PRACTICA DE EXAMEN

Karl's basic medical expense policy provides a $200 benefit for each day of hospitalization. He is hospitalized for five days at a cost of $5,000. How much will his policy pay?

$1,000 Because Karl's policy will pay the stated benefit amount for each day he is confined to a hospital. Under his policy, he will receive $1,000 in benefits (five days at $200 per day).

Bob bought a $100,000 universal life insurance policy and chose an Option 2 increasing death benefit option. At his death ten years later, the policy's cash value had increased to $50,000. What will his beneficiary receive?

$150,000 Because UL death benefit Option 2 features an increasing death benefit that equals the policy's specified amount plus its cash value. As the cash value increases, the death benefit increases by the same amount. If the cash value decreases (through withdrawals), the death benefit decreases by the same amount.

Catherine, age 45, purchased a life insurance policy with a single $100,000 premium payment, causing the policy to be deemed a MEC. Eight years later, the policy's current cash value is $120,000. What are the tax consequences if Catherine withdraws $25,000 from the MEC to pay for her son's college education?

$20,000 of the withdrawal is subject to income taxation and a 10 percent penalty tax. Because MEC withdrawals are treated on a LIFO (last-in, first-out) basis, which means that they are considered to be distributions of interest earnings first. Only after all interest has been distributed (and taxed) are amounts distributed from a MEC deemed a nontaxable return of invested premium. In addition, distributions of earnings taken before the owner's age 59' are generally subject to a 10 percent tax penalty.

Sherry's disability income policy specifies that if she is disabled and her earnings are reduced by at least 25 percent of pre-disability earnings, a residual benefit will be paid. Sherry is injured and suffers chronic back problems. She works part time when she feels well. If she previously earned $10,000 per month, what is the most she can earn each month to qualify for the residual benefit?

$7,500 Because After the disability, if Sherry is only able to earn $7,500 per month or less, she will qualify for the residual benefit because her income has been reduced at least 25 percent of her pre-disability earnings.

The Texas Department of Insurance has found that ABT Insurance has consistently failed to promptly respond to policyholder communications regarding claims. This means that it typically fails to respond within:

15 days Because Insurers must timely acknowledge pertinent communications relating to a claim arising under the insurer's policy within 15 business days. Failing to do so can be considered an unfair claim settlement practice.

After it issues an insurance policy, how long does the insurance company have to void the policy due to fraud in the application?

24 months The time during which an insurer can void an insurance company on the basis of fraud is typically limited to two years from the date the contract was signed and issued.

If a health insurance policy is cancelable, the insurer can cancel the policy at any time provided it gives the policyowner at least:

45 days' notice Because The cancellation provision lets an insurer cancel the policy at any time with 45 days' notice. The 45-day notice is also necessary if the insurer is not going to renew the policy or changes the premium.

What is the maximum period for pre-existing limitations or exclusions under Medicare supplement insurance policies with grandfather status under the Affordable Care Act?

6 months Because Pre-existing exclusion periods may not exceed six months.

With respect to Social Security's survivor benefits, a deceased worker's dependent 16-year-old child is entitled to:

75 percent of the worker's primary insurance amount until the child reaches age 18 (19 if still in high school). Because A deceased worker's dependent children under age 18 (19 if still in high school) are each eligible to receive survivor benefits until they reach age 18 (19 if still in high school). If the child is disabled, benefits continue indefinitely. The child's benefit is equal to 75 percent of the deceased worker's PIA.

All the following statements regarding tax-free Section 1035 exchanges are correct EXCEPT:

A 1035 exchange is not considered a policy replacement for regulatory purposes. Because By definition, 1035 exchanges involve the replacement of one policy with another. Producers have both an ethical and legal obligation to make sure policy replacements are suitable and done solely in the customer's best interest. CORRECT: 1-A modified endowment contract (MEC) exchanged for a new life insurance policy will result in the new policy being a MEC. 2-A nonqualified annuity cannot be exchanged for a qualified annuity. 3-An annuity can be exchanged for a tax-qualified long-term care insurance policy.

Tom, Henry, Stacey, and Alison are licensed agents in Texas. Given the following circumstances, which of them will NOT be subject to disciplinary action by the Texas Department Insurance?

Alison, who was convicted of a misdemeanor traffic violation Because The Texas Department of Insurance can discipline a license holder who has been convicted of a felony but not for committing a misdemeanor traffic violation.

