215 Study Guide

Which entity does not rate the solvency of insurance companies? A-M Best Duff and Phelps Lloyd's of London Standard and Poor

Lloyd's of London explanation: A-M Best, Duff and Phelps, and Standard and Poor's are all rating agencies. Lloyd's of London is an association of individuals and companies that underwrite insurance on their own accounts.

Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in Florida? failing to promptly acknowledge communications about claims failing to promptly settle a claim for which liability is uncertain offering to settle claims for less than due to encourage litigation raising policy defenses to reduce a claim

failing to promptly settle a claim for which liability is uncertain Explanation: An insurer is not obligated to settle a claim for which it is not clearly liable.

Which of the following discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising? indexed annuities variable annuities market value adjusted annuities fixed annuities

market value adjusted annuities Explanation: The purpose of the MVA provision is to discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising.

For policyowners who do not pay premiums annually, insurance companies increase premiums to do which of the following? offset the insurer's cost of doing business offset the insurer's increased billing costs and lost earnings. decrease the insured's risk compensate for the insured's bad credit

offset the insurer's increased billing costs and lost earnings. Explanation: The additional premiums do not decrease the insured's risk.

Which activity is NOT prohibited by the Code of Ethics? misrepresentation replacement rebating defamation

replacement Explanation: The Code of Ethics addresses four main activities: misrepresentation, twisting, rebating, and defamation.

Transacting insurance includes all of the following EXCEPT: negotiating insurance contracts soliciting insurance contracts transacting matters after an insurance contract has been issued that are related to the policy underwriting insurance contracts

underwriting insurance contracts Explanation: Transacting insurance includes all of the listed acts except underwriting insurance policies.

Sarah misstated her age on her health insurance application. The insurer discovers this after receiving notice of Sarah's claim. What result will come from her misstatement? The claim will not be paid. The claim will be paid, but she must reapply for coverage. A penalty will be deducted from the claim payment. The benefit payment will be adjusted for her age.

The benefit payment will be adjusted for her age. Explanation: Under the misstatement of age provision, the insured is still entitled to benefits. However, the benefits payable will be those the insured's premium would have bought at his or her actual age.

Which of the following integrates with a basic medical expense policy to cover costs exceeding the basic policy's coverage? a comprehensive major medical policy a supplementary major medical policy a comprehensive basic medical policy a basic medical stop-loss policy

a supplementary major medical policy Explanation: This is not a standard type of medical insurance.

An errors and omissions insurance policy protects the: agent or producer underwriter beneficiary policyowner

agent or producer Explanation: Errors and omissions, or E&O insurance, covers injuries and losses incurred as a result of services that an insurance agent renders or fails to render.

Section 457 plans are qualified retirement plans that are reserved for employees of which type of organization? state and local government units charitable organizations self-employed individuals small employers

state and local government units Explanation: Keogh (HR-10) plans, not 457 plans, are designed for sole proprietorships and partnerships.

Which entity spreads the cost of losses among its members by having each member pay a pro-rata share of these losses? risk retention group reciprocal insurer reinsurer self-insurer

reciprocal insurer Explanation: A reciprocal insurer is a group of people or businesses that exchange this promise: each member agrees to pay a pro-rata share of any loss suffered by any other member. A reciprocal insurer is essentially a formal risk-sharing arrangement.

James owns a variable annuity. Where will his premiums and contract values be maintained? in any asset management company he chooses in a securities account that is managed by the Securities Exchange Commission (SEC) in subaccounts selected by the policyowner that are managed within the insurer's general account in subaccounts selected by the policyowner that are managed within the insurer's separate account

in subaccounts selected by the policyowner that are managed within the insurer's separate account Explanation: From within an insurer's separate account, variable annuities offer the owner a choice of as many as 20 or 30 different subaccounts that can range from money market to bond to international stock portfolios.

A person who is insured under a managed care plan is considered a: subject client patient member

member

Which factor must insurers consider when setting the premium for health insurance policies? mortality rates accidental death rates morbidity rates current economic conditions

morbidity rates Explanation: When pricing health insurance policies, insurers must account for morbidity rates. Morbidity rates indicate the average number of persons at various ages who can be expected to become disabled because of sickness or accident. Morbidity rates also indicate how long a disability is expected to last.

James is a licensed agent who lives in Florida. He moves to Georgia. When must he notify the Department of Financial Services of his move? within 7 days within 14 days within 21 days within 30 days

within 30 days Explanation: An agent who changes his or her residential or business address must notify the Department within 30 days of moving.

Wally annuitized his nonqualified fixed annuity and now receives $1,800 each month. Of this amount, $1,500 represents his investment in the annuity, and $300 represents interest earnings. Which statement regarding the taxation of Wally's annuity payments is correct? $1,800 is taxed as ordinary income $1,500 is taxed as ordinary income $300 is taxed as ordinary income none of the income is taxable

$300 is taxed as ordinary income Explanation: Annuitized income is taxed by applying the exclusion ratio, which calculates the proportion of income that is attributable to principal and is not taxed. In this case, $1,500 of Wally's monthly payment is a return of principal and is not taxable; the remaining $300 in interest earnings is taxed as ordinary income.

Sherry's disability income policy specifies that if she is disabled and her earnings are reduced by at least 25 percent of pre-disability earnings, a residual benefit will be paid. Sherry is injured and suffers chronic back problems. She works part time when she feels well. If she previously earned $10,000 per month, what is the most she can earn each month to qualify for the residual benefit? $7,500 $7,000 $6,000 $2,500

$7,500 Explanation: After the disability, if Sherry is only able to earn $7,500 per month or less, she will qualify for the residual benefit because her income has been reduced at least 25 percent of her pre-disability earnings.

Tom is a 45-year-old senior accountant employed by ABC, Inc. Under ABC's employer-pay-all group life plan, Tom's coverage is $120,000. The IRS Table I value of what amount of that coverage is taxable to Tom? $120,000 $70,000 $50,000 $0

$70,000 Explanation: The IRS Table I value of coverage in excess of $50,000 is a taxable benefit to the plan participant, who must include the amount in his or her income for tax purposes.

A claimant on a health insurance policy must give written notice of the claim to the insurer within how many days following a loss? 7 10 14 20

20 Explanation: A claimant on a health insurance policy must give written notice of the claim to the insurer within 20 days after a loss or as soon thereafter as reasonably possible.

For a 30-year-old insured, which of the following life insurance policies of the same face amount would lead to the fastest buildup of cash value? level term life straight whole life 20-pay life life-paid-up-at-65

20-pay life Explanation: The 20-pay life policy will require higher premium payments and is confined to a shorter time, so its cash value will build up more rapidly.

Terry is licensed in Florida as a life and health insurance producer for the past two years. To maintain his license, how many hours of continuing education must he complete every two years? 18 24 30 36

24 Explanation: Agents who have been licensed in Florida for less than six years are required to complete at least 24 hours of continuing insurance education every two years in order to renew their license. At least three hours must be in ethics.

Jeff is a licensed insurance agent in both New York and Florida. He is was charged with embezzlement in New York, and pleaded guilty to the charge on March 1. He must notify the Florida Department of Financial Services of the charge within how many days? 7 10 14 30

30 Explanation: An agent must give written notice to the Department within 30 days after being found guilty or pleading guilty or no contest to a felony or crime punishable by imprisonment of one year or more.

Eric fails to pay the annual premium on his major medical insurance policy. The grace period provision allows him to pay the premium within how many days after the due date? 7 14 21 31

31 Explanation: A policyholder is entitled to a 31-day grace period in which to pay the premium due on an annually renewable health insurance policy.

An optional inflation protection benefit generally increases a long-term care insurance policy's benefit by about: 1 percent annually 5 percent annually 10 percent annually 12 percent annually

5 percent annually Explanation: Both the simple inflation protection and compound inflation protection benefit are based generally on a 5 percent per year increase.

What is the minimum age at which Gary can withdraw funds from his deferred market value adjusted annuity (MVA) without incurring a tax penalty? 55 59' 62 70

59' Explanation: Regardless of the type of annuity, tax penalties apply to withdrawals if the annuity owner is younger than age 59'.

Michael and his friends and family, who are tired of paying high premiums for their individual policies, decide to get together and buy a group life insurance policy. Why will their approach not work? Group policies are only available to employers. Family members cannot be covered under the same group policy. A group cannot be formed just for the purpose of obtaining insurance. None of the members in the group is a licensed agent.

A group cannot be formed just for the purpose of obtaining insurance. Explanation: A group cannot be formed solely for the purpose of obtaining insurance.

Which statement about group health plan menus is correct? Plans offered by an employer are always issued by the same company. Employer plans do not provide the same features and benefits that are available with individual plans. Coverage for any one employee cannot be tied to an insurer's benefit schedule. A more complete benefit package appeals to prospective employees.

A more complete benefit package appeals to prospective employees. Explanation: Employer plans usually provide the same features and benefits available with individual plans.

How does a state's long-term care partnership policy different from other long-term care policies? The insurers that offer partnership policies are more reliable and have better customer service. A partnership policy holds tax-favored status . Partnership policies are endorsed by senior advocacy groups. A partnership is established between the insurer and the insured.

A partnership policy holds tax-favored status Explanation: A policy must be tax qualified to be sold under the partnership program. Qualified policies receive favorable tax treatment for federal income tax purposes.

ABC Insurance Company is domiciled in Delaware and does business in Ohio. Which of the following is correct about ABC? ABC is a domestic insurer in Delaware and an alien insurer in Ohio. ABC is a domestic insurer in Delaware and a foreign insurer in Ohio. ABC is a domestic insurer in Ohio. ABC is a foreign insurer in Delaware.

ABC is a domestic insurer in Delaware and a foreign insurer in Ohio. Explanation: Insurers doing business in the state in which they are domiciled are classified as domestic companies in that state. A company that does business in states other than the one in which it is domiciled is classified as a foreign company in those states.

When owned by non-natural entities, the accumulating values in a nonqualified deferred annuity contract are taxed in which one of the following ways? Accumulating values are taxable in the year earned. Accumulating values are tax-deferred until withdrawn. Accumulating values are tax-deferred until the named annuitant turns age 65. Accumulating values are never taxable.

Accumulating values are taxable in the year earned. Explanation: When owned by non-natural entities like corporations, the accumulating values in a nonqualified deferred annuity are taxable in the year earned (that is, growth is not tax deferred).

Which of the following best illustrates risk transfer? Anita buys health insurance to protect herself in case of serious illness. Abigail continues to rent her home because she thinks homeowners insurance is too expensive. Refusing to buy a home and insure it is an example of risk avoidance. Anne does not venture out after dark because she is afraid of being assaulted. Arlene decides not to purchase life insurance because she has no dependents and plenty of cash in her savings accounts to cover any final expenses.

Anita buys health insurance to protect herself in case of serious illness. Explanation: In risk transfer, a party transfers the risk of loss to an insurance company in exchange for payment of a premium.

All the following statements about the taxation of accidental death and dismemberment (AD&D) policy benefits are correct EXCEPT: The death benefit payable to an insured's beneficiary under an AD&D policy is not taxed. Any interest earnings paid are not taxed. The capital sum payable if the insured is dismembered is not taxed. To avoid taxes under all circumstance

Any interest earnings paid are not taxed. Explanation: Any interest earnings paid may be taxed.

When Bill left Beta Industries on March 1, he received a distribution of the entire account balance from his 401(k) plan. To avoid taxation of the entire amount, he must deposit the funds into a rollover IRA no later than: March 31 April 15 April 30 June 1

April 30 Explanation: If a participant receives retirement plan funds directly and plans to roll them over into an IRA, he or she has 60 days to complete the rollover transaction. If the new account is not opened and the funds deposited within 60 days, then they are subject to tax and a potential tax penalty.

John owns a whole life insurance policy with a $250,000 death benefit. Over the years, the policy's cash value has grown to $25,000. All the following statements regarding this are correct EXCEPT: John can withdraw funds from the policy's cash value to pay for his son's college education. If John surrenders the policy, he will receive the policy's cash value. John can take a loan from the policy's cash value if he needs funds in an emergency. At John's death, the beneficiary receives the policy's cash value plus its face amount.

At John's death, the beneficiary receives the policy's cash value plus its face amount. Explanation: With a permanent life insurance policy, the cash value is an integral part of the policy's face amount. It is not paid in addition to the face amount but distributed as part of the face amount.

Which of the following statements regarding key person disability income insurance is correct? Key person disability income insurance provides a monthly benefit directly to a disabled executive or key employee. Key person insurance ensures that key employees will have a source of ongoing income if they become disabled and cannot work. Premiums are tax deductible by the business. Benefit payments are income tax-free.

Benefit payments are income tax-free. Explanation: Key employee disability income insurance insures the key employee but provides a benefit to the business.

Which of the following statements comparing annuities and life insurance is correct? Both products distribute funds tax-free at death. Both products are primarily designed to liquidate sum of money. Both products are based on the actuarial principles of mortality, interest and expenses. Both products can be promoted as insurance against living too long.

Both products are based on the actuarial principles of mortality, interest and expenses. Explanation: Both life insurance and annuities are based on the actuarial principles of mortality, interest and expenses. In fact, it is because of their experience in these areas that life insurance companies can guarantee a stream of income for an individual's lifetime.

Lola buys a Medicare supplement policy on June 15 but decides not to keep it. Two weeks later, she mails the policy back to the insurer. What must the insurer do? Cancel the policy and refund the premium. Cancel the policy and deduct the service fee from the returned premium. Cancel the policy and retain the premium. Keep the policy in force because the free-look period has ended.

Cancel the policy and refund the premium. Explanation: Medicare supplement policies must provide for a free-look period of at least 30 days, during which the insured can return the policy for any reason for a full refund of the premium paid.

All of the following statements about health insurance reinstatement provisions are correct, EXCEPT: Reinstatement is normally effective when the insurer notifies the insured. If the insurer does not notify the insured within 45 days of the date of application for reinstatement, the policy is automatically reinstated. Under reinstated health insurance policies, accidents are covered immediately. Claims resulting from sickness are covered immediately upon policy reinstatement

Claims resulting from sickness are covered immediately upon policy reinstatement Explanation: Reinstatement is normally effective when the insurer notifies the insured.

Which of the following statements about health savings accounts (HSAs) is correct? The medical insurance plan associated with the HSA has low deductibles and low copayments. Distributions from an HSA are always taxable when withdrawn. Contributions to an HSA grow on a tax-deferred basis. HSA plans are available only as group plans.

Contributions to an HSA grow on a tax-deferred basis. Explanation: HSA plans are available on both an individual and group basis.

Which one of the following statements most correctly describes how interest-sensitive whole life and current assumption whole life insurance differ? Only current assumption policies include an interest crediting feature. Current assumption policies guarantee a minimum interest rate and cash value while interest-sensitive policies do not guarantee the interest rate and cash value. Current assumption policy premiums can only increase while interest-sensitive policy premiums may increase or decrease Current assumption policies guarantee the death charges and expense charges.

Current assumption policies guarantee a minimum interest rate and cash value while interest-sensitive policies do not guarantee the interest rate and cash value. Explanation: Current assumption policies guarantee minimum cash values while interest-sensitive policies guarantee the death charges and expenses but not the interest rate (and thus, not the cash value).

Assuming no relation other than that stated, in which of the following situations does insurable interest exist? Debbie would like to take out a life insurance policy on her best friend. Debbie would like to take out a life insurance on the owner of her food delivery service. Debbie would like to take out a life insurance policy on her lawyer. Debbie would like to take out a life insurance policy on herself.

Debbie would like to take out a life insurance policy on herself. Explanation: Insurable interest in personal relationships is generally limited to the applicant and a member of the applicant's family.

Delta Insurers typically affirms or denies claims within 120 days after it receives proof of loss statements. Which statement is correct? Delta is engaged in lawful claims settlement practices. Delta is legally required to pay its claims within 90 days. Delta has committed insurance fraud. Delta is engaged in unfair claims settlement practices.

