known as A. An offer B. Agreernent C. Consideration D. Implied authority

Answer C is correct. Explanation: To form a valid contract, each party must give some form of consideration to the other. With insurance, the consideration the insured gives is the premium payment and the consideration the insurer gives is the promise to pay if a loss occurs.

All of the following are true about group health insurance except A. It has fewer limitations on benefits than individual insurance. B. All participants are insured under a single master contract. C. All members of the insured group must be covered. D. It is rated on a group basis.

Answer C is correct. Explanation: Under contributory group plans, only 75% of the eligible members must be covered.

All of the following are true about reinstatement of a life insurance policy except A. Evidence of insurability is usually required. B. All overdue premiums, plus interest, must be paid. C. The policy will be rated at the insured's current age. D. Reinstatement must be made within a specified period of time.

Answer C is correct. Explanation: Upon reinstatement, when all overdue premiums, policy loans, and interest are paid, the policy is reinstated with all its original values and the rates are still based on the insured's age on the original issue date.

Each of the following is a significant consideration in the underwriting of individual health insurance risks except A. Occupation B. Age of applicant C. Physical condition D. Geographic location

Answer D is correct. Explanation: An applicant's occupation, age, and physical condition are important factors in the underwriting of a risk. The geographic location of the applicant is not relevant.

Not all risks are insurable. Certain characteristics must be present for a particular risk to be considered an insurable risk. Which of the following characteristics might make a risk uninsurable? A. If a loss occured, it would result in an economic hardship. B. The risk of loss can be defined in terms of a specific number of dollars. C. Expected loss can be predicted due to a large number of exposure units. D. The risk of loss exists because of a catastrophic exposure.

Answer D is correct. Explanation: Catastrophic exposures are generally not insurable.

In the administration of a group health insurance plan, if there is a clerical error concerning the information about an insured, that person's coverage and benefits A. Could be reduced B. Could be delayed C. Could be terminated D. Will not be affected

Answer D is correct. Explanation: Coverage will not be affected by a clerical error.

Under the Uniform Policy Provisions Law, a required provision concerning proof of loss obligates a policyholder to file a written proof of loss within A. 20 days after a loss B. 30 days after a loss C. 60 days after a loss D. 90 days after a loss

Answer D is correct. Explanation: Generally, a policyholder is required to file a written proof of loss within 90 days.

For employer-paid (noncontributory) group health insurance, the percentage of eligible group members that must be covered is A. 50% B. 65% c. 75% D. 100%

Answer D is correct. Explanation: When an employer pays all of the group health insurance premium, the plan is noncontributory and it is required to cover all eligible group members.

If an irrevocable beneficiary designation has been made on a life insurance policy, the designation A. Can never be changed B. Cannot be changed during the remainder of the policy year C. Cannot be changed for at least 5 years D. Can be changed only with consent of the beneficiary.

Answer D is correct. Explanation: When an irrevocable beneficiary designation has been made on a life insurance policy, the designation may be changed with consent of the beneficiary, but not otherwise.

A Keogh plan is A. A low-cost type of group insurance B. A business continuation C. A type of pension plan used by corporations D. A retirement plan for self-employed persons

Answer D is correct. Explanation: Keogh plans were designed specifically to provide retirement accounts for self-employed individuals.

The longer the benefit period A. The higher the policy's premium will be B. The lower the policy's premium will be C. The higher the policy's benefits will be D. The lower the policy's benefits will be

A. A is correct. If an insured selects a long benefit period the insurer will have to charge more premium because it is assuming more risk.

Which of the following is an optional provision under the Uniform Provisions Model Act? A. Cancellation B. Physical examination and autopsy C. Legal actions D. Reinstatement

Answer A is correct. A cancellation provision is an optional policy feature.

Ally pays for her health insurance monthly. Her identical twin Georgia has the same policy, but pays annually. Which of them probably pays more for the policy? A. Ally probably pays more. B. Georgia probably pays more. C. They probably pay the same. D. It is not possible to determine from the information provided.

Answer A is correct. Ally will pay more because the insurance company does not have the use of her entire annual premium in advance.

Calvin is hit by a car while traveling out of state. When the bill for his emergency services arrives, Calvin's HMO will probably A. Pay for the services, even though they were incurred out-of-network, because emergency coverage is a basic health care service. B. Deny the claim, because the services were out of network. C. Pay the claim only if the HMO had an affiliation agreement with the facility where the services were provided. D. Pay the claim if the HMO had an affiliation agreement with the facility the services were provided, or there is no affiliated facility within 50 miles.

Answer A is correct. Emergency coverage is provided even when received out of state and out of network.

Business written on the producer's own life or interests is known as A. Controlled business B. Personal business C. Conflicted business D. Producer business

Answer A is correct. Explanation: "Controlled business" means insurance on a producer's own life or interests, or those of family members or business associates.

Which of the following provisions reflects a guarantee that at specified ages, dates, or events, the insured may buy additional insurance without a medical exam? A. Guaranteed insurability B. Return of premium C. Accidental death D. Waiver of premium

Answer A is correct. Explanation: A guaranteed insurability provision locks in the right to purchase additional insurance regardless of changing circumstances.

Life insurance contracts contain all the following except A. Policy folder B. Insuring clause C. Conditions D. Exclusions

Answer A is correct. Explanation: All life insurance policies include an insuring clause, conditions, and exclusions. There is no requirement for a policy folder.

Which of the following people represents several insurance companies but owns the policy expirations? A. Independent agent B. Exclusive agent C. Direct writing agent D. General agent

Answer A is correct. Explanation: An independent agent may represent many insurers but owns his or her accounts and is entitled to renewal commissions even if they shift to another company.

The candlestick maker offers insurance to its employees. This type of group is called a A. An employee group B. A multiple employer trust C. A Taft-Hartley trust D. A labor group

Answer A is correct. Explanation: An individual employer offering group insurance to its workers is an example of an employee group.

Ralph is a producer for Hoosier Insurance Company. His contract states that he is allowed to put the company's logo on his business cards and the door to his office. This is an example of A. Express authority B. Implied authority C. Lingering implied authority D. Apparent authority

Answer A is correct. Explanation: Express authority is spelled out in an agent's written contract.

Which of the following can bind an insurance company by oral or written agreement? A. Property/Casualty producer B. Life producer C. Broker D. Solicitor

Answer A is correct. Explanation: Property/CasuaIty producers often have authority to bind coverage. Life insurance agents, brokers, and solicitors never have binding authority.

Which of the following risks is most likely to be insurable? A. George is concerned about the financial impact his premature death would have on his family. B. Talyn is concerned about the financial impact large betting losses at the horse track will have on his retirement savings. C. John is concerned about the financial impact on his savings when his car eventually becomes worn enough to need to be replaced. D. Jewel is concerned about the financial impact losing her hat would have on her weekly spending money.

Answer A is correct. Explanation: Purchasing life insurance is a legitimate and practical use of insurance. The other answer choices do not reflect insurable risks.

Which of the following statements is false? A. Replacement is illegal. B. Replacement is the purchase of one life insurance policy to replace another. C. Replacement laws are designed to protect the interests of life insurance purchasers. D. Replacement laws concern themselves with the use of false and misleading statements used in the sale of insurance.

Answer A is correct. Explanation: Replacement transactions are not illegal when they are in the best interests of the insured.

Self-insurance is an example of which method of handling risk? A. Acceptance B. Transference C. Avoidance D. Reduction

Answer A is correct. Explanation: Self-insurance is an example of accepting risk because no other party will be involved if a loss occurs.

Lee applies for a policy, pays the initial premium and receives a conditional receipt on March 14. On March 15, he passes the medical exam with flying colors. On March 16, an undiagnosed brain aneurysm bursts, killing Lee instantly. On March 17, the insurer receives the results of the medical exam, which includes no information about the aneurysm. On March 19, the insurer receives the notice of claim. The insurer will A. Pay the claim. B. Return the premium. C. Pay the claim plus the amount of the first premium. D. Pay the claim minus a processing fee.

Answer A is correct. Explanation: The conditional receipt was based on underwriting acceptance. There would have been no reason for the underwriter to decline this application.

The initial premium payment sent with an application constitutes which part of the formation of an insurance contract? A. Consideration B. Acceptance C. Offer D. Legal purpose

Answer A is correct. Explanation: The premium is the consideration given by the insured in exchange for the insurer's promise to pay if a loss occurs.

Ana wishes to purchase enough insurance to support her husband for the rest of his life if she should die prematurely, and then leave a sizeable inheritance for her children upon his death. Which method should be used to calculate the amount of insurance necessary? A. Capital conservation B. Capital liquidation C. Human life value D. Needs analysis

Answer A is correct. Explanation: The primary concern here is capital conservation.

If an applicant is rated or declined an insurance policy, the reasons for this decision will be explained to the applicant by A. The producer B. The underwriter C. The insurer D. The Insurance Commissioner

Answer A is correct. Explanation: The producer is the person who has direct contact with an applicant, and it is the producer's duty to explain any adverse underwriting decision.

Brit purchases a policy and tells the producer he wants immediate coverage, regardless of the underwriting outcome. To meet Brit's demand, the producer is most likely to A. Accept the premium and set up a temporary insurance agreement. B. Accept the premium and issue an inspection receipt. C. Accept the premium and issue a binding receipt. D. Accept the premium and issue a conditional receipt.

Answer A is correct. Explanation: The temporary insurance agreement provides immediate coverage while the underwriting process is taking place

Under the Financial Modernization Act, an individual with whom a financial institution has an ongoing relationship is a A. Customer B. Consumer C. Client D. Patron

Answer A is correct. Explanation: The term "customer" is used to describe an individual with whom a financial institution has an ongoing relationship.

Applicants for insurance must be given advance notice, including all the following types of information except A. The persons who are collecting information B. The kind of information to be collected C. The sources of information D. The persons with access to personal information

Answer A is correct. Explanation: There is no requirement to provide information about the persons who are collecting the information.

LaKita buys a policy that enables her to adjust the face amount, premium, and length of protection without having to complete a new application or have a new policy issued. LaKita has a(n) A. Adjustable life insurance policy B. Economatic life insurance policy C. Indeterminate premium life insurance policy D. Variable universal life insurance policy

Answer A is correct. Explanation: This is an example of adjustable life insurance.

