Prelicense Texas Life and Health Insurance- General Principles, Life, Health, and Texas Law

Harry can submit a written statement describing how the loss occurred, the nature of the loss, and how much was lost. He does not need a lawyer. He can submit a written statement describing how the loss occurred, the nature of the loss, and how much was lost.

Harry files a notice of claim but does not receive claim forms from his insurer within the required number of days. What can Harry do?

The premium goes down. If a policyowner partially surrenders a policy, the premium goes down.

If a policyowner partially surrenders a life insurance policy, which of the following happens?

The insurer learns, when paying the claim, that the designated beneficiary had no insurable interest in the insured at the time of death. The facility of payment clause lets the insurer pay the death benefit if the claim was not submitted within a reasonable time.

In which of the following situations would the facility of payment clause of a life insurance policy NOT be applied?

issuing the rider for a specified amount or for a specified percentage of the base policy A common approach to setting children's term rider limits is to issue the rider for a specified amount (such as $5,000 or $10,000).

Insurers often set children's term rider limits on the basis of which of the following?

$1,000 A person who does not take the correct required minimum distribution from a qualified plan must pay a penalty tax equal to 50 percent of the difference between the amount that was taken and the amount that should have been taken. Jack must therefore pay a $1,000 penalty tax (50 percent of $2,000).

Jack's required minimum distribution from his 401(k) plan this year was $8,000. However, he mistakenly withdrew only $6,000. Jack must pay a penalty tax equal to what amount?

coinsurance The coinsurance or co-payment provision in Jennifer's policy states that she must pay 20 percent of the next $10,000 of covered costs. The policy will pay the remainder.

Jennifer's major medical policy states that after her $500 deductible, she will pay 20 percent of the next $10,000 of her medical expenses. The 20 percent represents which of the following?

Diana's premium payments will grow on a tax-deferred basis. During the accumulation phase, an annuity's earnings will grow on a tax-deferred basis. When withdrawn, earnings are taxed as ordinary income.

Diana pays $3,000 each year in premiums for her variable annuity and plans to annuitize the contract when she retires in ten years. Which of the following statements is correct while Diana's annuity is still in the accumulation phase?

Those who are enrolled in a managed care plan under Part C and who want to receive all of their medical and drug benefits from a single source can buy a prescription drug plan with an integrated benefit for hospital, physician, and drug costs. The drug plan contracts with Medicare to provide drug coverage to Medicare beneficiaries.

Effective in 2006, the Medicare program was expanded to include the costs of prescription drugs. This portion of Medicare, Part D, is optional. For those enrolled in Part A or B, which of the following correctly describes Part D?

elective deferrals Employee contributions to a 401(k) are known as elective deferrals because the employee can choose whether to participate in the plan and to defer a portion of wages for retirement.

Employee contributions to a 401 (k) plan are also known as which of the following?

The insurer may not cover the costs at all or may only partially cover them. Rather than not cover the costs at all, the insurer may partially cover them.

Eric's managed care plan states that he and his family must receive care from an approved provider. If they receive care from an unapproved provider, what will happen?

traditional medical expense plan PPOs commonly limit the choice of providers.

Eric's medical expense plan requires Eric and his family to get medical care from certain providers if the cost of the care is to be covered. Given this information, what type of insurance does Eric NOT have?

interest-only option Under the interest-only option, the insurer holds the policy proceeds until a future date and instead pays out the interest that those proceeds earn. At the end of the interest-paying period (or upon request by the beneficiary), the proceeds the insurer held are paid out, either in a lump sum or under one of the other settlement options.

Fred's wife was the primary beneficiary of his $750,000 life insurance policy. She received payments of approximately $900 a month in interest during her life, and at her death, their son received a lump-sum payment equal to $750,000. What settlement option was in effect at Fred's death?

own occupation Most policies include a presumption of disability provision. The insured can automatically qualify for the policy's full benefit if he or she suffers from certain specified conditions. However, the conditions that automatically qualify the insured as totally disabled are quite severe.

From an insured's perspective, which of the following is the preferred definition of total disability?

their joint income Current tax laws prohibit George and Martha from participating in a Roth IRA if their combined income exceeds an annually adjusted limit.

George and Martha are married and file a joint tax return. They ask you, the agent, about opening up a Roth IRA. What is the first piece of information do you need from them before you can advise them?

Insurers cannot evaluate the person and charge the appropriate premium for the converted coverage. Insurers can evaluate the person and charge the appropriate premium.

Group health plans that provide medical expense coverage have a conversion privilege. All of the following statements about conversion privileges are correct, EXCEPT:

Insurers cannot evaluate the person and charge the appropriate premium for the converted coverage. The insurer cannot deny the person coverage even if he or she would otherwise be considered uninsurable.

Group health plans that provide medical expense coverage have a conversion privilege. All of the following statements about conversion privileges are correct, EXCEPT:

the claim forms provision The notice of claim provision requires that the insured notify the insurer within 20 days after the insured has a covered loss.

Which of the following provisions states that the insurer must provide claim forms to the insured within a certain number of days of receiving a notice of claim?

It can be a very long period—up to many years—or it can be as short as one month. Although it can be a very long period, it can be as short as one month.

Which of the following statements best describes an annuity's accumulation period?

They pay a death benefit whether the insured dies during or after the endowment period. If the policy endows while the insured is still alive, the policyowner receives a specified sum as a living benefit.

Which statement about endowment contracts is NOT correct?

The net single premium for a traditional life insurance policy is the amount charged to the policyowner. Net single premium reflects two of the premium factors: mortality and interest.

