PSI L & H Study Questions
You own a Major Medical policy with a $500 deductible, an 80/20 coinsurance requirement, a $20,000 Stop Loss provision and a $1,000,000 Lifetime benefit limit. If your first claim under the policy is for $6,500 of covered expenses, what amount do you have to pay of this claim?
$1,700
An insured owns a $10,000 Life policy with a Cash Value of $2,000 and a loan interest rate of 5%. On January 1, the insured borrows $500 and pays one year's interest in advance. During the year, the insured does not repay any part of the loan. If the insured dies on December 31, what is the payment amount to the beneficiary?
$9,500
To be eligible for Social Security Disability Income benefits, what is the minimum number of months an impairment is expected to last?
12
If a health insurance policy lapses due to nonpayment of premium, coverage will be reinstated after an application is submitted, premium is paid, and the coverage is not refused within how many days?
45 days
The Uniform Individual Health Policy Provisions Law requires a policy owner to wait at least how many days submitting a claim before taking legal action?
60
Who is ineligible to contribute to an Individual Retirement Account (IRA)?
A single college student who is paying his bills from his trust fund
How do warranties differ form representations?
A warranty is guaranteed to be true, a representation is believed to be true to the best of one's knowledge.
The use of which Dividend Option would create a taxable event?
Accumulate at interest
Which is NOT a benefit of a Long Term Care policy?
Acute hospital care
Which type of policy allows the policyowner the option to change the face value, amount of premium, length of coverage, and type of coverage without changing policies?
Adjustable life
What is an application submitted to an insurance company without premium legally considered to be?
An invitation to make an offer
What does an application for insurance contractually represent for the insured?
An offer
Which is NOT a required element of a legal contract?
Assignment
At which point are contractual death benefit settlement options determined and by whom?
At the time the policy is purchased by the owner of the policy
If a Whole Life policy is in danger of lapse, which rider avoids the proof of insurability requirement of the reinstatement provision?
Automatic Premium Loan
Which method of handling risk represents an insured's attempt to refrain from risk?
Avoidance
Which statement concerning Health insurance deductibles is TRUE?
Both time and dollar deductibles help hold down the cost of health insurance.
What is the major reason that insurance regulators are often critical of dread disease insurance policies?
Buyers often think they are getting broader coverage than they actually purchase.
Which statement about the Group Life conversion privilege is TRUE?
Death during the conversion period is covered even if the departing employee chooses not to convert.
The Free Look period begins on which date?
Delivery date
Which of the following policies provides a specified income benefit if an insured person become incapable of working?
Disability income
Which major medical policy is triggered by one disease?
Dread Disease policy
Which health provision states that the producer does not have the authority to waive any of the provisions of the insurance contract?
Entire Contract
Which Life policy provision defines who can change a policy after it has been issued?
Entire contract clause
The feature of a Life Insurance Policy stating that the policy will NOT cover certain risks is known as
Exclusion
What type of authority is in writing and allows a producer to act on behalf of the insurer?
Express
A 35-year-old autoworker with a spouse and three children is laid off from work for a period expected to last from 6 to 12 months. During this period, the autoworker cannot pay premiums on the Whole Life policy he has owned since age 20. Which non-forfeiture option is most appropriate if he plans to reinstate his policy when he does back to work?
Extended Term
Which life policy offers permanent protection and a gradually increasing premium during the early years of the contract?
Graded Premium Whole Life
What is the form of Health insurance renewal that guarantees coverage until a stated date or age but des NOT guarantee premium called?
Guaranteed Renewable
What does the Legal Action provision of an individual health policy state?
Insureds must wait 60 days after filing Proof of Loss to initiate a lawsuit, and must act within 3 years.
Which part of an insurance contract contains the promise to pay losses covered by the policy in exchange for the insured's premium and compliance with policy terms?
Insuring clause
Which health policy provision permits an insurance company to refuse the payment of a claim?
Intoxicants and Narcotics
Which statement concerning Waiver of Premium in a Disability Income policy is FALSE?
It is a rider.
Which type of annuity covers two or more annuitants and provides monthly income only until the first annuitant dies?
Joint life annuity
What type of insurance should a company purchase if it wants to insure the life of its CEO?
Key person insurance
An annuity owner wants to ensure that all of the principal dollars invested in his annuity will be paid to him or his beneficiaries. He should be advised to select any of the following payouts EXCEPT
Life Annuity with Period Certain
The policy that is designed to provide nursing home benefits on an extended basis for NOT less than 12 consecutive months is
Long-Term Care.
Which factor is NOT important in life insurance underwriting?
Martial status
Which type of insurance provides benefits for expenses incurred as a result of hospitalization, surgical procedures, and outpatient expenses such as office visits, laboratory tests, and diagnostic services?
Medical expense
A consumer report used to determine eligibility for insurance may include all of the following EXCEPT
Medical underwriting exam.
Which of the following refers to how often a premiums is paid?
Mode
An insurance policy's gross premium is calculated in which of the following ways?
Mortality - Interest + Expenses
Which feature makes Universal Life insurance different from other forms of cash value life insurance?
Premium options
Which statement is TRUE if a policy owner elects a non-forfeiture option under their life insurance policy?
Premiums will no longer be required.
Which is NOT required by a Long Term Care contract?
Prior hospitalization
In which of the following must a beneficiary change request be filed in writing to the insurer and is made effectively by the insurance company recording the change in its records?
Recording method
Which is a Non-forfeiture option?
Reduce Paid-Up insurance
Standard nonforfeiture benefits include
Reduced paid-up insurance
Which type of life policy can be continued year after year without a required medical examination, but rates are dependent on the insured's current age?