Suki dies without leaving a will. The distribution of her estate will be handled by a(n) A. Intestate distribution B. Inter vivos distribution C. Testamentary distribution D. Vivos testate distribution

Answer A is correct. Explanation: This is an example of an intestate distribution.

Wilma's husband died 3 years ago, leaving her with two children in grade school. Wilma is most likely in which income period? A. The family dependency period B. The preretirement period C. The retirement period D. The grieving period

Answer A is correct. Explanation: This is an example of the family dependency period.

The incontestable clause is usually in effect after A. 2 years B. 4 years C. 5 years D. 6 years

Answer A is correct. Explanation: This is the period of time that applies in most states.

A is a 25-year-old who drinks very occasionally, does not smoke, and does not have any known health problems. A would probably be classified by an insurer as A. A standard risk B. A substandard risk C. A super standard risk D. A preferred risk

Answer A is correct. Explanation: This person probably falls into the standard risk category.

Al's Print Shop pays a provisional premium at the beginning of the year. At the end of the year, Al's insurer has the right to change that premium by charging more or issuing a refund. Al's policy is funded using which premium option? A. Retrospective premium B. Minimum premium C. Variable premium D. Administrative services only

Answer A is correct. Explanation: Under retrospective premium rating the insurer will adjust the premium at the end of the year based on the amount of actual losses.

Albert's life insurance premium is due on the 10th of the month. Because he gets paid at the end of the month, he has always sent the premium late. The insurer has been accepting his premium this way for 3 years. A new CEO comes in and decides to crack down on late premiums, canceling Albert's policy for nonpayment of premium. Albert contests this decision legally and gets the policy reinstated. The decision to reinstate the policy is an example of A. Estoppel B. Waiver C. Contract of adhesion D. Express authority

Answer A is correct. Explanation: Under the principal of estoppel, a pattern of past behavior may prevent the insurer from exercising a right it might have had if it had exercised it earlier.

Group insurance generally does not require A. Stringent medical underwriting B. A short application form C. A minimum level of participation among the eligible insureds D. A master policyowner to hold the policy

Answer A is correct. Explanation: Underwriters consider the overall group, but there is no individual underwriting of the covered individuals and no medical exams required.

General Electricians offers insurance to its employees. About 80% of the eligible employees are currently covered under the plan. The plan is most likely A. Contributory B. Noncontributory C. Inclusive D. Non-inclusive

Answer A is correct. Explanation: Usually, at least 75% participation is required for contributory groups. Because 100% participation is required for noncontributory groups, this is not a noncontributory group.

Kim is injured in a house fire. When the bills come, the insurance company pays 80% of the cost and Kim pays the rest. This is an example of A. Coinsurance B. A deductible C. Extraneous insurance D. Policy limits

Answer A is correct. Explanation: When coinsurance applies, an insured may be required to pay a percentage of a health insurance cost known as a co-payment.

Which of the following is not an advantage of whole life policies? A. Low initial cost B. Permanent coverage C. Guaranteed cash value D. Non-forfeiture values

Answer A is correct. Explanation: Whole life policies provide level premiums, but term insurance could provide the same coverage at a lower cost.

George has a noncancelable policy. Which of the following may the insurer do? A. Cancel the policy if George fails to pay premiums. B. Increase the premiums on all members of George's class. C. Increase the premiums on George's policy only. D. Cancel the policy if the insurer chooses to no longer do business in George's state.

Answer A is correct. For all types of insurance, the insurer is permitted to cancel a policy for nonpayment of premium.

Among individual policies that include coverage for mental infirmities, the benefit will generally be A. Lower than the benefit for physical infirmities B. Higher than the benefit for physical infirmities C. Unlimited D. The same as the benefit for physical infirmities

Answer A is correct. Many policies place limitations on treatment of mental illness, including lower limits.

The grace period varies according to A. Premium payment frequency B. Premium payment amount C. Method of premium payment D. Type of policy

Answer A is correct. The grace period depends on how frequently premiums are paid.

Which definition of total disability is more favorable to the insured? A. Own occupation. B. Any occupation. C. They are the same in terms of benefits to the insured. D. There is no way to determine from the information provided.

Answer A is correct. The inability to perform the duties of one's own occupation may provide benefits not provided by a policy that pays only for the inability to work in any occupation.

The expenses that must be incurred before major medical benefits begin to be paid is the A. Deductible B. Coinsurance C. Stop-loss limit D. Maximum benefit

Answer A is correct. This is an example of a deductible.

George has a policy that will provide him an income if he is disabled from illness or injury and recuperating at home. George probably has a A. Disability income policy B. Medical expense insurance policy C. Long-term care policy D. Hospital income insurance policy

Answer A is correct. This is an example of a disability income policy.

The benefit that pays the regular total disability benefit during the elimination period when the insured is hospitalized is known as the A. Hospital confinement rider B. Rehabilitation benefit C. Non-disabling injury rider D. Offset rider

Answer A is correct. This is an example of a hospital confinement rider

The Albuquerque HMO's contracting physicians are paid employees working on the staff of the HMO, operating in a clinic setting at the HMO's physical facilities. The Albuquerque HMO operates as a(n) A. Staff model HMO B. Network model HMO C. Group model HMO D. Individual Practice Association Model HMO

Answer A is correct. This is an example of a staff model.

A type of policy covering doctor visits while the insured is in the hospital is A. A basic medical expense policy B. A major medical expense policy C. A comprehensive medical expense policy D. A supplemental medical expense policy

Answer A is correct. This is an example of basic medical expense coverage.

A statement that assures benefits provided under the old policy will continue under the new policy is A. A transfer of benefits statement B. A continuation of benefits statement C. A preexisting conditions coverage statement D. A replacement statement

Answer A is correct. This is the term used for the document that assures that the same benefits will continue.

Which of the following would be most likely to be covered under a medical expense policy? A. Gertrude steps on a rusty nail and requires a tetanus shot. B. Carmelita decides to get a flu shot this year. C. Gary goes to the doctor each year for an annual checkup. D. Earl requires some help getting dressed in the morning.

Answer A is correct. This is the type of accident that is almost always covered. The other answer choices reflect situations for which coverage may be limited or excluded.

Legally, the policy is considered delivered in all of the following situations except: A. When the policy is approved by the company B. When the policy is mailed to the policyowner C. When the policy is turned over to the policyowner D. When the policy is turned over to someone acting on behalf of the policy owner

Answer A is correct. Underwriting approval does not constitute delivery.

The type of policy covering doctor visits while the insured is in the hospital is A. A basic medical expense policy B. A major medical expense policy C. A comprehensive medical expense policy D. A supplemental medical expense policy

Answer A: A basic medical expense policy Explanation: This is an example of a basic medical expense coverage. Basic medical expense coverage is a type of policy that covers doctor visits while the insured is in the hospital.

Which of the following a comprehensive dental policy generally pays For nonroutine treatments? A. A percentage of the reasonable and customary charges from the first dollar B. Nothing C. A percentage of the reasonable and customary charges after a deductible D. The full amount

Answer A: A percentage of the reasonable and customary charges after a deductible Explanation: This is typically how the policy operates. A comprehensive dental policy generally pays a percentage of the reasonable and customary charges after a deductible; For non-routine treatment.

Mathew has a policy that will provide him an income if he is disabled from illness or injury and recuperating at home. Mathew probably has a A. Disability income policy B. Medical expense insurance policy C. Hospital income insurance policy D. Long-term care policy

Answer A: Disability income policy Explanation: This is an example of a disability income policy. Mathew has a disability income policy that will provide him an income if he is disabled from illness or injury and recuperating at home.

The creditor should notify the debtor that he or she might be covered by the group insurance plan A. Even if the creditor pays the full cost of the coverage B. If the creditor chooses to make the disclosure C. If the debtor is to be charged more than half the premium amount D. Only if the debtor is to be charged the full premium for the insurance

Answer A: Even if the creditor pays the full cost of the coverage Explanation: This is true even if the creditor pays all of the premiums. The creditor should notify the debtor that they might be covered by the group insurance plan even if the creditor pays the full cost of the coverage.

Which one of the following would most probably be covered under a medical expense policy? A. Gertrude steps on a rusty nail and requires a tetanus shot. B. Earl requires some help getting dressed in the morning. C. Carmelita decides to get a flu shot this year. D. Gary goes to the doctor each year for an annual checkup.

Answer A: Gertrude steps on a rusty nail and requires a tetanus shot. Explanation: This type of accident is almost always covered. The other answer choices reflect situations for which coverage may be limited or excluded.

The benefits of Maternity must be provided on the same basis as nonmaternity benefits. A. If the policy covers an employee group of 15 or more people B. In all cases C. Only if the insurer chooses to do so D. If the policy provides disability income coverage

Answer A: If the policy covers an employee group of 15 or more people Explanation: This is a requirement in most states. If the policy covers an employee group of 15 or more people, then maternity benefits must be provided on the same basis as nonmaternity benefits.

Max is the beneficiary of his mother's life insurance policy. He wants to make sure the proceeds will last as long as he lives and as long as his wife is alive. Max should select the A. Joint and survivor life income option B. Life income certain option C. Refund annuity option D. Straight life income option

Answer A: Joint and survivor life income option Explanation: The joint and survivor option will pay benefits as long as Max or his wife is alive, regardless of who dies first.

Between individual policies that include coverage for mental infirmities, the benefit will normally be A. Lower than the benefit for physical infirmities B. Unlimited C. Higher than the benefit for physical infirmities D. The same as the benefit for physical infirmities

Answer A: Lower than the benefit for physical infirmities Explanation: Many policies place limitations on the treatment of mental illness, including lower limits. So, the benefit will normally be lower than the benefit of physical infirmities.

Which one of the following is considered a disqualifying event under COBRA? A. The employer ceases to maintain any group health plan. B. The employee is no longer eligible for the group health plan due to a change in the covered classes. C. The employee voluntarily leaves employment with the employer. D. The employee's employment is terminated by the employer.

Answer A: The employer ceases to maintain any group health plan. Explanation: If the employer terminates all group coverages, there are no remaining rights under COBRA. If the employer ceases to maintain any group health plan, it is considered a disqualifying event under COBRA.