Delta is engaged in unfair claims settlement practices. Explanation: It is an unfair claims settlement practice for insurers to fail to affirm or deny coverage of claims within 30 days after receiving proof of loss statements.

Which statement is correct about the types of insurance sales systems? Captive agents may represent any number of insurance companies. Direct response companies sell insurance to consumers without the use of a licensed producer. General agencies sell insurance only through independent brokers. To sell for another insurer, independent brokers must get permission from the primary company they represent.

Direct response companies sell insurance to consumers without the use of a licensed producer. Explanation: Brokers represent multiple companies and are not affiliated with a particular insurance company.

Employee rights under an employer-sponsored retirement plan are protected under which of the following? NAIC EEOC ERISA HIPAA

ERISA Explanation: The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of employees who participate in employer-sponsored retirement plans.

Macy borrowed $100,000 from Falcon Loans, which added her to its credit life group insurance policy. Which party will receive the life insurance proceeds if Macy dies before repaying the entire amount of the loan? Macy's heirs Falcon Loans Macy's heirs and Falcon Loans, equally neither Macy's heirs nor Falcon Loans

Falcon Loans Explanation: Under a group credit life insurance policy, the creditor is the policyowner and beneficiary while the borrower is the insured. If the borrower dies before repaying the loan, the proceeds will be paid to the creditor.

Which of the following provides access to health insurance to Florida residents who have been rejected by at least two insurers for health reasons? Florida Health Insurance Plan Florida Life and Health Guaranty Association Florida Universal Health Care Plan Florida Health Care Continuation Plan

Florida Health Insurance Plan Explanation: The Florida Health Insurance Plan makes health insurance available to Florida residents who are denied coverage in the regular insurance market by at least two insurers because of prior medical conditions.

Jason applies for Medicaid assistance and discloses his assets and income. He has a car, $200 in cash, some personal items, and an industrial life insurance policy with a $1,000 face amount. Which statement is correct? He can only have $5,000 total in assets and still qualify for Medicaid. He can only keep his personal items and $500 in cash to qualify for Medicaid. He must reduce his assets in order to qualify for Medicaid. He may keep some assets and qualify for Medicaid according to his state's formula for calculating the maximum allowable income and assets.

He may keep some assets and qualify for Medicaid according to his state's formula for calculating the maximum allowable income and assets. Explanation: A person's need for assistance is based on his or her state's formula for calculating the maximum allowable income and assets. The calculation excludes certain assets and does not allow an applicant to have many excess funds. The specific limits also change annually.

Franklin is covered by a PPO. If he receives medical treatment from an out-of-network physician, what is the result? The PPO will deny the claim. He will pay a higher amount for the medical care. He must pay a deductible and coinsurance amount. His cost for the medical care will not be affected.

He will pay a higher amount for the medical care. Explanation: PPO members are free to receive services from any providers in the PPO's network. They can also visit out-of-network doctors but will be reimbursed at a lower rate for such care.

Which statement is correct about the income requirements for Medicaid eligibility? Only one source needs to be reported at the federal level. Certain states require full income disclosure. Federal tax returns determine qualifying income. Income limits are determined by the state.

Income limits are determined by the state. Explanation: In addition to being over age 65 without qualifying assets, if a Medicaid applicant has an income below the state limit, he or she qualifies for assistance.

If Dale decides not to exercise his guaranteed insurability rider on an option date, what becomes of that option date? It can be extended for 12 months. It expires and cannot be used later. It does not change anything; Dale can buy additional coverage at any time. It can be extended for six weeks.

It expires and cannot be used later. Explanation: If the policyowner decides not to buy the additional life insurance, that option is lost. He cannot exercise the option any time he wishes, but he can apply for new coverage, though its issue is not guaranteed.

Tim paid only the first premium for his health insurance policy before he was diagnosed with cancer. Nevertheless, the insurance company paid all of the expenses for his medical treatment. Which characteristic of an insurance policy resulted in the insurer paying much more than the premium it received? It is a unilateral contract. It is an aleatory contract. It is a personal contract. It is a contract of adhesion.

It is an aleatory contract. Explanation: Insurance policies are aleatory contracts, which means that one party may receive a benefit that is entirely out of proportion to the consideration he or she is giving. In this case, Tim receives a disproportionate amount of benefits compared to the amount of premiums that he has paid for insurance coverage.

Before delivering a health insurance policy to a client, the agent alters the insuring clause in a way that he believes will benefit the insurance company. What is true about this alteration? It is required of a diligent agent. It is prohibited by the entire contract provision. It is permitted only when it is in the insurer's best interests. It is prohibited unless the insured agrees to it in writing.

It is prohibited by the entire contract provision. Explanation: Under the entire contract provision, changes to an insurance policy are invalid unless they are approved and endorsed by an officer of the insurance company. An agent cannot unilaterally change the terms of the policy.

To be eligible to set up a SIMPLE plan, a business has to meet which one of the following basic requirements? It must already have a qualified plan in place that it will be replacing with the SIMPLE plan. It must employ no more than 100 people. It must be organized as an S corporation. It must have reported a profit on its tax returns the previous two years.

It must employ no more than 100 people. Explanation: SIMPLE plans are designed solely for small businesses with no more than 100 employees.

Which statement is correct about benefit payments under a Blue Cross Blue Shield plan? It pays benefits directly to the insured. It pays the provider directly, with no claim form. It is prepaid insurance. It indemnifies the insured for the expense.

It pays the provider directly, with no claim form. Explanation: Under Blue Cross Blue Shield, the insurer pays the health-care service provider directly without requiring the insured to provide a claim form.

How late in the year can flexible spending account (FSA) participants apply their contributions for any one year? March 1 of the following year April 15 of the following year March 15 of the following year as late in the year as necessary

March 15 of the following year Explanation: Participants can apply the FSA contributions they made for any one year as late as March 15 of the following year.

Which of the following statements about deferred annuity surrender charges is NOT correct? A deferred annuity owner has rights to his or her contract values but may be forced to pay an insurer-imposed charge for withdrawing them. Most deferred annuities apply them if the owner withdraws from, or surrenders, the contract within a set period after he or she buys the contract. The surrender charge is typically a declining percentage of the contract's accumulated value. Most deferred annuities apply surrender charges for all years after the contract is issued.

Most deferred annuities apply surrender charges for all years after the contract is issued. Explanation: Most deferred annuities apply surrender charges for only the first five to ten years after contract issue.

Kate bought a universal life policy with a $200,000 death benefit and chose death benefit option 1. In year five of the policy, she withdrew $50,000 from the policy's cash value. If she dies after withdrawing the $50,000, what will her beneficiary receive? $50,000 $150,000 $200,000 $250,000

$150,000 Explanation: If Kate withdraws $50,000 from her universal life policy, the specified amount will drop by $50,000. This means that the death benefit will be reduced by $50,000. Her beneficiary will get $150,000.

Which organization provides access to comprehensive insurance and health care for uninsured children ages 5 through 18 in Florida? Florida Health Alliance Cover Florida Florida Healthy Kids Florida Kids' Care

Florida Healthy Kids Explanation: Florida Healthy Kids is designed to improve access to comprehensive insurance and health care for uninsured children ages 5 through 18 in the state. Coverage is provided for doctor visits, immunizations, dental care, emergency care, and hospital stays, among other benefits.

Which is not an element of all legal contracts? counteroffer offer consideration acceptance

counteroffer

Which type of insurance company pays dividends to its stockholders? stock company mutual company fraternal benefit society reciprocal insurer

stock company Explanation: Stock insurance companies are owned by stockholders, just like many other major public companies. They pay dividends, when declared, to their stockholders.

By what means have managed care companies entered the Medicare services market? Part D Part A Part B Part C

Part C Explanation: In 1997, Medicare was expanded to include another option, Part C, also called Medicare Advantage. Part C opened the program to new health-care providers and managed care plans.

Paul knows that if he ever needs funds quickly, he can easily access his life insurance policy's cash value. Which of the following best explains why this is so? Permanent life insurance is a regulated product. Permanent life insurance is a very liquid asset. Cash values are guaranteed with most types of permanent life insurance. Permanent life insurance cash values are not an integral part of the policy's death benefit.

Permanent life insurance is a very liquid asset. Explanation: Liquidity in an investment refers to how easy and inexpensive it is to convert the investment into cash. A life insurance policy with a cash accumulation feature has important liquidity options. For example, many policies allow the policyowner to take out loans or to make withdrawals.

Sasha, Kendall, Adam, and Julio are licensed agents in Florida. The Department of Financial Services would NOT be able to suspend or revoke which agent's license for engaging in the following acts? Sasha, who sold insurance policies to family members and friends this year Kendall, who intentionally violated an order issued by the Office of Insurance Regulation Adam, who offered season football tickets to prospects who purchased policies Julio, who used insurance premiums he collected to renovate his business office

Sasha, who sold insurance policies to family members and friends this year Explanation: The Department can revoke or suspend the licenses of agents who engage in all of the listed acts but cannot suspend or revoke a license because an agent sells insurance to family and friends.

Why does an insured pay a different amount for group insurance than for a comparable individual plan? Coverage costs more for group plans. The risk for a group is spread over many people. The cost of underwriting group health insurance is greater than that of underwriting individual health insurance. The insurer pays more in sales and administrative costs.

The risk for a group is spread over many people. Explanation: The risk for a group is spread over many people.

Brittany Importers is headquartered in Florida and would like to purchase a group health plan to cover its employees. What is the minimum number of employees that Brittany Importers must have to be eligible for group insurance? 10 15 50 There is no minimum.

There is no minimum. Explanation: All employees (or class of employees) must be eligible for coverage under a group policy issued to an employer. However, Florida does not require a minimum number of employees for group health insurance.

How do independent agents differ from captive agents? They earn higher commissions. They are bound by fewer rules. They can sell policies for several insurers. They can sell more types of insurance products.

They can sell policies for several insurers. Explanation: Unlike captive agents, independent insurance agents work with several insurers to find insurance products to meet their clients' needs.

All of the following statements regarding basic hospital, surgical, and physician policies are generally correct EXCEPT: They restrict the insured's right to choose a health care provider. They limit the types of coverage provided and the amounts that the insurer will pay. They commonly have a number of exclusions that the plan does not cover. They generally pay 'first dollar' coverage without deductibles and co-insurance.

They restrict the insured's right to choose a health care provider. Explanation: Basic plans offer the right to choose any health care provider.

With respect to Roth IRA conversions, all the following statements are correct EXCEPT: Income taxes must be paid on the traditional IRA when the account is converted. To convert to a Roth IRA, a person must have earned income. Amounts converted to a Roth IRA will grow tax free. To convert to a Roth IRA, the owner may have any amount of modified adjusted gross income in the year of conversion.

To convert to a Roth IRA, a person must have earned income. Explanation: Anyone can convert a traditional IRA to a Roth IRA, regardless of income. Current income taxes (but no penalty taxes) are payable on the full value of the traditional IRA at the time of the conversion. After that, all distributions are tax free.

Which of the following statements about the delivery of newly issued health insurance policies to the customer is correct? The insurance company commonly mails the policy directly to the new policyowner. When delivering the policy, the producer should review the policy to ensure that its terms and conditions match those the client applied for. If a policy is rated or denied, it is not necessary for the producer to explain to the applicant the reason for the decision. If an applicant applies for a policy without paying the first premium, the producer must collect the first premium along with a surcharge when delivering the policy.

When delivering the policy, the producer should review the policy to ensure that its terms and conditions match those the client applied for. Explanation: When the producer delivers the policy, he or she should review it with the applicant to ensure that its terms and conditions match those that were applied for.

While completing an application for a life insurance policy, Ken withholds information about his health history to avoid paying a higher premium. He has been in excellent health for the past five years. Has he committed fraud? No, because he is now in a lower risk category. No, because more than two years have passed since his last serious health issue. Yes, because he made a misstatement with the intent to deceive the insurance company. Yes, because he is trying to pay a lower premium than he should.

Yes, because he made a misstatement with the intent to deceive the insurance company. Explanation: Fraud is a deliberate deception to gain some advantage. By withholding information in order to pay a lower premium, Ken has committed fraud. If the fraud is discovered within two years of policy issue, the insurer can void the contract.

A fiduciary must be named to administer a health plan in a financially responsible manner and in the best interests of its enrollees in accordance with ERISA's requirements for: information disclosure accountability claims procedures and appeals administration

accountability Explanation: Under ERISA's accountability function, a fiduciary must be named. The fiduciary administers the health plan in a financially responsible manner and in the best interests of its enrollees.

Jennifer applied for a $500,000 whole life insurance policy. The insurer issued the policy but classified her as a substandard risk, which cost her a higher premium. Which type of policy delivery is recommended in this situation? constructive delivery implied delivery actual delivery interim delivery

actual delivery Explanation: Actual delivery of a policy requires personal delivery to the client and an explanation. The agent should explain any terms of the policy that were imposed during the underwriting process as well as the reason for any additional premium charge that was not known at the time of application.

Because an applicant for an insurance policy cannot negotiate the terms of the policy, the policy is what kind of contract? aleatory unilateral conditional adhesion

adhesion Explanation: An insurance contract is a contract of adhesion. Unlike other contracts, the parties do not negotiate the terms, price, or other elements of the contract. Instead, when an insurer offers a policy to a prospective policyowner, the prospect must "take it or leave it."

How is increasing term life insurance normally sold? as a cost-of-living rider on a permanent life insurance policy as a permanent insurance policy as an endorsement as a modified endowment contract

as a cost-of-living rider on a permanent life insurance policy Explanation: Insurers offer increasing term insurance as a cost-of-living increase rider on a permanent life policy.

A provision found in some deferred annuities, which allows surrender charge-free withdrawals if the interest rate credited to the accumulated value drops below a specified level, is called a(n): bailout provision surrender provision release provision nonforfeiture provision

bailout provision Explanation: Some deferred annuities include a bailout provision (sometimes called a waiver of penalties provision) that allows charge-free withdrawals if the interest rate credited to the accumulated value drops below a specified level.

Due to a significant drop in sales this year, Agent Smith has been soliciting current clients and encouraging them to use the policy values in their existing life insurance policies to purchase new policies in order to increase his commissions. Which unfair trade practice has Agent Smith committed? sliding misrepresentation churning fraud

churning Explanation: Churning involves using the policy values in an existing life insurance policy to purchase another policy without having a reasonable basis for believing that the new policy will provide the policyowner with an actual benefit. This unlawful activity generally increases the amount of commission a producer will receive.

William buys a $250,000 life insurance policy. He worries that he will not have coverage during the policy review and underwriting period. Which will cover William during this time? insurance waiver bridge loan paid-up term life rider conditional insurance receipt

conditional insurance receipt Explanation: An insured may be granted coverage through an insurance receipt. A conditional receipt usually limits this coverage to less than the face amount applied for.

Carol applies for a $250,000 life insurance policy. Her agent gives her a document that provides limited coverage during the underwriting period. What is this document? promissory note conditional receipt temporary waiver binding endorsement

conditional receipt Explanation: During the underwriting period of determining insurability, an insured may be granted coverage through an insurance receipt. A conditional receipt usually limits this coverage to less than the face amount applied for.

Which of the following life insurance products is best suited for insuring a mortgage or other long-term loan with the least premium possible? increasing term life insurance level term life insurance decreasing term life insurance whole life insurance

decreasing term life insurance Explanation: Because it has a decreasing face amount, decreasing term life insurance is ideally suited for mortgage protection programs in which the face amount matched the decreasing loan balance.

Manny lost both legs in a motorcycle accident. His health insurance policy paid double the normal benefits due to the accident. Which type of rider does Manny's policy contain? indemnity rider double indemnity rider accidental death and negligence rider accidental injury rider

double indemnity rider Explanation: Manny's health insurance policy contains a multiple indemnity rider. This rider doubles or triples the benefits if the insured dies from a specific accident. Likewise, the benefits are doubled or tripled if accidental dismemberment is of a specific type.

