Practice Test

Corporate owned life insurance proceeds may be used for the following purposes: a. To find, replace, and train a new employee or executive b. To fund other corporate debt obligations c. To redeem the deceased employee's stock

All of the above; There are many purposes in which the proceeds of corporate owned life insurance may be used.

TRUE OR FALSE: An insured is involved in a car accident, rendering him in a wheelchair and partially blind. The blindness improves a month later. Will he receive the full benefits?

False

Which of the following is not a form of health insurance? a. Dental insurance b. Vision insurance c. Disability insurance d. Long-term care insurance

None of the above, All of the above are types of health insurance policies.

Minimum Age requirement to get an insurance license: a. 18 b. 19 c. 21 d. 24

a. 18

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping on a trampoline and breaks an ankle. What coverage will apply? a. No coverage will apply, since the injury could have been foreseen. b. No coverage will apply, since disability income policies cover sickness only. c. Coverage will apply since the break was accidental. d. Coverage will apply, but will be reduced by 50%.

a. No coverage will apply, since the injury could have been foreseen.

True or False: Social Security should be considered one's primary source of disability income coverage.

False; Although Social Security may provide disability benefits, in the majority of cases, these benefits are inadequate. Therefore, Social Security disability benefits should only be used to supplement an individual disability income policy.

What type of notice is used to show all of the services or supplies that were billed to Medicare during a 3-month period, what Medicare paid, and what the patient may owe the provider? a. MSN b. CPT c. OPPS d. HCPCS

a. MSN; A MSN, or Medicare Summary Notice, can also be checked for any changes to a patient's claims.

As a professional surgeon, which type of disability coverage would offer the most liberal definition of benefit triggers for the policy holder in terms of benefit receipt if the insured were to break his or her hand? a. Own occupation b. Employer provided c. Social Security d. Business overhead

a. Own occupation; Own occupation offers the most liberal definition of disability as the insured is considered to be totally disabled if he or she is unable to engage in the principal duties of his or her own occupation.

Which of the following deals with a set of relationships where one person is authorized to act on behalf of another in order to create a legal relationship with a third party. a. Law of principals b. Law of agency c. Law of third parties d. None of the above

b. Law of Agency; The law of agency regulates the relationship between agents and principals as well as agents and third parties with whom they deal on the principal's behalf.

Which of the following is a rider that allows a terminally ill person to access at least a portion of the death benefit proceeds prior to death? a. Waiver b. Living benefit c. Supplement d. Addendum

b. Living Benefit; A living benefit on a life insurance policy is typically a policy rider that allows an insured who has a qualifying terminal illness to access some or all of the death benefit proceeds in order to pay medical bills or other financial obligations. The death benefit proceeds on the policy will be reduced by the amount that is accessed by the insured.

Jack and his wife Lyn just purchased a home with a 15-year mortgage. Wanting to make sure that Lyn would be able to pay off the mortgage balance in the event of Jack's death, Jack had a "temporary" need for life insurance. What type of policy should Jack purchase? a. Whole Life Insurance b. Term Life Insurance c. Variable Life Insurance d. A Viatical Settlement

b. Term Life Insurance; Given Jack's temporary need for 15 years of coverage to pay off the mortgage balance, the best choice for Jack would be a 15-year term life insurance policy as the premiums would likely be far less than a permanent policy, and once the mortgage is paid off in 15 years, this particular need for Jack will no longer exist.

All of the following statements are true regarding tax-qualified annuities EXCEPT? a. Tax accumulation is deferred. b. They must be approved by the IRS. c. Withdrawals are taxed. d. Employer contributions are not tax deductible

b. They must be approved by the IRS

All of the following are parties to a life insurance contract EXCEPT: a. Insurer b. Underwriter c. Beneficiary d. Owner e. Insured

b. Underwriter, c. Beneficiary, and e. Insured; A beneficiary and the underwriter are not parties to a life insurance contract. An insured may be, but is not necessarily a party. A wife (owner) can take a policy out on her husband (insured), yet the husband is not a party to the insurance contract.

Federal law required hospital, medical, and surgical plans providing dependent coverage must extend the coverage for dependent children up to age: a. 18 b. 21 c. 26 d. 29

c. 26

Life insurance underwriters look at a variety of factors when determining the acceptance of an applicant. These factors can include: a. Health history b. Occupation c. Hobbies d. All of the above e. Both a and b only

c. All of the above; Underwriters look at many factors that can deem an applicant for life insurance as being more or less risky. These criteria can include hobbies, occupation, lifestyle, gender, age, income, and many more.

