XCEL Chapter 11, XCEL Finial Study PRE-EXAM
What does the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 allow an employee to do? A. In the event of employment termination, group health insurance can be kept if the employee pays the premiums B. Receive a tax credit to help offset the cost of health insurance C. Remain on their current coverage for 30 months D. In the event of employment termination, group health insurance can be kept if the employer pays the premiums
In the event of employment termination, group health insurance can be kept if the employee pays the premiums
All of the following are characteristics of a Group Life Insurance Plan EXCEPT? A. Group underwriting B. Master contract C. Individual underwriting D. Probationary period
Individual underwriting
The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT? A. charities B. political organizations C. insurance sales calls D. surveys
Insurance sales calls
Without a Section 125 Plan in place, what would happen to an employee's payroll contribution to an HSA? A. It would be considered taxable income to the employee B. The employee would not be allowed to an HSA C. The employer would pay payroll tax and FICA on the contribution amount D. The employer would not be allowed to deduct the contribution from the employee's pay
It would be considered taxable income to the employee
Which type of life insurance is normally associated with a Payor Benefit rider? A. Juvenile insurance B. Family income insurance C. Spouse insurance D. Term rider
Juvenile insurance
The authority granted to a licensed producer is provided via the? A. producer's apparent authority B. written contract C. Law of Agency D. Principal Capacity
Law of Agency
How do insurers predict the increase of individual risks? A. Law of large numbers B. U.S. Census C. Average mortality incidents D. Experience of morbidity
Law of large numbers
Insurance companies determine risk exposure by which of the following? A. Insurable interest B. Insurance exchanges C. Law of large numbers and risk pooling D. Population table data
Law of large numbers and risk pooling
Which contract element is insurable interest a component of? A. Competent parties B. Offer and acceptance C. Consideration D. Legal purpose
Legal purpose
All of the following are examples of pure risk EXCEPT? A. Losing money at a casino B. Injured while playing football C. Falling at a casino and breaking a hip D. Jewelry stolen during a home robbery
Losing money at a casino
What is the contract called that is issued to an employer for a Group Medical Insurance plan? A. Master policy B. Certificate of coverage C. Provisional policy D. Document of coverage
Master policy
Sonya applied for a health insurance policy on April 1. Her agent submitted the information to the insurance company on April 6. She paid the premium on May 15 with the policy indicating the effective date being May 30. On which date would Sonya have coverage? A. April 1 B. April 6 C. May 15 D. May 30
May 30
What makes an insurance policy a unilateral contract? A. Only the insured pays the premium B. Only the insured can change the provisions C. Only the insurer is legally bound D. Only the insured is legally bound
Only the insurer is legally bound
According to the Health Insurance Portability and Accountability Act (HIPAA), when can a group health policy renewal be denied? A. There have been too many claims in the previous year B. The size of the group has increased by more than 10% C. Participation or contribution rules have been violated D. Participation or contribution rules have been changed
Participation or contribution rules have been violated
What is known as the immediate specific event causing loss and giving rise to risk? A. Peril B. Hazard C. Loss factor D. Liability
Peril
Which situation accurately describes a reduced paid-up nonforfeiture option? A. Policy has a decreased face amount B. Face amount of the new policy equals that of the original policy C. Cash value is surrendered to policyowner D. Premiums must continue to be paid
Policy has a decreased face amount
Which of the following would evidence ownership in a participating health insurance contract? A. Stock ownership B. Irrevocable beneficiary status C. Policy ownership D. Collateral assignment
Policy ownership
Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? A. Policy loans are disallowed B. The premium payments will be tax deductible C. Pre-death distributions are typically taxable D. Withdrawals will be prohibited
Pre-death distributions are typically taxable
Coordination of Benefits regulation applies to all of the following plans EXCEPT? A. Group vision plan B. Preferred Provider Organization plan C. Self-funded group health plan D. Group health plan
Preferred Provider Organization plan
Decreasing term life insurance is often used to? A. provide retirement funds B. provide coverage for a home mortgage C. accumulate cash value D. provide coverage for estate taxes
Provide coverage for a home mortgage
How are survivorship life insurance policies helpful in estate planning? A. Provide funds to help fund retirement B. Provide funds to help pay taxes C. Provide funds for funeral expenses D. Provide tax deductions for premium payments
Provide funds to help pay taxes
Which of these techniques will remove the risk of losing money in the stock market by never purchasing stocks? A. Risk reduction B. Risk transference C. Risk avoidance D. Risk retention
