Test 1 Missed Answers
Insurable interest for life insurance is necessary only at the time of: Policy delivery Policy renewal Application Death
Application. In Life and Health Insurance, insurable interest must exist at the time of application or policy issuance. It is not required at any later point in time.
The cost of the plan is determined by....
...the average age of the group, size, industrial classification (nature of the work involved), experience rating (the group's claims) and the personnel turnover history. These factors are more important than the actual overall health of the group.
When funds are transferred from one qualified plan to the trustee of an IRA or another plan, there is a _______ day requirement. 90 60 30 0
0. A rollover is a payment made directly to the IRA owner. The owner has 60 days to deposit the check into a new IRA to avoid taxes and penalties. A direct rollover applies when the funds are transferred from one qualified plan to the trustee of an IRA or another plan. There is no 60 day requirement.
A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason. 10 20 35 45
10 Days. The standard Free Look, or Right to Examine provision allows the insured to return the policy for any reason within 10 days after policy delivery.
If a first party claim is not paid within how many days after the receipt of adequate proof of loss, the insurer must pay interest from the date the claim is received? 20 15 30 10
30. If a first party claim is not paid within 30 days after the receipt of adequate proof of loss, the insurer must pay interest from the date the claim is received.
A contract in which both parties must perform specified duties in order for the contract to remain enforceable.
A Conditional Contract is one in which both parties to a contract must perform certain duties to make the contract enforceable.
Withdrawals from a non-qualified annuity that is not part of an annuitization are taxed on which of the following methods? Last-in, first-out basis (LIFO) First-in, last-out basis (FIFO) Weighted average Cost basis identification
A withdrawal is any amount distributed from the annuity that is not part of the annuitization process and will be taxed on a last-in, first-out basis (LIFO). That means for income tax purposes, the first money out of the annuity will be considered as earnings, not principal.
What is a life contingency payout based off of? Actuarial assumptions based off of the law of large numbers Tables published by each individual State The NAIC model payout table The IRS tables published annually
Actuarial assumptions based off of the law of large numbers.
Which of the following types of coverage provides custodial care outside the home for individuals not requiring confinement? Hospice Care Adult Day Care Respite Care Home Health Care
Adult Day Care. Adult Day Care provides custodial services outside the home for individuals not requiring a 24-hour confinement in a nursing home.
Which of the following types of limited policies would a common carrier purchase to provide medical and surgical benefits in excess of any primary coverage? Blanket Plan Hospital Indemnity Short Term Medical Expense Accidental Death and Dismemberment
Blanket Plan. Blanket plans are primarily sold to groups whose membership fluctuates to provide medical and surgical benefits in excess of any primary coverage.
The type of disability coverage purchased by a small business owner, to cover ongoing overhead in the event of the owner becoming disabled, would be called: Disability Reducing Term Key Employee Insurance Buy-Sell Agreement Business Overhead Expense
Business Overhead Expense provides the funds to cover the overhead expenses of a business when the owner becomes disabled, such as office rent, employee labor, etc.
Which of the following plans could generate a taxable event to the recipient? Business overhead expense Key person disability income Disability buy-sell Medical expense policy owned by a sole proprietor
Business overhead expense. Since the premiums are deductible, the benefit is taxable.
The rates charged by Independent Practice Association HMO physicians are prenegotiated on a ________ basis. Reimbursement Capitation, or capitated Indemnity Out-of-pocket
Capitation, or capitated. HMOs compensate physicians with monthly capitation to cover general expenses, in exchange for prenegotiated rates for services actually performed.
T/F? Regarding funding of Social Security: Actuarial value of contributions is related to actuarial value of benefits
False. The actuarial value of contributions is not related to the actuarial value of benefits.
Regarding Medicare Part B, which of the following is not true? It is optional coverage for those eligible for Part A Provides coverage for outpatient services All recipients pay a monthly premium For citizens over the age of 65, there is no additional premium or cost
For citizens over the age of 65, there is no additional premium or cost. Part B - Medical Insurance (Physicians, Surgeons, and Outpatient expenses) is a voluntary program of government-subsidized insurance requiring participants to make premium payments.
What is the only way an annuity can pay out income tax free benefit payments? Use the annuity funds to purchase a life insurance plan through a 1035 exchange Fund a Roth IRA and make a qualified distribution Choose a life only settlement option Delay withdrawals past age 70 1/2
Fund a Roth IRA and make a qualified distribution. The only exception is if the income comes from a Roth IRA annuity whereby the income stream would be tax-free under certain qualifying situations.
