Practice Test 2

long-term care insurance may be purchased in all of the following forms except

federal government-sponsored policies

all of the following would be considered one of the four major types of loss exposures, except

financial loss exposure

unless the applicant indicated otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invested only in

fixed income investments and money market funds

choose from the following selections the best description of a premium

funds received by an insurer from an insured to realize the benefits of the policy

with the cost of living rider, the life insurance policy owner

gets the automatic increase in the face value if there is an increase in the cost of living index. there is an addition premium for the additional coverage

which of the following gives individuals the right to purchase additional life insurance regardless of their insurability

guaranteed insurability

in which of the following plans are claim forms typically completed and submitted by the participant

indemnity

which long-term care policy provision allows for a periodic increase in policy benefits

inflation protection

a written contract attempts to indemnify another party against loss, damage, or liability arising from a contingent or unknown event. this describes

insurance

all of the following are characteristics of adverse selection except

insurance companies can not discriminate against applicants who have a higher probability of loss

which plan covers the medical expenses that are NOT covered by medicare

medicare supplement

disability insurance benefits are usually paid

monthly

the theory of probability is applied to life insurance through the use of

mortality tables

if the commissioner issues a notice of seizure for documents and the individual fails to send those documents what is the penalty

1 year in jail and/or $1,000 fine

the minimum number of employees for group life insurance in California is

2

when are parties to a contract required to communicate information solely based on personal judgement for a matter in question

never

identify the penalty for each violation of a person engaging in any unfair method of competition

no more than $5,000 for each act, or no more than $10,000 for each act if the act is judged to be willful

john pays the premium for a $200,000 life insurance policy and is issued a binding receipt. john died in an accident the next day. in the course if underwriting, the company determines John was not insurable by their guidelines at the time the binding receipt was issued. what must the insurer do?

pay the claim in full

which risk classifications carries the lowest premium

preferred

in a reinsurance agreement the insurer that transfers its loss exposure to another is called the

primary insurer

characteristics of preferred provider organizations (PPOs) include all of the following except

primary physicians serve as gatekeepers

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

promise

The price of insurance for each exposure unit is called the

rate

how would a "peril" best be defined

reason for the loss

which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium

renewable term

a form of rest or relief offered to family members who are caring for a person who requires continual care is

respite care

according to the California Insurance Code, which of the following MUST be specified in an insurance contract

risks insured against

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

telephone call from an agent

An individual with a low income and high insurance needs should buy

term insurance

there are four basic classes of life insurance. all of the selections listed below are regarded as ordinary insurance, except

term life insurance policy

Choose the payments from an insurance policy which are not subject to federal income taxes

the death benefit paid to a beneficiary in a lump sum

unless certified by another governmental agency, which entity has jurisdiction over providers of coverage designed tp pay for heath care services

the department of insurance

any time a ling-term care policy is replaced, the sales commission paid to the agent by the insurer shall be calculated based on

the difference between the annual premium of the replacement coverage and that of the original coverage

when an agent takes an application or receives premium moneys for an application, including a health policy, the insurance code specifically requires the agent to disclose to the insured or applicant

the effective date of coverage, if known, or the circumstances under which coverage will be effective

what is the limit of liability in a term life policy

the face amount of the policy

when does an individual have an insurable interest in the life of another person

the individual depends on the other person for financial support

During the grace period, when may an insurer terminate medical coverage

the insured requests termination in writing

mark holds two jobs. if mark where to apply for an insurance policy and the insurer reviews the risk exposure based on his occupations, which of the following would the insurer most likely use to classify him

the job that represents the highest hazard

In the mathematical rule that says that the number of individual but similar exposure units increases the easier it is to predict losses is which of the following?

the law of large numbers

which statement best describes how the return of premium (ROP) rider works on a term life policy?

the policy owner will receive all or a portion of the premiums paid in over the life of the policy if the insured is still living at the end of the policy's term

it is a violation of the California Insurance Code to act as an agent for a non-admitted carrier unless

the producer is a surplus line broker

assuming Julie has a total and permanent disability, which of the selections below states her policy still covers her even though premium payments are not made

the waiver of premium provision

assume two people apply for life insurance with exactly the same monthly premiums. one individual buys a whole life policy, and the other, a 10-year renewable term plan. both are standard risks with no difference in their age or health rating. select the statement from below which is false

the whole life policy will pay a higher amount to the beneficiary should the insured due within the first 10 years

all of the following are reasons for an individual to purchase personal life insurance, except

to cover buy/sell agreement

under a disability income insurance policy with an own occupation clause, an individual who can no, longer perform the tasks of the job held at the time of injury is considered

totally disabled

which type of insurance coverage has both a savings element and a flexible premium option

universal life

an automatic premium loan, found only in cash value policies

will pay a premium that is due by using the policy's cash value

A person has paid $50,000 into a fixed annuity over 20 years. When he decides to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. In the first 10 years of payment how much is taxable each year?

