PSI Insurance Exam

In noncontributory plans, which percentage of eligible members must participate?

1

What is the maximum amount of time an insurer has to provide the claimant the forms for filing proof of loss?

15 days

When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during the policy's initial

2 year period.

How long after being entitled to Social Security disability benefits will an individual be eligible to receive Medicare benefits?

2 years

Which of the following is the time limit on certain defenses after which the policy becomes incontestable?

2 years

A life insurance policy may be returned for cancellation and full refund if it is returned NO later than

20 days after receipt by the policyholder.

Upon the issuance of a conditional receipt for a renewal when the premium is paid AFTER the time granted by the insurer, what is the maximum amount of time for reinstatement of the policy?

30 days

Under a Medicare Supplement Policy, preexisting conditions CANNOT be excluded after how many months from the effective date of the policy?

6 months

Which of the following is a characteristic of indexed universal life insurance?

A portion of the cash value is tied to an equity index account linked to a stipulated stock index.

Which of the following policies is considered a limited policy?

Accident Only

Which is the major reason why long term care insurance is becoming increasingly important?

As life expectancy increases, the chances of needing long term care also increase.

Obtaining consumer information reports under false pretenses is prosecutable by which of the following?

Fair Credit Reporting Act

What is the tax advantage of a non-qualified annuity?

Growth is tax deferred.

Which of the following is common in an increasing term life policy?

It begins with little or no insurance protection.

What is an impairment rider?

It lists specific conditions in the contract that are excluded from the contract.

The policy that is designed to provide nursing home benefits on an extended basis for NOT less than 12 consecutive months is

Long-Term Care.

What is the difference between misrepresentation and fraud?

Misrepresentation is a representation that is actually false, but fraud is an intentional act designed to deceive.

A few small employers in the same industry join together to become eligible for group insurance. The type of health insurance they have created for each other is known as

Multiple Employer Trust (MET).

Which of the following statements regarding federal taxation of individual life insurance premiums is correct?

Premiums are not tax-deductible and are paid with after-tax dollars.

Which of the following is considered an element of insurable risk?

Premiums must be calculable based on prior loss statistics.

Which of the following is true for most comprehensive dental policies?

Routine care is provided without coinsurance or deductibles.

What procedure is used by an insurer to protect itself in the event a dispute arises, and the applicant and the producer do not recall the changes that were made in a completed application?

The applicant and possibly the producer initial any changes made.

Which of the following is a distinguishing feature of a variable life insurance policy?

The cash value earnings are based on the performance of the separate account.

Which of the following is TRUE in a key employee life insurance policy?

The corporation is the applicant and policy holder. The employee is the insured.

Which of the following describes a jumping juvenile policy?

The face amount increases up to five times the original face amount when the insured reaches a specified age.

If an individual is insured by both their own health insurance policy and their spouse's policy, which policy pays first in the event of an illness?

The individual's policy pays first, the spouse's policy pays the remaining up to coverage amount.

In a case where an individual's health is insured by both their own policy and their spouse's policy, which policy pays in the event of an illness?

The individual's policy pays first, the spouse's policy pays the remaining up to coverage amount.

What does coinsurance mean?

The insurer and the insured share expenses over the deductible.

The right to change the beneficiary or dispose of the policy or its benefits in any manner one chooses is reserved to the policyowner UNLESS which of the following is true?

The policyowner has named an irrevocable beneficiary.

Which of the following is TRUE for a flexible premium annuity?

The purchaser has the option to vary the amount of each premium payment falling between a minimum and maximum amount.

Which of the following statements regarding a pure life annuity payout option is correct?

This option provides the highest monthly income.

Which type of policy allows the policyowner the option to change the face value, amount of premium, length of coverage, and type of coverage without changing policies?

adjustable life

All the following are elements of an uninsurable loss EXCEPT

affordable premiums can be charged.

An insurer that has been granted a certificate of authority to conduct business in a particular state is referred to as

an admitted insurer.

What does an application for insurance contractually represent for the insured?

an offer

What does the grace period protect the policyholder from?

an unintentional lapse of the policy

Which of the following is an example of a premium payment mode?

annual premium payment

The person who receives the benefit of an annuity is known as the

annuitant.

Which of the following policy loans is a provision in which an amount equal to the premium due is subtracted from the cash value to pay the premium and prevent a lapse of the policy?

automatic premium loan

Which method of handling risk represents an insured's attempt to refrain from risk?

avoidance

Which of the following defines the term peril?

cause of loss

What will result in a misstatement of age on a life insurance application?

change in benefits to reflect premium purchase for the correct age

If a policy is determined to be a Modified Endowment Contract (MEC), funds received under the policy will be

considered taxable income first.

Which whole life policy premium type is the most common?

continuous premium

Group Life Policies typically include which of the following provisions?

conversion privilege

Which of the following is the most common method to supplement Medicare coverage?

coverage offered by private insurers

The primary purpose of Health Reimbursement Accounts (HRAs) is to assist

covered employees with the payment of medical expenses on a high deductible plan funded through pre-tax contributions.

Which type of plan is used to buy out a partner's business interest in the event of a disability?

disability buy-sell agreement

Which of the following policies provides a specified income benefit if an insured person becomes incapable of working?

disability income

Which of the following coverage types pays a monthly cash benefit following the elimination period for total disability due to accident or sickness?

disability income insurance

A Business Disability Buy-Sell Policy is designed to assist in the sale of a business for the

disability of a businessowner.