Which of the following needs to have an insurable interest for an underwriter to issue an insurance policy? a. Owner b. Insurer c. Beneficiary d. Insured

c. Beneficiary; The person or entity that is the policy beneficiary will have an effect on the acceptance of the policy. This is because the beneficiary must be at risk of suffering some type of loss should the insured pass away.

What is the most common component in all life insurance policies? a. Living benefits b. Waiver of premium c. Death benefit d. Cost of living rider

c. Death Benefit; While there are many different options and riders on life insurance, all policies possess a death benefit.

The "deductible" in a long-term care insurance policy is referred to as the __________. a. Deductible b. Coinsurance c. Elimination period d. Copayment

c. Elimination Period; A long-term care insurance policy's elimination period is the number of days that the insured must pay for services out-of-pocket until the insurance coverage begins to pay.

An agent is in need of generating business. He gets an idea of asking his client to let his policy lapse so that the agent can sell him a new similar policy. Is this permissible and, if not, what is this action called? a. No, Rebating b. No, Bait and switch c. No, Twisting d. Yes, it is perfectly acceptable

c. No, twisting; Twisting involves an agent suggesting that an individual let their current insurance coverage lapse in order to purchase a new policy, typically with similar benefits. It is a prohibited activity. In this case, the new policy does not necessarily benefit the client, however, the agent will likely receive a commission on the sale of the new policy.

On a health insurance claim form, the exact procedures that were performed for the insured are represented by standard codes that are referred to as __________. a. RVU codes b. AMA codes c. HCPCS codes d. CPT codes

d. CPT Codes; Each CPT also corresponds to one or more International Classification of Diseases (ICD-9) codes. For example, 99214 may be used for a physical and 90658 indicates a flu shot.

All of the following can be considered life-changing events that could result in a change in the amount of life insurance coverage needed EXCEPT: a. Birth of a child b. Divorce c. Marriage d. Change in job title

d. Change in job title; While a new job with a drastic change in income and / or hazardous duties could result in a change of life insurance coverage needs, simply changing job titles will not.

A __________ is the amount that an insured person is expected to pay for a medical expense at the time of the visit. a. Deductible b. Reimbursement c. Corridor d. Copayment

d. Copayment

A beneficiary on a life insurance policy will receive what value upon the death of the insured? a. Cash value b. Surrender value c. Investment value d. Death benefit

d. Death Benefit; The death benefit is the amount that is paid to the policy beneficiary upon the death of the insured. Should a permanent life insurance policy holder decide to cancel the policy prior to the insured's death, they will receive the amount of the cash surrender value.

A business client is looking for ways to decrease its monthly premiums. To get down to the premium level sought after by the company, the agent realizes they have to go to a high deductible health plan. As part of your advice to the business, what should you include in your discussion? a. HMO b. PPO c. POS d. HSA

d. HSA; Health savings accounts (HSAs) are used with high deductible health insurance policies. With an HSA, money that is saved on the premium may be put into the account and then funds are used for certain medical fees. Because the funds in the HSA account can be used for medical services, participants often use them for un-covered procedures such as chiropractic visits or other health-related services that are not covered by their insurance policy.

As a marketing tool, Ted, a health insurance agent, offered to send an applicant and his wife on a weekend vacation to a local resort to induce the applicant to purchase a policy. Is this practice permitted and, if not, what is it called? a. No, Misrepresentation b. No, Twisting c. Yes, it is perfectly acceptable d. No, Rebating

d. No, Rebating; Rebating is the act of offering an applicant an inducement to purchase insurance. It is prohibited as an unfair trade practice. Another example would be returning a portion of the applicant's policy premium from the agent's commission.

Which type of life insurance is considered to be more risky based on its investment component? a. Level Term Life Insurance b. Whole Life Insurance c. Decreasing Term Life Insurance d. Variable Life Insurance

d. Variable Life Insurance; Because the underlying investments are equities such as mutual funds, variable life insurance policies are considered to be securities. As these investments move up and down with the movements of the equities market, variable life insurance is considered to be more risky than other types of policies as there is the probability that the value of the policy's investment component could decrease.

When constructing a major medical insurance policy, several criteria must be established, including: a. Policy deductible b. Maximum out-of-pocket amount c. Elimination period d. All of the above e. Both a and b only

e. Both a and b only; While major medical insurance policies typically have high deductibles, these must be established in the policy as well as the maximum amount of out-of-pocket costs that will be paid by the policy holder. The elimination period is not part of a major medical insurance policy.