If both parents have employer-provided group coverage, the children are covered under A. The plan of the parent whose birthday falls closest to the start of the calendar year B. The plan of the parent whose birthday falls closest to the child's birthday C. The mother's plan D. The father's plan

Answer A: The plan of the parent whose birthday falls closest to the start of the calendar year Explanation: This is an example of how the birthday rule applies. If both parents have employer-provided group coverage, the children are covered under the parent's plan whose birthday falls closest to the start of the calendar year.

Which of the following statements is not true regarding the future increase option rider? A. The rate for additional coverage will be at the insured's attained age at the time of purchase. B. The rider guarantees the ability to increase coverage to a predetermined limit, regardless of change in the insured's income. C. The rider generally limits the number of option dates on which the insured may purchase additional coverage. D. The rider usually limits the amount of additional coverage available at each option date.

Answer B is correct. An increase in the amount of benefits must be warranted by an increase in the insured's income.

Which of the following statements is true regarding social security disability benefits? A. For benefits to be paid, the disability must be permanent and expected to end in death. B. For benefits to be paid, the disability must prevent the individual from being able to perform any substantial gainful work existing in the national economy. C. Most of the people who apply for disability under social security are able to get benefits. D. Social security provides a fairly liberal definition of total disability tn keen individuals able to spend and support the national economy.

Answer B is correct. Benefits are provided only if the individual is prevented from performing any gainful work.

Which of the following is not a required provision under the Uniform Provisions Model Act? A. Grace period B. Change of occupation C. Time of payment of claims D. Proof of loss

Answer B is correct. Change of occupation is an optional, not a required, provision.

Comprehensive dental policies A. Limit benefits to specified maximums per procedure B. Work much the same way as comprehensive medical expense coverage C. Never require deductibles D. Seldom require coinsurance

Answer B is correct. Comprehensive dental policies are designed much like comprehensive medical policies.

Alice decides to buy a policy. She pays the first premium and the producer issues a receipt and tells her that she is covered immediately, until she is notified that the policy is either issued or declined. What kind of receipt has Alice received? A. Conditional receipt B. Binding receipt C. Inspection receipt D. Premium receipt

Answer B is correct. Explanation: A binding receipt provides immediate coverage.

Jimmy's Print Shop and Bryan's Boutique join to form a trust to provide insurance to their employees. This type of group is called A. An employee group B. A multiple employer trust C. A Taft-Hartley trust D. A labor group

Answer B is correct. Explanation: A multiple employer trust (MET) exists when individual employers join together to provide group insurance to their employees.

Hoosier Insurance Company is owned by the policyholders. Hoosier Insurance is a A. Stock insurer B. Mutual insurer C. Nonprofit insurer D. Fraternal insurer

Answer B is correct. Explanation: A mutual company is owned by its policyholders. A stock company is owned by its shareholders.

When representing an insurer, a producer acting as an agent has a responsibility to act with the degree of care that A. A licensed insurance producer would apply under similar circumstances B. A reasonable person would apply under similar circumstances C. A lawyer would apply under similar circumstances D. Any person would apply under similar circumstances

Answer B is correct. Explanation: A producer has a duty to act with a reasonable degree of care when representing an insurer.

The type of estate transfer made while the estate owner is still alive is called a(n) A. Inter venous transfer B. Inter vivos transfer C. Testamentary transfer D. Trustee transfer

Answer B is correct. Explanation: A transfer made while the estate owner is still alive in an inter vivos transfer.

Ken has paid only four premiums on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million dollars to cover his treatment and a lengthy stay in intensive care. This is an example of A. Contract of adhesion B. Aleatory contract C. Unilateral contract D. Utmost good faith

Answer B is correct. Explanation: An aleatory contract is one that depends on chance or an uncertain outcome. Ken may have received far more in benefits than he paid as premiums, but others who pay premiums may never have a loss and never receive even a dollar in benefits.

Janice and Julie are identical twins who both work as teachers and live next door to each other. They each purchase a $75,000 whole life policy at the same time. Janice chooses continuous premium whole life, and Julie chooses a 20-pay whole life policy. Which sister is probably paying a higher premium? A. Janice is probably paying more. B. Julie is probably paying more. C. They are probably paying the same amount. D. It is not possible to determine from the information provide

Answer B is correct. Explanation: Because Julie decided to pay her entire policy premium in a shorter period of time, her premiums will be higher.

The ZYX Insurance Company is incorporated in Alabama. While doing business in Texas, it is A. A domestic insurer B. A foreign insurer C. An alien insurer D. An export insurer

Answer B is correct. Explanation: Because ZYX is incorporated in Alabama, it is a foreign insurer within the jurisdiction of Texas.

Roger refuses to travel by airplane. Roger is managing the risk of being in a plane crash by A. Reduction B. Avoidance C. Transference D. Retention

Answer B is correct. Explanation: By not even getting on an ariplane Roger has avoided the risk he is afraid to take.

Gina accepts the initial premium when she sells an insurance policy and sends it to the company with the application. Nothing in her contract mentions handling of initial premiums. This is an example of A. Express authority B. Implied authority C. Lingering implied authority D. Apparent authority

Answer B is correct. Explanation: Implied authority is not expressly stated in an agent's contract but it is actual authority related to common business practices, such as accepting premiums for the insurer.

Which of the following is not a requirement for obtaining a producer's license in most states? A. Have not committed any act that is grounds for denial or suspension of an insurance license B. Be at least 19 years of age C. Pay the required fees D. Complete any required pre-licensing course

Answer B is correct. Explanation: In nearly all states the minimum age to qualify for a license is 18 years.

How long is the typical grace period? A. 10 days B. 30 days C. 60 days D. 90 days

Answer B is correct. Explanation: It is 30 or 31 days in most cases.

Which of the following is not likely to be contained in an MIB report? A. Mr. Jones reported a heart condition on an insurance application two years ago. B. Mr. Smith was turned down for insurance by two companies in the past year. C. Mr. Green's information has been requested 14 times in the previous two years. D. Mr. Brown reported a hobby as a flight instructor a year ago.

Answer B is correct. Explanation: MIB reports do not include any information about the action taken by insurers.

To be certain the insurer has the money available to pay claims as they arise, it is required to maintain A. A risk-based capital ratio B. Reserves C. Expense ratios D. Reinsurance

Answer B is correct. Explanation: Reserves are the funds insurers put aside to cover claims and other contingencies.

Shane is a master carpenter in business for himself. His business is probably operated as A. A corporation B. A sole proprietorship C. A partnership D. A limited liability company

Answer B is correct. Explanation: Shane has no partners and probably has no need to incorporate.

Life insurance that requires no medical exam and asks only basic medical questions is known as A. Simplified policy B. Simplified issue C. Simplified risk D. Preferred risk

Answer B is correct. Explanation: Simplified issue life insurance is a form of coverage that does not require a medical exam and asks only basic medical questions on the application.

Which of the following individuals is least likely to be granted a temporary license? A. Georgia, whose insurance producer-husband passed away unexpectedly, leaving her with a business to either learn or sell B. Kim, who wants to try selling insurance on a temporary basis before investing the time and money into being licensed C. Dave, an employee of a business entity, when the individual designated as the licensee in the business entity is disabled in an auto accident and unable to return to work for several months D. Lee, whose insurance producer-fiancée was recalled to active duty by the Navy and appointed Lee her designee.

Answer B is correct. Explanation: Temporary licensing is not intended to allow people to test the water before they are qualified to serve the public interest. Temporary licenses are commonly granted when a producer is no longer able to conduct business due to death, disability, or active military service.

Carol applies for a life insurance policy and pays the initial premium. Carol has A. Accepted an offer from the insurer B. Made an offer to the insurer C. Accepted a counter offer from the insurer D. Made a counter offer to the insurer

Answer B is correct. Explanation: The act of submitting an application with a premium payment is an offer that is still subject to acceptance by the insurer.

The failure to disclose known facts is A. Misrepresentation B. Concealment C. Fraud D. Impersonation

Answer B is correct. Explanation: The failure to disclose known facts is concealment. Intentionally giving false answers or misstating facts would be misrepresentation, and possibly fraud.

Which of the following is considered an unfair claims practice? A. Splitting a commission with a prospect B. Failing to affirm or deny coverage within a reasonable time after receiving proof of loss C. Convincing a policy owner to lapse or surrender an existing policy in order to sell another policy D. Making any oral or written statement that is false, maliciously critical, or calculated to injure a competing producer

Answer B is correct. Explanation: The other practices are all unfair trade practices, but they are not related to claims.

Under the Financial Modernization Act, an individual about whom a financial institution collects any information is a A. Customer B. Consumer C. Client D. Patron

Answer B is correct. Explanation: The term "consumer" is used to describe a person who is the subject of information gathering.

What type of policy combines whole life insurance with level term coverage? A. Family stability policy B. Family maintenance policy C. Family income policy D. Family protection policy

Answer B is correct. Explanation: This is an example of a family maintenance policy.

Harry decides to borrow some money from a bank and use life insurance cash values as collateral. What type of assignment will Harry probably use to secure the loan? A. Voluntary assignment B. Partial assignment C. Complete assignment D. Absolute assignment

Answer B is correct. Explanation: This is an example of a partial assignment.

Carol has a policy on her ex-husband that she wants to give to their daughter. Carol no longer wants any control over this policy. What type of assignment will Carol probably use to accomplish this? A. Collateral assignment B. Voluntary assignment C. Partial assignment D. Conditional assignment

Answer B is correct. Explanation: This is an example of a voluntary assignment.

An insurance producer analyzed Bonita's life insurance needs, taking into account Bonita's net annual salary, her expenses, her current age, and depreciation of the dollar over time. This producer was using A. The analytical approach to needs analysis B. The human life value approach to needs analysis C. The needs approach to needs analysis D. The planning approach to needs analysis

Answer B is correct. Explanation: This is an example of using the human life value approach.

