Life and Health Insurance
The amount of the distribution is reduced by the amount of a 20% withholding tax.
A 60-year old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
Collateral Assignment
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?
5 days
A consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
Third Party Owner
A legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.
Guaranteed
A new employee who meets HIPAA eligibility requirements must be issued health coverage on a what basis?
Guaranteed
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis?
$12,000, all of which is taxed
A noncontributory group disability income plan has a 30-day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive
Probationary Period
A specified period of time that a person joining a group has to wait before becoming eligible for coverage
certain groups of employees only.
A tax sheltered annuity is a special tax-favored retirement plan available to
Certain groups of employees only
A tax-sheltered annuity is a special tax-favored retirement plan available to
A copy of the original application for insurance
According to the Entire Contract Provision, a policy must contain
Late Payments, Failure to Pay off a Loan, Tax Delinquencies
According to the Fair Credit Reporting Act, what would be considered negative information about a consumer?
Donut Hole
An insured has Medicare Part D coverage. He has reached his initial benefit limit and must now pay 50% of his prescription drug costs. What is the term for this gap in coverage?
Yes, but he will have to pay a penalty if he is younger than 59 1/2.
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Can he do this?
Paid-Up additions
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
Consideration
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called
403(b) Plan (TSA)
An internal revenue code provision provides for an individual retirement plan for public school teachers is a
$500
Any willful violation will be considered a misdemeanor unless the amount is exceeds what, in which case the violation will be considered a felony.
Yes
Are nonforfeiture values required by state law to be in the policy?
Interest can be charged.
Can an insurer charge interest on outstanding policy loans?
Contracts of adhesion
Contracts that are prepared by one party and submitted to another party on a take-it-or-leave-it basis are called what?
Contracts of Adhesion
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Not subject to income taxation by the federal government
Death benefits payable to a beneficiary under a life insurance policy are generally
Taxable
Dividends are a return of unused premium. Any interest earned is considered ordinary income and is
No, they liquidate it.
Do annuities create an estate?
Yes, it is tied to an index like the Standard and Poor's 500.
Do equity indexed annuities have a guaranteed minimum interest rate?
The full amount.
During an IRA direct transfer, or direct rollover, what amount gets reinvested from one plan to the other?
Seek higher returns
Equity Indexed Annuities
Seek higher returns.
Equity indexed annuties
20% of covered charges above the deductible
Following an injury, a policyowner covered under Medicare Parts A &B was treated by her physician on an outpatient basis. How much of her doctor's bill will she be required to pay out-of-pocket?
100 Days
For how many days of skilled nursing facility care will Medicare pay benefits?
Tax-Deferred, however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes
Funds in a qualified plan accumulate on what kind of basis?
.Geographic areas
How are HMO territories typically divided?
They are not included as income for the employee, but are taxable upon distribution.
How are contributions to a tax-sheltered annuity treated with regards to taxation?
by federal and state funds
How is Medicaid financed?
A monthly premium and tax revenues
How is Medicare Part B financed?
7 days
How long is a grace period if the premium is paid weekly?
The benefits, limitations, and exclusions.
In a replacement situation, the agent must be careful to compare what found in the current and the proposed replacement policy?
Benefits, Limitations, and Exclusions
In a replacement situation, what must be considered.
Upon the last death
In a survivorship life policy, when does the insurer pay the death benefit?
When an insurer's underwriter approves the application and issues a policy.
In insurance, when does acceptance take place?
When the completed application is submitted.
In insurance, when is an offer made?
Agreement, Consideration, Competent Parties, and Legal Purpose
In order for insurance contracts to be legally binding they must have what four essential elements?
A person must have been employed in a job that is covered or the spouse of a deceased covered worker.
In order to qualify for Social Security
Exclusions
Items stipulated in the contract that the insurer will not provide coverage for are found where?
Adjusted to the insured's age at the time of renewal.
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
15
Proof of loss forms must be sent to the insured within how many days of notice of claim?
The condition the payment of benefits.
Regarding Medicare SELECT policies, what are restricted network provisions?
They condition the payment of benefits, in whole or in part, on the use of network providers.
Regarding Medicare SELECT policies, what are restricted provisions?
Considered true to the best of the applicant's knowledge.
Representations are written or oral statements made by the applicant that are
Recurrent Disability Provision
Sheila has an embolism in her brain. After a week-long hospitalization and subsequent bed rest, she is allowed to work again. Three months later, she develops a second brain embolism. Which provision would determine whether a new set of benefits would cover the second embolism?
Insurance companies from adverse selection by high risk persons.
