Insurance Practice Exam
Under an indeterminate premium whole life policy, what happens to premium rates if an insurer earns more on its investments than was factored into the premium calculation?
premiums decrease
Tom is covered under a prepaid dental plan offered through his employer. All the following are characteristics of this type of plan EXCEPT
prepaid dental charges typically include a deductible
The purpose of a "relation of earnings to insurance" provision in a disability income policy is to
prevent a person from receiving more from a disability insurance policy than he or she could have earned by working
Anna wants to replace her existing Medicare Supplement policy with another policy because she is not satisfied with its cost and the type of coverage provided. In this case, her agent Henry must
provides a notice regarding replacement to Anna stating that there will be no duplication of coverage
In a fixed annuity, what is the second interest crediting rate called?
renewal rate
Marie is an agent for Country Life Insurers. She receives a claim from a new client and reviews it before submitting it to Country Life. During her review, she detects inconsistencies that lead her to suspect the claimant is making a false claim for benefits. What must she do?
report her suspicions to TDI within 30 days
In cases where an existing life insurance policy is going to be replaced by new life insurance policy, the producer must do all the following EXCEPT:
require the applicant to sign a waiver exempting the producer from any liability associated with the replacement
The Smith family just became eligible for the Children's Health Insurance Program (CHIP) on January 1. Their children will be eligible to receive benefits under the program
on April 1
All the following statements regarding Simplified Employee Pension (SEP) plans are correct EXCEPT
only large employers use SEP plans
Alice is a long-term care policyowner. Her return of premium option allows her to have a portion of the premium she paid for this policy:
paid to her estate or a named beneficiary when she dies
In which of the following areas may a life insurance underwriter discriminate in determining policy eligibility and coverage limits?
personal health history
Which of the following is the cafeteria plan benefit through which employee withholdings fund premium contributions to an employer's group health plan on a before-tax basis?
pre-tax health insurance premium deductions
Which of the following is/are directly involved in the regulation of variable insurance product sales?
Both FINRA and state insurance departments
How long is the typical permanent life insurance policy's free-look period?
10 days
A group health insurance policy is NOT required to provide
120 days of impatient treatment for mental illness
Under Nick's basic surgical expense policy's fee schedule, an appendectomy has a unit value of 70. To determine the maximum payable under the policy, a conversion factor of $20 is multiplied by the unit value. So, if Nick needs to have his appendix removed, what is the maximum amount payable under his policy?
1400
Under the notice of claim provision, how many days does the insured have to notify the insurer after having a covered loss?
20 days
Offbeat Music Inc. has 40 full-time employees and wants to provide coverage for them under a small employer health benefit plan. To be eligible to do so, at least how many eligible employees must choose to participate in the plan?
30
Persons can buy tax-qualified long-term care insurance policies and deduct their premium payments by the amount that their unreimbursed medical expenses (including LTC premiums) exceed what percent of their adjusted gross incomes?
7.5 percent
Amanda used a basic illustration to help Mark, a potential client, understand how the cash value of his life insurance policy would grow. Mark then agreed to buy the policy. Which of the following best describes Amanda's duties with respect to delivering a copy of the illustration used?
Amanda must deliver a signed copy of the illustration to both Mark and the insurer
Anne turned 70 this year on March 15. By what date does she have to begin taking distributions from her retirement plan?
April 1 next year
Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Texas. Based on their job descriptions below, which of them is NOT an agent?
Brian who is a vice president in AllPro's human resources department and does not receive commissions
Cindy, age 51, withdraws $15,000 from her 401(k) plan so that she can buy a new boat. All the following statements regarding this are correct, EXCEPT:
Cindy can avoid taxation if she can demonstrate to the IRS that the boat was essential to her financial well-being
Larry's policy with Company A provides $2,000 in benefits while his policy with Company B provides $3,000 in benefits for the same loss. He suffers a $5,000 loss and files a claim with both insurers. Company A's liability for the covered loss will not be more than the proportion of total benefits (Company A benefits plus Company B benefits) it assumes. In this case, what is Company A's proportion of the loss?
Company A's proportion of loss is 40 percent (2000/ 5000)
Gina owns a $200,000 five-year renewable term insurance policy and wants to renew the policy at the end of the term. In this case, all the following statements are correct, EXCEPT:
Gina must prove insurability before the insurer can renew the policy
Which of the following consists of a number of privacy and security regulations that apply to entities with access to information about a person's health, and it is also intended to affect the way in which individual and group health insurance plans are made available?
HIPAA
HIPAA's requirements for insurers doing business in the small employer market must include all of the following, EXCEPT:
Insurance coverage is guaranteed renewable even if the company has relocated outside the insurer's service area
Jan and David both work for Acme Motors, have $50,000 of taxable income, and are in the 25 percent tax bracket. If Jan contributes to Acme's 401(k) plan this year and David does not, which of the following statements is true?