Risk avoidance
An insurer's claim settlement practices are regulated by the? A. Securities and Exchange Commission (SEC) B. National Association of Claims Adjusters (NACA) C. National Association of Insurance Commissioners (NAIC) D. State insurance departments
State insurance departments
The type of multiple protection coverage that pays on the death of the last person is called a(n)? A. joint life policy B. survivorship life policy C. annuity joint policy D. dual life policy
Survivorship life policy
Which of the following is typically NOT eligible for coverage in a group health policy? A. Full-time employee B. Temporary employee C. Business owner D. Partner in a partnership
Temporary employee
Which of the following policies does NOT build cash value? A. Term B. Straight Life C. Endowment D. Variable Life
Term
What does the word "level" in Level Term describe? A. The period of coverage B. The face amount C. The premium payments D. The cash value
The face amount
What is a corridor in relation to a Universal Life insurance policy? A. The gap between the total death benefit and the policy's cash value B. The gap between when a claim is filed and when the death benefit is received C. The amount of interest that has accumulated in the policy's cash value D. The point in time when the policy's cash value reaches $0
The gap between the total death benefit and the policy's cash value
The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is? A. The shorter the payment period, the lower the premium B. The longer the payment period, the higher the premium C. The shorter the payment period, the higher the premium D. The payment period has no affect on the premium payment
The shorter the payment period, the higher the premium
Under a contract of adhesion? A. there is the potential for an unequal exchange of value B. the insurer's obligations are dependent upon certain acts of the insured individual C. the terms must be accepted or rejected in full D. only one party makes any kind of enforceable promise
The terms must be accepted or rejected in full
Legal purpose is a term used in contract law meaning? A. there must be an offer and acceptance B. the contract must be aleatory C. there must be legal reasons for entering into the contract D. the contract must be a contract of adhesion
There must be legal reasons for entering into the contract
Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? A. Tom's spouse B. Bob's estate C. Bob's spouse D. Tom
Tom
A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called? A. whole life B. group life C. credit life D. universal life
Universal life
Which type of policy combines the flexibility of a universal life policy with investment choices? A. Adjustable universal life policy B. Flexible universal life policy C. Variable universal life policy D. Modified universal life policy
Variable universal life policy
When are group disability benefits considered to be tax-free to the insured? A. When the recipient pays the premiums B. When the employer pays the premiums C. When both the employer and recipient pay the premiums D. When benefits paid are equal to or lower than the recipient's salary
When the recipient pays the premiums
A non-contributory health insurance plan helps the insurer avoid? A. adverse selection B. state compliance C. the underwriting process D. tax deductions
adverse selection
People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called? A. risk retention B. preexisting conditions C. law of large numbers D. adverse selection
adverse selection
A type of group that has a constitution and bylaws and has been organized for purposes other than obtaining insurance is called a(n)? A. employer group B. employee group C. association or labor group D. multiple coalition
association or labor group
According to life insurance contract law, insurable interest exists? A. when any business relationship exists B. at the time of application C. at the time of death D. only when determined by a judge
at the time of application
The purpose of the Coordination of Benefits provision in group accident and health plans is to? A. avoid overpayment of claims B. reduce out-of-pocket costs C. reduce adverse selection D. lower the cost of premiums
avoid overpayment of claims
All of the following are elements of an insurance policy EXCEPT? A. definitions B. other insurance C. claim forms D. conditions
claim forms
Susan is insured through her Group Health Insurance plan and changed her coverage to an individual plan with the same insurer after her employment was terminated. This change is called a(n) A. crossover B. conversion C. exchange D. extension of benefits
conversion
An employee under a group insurance policy has the right to name a beneficiary and the right to? A. remain on the group plan in the event of employment termination B. cash surrender the existing policy C. change the policy provisions D. convert to an individual policy in the event of employment termination
convert to an individual policy in the event of employment termination
Under the Health Insurance Portability and Accountability Act (HIPAA), the employee's new Group Health Plan will verify Creditable Coverage so that the A. employee's benefits still owed can be claimed B. employee cannot be excluded from the new employer's health plan C. employee's waiting period for coverage of a preexisting condition can be reduced under the new employer's health plan D. new health insurance carrier will have a clear record of any chronic conditions that exist