The Medical Information Bureau (MIB) was created to protect
Grace Period
The automatic premium loan provision is activated at the end of the
Universal Life- Option B
The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Part A
The part of Medicare that helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care is known as
Whole Life Policy
The policy owner is entitled to policy loans in what kind of policy?
Attained Age
The premium charged for exercising the Guaranteed Insurability Rider is based on the insured's
Conditional
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Insuring Clause
The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the
A presentation of non-guaranteed elements of a policy.
The term "illusion" in a life insurance policy refers to
$10,000
The violation of a cease and desist order may result in a fine of
Illegal Occupation provision
This optional provision specifically excludes coverage for injuries incurred while performing an illegal act.
18 months
To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?
At the time of application
To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested?
Discrimination
Two individuals are in the same risk and age class, yet they are charged different rates for their insurance policies due to an insignificant factor. What is this called?
the same face value as in the whole life policy
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy.
Under an extended term nonfortfeiture option, the policy cash is converted to
Monthly
Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is
A statement that is sufficiently clear to identify the insured and the nature of the claim
Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain
90 days of a loss
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within
A tax-sheltered annuity.
What is a 403(k) plan?
The return of unused premium. It is NOT taxable, though the interest accrued is.
What is a dividend?
Warranty
What is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
A presentation of nonguaranteed elements of a policy
What is an "illustration?"
Replacing insurance policies for the sole purpose of making commissions.
What is churning?
Lab Services, Physician Expenses, Home Health Care
What is covered in Medicare Part B?
Medical Background
What is in Part 2 of the application for insurance?
Absolute assignment
What is it called with a full policy is transferred to another person?
It allows an insurer to send the policyholder an annual, nontaxable dividend check.
What is the cash option?
Conditionally Renewable
What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?
A 10 day period that permits the insured to return the policy for a full refund of premiums paid.
What is the free-look period?
settlement option
What kind of option is a fixed period installment
Calls on behalf of tax-exempt nonprofit organizations, Calls for which the consumer has given prior written permission, Calls which are not commercial or do not include unsolicited advertisements
Which of the following would be considered a part of the National DO NOT CALL list?
Fully Insured Status with a 5 month waiting period
Which one is an eligibility requirement for Social Security disability income benefits?
Option B
Which option for Universal Life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Universal Life- Option A
Which policy would have an IRS required corridor or gap between the cash value and the death benefit?
Insuring Clause
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Period of Time
Which renewability provision are you most likely to see on a travel accident policy?
Optionally Renewable
Which renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date?
Tax Deductible
Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advice her that the contributions are
An endowment policy.
Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend?
other-insured rider
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Accumulated at Interest, Reduction of Premium, Paid up Additions
All of the following are dividend options
misdemeanor
An agent commingled $300 of insurance premiums collected with new applications with his personal funds. The agent could be found guilty of a
Ask her to sign a statement of good health
An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have, and then leaves. What did he forget to do?
Equity Indexed.
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase what kind of annuity?
A profit sharing plan.
An employee has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Guaranteed Insurability Option
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. What options should be included in the policy?
Elimination period.
An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This indicates that his policy is written with a 30-day
$50,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would the face amount of the new term policy be?
6 months to 2 years
Benefit periods for individual short-term disability policies will usually continue from
10 days
How long is the grace period if the premium is paid monthly?
31 days
How long is the grace period if the premium is paid semi or annually?
31
How many days is the grace period in an annual pay policy?
guaranteed insurability rider
If a life insurance policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
12
If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she have earned to receive benefits?
The balance of the loan will be taken out of the death benefit.
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
Conversion
If an employee terminates her employment, which provision would allow her to continue her health coverage under an individual policy, if requested within 31 days?
A statement that is sufficiently clear to identify the insured and the nature of the claim.
Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain
Guaranteed Insurability Option
What allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability?
Term Rider
What allows, when attached to a permanent insurance policy, the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Accumulating Retirement Funds, Accumulating funds in an IRA, Funding a Child's College Education
What are appropriate uses of a deferred annuity?
Signed Application, Endorsements, and Attachments.
What constitutes an entire contract?
Covers services and supplies not covered by Part A.
What does Medicare Part B do?
It grows tax deferred, and is best suitable for accumulating retirement income or funds for children's college education.
What is a deferred annuity?
Collateral assignment.
What is it called with a part of the policy is transferred to another person?
An assistance program for persons with insufficient income or resources to pay for health care.
What is medicaid?
Military Service of War
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
To control health insurance claims expense
What is the purpose of managed care health insurance plans?