An agent will violate the prohibition against controlled business if she sells most of her insurance policies to whom? members of labor unions and other collective bargaining groups employees of a business owned by her husband members of an association nonprofit organization members

employees of a business owned by her husband Explanation: The Department will not grant or continue a license if the license is used primarily to engage in controlled business. Controlled business is insurance that is written primarily on the lives, property, or risks of the licensee or of the licensee's family members, employer, or business associates.

Suppose an agent's contract with the insurer gives the agent permission to sell and solicit business for the insurer. What kind of authority does the contract grant to the agent? implied apparent express anticipated

express Explanation: The contract between the agent and insurer sets forth certain acts and duties the agent is specifically authorized to perform. This authority is called express authority.

Each year, Marco defers part of his pre-tax compensation into an account to pay health-care expenses not reimbursed by his employer's group plan. At the end of the year, he has $300 in his account, and he has until March 15 to use these funds. Which type of health savings arrangement does he have? health savings account consumer-driven health plan health reimbursement arrangement flexible spending account

flexible spending account Explanation: Marco has a flexible spending account, which is a group benefit that employers can offer to their employees. Employees contribute to an FSA on a pre-tax basis and use the funds to pay for unreimbursed medical expenses. Any amounts remaining at the end of the year must be used by March 15 of the following year.

Jake has a consumer-driven health plan. What will the plan include to pay for expenses beyond the deductible? high-deductible health plan optionally renewable provision no policy deductible few co-payments for services

high-deductible health plan Explanation: A consumer-driven health plan generally consists of a tax-exempt health account used to pay for health-care expenses within an annual limit (such as an HSA) and a high-deductible health plan (HDHP) to pay for expenses beyond the deductible.

Which of the following is NOT required in order to operate as an HMO in Florida? capital and surplus minimum requirements rate filings license of certification maintenance of grievance procedures

license of certification Explanation: To operate as an HMO in Florida, an HMO must obtain a certificate of authority from the Office of Insurance Regulation. An HMO must also meet other requirements pertaining to capital and surplus minimums, rate filings, contract and forms submissions, marketing procedures, and operations and grievance procedures.

When asked about the payment of dividends by a prospect, Agent Maloney states that policy dividends are always guaranteed, even though they are not. Which unfair trade practice has the agent committed? twisting unfair discrimination coercion misrepresentation

misrepresentation Explanation: It is considered misrepresentation to circulate misleading information about an insurance contract, such as by assuring policyholders that they will receive future dividends when they are not guaranteed.

What rights, if any, does an insured person have in a policy when another person owns the policy? the right to review the policy the right to change the policy no rights the right to adjust the death benefit

no rights Explanation: In a third-party ownership situation, the insured under the life insurance policy generally has no rights under the policy.

Theodore's health insurance policy states that the insurer cannot change the policy or cancel it unless he stops paying premiums. What kind of policy does Theodore have? noncancelable guaranteed renewable nonrenewable rescindable

noncancelable Explanation: The term "noncancelable" may be used only in a policy where the insured has the right to continue that policy in force for life by the timely payment of premiums and the insurer has no right to make unilateral changes in any provision of the policy.

While reviewing a life insurance policy issued by her home office, Angela notices that the premium is much higher than she quoted her client. The policy also has features that the client did not request. What should Angela do? present the policy to the client because it was generated by the home office not present the policy to the insured until the home office reviews the policy and recalculates the premium recalculate the premium herself advise the client to seek coverage from another insurer

not present the policy to the insured until the home office reviews the policy and recalculates the premium Explanation: Under the concept of utmost good faith, both parties are entitled to receive all the material facts related to the circumstances under which they enter into the contract.

What are annuity interest earnings taxed at? long-term capital gains tax rates short-term capital gains tax rates ordinary income tax rates the Alternative Minimum Tax rate

ordinary income tax rates Explanation: Annuity interest earnings are taxed at ordinary income tax rates.

An agent's license can be suspended or revoked for all of the following reasons EXCEPT: violating the Florida Code of Ethics selling unregistered securities demonstrating untrustworthiness when transacting insurance paying commissions to a licensed agency

paying commissions to a licensed agency Explanation: A life insurance agent's license may be suspended or revoked for all of the listed reasons except for paying commissions to a licensed agency with which the agent is affiliated.

Which is considered a pre-paid health plan? basic medical expense policy accidental death and dismemberment plan preferred provider organization medical expense plan

preferred provider organization Explanation: Under a prepaid health plan, the health-care provider pre-negotiates with the insurer the fees for a given service. The health-care provider bills the insurer directly rather than billing the insured. HMOs and PPOs typically use the pre-paid option.

A prospective insured gives an agent a completed life insurance application with the first premium payment. What must the agent now give the applicant? copy of the application premium receipt temporary policy bridge policy

premium receipt Explanation: Premium receipts are designed to offer interim coverage while the application is being approved and the policy is being formally issued.

Insurance agents are often called: account executives managing general agents brokers producers

producers

A client's answers on an application for insurance are considered to be: warranties representations assurances guarantees

representations Explanation: An applicant's statements on an application for insurance are considered representations and not warranties.

Dorothy, who just turned 65, is not yet receiving Social Security retirement benefits, but can enroll voluntarily in Medicare. How long is her enrollment period? 30 days, starting on her 65th birthday 60 days, ending 30 days after her 65th birthday 180 days seven months, ending three months after her 65th birthday

seven months, ending three months after her 65th birthday Explanation: People not covered under Social Security normally enroll for Medicare during the month of their 65th birthday. They can also enroll during the three months before or after their 65th birthday' a seven-month enrollment period altogether.

A type of life insurance that covers two people and pays the death benefit only upon the second insured's death is called survivorship life family life spousal life joint life

survivorship life Explanation: Commonly used in estate planning, survivorship life insurance policies insure two people but pays the death benefit only when the second insured dies.

Changes to a disability income insurance policy's benefits under the cost-of-living adjustment (COLA) rider are typically based on: the Dow Jones Industrial Average the insurer's investment returns the Consumer Price Index the S&P 500

the Consumer Price Index Explanation: The COLA rider adjusts the benefit payments according to changes in the consumer price index (CPI).

An indexed whole life policy ties death benefits and premiums to which of the following? the stock market the insurer's stock price the Consumer Price Index (CPI) the insurer's investment experience

the Consumer Price Index (CPI) Explanation: Indexed whole life insurance ties its death benefit and its premiums to a specified index, most commonly the Consumer Price Index (CPI).

When deciding whether to issue a policy, the health insurance underwriter will weigh all of the following factors EXCEPT: the applicant's lifestyle the applicant's occupation the applicant's sex the applicant's neighborhood

the applicant's neighborhood Explanation: When evaluating the risk factors an individual applicant presents, the underwriter will weigh numerous factors, including the applicant's age, sex, occupation, and lifestyle. The neighborhood in which the applicant lives is not considered in underwriting.

All the following are required to sign an application for life insurance EXCEPT: the policy owner the beneficiary the insured the producer

the beneficiary Explanation: Beneficiaries do not sign the application because they are not a party to the contract.

All of the following are permitted as tax-free transactions under a Section 1035 exchange EXCEPT: the exchange of a life insurance contract for a life insurance contract the exchange of a life insurance contract for an annuity contract the exchange of an annuity contract for a life insurance contract the exchange of a life insurance contract for a tax-qualified long-term care insurance policy

the exchange of an annuity contract for a life insurance contract Explanation: IRS Section 1035 exchange rules do not allow the exchange of an annuity contract for a life insurance contract, as this would allow a person to potentially avoid taxation on the annuity's gain (were it to be paid out as a life insurance death benefit).

If a business owner is disabled, business overhead expense insurance will NOT pay the: employees' wages rent utilities the owner's salary

the owner's salary Explanation: Business overhead expense insurance reimburses the company for certain business expenses if the business owner is disabled. Covered expenses may include utilities, leased equipment, office supplies, nonowner salaries, and rent. The owner's salary is not a covered expense.

What is the normal reinstatement period for health insurance policies? 90 days from the date of lapse one year from the date of lapse three years from the date of lapse five years from the date of lapse

three years from the date of lapse Explanation: The normal reinstatement period is three years from the date of lapse.

How long is the standard incontestability period? one year from the application date two years from the date of issue five years from the date of issue 31 days from the date of issue

two years from the date of issue Explanation: Under most policies, the incontestability period is two years from the issue date.

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain towns in Florida. What are Acme and Apogee engaging in? acceptable marketing and underwriting practices unfair and prohibited business practices insurance fraud false advertising

unfair and prohibited business practices Explanation: Acme and Apogee are agreeing to an unreasonable restraint of trade in the insurance business of Florida. Furthermore, they are engaging in unfair discrimination by charging persons of the same class and substantially equal risk different premium rates and by paying different benefits to persons in this class.

Sandy and Cindy are healthy, 45 years old, and have similar life expectancies. Though they are insured by the same company, Sandy's life insurance premiums are considerably lower than Cindy's. What may this indicate a case of? misrepresentation unfair discrimination twisting false advertising

unfair discrimination Explanation: Unfair discrimination can arise when individuals of the same class and life expectancy are charged different premiums or rates for life insurance. However, if these differences are based on sound actuarial principles, they do not constitute unfair discrimination.

Bill believes he has a cause of action against his health insurer for its refusal to pay benefits on a claim. He filed written proof of loss on April 1. Not having received a response by May 1, he decides to take legal action. His attorney will probably advise him to do what? file suit wait file proof of loss again cancel the policy

wait Explanation: The legal actions provision of a health insurance policy prohibits the insured from suing the insurer on a claim before 60 days have passed since filing written proof of loss. However, an insured cannot bring suit after five years have passed since filing proof of loss.

All of the following are examples of an agent's responsibilities toward an applicant EXCEPT: waiving payment of the policy's first premium recommending suitable insurance disclosing all important information about a policy clearly representing the terms of a proposed policy

waiving payment of the policy's first premium Explanation: Agents must act in the applicant's or insured's best interests at all times. Agents must give all important information concerning a proposed policy and must clearly explain the policy. Agents also must recommend insurance products that are suitable for the customer's needs. They cannot waive the policy's first premium (or any premium).

Julia has decided to surrender her $250,000 whole life policy, which has a $31,000 cash value. If she elects the extended term nonforfeiture option, Julia will receive a term policy with a face value equal to what amount? $31,000 $219,000 $250,000 $281,000

$250,000 Explanation: If Julia chooses the extended term nonforfeiture option, the insurer will apply the cash value of the lapsed policy to buy a term insurance policy. The term insurance is bought in an amount equal to the face amount of the lapsed policy, or $250,000. The term coverage lasts for whatever period the cash value buys.

Emily, age 48, withdrew $8,000 from her SIMPLE plan to buy a car. How much penalty tax will she owe? $0 $800 $1600 $4000

$800 Explanation: Emily will not have to pay a penalty tax of $1,600 (or 20 percent) on her premature distribution.

ABC Life Insurance Co. sells term and whole life insurance policies through agents. If it sells a policy, it must give the customer the right to examine the policy for at least how long? 14 days 20 days 30 days 31 days

14 days Explanation: Life insurance policies must provide for a free-look period of at least 14 days after the policy is delivered to the policyowner. If unsatisfied with it for any reason, the policyowner or contract owner can return it to the insurer for a full refund of the premium paid.

An insurer must notify its current customers of its privacy policies or practices at least once every how often? 6 months 12 months 18 months 24 months

12 months Explanation: An insurer or agent must notify its current customers of its privacy policies or practices at least once every year.

Which of the following statements correctly describes the comparison of health insurance to life insurance? Only health insurance protects against financial loss. Only health insurance protects against unexpected loss. Only health insurance protects against risks a person may face many times during his or her life. Unlike health insurance, there is only one type of life insurance.

Only health insurance protects against risks a person may face many times during his or her life. Explanation: Unlike the risk of death, a person may face health risks many times during his or her life.

What is the only restriction on naming an annuitant? The annuitant must not be related to the owner. The annuitant must be a natural person. The annuitant can be a natural or non-natural person. The annuitant must be related to the owner.

The annuitant must be a natural person. Explanation: The annuitant must be a natural person; it cannot be a non-natural person such as a corporation.

When holding insurance premiums and other funds, agents must act in a what role? a trustee relationship a fiduciary capacity an agency capacity a trustor capacity

a fiduciary capacity Explanation: Licensed individuals hold insurance premiums and other funds in a fiduciary capacity. Anyone who appropriates such funds for his or her own use or without the consent of the person entitled to the funds is guilty of larceny.

As a legal contract, a life insurance requires all of the following elements, EXCEPT: offer basis consideration acceptance

basis Explanation: As a legal contract, a life insurance policy requires three elements: offer, acceptance, and consideration.

An insurable risk is not: ascertainable catastrophic uncertain an economic hardship

catastrophic Explanation: A catastrophic loss is not the determining factor. The potential loss must be ascertainable for the risk to be insurable.

Agent Adams met with Shirley, an elderly client, to discuss variable annuities and other insurance products. For how long must he keep records of the information he collects from Shirley that he uses to make annuity recommendations? five years four years three years two years

five years Explanation: Insurers and agents must keep records of the information collected from a consumer and used in making annuity recommendations for five years.

A life insurance policyowner who has named a beneficiary irrevocably must observe all the following restrictions, EXCEPT: not taking a policy loan without the consent of the irrevocable beneficiary not changing the beneficiary without his or her signed consent not designating a new beneficiary if the irrevocable beneficiary dies before the insured not adding a second primary beneficiary unless the irrevocable beneficiary agrees to it

not designating a new beneficiary if the irrevocable beneficiary dies before the insured Explanation: The policyowner cannot remove the irrevocable beneficiary without his or her signed consent.

Andrea owns a participating life insurance policy, which means that the insurer will pay dividends to whom? policyowners every year both policyowners and stockholders policyowners from company surplus policyowners beginning no later than the end of the first policy year

policyowners from company surplus Explanation: A participating life insurance policy pays dividends to policyowners from company surplus. The dividends are considered a return of premium based on the insurance company's financial success but are not guaranteed. Under a participating policy, the insurer must annually ascertain and apportion the divisible surplus, if any, beginning no later than the end of the third policy year.

Which of the following health insurance policy provisions requires that insurers must receive written proof of loss within a certain number of days of the loss? time payment of claim provision proof of loss provision optional provisions change of occupation provision

proof of loss provision Explanation: Under the proof of loss provision, the insurer must receive written proof of loss within 90 days of the loss.

Allen buys an annuity with a single, lump-sum payment, which grows in the contract until he accesses the funds or the contract annuitizes. No additional premium payments are accepted. What type of annuity has Allen bought? single-premium deferred annuity fixed premium deferred annuity flexible premium deferred annuity single-premium immediate annuity

single-premium deferred annuity Explanation: A person can buy a single-premium deferred annuity (SPDA) with a single lump-sum payment. This money grows in the contract until the owner accesses the funds or the contract annuitizes. Once a person buys an SPDA, no additional premium payments are accepted.

If corporation owns, pays for, and is the beneficiary of the life insurance policies covering the lives of its three shareholders under their buy-sell agreement, what type of agreement does it have? stock redemption agreement cross-purchase buy-sell agreement entity cross-purchase agreement corporate purchase agreement

stock redemption agreement Explanation: In an entity buy-sell agreement, the business itself is a party to the agreement. The business buys the interest or shares of a deceased partner or shareholder. If the business is a close corporation, the agreement is called a stock redemption agreement.

A type of permanent life insurance that lets the policyowner increase, reduce or even skip premium payments at will without the policy lapsing best describes: variable life insurance universal life insurance adjustable life insurance modified premium whole life insurance

universal life insurance Explanation: While it does permit the policyowner to adjust premiums (within limits), adjustable life insurance premiums must be paid on time to prevent the policy from lapsing.