PDQ Printing pays for all the routine claims. PDQ's insurer pays for excess or unexpected claims beyond a specified trigger point. PDQ's policy is funded using which premium option? A. Retrospective premium B. Minimum premium C. Variable premium D. Administrative services only

Answer B is correct. Explanation: Under a minimum premium plan the employer selfinsures the normal and expected claims up to a given amount and the insurer funds only the excess amounts.

An insurer might require personal delivery A. To ensure the policy goes to the right person B. For verification of the continued good health of the insured at the time of delivery C. To ensure the correct policy is delivered D. To verify information listed on the application

Answer B is correct. If a verification of good health is required, the agent will have to personally deliver the policy.

Cindy has a claim for $2,000, and a past due premium of $200. The insurer will A. Refuse to pay the claim until the past due premium is paid. B. Pay the claim minus the past due premium. C. Pay the claim and forgive the past due premium. D. Pay the claim and bill Cindy for the past due premium.

Answer B is correct. The insurer has the right to deduct past due premiums from any claim settlements.

Gwyneth's HMO requires that she receive health care services from a specified, limited number of health care providers chosen by the HMO. Gwyneth's HMO is A. Open-panel B. Closed-panel C. Choice-panel D. Guarded-panel

Answer B is correct. This is an example of a closed-panel HMO structure.

Julia has a policy that will pay any expenses that she incurs due to inhospital medical treatment, as well as some of the expenses she incursnon an outpatient basis. Julia probably has a A. Disability income policy B. Medical expense insurance policy C. Long-term care policy D. Hospital income insurance policy

Answer B is correct. This is an example of a medical expense policy.

Star HMO contracts with 14 medical groups to increase accessibility to providers as a convenience for subscribers. Each of the medical groups is paid on a capitation basis to provide services to Star's subscribers. The Star HMO operates as a(n) A. Staff model HMO B. Network model HMO C. Group model HMO D. Individual Practice Association Model HMO

Answer B is correct. This is an example of a network model.

The method of payment in which a provider is paid a particular fee monthly for each subscriber is known as A. Indemnity B. Capitation C. Fee-for-service D. Managed care

Answer B: Capitation Explanation: A capitation fee is a payment method in which a provider is paid a particular fee monthly for each subscriber.

Jasmine has chosen to receive the payout from her husband's life insurance policy to receive an income for the next 15 years. At the end of that time, the entire proceeds from the policy will have been paid out. Jasmine has selected the A. Interest-only option B. Fixed period option C. Fixed amount option D. Life income option

Answer B: Fixed period option Explanation: This is an example of a fixed period option. Jasmine has selected the fixed period option to receive the payout from her husband's life insurance policy.

Generally, the amount of coverage available under a credit insurance policy is restricted to A. The total amount of the loan covered B. The total amount of indebtedness at any given point C. No limit D. The amount the policy is written for

Answer B: The total amount of indebtedness at any given point Explanation: By law, the amount of insurance at any given time may not exceed the outstanding debt. The amount of coverage available under a credit insurance policy is restricted to the total amount of indebtedness at any given point.

Nonfinancial regulatory activities of an insurance department fall under the broad heading of A. Market regulation B. Conduct regulation C. Market conduct D. Insurance conduct

Answer C is correct. Explanation: "Market conduct" is a term that means nonfinancial activities and practices that may be investigated and regulated by the insurance department.

Sara is hired to work at a restaurant. She is not eligible to join the group insurance plan for 30 days. This is an example of A. The introductory period B. The weeding out period C. The probationary period D. The eligibility period

Answer C is correct. Explanation: A probationary period is an initial period of time a person must work before being eligible for group insurance.

Minimum deposit policies have become less popular due to tax regulations, but they can still be used as long as a certain number of the initial payments are made from sources other than cash value. How many payments must be made from other sources? A. 2 of 7 B. 3 of 7 C. 4 of 7 D. 5 of 7

Answer C is correct. Explanation: At least four payments must be made from sources other than policy loans. This is an IRS rule.

Chianna becomes injured in a car accident caused when she took her eyes off the road to answer her cell phone. This is an example of a A. Physical hazard B. Moral hazard C. Morale hazard D. Legal hazard

Answer C is correct. Explanation: Carelessness is an example of a morale hazard.

In many jurisdictions, testing for the presence of HIV infection requires all the following except A. A signed consent form before the blood test is performed B. A signed release form whenever test results will be disclosed to any party who is not otherwise entitled to the information C. Medical oversight of any testing by a specialist in HIV research D. Confidentiality of results in the absence of a signed release form

Answer C is correct. Explanation: Consent forms, release forms, and confidentiality of results are required. There is no requirement for medical oversight by a research specialist.

A person licensed as an insurance producer in another state who moves to this state has how long after establishing legal residence to become a resident licensee without taking pre -licensing education or an examination? A. 30 days B. 60 days C. 90 days D. 120 days

Answer C is correct. Explanation: If the person does not apply for a resident license within 90 days, the exemption is lost and the individual would be subject to Pre -licensing education and examination requirements.

A social device for spreading the chance of financial loss among a large number of people is the definition of A. Hazard B. Risk C. Insurance D. Peril

Answer C is correct. Explanation: Insurance is a social device for spreading the chance of loss among a large number of people.

Which of the following would not be an example of insurable interest? A.Jose wishes to take out a life insurance policy on his own life to provide for his family in the event of his death. B. Ana wishes to take out a life insurance policy on her mother to ensure that funeral costs will be covered when the time comes. C. Juan wishes to take out a life insurance policy on his neighbor because his neighbor is a careless driver who Juan thinks is likely to die in a car accident. D. Carla wishes to take out a life insurance policy on her best salesperson to protect the business from lost sales in the event of the salesperson's death.

Answer C is correct. Explanation: Juan has no personal or financial interest is his neighbor and is simply gambling. This is not an example of insurable interest, but all of the other answer choices are.

A policy may be issued all of the following ways except A. As applied for B. As a modified or amended policy C. As an exchange policy, covering someone other than the original applicant D. With a waiver excluding death by a certain cause wing are true about annuities except

Answer C is correct. Explanation: Life insurance policies cannot be exchanged to cover a different insured.

Which of the following does not have an impact on insurance premium rates? A. Mortality or morbidity B. Interest rates C. Producer certification D. Expenses

Answer C is correct. Explanation: Mortality or morbidity, interest rates, and expenses all influence insurance premiums. A producer's status has no effect on insurance rates.

Most insurance regulation takes place at the A. International level B. National level C. State level D. Local level

Answer C is correct. Explanation: Most insurance regulation does take place at the state level, although some federal regulations apply.

A type of life insurance that is usually written for small amounts, and that requires frequent premium payments collected by the agent, is called A. Group life insurance B. Key executive life insurance C. Industrial life insurance D. Credit life insurance

Answer C is correct. Explanation: Small amounts of insurance with frequent premium payments that are collected by the agent are features of industrial life insurance.

The social security program provides all of the following types of benefits except A. Survivors benefits B. Disability benefits C. Deferred compensation benefits D. Retirement income benefits

Answer C is correct. Explanation: Social security provides survivor, disability, and retirement benefits. Deferred compensation is a special type of employer benefit designed for company executives.

Which of the following group underwriting characteristics is generally required by law? A. Employer control B. Predetermined coverage amount C. Nondiscriminatory classifications D. Insurance incidental to group

Answer C is correct. Explanation: State law requires nondiscriminatory classifications. The other answer choices are examples of insurance company requirements.

The Commissioner of Insurance has all the following powers except A. Conducting investigations and examinations B. Making reasonable rules and regulations C. Promulgating insurance law Approving insurance policy forms sold within the state

Answer C is correct. Explanation: The Commissioner has no authority to make insurance laws, but does have authority to make rules and regulations, to conduct investigations and examinations, and to approve or disprove policy forms.

Which of the following does not contain provisions protecting individual privacy? A. Gramm-Leach-Bliley Act B. Privacy Act of 1974 C. McCarran-Ferguson Act D. Fair Credit Reporting Act

Answer C is correct. Explanation: The McCarran-Ferguson Act exempted insurance companies from federal antitrust laws and established the right of states to regulate insurance. All the other answer choices involve laws that have provisions protecting individual privacy.

Carl purchased a life insurance policy when he was 44. The insurer accidentally recorded his age as 42. When the mistake is discovered in a review of the files 5 years later: A. The policy will be canceled due to misrepresentation. B. The policy will not change, because the incontestable period will have passed. C. Carl will be charged the difference in premium between his actual age and his stated age, along with the interest on the back payments. D. Carl will be credited the difference in premium between his actual age and his stated age, along with the interest on the back payments.

Answer C is correct. Explanation: The adjustment will be made based on Carl's true age.

Rich applies for a policy, pays the initial premium, and receives a binding receipt on Friday, September 1. On Monday, September 4, the underwriting department decides not to issue the policy and places the file in a pile for notification letters to be sent out at the end of the week. On Wednesday, September 6, Rich is killed in a auto accident. On Thursday, September 7, the insurer receives the notice of claim. The insurer will A. Return the premium and not pay the claim, because the underwriting decision had been made. B. Return the premium and not pay the claim, because death occurred before the policy was issued. C. Pay the claim, because a binding receipt assures coverage until the potential insured is notified of a rejection. D. Pay the claim, because any receipt assures coverage until the potential ir notified of a rejection.

Answer C is correct. Explanation: The binding receipt guarantees coverage until the applicant is notified otherwise.

Which of the following statements describe the best use of a producer's time when personally delivering the policy? A. Mr. Jones delivers a policy and makes a special point of finding out how the insured's son performed in the gymnastics competition. B. Ms. King delivers a policy and reiterates the same sales pitch she used to make the initial sale. C. Mrs. Ritley delivers a policy and restates the advantages of the policy and how it can be amended to meet future insurance needs. D. Mr. Bourne delivers a policy early in the morning, before the client is home, so that he can simply leave the policy in the mailbox.

Answer C is correct. Explanation: The other answer choices do not reflect good use of the producer's time.

Which of the following should not be taken into account when a producer makes recommendations as to the amount and type of insurance needed by an individual? A. How much premium can the individual afford to pay? B. Should the premium be level, increasing, or decreasing? C. How much commission does the product offer? D. Is the individual insurable?

Answer C is correct. Explanation: The producer is supposed to serve the client's needs. The amount of commission should not be a factor in any recommendations.