Jan's taxable income will be lower than David's
Fred's license was revoked on January 15, 2009 because he had engaged in controlled business on a regular basis. If he did not seek a judicial review of the license revocation, what is the earliest date that he can re-apply for an agent's license?
January 15, 2014
Jake is a new life insurance agent and was reviewing several applications for insurance to determine whether an insurable interest exists between the parties. He determined that an insurable interest does NOT exist in which of the following cases?
Patricia who is applying for life insurance on her best friend's life
Which of the following statements is not true about binding receipts in the health insurance sale?
a binding receipt guarantees coverage from the time the applicant completes the application, but only if the applicant is found to be insurable
Which of the following statements about business overhead expense policies is FALSE?
a business is not taxed on the benefits
Which of the following statements regarding a flat deductible in a major medical plan is most correct?
a flat deductible is most often used in a comprehensive major medical plan
When Matthew met with a potential client, he used a life insurance illustration to show how the policy's cash value would grow over the client's lifetime. Matthew could include all of the following in the illustration without violating Texas regulations EXCEPT
a statement that the policy is a type of investment and savings plan
Danielle owns a health insurance policy that pays a flat rate of $200 a month if Danielle becomes disabled, regardless of her actual income. How is Danielle's policy written?
a valued policy
Which of the following is not commonly associated with disability income policies?
accelerated benefits rider
The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider?
accidental death benefit rider
Which of the following statements about using testimonials or endorsements by a third party in insurance advertisements is correct?
advertisements must state whether a person is being paid for endorsing the insurance product
The Royale Insurance Company, headquartered in Toronto, Canada, conducts business legally in New York. In New York, Royale is a(n)
alien insurance company
Which of the following best describes an agent's responsibilities?
an agent has to act in the best interests of insureds, applicants, and insurers
Frank is a PPO member and just received information from his insurer which lists all of the covered services and benefits under his plan. As a PPO member, Frank is also entitled to all of the following information EXCEPT
an explanation of his legal remedies if he disagrees with the insurers decision, including his right to arbitration and mediation
Superior Insurance Company receives a claim and proof of loss from an insured on April 1. It investigates the claim on April 5 and determines that the claim is a valid one by April 12. The insured submits additional information in support of the claim on May 1. On which date did Superior first become obligated to settle the claim?
april 12
ERISA requires written rules for how claims must be filed and how participants can appeal if they are denied covered services. Claims appeals processes must be fair and timely. What is this function of ERISA called?
claims procedures and appeals
What are HMOs that do not provide services or coverage outside their network called?
closed panel
Group health insurance plans that base premium increases on the claims experience of multiple groups in a geographical region rather than the single group are known as what type of plan?
community related plan
Country Life Insurers is a small insurance company with $10 million of assets in its general account. These assets would most likely be invested in
conservative and safe investments
Which one of the following statements about Roth IRAs is correct?
contributions to a roth IRA cannot be deducted
Paul is covered by his own group health insurance plan as well as by his wife's group plan. Which of the following provisions in Paul's plan will prevent overinsurance?
coordination of benefits provision
Which type of life insurance policy would most likely be used to insure the declining balance of a home mortgage?
decreasing term
The elimination period is to a disability income insurance policy as which of the following is to a medical expense policy?
deductible
Which of the following can be funded with a single premium payment, a series of fixed premium payments, or flexible premium payments?
deferred annuities
Which of the following types of health insurance provides income when the insured cannot work because of a disability?
disability income policies
In noncancellable health insurance policies, which of the following is guaranteed?
during the noncancellable period, the insurer will not end the policy nor will it increase the premium
Annuity contracts include a provision to pay a death benefit if the owner or annuitant dies before the contract annuitizes. What does this death benefit typically equal?
either the contract's accumulated value of the amount of premium the owner invested, whichever is greater
Most states permit insurers to include a provision in their life insurance policies that does which of the following?
excludes coverage of death that occurs while the insured is operating an aircraft
Workers' compensation plans offer all of the following benefits to covered workers EXCEPT
expenses of running a business until a disabled worker can return to work
If a person terminates his or her membership in a group covered by a Medicare supplement policy, then
he or she must be allowed to convert to an individual policy
John would like to buy life insurance to provide for his family in case he dies prematurely. To figure out how much life insurance John needs, the agent must look at all of the following, EXCEPT
health status
Fred, age 65, never married and has been working for more than 40 years. He provided more than 80 percent of his elderly mother's financial support. He died a year after he began caring for her. Which of the following statements is correct?
his mother is eligible to receive monthly benefits equal to 82.5 percent of Fred's primary insurance amount (PIA)
All of the following statements about the delivery of health insurance policies are correct, EXCEPT
if an applicant applies for a policy without paying the first premium, the producer must collect the first premium along with a surcharge when delivering the policy
Which of the following do insurers use to limit or exclude coverage for a specific condition an insured may have?
impairment riders
Group health plans require that eligible employees choose to participate in the plan by formally enrolling in it. When they enroll, which of the following do they NOT do?
indicate any health coverage that they are rolling over from another employer
How do insurers set usual, customary, and reasonable (UCR) rates?
