Health Insurance Units 1-30
Tom buys his wife Mary a $50k diamond ring. When she is not wearing the ring, she keeps it in a safe deposit box at a local bank. This is an example of risk a. avoidance b. reduction c. retention d. transference
b
Under which option does the insurer hold the death proceeds for a specified period of time and, at regular intervals, pay the beneficiary interest on the proceeds? a. fixed-period b. interest-only c. fixed-amount d. life-income
b
When a cash value life insurance policy is converted into an annuity in a nontaxable transaction, that event is generally known as? A) a pension enhancement. B) a 1035 exchange. C) a modified endowment. D) a rollover.
b
Which of the following best describes the function of insurance? a. It is a form of legalized gambling b. It spreads financial risk over a large group to minimize the loss to any one individual c. It protects against living too long d. It creates and protects risks
b
Which of the following statements is correct? a. only speculative risks are insurable b. only pure risks are insurable c. both pure risks and speculative risks are insurable d. neither pure risks and speculative risks are insurable
b
Bob, age 43, owns a traditional IRA and a Roth IRA. What is the maximum amount that he can contribute to both accounts in 2019 without being penalized? a. $2,000 b. $4,000 c. $5,5000 d. $6,000
d.
If David sets up a traditional IRA, what is the maximum contribution he can make and deduct from adjusted gross income for 2019? a. $1,000 b. $3,000 c. $4,000 d. $6,000
$6,000
The owner of a camera store is worried that her new employees may help themselves to items from inventory without paying for them. What kind of Hazard is described?
Moral hazard
Sarah, age 65, the owner of a $150,000 whole life policy, decides to surrender the policy and take the $90,000 cash value in a lump sum. Over the years, she has paid a total of $54,000 in premiums. how much, if any, of the payment will be taxed as income? a. $0 b. $36,000 c. $54,000 d. $90,000
b
The primary distinction between the insurability and approval types of conditional receipts is when a. the applicant pays the initial premium b. the coverage goes into effect c. the medical exam is given d. the applicant proves insurable
b
"Annuity payments are taxable to the extent that they represent interest earned rather than capital returned." When an annuitized payout option is chosen, what method is used to determine the taxable portion of each payment? a. exclusion ratio b. marginal tax formula c. surtax ratio d. annuitization ratio
a
All of the following types of plans are reserved for small employers except a. 401k b. SARSEPs c. SIMPLE IRAs d. SIMPLE 401ks
a
HMOs are known for stressing a. preventive medicine and early treatment b. state-sponsored health care plans c. in-hospital care and services d. health care services for gov't employees
a
In an insurance transaction, licensed agents legally represent which of the following? a. insurer b. applicant and insured c. state office of insurance regulation d. themselves
a
Which of the following statements regarding the Fair Credit Reporting Act (FCRA) is correct? a. Applicants must be notified within a short period of time that their credit report has been requested b. If an applicant for insurance is rejected based on a consumer report, the name of the reporting agency must be kept confidential c. if requested to do so, the insurance companymust provide the actual consumer report to the applicant d. consumer reports are final in nature and cannot be disputed by an applicant
a
Which of the following statements regarding types of insurers is NOT correct? a. reinsurers usually deal with policyowners b. mutual insurance companies seek a profit for their policyowners c. stock insurance companies seek a profit for their shareholders d. fraternal benefit societies must be nonprofit organizations
a
A partnership owns, pays for, and is the beneficiary of the life insurance policies on the lives of its individual partners. This is known as a. an entity buy-sell plan b. a stock redemption plan c. a cross purchase plan d. a Keogh plan
a.
Assume the following persons buy identical life insurance policies from the same company. Generally speaking, who will pay the lowest premium, if all have standard ratings? a. Linda, age 28 b. Thomas, age 28 c. Louise, age 40 d. Joe, age 45
a.
Jan, a single, working mother, dies at age 40. Dave, her only son, would receive a one-time lump-sum benefit of $255 $500 $1,000 $2,555
a.
Leland elects to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will A. continue to increase B. decrease gradually C. remain the same as in the old policy D. be forfeited
a.
The method used today to change beneficiaries is known as a. the recording method b. the beneficiary alteration method c. the assignment method d. the change of designation method
a.