Which of the following is true about an automatic premium loan provision? A. It applies only to term policies. B. It is automatically included in all policies. C. It keeps the policy in force when it would otherwise lapse due to nonpayment of premiums. D. Money used to pay premiums is treated as a partial withdrawal and not subject to interest charges.

Answer C is correct. Explanation: The provision is designed to keep a policy in effect when cash value is available to pay the premium.

Consumer reporting agencies are prevented from putting information in their reports about all the following except A. Bankruptcies over 14 years old B. Suits and judgments over 10 years old if the statute of limitations has not expired C. Arrests, indictments, or conviction of crime reports D. Paid tax liens or accounts placed for collection more than 7 years Previous

Answer C is correct. Explanation: There are no time limitations on reporting arrests or criminal convictions.

Which of the following statements is true about submitting the application, premium, and other forms to the insurance company? A. The application and any questionnaires must be signed by the beneficiary. B. The producer must keep accurate records of all transactions involving the applicant's money. C. Because coverage is effective immediately, it is not necessary to send the forms to the home office underwriter more often than weekly. D. A life insurance policy may be issued only as applied for or rejected.

Answer C is correct. Explanation: This is a common business practice.

What type of policy combines whole life insurance with decreasing term coverage? A. Family stability policy B. Family maintenance policy C. Family income policy D. Family protection policy

Answer C is correct. Explanation: This is an example of a family income policy.

The type of estate transfer made after the estate owner dies is called a(n) A. Inter venous transfer B. Inter vivos transfer C. Testamentary transfer D. Trustee transfer

Answer C is correct. Explanation: This is an example of a testamentary transfer.

Christy has a term policy that will enable her to switch over to a whole life policy at any time during the first half of the term without providing evidence of insurability. What type of policy is this? A. Level term insurance B. Renewable term insurance C. Convertible term insurance D. Reentry term insurance

Answer C is correct. Explanation: This is an example of convertible term insurance.

What type of insurance is designed to provide life insurance protection for only a limited period of time? A. Whole life insurance B. Variable life insurance C. Term life insurance D. Universal life insurance

Answer C is correct. Explanation: This is an example of term insurance.

An insurance producer analyzed Dwight's life insurance needs, taking into account the amount of money Dwight anticipated needing for his funeral and the amount of income that would be required to maintain his family's standard of living in the event of his death, including projected college costs and the costs of supporting his spouse. This producer was using A. The analytical approach to needs analysis B. The human life value approach to needs analysis C. The needs approach to needs analysis D. The planning approach to needs analysis

Answer C is correct. Explanation: This is an example of using the needs approach to needs analysis.

Which element is not necessary for the formation of a valid contract? A. Consideration B. Competent parties C. Written document D. Legal purpose

Answer C is correct. Explanation: Valid contracts do not need to be in writing. Oral contracts are legally binding.

The baker's union and the butcher's union worked together to form a trust to provide insurance to their employees. This type of group is called A. An employee group B. A multiple employer trust C. A Taft-Hartley trust D. A labor group

Answer C is correct. Explanation: When one or more labor unions or associations form a trust it is known as a Taft-Hartley trust.

Full disability benefits will generally be paid for the lifetime of the insured if total disability due to sickness begins at age A. 45 or earlier B. 50 or earlier C. 55 or earlier D. 65 or earlier

Answer C is correct. Full lifetime benefits are usually provided if the disability begins at age 55 or earlier. At later ages, percentage reductions in the benefits apply.

Restrictions applying to the replacement of Medicare supplement policies A. Are often less restrictive than regulations applying to the replacement of other policies B. Are generally the same as regulations applying to the replacemen of other policies C. Are often more restrictive than regulations applying to the replacement of other policies D. Are prohibited entirely by federal law

Answer C is correct. Requirements related to replacing Medicare supplement policies are more restrictive in order to protect senior citizens.

CeeCee's policy is guaranteed renewable. Which of the following may the insurer not do? A. Refuse to renew the policy if CeeCee fails to pay the premium. B. Increase the premiums on all members of CeeCee's class. C. Increase the premiums on CeeCee's policy only. D. Refuse to renew the policy after CeeCee reaches a specified age.

Answer C is correct. The insurer is not permitted to increase the premium for an individual policy.

The maximum time during which suit can be filed is A. 1 year after written proof of loss is furnished B. 2 years after written proof of loss is furnished C. 3 years after written proof of loss is furnished D. 4 years after written proof of loss is furnished

Answer C is correct. The limit on filing suit is 3 years.

Mike allows his policy to lapse and then applies for reinstatement using the company's required application. The company does not inform Mike either that the policy has been accepted or that the policy is being rejected. At what point can Mike consider the policy reinstated? A. Not until the insurer notifies him that it has been reinstated B. As soon as the application has been submitted C. After 45 days D. After 90 days

Answer C is correct. The policy provisions state that reinstatement may be assumed after 45 days if there has been no notification to the contrary.

When a health insurance policy becomes effective, unless it is canceled, it will stay in force A. For 1 year B. For 6 months C. The length of the term D. Indefinitely

Answer C is correct. The policy will stay in force for the length of the term for which a premium has been paid.

Maternity benefits must be provided on the same basis as nonmaternity benefits A. In all cases B. Only if the insurer chooses to do so C. If the policy covers an employee group of 15 or more people D. If the policy provides disability income coverage

Answer C is correct. This is a requirement in most states.

A deductible that runs between the first dollar coverage of a basic policy and the comprehensive coverage of a supplemental policy is known as a A. Stop-loss deductible B. Capitated deductible C. Corridor deductible D. Limited deductible

Answer C is correct. This is an example of a corridor deductible.

A hospice A. Treats diseases only, not accident-related medical issues B. Controls pain and suffering and treats illness C. Alleviates pain and suffering among terminally ill patients until their death, but does not attempt to cure D. Works with medical professionals when they become ill, to provide treatment in a private setting away from lay patients

Answer C is correct. This is an example of a hospice environment.

No loss-no gain legislation A. Requires a replacing policy to have exactly the same premium as the policy it replaces B. Requires a replacing policy to have exactly the same limits of coverage as the policy it replaces C. Requires a replacing policy to continue to pay claims ongoing under the policy it replaces D. Requires a replacing policy to continue to use the same producer to manage the policy as the policy it replaces

Answer C is correct. To avoid gaps in coverage the new policy has to cover claims that would have been covered by the previous policy.

All of the following are examples of managed care plans except A. Health maintenance organizations B. Preferred provider organizations C. Indemnity arrangements D. Point-of-service plans

Answer C is correct. Traditional insurance plans are indemnity arrangements and not a form of managed care.

Brandon injures his back working at a warehouse. Six months later, he is well enough to go back to work lifting boxes. Two weeks into working, however, he strains his back again and has to go back on bed rest. This is an example of a A. Redundant disability B. Residual disability C. Recurrent disability D. Reduced disability

Answer C is correct. When a disabling injury is related to an earlier injury, it is an example of a recurrent disability.

Which of the following will not make fully deductible contributions to an IRA? A. People who are not eligible for company retirement plans B. People who do participate in company retirement plans and who earn less than specified amounts C. Anybody with earned income above the specified income limits D. People who do not participate in company retirement plans

Answer C: Anybody with earned income above the specified income limits Explanation: If earned income exceeds a specified amount, limitations apply. Anybody with earned income above the specified income limits will not make fully deductible contributions to an IRA.

Poly has a policy that will pay any expenses that she incurs due to in -hospital medical treatment, and some of the expenses she incurs on an outpatient basis. Poly probably has a A. Long-term care policy B. Disability income policy C. Medical expense insurance policy D. Hospital income insurance policy

Answer C: Medical expense insurance policy Explanation: This is an example of a medical expense policy. Poly has a medical expense policy that will pay any expenses that she incurs due to in-hospital medical treatment and some of the expenses she incurs daily.

A method of payment in which a provider is paid a specific fee monthly for each subscriber is known as A. Indemnity B. Fee-for-service C. Managed care D. Capitation

Answer D is correct. A capitation fee is a fixed amount paid to the provider for each patient.

Kim is required to take a $2,000 minimum annual distribution from her IRA. She fails to comply and takes only a $1 ,000 distribution. Because of this failure, Kim will be subject to a A. Deductible excise tax of $1 ,000 B. Nondeductible excise tax of $1 ,000 C. Deductible excise tax of $500 D. Nondeductible excise tax of $500

Answer D is correct. A non-deductible excise tax equal to 50% of the difference between the amount withdrawn and the amount required applies.

Carmen gets her health insurance policy on May 1, and on May 3 she decides she doesn't want it and returns it to the company. On May 6, she is hit by a car. The company A. Will pay any resulting claim, because she was injured within the 10-day free-look period. B. Will pay any resulting claim only if the premium has not yet been returned to Carmen. C. Will pay any resulting claim minus the amount of the returned premium. D. Will only return any premium Carmen has paid and not any resulting claim.

Answer D is correct. Carmen canceled the contract by returning it, and the fact that she later had an accident and regretted her decision has no legal weight.

What type of policy combines whole life insurance on one family member with term coverage on other family members? A. Family stability policy B. Family maintenance policy C. Family income policy D. Family protection policy

Answer D is correct. Explanation: A family protection policy combines whole life insurance for the policyowner with term coverage for other family members.

Which of the following would not be financed by using life insurance? A. A buy-sell agreement B. A Section 303 stock redemption C. A cross-purchase agreement D. A split-dollar plan

Answer D is correct. Explanation: A split-dollar plan is a method of purchasing life insurance, rather than a plan financed using life insurance.

Mathematicians who study and compile statistical data regarding exposure and risks for insurance companies are called A. Solicitors B. Insuraries C. Underwriters D. Actuaries

Answer D is correct. Explanation: Actuaries study and analyze statistical data in order to project losses and develop premium rates.

Which of the following are costs associated with death? A. Doctor or hospital bills from a final illness or accident B. Paying off debts such as credit cards or other loans C. Taxes D. All of the above

Answer D is correct. Explanation: All of the choices are costs that might be associated with death.