insurers use published databases to determine how much they will reimburse under their policies
Which of the following statements regarding joint life insurance and survivorship life insurance is NOT true?
joint life insurance is especially popular in the estate planning market
What is a term insurance policy in which the protection and premium amounts stay the same during the term period known as?
level term
Which annuity settlement option guarantees that income is paid for the length of the annuitant's life, but no less than a specified number of years?
life income with period certain
A policyowner can access the cash value of many life insurance policies through withdrawals, loans, or policy surrender. Which of the following terms describes the ability to easily convert life insurance into cash?
liquidity
Which of the following statements best describes the Medicaid benefit program?
medicaid provides a range of health services for beneficiaries, but services vary from state to state
As a general rule, insurers do not pay death benefits to designated beneficiaries who are minors because
minors do not have the legal capacity to sign a binding receipt for the funds
Annuity income payments are most commonly paid on what schedule?
monthly
Loading reflects the costs that the insurance company can expect to pay for its operations. These costs include all of the following, EXCEPT:
mortality costs
Jane is stopped at a traffic light when thieves carjack her vehicle. She refuses to own another car, saying that she never wants to be subjected to this type of trauma again. Which of the following is Jane using as a means of risk management?
risk avoidance
The federal Risk Retention Act of 1986 contains guidelines for which of the following entities?
risk retention groups
Social Security benefits are funded through payroll taxes split between the employee and employer. Which of the following best explains the amount of tax paid by self-employed individuals?
self-employed individuals pay a tax rate equal to the combined employer and employee rate
All the following statements regarding the tax advantages that self-employed people receive on their health insurance expenses are correct EXCEPT
self-employed persons cannot deduct the premiums paid for medical insurance, though they can deduct their costs of medical care received
Sarah, age 40, has just bought a 20-pay whole life policy. Which of the following statements is correct when she turns 60?
she will stop paying premiums
When using illustrations to sell a life insurance policy, an agent can
show the policy's guaranteed death benefits before non-guaranteed values
All the following statements regarding perils and hazards are correct EXCEPT
smoking cigarettes is an example of a peril
Which one of the following is a common way for an insurer to recoup acquisition fees associated with the sale of universal life insurance?
surrender charge
Tony pays the premium for his individual health insurance policy on the first of every month. However, he went on a 30-day trip and forgot to pay the premium. His policy must contain a grace period of at least
ten days
Which of the following is NOT a mandatory provision for an individual life insurance policy issued in Texas?
ten-day grace period
A variety of health insurance plans, both public and private, are designed for seniors. These plans include all of the following EXCEPT:
term insurance
Bob's only goal is to provide a death benefit to protect his family in case he dies while his children are young. What type of life insurance is best suited to this need?
term insurance
Annuities are often referred to as "insurance against living too long" for all of the following reasons, EXCEPT:
the annuity contract includes a face amount that pays a death benefit whether death occurs before or after annuitization
Which of the following statements most correctly describes the relationship, if any, between the application and the insurance contract?
the application is part of the entire contract
Who normally owns life insurance used to meet business insurance needs?
the business
The amount a market value adjusted annuity (MVA) owner receives at withdrawal goes up or down depending on which of the following?
the current interest rate at the time of the withdrawal
Which of the following statements is correct about earnings building within an individual's qualified plan account?
the employee-participant pays no income tax on the earning until they are withdrawn
Replacement is considered to have occurred if a life insurance policy is purchased and, in conjunction with that purchase, any of the following occur with an existing policy EXCEPT
the existing policy's beneficiary designation is charged
The exclusion ratio applies until all principal in the annuity contract has been paid out. After that, what happens?
the full amount of future annuity payments are treated as taxable income
Under the unpaid premium provision, what may the insurer do with respect to unpaid premiums that the insured owes when a claim is made?
the insurer can deduct this amount from the benefit it pays the insured
What options does an insurer have when asked by an annuity owner for a full withdrawal of an annuity contract's accumulated value?
the insurer must comply with the request
With respect to penalties and fines for noncompliance with the coverage requirements of the Patient Protection and Affordable Care Act, all the following statements are correct EXCEPT
the penalty for non-coverage is the same for adults and children
After the deductible is paid, Medicare Part A pays full benefits for the first 60 days of hospitalization. What else does Medicare pay benefits for?
the remaining time in the benefit period from the 61st day to the 90th day
Which statement about health savings accounts is correct?
they are available on an individual or group basis
Initial open enrollment for Medicare Part D prescription drug insurance began in 2005. What happens every year, as people become eligible for Social Security?
they have an opportunity to enroll in Medicare Part D during the law two months of the year
The Acme Supply Company might buy life insurance to do all of the following, EXCEPT:
to provide insurance coverage for large-volume customers
Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses?
up to 70-75%, depending on the insurer
Which of the following cost-control efforts assesses the need for and appropriateness of health-care services for members or subscribers?
utilization reviews
What is the term for voluntarily giving up a known right?
waiver