Amanda used a basic illustration to help Mark, a potential client, understand how the cash value of his life insurance policy would grow. Mark then agreed to buy the policy. Which of the following best describes Amanda's duties with respect to delivering a copy of the illustration used?

Amanda must deliver a signed copy of the illustration to both Mark and the insurer. Because Because Amanda used a basic illustration when selling a life insurance policy to Mark, she must give a signed copy to Mark. She is also required to give a signed copy to the insurer when she submits his application.

Which statement about HMOs is NOT correct?

An HMO's network of providers is limited to a town or city. Because People become members or participants in an HMO by signing a contract to join the organization. YES, CORRECT: 1-People become members or participants in an HMO by signing a contract to join the organization. 2-People pay premiums monthly, quarterly, semi-annually, or annually to an HMO. 3-The HMO is responsible for the availability, accessibility, quality, and cost of the health care it delivers.

Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Texas. Based on their job descriptions below, which of them is NOT an agent?

Brian, who is a vice president in AllPro's human resources department and does not receive commissions Because A regular salaried officer or employee of an insurer who devotes substantially all of his or her time to activities other than soliciting insurance applications and who does not receive a commission based upon the amount of insurance business transacted is not acting as an agent.

Raphael is an agent for ABC Insurers and refers a prospective client to Dana, an agent at XYZ Insurers. Which of the following statements about commissions in this case is correct?

Dana can legally share her commission with Raphael under Texas law. Because As a licensed agent, Dana can share her commission with Raphael for referring the client to her. She cannot share her commissions with any person who does not hold a Texas agent's license.

Which of the following statements correctly describes the taxation of a Roth IRA distribution to a person who is age 59' or older?

Distributions are generally tax free. Because Once a Roth IRA owner reaches age 59', he or she can take distributions income tax free, as long as he or she has held the account for at least five years.

Janson Automotive is a small family-owned business with 20 employees. If it offers a small employer health benefit plan, which of the following employees will be eligible for coverage?

Dora, who works 35 hours a week as a full-time office manager Because Employees who are employed full-time and work 30 hours or more a week are eligible to participate in a small employer health benefit plan.

With respect to the taxation of group and individual disability income (DI) insurance, which of the following statements is correct?

Employer-paid premiums for group DI insurance are deductible by the employer. Because An employer who pays the premiums for an employee's policy can deduct the premiums. The premium payments are not considered taxable income to the employee. However, the employee pays taxes on benefits that are based on employer-paid premiums.

Which of the following statements correctly describes how premiums for group life insurance are treated for tax purposes?

Employers can deduct premiums paid on a group life insurance plan but employees cannot deduct their contributions. Because Employers may deduct premiums paid for all participants in a group life insurance plan but employees cannot deduct their contributions. Employee contributions are not tax deductible.

Adam bought an individual disability income policy with a social insurance supplement (SIS) rider. If he becomes disabled and is eligible for Social Security disability benefits, what will happen?

He will receive benefits under the SIS rider while he is waiting for his Social Security disability benefits to begin. Because A social insurance supplement (SIS) rider (also known as a Social Security rider) pays an additional monthly benefit before social insurance program benefits begin.

Which describes the basic concept of the health savings account (HSA)?

It combines a high-deductible, high out-of-pocket cost insurance plan with a tax-favored savings account. Because An HSA combines a high-deductible, high out-of-pocket cost insurance plan with a tax-favored savings account.

Which of the following correctly defines the meaning of 'life insurance settlement' option?

It is one of several ways a policyowner or beneficiary can choose to receive life insurance death benefit proceeds. Because Every life insurance policy lists a variety of ways - called settlement options - the death benefit can be paid, or "settled," upon the insured's death.

Beverly owns a small manufacturing business. Her sister, Rose, is her assistant. Beverly could not run the business without Rose. Beverly wants key employee disability insurance because:

It will pay cash benefits to the employer if a key employee is disabled. Because Key employee disability insurance is short term because it is assumed that a capable replacement can be found within one to two years. The benefit amount considers the income of the key person, the replacement costs associated with hiring and training a capable replacement, and the key person's contribution to the company's earnings.

Karen bought a life insurance policy at age 23. She added the guaranteed insurability rider to the policy. If Karen buys another policy under the rider at age 39, the premium of that policy will be based on which of the following?

Karen's current age Because The premiums for any future policies Karen buys under the rider are based on her age when she buys the policies.