Which statement about the net single premium for a traditional life insurance policy is NOT correct?

whether he is covered by an employer-sponsored retirement plan As of 1986, tax deductibility of traditional IRA contributions depends on two factors: whether the IRA owner is covered by an employer-sponsored retirement plan and the owner's income level if covered under such a plan. If Nicholas is not already covered, his initial IRA contribution is fully deductible up to $5,500.

A prospective client, Nick, wants to open an individual retirement account. As the agent on this transaction, what would be the first thing you want to know about Nick before you advise him on his purchase?

medical care benefits A worker who is considered fully insured is entitled to survivor benefits under Social Security when the worker dies.

A worker who is considered fully insured is entitled to all of the following benefits under Social Security EXCEPT:

mortality and interest assumptions The net single premium for a traditional life insurance policy does not reflect morbidity (which has to do with disability rates) and interest assumptions.

Actuaries calculate net single premiums based on which of the following?

Adam's secondary insurer, with Medicare as his primary insurer Medicaid serves as Adam's secondary insurer. Medicare is his primary insurer.

Adam is a Medicare beneficiary who is also eligible for his state's Medicaid program. For Adam, what does Medicaid serve as?

limited benefits policy Medical expense policies cover the cost of medical care and medical services.

Although Kevin is healthy and has not been diagnosed with cancer, many members of his family have been treated for one or more cancerous conditions. Consequently, Kevin is in the market for cancer insurance. Cancer insurance is what type of health insurance?

noncancellable. Guaranteed renewable means that the insured has the right to continue the policy in force by timely paying premiums and the insurer cannot change any provision of the policy or rider while the insurance is in force.

Bob was reading an advertisement for a long-term care policy which stated that the policy had a level premium. When he contacts the agent to get more information, the agent informs him correctly that this policy is

An insured would prefer a policy like Brian's. Insureds can more easily qualify for total disability benefits under policies that use the own occupation definition of total disability. The any occupation definition is much more difficult to meet.

Brian and Paul are the same age. Each buys a disability income policy from the same insurer. However, Paul's disability income policy uses an any occupation definition of total disability while Brian's policy has an own occupation definition. Which of the following statements is correct?

buy an extended stay rider An extended stay rider extends the number of days the policy will cover when the insured is hospitalized. The rider may extend coverage 30 days or longer, depending on the premium the insured is willing to pay.

Cecil, concerned about the rising cost of health care, fears that his medical expense insurance policy may not provide enough coverage in the event of a catastrophic illness. Which is Cecil's best course of action?

Kyle controls how the funds in the account are used. Although Joe is the beneficiary of the Section 529 plan account, he cannot control how the funds in the account are used.

Kyle set up a Section 529 college savings plan and named his only son, Joe, as beneficiary. Which of the following statements is correct?

to wait before filing suit Policy contract provisions limit the period for filing a lawsuit against an insurer on the basis of a claim typically after 60 days and before two years have passed from filing the claim. The insured cannot sue the insurer until the minimum time has passed after filing the claim.

Paul is the beneficiary under his wife's life insurance policy. When he submits a claim under the policy after his wife's death, the insurer doesn't respond. After one month, Paul wants to take legal action and consults an attorney. Which of the following is his attorney likely to advise?

The four months represents the waiting period. Most waiver of premium riders require that the insured be totally disabled for four to six months before the waiver begins. This period is known as the waiting period.

Sara has a waiver of premium rider attached to her life insurance policy in the event she becomes disabled. When she suffers a stroke, she learns that she must wait four months before her waiver of premium benefit takes effect. Which of the following best explains the reason for the wait?

state level All health insurance is regulated mainly at the state level, but the federal government is becoming increasingly involved.

What level of government mainly regulates health insurance?

Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender. Unlike a withdrawal, a partial surrender is the actual surrendering of a portion of the policy.

Which of the following best describes a partial surrender of a permanent (non-universal) life insurance policy?

Nell's policy provides that if there are unpaid premiums owed at the time of a claim, the insurer can deduct that amount from the total benefit owed. A policy may provide that any premium due may be deducted from a claim payment, but this is not required. All other situations described are covered under mandatory provisions that must be included in every health insurance policy.

Which of the following describes a optional policy provision that may be included in a health insurance policy at the insurance company's option?

Under Lindsey's policy, the insurer is not liable for any loss in which she is intoxicated. A provision that the insurer is not liable for any loss occurring while the insured is intoxicated is optional.

Which of the following describes an optional provision under the insured's health insurance policy?

state insurance departments and the SEC Variable products contain both insurance and securities elements. As such, they are regulated by both insurance and securities authorities.

Which of the following entities regulates variable insurance products?

a provision requiring premiums to be paid by automatic draft Polices are required to contain certain provisions, but premiums to be paid by automatic draft is not a required provision.

Which of the following is an optional provision under health insurance policies?

David, who owns a participating whole life policy issued by ABC Mutual Insurance Company Mutual companies are owned by their policyowners. Shares of mutual companies are not publicly traded, and when mutual companies declare dividends, they are paid to the policyowners.

Who of the following may receive dividends on his life insurance policy?

$200,000 The beneficiary under a life insurance policy with return of premium rider would be entitled to the death benefit if the insured died within the stated period in the rider, but not to the premiums paid. The premiums would be returned if the insured were still alive at the end of the stated period.

Your client has a $200,000 life insurance policy with a return of premium rider. The insured dies within the stated period in the rider after having paid $15,000 in premiums. How much will the beneficiary receive?