Missed Questions 3
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? a) A portion of the benefit up to a limit is tax free; the rest is taxable income. b) Principal is tax free, but interest is taxed. c) The entire benefit will be received tax free. d) The entire living benefit is considered taxable income.
a) A portion of the benefit up to a limit is tax free; the rest is taxable income. When accelerated benefits are paid to a chronically ill insured, they are tax free up to a certain limit. Any amount received in excess of this dollar limit must be included in the insured's gross income
In a basic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible? a) Corridor b) Full c) Half d) None
a) Corridor The basic expense policy will provide coverage on a first-dollar basis (no deductible). After the limits of the basic policy are exhausted, the insured must pay a corridor deductible before the major medical coverage will pay benefits. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage.
An insured owns a 20-year Return of Premium term life policy. If the insured is still alive after 20 years, the premiums will be refunded a) In full as nontaxable income. b) For the cash value only. c) Minus the insurer's cost of coverage. d) As taxable income.
a) In full as nontaxable income. Since the amount returned equals the amount paid in, the returned premiums are not taxable.
Lyle has a $10,000 term life policy. He paid his annual premium on February 1. Lyle fails to renew the policy and dies on February 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company? a) $10,000 b) $9,800 c) $200 d) $0
b) $9,800 In this scenario death occurred within the mandatory 30 day grace period. Past due premium would be subtracted from the face amount of the policy.
An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? a) 7 days b) 10 days c) 31 days d) 60 days
b) 10 days The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.
All of the following are differences between individual and group health insurance EXCEPT a) Individual policies are renewable at the option of the insured, while group usually terminates when the individual leaves the group. b) Individual insurance does not require medical examinations, while group insurance does require medical examinations. c) In individual policies, the individual selects coverage options, while in a group plan all employees are covered for the same coverage which is chosen by the employer. d) Individual coverage can be written on an occupational or nonoccupational basis; group plans cover only nonoccupational.
b) Individual insurance does not require medical examinations, while group insurance does require medical examinations. In individual coverage, policies are issued based upon individual underwriting. In group plan, everyone is covered for the same coverage and there is no individual underwriting selection.
According to the incontestability provision, which of the following is a reason an insurer can deny a claim on a policy that has been in force for 2 years? a) Insured gave false medical information b) Insured stopped paying premiums c) Insured misstated his age d) Insured has disparaged insurer in public
b) Insured stopped paying premiums After a life insurance policy or an annuity has been in force for 2 years, an insurer can contest it for nonpayment of premiums.
All of the following are covered by Part A of Medicare EXCEPT a) Post-hospital home health services. b) Physician and surgeon services. c) In-patient hospital services. d) Post-hospital nursing care.
b) Physician and surgeon services. Physician and surgeon services are covered under Part B.
A primary beneficiary discovers upon the death of her uncle that he chose the interest only option. What does this mean? a) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. b) The beneficiary will only receive payments of the interest earned on the death benefit. c) The beneficiary must pay interest to the insurer. d) The beneficiary will receive the lump sum, plus interest.
b) The beneficiary will only receive payments of the interest earned on the death benefit. With the Interest Only Option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually).
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have no history of claims b) Those who have been insured under the plan for at least 5 years c) Those who have worked in the company for at least 3 years d) Those who have dependents
b) Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) Wilma, the former wife of the deceased b) William, Jr., minor son of the insured c) Fred, a business partner of the insured d) Flossie, the present wife of the deceased
b) William, Jr., minor son of the insured Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.
What percentage of individually-owned disability income is taxable? a) 100% b) Amount paid by insured c) 0% d) 50%
c) 0% Premiums are paid with after tax dollars. Benefits are not income taxable.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) Accelerated endowment. b) Paid-up additions. c) One-year term option. d) Paid-up option.
c) One-year term option. The dividend is utilized to purchase one year term insurance.
An insured has endured multiple surgeries and hospitalizations for an illness during the summer months. Her insurer no longer bills her for medical expenses. What term best describes the condition she has met? a) Maximum Loss Threshold b) Maximum Loss c) Stop-Loss Limit d) Out-of-Pocket Limit
c) Stop-Loss Limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.