Equity Indexed Annuities
What kind of annuity invests on a relatively aggressive basis to aim for higher returns?
Conditional Contract
What kind of contract requires BOTH the insurer AND the policyowner to meet certain conditions before the contract can be issued?
0%
What percentage of individually-owned disability income benefits is taxable?
Defamation
What term describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
General questions- name, age, address, birth date, gender, income, marital status, occupation
Which of the following information about the applicant is included on Part 1 of the application for insurance?
The amount of premium payment
Which of the following information will be stated in the consideration clause of a life insurance policy?
Copayment
Which of the following terms describes a specific dollar amount of the cost of care that must be paid by the member?
Medicare SELECT
Which type of Medicare policy requires insureds to use specific healthcare providers and hospitals (network providers,) EXCEPT in emergency situations?
The insurer
Who does the agent represent, the insured or the insurer?
Neither approved the application or issued the policy
An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point?
The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy.
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an automobile accident the next day,
Join during the open enrollment period.
An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?
The date of medical exam.
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later, the applicant had to submit a medical exam. If the policy is issued, what would be the policy's effective date?
Age, Gender, Occupation.
What information about an applicant is identified in the General Information section of a life insurance application?
Occupation, Marital Status, Gender.
What information is included on Part 1 of the application for insurance?
A contract that requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
What is a conditional contract?
A rider that allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. It is usually level term insurance.
What is a spouse term rider?
A signed form that acknowledges that the insured's health status has not changed since the policy was approved.
What is a statement of good health?
The transfer of rights of ownership from the owner to another person.
What is policy assignment?
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
What is the MIB?
40
What is the number of credits required for fully insured status for Social Security disability benefits?
When the insured reaches age 100.
When would a 20-pay whole life policy endow?
Extended Term
Which nonforfeiture option has the highest amount of insurance protection?
Application
Which of the following is the basic source of information used by the company in the risk selection process?
Dividend
Which of the following terms is used to name the nontaxed return of unused premiums?
A policyowner who is not the insured.
Who is a third party owner?
Employees of public education, as well as employees of charitable organizations.
Who is eligible for a 403(k) plan?
They do not require the insured to pay a deductible.
Why are the three basic types of coverage (hospital, surgical, and medical) often referred to as first-dollar coverage?
They are intended to be used while the insured is alive. Because of this, the premium is considerably more expensive than an ordinary straight life policy.
Why do the funds of an endowment policy build up faster?
$10,000, no tax consequence.
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
Common Disaster
An insured and his wife are involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Elimination Period
An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This indicates that his policy is written with a 30-day
The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
Are the premiums in a key-person life insurance policy taxable?
Nothing
If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for Medicare?
Who joined the group after the effective date
In a group health policy, a probationary period is intended for people
who joined the group after the effective date
In a group health policy, a probationary period is intended for people
Executive is the owner, and executive pays the premium
In the Executive Bonus plan, who is the owner of the policy and who pays the premium?
10%
Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income?
No- it is covered under Part B.
Is Outpatient Hospital Treatment covered under Part A Medicare?
No
Is age a contributing factor in determining qualifications for Social Security disability benefits?
It is not taxable
Is money borrowed from a policy taxable?
Inability to engage in any gainful employment due to a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of 12 months.
What is Social Security disability?
A specified dollar amount beyond which the insured no longer participates in the sharing of expenses.
What is a "stop-loss limit?"
Elimination Period
The time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.
Tax Status, Financial Experience, Annual Income.
What information about a customer must be used in determining annuity suitability?
Allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse.
What is the nonforfeiture clause?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy.
What is the purpose of a conditional receipt?
Application
What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided?
Annuitization Period
What is the time during which accumulated money converts into an income stream?
It requires the policy owner to pay all overdue premiums with interest before the policy is reinstated.
What is true of the reinstatement provision?
$8,000 and 60 days
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?
Substandard, Standard, Preferred
What is used as a risk classification by underwriters for life insurance?
Free-Look Period
What phase begins after the new policy is delivered?
Optionally Renewable
What renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds?
Consumer Report
What report provides the underwriter with the information about an insurance applicants credit?
Revocable
What type of beneficiary is changeable at any point?
Irrevocable
What type of beneficiary requires they give permission to the policy owner in order for the beneficiary to be changed?
Annuity
What type of policy will protect an individual from outliving his or her money?
Interest only.
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Consideration
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
At any time, including surrender and death.
When can policy loans be repaid?
Collect any premium that may be due
When delivering a policy, what is the agent's responsibility?