Living benefits on a life insurance policy can be typically be accessed via: a. Lump sum b. Regular installments c. Loan d. All of the above e. Both a and b

e. Both a and b; The living benefits that are accessed from a life insurance policy can typically be taken out either in one lump sum amount or they could be received via regular installments. With the installment method, the insured may wish to use these funds to pay his or her ongoing monthly bills.

True or False: Term life insurance should always be used in buy / sell agreements.

False; Permanent life insurance should be used with buy / sell agreements in order to ensure that the insured will not need to re-qualify for life insurance after a certain amount of time elapses.

The settlement option under which payments totaling the death benefit are guaranteed for a specified number of years is referred to as: a. Fixed amount b. Life income only c. Interest only d. Fixed period

d. Fixed period

How many hours of CE must be in Ethics? a. 3 hours b. 6 hours c. 12 hours d. 24 hours

a. 3 hours

If an insured commits suicide while the suicide clause is in effect, the insurance company will: a. Deny the claim b. Pay the claim c. Pay face amount d. Refund the amount of premiums paid

d. Refund the amount of premiums paid

Which of the following is a cost containment measure for a managed care plan? a. Coinsurance b. Deductible c. Probationary period d. Second surgical opinion

d. Second surgical opinion

An insured notifies the insurance company that he has become disabled. What provision states that claims must be paid immediately upon written proof of loss? a. Incontestability b. Physical Exam and Autopsy c. Legal Actions d. Time of Payment of Claims

d. Time of Payment of Claims (The Time of Payment of Claims provision specifies that claims are to be paid immediately upon written proof of loss.)

Which of the following is offered on a long-term care policy that locks in guaranteed benefit increases each year the policy is in force? a. Non-forfeiture benefit b. Inflation protection benefit c. Respite care benefit d. Waiver of premium

b. Inflation protection benefit

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be? a. Installments and fixed amount b. Installments for a fixed period c. Installment refund d. Cash refund

b. Installments for a fixed period (This option pays for a specific period of time only, and there are no life contingencies.)

The waiver of premium rider will waive the premium after a specified waiting period if the: a. Insured becomes unemployed b. Insured becomes disabled c. Cash value exceeds the face amount d. Policyowner retires

b. Insured becomes disabled

The insured cannot borrow against the loan value of the policy without the permission and consent of which of the following, if named? a. Revocable beneficiary b. Irrevocable beneficiary c. Primary beneficiary d. Tertiary beneficiary

b. Irrevocable beneficiary

Health plan issuers are prevented from collecting genetic information for underwriting purposes or limited in their requests for generic tests by? a. Individual insurers' underwriting standards. b. The Genetic Information and Nondiscrimination Act. c. Underwriters' risk classification standards. d. The Genetic Anti-Discrimination Act

b. The Genetic Information and Nondiscrimination Act(The Genetic Information and Nondiscrimination Act of 2008 (GINA) limits what requests a health plan issuer can make regarding genetic testing, and prohibits the collection of genetic information for underwriting purposes.)

If a change or correction must be made on the application for insurance, which of the following applies? a. The change must be made in red ink b. The producer can make the change and the applicant must initial the change c. A change cannot be made once the application is signed d. The producer can make and initial the change at any time prior to submitting the application

b. The producer can make the change and the applicant must initial the change

Which of the following is not considered a form of health insurance? a. Medical expense b. Workers' compensation c. Long-term care d. Disability income

b. Workers' compensation

Select what is NOT an example of third-party ownership in insurance: a. Parents buying insurance for their kids. b. Businesses that own policies on key employees. c. A single man buying insurance for himself. d. Business partners that own policies on each other.

c. A single man buying insurance for himself.

If the primary beneficiary predeceases the insured, the death benefit is next payable to the ________ beneficiary. a. Policyowner b. Successor c. Contingent d. Conditional

c. Contingent

PPO providers are paid based on which of the following? a. Flat fee b. Capitation fee c. Discounted fee-for-service, negotiated in advance by the insurer d. Discounted fee-for-service, negotiated in advance by the insured

c. Discounted fee-for-service, negotiated in advance by the insurer

All of the following are correct regarding annual Renewable Term, except: a. The premium increases each year based on attained age b. It is pure insurance protection c. It matures at age 100 d. Most group life insurance is annual renewable term

c. It matures at age 100

Form of coverage written on the lives of minors. a. Minor's insurance b. Dependent Rider c. Juvenile Life Insurance d. Age 26

c. Juvenile life insurance

MIB is a nonprofit association that maintains medical information on applicants for life or health insurance. What does MIB stand for? a. Men in Black b. Medical Information Branch c. Medical Information Bureau d. Medicinal International Bureau

c. Medical Information Bureau

Statements made by the applicant on a life or health insurance application are true to the best of one's knowledge are considered to be: a. Warrantees b. Concealments c. Representations d. Misstatements

c. Representations

All of the following are considered a qualifying life event regarding termination of group coverage and continuation, except: a. Eligibility for Medicare b. Divorce of covered employee from a spouse c. Termination due to gross misconduct d. Reduction of hours

c. Termination due to gross misconduct

All of the following employees may use a 403(b) plan for their retirement EXCEPT? a. The vice president of a charitable organization. b. A part-time classroom aide. c. The CEO of a private corporation. d. A school bus driver.