Tom has always made a practice of having his policyholders mail their premium checks directly to him, and forwarding them on to the insurer, so that he is aware of anyone missing a payment and can contact policy -owners directly if that should happen. His contract does not allow this, but the insurer is aware of the practice and has not asked him to stop. This practice is an example of A. Express authority B. Implied authority C. Lingering implied authority D. Apparent authority

Answer D is correct. Explanation: Apparent authority is the authority an agent appears to have because of past actions that have not been challenged by the insurance company.

Ken has terminal cancer and wants to access the death benefit of his life insurance policy to pay medical expenses. How might he be able to do this? A. He won't be able to access the policy funds until after his death. B. He may access the funds through accelerated benefits. C. He may access the funds through a viatical settlement. D. He may access the funds either through a viatical settlement or by using the accelerated benefits provision.

Answer D is correct. Explanation: Both options make funds available prior to death.

The insurer looks at Carol's application and decides to offer Carol a modified policy, including an exclusion Carol did not request. The insurer has A. Accepted an offer from Carol B. Made an offer to Carol C. Accepted a counter offer from Carol D. Made a counter offer to Carol

Answer D is correct. Explanation: By not accepting the initial offer and offering alternative terms, the insurer has made a counter offer.

Which of the following people would be required in most states to obtain an insurance license? A. Rachel, a salaried employee of a large department store chain, who counsels her employer on insurance-related matters B. Ross, who works in an advertising agency, supervising the advertising business of a major insurer C. Phoebe, who works as an underwriter for a small insurer D. Chandler, who sells insurance to businesses only

Answer D is correct. Explanation: Chandler is the only one actively selling insurance. In each of the other cases the individual is not acting as an insurance producer.

Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known as A. Insurance Associations B. Department Associations C. Liability Associations D. Guaranty Associations

Answer D is correct. Explanation: Guaranty associations were established to protect policy holders and claimants in the event that an insurer becomes financially impaired or insolvent.

What provision might eliminate all future premiums in the event of total and permanent disability? A. Guaranteed insurability B. Return of premium C. Accidental death D. Waiver of premium

Answer D is correct. Explanation: If a waiver of premium provision applies, no future premium payments will be required if the insured becomes totally and permanently disabled.

Kelsy's Printing funds all the claims in a year, regardless of the amount of the claim. Kelsy's insurer manages the paperwork for the claims. What option is Kelsy's Printing using? A. Retrospective premium B. Minimum premium C. Variable premium D. Administrative services only

Answer D is correct. Explanation: Kelsy's is self-funding losses and using an insurer only for administrative services.

John fills out an application for a life insurance policy to insure his own life, and for which he plans to pay the premiums. John is playing all the following roles except A. Applicant B. Policy-owner C. Insured D. Beneficiary

Answer D is correct. Explanation: Obviously John is the applicant and the insured. Because he will pay the premiums, he is also the policy-owner.

An organization that establishes model laws that are often adopted by states with only slight differences is the A. National Association of Insurance Companies B. National Association of Independent Commissioners C. National Association of Insurance Consultants D. National Association of Insurance Commissioners

Answer D is correct. Explanation: The NAIC is the national organization that drafts and proposes model laws to the states.

The United Auto Workers union provides insurance to its employees. This type of group is called A. An employee group B. A multiple employer trust C. A Taft-Hartley trust D. A labor group

Answer D is correct. Explanation: This is an example of a labor union group.

Tim has a life insurance policy that will pay $100,000 if he dies before age 65 and $50,000 if he dies after age 65. Tim probably has a A. Juvenile policy B. Minimum deposit policy C. Joint life policy D. Multiple protection policy

Answer D is correct. Explanation: This is an example of a multiple protection policy.

A flexible premium, adjustable benefit life insurance contract that accumulates cash values is called A. Whole life insurance B. Variable life insurance C. Term life insurance D. Universal life insurance

Answer D is correct. Explanation: This is the definition of universal life insurance.

Gerald has a state insurance license but no other training or licenses. Gerald can sell any of the following except a(n) A. Adjustable life insurance policy B. Economatic life insurance policy C. Indeterminate premium life insurance policy D. Variable universal life insurance policy

Answer D is correct. Explanation: To sell this type of contract a producer must pass an NASD exam and be registered to sell securities.

Marie has worked at the restaurant for more than a year, but she never participated in the insurance program. She decides that it is now time to join. She is required to undergo a medical exam because she is signing up after A. The probationary period has expired. B. The weeding out period has expired. C. The introductory period has expired. D. The eligibility period has expired.

Answer D is correct. Explanation: Under contributory plans, if an employee does not enroll during the initial eligibility period the insurer may require a medical exam.

Health insurance coverage never applies until A. The policy is delivered. B. An underwriting decision is made. C. The application is reviewed by underwriting. D. The insured has paid for the policy.

Answer D is correct. Health insurance will not take effect until the insured has paid the premium.

If Lois cancels her health insurance policy, the insurer will A. Issue a pro rata refund of all of the unearned premium. B. Issue a pro rata refund of most of the unearned premium. C. Issue a short-rate refund of all of the unearned premium. D. Issue a short-rate refund of most of the unearned premium.

Answer D is correct. It is standard procedure when an insured cancels for the insurer to issue a short-rate refund and retain a portion of the unearned premium to cover its expenses.

Most often, LTD policies provide benefits A. For 2 years B. For 5 years C. To age 60 D. To age 65

Answer D is correct. Most LTD policies do provide benefits until age 65.

The Gargantuan Garage company funds its own claims, but it uses another company to make sure the plan is run correctly, acting as a liaison between the insurer and the employer. This arrangement is probably a A. Cafeteria plan B. Health Maintenance Organization C. Multiple employer trust D. Third-party administrator

Answer D is correct. The garage is using a third-party administrator.

Carmen falls and breaks her leg, incurring $2,000 in medical expenses. Her policy pays the entire amount. Carmen has a A. Hospital expense policy B. Surgical expense policy C. Medical expense policy D. Policy with first dollar coverage

Answer D is correct. This is an example of first dollar coverage.

A combination of basic medical expense coverage and major medical expense coverage is A. A basic medical expense policy B. A major medical expense policy C. A comprehensive medical expense policy D. A supplemental medical expense policy

Answer D is correct. This is an example of supplemental major medical coverage.

The dollar limit beyond which the insurer no longer participates in payment of expenses is the A. Deductible B. Coinsurance C. Stop-loss limit D. Maximum benefit

Answer D is correct. When the maximum benefit amount has been paid, the insurer has no further obligations.

A deduction that runs between a basic policy's first dollar coverage and the comprehensive coverage of a supplemental policy is known as a A. Stop-loss deductible B. Capitated deductible C. Limited deductible D. Corridor deductible

Answer D: Corridor deductible Explanation: This is an example of a corridor deductible. A deduction that runs between a basic policy's first dollar coverage and the comprehensive coverage of a supplemental policy is known as a Corridor deductible.

All of the following is generally needed to cover in vision care insurance except A. Costs of prescription lenses B. Costs of contact lenses C. Eye examinations D. Injury to the eye

Answer D: Injury to the eye Explanation: Vision care insurance covers routine examinations and maintenance. Accidental injuries are covered by regular forms of health insurance.

Which of the following statement is correct about paid-up additions? A. The operating expenses of putting this coverage in force are higher than original policy expenses. B. The single premium for the added coverage will be based on the insured's original age. C. The additional protection is almost always restricted to term insurance. D. The dividends are used to purchase additional insurance protection.

Answer D: The dividends are used to purchase additional insurance protection. Explanation: With this option, additional amounts of insurance are purchased. The dividends are used to purchase additional insurance protection in paid-up additions.

Which of the following terms means that an insurance contract is dependent on an uncertain outcome? A. Valued B. Aleatory C. Unilateral D. Adhesion

Answer B is correct. Explanation: An aleatory contract is one that depends on chance or an uncertain outcome. This is the case with insurance because a loss may or may not occur.

Workers compensation programs provide each of the following types of benefits except A. Death benefits B. Medical benefits C. Disability benefits D. Retirement benefits

Answer D is correct. Explanation: Workers compensation programs provide death benefits, medical benefits, and disability benefits. They do not provide retirement benefits.

Each of the following is true about taxes and life insurance except A. Dividends paid to a policyholder are subject to income taxes. B. Proceeds paid to an estate are subject to estate taxes. C. Premiums paid for individual life insurance are not tax-deductible. D. On surrender of a policy any cash value received in excess of the premiums paid is taxable as current income.

Answer A is correct. Explanation: Dividends paid to a policyholder are subject to income taxes.

Which of the following does not apply to credit life insurance? A. Benefits are paid directly to the insured or beneficiary. B. Coverage is usually provided by term insurance. C. The outstanding debt is paid if the debtor dies. D. Premium payments are usually added to the loan payments.

Answer A is correct. Explanation: If the insured dies, benefits are paid to the creditor to extinguish the loan and are not paid to a beneficiary.

In health insurance policies, the purpose of a grace period is to give a policyholder extra time to A. Pay a premium after the due date. B. Submit a proof of loss to an insurer. C. Appear for a medical exam to justify a claim. D. Make application for reinstatement of a policy.

Answer A is correct. Explanation: In health insurance policies, the purpose of a grace period is to give a policyholder extra time to pay a premium after the due date.

All of the following are true about variable annuities except A. Insurance companies cannot sell this type of annuity. B. The annuity premium is invested in securities. C. Installments will fluctuate with the market value of securities. D. The payout is not guaranteed to be a fixed number of dollars.

Answer A is correct. Explanation: Insurance companies commonly sell variable annuities

Life insurance settlement options were developed in order to A. Give insureds and beneficiaries alternative ways of receiving benefits B. Reduce the number of lawsuits over life insurance settlements C. Give insurance companies more control over settlements D. Simplify the administration of estates

Answer A is correct. Explanation: Life insurance settlement options were developed in order to give insureds and beneficiaries alternative ways of receiving benefits.

Which of the following is not a common life insurance non -forfeiture option? A. Taking a full refund of all premiums paid B. Requesting the cash surrender value C. Converting to a lesser amount of paid-up insurance D. Converting to an equal amount of extended term insurance

Answer A is correct. Explanation: Receiving a full refund of all premiums paid is not a non-forfeiture option.