The type of insurance most frequently used in group life plans is a. annually renewable term b. 10-year renewable term c. limited pay whole life d. single-premium whole life
a.
Which of the following is(are) a common life insurance policy exclusion? a. death from war b. death by accidental means c. death by commercial aviation d. all of the above.
a.
With regard to the situation described in the previous question, how much of the $75,000 death benefit that was paid to Art's wife in a lump sum is taxable income to her? a. $0 b. $26,000 c. $49,000 d. $75,000
a.
a policy that pays double or triple the face amount if death occurs during a specified period is a. a multiple protection policy b. a credit life policy c. a family policy d. a joint policy
a.
the cash values of life insurance policies belong to which of the following? a. policyowner b. insured c. insurer d. beneficiary
a.
which of the following allows 30 days during which premiums may be paid to keep policies in force? a. grace period b. reinstatement clause c. incontestable clause d. waiting period
a.
All of the following are involved in a product presentation EXCEPT a. pressure b. education c. discussion d. disclosure
a. pressure
All of the following are basic forms of heath insurance coverage except a. medical expense b. limited pay health c. disability income d. accidental death and dismemberment
b
Joanna and her husband, Tom, have a $40,000 annuity that pays them $200 a month. Tom dies and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the company ceases payment. This is an example of A. an installment refund annuity B. a joint and full survivor annuity C. a life annuity D. a cash refund annuity
b
Kevin, the insured under a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy pay benefits to? A) Both Kevin's and Lynda's estate, equally. B) Kevin's estate. C) Lynda's estate. D) The proceeds will transfer to the state.
b
Which of the following statements regarding Social Security survivor benefits is NOT correct? a. a surviving widow, age 66, will be entitled to a monthly life income equal to her husband's PIA b. A healthy dependent child of a deceased worker will be entitled to an income benefit until age 18, or to age 22, if the child attends college. c. A surviving widower, age 47, has a 13 year old child who was also a dependent of the deceased worker. The widower is entitled to monthly income until the child reaches age 16, at which time benefits will cease to the widower until the widower reaches at least age 60. d. A deceased covered worker was providing one-half of the support for a 62 year old parent who is confined to a nursing home. The parent is entitled to a survivor's benefit.
b
Which of the following statements regarding annuity payout options is NOT correct? a. under a straight life annuity option, all annuity payments stop when the annuitant dies. b. in a cash refund annuity, the annuitant's beneficiary always receives an amount equal to the beginning annuity fund plus all interest c. a period certain annuity guarantees a definite number of payments d. joint and survivor annuities guarantee payments for the duration of two lives
b
Which of the following statements regarding insurable interest is NOT correct? a. insurable interest exists when the applicant is the insured b. a policy obtained by a person without an insurable interest in the insured can be enforced c. the applicant must be subject to loss upon the death, illness, or disability of the insured d. generally, the person to be insured must give consent before a policy is issued, even if the applicant has an insurable interest
b
which of the following statements describes an insurable interest? a. the policyowner must expect to benefit from the insured's death b. the policyowner must expect to suffer a loss when the insured dies or becomes disabled c. the beneficiary, by definition, has an insurable interest in the insured d. the insured must have a personal or business relationship with the beneficiary
b
A reinsurer is a company that a. accepts all the risk from another insurer b. assumes a portion of the risk from another insurer c. ceded the risk d. does not take any risk
b.
Before he died, Gary received a total of $9,200 in monthly income payments from his $15,000 straight life annuity. He also was the insured under a $25,000 life insurance policy that named his wife, Darlene, as primary beneficiary. Considering the two contracts, Darlene would receive death benefits totaling a. $15,000 b. $25,000 c. $30,800 d. $40,000
b.
If a medical report is required on an applicant, it is completed by: a. a home office underwriter b. a paramedic or examining physician c. the agent d. the home office medical director
b.
The State Guaranty Association guarantees a. that a policy will be issued b. that a claim will be paid if an insurer becomes insolvent c. that dividends will be paid d. the rate of return on a policy
b.
The beneficiary on Walter's life insurance policy reads, "Children of the Insured." Which of the following phrases best describes this type of beneficiary designation? a. juvenile beneficiaries b. class beneficiaries c. generational beneficiaries d. attractive nuisance beneficiaries
b.
When an agent spreads a false story that damages a competing agent's reputation, the offense is called a. twisting b. defamation c. disclosure d. rebating
b.