Renewable term
A producer takes a prepaid application on a Major Medical policy from a couple on October 1st. They sail through underwriting, and a policy with an effective date of October 15 arrives in the producer's officer on October 17. What should the producer do when he delivers the policy?
Review the policy benefits, exclusions and riders.
How does a traditional IRA differ from a Roth IRA?
Roth IRAs are funded with after-tax dollars.
Dental coverage plans which list all covered dental procedures and the price the coverage will pay for each procedure are known as what type of plan?
Scheduled
What is the highest level o care under a Long Term Care policy?
Skilled Nursing Care
J and M are both insureds under a policy which will pay when the last of the two dies. Which type of policy do they have?
Survivorship Life policy
How are non-qualified annuity payouts taxed to the annuitant?
Taxes must be paid on the interest earned as defined by the exclusion ratio.
Ted is the owner and the insured of a Universal Life policy in which he names his wife, Betty, as the sole, revocable beneficiary; no contingent beneficiaries are named even though the marriage produces two children. If Ted and Betty both die instantly in an auto accident, who receives benefits?
Ted's estate
Evan's Major Medical policy is reinstated on February 1. When he suffers a heart attack on February 6th, he files a claim. How should the company handle the claim?
The claim is denied due to a 10-day probationary period.
When does life insurance coverage begin if an Interim Insuring Agreement (Conditional Receipt) is NOT used?
The date of policy delivery
Who created the Medical Information Bureau and why was it created?
The insurance companies to use as an underwriting tool
Which does NOT trigger the payment of an Accelerated Death Benefit?
The insured is permanently and totally disabled.
How do health care plans using a preferred provider network usually discourage the use of non-network providers?
The plans require greater cost sharing for the use of non-network services.
Beth and Seth are both employed, and each covers the family with their nonparticipating Group Major Medical policy. How do we determine whose policy is primary for their children?
The policy of the spouse having a birthday in the earliest month of the year is primary.
Which of the following occurs immediately after the application is submitted and the initial premium paid?
The underwriting process begins.
Which statement about Income Replacement contracts is TRUE?
They can pay even when there is no loss of time or duties.
How do insurance companies protect themselves against adverse selection when underwriting individual health insurance policies?
They pay for AIDS testing of all applicants.
Which type of coverage pays the operating costs of a small business when the owner becomes disabled?
business overhead expense disability insurance
Which factor is used in calculating an individual's Social Security Primary Insurance Amount (PIA)?
earned income during the working years
All of the following are characteristics of an HMO EXCEPT
easy access to specialist.
Jim has a Major Medical policy when a covered illness results in a hospital bill of $10,298.37. Jim's company pays $8,214.15. All of the following could account for the difference EXCEPT the
elimination period
A company decides to purchase Key Employee Life Insurance for its vice president of operations. All of the following statements are correct EXCEPT the
employee names the beneficiary.
What is the process used when an insurance company uses the claims history of a group in the underwriting?
experience rating
Which of the following does not apply to the time limit on certain defenses provision in health insurance policies?
fraudulent misstatements
Under a Family Medical Expense policy, when are adopted children covered?
from the date of placement
In a Preferred Provider Organization (PPO), what is the primary financial benefit for an insured member to use only the services of a listed health care provider?
lower cost sharing expenses
What does a Life Annuity protect against?
outliving income
The Suicide Clause dictates that if the insured commits suicide 15 years after the policy is issued, the company will
pay the claim in its entirety
Who pays the premium for individuals continuing Medical Expense coverage under the same Group plan?
the employee
If a company provides group disability insurance to its employees, which of the following may be tax-deductible?
the premiums paid by the company as a business expense
What is the purpose of an elimination period in a health policy?
to serve as a time-based deductible
Which statement about Viatical Settlements is FALSE?
Payments received by a viator with a life expectancy of less than 5 years from the sale of a life policy to a viatical company are free from federal taxes.
Which type of assignment occurs when a person transfers ownership of a life insurance policy to another person, such as a son when turning 18?
Permanent
What is the period called in which an annuity owner pays the premium to the insurance company?
accumulation period
Which is NOT guaranteed under a Variable Whole Life policy?
Cash value
What will result in a misstatement of age on a life insurance application?
Change in benefits to reflect premium purchase for the correct age.
Which is the best definition of risk?
Change of loss
Which policy contains a Corridor Deductible?
Comprehensive Major Medical
What does Renewable Term insurance allow the policy owner to do?
Continue the coverage without additional proof of insurability
While whole life policy premium type is the most common?
Continuous premium
The insured dies four months after the effective date of his life policy. At that time, the company discovers six unanswered questions on the application. How should the insurance company handle the policy?
Pay the claim
What does the life insurance company do if the insured dies during the Grace Period?
Pay the face amount minus the overdue premium and interest.
Charles understates his age when he buys a life policy naming his wife, Mary, as an irrevocable beneficiary. When he dies 10 years later, the company discovers the misstatement. What should the company do?
Pay the amount the premium would have purchased at the correct age.
Which of the following statements regarding a pure life annuity payout option is correct?
This option provides the highest monthly income.
Which best describes the purpose of insurance?
Transfer of risk
Which health insurance policy requires a beneficiary designation?
Travel Accident
A producer must deliver a prospectus to a proposed insured when selling which policy?
Variable Life
A Separate Account is a feature of which policy?
Variable Whole Life
If you hold only a Life and Health license, you may NOT sell
Variable Whole Life.
Which policy type is backed by equity investments and allows the policyholder to adjust the death benefit?
Variable universal life
Which of the following are defined as a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional?
Warranties
Which is TRUE concerning the coverage afforded by Workers Compensation and Group Major Medical insurance?
Workers Comp covers occupational accident and sickness claims, and Group Major Medical covers non-occupational accident and sickness losses.