c. The CEO of a private corporation. (Not all public employees are eligible for 403(b) plans, or tax-sheltered annuities, only employees of public education (local, state, or federal), as well as employees of charitable organizations.)

The owner's rights include all of the following, except: a. Select a settlement option b. Take a policy loan c. Designate the beneficiary d. Choose the mortality rate

d. Choose the mortality rate

The time period an insured must wait after the onset of a disability before any benefits from a disability income policy become payable is the: a. Enrollment period b. Policy Period c. Benefit Period d. Elimination period

d. Elimination period

Which provision will assure that the life insurance policy premiums are deducted from the cash value if the premiums are not paid directly by the owner at the end of the grace period? a. Automatic Premium Loan b. Collateral Assignment c. Suicide Clause d. Consideration Clause

a. Automatic Premium Loan

A substandard risk may be issued based on any of the following, except: a. A preferred rate b. Graded c. Flat rate d. Rated-up

a. Graded

Juvenile life insurance is also called the Jumping Juvenile because it automatically increases in the face amount at a given age, usually 21, but the premium remains _____. a. level b. increasing c. decreasing d. jumping

a. Level

The stipulation in a health policy that allows the insured to examine a policy for a specific number of days after delivery and return for a premium refund if desired is called the: a. Insuring clause b. Free look provision c. Assignment clause d. Consideration clause

b. Free look provision

If taken as a lump sum, life insurance proceeds to beneficiaries are passed? a. Without interest b. Free of federal income taxation c. Tax-deductible d. Part tax-free and part taxable

b. Free of federal income taxation (Life insurance proceeds to beneficiaries are passed free of federal income taxation if taken as a lump sum distribution. If the proceeds are taken as other than lump sum, part of the proceeds will be tax-free and part will be taxable. When paid in installments, part of the proceeds contains principal and some interest, so the interest portion is subject to federal income taxation.)

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? a. Capital gains tax on distributions plus 10% penalty. b. Income tax on distributions and no penalty. c. Income tax on distributions plus 10% penalty. d. Capital gains tax on distributions and no penalty.

b. Income tax on distributions and no penalty. (If the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 70½, the distributions would be subject to income taxation at the rate at the time of withdrawal.)

_______ is not an "activity of daily living" associated with triggering events for Long-Term Care policies. a. Mobility b. Talking c. Bathing d. Eating

b. Talking

The initial dollar amount an insured is required to pay annually in a medical expense plan before benefits are payable by the insurer is called the: a. Premium b. Stop-loss c. Deductible d. Coinsurance

c. Deductible

Choose the right way to make changes in a completed application: a. Agent changes it without notice to applicant. b. Agent lets applicant change the consumer report. c. Applicant lets the agent forge his signature. d. Applicant initials any change in the application.

d. Applicant initials any change in the application.

At what point must an outline of coverage be delivered? a. At any point up to 30 days after policy delivery. b. At the time of application only. c. Upon delivery of the policy only. d. At the time of application or upon delivery of the policy.

d. At the time of application or upon delivery of the policy.

If an insured is unable to make a premium payment on the due date, which provision will prevent the policy from being cancelled immediately? a. Elimination period b. Probationary period c. Waiting period d. Grace period

d. Grace period

Which of the following is NOT a licensed agent: a. Producer b. Gatekeeper c. Benefits Advisor d. Underwriter

b. Gatekeeper

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is considered a(n)? a. A Modified Endowment Contract b. An Accelerated policy c. An endowment d. A Multiplicative Policy

a. A Modified Endowment Contract (Any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life contract.)