HIPAA laws apply to groups of _____ or more. 100 20 5 2
HIPAA laws apply to groups of 2 or more.
Annuities are insurance products based off of a mortality table.
If a life contingency settlement option is chosen, the insurance company guarantees to provide an income benefit payment as long as the annuitant lives (for example, life only or joint and survivor only). Actuarial assumptions based off of the law of large numbers allow this to occur.
In a long-term care policy transaction, when must the outline of coverage be provided to the applicant? At the time of initial solicitation and prior to the application At the time of premium collection At the time of issuance At the time of delivery
In a long-term care policy transaction an Outline of Coverage must be delivered to an applicant on the initial solicitation and prior to the presentation of the application form.
Which of the following life insurance policies has a current and guaranteed maximum premium stated in the policy? Adjustable Life Indeterminate Premium Life Ordinary Straight Whole Life Limited Premium Payment Whole Life
Indeterminate Premium Whole life charges a current premium based on its current estimate of investment earnings, mortality, and expense costs. If these change then so too the premium but never beyond the maximum stated in the policy.
A(n) ________ report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits. Agent's Inspection Motor vehicle Attending physician's
Inspection Report. An Inspection Report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits.
With health and life insurance a/an _________ is required at the time of the application.
Insurable interest must exist at the time of application, or policy effective date.
No assignment of a policy will be binding on the insurer, unless: It is accompanied by supporting legal documentation It is determined to be a valid by the insurer It is in writing and received at the insurer's home office Sworn affidavits accompany the request
It is in writing and received at the insurer's home office. No assignment of the policy will be binding on the insurer unless it is in writing and received at the insurer's home office. The insurer is not responsible for determining the validity of the assignment.
A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal? Buy two separate Whole Life policies Purchase a Joint life policy Buy two separate Limited payment life policies Buy a Joint and Survivorship Life Policy
Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies.
Benefits received from an individual Long-Term Care Policy are not subject to ______, regardless of the deductibility of the premiums paid for the plan. Sales tax Income tax Deductibles Premiums
LTC benefits are usually not subject to federal income tax.
An insured is hospitalized for at least 3 days. How long will Medicare pay for confinement in a skilled nursing facility? Up to 90 days Up to 30 days Up to 365 days Up to 100 days
Medicare Part A will provide coverage for up to 100 days of post-hospital skilled nursing care. Only the first 20 days are covered at 100% of the actual cost.
Part B of Medicare excludes which of the following medical expenses? A regular dental checkup Home health care Outpatient hospital treatment Clinical laboratory services
Part B does not cover routine dental services.
An insured owning an Adjustable Life Policy enjoys a policy that has characteristics of both ______ and _______. Increasing and Decreasing Term Permanent and Term Level and Increasing Term Decreasing and Level Term
Permanent and Term. Adjustable Life, the precursor to Universal Life, combines the features of term and whole life coverage.
Which of the following statements about life insurance policy loans is TRUE? Policy loans are the same thing as accelerated death benefits Policy loans must be provided without interest Policy loans are the same thing as cash surrender value Policy loans are not available under term insurance policies
Policy loans are not available under term insurance policies.
What is the primary purpose of the reinstatement provision? To help the insurer recoup back premiums To put a policy back in force as if it had never lapsed For insurers to profit on the interest charge To protect beneficiaries rights to future claims
Reinstatements are designed to put a policy back in force as if the lapse never occurred. Upon reinstatement, a new Incontestability clause takes effect, since a new application is required.
In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the _______. The earned interest The cash value Risk corridor The MEC limit
Risk Corridor. A universal life policy must include an amount at risk. If the cash value approaches the face amount, the death benefit must increase so as to provide for this amount at risk. This minimum separation between the cash value and the death benefit is called the 'risk corridor.'
This organization is licensed in one state and may insure members in other states consisting of a large number of similar units with similar risk exposures such as theme parks, go-cart tracks, or water slides is known as a(n) _________. Fraternal Benefit Association Lloyd's of London Association Risk Retention Group Reciprocal Insurance Company
Risk Retention Group. A risk retention group is a group owned insurer that primarily assumes and spreads the liability of related risks of its members with each member assuming a portion of the risks insured.
Payment of the first premium and an application must be submitted to an insurer for individual coverage within how many days to convert group coverage to an individual policy not requiring proof of insurability? 7 days 10 days 31 days 45 days
State insurance laws require a 30- or 31-day Conversion Period in group insurance policies
_____________ insurance allows for insurance coverage to be obtained when not available from admitted carriers. Brokerage Fraternal Surplus lines Foreign
Surplus lines insurance can be obtained through surplus lines brokers (producers) from non-admitted insurers.