employee's waiting period for coverage of a preexisting condition can be reduced under the new employer's health plan
A group Disability Income plan that pays tax-free benefits to covered employees is considered? A. non-contributory B. partially contributory C. group contributory D. fully contributory
fully contributory
Credit Accident and Health plans are designed to? A. permit creditors the ability to require that coverage be purchased through insurers of their choice B. provide permanent protection C. help pay off existing loans during periods of disability D. not permit free choice of coverage selection
help pay off existing loans during periods of disability
The conversion privilege under a group life plan allows an employee to convert to a(n)? A. family plan with another insurer B. individual plan with another insurer that has better rates C. individual plan upon employment termination D. individual policy in the spouse's name
individual plan upon employment termination
According to HIPAA, when an insured individual leaves an employer and immediately begins working for a new company that offers group health insurance, the individual? A. is eligible for coverage upon hire B. must wait 360 days to be eligible for coverage C. must continue coverage with the previous employer D. is eligible for only health insurance, not life or dental insurance
is eligible for coverage upon hire
A common exclusion with Vision plans is A. eyeglass frames B. the examination C. contact lenses D. lasik surgery
lasik surgery
A limited payment whole life policy provides? A. protection for 20 years B. lifetime protection C. protection for more than one person D. discounted premiums
lifetime protection
A life insurance policy that has premiums fully paid up within a stated time period is called? A. stated payment insurance B. limited universal insurance C. stated modified insurance D. limited payment insurance
limited payment insurance
An insurer's ability to make unpredictable payouts to policyowners is called
liquidity
The election of COBRA for continuation of health coverage will? A. increase the coverage and lower premium B. maintain the same coverage and increase premium C. increase out-of-pocket costs and lower premium D. decrease out-of-pocket costs and maintain same premium
maintain the same coverage and increase premium
A Renewable Term Life insurance policy can be renewed? A. at a predetermined date or age, regardless of the insured's health B. only if the insured provides evidence of insurability C. anytime at the policyowner's request D. typically with no change in premium
only if the insured provides evidence of insurability
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus? A. nonparticipating life insurance policy B. participating life insurance policy C. divisible surplus life insurance policy D. straight life insurance policy
participating life insurance policy
The Fair Credit and Reporting Act's main purpose is to
protect consumers with guidelines regarding credit reporting and distribution
A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the? A. mutual insurer B. reinsurer C. reciprocal insurer D. participating insurer
reinsurer
Under the subrogation clause, legal action can be taken by the insurer against the? A. responsible third party B. beneficiary C. policyowner D. State
responsible third party
Health insurance involves two perils, accident and ____. A. death B. sickness C. disability D. liability
sickness
A nonparticipating company is sometimes called a(n)? A. alien insurer B. mutual insurer C. reinsurer D. stock insurer
stock insurer
An insurer has the right to recover payment made to the insured from the negligent party. These rights are called? A. contributory B. indemnity C. estoppel D. subrogation
subrogation
Continued coverage under COBRA would be provided to a(n) A. former dependent of employee no longer of dependent status B. terminated employee C. divorced spouse of employee D. employee reaching full retirement
terminated employee
Converting a group plan to permanent life insurance requires? A. submitting proof of insurability B. paying a lower premium C. converting to term life insurance D. the conversion being applied for within 31 days of termination
the conversion being applied for within 31 days of termination
Insurance represents the process of risk? A. selection B. avoidance C. transference D. assumption
transference
A renewable Term Life insurance policy allows the policyowner the right to renew the policy? A. at anytime the policyowner chooses B. as many times as the policyowner chooses C. paying the same premium as before the renewal D. without producing proof of insurability
without producing proof of insurability
Who is responsible for assembling the policy forms for insureds? A. State Insurance Departments B. NAIC C. Insurance carriers D. Insurance producers
Insurance carriers
The cause of a loss is referred to as a(n) A. hazard B. adversity C. peril D. risk
Peril
Under a group life policy, the insurer will issue an individual _____ to the policyowner for delivery to each person insured. A. policy B. certificate C. application D. rider
certificate
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this? A. $0 B. $5,000 C. $10,000 D. $15,000
$10,000
Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?
