All Chapter Quiz
P is selfemployed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$0
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
The provision that defines to whom the insurer will pay benefits to is called:
Payment of Claims
Which of these is considered a mandatory provision?
Payment of Claims
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor clause
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
Which of the following information is NOT required to be included in a Whole Life policy?
Policy's guaranteed dividend table
Who has the right to change a revocable beneficiary?
Policyowner
is authorized to assign a Life Insurance policy as collateral for a loan.
Policyowner
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
How does group insurance differ from individual insurance?
Premiums are lower
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Premiums may increase at time of renewal
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K's estate if P dies within a specified time
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary
K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
Reinstatement
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called:
Reserves
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Which of the following are Equity Indexed annuities typically invested in?
S&P 500
What does a 401(k) plan generally provide its participants?
Salary-deferral contributions
A prepaid application for individual Disability Income insurance was recently submitted to an insurer When the insurer received the Medical Information Bureau (MIB) report , the report showed that the applicant had suffered a stroke 18 months ago , something that was not disclosed on the application Which of the following actions would the insurance company NOT take?
Send a notice to the MIB that the applicant was declined
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT
Signed HIPAA disclosure
S recently received a $500,000 lump sum retirement buyout from her employer . She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation ?
Single Premium
Which mode of payment is NOT used by health insurance policies
Single Premium
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
The percentage of an individuals primary insurance amount PIA determines the benefits paid in which of the following programs
Social Security Disability Income
Why must an insurance applicant answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy
The insuring clause
States the scope and limits of the coverage
Which of the following costs would a Basic Hospital/ Surgical policy likely cover?
Surgically removing a facial birthmark
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
What does a Guaranteed Insurability rider provide a Disability Income policyowner?
The ability to periodically increase the amount of coverage without evidence of insurability
Which of the following statements is CORRECT about an agent who is taking an insurance application?
The agent should have the applicant initial any changes made on the application
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
The amount of the benefits available from other sources
Which statement regarding a Key Employee Life policy is NOT true?
The beneficiary is named by the key employee
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase?
The duration of premium payments
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments , but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?
The insurer will rescind the policy, deny the claim, and recover all payments made
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is:
Time Limit on Certain Defenses
Which Accident and Health policy provision addresses preexisting conditions?
Time Limit on Certain Defenses
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
USA Patriot Act
A Variable Annuity has which of the following characteristics?
Underlying equity investments
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following BEST describes how pre-admission certification is used?
Used to prevent nonessential medical costs
Which of the following phrases refers to the fees charged by a healthcare professional?
Usual, customary, and reasonable expenses
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of premium rider
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract
A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?
When the applicant receives the policy and pays the initial premium
If an individual is covered under an Accidental Death Policy and dies, an autopsy can be performed in all these situations EXCEPT:
When the state prohibits this by law
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
Without evidence of insurability
All students attending a large university could be covered by:
a blanket policy
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will:
adjust the death benefit to a reduced amount
Group life insurance policies are generally written as
annually renewable term
Which type of contract liquidates an estate through recurrent payments?
annuity
T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for violation of
anti-money laundering rules
To be eligible for Social Security disability benefits , an employee must be unable to perform :
any occupation
When can a policyowner change a revocable beneficiary?
anytime
In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
The Automatic Premium Loan provision is designed to:
avoid a policy lapse
Group health plans typically contain a coordination of benefits (COB) provision. This provision's purpose is to
avoid duplication of benefit payments
Medicaid was designed to assist individuals who are
below a specific income limit
Variable Whole Life Insurance can be described as:
both an insurance and securities product
A Health Reimbursement Arrangement MUST be established :
by the employer
Under an Interest Sensitive Whole Life policy,
cash values are determined by interest rates
Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?
certificate of insurance
Insurance contracts are known as —- because certain future conditions or acts must occur before any claims can be paid
conditional
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will:
continue coverage but exclude the heart condition
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers (and their families) whose employment has been terminated the right to:
continue group health benefits
A Business Overhead Expense policy:
covers business expenses such as rent and utilities
An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is :
determine if the applicant is an acceptable risk by completing standard underwriting procedures
A variable insurance policy:
does not guarantee a return on its investment accounts
Medicare Part B does NOT cover
inpatient hospital services
A policy of adhesion can only be modified by whom?
insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
Quarterly premium payments increase the anual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased
Which of these types of coverage is best described as a short term medical policy?
interim coverage
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
is blinded in an accident
A Disability Income policy that only the policyowner can terminate and which the rates will never go up is considered to be
noncancellable
What type of renewability guarantees premium rates and renewability?
noncancellable
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
none
If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee?
nothing
An accident policy will most likely pay a benefit for a(n) :
off-the-job accident
When a policy pays dividends to its policyholders, it is said to be
participating
The benefits under a Disability Buy-Out policy are
payable to the company or another shareholder
Which life insurance rider typically appears on a Juvenile life insurance policy?
payor benefit rider
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
Which of these options can an individual use their medical flexible spending account to pay for?
prescription drugs
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
probability of making timely premium payments
Which of the following is considered to be the time period after a Health Policy is issued, during which no benefits are provided for illness?
probationary period
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
reimbursement
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
renewable
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a:
risk retention group
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
the current contract surrender value
Which of the following statements is correct regarding an employer/employee group health plan?
the employer receives a master policy and the employees receive certificates
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
A term life insurance policy matures:
upon the insured's death during the term of the policy
A(n) annuity pays benefits based on units rather than stated dollar amounts
variable
A. Life policy offers the owner investment In products such as money market funds, long term bonds and equities.
variable
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
variable
Disability policies do NOT normally pay for disabilities arising from which of the following?
war
Which of these is considered a statement that is assured to be true in every respect?
warranty
Insurers may request a hearing within if their policy is rejected
20 days
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
One becomes eligible for Social Security disability benefits after having been disabled for:
5 months
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than month(s) prior to the effective date of coverage.