Which of the following will meet the use of life insurance for a business' loss of an expert? a. Key person life insurance b. Buy-Sell agreement c. Executive bonus plan d. Annuity

a. Key person life insurance

The coverage is not effective until... a. The policy is delivered and the initial premium is paid. b. The policy is delivered. c. The initial premium is paid. d. The initial premium is delivered.

a. The policy is delivered

Minimum requirements for the Core Medicare Supplement Plan A include all of the following, except: a. The cost of the first 3 pints of blood b. Outpatient prescription drugs c. Medicare Part A hospital copayment for days 61-90 per benefit period d. 20% coinsurance for covered medical expenses under Medicare Part B

b. Outpatient prescription drugs

If in coinsurance the insured and insurer share in the percentage of the covered expenses, in copayment the insured ______. a. Pays half b. Pays a flat fee c. Pays all d. Pays utility fee

b. Pays a flat fee

A transaction in which a life policy is purchased when an existing policy is surrendered is called: a. Conversion b. Continuation c. Replacement d. Solicitation

c. Replacement

If a company has a Simplified Employee Pension plan, what type of plan is it? a. A qualified plan for a small business b. The same as a 401(k) plan c. The same as an IRA, with the same contribution limits d. An undefined contribution plan for large businesses

a. A qualified plan for a small business (A Simplified Employee Pension (SEP) is a type of qualified plan suited for the small employer or for self-employed. A SEP is an employer-sponsored IRA with an expanded contribution rate up to 25% of compensation or a specified maximum contribution amount.)

Which of the following best describes the difference between Pure Life and Life with Guaranteed Minimum settlement options? a. Life with Guaranteed Minimum will pay the remaining principal to the beneficiary b. In Life with Guaranteed Minimum, payments can be made in installments c. Pure Life guarantees to pay out all the proceeds. d. Pure Life is not a life contingency option.

a. Life with Guaranteed Minimum will pay the remaining principal to the beneficiary (With the Life with Guaranteed Minimum, if the annuitant dies before the principal amount (the amount he paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Under the Pure Life option, the payments cease upon the annuitant's death regardless of the amount of the principal paid out.)

In health underwriting it would be inappropriate to decline a risk using any of the following EXCEPT? a. Mental illness. b. Genetic characteristics. c. Marital status. d. Blindness.

a. Mental Illness (Insurers cannot decline a risk based on blindness or deafness, genetic characteristics, marital status, or sexual orientation. Mental illness is part of the prospective insured's physical condition and can be used in determining the underwriting decision.)

A disability that is presumed to result from the same cause as an immediate prior disability within 6 months of recovery is a: a. Recurrent disability b. Delayed disability c. Residual disability d. Presumptive disability

a. Recurrent disability

Which type of retirement account allows contributions to continue beyond age 70 1/2 and does not force distributions to start at age 70 1/2? a. Roth IRA b. Flexible IRA c. Standard IRA d. Traditional IRA

a. Roth IRA

A lump sum of money is placed into an account from which the annuitant will draw periodic benefits the following month. This describes a: a. Single Premium Immediate Annuity b. Single Premium Deferred Annuity c. Flexible Premium Immediate Annuity d. Flexible Premium Deferred Annuity

a. Single Premium Immediate Annuity

Social Security disability income benefits are payable as long as all of the following conditions are met, except: a. The disability is expected to last at least 5 years b. The recipient is at least currently insured c. The injured worker is unable to engage in any kind of gainful employment d. The worker is totally and permanently disabled for a 5-month waiting period

a. The disability is expected to last at least 5 years

Which of the following correctly describes Medicaid? a. Available to seniors age 65 and older b. Available to qualified low-income individuals c. Provides supplement Medicare d. Provides long-term care to everyone

b. Available to qualified low-income individuals

All of the following are required to sign an application for insurance, except: a. Applicant b. Beneficiary c. Producer or agent d. Policyowner

b. Beneficiary

Which of the following policies will provide for a flexible premium, adjustable death benefit, and a guaranteed minimum interest to be credited to the general account if the current rate falls to the minimum rate? a. Adjustable Life b. Variable Life c. Universal Life d. Variable Universal Life

c. Universal Life

According to the Entire Contract clause, which of the following constitutes the entire contract of insurance in a health policy? a. The policy including provisions, copy of the application, amendments and riders b. The policy and original application only c. The policy, medical records and agent's report d. The policy, application, and credit report

a. The policy including provisions, copy of the application, amendments and riders