The term used to describe the voluntarily surrender of a known right is: estoppel waiver voidable conditional

waiver explanation- Estoppel is giving up a right without the intent to do so. A party surrenders a right that it failed to preserve.

Under a health insurance policy claim forms provision, how many days does the insurer have to provide claim forms to the insured after receiving a notice of claim? 10 days 15 days 30 days 60 days

15 days Explanation: The claim forms provision states that the insurer must provide claim forms to the insured within 15 days of receiving a notice of claim.

Group life insurance policies must include a grace period of how long for paying any premium except the first? 15 days 20 days 31 days 60 days

31 days Explanation: After the group policyholder has paid the initial premium, it has a grace period of 31 days within which to pay every subsequent premium. The policy remains in force during the grace period.

BBX Insurers terminated Henry's appointment as its life insurance agent on December 1. How long will Henry remain eligible to be appointed as a life insurance agent by another insurer? 12 months 24 months 36 months 48 months

48 months Explanation: If an agent's appointment for a particular class of insurance has been terminated or not renewed, the agent remains eligible to be appointed as an agent for that line of business for 48 months. If the agent does not obtain an appointment during the 48-month period, then his or her qualification for that line of authority will expire.

In setting up a viatical settlement, the provider pays the policyowner a lump-sum payment that is typically in the range of: 25 to 50 percent of the policy's cash value 50 to 80 percent of the policy's cash value 25 to 50 percent of the policy's face amount 50 to 80 percent of the policy's face amount

50 to 80 percent of the policy's face amount Explanation: The viatical settlement provider buys the policy with a lump-sum payment, typically ranging from 50 to 80 percent of the death benefit, and is thereafter responsible for paying future premiums.

Which statement is correct about the optional coverage that a health insurance policy provides? An insurer cannot cancel a policy if it receives the premium before the end of the grace period. A policy, including endorsements and riders, forms the entire contract. An insurer has the right to request an autopsy in case of the insured's death. A policy will not cover medical losses that arise from the insured's intoxication.

A policy will not cover medical losses that arise from the insured's intoxication. Explanation: While most health insurance policies exclude coverage for losses resulting from intoxication or being under the influence of an illegal narcotic, this is an optional provision. All other provisions described here are mandatory.

Which of the following statements best describes the purposes that annuities serve? Annuities accumulate and/or distribute sums of money. Annuities collect premiums to pay them back to the annuitant in a lump sum sometime in the future. Annuities are a way to provide tax-free retirement income. When "annuitized," funds accumulated in an annuity are paid out and the contract expires with no value.

Annuities accumulate and/or distribute sums of money. Explanation: When accumulated funds are "annuitized," the funds are turned into a series of ongoing, periodic income payments.

Agent Monroe helped her client Brian enter into a viatical settlement agreement with Best Insurers. Which of the following parties will receive the life insurance proceeds at Brian's death? Brian's beneficiaries under his will Agent Monroe Agent Monroe and Best Insurers Best Insurers

Best Insurers Explanation: A viatical settlement contract is a written agreement between a viatical settlement provider and a life insurance policyowner. At the policyowner's death, the provider receives the death benefit.

All of the following distributions from a qualified plan are exempt from the 10 percent penalty tax on premature distributions, EXCEPT: Distributions made because the participant dies. Distributions made because the participant becomes disabled. Distributions made because the participant needs the funds to pay for homeowners insurance premiums. Distributions made because the participant has medical expenses that exceed 10 percent of his or her adjusted gross income.

Distributions made because the participant needs the funds to pay for homeowners insurance premiums. Explanation: The 10 percent premature distribution penalty tax does not apply to distributions taken because the participant becomes disabled.

Which describes the type of relationship based on trust that exists between the insurer and its appointed agent? fiduciary consensual exclusive binding

Fiduciary explanation- The agency agreement between an insurer and an agent creates a fiduciary relationship between the two parties. Out of this relationship comes the agent's duty to act in the best interests of the insurer.

Life and health insurance companies regulate themselves through each of the following entities or organizations EXCEPT: National Association of Life Underwriters American Society of Chartered Life Underwriters International Association of Health Underwriters Financial Industry Regulatory Authority

Financial Industry Regulatory Authority Explanation: The Financial Industry Regulatory Authority (FINRA), formerly known as the National Association of Securities Dealers (NASD), regulates agents who sell variable life products. It does not apply to most life insurance products.

Which entity protects policyowners, insureds, and beneficiaries if an insurer cannot perform its contractual obligations because of impairment or insolvency? Florida Life and Health Insurance Coverage Program Florida Comprehensive Life and Health Association Florida Life and Health Guaranty Association Florida Life and Health Care Access Association

Florida Life and Health Guaranty Association Explanation: The Florida Life and Health Guaranty Association protects policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance policies, health insurance policies, and annuity contracts if an insurer fails to perform its contractual obligations because it becomes impaired or insolvent.

Harry files a notice of claim under his health insurance policy but does not receive claim forms from his insurer within the required number of days. What can Harry do? He can re-file the notice of claim. Harry can submit a written statement describing how the loss occurred, the nature of the loss, and how much was lost. Harry should consult a lawyer to get the insurer to send the appropriate forms. Harry should leave a message or send an email to the insurer describing the circumstances, nature, and extent of the loss.

Harry can submit a written statement describing how the loss occurred, the nature of the loss, and how much was lost. Explanation: He does not have to refile the claim. He can submit a written statement describing how the loss occurred, the nature of the loss, and how much was lost.

Howard, 33, and Mary, 32, want to fund their 13-year-old daughter's college education. Which one of the following would be the most appropriate advice about using a deferred annuity? It is a good idea. Deferred annuities can be used for almost any purpose that calls for future income. Though not the best use for an annuity, it is acceptable because the contract's value accumulates on a tax-deferred basis. It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59' may be subject to a tax penalty. Though there may be some merits to the idea, the use of deferred annuity withdrawals to pay for personal expenses like college tuition is forbidden under federal law.

It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59' may be subject to a tax penalty. Explanation: Howard and Mary are too young to escape a tax penalty for withdrawing funds from their annuity before 59' , considering that their daughter will be starting college in less than seven years.

Nicole, age ten, is the insured in a traditional "jumping juvenile" policy with a $5,000 face amount. When she reaches age 21, what will most likely happen to the policy's face amount? It will increase to $10,000. It will increase to $20,000. It will increase to $25,000. It will remain $5,000.

It will increase to $25,000. Explanation: A jumping juvenile policy is typically issued in units of $1,000 of death benefit. When the insured child reaches age 21, the death benefit jumps to $5,000 per unit.

Jake and five of his friends are self-employed in different fields. They want to form a group so that they can buy group life insurance. What can they do? Jake and his friends would probably not be considered an eligible group for insurance purposes. Jake and his friends could form an association group to get group life coverage. Jake and his friends could form a Multiple Employer Welfare Arrangement to get group life coverage. Jake and his friends would need to find at least two more people to join their group to be eligible for group life insurance.

Jake and his friends would probably not be considered an eligible group for insurance purposes. Explanation: Jake and his friends, who work in different industries, would not be eligible to form an association group.

White Insurance Company is a domestic insurer in Florida. By what date must it file an annual statement regarding its financial condition each year? January 1 February 1 March 1 May 1

March 1 Explanation: Insurers are required to file an annual statement regarding their financial condition, transactions, and affairs with the Office of Insurance Regulation by March 1. Quarterly statements must also be filed.

Carolyn bought a $500,000 five-year renewable term policy with a guaranteed renewal rate. Two years after buying it, she develops cancer and is no longer insurable. If Carolyn is alive at the end of the five-year term, which of the following statements is most correct? She can renew the policy but must pay a higher premium based on her age at the time of renewal. She must prove insurability before the insurer can renew the policy. The insurer can increase her premiums because of her health problems. She will not be able to renew the policy.

She can renew the policy but must pay a higher premium based on her age at the time of renewal. Explanation: Under a renewable term life insurance policy with a guaranteed renewal rate, Carolyn can renew the policy without proving evidence of insurability. However, the premium for the renewal coverage will be based on her age at the time of renewal and will therefore be higher than her initial premium.

Which one of the following statements about variable life insurance is correct? With a variable life insurance policy, the insurer assumes most of the investment risk. Variable life policyowners can invest all of their premiums in the insurer's general account. Variable life policyowners can choose flexible premium payment schedules. Subaccounts are separate from the insurer's general account.

Subaccounts are separate from the insurer's general account. Explanation: Variable life policyowners can fully invest in the unsecured investment subaccounts or they can divide the funds between the separate subaccounts and the insurer's general account.

Jill is insured under a $250,000 convertible term policy and would like to convert to a permanent policy. Which of the following statements is most correct? She must first prove insurability. The amount of the new policy cannot exceed $250,000. The premiums for the new policy will be based on Jill's age when she applied for the term policy. She must pay a conversion penalty.

The amount of the new policy cannot exceed $250,000. Explanation: The convertibility provision of a term life policy lets a policyowner convert term coverage to a permanent life insurance policy without proving insurability.

Arianna owns several industrial life insurance policies and wishes to convert them into an ordinary life insurance policy. Which of the following is required to convert the policies? The combined face value of Arianna's policies must exceed $3,000. Arianna must own at least three industrial life insurance policies. Arianna must provide evidence of insurability. Arianna must agree to a premium change and provide evidence of insurability.

The combined face value of Arianna's policies must exceed $3,000. Explanation: If a person owns industrial life insurance policies with one insurer and the combined face value of all the policies exceeds $3,000, the policyowner has the option of converting these policies into one ordinary life insurance policy. The policyowner is not required to provide evidence of insurability.

Which condition must exist for a risk to be considered insurable? The potential loss must be catastrophic. The potential loss must be due to a force of nature. The potential loss must happen within six months of the policy's effective date. The loss must be ascertainable.

The loss must be ascertainable. Explanation: An ascertainable loss can be covered because it can be measured and determined with some degree of certainty.

All of the following statements regarding IRA rollovers are correct EXCEPT: There is no limit on the amount of money that can be transferred into a rollover IRA. There is no limit on the number of times an IRA may be rolled over to another IRA in a 12-month period. To avoid taxation, an IRA owner must complete a direct rollover IRA transaction within 60 days after receiving the funds. In a trustee-to-trustee IRA rollover, no taxes are withheld from the transferred funds.

There is no limit on the number of times an IRA may be rolled over to another IRA in a 12-month period. Explanation: There is no limit on the amount of money that can be transferred into a rollover IRA. However, only one rollover from an IRA can be made to another (or the same) IRA in any 12-month period.

In addition to Ken's application and an attending physician's statement (APS), insurers can use various other reports and public records. How do these documents help insurers? They help the underwriter judge the applicant's intent. They offer details that help the underwriter properly evaluate the risk that the proposed insured represents. They help insurers judge the applicant's character. They show the applicant's interest in purchasing life insurance.

They offer details that help the underwriter properly evaluate the risk that the proposed insured represents. Explanation: Public records and reports offer details that help the underwriter to properly evaluate the risk Ken represents.

All the following statements about endowment contracts are correct EXCEPT: If the policy endows while the insured is still alive, the policyowner gets a specified sum as a living benefit. They are designed to build cash values quickly. They receive preferential income tax treatment. Policies endow well before age 120, usually at age 65.

They receive preferential income tax treatment. Explanation: Endowment contracts are a special form of life insurance in which cash values grow rapidly. As a result, the policy endows well before age 120.

Which of the following individuals would be able to access their life insurance policy's cash value through a partial surrender but not a policy loan? Tonya, who owns a variable life insurance policy Gina, who owns a term life insurance policy Tim, who owns a universal life insurance policy Abe, who owns a whole life insurance policy

Tim, who owns a universal life insurance policy Explanation: As a form of whole life insurance, variable life insurance policy cash values are accessible only through a policy loan.

With respect to the difference between variable life insurance (VLI) and variable universal life insurance (VUL), which of the following statements is correct? Variable life policies require a fixed premium payable for the life of the policy while variable universal life permits premium flexibility. Only variable life policies allow the policyowner to put funds in investment subaccounts. Only variable universal life policies offer a minimum death benefit. Only variable universal life is a securities product.

Variable life policies require a fixed premium payable for the life of the policy while variable universal life permits premium flexibility. Explanation: Both variable life and variable universal life are securities products as well as insurance products.

Which of the following penalties may the Office of Insurance Regulation impose if an agent intentionally represents an unauthorized insurer in Florida? up to six months' imprisonment a fine of up to $5,000 a fine of up to $10,000 restitution

a fine of up to $10,000 Explanation: Agents who intentionally represent an unauthorized insurer commit a felony of the third degree. The Office may impose a fine of up to $10,000 for each willful violation.

Which of the following is NOT a life insurance premium? competitors' rates mortality charge interest credit expense charge

competitors' rates Explanation: Actuaries base life insurance premiums on three basic factors: mortality (a charge), interest (a credit), and expenses (a charge).

A typical errors and omissions (E&O) policy covers all the following , EXCEPT: completing and signing an application for an applicant without that person's knowledge professional negligence failing to perform due diligence placing insurance with insurers who are not authorized to conduct business in the state

completing and signing an application for an applicant without that person's knowledge Explanation: Producers can get Errors and Omissions (or E&O) insurance to cover harm arising from non-willful actions a producer gives or failed to give. However, the policy will not cover willful fraud and other criminal acts.

George buys a participating life insurance policy. A dividend is paid this year, and George wants to use it to purchase small single premium amounts of life insurance. Which dividend option has he selected? cash value reduced premium paid-up additions continual additions

paid-up additions Explanation: Dividends from participating life insurance policies can also be taken in cash or used to purchase paid-up additions to the policy's face value, accumulate at interest for future use, or purchase one-year term insurance.

If a worker has over 40 OASDI quarters of coverage what is his or her Social Security worker status? permanently insured completely insured partially insured currently insured

permanently insured Explanation: A worker is considered permanently insured once he or she has earned 40 quarters of coverage. Social Security does not have a "completely insured" status for workers.

The life insurance policy rider that makes the insurance company pay the policy premiums if the insured becomes totally disabled is called a(n): return of premium rider disability income rider waiver of premium rider payor benefit rider

waiver of premium rider Explanation: Under the waiver of premium rider, the policy's premiums are waived if the insured becomes totally disabled for a period stated in the rider.

Harry is diagnosed with a cognitive disorder. To become eligible for payments under his policy's long-term care rider, which condition must he meet? that his health or safety had been at risk within the last six months that he has been mentally handicapped for the past 12 months within the past 12 months, a physician-certified that his health or safety would be at risk without supervision that the mental condition appeared within the past ten months

within the past 12 months, a physician-certified that his health or safety would be at risk without supervision Explanation: To qualify for a cognitive reason, the insured must be physician-certified, within the previous 12 months, that his or her health or safety would be at risk without supervision.

Individual short-term disability plans typically pay benefits for up to: 6 months 1 year 2 years 10 years

2 years Explanation: Benefits in individual short-term disability income policies are generally limited to less than 2 years.

Joanne buys a Medicare supplement policy but decides not to keep it. How many days does she have to return it for a full refund of the premium she paid? 10 14 21 30

30 Explanation: A policyholder has the right to return a policy within 30 days of its delivery and to have any premium refunded if, after examination, he or she is not satisfied for any reason. Refunds must be paid directly to the policy or certificate holder in a timely manner.

For purposes of group health insurance, a small employer is defined in Florida as any person or entity that employs no more than how many employees? 100 50 20 2

50 Explanation: A small employer in Florida is, for purposes of group health insurance, defined as any person or entity engaged in business that employed between 1 and 50 employees during the preceding year, the majority of whom worked in Florida. A small employer must also maintain its principal place of business in the state.