A self-funded health care plan may be a practical alternative to insurance for an employer if A. Claim costs are fairly predictable. B. Claim costs are generally unpredictable. C. The employer cannot afford to buy insurance. D. The employer is engaged in a high-risk industry.

Answer A is correct. Explanation: Self-funding may be a realistic alternative to traditional insurance if claim costs are predictable.

All of the following are true about insurance except A. Insurance is a mechanism for handling speculative risk. B. Insurance transfers risk from one party to a group. C. It is a social device for spreading loss over a large number of people. D. A large uncertain loss is traded for a small certain loss.

Answer A is correct. Explanation: Speculative risks may not be covered by insurance policies. Insurance is used only to cover pure risks.

Which of the following is not a characteristic of a whole life continuous premium policy (also known as straight life)? A. The premiums are paid only until the insured reaches age 70. B. The policy builds a cash surrender value. C. The face amount is a constant amount of protection. D. The policy requires level premium payments.

Answer A is correct. Explanation: Straight life policies are designed to provide coverage until age 100, and premium payments continue until that age or an earlier death or termination of coverage.

For any given amount of annuity, which method of disposition of the funds would provide the greatest level of periodic income payments to the payee? A. Life annuity B. Life annuity refund C. Life annuity, period certain D. Installment refund annuity

Answer A is correct. Explanation: The life annuity with no other provisions provides the greatest level of periodic income payments because it is based only on the life expectancy of the annuitant. All other features, such as refund options or payment period certain, reduce the payment because the insurer has to set aside some money for these contingencies.

Under the Uniform Policy Provisions Law, a required provision concerning notice of claim obligates a policyholder to give the insurer or its agent notice of a claim within A. 20 days of a loss, or as soon as reasonably possible B. 30 days of a loss, or as soon as reasonably possible C. 60 days of a loss, or as soon as reasonably possible D. 90 days of a loss, or as soon as reasonably possible

Answer A is correct. Explanation: The provision requires a policyholder to give the insurer or its agent notice of a claim within 20 days of a loss, or as soon as reasonably possible.

A disability that prevents a person from performing one or more of the regular duties of that person's job and that is a condition that will last for the remainder of the person's life, is a A. Permanent partial disability B. Permanent total disability C. Temporary partial disability D. Temporary total disability

Answer A is correct. Explanation: This is an example of a permanent partial disability. It is permanent because the person will not recover, and it is partial because it does not prevent the person from performing any work at all.

What is the name of a health care delivery system involving private insurers who contract with doctors and hospitals to provide services at set prices and that allows insureds to choose among designated doctors and hospitals when medical treatment and care is needed? A. Preferred provider organization B. Administrative services organization C. Health care service organization D. Health maintenance organization

Answer A is correct. Explanation: This is an example of a preferred provider organization (PPO).

All of the following are true about a presumptive disability except A. Such a condition is considered to be total and permanent. B. Examinations to verify the loss will be required only every 2 years. C. Loss of two limbs qualifies as a presumptive disability. D. Loss of sight qualifies as a presumptive disability.

Answer B is correct. Explanation: After a presumptive disability has been medically verified, no further examinations are required to verify the loss.

Which of the following is not generally a feature of term life insurance policies? A. It is convertible. B. It offers permanent protection. C. It offers pure protection. D. It is renewable.

Answer B is correct. Explanation: Although term life insurance provides pure protection and may be convertible and renewable, it does not provide permanent protection.

A person who wants to accumulate a specific number of dollars that would be available at a given age, while having insurance protection prior to reaching that age, should consider buying A. Level term insurance B. Endowment insurance C. Convertible insurance D. Limited payment whole life insurance

Answer B is correct. Explanation: An endowment is the type of contract that guarantees a specific value at a given time or age while providing insurance protection prior to that time.

In the field of estate planning, arrangements are often made to dispose of business interests, provide for survivors, and to minimize tax consequences. One technique, an inter vivos transfer, means A. Provisions for settling the estate are written into a will. B. Properties or rights are transferred while the estate owner is living. C. Annuities will be used to create special trust funds. D. All insurance proceeds will be paid to the estate.

Answer B is correct. Explanation: An inter vivos transfer occurs when properties or rights are transferred while the estate owner is still living.

Blue Cross and Blue Shield are A. Health maintenance organizations B. Prepaid health care service organizations C. Administrative service organizations D. Preferred provider organizations

Answer B is correct. Explanation: Blue Cross and Blue Shield are examples of prepaid health care service organizations.

If a health insurance policy has lapsed and it is later reinstated, the reinstated policy will cover only sickness that begins A. After the date of reinstatement B. At least 10 days after the date of reinstatement C. At least 20 days after the date of reinstatement D. At least 30 days after the date of reinstatement

Answer B is correct. Explanation: If a health insurance policy has lapsed and it is later reinstated, the reinstated policy will cover only sickness that begins at least 10 days after the date of reinstatement. This provision exists because a person who becomes sick might be motivated to reinstate coverage only to claim benefits. Accidents are covered immediately because accidents cannot be anticipated.

A health insurance policy has lapsed because of nonpayment of premium. If the policy does not require an application for reinstatement, the policy must be reinstated on A. Acceptance of the overdue premium by the agent B. Acceptance of the overdue premium by the insurer C. Receipt by the agent of a written request for reinstatement D. Receipt by the insurer of a written request for reinstatement

Answer B is correct. Explanation: If a policy does not require an application for reinstatement, the policy must be reinstated upon acceptance of the overdue premium by the insurer.

Restrictions are usually placed on the amount of insurance that agents can write on their own property or interests, or those of their immediate families, their employers, and certain business relationships. This type of insurance is known as A. Admitted business B. Controlled business C. Authorized business D. Unauthorized business

Answer B is correct. Explanation: Insurance coverage on an agent's own property or interests, or those of the agent's family members or an employer, are known as controlled business and the amount of such business that may be written is limited by law.

Life insurance companies are required to establish a variety of reserves for record-keeping purposes. These accounting measurements are actually A. A measure of net worth B. Liabilities C. Assets D. Contingency funds and surplus

Answer B is correct. Explanation: Reserves are accounting measurements of an insurer's liabilities to its policyholders.

One technique that helps to control health care costs is a requirement for A. Preexisting conditions B. Second surgical opinions C. Waiver of premiums D. Optional benefit riders

Answer B is correct. Explanation: Second surgical opinions are often recommended before expensive surgical procedures are performed because they may help to avoid unnecessary treatments and costs.

Social security disability benefits begin after a waiting period. Generally, benefits begin with the A. 3rd month of disability B. 6th month of disability C. 9th month of disability D. 18th month of disability

Answer B is correct. Explanation: Social security disability benefits begin after a waiting period of 5 months. Benefits begin with the 6th month of disability.

All of the following are true about term life insurance except A. Term insurance is temporary insurance. B. Term insurance is one of the most expensive forms of protection. C. There is no cash value when a term policy expires. D. Term insurance policies are written for a specified number of years.

Answer B is correct. Explanation: Term insurance provides the most amount of protection for a given amount of premium dollars. But it is not permanent insurance and has no other features, such as cash value or non-forfeiture values.

Eligibility for social security disability benefits depends on having earned the required work credits, which are accumulated in units of time. During each calendar year, a full-time worker may earn up to A. Three work credits B. Four work credits C. Six work credits D. Twelve work credits

Answer B is correct. Explanation: Under the social security program, a person may earn up to four work credits in any calendar year based on the amount of income earned.

In the medical insurance field, the term coinsurance means that an insured person A. Has coverage under two or more policies B. Has to pay a portion of covered expenses C. Is covered in full, after paying the deductible amount D. Has coverage under his or her own policy and under the spouse's policy

Answer B is correct. Explanation: The term coinsurance means the insured will have to pay a portion of the covered expenses. Usually the insured pays 20% and the insurance company pays 80% within a given range.

In the rating of a life insurance policy, a preferred risk is an applicant who has A. Provided evidence of insurability B. Never been turned down when applying for life insurance C. A low-risk occupation and follows a healthy lifestyle The financial ability to make the premium payments

Answer C is correct. Explanation: A person who has a low-risk occupation and follows a healthy lifestyle is an example of a preferred risk.

A residual disability benefit provides an income benefit if an insured A. Has exhausted all partial disability benefits B. Has exhausted all temporary disability benefits C. Returns to work and cannot earn as much as earned before the disability D. Is receiving no other benefits during a waiting period

Answer C is correct. Explanation: A policy that provides an income benefit if an insured returns to work and cannot earn as much as earned before the disability is an example of a residual disability benefit.

In health insurance policies, a preexisting condition is one that A. An insurer puts forth as a prerequisite to acceptance of the risk B. An applicant suspects already exists when completing the application C. An applicant received medical advice or treatment for prior to applying D. An insurer requires the applicant to agree to before it issues a policy

Answer C is correct. Explanation: A preexisting condition is one for which an applicant received medical advice or treatment prior to applying for coverage.

An agent's obligation to act in an insurance applicant's or insured's best interest, based on the faith and trust placed on the agent by members of the insurance-buying public, is known as A. A presumption of agency B. The warranty of the agent C. A fiduciary duty D. The duty owed to a principal

Answer C is correct. Explanation: An agent's duty to act in the best interest of insurance applicants or insureds is known as a fiduciary duty.

All of the following are true about a life insurance settlement option known as life income except A. When the payee dies, all benefit payments end. B. The option may be used to provide retirement income. C. Total benefits may not exceed the principal amount plus interest. D. The older the payee when payments begin, the larger the payments.

Answer C is correct. Explanation: Because a lifetime income is guaranteed, the benefits could exceed the principal plus interest if the insured lives long enough

One of the reasons why many group disability insurance policies are written on a non-occupational basis is that A. Occupational coverage is too expensive. B. Health insurance can no longer be written on an occupational basis. C. Occupational coverage is provided by workers compensation. D. Few occupational risks exist because of health and safety regulations.

Answer C is correct. Explanation: Because work-related injuries are covered by workers compensation, most group health insurance plans are written on a nonoccupational basis to cover only injuries or illnesses that are not work-related.

Which of the following is not one of the available methods for dealing with an exposure to risk? A. Avoid the risk. B. Retain the risk. C. Ascertain the risk. D. Transfer the risk.