Which of the following is not one of the principal objectives of an HMO? a. Using emergency room for routine care b. Stress preventative medicine c. Saving on administrative costs d. Reducing the number of days per hospital visit

a. Using emergency room for routine care

Continuing Education Courses must be taken every __ year/s. a. 1 year b. 2 years c. 3 years d. 5 years

b. 2 years

The proof of loss provision limits the amount of time the insured has to submit proof of loss to the insurer to within: a. 30 days after receiving claim form b. 90 days of the loss c. 6 months of recovery d. 15 days of the loss

b. 90 days of the loss

The permanent transfer of ownership in a policy is called: a. Collateral ownership b. Absolute assignment c. Reinstatement d. Facility of payment

b. Absolute assignment

Evidence of group life insurance coverage provided to an employee is the: a. Master policy b. Certificate of insurance c. Premium receipt d. Summary of benefits

b. Certificate of insurance

Which of the following statements regarding insurable interest is not correct? a. An individual has an unlimited insurable interest on himself. b. Insurable interest is the possibility of economic loss due to sickness or death. c. Insurable interest must exist between the policyowner and insured at the time of application. d. Insurable interest only applies to individuals related by blood.

d. Insurable interest only applies to individuals related by blood.

Which document is used to assess risk associated with an applicant's lifestyle and character? a. Character Assessment. b. Non-medical Risk Assessment. c. Applicant Lifestyle Assessment. d. Investigative Consumer Report

d. Investigate Consumer Report (An Investigative Consumer Report is considered to be a part of an insurance application. This report is used in the underwriting process in order to assess non-medical risk factors related to moral standing and avocations. Friends and colleagues are interviewed in order to evaluate the applicant's character, reputation, and habits. The applicant must be informed in writing if the insurer decides to conduct the investigation.)

If the owner of a business becomes disabled, a Business Overhead Expense plan will cover all of the following, except: a. Rent b. Utility Bills c. Employees' salaries d. Owner's salary

d. Owner's salary

Premium Mode refers to which of the following? a. Dollar amount b. Premium of riders c. Frequency of application d. Payment frequency

d. Payment frequency

All of the following are correct regarding taxation of individual life insurance, except: a. Individual life insurance premiums are not tax deductible b. Lump sum death benefits are not taxable income c. Interest paid from a settlement option is taxed as ordinary income d. Policy loans are considered an investment and are always taxable

d. Policy loans are considered an investment and are always taxable

A guaranteed renewable health insurance policy allows the... a. Policyholder to renew the policy to a stated age and guarantees the premium for the same period. b. Policy to be renewed at time of expiration, but the policy can be canceled for cause during the policy term. c. Insurer to renew the policy to a specified age. d. Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class

d. Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class

TRUE OR FALSE: Applicants approved coverage due to information in an MIB report must be given explanation and an opportunity to challenge information about their medical history that may be inaccurate.

False

Which of the following is not covered by Medicare Part A? a. Skilled Nursing b. Doctors' services c. Hospice care d. Home health care

b. Doctors' services

For a retirement plan to be qualified, it must be designated for the benefit of? a. IRS b. Employees c. Key Employee d. Employer

b. Employees

Consumer report contains which of the following? a. Information on a person's medical history b. Information on a person's credit, character, reputation or habits c. Information on a person's love life d. Information on a person's grocery list

b. Information on a person's credit, character, reputation or habits

TRUE OR FALSE: All producers must be appointed by at least one insurer.

True

Which of the following will have to meet an insurable interest requirement in order for a policy to issue? a. Beneficiary b. Insured c. Insured's dependents d. All of the above e. Both a and b only

a. Beneficiary; In addition to the information about the applicant for insurance, underwriters will also look at the named beneficiary in the policy in order to determine whether or not there is an insurable interest. If there is not, the application for life insurance could be rejected.

The insured party has no part in determining the wording of an insurance contract. In this respect, insurance contracts are considered to be __________. a. Contracts of Adhesion b. Contracts of Forbearance c. Contracts by Regulation d. Contracts by Law

a. Contracts of Adhesion

Permanent life insurance policies always have two components. What are they? a. Death benefit b. Cash value c. Living Benefits d. Conversion Benefit

a. Death Benefit, b. Cash Value; Permanent life insurance policies consist of both a death benefit component and a cash value component.

Which of the following is NOT a feature of a guaranteed renewable provision? a. The insurer can increase the policy premium on an individual basis. b. The insured's benefits cannot be reduced. c. Coverage is not renewable beyond the insured's age 65. d. The insured has a unilateral right to renew the policy for the life of the contract.

a. The insurer can increase the policy premium on an individual basis. (Guaranteed renewable provision has all the same features that the non-cancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.)