Which entity does not rate the solvency of insurance companies?

Lloyd's of London Because A-M Best, Duff and Phelps, and Standard and Poor's are all rating agencies. Lloyd's of London is an association of individuals and companies that underwrite insurance on their own accounts.

All of the following are correct statements about the taxation of modified endowment contracts (MECs) EXCEPT:

MECs enjoy all of the tax advantages of life insurance. Because Policies that are deemed modified endowment contracts enjoy only some of the tax advantages that apply to life insurance. THIS ARE CORRECT STATEMENTS ABOUT THE TAXATION OF MODIFIED ENDOWMENT CONTRACT. 1-The death benefit under a MEC is not taxable to the beneficiary if it is paid in a lump sum. 2-Cash values in a MEC grow tax-deferred as long as they stay in the contract. 3-MEC policy loans are taxable.

In Texas, every HMO is required to file an annual report with the insurance commissioner listing the number of subscribers enrolled and terminated in the report year no later than

March 31 of the following year Because In Texas, every HMO is required to file an annual report with the insurance commissioner listing the number of subscribers enrolled and terminated in the report year no later than March 31 of the following year.

A common name for Medicare Part C is:

Medicare Advantage Because Originally, Part C was named "Medicare+Choice." It is now called Medicare Advantage.

Janet has been continuously licensed as an agent in Texas for the past 25 years. Her friend, Steven, is a nonresident licensee in Texas and every year completes his state's continuing education requirements. When they ask you for advice on meeting the Texas continuing education requirements, you inform them that

Neither Steven nor Janet needs to comply with Texas's continuing education requirements. Because Janet is exempt from Texas' continuing education requirements because she has continuously held a license for at least 20 years. Steven is also exempt, provided that he has complied with his resident state's continuing education requirements.

Which one of the following statements about variable life insurance is correct?

Policyowners can choose how to invest their policy's premiums and cash values. Because Variable life policyowners can choose how to invest their policy's premiums and cash values.

Carolyn bought a $500,000 five-year renewable term policy with a guaranteed renewal rate. Two years after buying it, she develops cancer and is no longer insurable. If Carolyn is alive at the end of the five-year term, which of the following statements is most correct?

She can renew the policy but must pay a higher premium based on her age at the time of renewal Because Under a renewable term life insurance policy with a guaranteed renewal rate, Carolyn can renew the policy without proving evidence of insurability.

Maxine has a basic hospital expense policy that pays a benefit of $250 per day for up to 30 days. If she is hospitalized for more than 30 days, which of the following statements is correct?

She will be responsible for all hospital costs beyond the first 30 days. Because Basic hospital expense policies provide a maximum per-day benefit for a certain number of days. Maxine must pay hospitalization costs beyond her policy's 30-day coverage period.

What is the only restriction on naming an annuitant?

The annuitant must be a natural person. Because The annuitant may be related to the owner but this is not a requirement.

In which case does ABC Insurance Company most accurately reflect its group underwriting standards in its premium rates?

The company prices a policy based on its own morbidity experience. Because When an insurer chooses to price a policy based solely on its own morbidity experience, it can more accurately reflect its underwriting standards in its premium rates. This is especially true of larger insurance companies.

When the funds in an annuity contract are converted into a series of ongoing periodic income payments, which of the following has occurred?

The contract is annuitized. (El contrato está anulado.) Because When a contract's accumulated funds are annuitized, the funds are turned into a series of ongoing, periodic income payments.

Edgar is insured under a $1 million life insurance policy and dies during the grace period. What happens if Edgar had not yet paid the premium at the time of his death?

The death benefit will be paid after the premium due is subtracted from it. Because During the grace period, the policy remains in force. In the event that death occurs during the grace period while the premium remains unpaid, the unpaid premium is generally deducted from the death benefit proceeds.

If a universal life insurance policyowner chooses death benefit option 1, which of the following correctly describes the death benefit?

The death benefit will generally remain level but may vary based on the amount of premiums actually paid. Because Death benefit Option 1 resembles the policy structure of a traditional whole life policy in that the specified amount generally remains level. However, if it is excessively funded then the specified amount will increase to maintain a minimum IRS corridor of pure insurance protection.

Sky Corporation pays 80 percent of the premium for its group medical plan each year while the employees pay the remaining 20 percent. Which statement is correct about the deductibility of the premium payments from taxable income?