$2,000

life insurers are required to maintain records on policies they have sold. how long from the day of delivery must these records be kept?

5 years

at what age are individuals eligible for medicare part A benefits

65

what is the performance of an equity annuity based on

S&P 500

disability insurance contracts often include a provision called an "elimination period." which of the following best describes this time period

a specific number of days or month after the onset of a disability that must pass before any payment of benefits being to be paid to the insured

which of the following may serve as a health insurance administrator

a third party organization

an annuity in which the underlying investment performance will cause a fluctuation in the value if the benefit is

a variable annuity

which of the following is not an acceptable risk to the underwriting department of an insurance company

all are acceptable risks

Which of the following terms are used to describe the extent of a disability

all of the above

failure to report backdrop changes within 30 days as required under section 1729.2 of the California Insurance Code could subject a licensee or applicant to

all of the above

which of the following is required to be included in the writing of an insurance contract

all of the above

disability income insurance payments are based on

an amount agreed upon by the insurer and the insured

in insurance terms a representation can be considered

an implied warranty

an example or a morale hazard in relation to a life insurance application would be

an individual has an indifference attitude about participating in activities that may be damaging to his health

subject to the restrictions of the California Insurance Code, any person capable of making a contract may be considered

an insurer

there is a financial product that was created to address the risk of a person outliving their life savings. what is this product called?

annuities

if the owner of a life insurance policy does not select a settlement option on behalf of the beneficiary, the beneficiary

can choose a settlement since it was not chosen by the owner

as defined by the California code of regulations, a person who asserts a right of recovery under an insurance policy is called a

claimant

the policy provision which comes into effective when the insured and primary beneficiary die in a simultaneous (common) accident with no evidence as to who died first is

common distastes provision

a failure to communicate information which a party to an insurance contract knows and should communicate, is called an act of

concealment

a long-term care insurance rider dan include coverage for all of the following except

hospital acute care

which of the following is true regarding an aleatory contract

if there were a loss, the insurer would pay out considerably more compared to the insured's premium

creditors have rights to life insurance policy proceeds when the beneficiary is the

insured's estate

the insured cannot borrow against the loan value off the policy without the permission and consent of which of the following

irrevocable beneficiary

which of the following is not characteristic of life insurance

it may be based strictly in an oral agreement

which two insurance products are commonly used to fund buy-sell agreements

life insurance and disability insurance

who are members of the medical information bureau

life insurance companies

in insurance terminology, "indemnify" means

make whole

members of the medical information bureau are required to report

medical impairments found during the underwriting process

which statement about medicare is not correct

medicare part c covers long-term care

all of the following statements about health maintenance organizations (HMOs) are true except

members pay higher monthly fees when out-of-network providers are utilized

Tony Brown has a CLY certification. Which of the following names would be automatically approved for his agency's use

none of these would be automatically approved

all of the following are requirements for a notice by mail to an insured by an insurer, except

notice must be sent with return receipt required

all of the following are contained in a mortality table except

number living at the end of designated year

which of the following is not allowed by code in connection with the sale of medicare supplement policies

offer only broader plans

by putting a maximum limit on how much is covered under a policy for certain selected coverages, an insurance company can try to avoid

over-insurance

are low-income families eligible to participate in the California Health Benefit Exchange program?

yes, using tax credits and if the low-income family/individual's income is between 133-400% of the federal poverty level

which of the following is an express authority of an agent in an agency agreement

authority to represent the insurer

All of the following statements apply to a producer acting as an insurance BROKER (as distinguished from an insurance AGENT) except

a broker acts on behalf of the insurer

which of the following is a hazard

a condition that might increase the likelihood of a loss occurring

an agent must submit all of the following to the insurer, except

a copy of all printed communications used for the presentation

which of the following would be the best client to purchase a variable annuity

a middle aged divorced housewife with a substantial portfolio, and $60,000 per year income

which type of beneficiary designation gives the policy owner the right to change the beneficiary designation without requiring the beneficiary's consent

a removable beneficiary designation

what is a morbidity table

a table that has information on the probability of disabilities because of sickness or accidents

an assignment which transfers all "incidents of ownership" to another party is a(n)

absolute assignment

the tendency of a person who has greater than average exposure to loss to seek out insurance is called

adverse selection

what is the first step in the personal financial planning process

define objectives

the components of determining policy premiums include all of the following except

dividends

the purchase of an insurance policy may not provide one of the following foe the insured. select the most complete answer

elimination of the risk

the master policy owner of a group health insurance contract is the

employer

which type of policy pays the face amount if the insured survives to the end of a certain period

endowment insurance

which is not part of transacting insurance

establishing a list of clients

when children are covered under a family life policy

evidence of insurability is not required if conversion is made to permanent insurance for those children