The period of time immediately following a disability during which benefits are not payable is a) The grace period. b) The residual period. c) The elimination period. d) The probationary period.
c) The elimination period. The elimination period is a waiting period, expressed in days, not dollars, imposed on the insured from the onset of disability until benefit payments commence.
All of the following are characteristics of a Universal Life policy EXCEPT a) The cash account accumulates on a tax-deferred basis. b) Universal Life is a combination of term insurance and a separate savings account joined in a single contract. c) The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner. d) The insurance company reserves the right to adjust the mortality charges and/or interest rate.
c) The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner. Any premium amounts not required to pay for mortality and expenses, create the cash account.
A deductible is a) A percentage of the medical bill the insured must pay before services will be rendered. b) An insurer's obligation to the service provider. c) A nominal fee for the use of an insurer's services. d) A specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits.
d) A specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits. The purpose of a deductible is to have the insured absorb the smaller claims, while the coverage provided under the policy will absorb the larger claims. The higher the deductible, the lower the premium.
Sally purchases an individual health insurance policy on September 1. On September 7 her doctor informs her that she is four months pregnant. Her coverage will most likely pay a) Only expenses related to the pregnancy. b) Nothing. c) All expenses. d) All expenses except those related to the pregnancy.
d) All expenses except those related to the pregnancy. The pregnancy would not be considered a pre-existing condition if part of a group policy because of HIPAA, but since she has purchased an individual policy, all expenses would be covered except those relating to the pregnancy.
Assuming that all of the following people are covered by a High Deductible Health Plan and are not claimed as dependents on anyone's tax returns, which would NOT be eligible for a Health Savings Account? a) Andy is 55 and is covered under a dental care policy b) Jenny is 60 and also has a long-term care insurance plan c) Joe is 40 and is not covered by any other health insurance d) Amanda is 67 and is covered by a basic medical expense policy
d) Amanda is 67 and is covered by a basic medical expense policy To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance except for specific injury, accident, disability, dental care, vision care, or long-term care insurance, must not be eligible for Medicare (usually age 65), and can't be claimed as a dependent on someone else's tax return.
Under which condition would an employee's group medical benefits be exempt from income taxes? a) An employee's group medical benefits are never exempt from taxation as income. b) When the premiums and other unreimbursed medical expenses exceed 6.5% of the employee's adjusted gross income c) When the premiums and other unreimbursed medical expenses exceed 7.5% of the employee's adjusted gross income d) An employee's group medical benefits are generally exempt from taxation as income.
d) An employee's group medical benefits are generally exempt from taxation as income. Group medical and dental benefits are received tax-free to employees. Also, premiums paid by the employer are deductible as business expenses.
In an optionally renewable policy, the insurer has which of the following options? a) Increase the grace period b) Alter the due date so the policy can be cancelled sooner c) Alter the amount of notice that the insured receives d) Increase premiums
d) Increase premiums Optionally Renewable policies allow the insurer to cancel a policy for any reason whatsoever. Policies can only be cancelled by class on the policy anniversary or premium due date (renewal date). If the insurer elects to renew coverage, it can also increase the policy premium.
An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true? a) The claim most likely will not be paid since the official claims form was not submitted. b) The insurer will be fined for not providing the claims forms. c) The insured must submit proof of loss to the Department of Insurance. d) The insured was in compliance with the policy requirements regarding claims.
d) The insured was in compliance with the policy requirements regarding claims. If claims forms are not furnished to the insured, the claimant is deemed to have complied with the requirements of the policy if he or she submits written proof of the occurrence, nature of the loss, and extent of loss to the insurer
Which is true about a spouse term rider? a) Coverage is allowed for an unlimited time. b) The rider is decreasing term insurance. c) Coverage is allowed up to age 75. d) The rider is level term insurance.
d) The rider is level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance
The Waiver of Cost rider is found in what type of insurance? a) Whole Life b) Joint and Survivor c) Juvenile Life d) Universal Life
d) Universal Life The Waiver of Cost rider is found in Universal Life policies. If the insured becomes disabled, the Waiver of Cost rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.