Answer C is correct. Explanation: Common risk management methods include avoiding, retaining, reducing, or transferring a risk. Ascertaining a risk is simply a process of evaluating a risk before a decision is made about how to deal with it.

All of the following are true of the double indemnity provision found in life insurance policies except A. It provides for payment of double the face amount. B. It applies only if death occurs within 90 days of injury. C. It applies to death by accident or unexpected illness. D. It is a relatively inexpensive additional benefit.

Answer C is correct. Explanation: Double indemnity applies only in cases of death by accident.

In order to become eligible for social security retirement benefits, a worker must A. Not have a private pension plan B. Have dependents who are not disabled C. Have earned the required work credits D. Not be eligible for Medicare

Answer C is correct. Explanation: Eligibility for social security benefits depends on work credits. It does not matter whether a person has dependents, a private pension plan, or is eligible for Medicare.

When a party appears to have given up a particular right by acts or by inaction that another party has relied on, the legal basis for asserting the original right may have been lost. This is known as the legal doctrine of A. Waiver B. Warranty C. Estoppel D. Condition precedent

Answer C is correct. Explanation: Estoppel is a legal term that means a party has given up a right by previous acts or in actions on which another party has relied.

Under a provision known as time payment of claims in a health insurance policy, after receiving proof of loss, all benefits other than those that are paid in periodic installments are supposed to be paid A. Within 30 days B. Within 60 days C. Immediately D. At the end of the month

Answer C is correct. Explanation: Generally, all claims other than those for periodic installments should be paid immediately after the insurer has received proof of loss.

When life insurance is written on a participating basis, dividend options may be selected by the A. Insured person B. Insurance company C. Policy owner D. Beneficiary

Answer C is correct. Explanation: It is the policy owner, who may not be the insured, who has the right to select dividend options or any other options available under the policy. 49. Answer A is correct. Dividends paid to a policyholder are subject to income taxes.

The principal purpose of the Medicaid program is to assist in providing medical care to persons who are A. Not covered by Medicare B. Over the age of 65 C. Unable to afford the medical care they need D. Not covered by any individual insurance plan

Answer C is correct. Explanation: Medicaid is a joint federal-state program designed to provide health care to people who are unable to afford

Misrepresenting an insurance policy, or making incomplete comparisons of policies, for the purpose of inducing someone to change or replace an existing insurance policy is an illegal practice known as A. Defamation B. Coercion C. Twisting D. Rebating

Answer C is correct. Explanation: Misrepresenting insurance policy provisions or making incomplete comparisons of policies for the purpose of inducing someone to change or replace an existing insurance policy is an illegal practice known as twisting.

When a life insurance policy lapses or is surrendered prior to maturity, any built-up cash value may be used to buy a lesser amount of the same type of insurance. When this is done, the new policy would be known as A. Additional insurance B. Convertible insurance C. Paid-up insurance D. Extended insurance

Answer C is correct. Explanation: Paid-up insurance is the term used to describe a new policy when cash value is used to buy a lesser amount of the same type of insurance upon lapse or surrender.

The part of a health insurance policy that states the kind of benefits provided and the circumstances under which they will be paid is/are the A. Definitions B. Conditions C. Benefit clause D. Face of the policy

Answer C is correct. Explanation: The part of a health insurance policy that states the kind of benefits provided and the circumstances under which they will be paid is the benefit clause.

All of the following are true about the group life insurance conversion option except A. The option is available on termination of employment. B. Evidence of insurability is not required for conversion. C. Conversion permits the insured to continue to be covered by the group policy. D. The option must be exercised during a specified period of time.

Answer C is correct. Explanation: The right of conversion allows an insured to switch to an individual policy, not to remain covered under the group plan.

Adverse selection exists when A. A beneficiary selects a settlement option that is likely to pay more than the principal. B. An underwriter carefully screens out poor risks by charging higher premiums or declining applications. C. A disproportionate number of people who have a high risk of loss apply for insurance. D. Insurance companies order inspection reports to supplement applications.

Answer C is correct. Explanation: This is a classic definition of adverse selection, which exists when a disproportionate number of people who have a high risk of loss apply for insurance.

A type of life insurance that periodically allows the insured to change the face amount of the policy or the amount of the premium is A. Universal life insurance B. Variable life insurance C. Adjustable life insurance D. Multiple protection life insurance

Answer C is correct. Explanation: This is an example of adjustable life insurance.

Disability income policies often do not begin paying benefits immediately when an insured person becomes disabled. Usually, the disability must continue for a period of time before benefits begin. This period is known as the A. Trial period B. Probationary period C. Elimination period D. Verification period

Answer C is correct. Explanation: This is an example of an elimination period.

Small employers, who might not otherwise qualify for a group health insurance plan, may be able to obtain similar low-cost benefits for their employees by joining a A. Health care service organization B. Health maintenance organization C. Preferred provider organization D. Multiple employer trust

Answer D is correct. Explanation: A multiple employer trust allows small employers to join together in order to obtain health care benefits for their employees at a reasonable cost.

On a life insurance policy, a waiver of premium clause or rider is a provision that suspends the premium payments A. While a premium loan is in effect B. On the date the insured reaches normal retirement age C. If the insured is unable to pay premiums because of economic hardship During total disability, usually lasting at least 6 months

Answer D is correct. Explanation: A waiver of premium clause or rider is a provision that suspends the premium payments during total disability, usually lasting at least 6 months. A waiver of premium provision is designed to suspend the premium payments in the event of total disability.

One approach to determining life insurance needs is to calculate the human life value of the person to be insured. Which of the following is not a factor in determining a person's remaining human life value? A. Years remaining to retirement B. Annual income C. Annual expenses D. Property owned

Answer D is correct. Explanation: Annual income and expenses and years remaining until retirement are factors. The amount of any property owned is not.

All of the following are true about annuities except A. They may be used to provide a lifetime income. B. They may be used to provide income for a fixed period. C. They are used to systematically liquidate a principal sum. D. They have all the same characteristics as life insurance.

Answer D is correct. Explanation: Annuity contracts are not the same as life insurance and have some unique characteristics.

All of the following are true about variable annuities except A. Payouts are made in units, not fixed dollar amounts. B. Annuity income varies with the market value of securities. C. Variable annuities are regulated by the S.E.C. D. Inflation has no effect on the value of the annuity payouts.

Answer D is correct. Explanation: Because the funds supporting variable annuities are invested in securities, inflation does affect the ultimate payouts.

Because an insurer writes the policy language and the insured has little or no control over the content, any ambiguity in the wording is usually resolved in favor of the insured. Because the design and wording of a policy are in the hands of the insurer, insurance policies are said to be A. Unilateral contracts B. Contracts of indemnity C. Aleatory contracts D. Contracts of adhesion

Answer D is correct. Explanation: Because the insurer drafts the language of the contract, the insured simply adheres to the terms.

In the famous South-Eastern Underwriters' case, the Supreme Court held that insurance A. Should be regulated by the individual states B. Was exempt from the federal antitrust laws C. Transacted across state lines was not interstate commerce D. Transacted across state lines was interstate commerce

Answer D is correct. Explanation: In the South-Eastern Underwriters' case the Supreme Court held that insurance transacted across state lines was interstate commerce.

A person who dies without leaving a will has died A. Innocuously B. Testamentary C. Inter vivos D. Intestate

Answer D is correct. Explanation: Intestate is the term that applies when a person dies without leaving a will.

All of the following are true about Medicare supplement policies except A. The policies are subject to approval by state insurance departments. B. They supplement Medicare by paying toward deductibles and co -payments. C. They may cover some services not covered by Medicare. D. They are sold by state and federal government agencies.

Answer D is correct. Explanation: Medicare supplement policies may not be sold by any state or federal government agencies.

Members covered by a group health insurance plan receive a document that summarizes the benefits and the important policy provisions. This document is known as a A. Master policy B. Member's policy C. Coordination of benefits D. Certificate

Answer D is correct. Explanation: Members covered by group insurance plans receive certificates of insurance that summarize the benefits.

Health insurance policies have a consideration clause, which states that the insurance is provided in consideration of what? A. Payment of a conditional premium B. Statements made by the applicant to the agent C. The representations made in the completed, signed application D. Payment of the first premium and completion of the application

Answer D is correct. Explanation: The clause states that the insurance is provided in consideration of payment of the first premium and completion of the application.

In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments A. Whenever an insured is unable to work B. During the time an insured is confined in a hospital C. Following an accidental injury, but not during sickness D. After an insured has become totally disabled as defined in the policy

Answer D is correct. Explanation: The waiver of premium provision keeps the coverage in force without premium payments if the insured has become totally disabled as defined in the policy.

Individual health insurance policies may include a provision concerning unpaid premiums. When the provision applies, if a premium payment is overdue when a claim for benefits is made A. Coverage is suspended until the premium is paid. B. The insurer may pay the claim and then cancel the policy. C. A written demand for premium payment will be sent to the insured. D. The insurer may deduct the overdue premium from the benefits

Answer D is correct. Explanation: This is a standard provision in almost all life and health insurance policies. The insurer always has the right to deduct overdue premiums from any benefits paid.

What is the name of a health care delivery system providing prepaid doctor and hospital care, emphasizing preventive care, and charging a fixed periodic fee to its enrolled members? A. Preferred provider organization B. Administrative services organization C. Health care service organization D. Health maintenance organization

Answer D is correct. Explanation: This is an example of a health maintenance organization (HMO).

A type of insurance that provides a death benefit and benefits for a permanent loss of sight or limbs is known as A. Medical expense insurance B. Disability income insurance C. Life insurance with coinsurance D. Accidental death and dismemberment insurance

Answer D is correct. Explanation: This is an example of accidental death and dismemberment insurance.

Under a group life insurance conversion privilege, an employee who terminates membership in the insured group is allowed to A. Continue to participate in the group plan by taking over premium payment B. Continue to participate in the group plan until covered elsewhere C. Convert to an individual policy if evidence of insurability is given D. Convert to an individual policy without evidence of insurability

Answer D is correct. Explanation: When a conversion privilege applies, an employee who loses coverage may convert to an individual policy without having to provide evidence of insurability.