To receive favorable tax benefits, a life insurance policy must not be designated as a modified endowment contract (MEC), which can happen if a life insurance policy fails the: HIPAA test 7-pay test Section 1035 test Section 7702 test

7-pay test Explanation: A policy becomes a MEC if it fails to meet the 7-pay test. If, at any point during the first seven policy years, the sum of premiums paid at that point exceeds the sum of premiums that would have been required at that point to pay up the policy in seven years, the policy becomes a MEC.

Assuming they meet the age and financial dependency requirements, each parent of a deceased worker is eligible to receive Social Security survivor benefits equal to: 75 percent of the worker's PIA, whether both parents are eligible or just one. 82.5 percent of the worker's PIA, whether both parents are eligible or just one. 50 percent of the worker's PIA if two parents are eligible, or 75 percent of the PIA if only one parent is eligible. 75 percent of the worker's PIA if two parents are eligible, or 82.5 percent of the PIA if only one parent is eligible.

75 percent of the worker's PIA if two parents are eligible, or 82.5 percent of the PIA if only one parent is eligible. Explanation: When two parents are eligible, each receives 75 percent of the worker's PIA. If only one parent is eligible, he or she receives 82.5 percent of the worker's PIA.

Alpha Corporation pays the premiums for its group medical, dental, disability, and long-term care insurance plans. Which statement is correct about the income tax consequences? The premiums for all of the policies are taxable income to the employees. The premiums are deductible income to the employees. Alpha can take an income tax deduction for all of the premiums it pays for all of the policies. Alpha can take an income tax deduction only for the premiums it pays for its medical plans.

Alpha can take an income tax deduction for all of the premiums it pays for all of the policies. Explanation: Group health insurance is considered a reasonable and ordinary business expense. As such, the employer can deduct the premiums it pays for a group health insurance plan. This includes premiums the employer pays for medical, dental, disability, and long-term care coverage.

Which of the following correctly describes the income tax treatment of qualified long-term care insurance premiums and benefits? Benefits paid under the policy are taxable and premiums are deductible, within limits. Benefits paid under the policy are taxable and premiums are not deductible. Benefits paid under the policy are not taxable, within limits. Premiums are deductible within limits if they exceed 10 percent of a person's adjusted gross income Benefits paid under the policy are not taxable and premiums are fully tax-deductible.

Benefits paid under the policy are not taxable, within limits. Premiums are deductible within limits if they exceed 10 percent of a person's adjusted gross income Explanation: Individually-owned qualified long-term care (LTC) policies get favorable tax treatment in two ways: Benefits are not taxed (within limits), and premiums are deductible (within limits) to the extent total unreimbursed medical expenses exceed 10 percent of AGI.

Which plans were the first to use risk pools and group or community ratings? Blue Cross Blue Shield plans indemnity plans HMO plans PPO plans

Blue Cross Blue Shield plans Explanation: Blue Cross Blue Shield plans first used risk pools and community rating. Under these plans, an entire insured group in a given area is quoted an identical rate. The individual subscriber's health status, age, or sex does not matter.

Which of the following statements regarding both term life insurance and permanent life insurance is correct? Both types build a cash value over time. Both types are designed to provide coverage for the insured's entire life. Both types are noncancellable by the insurer except for nonpayment of premiums. Both types provide a 'living benefit.'

Both types are noncancellable by the insurer except for nonpayment of premiums. Explanation: Only permanent life insurance, through its cash value, provides a 'living benefit.' Because it does not build a cash value, term life insurance does not offer 'living benefits.'

All of the following are eligible to make contributions (tax-deductible or otherwise) to a traditional IRA EXCEPT: Pete, age 19, who works part time delivering pizzas while attending school Derek, age 32, who is covered by his employer's 401(k) plan Lyndie, age 45, whose AGI last year was $125,000 Bud, age 68, whose income consists of his pension and Social Security benefits

Bud, age 68, whose income consists of his pension and Social Security benefits Explanation: A person who is younger than age 70' at the end of the year and who has earned income for that year can make an IRA contribution. Earned income does NOT include interest or dividend income, Social Security benefits, unemployment benefits, disability income payments, or pension benefits.

Which of the following statements regarding inflation protection in a long-term care insurance policy is correct? By law, it must be included in all policies. By law, it must be included in all policies unless the applicant rejects it on the application. By law, policies cannot include it unless the applicant requests it on the application. By law, it can no longer be provided in long-term care policies.

By law, it must be included in all policies unless the applicant rejects it on the application. Explanation: The law makes this protection automatic unless the buyer rejects it on the application.

Joan bought a health insurance policy from Delta Insurers. Which statement describes the consideration that a party gave under the contract? Joan promises to file claims in a timely manner. Delta promises to pay benefits when a stated future event occurs. Joan promises to not sue Delta for at least 60 days after she files a claim. Delta promises to not cancel the policy without advance notice.

Delta promises to pay benefits when a stated future event occurs. Explanation: The applicant's consideration in the health insurance contract is the application and the first premium he or she pays. The insurance company's consideration is the promise to pay a benefit when a stated future event occurs.

Which statement about flexible spending accounts (FSAs) is NOT correct? An FSA is designed specifically as a group benefit that an employer can offer to its employees. An FSA allows an employee to contribute to the plan on a pre-tax basis. Employees can use the FSA funds to pay qualified medical costs as well as costs their employer's health plan covers. Employees can use the contributed amounts to pay for partially covered costs.

Employees can use the FSA funds to pay qualified medical costs as well as costs their employer's health plan covers. Explanation: Employees can use amounts contributed to FSAs to pay for qualified medical costs. They cannot use these funds to pay for costs their employer's health plan does not cover.

Who is the contingent beneficiary, second level, in the following beneficiary designation: "Sally Grant, wife of the insured, if she survives the insured; otherwise in equal shares to surviving children of the insured, if any; otherwise to Frank Grant, brother of the insured." Sally Grant the surviving children Frank Grant the insured's estate

Frank Grant Explanation: Frank Grant is the contingent beneficiary, second level.

Ginger operates an accounting business as a sole proprietor. She pays $1,600 each month in premiums for a medical insurance policy covering herself and her family. Which of the following statements correctly describes the tax treatment of this policy? The premiums are not tax deductible, and benefit payments are tax-free. The premiums are tax deductible only to the extent Ginger's medical expenses exceed 10 percent of her adjusted gross income, and benefit payments are tax-free. Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are tax free. Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are taxable.

Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are tax free. Explanation: Self-employed persons can fully deduct premiums paid for medical, dental, and long-term care insurance that covers them, their spouses, and their dependents. These deductions directly reduce taxable income as 'above the line' deductions. Benefit payments are tax-free.

What is one difference between individual disability income policies and group disability income policies? Group plans are underwritten as a whole while individual policies consider the insurability of the applicant. Group policies are portable while individual plans are not. Individual disability insurance is easier to obtain than group coverage. Individual disability insurance is less expensive than group coverage.

Group plans are underwritten as a whole while individual policies consider the insurability of the applicant. Explanation: In a group disability income plan, the group is underwritten as a whole and the insurability of each member of the group is not considered.

Which of the following statements about children's term riders is correct? When coverage ends for a covered child, the child can apply for any permanent life insurance policy only if the child is insurable. There is no age limit for how long a child may be covered under a child's term rider. If a child converts coverage to a permanent policy, the new policy's face amount can be greater than the term rider coverage. The children's term rider only covers children born before the base policy was issued.

If a child converts coverage to a permanent policy, the new policy's face amount can be greater than the term rider coverage. Explanation: When coverage ends for a child, the child can convert the coverage to any permanent life insurance policy the insurer is then issuing. Evidence of insurability is not required. The policy face amount can be greater than the term rider coverage.

What impact did the Patient Protection and Affordable Care Act (PPACA, or ACA) have on the pre-existing conditions restriction found in most health insurance policies? It eliminated the use of pre-existing condition restrictions on all types of health insurance. It ended the use of pre-existing condition restrictions in long-term care and medical expense insurance. It ended the use of pre-existing condition exclusions in medical expense insurance only. It expanded the use of pre-existing conditions restrictions in health insurance policies.

It ended the use of pre-existing condition exclusions in medical expense insurance only. Explanation: The Patient Protection and Affordable Care Act (PPACA, or ACA) ended the use of pre-existing condition exclusions in medical expense insurance. Since 2014, medical expense insurers cannot deny coverage or charge a higher premium because of a pre-existing condition.

Beverly owns a small manufacturing business. Her sister, Rose, is her assistant. Beverly could not run the business without Rose. Beverly wants key employee disability insurance because: It will increase the owner's salary to compensate for the extra work necessary while the key employee is disabled. It will pay the key employee's wages to the employee during disability. It will pay cash benefits to the employer if a key employee is disabled. It will guarantee the business' profitability while the key employee is disabled.

It will pay cash benefits to the employer if a key employee is disabled. Explanation: Key employee disability insurance is short term because it is assumed that a capable replacement can be found within one to two years. The benefit amount considers the income of the key person, the replacement costs associated with hiring and training a capable replacement, and the key person's contribution to the company's earnings.

Janet is the owner of a small hardware store and is insured under a business overhead expense policy. If Janet became disabled, the policy would cover all of the following EXCEPT: rent the store's utility bills Janet's salary insurance covering the store

Janet's salary Explanation: Business overhead expense insurance covers certain overhead costs of a small business owner such as rent, utility bills, insurance, and taxes. Typical policies do not cover the owner's wages.

Which of the following statements is true with ALL types of life insurance? Premiums are invested in the insurer's general account, allowing policy values to be contractually guaranteed. Insurers return excess premiums to policyowners in the form of policy dividends. Life insurance policies are noncancellable by the insurer except for non-payment of premium. Life insurance policies feature a cash value that can be accessed while the insured is alive.

Life insurance policies are noncancellable by the insurer except for non-payment of premium. Explanation: All life insurance policies are noncancellable if premiums are paid on time. Insurers cannot cancel any life insurance policy for any reason other than nonpayment of premiums.

Justine leaves her position with her employer on March 1. She wants to convert her employer's group life insurance coverage to an individual policy. In order to convert her group coverage, she must apply for an individual policy no later than what date? March 7 March 10 March 31 April 30

March 31 Explanation: In order to convert group coverage to an individual policy, a person must apply for the individual policy and pay its first premium within 31 days of leaving the group.

Which of the following statements correctly describes the tax treatment of disability buy-out insurance? Premiums are not tax-deductible and benefit payments are tax-free. Premiums are not tax-deductible and benefit payments are taxable. Premiums are tax-deductible and benefit payments are tax-free. Premiums are tax-deductible and benefit payments are taxable.

Premiums are not tax-deductible and benefit payments are tax-free. Explanation: Disability buy-out insurance is a discretionary expense, so premiums are not tax-deductible. However, benefits are not taxable income.

All the following statements regarding prepaid tuition plans are correct EXCEPT: Prepaid tuition plans allow parents to lock in the cost of today's tuition, even if inflation or tuition increases. Prepaid tuition plans are typically open to both state residents and non-residents. Prepaid tuition plans typically limit a child's choice of colleges to in-state schools. Amounts contributed to prepaid tuition plans are available tax free when used to pay for qualified tuition costs.

Prepaid tuition plans are typically open to both state residents and non-residents. Explanation: State pre-paid tuition plans are usually limited to state residents and apply to in-state public universities or colleges.

Sally is covered by a PPO. Stanley is covered by a traditional indemnity plan. Which statement is correct? Neither Sally nor Stanley are required use in-network providers to get the lowest costs. Sally can never use an out-of-network provider, but Stanley can select any provider. Sally and Stanley pay deductibles and coinsurance amounts under their plans. Sally will not pay a deductible, but Stanley will pay an annual deductible.

Sally and Stanley pay deductibles and coinsurance amounts under their plans. Explanation: Most PPOs, like traditional indemnity plans, charge deductibles and coinsurance amounts. However, these amounts are applied to the lower, negotiated rates. As a result, PPO members who use PPO-contracted providers have lower out-of-pocket costs.

An insurance applicant submits a completed application with a check for the first premium to her agent. The insurance company accepts the application and issues the policy. Which describes this process? The agent offered the policy, and the applicant accepted it. The insurance company offered the policy, and the applicant accepted it. The applicant offered to buy the policy, and the insurance company accepted. The agent offered the policy, and the insurance company accepted the offer.

The applicant offered to buy the policy, and the insurance company accepted. Explanation: In an insurance transaction, typically the applicant makes the offer by submitting a completed application and paying the first premium. Upon approval of the application, the insurance company formally accepts the offer by issuing the insurance policy.

Abby receives $15,000 of benefits this year from her employer's managed care plan. Which statement is correct about the taxation of these benefits? The benefits are not taxable income. She must include part of the benefits in her income. She must treat the benefits as taxable income. She must include the benefits in taxable income to the extent they exceed a certain percentage of adjusted gross income.

The benefits are not taxable income. Explanation: An insured is not taxed on benefits received from a group managed care plan.

Sandra and David orally agree that she will pay him $25,000 to set fire to her ex-husband's house. Which statement is correct? The contract is unenforceable because it is not in writing. The contract is unenforceable because its purpose is illegal. David can void the contract if he changes his mind about setting fire to the house. The contract is unenforceable because the consideration will be paid after the act is performed.

The contract is unenforceable because its purpose is illegal. Explanation: For a party to a contract to enforce its terms, the contract must be for a legal purpose. This means that the contract can cover anything that the parties choose. However, the contract may not be for an illegal purpose. Because the purpose of the contract between Sandra and David is illegal, the contract is not enforceable.

What is the main difference between a traditional deferred compensation plan and a salary continuation plan? The employee funds the future benefit under a salary continuation plan. The employer cannot deduct benefits that are paid under a salary continuation plan. Term life insurance is often used to fund a deferred compensation plan. The employee does not fund it by deferring salary, rather, the employer funds the future benefit under a salary continuation plan.

The employee does not fund it by deferring salary, rather, the employer funds the future benefit under a salary continuation plan. Explanation: With a salary continuation plan, the employer funds, or pays for, the future benefit. In contrast, in a traditional deferred compensation plan, the employee funds the benefit by deferring a portion of current compensation.

What does the entire contract provision state? The policy is the contract between the insured and the insurance carrier. The policy and any outside oral or written agreements form the contract between the insured and the insurance carrier. The entire contract consists of the policy, attached riders, and endorsements. The policy, attached riders, and endorsements make up the entire contract, and that only a licensed agent of the company can make any changes to the policy.

The entire contract consists of the policy, attached riders, and endorsements. Explanation: The entire contract provision states that the policy, attached riders, and endorsements make up the entire contract. Any other agreements outside of the contract, either written or oral, are not considered part of the contract.

How will a PPO treat coverage of nonemergency medical treatment from an out-of-network physician? The claim will be denied. The insured will pay a higher amount for the medical care. The insured's cost will not be affected. The insured will pay a lower amount for the medical care.

The insured will pay a higher amount for the medical care. Explanation: A PPO subscriber can choose a physician from an extensive list of providers. A person can also choose a non-PPO provider but must pay more for nonemergency treatment from outside the network of PPO providers.

If the insured suffers a disabling injury five days after buying a disability income policy with a 15-day probationary period, which of the following statements is correct? The policy will not cover the loss because the injury occurred during the probationary period. The policy will cover a reduced portion of the loss because the injury occurred during the probationary period. The policy will cover the loss only if the insured remains disabled through the probationary period. The policy will cover the loss.

The policy will cover the loss. Explanation: Probationary periods are intended to guard against adverse selection, and apply only to disabilities related to sickness or illness-related losses. Because accidental injury-related losses cannot be foreseen, they are covered immediately upon policy issue. The covered loss is still subject to an elimination period, if one is included in the policy.

If the total amount of a policy loan plus interest exceeds the policy's cash surrender value, which of the following will happen? The policy will lapse. The policy will be surrendered for cash. The policy's face amount will be reduced. The policy's premium will be increased.