The employees can deduct the amount of premiums they pay that exceed 10 percent of adjusted gross income. Because Any contribution that a person pays toward the premium for a group health insurance plan is not tax deductible unless, when combined with other qualified unreimbursed medical expenses, the total exceeds ten percent of adjusted gross income.

The exclusion ratio applies until all principal in the annuity contract has been paid out. After that, what happens?

The full amount of future annuity payments are treated as taxable income. Because The exclusion ratio applies until all basis in the contract has been recovered tax free. After that, annuity payments are fully taxable.

Under a health insurance policy's unpaid premium provision, what may the insurer do with respect to unpaid premiums that the insured owes when a claim is made?

The insurer can deduct this amount from the benefit it pays the insured. Because The unpaid premium provision addresses premiums the insured still owes when a claim is made. The insurer can deduct the amount of the premium from the benefit it pays the insured.

Jim's insurance company offers him the option to pay the premium annually or semi-annually. If Jim chooses to pay half of the premium now and the other half six months from now, how will the insurer cover the additional cost of processing his payments?

The insurer charges a modestly higher premium. Because If a policyowner wants to reduce the premium payment by paying a portion of it now and the rest later, the insurer accounts for the lost interest earnings and additional costs by increasing the annual premium.

All the following statements regarding the automatic premium loan are correct, EXCEPT:

The insurer deducts the automatic premium loan on the first day of the premium payment grace period if the policyowner has not paid by that time. Because Typically, the cash value of the policy must be at least equal to the unpaid premium for an automatic premium loan to be made. automatic premium loan are correct: 1-Under the most common automatic premium loan provision, the policy's cash value must be at least equal to the unpaid premium for the automatic premium loan to be made. 2-The insurer can set up the policy so that automatic premium loans cannot pay consecutive premiums. 3-The insurer can set up the policy so that automatic premium loans can pay no more than 12 monthly premiums

If a terminated employee chooses to continue his or her group health insurance coverage under COBRA, which of the following statements is true?

The terminated employee can continue coverage by paying 100 percent of the full premium plus an additional 2 percent. Because Under COBRA, participants who continue group coverage pay the entire premium. In addition, the employer can charge up to 2 percent of the cost to cover its administrative expenses.

When do funds in a deferred annuity become the owner's?

They always belong to the contract owner. Because Funds in a deferred annuity always belong to the contract owner.

In addition to Ken's application and an attending physician's statement (APS), insurers can use various other reports and public records. How do these documents help insurers?

They offer details that help the underwriter properly evaluate the risk that the proposed insured represents. Because Public records and reports offer details that help the underwriter to properly evaluate the risk Ken represents.

For which of the following planning needs would purchasing an insurance policy be LEAST appropriate?

Tina, who wants to save money for a vacation next year Because Life insurance can be used to fund retirement, provide for surviving family members, and provide funding for college education. Life insurance is not appropriate, however, for short-term savings needs

Which employer is exempt from the requirements of COBRA?

a company that employs 19 people Because Employers that employ fewer than 20 people are exempt from COBRA requirements, unless they operate in a state that has requirements that go beyond COBRA's protections.

In addition to charges for a hospital room, hospital expense policies cover miscellaneous hospital charges up to an amount that is generally defined as:

a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount. Because Hospital expense policies cover miscellaneous hospital charges up to an amount that is stated as a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount.

The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy?

a permanent life insurance policy Because Convertible term life insurance includes a conversion privilege that lets policyowners exchange their term life coverage for a permanent life insurance policy without having to provide evidence of insurability. The new policy's face amount usually matches the expiring term policy's face amount.

Which of the following entities would be eligible to set up a Keogh (HR-10) qualified plan?

a three-person law partnership Because A Keogh plan is a qualified retirement plan designed for unincorporated businesses (sole proprietorships and partnerships

Under Texas law, an individual life insurance policy may, but is NOT required to contain a(n):

accelerated benefit provision. Because All individual life insurance policies that have nonforfeiture benefits (except single premium policies) must provide that if a default in premium payments occurs and the value of the policy is applied to the purchase of other insurance, the policy can be reinstated within three years.

When completing an application for life insurance, Madison states that she is 40 years old, though she is actually 43. When the insurer discovers this, what will it likely do?

adjust the benefits Because Misstating the age of the insured on a life insurance application is not grounds for voiding the policy. However, the insurer can adjust the policy's benefits to reflect the death benefits the insured would have bought with the premiums he or she paid based on the insured's correct age.

