Practice Exam Questions

The most the Insurance Guaranty Association will pay for net cash surrender values is

$100,000

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to

10 yrs - Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.

In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective?

100%- One hundred percent of eligible employees must participate in a non-contributory health insurance plan for the plan to become effective.

A group life insurance is converted to an individual policy. The insured is eligible for individual life insurance coverage without any evidence of insurability. Within how many days of the first premium must the insurer notify the insured of his eligibility?

15 days.

Which of the following is NOT required to be included in the certificate of insurance delivered to each insured by the policyholder?

A letter of approval by the commissioner.

Which of the following is NOT an enrollment period for Medicare Part A applicants?

Automatic enrollment- There are 3 types of enrollment periods for Medicare Part A: initial enrollment period, general enrollment period and special enrollment period.

Medicaid is sponsored by what kind of sources?

Both state and federal- Medicaid is sponsored at both the state and federal levels. Most other standard health insurance programs are provided by private insurance companies.

In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is

Broader in general- A policy that uses the accidental bodily injury definition will provide broader coverage than a policy that uses the accidental means definition.

Most scheduled plans provide first-dollar benefits without

Coinsurance and deductibles- Scheduled/basic plans pay benefits from a list of procedures up to the amount shown in the schedule. Most plans provide first-dollar benefits without coinsurance or deductibles.

Earning commissions based on transactions with a person's friends and family is called

Controlled Business- Insurance licenses are issued with the intent that the licensee will engage in the business of insurance with members of the general public, and that the license will not be used primarily to earn commissions on personal business, or that of the licensee's immediate family or close associates.

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?

Cost comparison methods.

What does "level" refer to in level term insurance?

Face amount.

Which of the following best describes MIB?

IT's a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

Which of the following is correct about a group health insurance policy?

It can provide coverage for handicapped children- Both individual and group policies covering a family, must provide coverage on handicapped children of the insured. If upon reaching the maximum age for coverage the child continues to be both, incapable of self- support, and chiefly dependent upon the policyholder for support and maintenance, coverage may continue beyond the specified maximum age.

Which of the following is true regarding a term health policy?

It is nonrenewable- In term health policies, the owner has no rights of renewal.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint life.

If a life insurance policy increases significantly in face amount when the insured reaches a specified age, what type of policy is this?

Jumping juvenile policy.

In franchise insurance, premiums are usually

Lower than individual policies, but higher than group policies- Premiums charged are generally less than for an individual policy, but more than group coverage.

During replacement of life insurance, a replacing insurer must do which of the following?

Obtain a list of all life insurance policies that will be replaced.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?

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

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense.

Paul is a producer in Ohio and wants to become a producer in Nebraska. The Director will waive certain examination requirements, provided that Ohio would waive these same requirements if a Nebraska producer sought licensure in Ohio. What term is used to describe this phenomenon?

Reciprocity -"Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Nebraska.

When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis?

Reimbursement- The insured is responsible to pay the provider, and the policy reimburses the insured for covered expenses.

In dental insurance, what type of care will cover crowns?

Restorative- Restorative care covers crowns and fillings. Prosthodontics covers bridgework. Preventive care would include cleanings. Endodontics covers oral surgery (such as root canals); orthodontics covers braces.

An applicant has a history of heart disease in his family, so he would like to buy a health insurance policy that strictly covers heart disease. What type of policy is this?

Specified coverage- Specified coverage policies are those insurance policies that limit coverage to one illness or one limiting group of coverages, i.e. cancer policies, prescription drug coverage, dental plans, and other limited coverage plans.

Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called.

Suitability

All of the following statements concerning the use of life insurance as en Executive Bonus are correct EXCEPT

The policy is owned by the company.

The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom?

The producer.

Which of the following is TRUE about nonforfeiture values?

They are required by state law to be included in the policy- Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal life- Option A.

Which of the following life insurance policies would be considered interest sensitive?

Universal life.

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

Universal life.

Which of the following is NOT a characteristic of an insurable risk?

a)The loss must be catastrophic- In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.

A universal life insurance policy is best described as an

annually renewable term policy with a cash value account.