When would life insurance policy proceeds be included in the insured's taxable estate? a. When there are any incidents of ownership at the time of death. b. If the insured's spouse is the policyowner. c. If the insured transfers ownership of the policy or makes a gift of the policy 5 years prior to his or her death. d. When the beneficiary is named in the policy.

a. When there are any incidents of ownership at the time of death. (If the insured were the owner of the policy at the time of death or possessed any incidents of ownership at the time of death, the value of the policy will be included in the insured's taxable estate. If the insured, as policyowner, assigns or transfers ownership of the policy or makes a gift of the policy within 3 years prior to his or her death, the entire face amount of the policy will be included in his or her taxable estate.)

The insuring clause found in a life insurance contract states the: a. Effective date of the coverage b. Insurers' promise to pay death benefits as long as all conditions are met c. Nonforfeiture options of a cash value policy d. Amount and frequency of the premium

b. Insurers' promise to pay death benefits as long as all conditions are met

What is the main purpose of the Seven-pay Test? a. It guarantees interest minimum. b. It determines if the insurance policy is an MEC. c. It requires level premium payments for 7 years. d. It ensures that the policy benefits are paid out in 7 years.

b. It determines if the insurance policy is an MEC. (The Seven-pay Test determines whether an insurance policy is "over-funded" or if it's a Modified Endowment Contract. In other words, the cumulative premiums paid during the first seven years of a policy must not exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs and interest.)

Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss? a. Consideration b. Notice of Claim c. Loss Notification d. Claims Initiation

b. Notice of Claim (The Notice of Claim Provision spells out the insured's duty to provide the insurer with reasonable notice in the event of a loss.)

Which of the following can surrender a deferred annuity contract? a. Deferred annuity cannot be surrendered b. Only the annuity owner c. The beneficiary after the owner's death d. Only the insurance company for nonpayment of premiums

b. Only the annuity owner (If the need arises, a deferred annuity contract may be surrendered only by the annuity owner. At surrender the owner receives the value of the annuity minus a surrender charge.)

John, who had a life insurance policy with a death benefit, died on August 31st, after a long bout with cancer. He had been hospitalized for a month before his death. His wife contacted the insurance company to file her claim for the death benefit on September 5th, after John's burial, and after she had time to collect her emotions to deal with her personal loss. The insurance agent filed the papers to process the claim with his supervisor, and the death benefit was settled on October 30th. Were any laws violated in this scenario? a. No, the agent filed the paperwork within 30 days of the claim. b. Yes, the claim was not settled within 30 days of the claim. c. No, there are suspicions around the death of John. d. Yes, the claim was not settled within 15 days of the claim.

b. Yes, the claim was not settled within 30 days of the claim; Although it typically takes approximately two weeks to settle death benefit claims, insurance companies are required to settle such claims within 30 days. Some claims may require additional time if they require additional investigation. Here, there is nothing suspicious about John's death.

Which of the following does the Insuring Clause NOT specify? a. The insurance company b. Covered perils c. A list of available doctors d. The name of the insured

c. A list of available doctors (The Insuring Clause lists the insured, the insurance company, what kind of losses are covered, and for how much the losses would be compensated.)

Variable whole life includes all of the following features, except: a. A guaranteed minimum death benefit b. A fixed level premium c. Annual renewable term insurance d. Cash value that varies based on the market

c. Annual renewable term insurance

The principal sum in an Accidental Death and Dismemberment policy is the: a. Benefit payable to the insured for a single dismemberment b. Benefit designated to cover hospital and doctor expenses c. Death benefit paid to the insured's beneficiary d. Loss of income benefit

c. Death benefit paid to the insured's beneficiary

Which of the following is true regarding taxation of dividends in participating policies? a. Dividends are taxable in some life insurance policies and nontaxable in others. b. Dividends are considered income for tax purposes. c. Dividends are not taxable. d. Dividends are taxable only after a certain amount is accumulated annually.

c. Dividends are not taxable. (Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.)

Which of the following is NOT TRUE regarding Privacy Notices? a. Explains what information the company gathers about the customer. b. Explains where the information is shared. c. Explains the dictionary definition of Privacy and how it notes. d. Explains how the company safeguards the information.

c. Explains the dictionary definition of privacy and how it works

Which of the following is not one of the 4 elements of valid legal contract? a. Agreement b. Consideration c. Incompetent Parties d. Legal Purpose

c. Incompetent Parties

A(n) __________ in an insurance contract is a statement by the issuing insurance company that sets out the essential element of insurance - to pay for losses covered in the policy. a. Beneficiary designation b. Premium amount c. Insuring clause d. Rider

c. Insuring Clause; This promise of covering losses is in exchange for the premium that is paid by the insured and the compliance with the policy terms.