Which of the following may be thought of as a time deductible rather than a dollar deductible in a disability income policy because benefits are not payable during that time?

elimination period

The feature of a Life Insurance Policy stating that the policy will NOT cover certain risks is known as

exclusion.

Which of the following is an example of a moral hazard?

filing a false insurance claim

All of the following can be used to qualify for Medicare Parts A and B EXCEPT

financial need.

According to the time of payment of claims provision, the insurer must make the payment immediately after receiving proof of loss EXCEPT

for claims involving periodic payments.

Which of the following does not apply to the time limit on certain defenses provision in health insurance policies?

fraudulent misstatements

Which of the following is exempted from the incontestability provision in insurance policies?

fraudulent misstatements

Which policy provision permits the policyowner to take a specified number of days to examine the contract, and allows for cancellation and a full refund if the policyowner rejects the terms or costs?

free look

Which principle holds that the insurer relies on the truthfulness of the applicant and in return promises and has the ability to pay claims?

good faith

A Basic Hospital Policy pays expenses for

hospital room and board.

Which of the following, by definition, provides benefits for expenses incurred as a result of in-hospital medical treatment and surgery as well as certain outpatient expenses such as doctor's visits, laboratory tests, and diagnostic services?

hospitalization insurance

Which of the following is covered by a dread disease policy?

illnesses that do not occur frequently but incur significant costs when they do occur

How are issues of ambiguity usually resolved because insurance contracts are contracts of adhesion?

in favor of the insured because the insurance company drafts the language in the contract

The accumulation period in an annuity is the period in which

interest is credited on a tax-deferred basis.

Current assumption whole life policies are sensitive to which of the following?

interest rates

How do most disability policies handle the case of a recurrent disability occurring at least 90 days after the first claim?

it must be handled as a new claim for a new period of disability, requiring a new elimination period.

Which annuity settlement option provides a stated monthly amount to the annuitant and, upon the annuitant's death, the same or a lesser amount paid for the lifetime of the survivor?

joint and survivorship option

What type of insurance should a company purchase if it wants to insure the life of its CEO?

key person insurance

All of the following are common exclusions from accident and health policies EXCEPT

loss of income from disability.

Compared to basic hospital, medical and surgical policies, which type of insurance provides broader coverage, fewer gaps, higher individual benefits, and higher policy maximums?

major medical insurance

What is a MIB report?

medical information on an applicant for assessing life or health insurance risk

What is it called when a life insurance policy pays a multiple of the coverage amount when certain types of accidents occur?

multiple indemnity

Short term disability insurance generally only covers injuries due to which of the following?

non-occupational injuries

Which of the following is an example of a hospital indemnity plan?

pays a fixed amount per day to the insured for each day the insured is hospitalized

Which of the following requires the claim information to be submitted to the insurer prior to treatment to determine whether the treatment is covered and how much the insured's plan will pay?

precertification provision

The aspect of a policy that allows a policyholder to select the timing of premium payments is known as

premium mode.

Which of the following features makes Universal Life Insurance different from other forms of Whole Life Insurance?

premium schedules

Which of the following is a characteristic of Health Maintenance Organizations (HMOs)?

preventive care

Under the Free Look Provision, an insured may cancel a policy and receive a full refund within 10 days of the date that the

producer delivered the policy.

A fraternal benefit society is one that

provides life insurance benefits to its members.

Standard nonforfeiture benefits include

reduced paid-up insurance.

All of the following are ownership rights EXCEPT

switching the policy from one insured to another

If an insurance company obtains an investigative consumer report on a prospective insured, it MUST inform the prospect that it is permitted to do so under which of the following Federal laws?

the Fair Credit Reporting Act

All of the following are TRUE regarding incomplete applications EXCEPT

the incomplete application can be accepted with the missing information added later.

In an adjustable life policy, all of the following are adjustable by the policy holder EXCEPT

the interest rate.

All of the following are disadvantages to an annually renewable term life policy EXCEPT

the living benefits decrease over time.

All of the following are required signatures on a life insurance application EXCEPT

the minor in a juvenile policy.

If a company provides group disability insurance to its employees, which of the following may be tax-deductible?

the premiums paid by the company as a business expense

The life insurance policy will not be truly effective until all of the following occur EXCEPT

the producer has explained the policy to the client.

How are term riders used?

to purchase insurance on a family member of the originally insured

Under an individual policy, an insured who CANNOT perform the duties of his/her own occupation for a specific period of time is

totally disabled.

Managed care plans increase efficiency by all of the following means EXCEPT

transferring the management of costs to the insureds.

All of the following are requirements to qualify for Social Security disability benefits EXCEPT when

unable to work in the occupation in which the worker was trained or educated.

The insurance contract in which ONLY one party, the insurer, makes a promise to another is known as

unilateral.

Which type of annuity attempts to offset inflation by providing a benefit linked to an underlying investment account?

variable

Which of the following are defined as a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional?

warranties

Under which situation must insurable interest exist between the applicant and insured at the time of application?

when a third-party applicant names themselves beneficiary

When are dividends paid from a participating policy considered taxable?

when the amount received exceeds the total amount of premiums paid for the policy

When can the premiums of an individually owned health insurance policy be deducted from the individual's income tax?

when the taxpayer's unreimbursed medical expenses exceed 7.5% of adjusted gross income during a taxable year