The special needs plan (SNP) under Medicare Advantage is NOT available to those persons who:

are suffering from minor chronic medical conditions Because The special needs plan (SNP) covers those with severe or disabling chronic conditions.

As a field underwriter, what does an agent do for the insurance company?

collect information from an applicant Explanation: Because Field underwriting describes the activities an agent does when taking applications for insurance. This includes requesting information from prospective insureds and helping them fill out their paperwork.

Susie was the intended recipient of death benefit proceeds from a life insurance policy insuring her husband, but she died a few months before him. Per the policy's beneficiary designation, the proceeds were paid to their son, Abe, who is considered the:

contingent beneficiary Because Abe is considered the contingent or secondary beneficiary. A tertiary beneficiary, if one was named, would receive proceeds only if both Suzie and Abe predeceased the insured.

COBRA provides for which of these after a person loses group health coverage?

continuation of insurance coverage through an individual policy Because The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, protects those who are no longer covered by an employer's health insurance plan or its benefits.

John is thinking about buying major medical expense coverage for himself and his family. He has determined that his family will require all of the services listed below. Which of the following will NOT be covered by his policy?

dental check-ups for his teenage son Because A major medical expense policy must cover in-hospital private duty registered nurse services.

Tom enrolled in Medicare Advantage when he first became eligible for Medicare Part B. If he is dissatisfied with Medicare Advantage, he can

disenroll from it and enroll in a Medicare supplement policy on a guaranteed issue basis within the first 12 months. Because A person who enrolls in Medicare Advantage when first eligible for Medicare Part B has the right to disenroll from Medicare Advantage within the first 12 months and enroll in a Medicare supplement policy on a guaranteed issue basis.

With respect to the taxation on annuitized income payments, which of the following terms refers to the non-taxable return of basis portion of the payment?

exclusion ratio Because When a deferred annuity is annuitized (or an immediate annuity is purchased), each periodic payment consists partly of non-taxable basis and partly of taxable gain. Determining the split between the two is achieved through the exclusion ratio.

A principal factor that determines eligibility for Medicaid is:

financial need Because Eligibility for Medicaid assistance is based only on financial need. Most Medicaid funds are spent on the elderly, but numerous others receive their share of Medicaid funding. For example, Medicaid covers children who are not eligible for Medicare.

A person must be totally disabled to qualify for Social Security disability benefits. In addition, a person must satisfy a waiting period of how long before benefits are paid?

five months Because A person is not required to complete a four-month waiting period before Social Security disability benefits are paid.

A life insurance underwriter may request an attending physician's statement (APS):

for specific details from the applicant's physician about any medical conditions found in the health section of the application Because Underwriters may undercover medical information not reported on the application through the APS, but it would be difficult for her to ask questions about conditions the applicant did not reveal on the application.

To a consumer in Texas, an insurance company that is headquartered in Missouri but admitted to do business in Texas is a(n)

foreign insurer Because To Texas consumers, a domestic insurer is one that is formed under the laws of Texas, a foreign insurer is formed under the laws of another state, and an alien insurer is formed under the laws of a country other than the United States.

A policyowner intentionally misstates material information on an insurance application to get coverage for a lower premium. This kind of deception is:

fraud Because Fraud occurs when a party makes a material misrepresentation to deceive another, and the other party relies on that deception to its detriment.

An agent meets with a prospect and learns that he already owns a life insurance policy. He is interested in replacing it with a new policy. Which must the agent do?

give the applicant the 'Notice Regarding Replacement' Because A producer must determine whether the sale of a life insurance policy will replace an existing policy. If so, the producer must list all existing life insurance policies that will be replaced and must give the applicant a comparison statement signed by the producer. The producer must also give the applicant a "Notice to Applicants Regarding Replacement of Life Insurance."

A health insurance policy states that the insurer can increase premium rates by class of insureds and can only cancel the policy if the insured fails to pay the premium. What type of policy is this?

guaranteed renewable Because The term "guaranteed renewable" may be used only in a policy where the insured has the right to continue it in force for life by the timely payment of premiums and the insurer has no right to make unilateral changes in the policy except with respect to premium rates by class.

Health insurance insures against all of the following common perils, EXCEPT:

illness-related death Because Disability income insurance covers the peril of illness or injury-related disabilities.