$5,000
Sole proprietors are permitted tax deductions for health costs paid from their earnings in the amount of? A. costs that exceed 7 1/2 % of AGI B. costs that exceed 10% of AGI C. 100% of costs D. no deduction permitted
100% of costs
How many employees must an employer have for a terminated employee to be eligible for COBRA? A. 20 B. 30 C. 40 D. 50
20
Ron has a new employer and wishes to enroll in the company's group health plan. In determining whether his pre-existing health condition applies, Ron cannot have more than a ___ day gap without previous health insurance. A. 45 B. 63 C. 75 D. 90
63
Which of the following BEST describes a conditional insurance contract? A. A contract that requires certain conditions or acts by the insured individual B. A contract that has the potential for the unequal exchange of consideration for both parties C. A contract where one party "adheres" to the terms of the contract D. A contract where only one party makes any kind of enforceable contract
A contract that requires certain conditions or acts by the insured individual
Which policy feature makes a universal life policy different from a whole life policy? A. A fixed cash value B. A flexible premium schedule C. A fixed death benefit D. The ability to take out a policy loan
A flexible premium schedule
All of these are valid options for an Adjustable Life Policy EXCEPT? A. The policy's premium can be increased or decreased B. The policy's death benefit can be increased or decreased C. A nonforfeiture option can be used to increase the death benefit D. The policy's protection period can be modified
A nonforfeiture option can be used to increase the death benefit
Which of the following is NOT considered advertising? A. A rating from a rating service company, such as A.M. Best B. An illustration C. A sales presentation D. Direct mailing from an agency
A rating from a rating service company, such as A.M. Best
A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called A. A self-derived plan B. A multiple-employer plan C. A blanket plan D. A self-funded plan
A self-funded plan
Under a disability income policy, which provision would be payable if the cause of an injury is unexpected and accidental? A. Presumptive disability provision B. Absolute accidental provision C. Accidental death benefit provision D. Accidental bodily injury provision
Accidental bodily injury provision
What does the Group Life underwriting risk selection process help protect insurance companies from? A. Risk aversion B. Natural selection C. Adverse selection D. Risk management
Adverse selection
The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as? A. Apparent B. Estoppel C. Aleatory D. Unilateral
Aleatory
Which of the following does Coordination of Benefits allow? A. Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid B. Allows both a group health plan and individual health plan to coordinate their benefit payments C. Allows the deductible to be spread out between all the health providers D. Allows each health provider to pay 100% of the claim
Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid
What is implied authority defined as? A. Authority given in writing to an agent in the agency agreement B. Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties C. Authority given to handle claims and process payments D. Authority given to an agent to act outside the scope of the agency agreement
Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties
Which of these factors would an insurer consider when determining whether to accept a group life plan? A. Number of dependents B. Incontestable period C. Average age D. Grace period
Average Age
Why are dividends from a mutual insurer not subject to taxation? A. Because insurance premiums are tax-deductible B. Because dividends are already subject to capital gains C. Because dividends are payable directly to the policyholder D. Because dividends are considered to be a return of premium
Because dividends are considered to be a return of premium
Which type of business insurance is meant to cover the costs of continuing to do business while the owner is disabled? A. Disability overhead policy B. Business continuation policy C. Disability buy-sell policy D. Business overhead expense policy
Business overhead expense policy
Insurable interest does NOT occur in which of the following relationships? A. Sister and brother B. Parent and children C. Business partners D. Business owner and business client
Business owner and business client
Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider? A. Can be converted to permanent coverage without evidence of insurability B. Coverage can be different for each child C. Premiums on this rider are not required until the limiting age is reached D. Increases the policy's overall cash value
Can be converted to permanent coverage without evidence of insurability
The coverage, conditions, and limitations in the master policy of a group contract can be found in which document? A. Certificate of Authority B. Consumer report C. Coverage document D. Certificate of coverage and benefits
Certificate of coverage and benefits
Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this? A. Child term rider B. Payor rider C. Family maintenance rider D. Family income rider
Child term rider
In an insurance contract, the element that shows each party is giving something of value is called? A. offer B. acceptance C. consideration D. purpose
Consideration
Tim is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place? A. Coordination of benefits B. Conversion C. Extension of benefits D. Rollover
Conversion
What is the primary purpose of a rating service company such as A.M Best? A. Determine which insurer offers the best rates B. Determine which insurer offers the best policies C. Determine financial strength of an insurance company D. Determine which agent to use locally
Determine financial strength of an insurance company
An example of risk sharing would be? A. Adding more security to a high-risk building B. Choosing not to invest in the stock market C. Doctors pooling their money to cover malpractice exposures D. Buying an insurance policy to cover potential liabilities
Doctors pooling their money to cover malpractice exposures
The policyholder for a group health benefit plan is considered to be the A. Employee B. Employer C. Liaison D. Insurer
Employer
Which of the following would be considered a possible applicant and contract policyholder for group health benefits? A. Human resource department B. Employer C. Insured employee D. Insurance company
Employer
Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this? A. Modified Endowment Contract B. Current assumptive whole life C. Credit life insurance D. Equity index whole life
Equity index whole life
When the principal gives the agent authority in writing, it's referred to as A. express authority B. implied authority C. apparent authority D. imposed authority
Express authority
A master contract and certificate of coverage can be found in which type of policy? A. Long-term B. Medicaid C. Group D. Medicare
Group
Which of the following is considered to be an event or condition that increases the probability of an insured's loss? A. Risk B. Hazard C. Indemnity D. Peril
Hazard