The policy will lapse. Explanation: As long as the total amount of the loan plus interest is not greater than the cash surrender value, the policy remains in force. If the loan amount plus accrued interest ever exceeds the cash value, the policy will lapse.

Which is true about warranties in an insurance contract? They are believed to be true. They establish competency among the parties. They disclose material facts. They are guaranteed to be true.

They are guaranteed to be true. Explanation: A warranty is a statement the maker guarantees to be true in every respect. The warranty becomes a part of the contract.

Agent Holly routinely charges her clients an extra amount in addition to the premium stated in the life insurance policy to cover her own personal administrative expenses. What is true about Holly's actions? They are lawful. They are lawful in most cases. They are unlawful. They are lawful if the client agrees in writing.

They are unlawful. Explanation: It is unlawful to knowingly collect any sum as a premium or charge for insurance that is not provided for in the policy. Insurers and agents also may not collect more than the amount of premium stated in the policy.

Because Medicare supplement policies were designed to supplement reimbursements under Medicare, which statement is true? They help pay the routine medical costs of persons eligible for Medicare and provide funds to pay for long-term care. They were solely designed to provide funds to pay the deductibles and coinsurance. They help pay for the health care costs of persons eligible for Medicare and provide funds to pay deductibles and coinsurance. They help pay for the health care costs of persons ineligible for Medicare and provide funds for routine health-care services.

They help pay for the health care costs of persons eligible for Medicare and provide funds to pay deductibles and coinsurance. Explanation: They help pay for the hospital, medical, or surgical costs of persons eligible for Medicare and provide funds to pay the deductibles and coinsurance.

Tori has a health insurance policy from ABC Insurers. ABC denies a claim because Tori failed to notify it in a timely manner of the loss. Tori argues that the policy's instructions on filing claims are confusing. A court that reviews the policy's instructions will probably resolve any ambiguities in favor of: Tori Tori's beneficiary ABC Insurers neither Tori nor ABC Insurers

Tori Explanation: Because Tori had little or no chance to change the terms of the policy, a court would generally rule in her favor if the policy provisions are ambiguous in any way.

Will's employer pays the premiums for his group disability income insurance policy. Which statement is correct about the tax treatment of the premiums and benefits? The company cannot deduct the premiums it pays as a business expense. Will cannot deduct the premiums that the company pays on his behalf. Any benefits Will receives are taxable income to him. Any benefits Will receives are not taxed as ordinary income.

Will cannot deduct the premiums that the company pays on his behalf. Explanation: The premiums are deductible for the company, but not for Will. He must pay income tax on any benefits he receives.

While taking an insurance application, Betty recommends backdating it so that the proposed insured will appear to be a year younger on the form. Can Betty do this? Yes. Backdating is permitted if the application is backdated no more than 18 months. No. Backdating is illegal. Yes. Backdating is always permitted. Yes. Backdating is permitted if it is for six months or less and authorized by the insurer.

Yes. Backdating is permitted if it is for six months or less and authorized by the insurer. Explanation: Insurers normally allow an applicant to backdate a policy by up to six months to qualify the applicant to have the policy issued at a younger age. The insurance company must authorize all backdating.

Which is NOT a common optional benefit offered with a long-term care insurance policy? guarantee of insurability benefit period of varying durations return of premium inflation protection

benefit period of varying durations Explanation: Benefit periods are common to all LTC plans, and are not an optional benefit.

Medicare Part C (Medicare Advantage) provides for which kind of coverage? comprehensive alternative to Parts A and B supplemental coverage to Part A supplemental coverage to Part B prescription drugs

comprehensive alternative to Parts A and B Explanation: Also known as Medicare Advantage, Part C provides the option of receiving Medicare-approved services from a managed care provider. Part C is comprehensive alternative to Parts A and B.

In order for Medicare Part A to pay for hospital services, the services must be: for any medical treatment, with a benefit period that begins on the day of admission to the hospital and ends 30 days after release for any medical treatment, with a benefit period that begins on the day of admission to the hospital and ends 90 days after release for any medically necessary treatment, with a benefit period that begins on the day of admission to the hospital and ends 120 days after release for any medically necessary and reasonable treatment, with a benefit period that begins on the day of admission to the hospital and ends 60 days after release.

for any medically necessary and reasonable treatment, with a benefit period that begins on the day of admission to the hospital and ends 60 days after release. Explanation: Medicare Part A will pay for any medically necessary and reasonable treatment, with a benefit period that begins on the day of admission to the hospital and ends 60 days after release.

Long Life Insurance Company is incorporated in Georgia but transacts insurance in Florida. Which type of insurer is Long Life considered in Florida? alien foreign domestic nonadmitted

foreign Explanation: Long Life Insurance Company would be considered a foreign insurer in Florida since it was formed under the laws of a state, district, territory, or commonwealth of the United States other than Florida.

What type of organization is a non-profit entity that operates on the lodge system, has no capital stock, and sells insurance mainly to its members? fraternal benefit society self-insurer reciprocal insurer mutual insurer

fraternal benefit society Explanation: A fraternal benefit society is a nonprofit entity that operates on the lodge system, has a representative form of government, has no capital stock, and sells insurance primarily to its members.

ERISA protects enrollees in an employer-sponsored health care plan in each of these ways EXCEPT: ensuring access to information about the plan guaranteeing immediate processing of claims permitting temporary continuation of terminated group coverage. review of a coverage dispute

guaranteeing immediate processing of claims Explanation: ERISA assures the timely and fair processing of claims.

If the parties disagree over the meaning of an insurance contract's terms, courts will usually interpret these terms in favor of the: insurance company insured beneficiary agent

insured

An applicant for an insurance policy submits an application without the first premium. By doing so, what has the applicant done? made an offer to the insurer invited the insurer to make an offer made an offer to the applicant prevented the insurer from making a counteroffer to the applicant

invited the insurer to make an offer Explanation: When an applicant submits an application without the first premium, the applicant has invited the insurer to make an offer. In contrast, when an applicant submits an application to the insurer with the first premium payment, the applicant has made an offer that the insurer may or may not accept.

Which type of medical expense coverage pays the benefit directly to the insured? PPO HMO major medical managed care

major medical Explanation: Major medical coverage pays benefits directly to the insured unless payment is assigned to the provider, in which case the provider is paid directly.

Before selling an annuity, an agent must make reasonable efforts to obtain information about the prospect with respect to all of the following EXCEPT: financial status investment objectives tax status marital status

marital status Explanation: Before selling an annuity, an agent or insurer must make reasonable efforts to obtain information concerning the consumer's financial status, tax status, investment objectives, and other information considered to be reasonable in making recommendations to the consumer.

What kind of misrepresentation on an insurance application gives the insurer reason to terminate a policy? factual mistake material fact warranty undisclosed fact

material fact Explanation: If an applicant misrepresents himself or herself in an application, the insurer may end the contract only if the misrepresentation was material to the formation of the contract. For example, a misrepresentation is material if the insurer would not have issued the policy or would have issued the policy at a different premium rate if the truth had been known.

Which expenses do Blue Cross Blue Shield plans cover? hospital expenses medical and surgical care durable equipment charges ambulance services

medical and surgical care Explanation: Blue Cross provides coverage for hospital care. Blue Shield provides coverage for medical and surgical care.

When Terry applied for his life insurance policy four years ago, he omitted any information in the application related to treatment he had received several years earlier for a serious chronic illness. Which of the following actions can the insurance company take when it learns of the omission? cancel the policy reduce the benefits impose additional exclusions nothing

nothing Explanation: After a policy has been in force for two years, it becomes incontestable with respect to the truthfulness of any statements that the policyowner made in the insurance application.

Jamie is 37 years old, but her friends insist that she looks younger than her age. She applies for a health insurance policy and on the application states that she is 27 years old. When the insurer discovers the truth, what will it probably do? cancel the policy reduce the benefits increase the premium refer the matter to the state's Attorney General's office

reduce the benefits Explanation: If the insured misstated his or her age in the application, benefits payable will be what the premiums would have purchased at the correct age.

If Jack takes a new job that is less hazardous than the job he had when he obtained health coverage, what may the insurer do? cancel the policy take no action increase the benefits reduce the premium

reduce the premium Explanation: The change of occupation provision in health insurance policies permits the insurer to reduce the premium if the insured changes his occupation to one that is less hazardous than the one for which the premiums were set. Conversely, insurers may reduce the benefits if the insured changes his occupation to one that is more hazardous than the one for which the premiums were set.

Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk? retention avoidance reduction transfer

retention Explanation: Rather than taking measures to reduce the risk to her family, such as buying life insurance, Emily has chosen to accept the exposure to the risk. This method of handling risk is known as risk retention.

Jennifer purchases an individual health insurance policy on June 1. One week later, she loses her job and decides she can no longer afford the policy. What are her options? returning the policy for a partial refund of premiums returning the policy for a full refund of premiums returning the policy but premiums will not be refunded keeping the policy

returning the policy for a full refund of premiums Explanation: The right to examine provision of health insurance policies issued in Florida entitles a policyowner to review the policy for at least ten days after it is delivered. If unsatisfied with it for any reason, the policyowner can return it to the insurer for a full refund of the premium paid.

What practice do insurance underwriters use to evaluate the risk that a proposed insured presents? risk tolerance risk selection adverse selection reinsurance

risk selection Explanation: Risk selection is the process of classifying risks that insurance underwriters follow to evaluate a proposed insured.

Harry has remarried and named his new wife beneficiary of his life insurance policy; he names his two children (now grown) to receive the death benefit if Harry's new wife predeceases Harry. As such, Harry's children are now which of the following? primary beneficiaries secondary or contingent beneficiaries tertiary beneficiaries second level secondary beneficiaries

secondary or contingent beneficiaries Explanation: Harry's two children are now his secondary beneficiaries.

Which of the following transactions requires an insurance producer to have more than one insurance license? selling variable life insurance comparing insurance policies selling universal life insurance replacing life insurance

selling variable life insurance Explanation: Producers who sell variable life insurance products must hold both a life insurance license and a Series 6 or 7 securities license.

Which of the following correctly describes a comparison between a supplemental major medical policy and a comprehensive major medical policy? supplemental policies generally have a higher deductible than comprehensive policies both types of policies use a corridor deductible only comprehensive policies have a coinsurance provision a supplemental policy is a valued contract while comprehensive policies are indemnity contracts

supplemental policies generally have a higher deductible than comprehensive policies Explanation: Because the underlying basic medical policy provides first dollar coverage, supplemental major medical policies have a high deductible. The basic policy will pay much of the initial costs of the medical care before the supplemental major medical policy pays expenses beyond the basic policy's limits. The high deductible avoids duplicate coverage and helps keep premiums low.

Settlement options with a life contingency base their benefit payments on: the insurance company's schedule of benefit payment amounts an amount specified in the policy the insured's lifespan the beneficiary's lifespan

the beneficiary's lifespan Explanation: Settlement options with life contingency are based on the lifespan of the beneficiary (i.e., the payee).

To which of the following are benefits paid under a key person disability income policy? the disabled worker's family the disabled worker's estate the disabled worker the business that purchased the policy

the business that purchased the policy Explanation: A business may buy a disability income policy on its key employees, partners, or shareholders. If a key person becomes disabled and can no longer contribute to the business, the benefits are paid to the business.

All of the following guarantees are associated with fixed deferred annuities, EXCEPT: the guarantee of principal protection the guarantee of current interest rates the guarantee of a fixed level of lifelong annuitized payments the guarantee of a death benefit

the guarantee of current interest rates Explanation: Current interest rates are not guaranteed.

Which of the following optional health insurance policy provisions addresses premiums that the insured owes at the time of a claim? the relation of earnings to insurance provision the unpaid premium provision the cancellation provision the conformity with state statutes provision

the unpaid premium provision Explanation: The optional unpaid premium provision addresses any premiums the insured may not have paid at the time of a claim.

Which one of the following is included in an employee's taxable income? the value of any group life insurance exceeding $20,000, less any premiums the employee pays the value of any group life insurance exceeding $30,000, less any premiums the employee pays the value of any group life insurance exceeding $40,000, less any premiums the employee pays the value of any group life insurance exceeding $50,000, less any premiums the employee pays

the value of any group life insurance exceeding $50,000, less any premiums the employee pays Explanation: The value of any group life insurance exceeding $50,000, less any premiums he or she pays, is included in the employee's taxable income.

A retiree's monthly Social Security retirement benefit amount is dependent on the worker's PIA and: the worker's W-2 earnings the year before retirement the worker's age at the time he or she chooses to receive benefits the worker's average income over the previous 24 months the worker's average income over the previous 48 months

the worker's age at the time he or she chooses to receive benefits Explanation: Monthly Social Security benefits are determined by an eligible worker's PIA (primary insurance amount) and the age at which he or she elects to receive the benefit.

Individual long-term care insurance policies are generally available to persons in which of the following age groups? those between the ages of 30 and 65 those between the ages of 40 and 85 those between the ages of 20 and 60 those between the ages of 55 and 70

those between the ages of 40 and 85

When does an insurance policy take effect? when the insured receives the policy when the insurance company sends the policy to the agent when the insured signs the application when the first premium is paid

when the first premium is paid Explanation: The effective coverage date depends on when the applicant pays the first premium.

Which of the following statements regarding an insured executive bonus plan is correct? The employer is the insured and the policyowner, and the executive is the beneficiary The employer is the insured and the executive is the policyowner The employer is the policyowner and the executive is the insured The executive is the insured and the policyowner

The executive is the insured and the policyowner Explanation: An executive bonus plan is one in which an employer agrees to pay some or all of the premiums on a life insurance policy purchased for a company executive, who is the policyowner.

The Family and Medical Leave Act (FMLA) protects the employment status of certain employees on unpaid leave for up to how long? 12 weeks per year 12 weeks per employer 24 weeks per year 24 weeks per employer

12 weeks per year Explanation: The Family and Medical Leave Act gives certain employees up to 12 weeks of unpaid leave per year while protecting their employed status. Employees can take leave for family and medical reasons. Group health benefits must be maintained through this period.

Frank's first income payment is $1,950. The value of each accumulation unit in each of the subaccounts in Frank's contract is $10. How many annuity units does Frank have? 195 225 1950 19

195 Explanation: The $1,950 first payment divided by $10 is 195 annuity units. This number stays constant. Frank's contract will forever have 195 annuity units.

What is the difference between a representation and a warranty in an insurance contract? A representation is believed to be true, while a warranty is guaranteed to be true. A representation is always part of a contract, while a warranty is never included in a contract. A representation is guaranteed to be true, while a warranty is guaranteed to be true under certain conditions. Insurance applicants can make representations, but only insurance companies can make warranties.

A representation is believed to be true, while a warranty is guaranteed to be true. Explanation: A representation is not guaranteed by its maker to be true; it is only believed to be true. A warranty is a statement guaranteed to be true.

All the following statements about term life insurance are correct EXCEPT: It offers protection for a specified, limited period. A small cash value gradually accumulates while the policy is in force. Upon issue, it is generally less expensive than permanent insurance of comparable face amount. It pays a benefit only if the insured dies during the specified period.

A small cash value gradually accumulates while the policy is in force. Explanation: Term life is pure insurance protection, with no cash value associated with it. If the insured dies during the coverage term, then the policy's death benefit is payable. If the insured is alive at the end of the coverage term, then the coverage ends, and the policy terminates without value.

Which statement is correct about representations and warranties in insurance contracts? A warranty is guaranteed to be true. A misrepresentation will void a contract. Insurers cannot void a contract for a material misrepresentation. A representation is guaranteed to be true.

A warranty is guaranteed to be true. Explanation: A representation is a statement that is true to the maker's knowledge. An application for an insurance policy contains the applicant's representations. If any of these representations are material to the insurer's decision to insure the applicant, and those representations are shown to be false, the insurer may cancel the insurance contract (policy). In contrast, a warranty is guaranteed to be true. Even if it is not material to the formation of the insurance contact, the insurer may cancel the policy if the warranty is breached.