The Texas Department of Insurance regulates the state's insurance industry. Which of the following is NOT one of its responsibilities?

imposing civil and criminal penalties on producers who violate the state's insurance laws Because While the Texas Department of Insurance can impose civil penalties on producers and insurers who violate the state's insurance laws, it has no authority to impose criminal sanctions. his jo is: 1- issuing certificates of authority to insurers 2-overseeing the marketing practices of insurers 3-licensing producers

James owns a variable annuity. Where will his premiums and contract values be maintained?

in subaccounts selected by the policyowner that are managed within the insurer's separate account Because From within an insurer's separate account, variable annuities offer the owner a choice of as many as 20 or 30 different subaccounts that can range from money market to bond to international stock portfolios.

Which provision is required in a health insurance policy?

incontestability Because The time limit on certain defenses or incontestability provision is one of the NAIC's standard provisions and is not among the optional provisions

Jan's health insurance plan pays benefits based on the actual amount of the loss, so she is repaid for some or all of the medical expenses she incurs. What type of health insurance plan does she have?

indemnity plan

Which plan is associated with traditional insurers and reimburses the insured for the cost of covered medical care received?

indemnity plans Because

Eric is a single, self-employed young man of modest means who needs a small amount of life insurance, primarily as a burial fund. Which one of the following types of insurance is most designed for this need?

industrial insurance

An insurer issues a new life insurance policy that has conditions attached to it, and instructs the producer to personally deliver it to the policyowner with an explanation of the conditions. This is an example of what kind of delivery?

legal delivery Because While delivery of every new policy is special, this is not the answer to the question.

Theodore's health insurance policy states that the insurer cannot change the policy or cancel it unless he stops paying premiums. What kind of policy does Theodore have?

noncancelable Because The term "noncancelable" may be used only in a policy where the insured has the right to continue that policy in force for life by the timely payment of premiums and the insurer has no right to make unilateral changes in any provision of the policy.

For a life insurance policy to be valid, when must there be an insurable interest between the owner and the insured?

only when the policy is issued An insurable interest is required only between the owner and the insured at policy issue, and is never required with a beneficiary

For a life insurance policy to be valid, an insurable interest must exist:

only when the policy is issued Because An insurable interest needs to exist only for a moment with a life insurance policy, but that moment is not at the insured's death.

Under a survivorship life insurance policy, when does the insurer pay the death benefit?

only when the surviving insured dies Because Survivorship life insurance policies are commonly known as second-to-die policies. They insure more than one person but pay the death benefit only when the second insured (the survivor) dies.

Al names his three sons as primary beneficiaries of his life insurance policy without specifying the percentage each should receive. If all three sons are alive when Al dies, the insurance company will:

pay an equal one-third share to each son Because Life insurance avoids probate. Regardless of what a person's will may say, life insurance proceeds are distributed in accordance with the policy's beneficiary designation. If specific percentages are not provided, the insurer will divide the proceeds equally among eligible beneficiaries.

After the insurer receives proof of loss of a claim under a health insurance policy, which provision specifies to whom payment will be made?

payment of claims Because The payment of claims provision states who the insurer will pay following a loss. The time payment of claims provision states that the insurance company pays claims immediately after receiving proper proof of loss.

What is the consideration that the insured gives in exchange for the insurer's promise to cover losses under an insurance policy?

premium payment Because The consideration clause establishes that in exchange for the consideration paid, the premium, the insurer promises to indemnify the insured against loss covered by the terms of the policy.

Bob applied for a health insurance policy but did not submit the premium with his application. If the insurer issues the policy as applied for, the producer must then take all of the following actions, EXCEPT:

provide a binding receipt Because After the insurer issues the policy, the producer must collect the premium because Bob did not submit it with his application.

All of the following are cash needs that surviving family members might face immediately after a breadwinner's death, and for which life insurance is commonly used, EXCEPT:

purchasing a vacation home Because Using life insurance proceeds to purchase a vacation is certainly possible, but few planners would consider this a typical need at death are cash needs that surviving family members might face immediately after a breadwinner's death 1-providing funds to meet daily living expenses 2-paying off existing debts 3-paying for final expenses

Jack, an insurance agent, offers free season football tickets to anyone who buys a life insurance policy from him. This sales practice is called:

rebating Because Offering employment or other valuable incentives such as football tickets (or other consideration that is not provided for in the contract) as an inducement to purchase or renew a policy is rebating and is illegal.