There are ______ methods available to determine the income objective after the death of the client for planning purposes. 2 3 4 5
The 2 methods are the capital liquidation and the capital retention/conservation approaches.
Which rating classification is typically used in the senior marketplace so that policies can be issued without a medical exam? Rated up age The lien plan The flat amount Substandard table rate
The Lien Plan. With the lien plan, initially, only the premium would be refunded in case of death. The death benefit increases over time with the full face amount eventually payable. This is generally used with Senior Life Insurance plans to provide minimal benefits without a medical examination.
The cost of the group life insurance plan is determined by all of the following except one is the least important of them all. Which one is that? The average age of the group The size of the group The actual overall health of the group The personnel turnover history
The actual overall health of the group. The cost of the plan is determined by the average age of the group, size, industrial classification (nature of the work involved), experience rating (the group's claims) and the personnel turnover history. These factors are more important than the actual overall health of the group.
Under what terms may an Army reservist who was just discharged from active military duty reinstate his/her former disability policy without evidence of insurability? If he submits written application within 90 days of discharge from active duty If he submits written application within 30 days of discharge from active duty If he is in the hospital following discharge If he is not in the hospital following discharge
The former disability insurance can be reinstated without evidence of insurability if the reservist submits a written application to the insurer within 90 days of discharge from active military duty.
All of the following are reasons why a new policy issued through a term conversion costs more, except: The insured's health has changed for the worse The new policy is permanent The new policy has cash values The new policy was issued at the attained age
The insured's health has changed for the worse. Conversion is done without proof of insurability.
What is the maximum amount the Arizona Life and Disability Guarantee Fund may be obligated to cover for disability income and long-term care benefits? $100,000 $300,000 $500,000 $250,000
The maximum amount the Arizona Life and Disability Guarantee Fund may be obligated to cover for disability income and long-term care benefits is $300,000.
The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers.
The residual marketplace is a source of coverage of last resort for those who have been rejected by the voluntary marketplace insurers.
What differences exist between the treatment of sole proprietors and partners when it comes to the taxation of medical expense insurance? There is no difference Sole proprietors can deduct 100% of their premiums with no restrictions, while partners have a partial deduction Sole proprietors can deduct their premiums, but partners cannot Sole proprietors can deduct their premiums, but partners are subject to amounts in excess of 10% of the partner's AGI
There is no difference. Neither a partnership nor a sole proprietorship is separately taxable from their owners; therefore, the owners do not have access to a separately purchased plan as they would from a corporation--which would be taxed separately on its income.
T/F? Regarding funding of Social Security: Self-employed individuals pay both the employer and employee amounts
True
T/F? Regarding funding of Social Security: The employer withholds the employee's tax and remits it with the employer's portion
True
T/F? Regarding funding of Social Security: The funds are kept in a trust fund and invested in government securities
True
One characteristic of life insurance is that the insurer is obligated to pay a claim in the event of the death of the insured, however, the insured is not contractually obligated to do anything other than keep the policy in force. This is a: Contract of Adhesion Unilateral Contract Aleatory Contract Conditional Contract
Unilateral Contract. In a Unilateral Contract, only one party is legally bound to contractual obligations after the premium is paid.
Which annuity has its income benefit payments related to an assumed interest rate (AIR)? Fixed Market Value Adjustment Indexed Variable
Variable. The income benefit payment is tied to AIR. If the actual return is lower than the AIR, the monthly annuity payment will be reduced. If the actual return is equal to the AIR, the monthly annuity payment will remain the same as the previous month. If the actual return is greater than the AIR, the monthly annuity payment will increase from the previous month.
Generally, life insurance death proceeds are income tax free to the policy beneficiary, except: If the employer deducts the premiums on a group life insurance plan covering the employees When a transfer of ownership has taken place When the policy is classified as a MEC When the death benefit option B is selected on a Variable Universal Life policy
When a transfer of ownership has taken place. Life insurance proceeds are generally income tax free except when a transfer of ownership has taken place.
Which of the following is a likely outcome if a buy-sell agreement in a two person partnership is not in place when one of the partners dies? The agreement will need to go through the probate process The surviving spouse of the deceased becomes the other partner The value of the business will increase Partnership transfer taxes are due within 9 months
Without a Buy-Sell Agreement in place, the surviving spouse of the deceased partner will likely step in as the new partner.