With respect to variable annuity annuitization, which of the following statements is NOT correct? Annuitization under a variable annuity contract provides for income payments that are fixed and unchanging, like a fixed annuity. Variable annuity income payments change in response to the performance of the contract's underlying subaccounts. The payout options for a variable annuity are the same as for a fixed annuity: straight life, life with period certain, joint life, period certain, etc. Determining the amount of each variable annuity income payment is very different from determining fixed annuity income payments.

Annuitization under a variable annuity contract provides for income payments that are fixed and unchanging, like a fixed annuity. Explanation: The payout options for a variable annuity are the same as for a fixed annuity: straight life, life with period certain, joint life, period certain, etc.

A group disability income policy has a 90-day elimination period. How does this affect benefit payments? The insured must wait 90 days before filing a claim. Benefits will not begin until 90 days after the insured submits an initial claim. Benefits will be paid for 90 days. Benefits will begin 90 days after the disability occurs.

Benefits will begin 90 days after the disability occurs. Explanation: The insured must qualify for benefits by satisfying the 90-day elimination period. During this period, no benefits are paid. If the disability continues at the end of this period, disability income payments begin at that time.

Blake has a vision care policy, while Tom has a policy that covers a variety of medical services. Which statement is correct? Blake owns a limited care policy, while Tom owns a comprehensive policy. Blake owns a critical illness policy, while Tom owns a limited policy. Blake's policy will typically be more expensive than Tom's policy. Blake's policy will provide comprehensive coverage, while Tom's policy will provide limited benefits.

Blake owns a limited care policy, while Tom owns a comprehensive policy. Explanation: A limited care policy is limited to a specific form of care, such as vision care or dental care only. A comprehensive policy covers a variety of conditions or medical services and will cost more than a limited care policy.

Sandy is covered by an individual health insurance policy, and Jackie is covered by a group plan. Both became pregnant within six months of their policies' effective dates. Under the Affordable Care Act, which statement is correct? Sandy's pregnancy is a pre-existing condition that her policy does not cover, but Jackie's must be covered. Jackie's pregnancy is a pre-existing condition that her policy does not cover, but Sandy's must be covered. Both policies must cover the costs of the pregnancies. Both policies can exclude the pregnancies as a pre-existing condition.

Both policies must cover the costs of the pregnancies. Explanation: Health insurers cannot consider pregnancy a preexisting condition under the Affordable Care Act. Moreover, they cannot charge the insured a higher premium because of her pregnancy.

Which of the following statements regarding the tax treatment of endowment contracts is correct? Endowment contracts no longer get the good tax treatment given to life insurance policies. Endowment contracts are treated like other life insurance policies for tax purposes. Congress has given endowment contracts the best tax status of all types of insurance policies. Endowment contracts are still popular today because of their good tax treatment.

Endowment contracts no longer get the good tax treatment given to life insurance policies. Explanation: Endowment contracts no longer meet the legal definition of life insurance. As a result, they do not get the same good tax treatment.

Warren is insured by a disability income policy and paid $2,500 each year in premiums until he is disabled. He now receives a $1,200 monthly disability benefit. Which statement is correct? He can deduct the premiums he paid from taxable income. He must include the benefits in taxable income. He cannot deduct the premium he paid but can exclude the benefits from taxable income. He can deduct the premiums he paid and can exclude the benefits from taxable income.

He cannot deduct the premium he paid but can exclude the benefits from taxable income. Explanation: Premiums that individuals pay for disability income policies they own are not tax deductible. However, the benefits the policy pays are not taxable income.

Jason has a group point-of-service (POS) plan and wants to use an out-of-network provider. Which statement is correct? He cannot use an out-of-network provider. He must pay a higher co-payment and deductible. He must pay the cost for any out-of-network providers that he uses. The POS plan will pay the cost for any out-of-network providers if Jason has met his deductible.

He must pay a higher co-payment and deductible. Explanation: When members select a health-care provider within the POS network system, they typically do not have to pay a deductible, and the co-payment will be minimal. For service provided outside the network, POS members must pay higher deductibles and co-payments. POS plans therefore use financial incentives to encourage members to choose network physicians.

Mark has satisfied the requirements to reinstate his lapsed health insurance policy, but after 45 days has still not heard from his insurer about his reinstatement request. Which of the following will happen? Mark can assume the reinstatement has not been accepted, and he can get his money back. Mark must contact the insurer to determine its decision. Mark's policy is automatically reinstated. Mark's policy automatically lapses.

Mark's policy is automatically reinstated. Explanation: If no notice is given during that period, the policy is automatically reinstated.

Based only on the information provided, for which of the following potential customers would an annuity NOT be a suitable financial choice? Peter, age 82, who has early signs of Parkinson's Disease Laura, age 56, who recently inherited a sum of money and wants to save it until she's ready to retire John, age 28, who recently was awarded a $2 million lawsuit settlement and wants to distribute the money over his lifetime Lucy, age 66, who wants to use some of the proceeds from the sale of her home to provide income for life

Peter, age 82, who has early signs of Parkinson's Disease Explanation: An annuity may not be suitable for someone with a limited life expectancy.

Assuming no relation other than that stated, insurable interest exists in all of the following situations EXCEPT: Pat on himself Paul on his father Pete on his son Peyton on his life coach

Peyton on his life coach Explanation: Correct! Insurable interest is generally limited to the applicant and a member of the applicant's family or business.

Maxine has a basic hospital expense policy that pays a benefit of $250 per day for up to 30 days. If she is hospitalized for more than 30 days, which of the following statements is correct? She will be responsible for all hospital costs beyond the first 30 days. She will be responsible for only the costs that exceed $250 per day beyond the first 30 days. She will be responsible for only the first $250 of costs per day beyond the first 30 days. The policy will pay 100 percent of costs beyond the first 30 days.

She will be responsible for all hospital costs beyond the first 30 days. Explanation: Basic hospital expense policies provide a maximum per-day benefit for a certain number of days. Maxine must pay hospitalization costs beyond her policy's 30-day coverage period.

Which of the following statements about life insurance accelerated living benefits riders or provisions is correct? They have been around a long time. They are designed to provide financial support to beneficiaries after the insured dies. Any policyowner facing a financial crisis can access benefits through a living benefits rider. They let the insured access a portion of the policy's face amount while still alive.

They let the insured access a portion of the policy's face amount while still alive. Explanation: Living benefit riders permit the release of some of the policy's death benefit to help pay for care, in amounts far greater than the policy's cash value, while the insured is alive.

Marilyn, 72, pays a lot for medical expenses. She wants to transfer assets to her son so that she can qualify for Medicaid. How will Medicaid's look-back rules apply to her? They will account for Medicaid benefits paid on her behalf during her first six months of Medicaid eligibility. They will account for Medicare benefits paid for care in a skilled nursing facility. They will consider the income, if any, that she earned during the 36 months before she applied for Medicaid. They will consider any transfers of assets she made during the 60 months before she applied for Medicaid.

They will consider any transfers of assets she made during the 60 months before she applied for Medicaid. Explanation: If an asset is improperly transferred, a state can consider the asset countable toward eligibility determination. States can look back for 60 months to find improper transfers of assets. If a transfer of assets for less than fair market value is found, the state must withhold payment for nursing facility care and certain other long-term care services.

An agent who sells insurance for an insurance company that does not have a certificate of authority to operate in the state represents: an alien insurer a non-admitted insurer an unregistered insurer a limited lines insurer

a non-admitted insurer Explanation: A company not holding a certificate of authority in the state in which it does business is a non-admitted insurer in that state.

Which person would not be considered competent to enter into an insurance contract? a 21-year-old man an adult who is not a U.S. citizen a person who is physically ill a person under the influence of alcohol

a person under the influence of alcohol Explanation: For an insurance contract to be enforceable, the applicant must be legally competent. This means that a person must be mentally sound, of legal age, and not under the influence of drugs or alcohol. Illness or citizenship does not affect a person's ability to be a party to a contract.

Which organization is NOT eligible to sponsor a 403(b) plan for its employees? a real estate partnership a state university a religious center a not-for-profit cancer society

a real estate partnership Explanation: A cancer society that is organized on a not-for-profit basis would be eligible to offer a tax-sheltered 403(b) plan for its employees.

Because the insurance company and the insurance applicant do not negotiate the terms of an insurance policy, the policy is what kind of contract? adhesion aleatory executory unilateral

adhesion Explanation: An insurance contract is a contract of adhesion. It is offered to prospective policyowners on a take-it-or-leave-it basis, without negotiation of its terms.

Which of the following types of health insurance provides income when the insured cannot work because of a disability? disability income policies medical expense policies accidental death and dismemberment (AD&D) policies Medicare supplement policies

disability income policies Explanation: Disability income policies provide income when the insured cannot work because of a disability.

The requirement that insurable interest must exist when a life insurance policy is purchased is intended to prevent people from: over-insuring a person misusing life insurance for criminal purposes using life insurance for wagering or betting purposes using life insurance to fund future cash needs

using life insurance for wagering or betting purposes Explanation: Insurers advocate the use of life insurance; it is not up to insurers to judge whether their products are being overused, assuming the insurable interest that allowed the contract is genuine and criminal intent has not motivated the purchase.

Which of the following requirements applies to a life insurance policy issued to a creditor-debtor group? All eligible debtors must be insured, if the creditor pays the entire premium. At least 50 new persons must enter the group each year. The amount of insurance may not exceed $50,000. Proceeds must be paid to the debtors.

All eligible debtors must be insured, if the creditor pays the entire premium. Explanation: A group policy may be issued to a creditor to insure debtors, provided all eligible debtors are insured, if the creditor pays the entire premium.

To protect his family as long as he lives yet wrap up premium payments at retirement, 45-year-old Jacob bought a $200,000 20-pay life policy. What will happen when Jacob turns 65 years old? He will stop paying premiums and $200,000 coverage will continue his whole life. He will stop paying premiums and coverage will terminate. Premiums and coverage will both begin to decrease, reaching zero when the policy matures. Premiums will begin to decrease but $200,000 coverage will continue his whole life.

He will stop paying premiums and $200,000 coverage will continue his whole life. Explanation: At the end of limited pay life plans, no more premium payments are necessary. However, the policy remains in force and coverage continues.

Which of the following statements regarding simplified employee pension (SEP) plans is correct? In a SEP plan, individual retirement accounts (IRAs) are set up for each participating employee. Contributions made on behalf of employees vest under a five-year graded vesting schedule. A SEP plan accepts both employer and employee contributions. All full and part-time employees must be eligible to participate.

In a SEP plan, individual retirement accounts (IRAs) are set up for each participating employee. Explanation: All contributions made to a SEP on the employees' behalf are immediately and fully vested.

Which statement about the conversion privilege in a group health plan is NOT correct? It allows individual insureds to convert group coverage to an individual plan with the same insurer. Insurers can evaluate the risk and charge the appropriate premium for the converted coverage. Individuals can covert group coverage to another group plan with the same or different insurer. The insurer cannot deny the person coverage even if he or she would otherwise be considered uninsurable.

Individuals can covert group coverage to another group plan with the same or different insurer. Explanation: The insurer cannot deny the person coverage even if he or she would otherwise be considered uninsurable.

Which statement is NOT correct about the use and investment of health insurance premiums? A portion of each premium is set aside as a reserve. The expense factor is used to calculate premiums. Interest is included with expense to calculate premiums. Insurers cannot invest health insurance premiums.

Insurers cannot invest health insurance premiums. Explanation: Like life insurance premiums, the insurer invests health insurance premiums to earn a return. The insurer's expected investment return is factored into its premium rates.

Which statement accurately describes the MIB (Medical Information Bureau)? It contains the complete medical history of insurance applicants. It collects medical information about insurance applicants and gives that information to member insurance companies. It lists the type of policies denied to applicants due to medical conditions. It makes information from applicants' physicians available to insurance companies.

It collects medical information about insurance applicants and gives that information to member insurance companies. Explanation: The MIB is a nonprofit information agency. It collects medical information about insurance applicants and makes that information available to its member insurance companies when asked. MIB information is available only to member companies and is available only to underwrite policies and to assess claims.

Which statement is NOT correct about the Medicaid program? It was signed into law as Title XIX of the Social Security Act. It is both federally and state funded. It is administered by the states. It is based on medical need.

It is based on medical need. Explanation: Eligibility for Medicaid assistance is based only on financial need, which makes it a means-tested program.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Florida Life and Health Insurance Guaranty Association. What is true about this kind of assurance? It is recommended when selling health insurance. It is prohibited at all times. It is required when selling to Medicare-eligible individuals. It is highly regulated by the Office of Insurance Regulation.

It is prohibited at all times. Explanation: It is an unfair trade practice to use the existence of the Florida Life and Health Insurance Guaranty Association, or the protections the association offers, for the purpose of selling insurance.

Charlie was an ironworker, but a recent injury caused him to take another position in an administrative role. How does the change of occupation provision in a health insurance policy protect Charlie? It requires the insurer to reduce the premium rate. It protects his salary. It requires the insurer to increase future benefits. It requires the insurer to begin a new incontestability period.

It requires the insurer to reduce the premium rate. Explanation: Under the change of occupation provision, if the insured changes to a less hazardous occupation, the provision requires the insurer to reduce the premium rate.

Nora has a point-of-service PPO plan and receives a second opinion from an out-of-network specialist. How will her plan cover the cost of this consultation? It will not be covered. It will be covered at a higher percentage than if Nora had consulted an in-network provider. It will be covered if she received a referral to see the specialist. It will be covered at a lower percentage than if Nora had consulted an in-network provider.

It will be covered at a lower percentage than if Nora had consulted an in-network provider. Explanation: PPOs that operate with a point-of-service option let members use services from providers outside the network. However, the out-of-network services are covered at a lower rate or lower percentage, so members must pay more for deductibles and co-payments.

If Rick withdraws funds from his universal life insurance policy, what will be the effect on the policy's death benefit? It will be reduced by the amount of the withdrawal, plus interest. It will not change as a result of the withdrawal. It will not change, as long as Rick repays the amount withdrawn. It will be reduced by the amount of the withdrawal.

It will be reduced by the amount of the withdrawal. Explanation: A withdrawal reduces the universal life insurance policy's death benefit by the amount of the withdrawal.

Thomas and his wife, Jane, have three children: Harry, who is 14 years old; Mary, who is 18 years old; and James, who is 23 years old and totally disabled. Which person would NOT be eligible for Social Security survivor benefits should Thomas die this year? Jane James Harry Mary

Mary Explanation: Since Mary is over the age of 17 and able-bodied without a disability, she would not be eligible for survivor benefits. A child who is totally disabled is eligible for survivor benefits indefinitely.

Which statement characterizes the role of Medicaid for its recipients? Medicaid assistance supplements personal savings used to pay the costs of an extended nursing home stay or catastrophic illness. Medicaid covers custodial care because most nursing home stays do not exceed 30 months. Because the costs associated with a nursing home stay seldom overwhelm personal savings, Medicaid recipients use little of their benefits. Medicaid helps cover the cost of medical care for those who cannot receive Supplementary Security Income benefits from Social Security.

Medicaid assistance supplements personal savings used to pay the costs of an extended nursing home stay or catastrophic illness. Explanation: Assistance for medical care under the Medicaid program can be provided for people who already receive Supplementary Security Income benefits from Social Security.

When and why was Medicaid created? Medicaid was established in 1932 to provide health care and health-related services to people with low incomes. It is funded and administered by private insurers. Medicaid was established in 1970 to provide health care and health-related services to Americans of all ages. It is jointly funded by the federal and state governments and private insurers and is administered by the states. Medicaid was established in 1960 to provide health care and health-related services to all Americans. It is funded by the federal government but administered by the states. Medicaid was established in 1965 to provide health care and health-related services to people with low incomes. It is jointly funded by the federal and state governments and administered by the states.