With three partners in a business, how many life insurance policies would be required to insure a cross-purchase buy-sell plan? a. 3 b. 6 c. 9 d. 12
b.
selling variable universal life insurance policies as mutual funds is an example of a prohibited practice called a. twisting b. misrepresentation c. replacement d. rebating
b.
what type of policy would be best used when the need for protection declines from year to year? a. level term b. decreasing term c. whole life d. universal life
b.
Group insurance plans that require employees to pay a portion of the premium are called a. underwritten b. contributory c. participatory d. shared
b. contributory
The authority that an insurer gives to its agent by means of the agent's contract is known as a. implied authority b. express authority c. fiduciary authority d. general authority
b. express authority (written)
which of the following is an example of legal consideration? a. politeness b. initial premium c. legal purpose d. offer and acceptance
b. initial premium
What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living? a. installment refund option b. life with period certain c. joint and survivor d. straight life income
b. life with period certain
"When level premium insurance is renewed, the premium amount rises to reflect the increased mortality risk of the insured's older age." What phrase best describes this approach to increasing premiums? a. variable rate b. targeted rate c. step rate d. seniority rate
c
A life insurance company organized in Illinois, with its home office in Philadelphia, is licensed to conduct business in Florida . In Florida, this company is classified as a. a domestic company b. an alien company c. a foreign company d. a regional company
c
All of the following statements regarding Roth IRAs are true except a. they provide for tax-free accumulation of funds b. they limit contributions each year c. they mandate distributions no later than age 70 1/2 d. they are not available to those in the upper income tax brackets
c
Three business partners individually agree to acquire the interest of a deceased partner and own life insurance on each of the other partners in the amount of his or her share of the business's buyout value. What is described here is a. an entity buy-sell plan b. a stock redemption buy-sell plan c. a cross-purchase buy-sell plan d. a 401k plan
c.
Elaine signs an application for a $50,000 nonmedical life policy, pays the first premium, and receives a conditional insurability receipt. If Elaine were killed in an auto accident two days later? A) the premium would be returned to Elaine's family because the policy had not been issued. B) the company could reject the death claim because the underwriting process was never completed. C) her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for. D) the company could reject the application on the basis that death was accidental.
c
If an irrevocable beneficiary dies before the policyowner, who of the following gains control of a life insurance policy with a reversionary irrevocable clause? A) Insured B) Irrevocable beneficiary's children. C) policyowner D) Insurer
c
In addition to the state, the organization that regulates variable life and variable annuities is the a. Federal Trade Commission (FTC) b. National Association of Insurance Commissioners c. Securities and Exchange Commission d. Federal Communications Commission
c
Robert and his employer agree on the purchase of a loan regime split-dollar life insurance policy. In this arrangement, who owns the policy? a. The employer b. the NAIC c. Robert d. Robert's spouse
c
Rudy is eligible for full death, retirement, and disability benefits under Social Security. His worker status is a. completely insured b. currently insured c. fully insured d. partially insured
c
When a policyowner cannot exercise his rights of ownership without the policy beneficiary's consent, the beneficiary is designated a. vested b. contractual c. irrevocabal d. primary
c
Which of the following factors is most important when computing basic premiums for life insurance? a. expense b. interest c. mortality d. reserves
c
Which of the following premium factors is unique to health insurance (as opposed to life insurance)? a. age b. sex c. morbidity d. interest
c
Which of the following statements pertaining to the Medical Information Bureau (MIB) is correct? a. the MIB is operated by a national network of hospitals b. information obtained by the MIB is available to all physicians c. the MIB provides assistance in the underwriting of life insurance d. applicants may request that MIB reports be attached to the policies
c
Which of the following statements regarding deferred compensation plans is correct? a. a deferred compensation plan must always be designed as a qualified plan b. Life insurance is not a permissible funding vehicle, but annuities are. c. they permit a business to provide extra benefits to officers, executives, and other highly paid employees d. a deferred compensation plan must be made available to all employees who are at least 21 years old and have 1 year of service to the business
c
which of the following whole life insurance policies attempts to make insurance premiums more manageable by offering lower premiums during the first few years following issue? a. minimum deposit whole life b. indexed whole life c. modified whole life d. indeterminate premium whole life
c
A clause that states that policy distributions payable to a beneficiary after the insured dies are not assignable or transferable and may not be attached in any way is called a. a facility-of-payment clause b. a debtors protection clause c. a spendthrift trust clause d. an assignment clause
c.