6
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
6,000
Which of these is an element of a Variable Life policy?
A fixed, level premium
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate
Which of the following is NOT included in an annuity contract?
AD&D rider
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D- Accidental Death & Dismemberment policy
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
Accidental Death and Dismemberment rider (AD&D)
Under a Long Term Care policy, which benefit would be typically excluded or limited?
Alcohol rehabilitation
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Contributory
Which of the following BEST describes a Hospital Indemnity policy?
Coverage that pays a stated amount per day of a covered hospitalization
S is the policyowner of a Major Medical policy. The premiums are paid monthly and due on the 1st of each month. S fails to make September's payment and is hospitalized October 15th. When S files the claim for this hospitalization, the insurer will likely
Deny the claim
M is insured under a basic Hospital/Surgical Expense policyA physician performs surgery on M. What determines the claim M is eligible for?
Determined by the terms of the policy
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell
A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant?
Disability Income
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
Disability Income
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy ?
Discourages overutilization of the insurance coverage
Which of the following does Social Security NOT provide benefits for?
Dismemberment.
What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?
Dread disease insurance
The sections of an insurance contract which limit coverage are called
Exclusions
Which of the following Nonforfeiture options offers the highest death benefit?
Extended term
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File written proof of loss
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in:
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
T , age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
Information obtained from a phone conversation to the proposed insured can be found in which of these reports ?
Inspection report
All of these statements about the Waiver of Premium provision are correct, EXCEPT:
Insured must be eligible for Social Security disability for claim to be accepted
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
If the insured and primary beneficiary are both killed in the same accident, and it cannot be determined, who died first where are the death proceeds to be directed under the uniform simultaneous death act
Insured's contingent beneficiary
Which of these needs is satisfied by Adjustable Life insurance?
Insured's need for flexible premiums
Which of the following health insurance policy provisions specifies the health care services a policy will provide?
Insuring clause
was reviewing her Health Insurance policy and noticed the phrase "This policy will only pay for a semi-private room". This phrase is considered to be a(n)
Internal limit
A life insurance arrangement which circumvents insurable interest statutes is called:
Investor-Originated Life Insurance
Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy?
Issue the policy with an altered Time of Payment of Claims provision
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26th
K is an insured under a life insurance policy owned by a third party. Which of these statements is true?
K has no ownership rights
Which of the following BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
Less restrictive
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
Life settlement contract
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited Pay Life
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
Marital status.
Which of the following best describes how preferred provider organization's PPO is less restrictive than a health maintenance organization HMO
More physicians to choose from
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?
Nonoccupational coverage
Which of the following actions is required by an insured who leaves the primary area of a medical coverage and seeks medical care
Obtain prior approval from the insurer for the medical service
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:
P only
What does Medicare parts A and B cover?
Part A covers hospitalization; Part B covers doctor's services
All of the following statements are true regarding a policy's Grace period, EXCEPT:
Past due premiums are waived
A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family's out-of- pocket medical expenses for 2013?
$1,000
An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim?
$1,250
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of
$10,000
N is covered under an individual Disability policy with a 30-day Elimination period and a monthly of $500N is totally disabled for 3 1/2 months. N's total benefit received on this claim is:
$1250
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a:
$25,000 individual whole life policy
An insured covered by a group Major Medical plan is hospitalized after sustaining injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the INSURED be responsible to pay with $11,000 in covered medical expenses?
$3,000
An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred?
$7,000
of personal life insurance premiums is usually deductible for federal income tax purposes.
0%
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
non-contributory plan requires participation of all eligible employees.
100%
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated:
1970 - Fair Credit Reporting Act
What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?
2
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
Traditional individual retirement annuity (IRA) distributions must start by
April 1st of the year following the year the participant attains age 70 1/2
Tis receiving $3,000/month from a Disability Income policy in which T's employer had paid the premiums. How are the $3,000 benefit payments taxable?
Benefits are taxable to T
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider
P is a Major Medical policyowner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim?
Claim will be denied
The situation in which a group of physicians or salaried employees and conduct business in an HMO facility is called a(n)
Closed panel
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
Which of the following reimburses its insureds for covered medical expenses?
Commercial interests
Which of the following consists of an offer, acceptance, and consideration?
Contract
Insurance policies are offered on a "take it or leave it" basis, which make them:
Contracts of Adhesion
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
a Disability Income policy, which of these clauses acts as a deductible?
Elimination period
"A producer does not have the authority to change a policy or waive any of its provisions". The health provision that best describes this statement is called the
Entire Contract
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
Which type of provider is known for stressing preventative, medical care, and routine physical examinations
Health Maintenance Organizations (HMO's)
wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a:
High deductible, health plan
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
When determining the monthly benefit amount for a Disability Income policy, the factor that the amount a prospective insured may purchase is
Income
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):
exclusion
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT :
free-look period has expired
A medical care provider, which typically delivers health services at its own local medical facility is known as a
health maintenance organization
J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a predetermined price. What type of plan does J belong to?
health maintenance organization
What kind of premium does a Whole Life policy have?
level
Which of the following is NOT a limited benefit plan?
life insurance policies
Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies?
long term care
Pre-hospitalization authorization is considered an example of
managed care
Which type of plan normally includes hospice benefits?
managed care plans
Periodic health claim payments MUST be made at least
monthly
Which of these is NOT an element of Life insurance premiums?
morbidity rate