The components of a long-term care insurance policy include all of the following EXCEPT: a. Elimination period b. Benefit amount c. Own occupation d. Benefit duration

c. Own occupation; Own occupation is a type of benefit trigger that is found in a disability insurance policy, not in long-term care insurance policies. An elimination period in a long-term care insurance policy is the number of days that an insured must pay for their care after a qualifying claim, but before benefits begin to pay (such as with a deductible). The benefit duration in a long-term care policy states how long benefits will be paid to an insured, and the benefit amount may be stated either as a daily or monthly amount. (Some recent long-term care insurance plans also offer a lump-sum benefit payout option).

Which of the following factors does an insurer use the most to determine the extent of disability benefits that it will promise in a contract? a. The insured's moral history b. The insured's hobbies c. The insured's income. d. The insured's marital status

c. The insured's Income (The amount of disability benefits that will be offered to an insured is stated in the policy. It is usually limited to a percentage of the insured's income in order to prevent over-insurance.)

Which of the following statements is true regarding coinsurance? a. The smaller the percentage that is paid by the insured, the lower the required premium will be. b. The smaller the percentage that is paid by the insured, the more consistent the required premium will be. c. The larger the percentage that is paid by the insured, the lower the required premium will be. d. The larger the percentage that is paid by the insured, the higher the required premium will be.

c. The larger the percentage that is paid by the insured, the lower the required premium will be. (After the insured satisfies the policy deductible, the insurance company will usually pay the majority of the expenses--typically 80%--with the insured paying the remaining 20%. Other coinsurance arrangements exist, such as 90%/10%; 75%/25%; or 50%/50%. When the insured retains a larger share of the risk, they will pay a lower premium.)

Mortality rate is which of the following: a. The 1,000 deaths caused by the applicant. b. Applicant's score in Mortal Combat. c. The number of deaths per 1,000 people. d. Applicant's average compared to 10,000 people.

c. The number of deaths per 1,000 people.

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur? a. A surrender charge will not be imposed because the account has been open for at least a year. b. The owner will forfeit any premiums he has paid into the account, but will receive any interest earned on the account. c. The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge d. Surrender charge will be imposed that is equal to 3 of the owner's monthly annuity payment

c. The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge (The charge is generally a percentage that reduces over time until it ends.)

The method of determining benefits considers the average fee charged by all doctors in a given geographical area. a. Fee-for-service b. Community Rating c. Usual, Customary and Reasonable d. Usual, Customers and Ransom

c. Usual, Customary and Reasonable

How many Continuing Education hours are needed? a. 3 hours b. 8 hours c. 16 hours d. 24 hours

d. 24 hours

An Ordinary Straight Whole Life policy provides for: a. A single premium, level face amount, and cash accumulation to age 65 b. An increasing premium based on annual renewable term and a level face amount c. A level premium, increasing face amount, and temporary insurance d. A level premium, level face amount, and cash accumulation until the policy matures

d. A level premium, level face amount, and cash accumulation until the policy matures

A Producer cannot share commissions with which of the following? a. Insurance Company b. Fellow insurance agent c. Agency d. A non-licensed person

d. A non-licensed person

The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have? a. Restrictive b. Accidental Death c. Comprehensive d. Accident only

d. Accident only (Accident-only policies cover medical benefits related to an accident. Medical conditions related to sickness are not covered.)

Which of the following is LEGAL? a. Fraud b. Bundling c. Rebating d. Advertising

d. Advertising

In an annuity, the accumulated money is converted into a stream of income during which time period? a. Payment period b. Amortization period c. Conversion period d. Annuitization period

d. Annuitization period

A receipt issued at the time of application upon the payment of premium that provides coverage effective as of the date of the application or medical exam, as long as the policy is issued as applied, is referred to as a: a. Statement of good health b. Trial of application c. Binding receipt d. Conditional receipt

d. Conditional receipt

Which of the following provides automatic increases in monthly benefits after the onset of a disability and is based on increases of the Consumer Price Index disability? a. Future increase option b. Impairment provision c. Guaranteed insurability rider d. Cost-of-living adjustment rider

d. Cost-of-living adjustment rider

Which of the following is the responsibility of an agent? a. Provide a copy of a credit report to the applicant if requested b. Request necessary medical exams c. Classify the risk and calculate premiums d. Explain the policy, provisions, riders and exclusions upon policy delivery

d. Explain the policy, provisions, riders and exclusions upon policy delivery

Which of the following statements is TRUE concerning whole life insurance? a. Policy loans are tax deductible. b. Premiums are tax deductible. c. Dividend interest is not taxable. d. Lump sum death benefits are not taxable

d. Lump sum death benefits are not taxable