A mortality table reveals which of the following? a. there is no death rate for persons age 99 b it specifies the people who will die in any given year c. it shows the average number of deaths that are expected each year in any age group d. the death rate normally is higher in the lower age groups
c.
All of the following are primary premium factors except a. expense b. interest c. dividends d. mortality
c.
All of the following employed persons who have no employer-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA except a. Miriam, age 26, secretary b. Brent, age 40, medical technician c. Edna, age 72, nurse d. Jack, age 60, plumber
c.
An error in age is discovered after the death of an insured but before any policy death proceeds are distributed. The insured was older than previously assumed. How would an insurance company handle such a situation? a. No adjustment would be made because the contestable period had passed. b. the amount of death proceeds would be reduced to reflect the statistically diminished mortality risk. c. the amount of death proceeds would be reduced to reflect whatever benefit the premium paid would have purchased at the correct age. d. the beneficiary would be required to pay all underpaid back premiums before the death benefit is received.
c.
Diverting insurance funds for personal use is an example of a. replacement b. rebating c. misuse of premiums d. misrepresentation
c.
Ethics is best described as a. laws and statutes enacted by duly elected representatives b. religious rituals and ceremonies c. instructions on how to interact with fellow members of a group or community d. a society's laws and regulations
c.
Life insurance premiums are typically based on what increment of the face value? a. $10 b. $100 c. $1,000 d. $10,000
c.
Art, the owner and insured under a $75,000 life policy, killed in an accident. He had paid total premiums of $26,000. How much of the death benefit will be included in his gross estate for estate tax purposes? a. $0 b. $26,000 c. $49,000 d. $75,000
d.
Which of the following examples pertaining to Social Security benefits is correct? a. Simon has a Social Security PIA of $700 at the time of his death. His surviving spouse will receive a lump-sum death benefit of $2,250 b. Lola, age 30, has a daughter, age 10. Her husband, who is covered under Social Security, died unexpectedly last month following surgery. Both Lola and her daughter are entitled to receive monthly survivor benefits until her daughter reaches age 18. c. Mason, who is married with one son, age 16, is a fully insured retired worker receiving Social Security benefits. In addition, his spouse is eligible for benefits at age 62 and his son, is eligible for benefits until he is 18 years old. d. Arlene, the 20 year old daughter of a fully insured retired worker, becomes totally and permanently disabled from injuries received in a car accident. Because her disability occurred after age 16, Arlene is not eligible for her father's Social Security benefits.
c.
Which of the following is stated in the consideration clause of a life insurance policy? a. Insured's risk classification b. insured's general health condition c. amount and frequency of premium payments d. benefits payable upon the insured's death
c.
Which of the following statements describing whole life insurance is correct? a. the face amount of the policy gradually increases the longer the policy remains in force. b. the shorter the premium period, the slower the cash value will grow. c. whole life insurance is designed to mature at age 100 d. the policy's cash value decreases each year the policy is in force
c.
Which of the following statements is correct? a. A per capita distribution is the most common method of distributing proceeds to beneficiaries. b. if a policyowner designates a per stirpes distribution of the proceeds, the designation becomes irrevocable once a beneficiary predeceases the policyowner c. a per stirpes distribution meands that a beneficiary's share of a policy's proceeds will be passed down to the beneficiary's living child or children if the named beneficiary predeceases the insured. d. a per capita distribution ensures that an insured's surviving family will share in the insurance proceeds
c.
Which of the following terms best describes a life insurance policy that provides a straight $100,000 of coverage for a period of 5 years? a. permanent level b. whole term c. level term d. variable term
c.
Which provision of a life insurance policy states that the application is par of the contract? a. consideration clause b. insuring clause c. entire contract clause d. incontestable clause
c.