Jackie's $250,000 whole life insurance policy had a $30,000 cash value at the time it lapsed. She decides to apply the cash value to purchase $90,000 in permanent coverage for which no further premiums would be required. Which nonforfeiture option did Jackie select?

reduced paid-up insurance Because Under the cash surrender option, the policy is surrendered, and the insurer simply pays the cash value to the policyowner in a lump sum. No ongoing life insurance coverage is provided.

Veronica changed to a less hazardous job two years after buying an accident insurance policy. If she submits proof of the change, the insurer can

refund the excess premium that she paid, effective from the date of the change. Because By changing to a less hazardous occupation, the insurer will not increase Veronica's premiums.

Which of the following is one of the key purposes of the USA PATRIOT Act?

require all financial institutions to create, execute, and maintain anti-money laundering (AML) programs Because Created after September 11, 2001, the USA PATRIOT Act strengthens federal enforcement in the fight on terror. Among other issues it addresses, the act requires that all financial institutions create, execute, and maintain anti-money laundering (AML) programs.

For what purpose are annuities used most often?

retirement planning Because Income accumulation is usually done using short-term savings vehicles.

Allen's insurance agent thinks Allen's habits and personal character should be examined further than is possible through the application alone. He believes Allen might have left out information to get a more favorable rating. What would the agent use to explain his concerns to the underwriters?

the Agent's Report Because

What part of employer-paid group life insurance-if any-is tax exempt for employees?

the IRS Table I value of the first $50,000 of coverage Because The IRS Table I value of coverage in excess of $50,000 is a taxable benefit to the plan participant, who must include the amount in his or her income for tax purposes.

All the following are factors an underwriter may consider when underwriting an individual disability income policy application EXCEPT:

the applicant's religion Because Health problems may cause the policy to be rated. A history of good health will result in a lower premium.

With a key person life insurance policy, who is the owner of the policy?

the employer Because With a key employee life insurance policy, the business applies for, owns, and is the beneficiary of the policy covering the life of a key employee.

Jason is a new agent and will be meeting with a potential client to discuss life insurance policies. He is not sure what type of questions he can ask the applicant about his sexual orientation or exposure to HIV, and has come to you for advice. You advise Jason correctly that

the insurer can require the applicant to take an HIV-related test. Because Questions relating to an applicant having been diagnosed with AIDS are allowed if they are factual and designed to establish the existence of the condition, not the applicant's sexual orientation.

Ben is covered by his employer's group health insurance plan and is also eligible for Medicare benefits. In Ben's case, what is Medicare considered?

the secondary payor Because Medicare is the secondary payor. It provides benefits only after the insured's group policy benefits are fully paid.

Which of the following are the two most basic categories of life insurance settlement options?

those with a life contingency and those without a life contingency Because These are both settlement options with a life contingency, and are not considered the two most basic categories.

Best Insurance Company issues health insurance policies that reimburse insureds for expenses instead of offering medical services through a provider network. What type of plan does Best Insurance sell?

traditional indemnity Because Commercial insurers typically write traditional indemnity plans that reimburse the insured for all or a portion of the cost of health care he or she receives. Health service providers and managed care providers, in contrast, provide their insureds with health care directly through a network of health-care providers.

An accidental death and dismemberment policy will pay $10,000 for the loss of one arm and $30,000 for the loss of one eye. On which basis is the policy written?

valued Because Health insurance policies can be either reimbursement contracts or valued contracts. A reimbursement contract bases its benefit payments on the loss actually suffered. Valued contracts pay a pre-set sum. Disability income and accidental death and dismemberment policies are valued contracts.

The term used to describe the voluntarily surrender of a known right is:

waiver Because Estoppel is giving up a right without the intent to do so. A party surrenders a right that it failed to preserve.

The life insurance policy rider that makes the insurance company pay the policy premiums if the insured becomes totally disabled is called a(n):

waiver of premium rider Because Under the waiver of premium rider, the policy's premiums are waived if the insured becomes totally disabled for a period stated in the rider.

Harry is diagnosed with a cognitive disorder. To become eligible for payments under his policy's long-term care rider, which condition must he meet?

within the past 12 months, a physician-certified that his health or safety would be at risk without supervision Because To qualify for a cognitive reason, the insured must be physician-certified, within the previous 12 months, that his or her health or safety would be at risk without supervision.