"An insurance contract is prepared by one party, the insurer, rather than by negotiation between the contracting parties." Which of the following statements explains this characteristic of insurance contracts? a. the insurance contract is an aleatory contract. b. the insurance contract is a contract of acceptance. c. the insurance contract is a contract of adhesion. d. the insurance contract names only the insurer as the competent party.
c. policy owner must adhere to contract
which of the following terms is used for the voluntary relinquishment of a known right? a. estoppel b. adhesion c. waiver d. unilateral
c. waiver
Ellen works part time to supplement her family's income. Last year she earned $6,500 and worked at least part of every month. With how many quarters of coverage will she be credited? a. 1 b. 2 c. 3 d. 4
d
Underwriting is a process of a. selection and issue of policies b. evaluation and classification of risks c. selection, reporting, and rejection of risks d. selection, classification, and rating risks
d
Which of the following phrases best describes vesting? a. The time at which a worker meets the eligibility requirements for plan participation b. the age at which an employee must begin to make withdrawals from retirement plans c. the right of a worker's spouse to be considered in retirement income needs d. the employee's right to funds or benefits, contributed by the employer, should the employee leave that employer
d
Which of the following statements about 401k plans is correct? a. all of a company's employees must participate in the plan b. an employee's deferred contributions become nonforfeitable according to the plan's vesting schedule c. employer contributions are included in the employee's income for the year d. there is a limit on employee deferrals
d
Which of the following statements regarding the assignment of a life insurance policy is Not correct? a. Absolute assignment involves a complete transfer, giving the assignee full control over the policy. b. under a collateral assignment, a creditor is entitled to be reimbursed out of the policy's proceeds only for the amount of the outstanding credit balance. c. under a collateral assignment, policy proceeds in excess of the collateral amount pass to the insured's beneficiary. d. all the beneficiaries must expressly approve any assignments of life insurance policies
d
a policy covering 2 lives that only pays a death benefit when the second insured person dies is a. a joint life policy b. a family policy c. a double indemnity policy d. a joint and last survivor policy
d
competent parties who can enter into insurance contracts are a. applicants b. trusts and estates c. business entities d. all of the above
d
"If an insurance company determined that the insured is totally disabled, the policy owner is relieved of paying the policy premiums as long as the disability continues." This statement describes a. the premium suspension clause b. the waiting period exemption c. the disability income rider d. the waiver of premium rider
d.
All of the following methods support the sale of insurance through agents and brokers EXCEPT a. independent agency system b. personal producing general agency system c. career agency system d. direct selling system
d.
Sandra has a life insurance policy that states her husband, Gerald, is to receive the full death benefit. If he predeceases her, their 3 children are to share the benefit equally. If her husband and all 3 children predecease her, the benefit is payable to the First Community Church. All of the following statements are correct EXCEPT? A) Gerald is the primary beneficiary. B) The 3 children are all secondary beneficiaries. C) The First Community Church is the tertiary beneficiary. D) The designation of the First Community Church can be contested by any of Sandra's relatives who survive the children.
d.
The basis for many state statures regulating insurance advertising is the NAIC;s a. McCarran-Ferguson Act b. Fair Credit Reporting Act c. Ethics in Advertising Act d. Unfair Trade Practices Act
d.
To what period would a 14-day free-look provision apply in Florida? a. The first 14 days after the application has been signed by the applicant b. the first 14 days after the application has been received by the insurer c. the first 14 days after the policy has been issued by the insurer d. the first 14 days after the issued policy has been delivered to the insured
d.
What is the beneficiary designation that can only be changed with the beneficiary's written agreement? a. revocable beneficiary b. wife of the insured c. per stirpes d. irrevocable beneficiary
d.
When values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions, this practice is called a. replacement b. misalliance c. rebating d. churning
d.
Which life insurance provision allows the policyholder to inspect and, if dissatisfied, to return the policy for a full refund? a. waiver of premium b. facility of payments c. probationary period d. free look
d.
An insurance sales person who offers a $100 gourmet dinner in exchange for the purchase of a life insurance policy would be considered to have violated ethical sales practices by a. twisting b. replacement c. churning d. rebating
d. rebating
An insurance company organized and headquartered in Florida can be described as what type of company in Florida? a. alien b. home-based c. foreign d. domestic
domestic
Which of the following insurance concepts is founded on the ability to predict the approximate number of deaths or frequency of disabilities within a certain group during a specific time?
law of large numbers
Buying insurance is one of the most effective ways of: a. avoiding risk b. transferring risk c. reducing risk d. retaining risk
transferring risk
an insurance company has how many years to challenge the validity of a life insurance contract?
two