Medicaid was established in 1965 to provide health care and health-related services to people with low incomes. It is jointly funded by the federal and state governments and administered by the states. Explanation: Medicaid was established in 1965 by Title XIX of the Social Security Act to provide health care and health-related services to people with low incomes. It is jointly funded by the federal and state governments and administered by the states.

A common name for Medicare Part C is: Medigap Medicare supplement Medicare Advantage Medicare+Choice

Medicare Advantage Explanation: Originally, Part C was named "Medicare+Choice." It is now called Medicare Advantage.

Which is an optional provision in a health insurance policy? Paula's policy allows her to reinstate her policy if it lapses for failure to pay the premium by the end of the grace period. 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. Saul's policy requires him to notify the insurer within 20 days after a covered loss. Nestor's insurer allows him to pay the premium up to 31 days after the premium due date.

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. Explanation: 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.

Sarah applies for a $1 million life insurance policy from ABC Insurance Company. ABC counters by offering to insure her for $200,000 and asks her for a written response. Sarah tells her agent that she accepts the counteroffer. Which statement is correct? The insurer must issue the $200,000 policy. The policy for $1,000,000 is replaced by a policy for $200,000. Sarah's intention to accept the counteroffer forms a binding contract. No binding contract is formed until ABC gets Sarah's written acceptance.

No binding contract is formed until ABC gets Sarah's written acceptance. Explanation: For an insurance contract to be binding, Sarah, as the offeree, must abide by all terms of the counteroffer. If the terms call for a written acceptance, then Sarah's verbal acceptance does not result in a binding contract. In addition, the contract would also require payment of the first premium.

A policyowner repeatedly declines the opportunity to increase her disability income policy benefits through its benefit increase rider. She suffers a loss that would have been covered under the rider. May she sue the insurance company to increase the policy benefit? No, because the policyowner waived her right to exercise the rider benefit when the opportunity to do so was available to her. No, because more than 30 days have passed. Yes; the insurer is at fault for not forcing the insured to exercise the right. Yes; the loss must be covered under the policy.

No, because the policyowner waived her right to exercise the rider benefit when the opportunity to do so was available to her. Explanation: By waiving her right to increase policy benefits when the opportunity to do so was present, the insured is estopped from exercising the right later on.

Which statement is correct about eligibility for Medicare Parts A and B? Part A is primarily hospital coverage automatically available to persons age 65 and Part B is mandatory medical care coverage available to those covered under Part A. Part A is primarily hospital coverage that is available on an optional basis to those who are age 65 and older, while Part B is optional for those age 65 and over who have elected to be covered under Part A. Part A is primarily hospital coverage automatically available to persons age 65 and over, while Part B is optional medical care coverage available to those covered under Part A. Part A is primarily hospital coverage that is available on an optional basis to those who are age 65 and older, while Part B is mandatory for those age 65 and over who have elected to be covered under Part A.

Part A is primarily hospital coverage automatically available to persons age 65 and over, while Part B is optional medical care coverage available to those covered under Part A. Explanation: Part A is primarily hospital coverage automatically available to persons age 65 and over, while Part B is optional medical care coverage available to those covered under Part A.

Which statement is correct about insurance regulation? The federal government alone regulates the insurance industry. The federal government primarily regulates the insurance industry, and state governments regulate some aspects of it. State governments alone regulate the insurance industry. State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it.

State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it. Explanation: Though some aspects are regulated at the federal level, insurance is primarily regulated at the state level. Every state maintains an agency called the department of insurance (sometimes called a division of insurance) for this purpose.

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company can only retain its coverage on June because she is not a principal of the company.

The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

Interest that accumulates on funds paid into deferred annuities is taxed in which of the following ways? It is taxed as it enters the annuity. The funds are not taxed while they remain in the annuity. It is taxed before entering the annuity. It is taxed during the conservation stage.

The funds are not taxed while they remain in the annuity. Explanation: The interest that accumulates on funds paid into annuities is not taxed while the funds remain in the annuity. This is one of the main benefits annuities offer.

Lynn participates in a flexible spending account established by her employer. Which statement is NOT correct? Lynn contributes funds to the account through a salary reduction agreement. The funds in the account roll over from year to year. Funds in the account escape both income tax and payroll tax. Lynn's employer may contribute to the account.

The funds in the account roll over from year to year. Explanation: The employee forfeits any unspent funds in the account at the end of each year.

What happens if an insured stops paying premiums for an insurance policy? The insurance company will compel the insured to continue paying the premiums. The insured breaches the contract. The insurance company must return all premiums that have been paid if no claims have been made under the policy. The insurance company is released from its promise to pay benefits and the contract expires.

The insurance company is released from its promise to pay benefits and the contract expires. Explanation: An insurance contract is a unilateral contract, which means that only one party-the insurer-makes a promise that can be enforced. The insured must only pay the first premium. The insurer cannot require the policyowner to pay more premiums. However, if the policyowner does not pay any required premiums, the insurer is released from its promise to pay the benefit and the contract expires.

Which of the following statements regarding third-party ownership of a life insurance policy is correct? The insured has no rights in the policy. The insured can access the policy's cash value but cannot designate the beneficiary. The insured cannot access the policy's cash value but can designate the beneficiary. The insured can designate the beneficiary and access the cash value, but cannot assign the policy to another third-party owner

The insured has no rights in the policy. Explanation: In a third-party arrangement, all rights are held by the policyowner (which is someone other than the insured).

When may an Insurance company call a consumer on the Do Not Call list? The DNC listing is in error. The insurer has an existing relationship with the consumer. The insurer has never sold a product to the consumer. The insurer did business with the consumer within the last two years.

The insurer has an existing relationship with the consumer. Explanation: If the consumer has an existing relationship with a business, the business can call for up to 18 months after the consumer's last purchase or payment.

Which statement about apparent authority is correct? The agency contract between the insurer and agent creates the authority. The authority arises from the insurer's intent. The authority arises from a third party's reasonably belief based on the conduct of the agent and insurer. The insurer is responsible for an agent's conduct while acting with apparent authority.

The insurer is responsible for an agent's conduct while acting with apparent authority. Explanation: Apparent authority is authority that the contract does not create and the insurer does not intend. It appears to belong to the agent based on the agent's reasonable statements and the actions (or inactions) of the insurer. Because apparent authority seems to the customer to belong to the agent, the insurance company may be liable for the agent's acts, even though the insurer did not allow those acts either expressly or by implication.

Len decides to surrender his policy for its cash value. All the following statements concerning his decision are correct EXCEPT: The insurer may decide to pay the cash value either in a lump sum or monthly installments. The policy is canceled and the insurer's responsibility under the terms of the contract ends. The policy cannot be reinstated. The insurer will send Len a check for the policy's cash surrender value.

The insurer may decide to pay the cash value either in a lump sum or monthly installments. Explanation: Under the cash surrender option, the insurer pays the cash value to the policy owner in a lump sum.

A joint and survivor income option can allow the joint payees to choose a period certain. Suppose the joint payees choose a ten-year period certain. If the second of the joint payees dies before ten years of income payments are made, then what happens? The insurer pays the contingent payee for ten years. The insurer pays the contingent payee for the balance of the ten-year period. The insurer pays the contingent payee for five years. The insurer stops payments.

The insurer pays the contingent payee for the balance of the ten-year period. Explanation: The insurer pays the contingent payee for the balance of the ten-year period-not for ten years.

Policyowners can withdraw the interest earnings on their dividends or allow the interest to continue to accumulate. In either case, how is the interest treated for income tax purposes? The interest earned on the dividend is reported as taxable income in the year credited. The interest earned is tax deferred. The interest earned is not taxable. The interest earned on the dividend is taxable if withdrawn, but if paid out as part of the death benefit it is income tax free.

The interest earned on the dividend is reported as taxable income in the year credited. Explanation: The interest earned on the dividend is taxable and is included in the policyowner's income in the year credited.

Which of the following statements regarding the reduced paid-up life insurance nonforfeiture option is correct? The monthly premium for a reduced paid-up insurance policy is less than the premium for the canceled policy. The paid-up policy will build a cash value. The paid-up policy is not eligible for dividends even if the lapsed policy was a participating policy. A policyowner of a lapsed policy can take the reduced paid-up option only if the canceled policy was issued on a standard basis.

The paid-up policy will build a cash value. Explanation: As a form of permanent life insurance, the reduced paid-up policy will grow a cash value, though much more slowly than during the period that premiums were being paid.

Which of the following reasons for taking a retirement plan distribution before age 59' will exempt the distribution from the 10 percent premature distribution penalty tax? The plan participant wants to buy a vacation home. The plan participant needs to make major repairs on his automobile. The plan participant wants to renovate his home. The plan participant has substantial medical expenses in that year.

The plan participant has substantial medical expenses in that year. Explanation: Pre-age 59' qualified plan distributions are exempt from the penalty tax (but not ordinary income taxation) if taken for several reasons including the participant's death, disability, medical expenses that exceed 10 percent of adjusted gross income and taking the distribution in equal payments over his or her life.

Jason bought a disability income policy with a cost of living adjustment (COLA) rider. What happens if he becomes disabled during a time of inflation? The policy will automatically increase his disability benefit payments to help keep pace with inflation. The policy will automatically increase his disability benefit payments by a set amount specified in the policy. The policy will let him purchase additional coverage without evidence of insurability if inflation exceeds a certain level. The policy will continue paying the same amount of benefits, despite inflation.

The policy will automatically increase his disability benefit payments to help keep pace with inflation. Explanation: A COLA rider adjusts disability benefit payments according to changes in the Consumer Price Index (CPI). If Jason becomes disabled during times of high inflation, the adjustment increases his payments.

Which is not correct about the agency contract between the insurance company and the agent it appoints to represent it? The principal gives the agent implied authority. The principal has express authority; the agent does not. The principal is bound only by the agent's authorized acts. The agent has legal authority to act on the company's behalf.

The principal has express authority; the agent does not. Explanation: Under the law of agency, in an agency relationship several types of authority are automatically given by the principal to the agent. This includes express authority.

If a life insurance policy's death benefit is paid to the insured's estate, which of the following statements is correct? The proceeds cannot be used to make charitable gifts. The proceeds cannot be given to heirs named in a will. The proceeds can be used to pay for estate taxes or other costs that an estate may face. The proceeds will never be subject to federal income tax.

The proceeds can be used to pay for estate taxes or other costs that an estate may face. Explanation: If life insurance proceeds are paid to the insured's estate, they can be used for any purpose, including estate taxes or other costs that the estate may face.

Under the Uniform Simultaneous Death Act, what is the result if the insured and the primary beneficiary of a life insurance policy die at the same time? The proceeds will be paid to the insured's estate. The proceeds will be paid as if the insured survived the beneficiary. The proceeds will be paid to the primary beneficiary. One-half of the proceeds will be paid to the primary beneficiary and the remaining one-half to the insured's estate.

The proceeds will be paid as if the insured survived the beneficiary. Explanation: According to the Uniform Simultaneous Death Act, if the insured and the beneficiary of a life or accident insurance policy have died and there is insufficient evidence that they died other than simultaneously, the proceeds will be distributed as if the insured had survived the beneficiary.

Jim owns an individual disability income policy. He is also covered by a group disability income policy. If he suffers a disabling injury and his personal disability income policy contains a relation-to-earnings provision, what will happen? The total amount he can receive from both policies cannot exceed the benefit payable through his group policy. The total amount he can receive from both policies cannot exceed his current wages. The individual policy will pay benefits only after the group policy pays its maximum amount. The individual policy will pay benefits without taking into account what the group policy pays.

The total amount he can receive from both policies cannot exceed his current wages. Explanation: A relation to earnings provision limits the total amount of disability benefits from all DI policies the insured owns to no more than a specified percentage of the insured's total wages.

With respect to a disability buy-out policies, which of the following statements is correct? They typically have a short elimination period. They typically include provisions to cover the business's overhead expenses. They typically provide benefits for partial as well as total disability. They typically give policyowners the option to receive benefits in a lump sum payment.

They typically give policyowners the option to receive benefits in a lump sum payment. Explanation: Although a business disability buy-out policy can provide for benefits to be paid monthly, it is more common for benefits to be paid in a lump sum. This amount is then used to buy the disabled owner's interest in the business.

With respect to the Patient Protection and Affordable Care Act, the terms platinum level, gold level, silver level, and bronze level refer to which of the following? a classification of health insurance plans that differ by the number of essential health benefits (EHBs) covered under the plan a classification of health insurance plans that differ by the deductible and coinsurance requirements of the plan a classification of health insurance plans that differ by the underwriting classification assigned to the insured a classification of health insurance plans that differentiates them by the percentage of medical expense costs paid by the plan

a classification of health insurance plans that differentiates them by the percentage of medical expense costs paid by the plan Explanation: Insurers must offer benchmark plans that provide coverage at one of four "metal levels": bronze, silver, gold, and platinum. Each level corresponds to the percentage of EHB costs that the plan pays, with the insured paying the remaining costs.

On what do basic hospital policies typically base payment for covered expenses? a maximum per-day benefit, e.g., a basic hospital policy may provide a hospital benefit of $500 per day a fee schedule under which various procedures are ranked, generally by their complexity a maximum per-day benefit for a certain number of days, e.g., a basic hospital policy may provide a hospital benefit of $200 per day for up to 30 days a percentage of the actual expenses

a maximum per-day benefit for a certain number of days, e.g., a basic hospital policy may provide a hospital benefit of $200 per day for up to 30 days Explanation: Basic hospital policies normally provide a maximum per-day benefit for a certain number of days. For example, a basic hospital policy may provide a hospital benefit of $200 per day for up to 30 days.

In addition to charges for a hospital room, hospital expense policies cover miscellaneous hospital charges up to an amount that is generally defined as: a flat additional daily room and board rate, such as $300 per day a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount. a percentage of the daily room and board rate, such as 50 percent of the daily benefit for hospital room and board. a multiple of the per stay room and board limit, such as ten times the standard per stay benefit for hospital room and board

a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount. Explanation: Hospital expense policies cover miscellaneous hospital charges up to an amount that is stated as a multiple of the daily room and board rate (such as 20 times the daily benefit for hospital room and board), or as a maximum dollar amount.

Jay's medical expense policy uses a benefits schedule. After he incurs a covered medical expense, what amount will the insurer pay? the amount of the expense a negotiated amount to which Jay and the insurer have agreed a percentage of or the entire unit value assigned to the medical procedure the balance that remains after Jay's copayment

a percentage of or the entire unit value assigned to the medical procedure Explanation: The amount the insurer pays is a percentage of or the entire unit value assigned to the medical procedure.

The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy? a convertible term policy a renewable term policy a permanent life insurance policy a paid-up whole life insurance policy

a permanent life insurance policy Explanation: Convertible term life insurance includes a conversion privilege that lets policyowners exchange their term life coverage for a permanent life insurance policy without having to provide evidence of insurability. The new policy's face amount usually matches the expiring term policy's face amount.

All the following are contained in the NAIC's Fraudulent Viatical Settlements Model Act EXCEPT: a requirement that viatical settlement brokers and providers must obtain a state-issued license before engaging in any viatical settlement activity a definition of fraudulent practices that are prohibited in the process of transacting a viatical settlement a requirement that only life insurance companies may serve as viatical settlement providers a requirement that interested consumers be provided with an NAIC-prepared brochure describing the viatical settlement process

a requirement that only life insurance companies may serve as viatical settlement providers Explanation: A viatical settlement provider can be any person or entity licensed as such, and rarely is an insurance company.

John buys a $1 million life insurance policy. He dies two years later and the insurer pays the $1 million benefit. Even though the premiums never came close to the benefit amount, the insurer pays the full benefit because the insurance policy is type of contract? an indemnity contract a valued contract a reimbursement contract an indemnification contract

a valued contract Explanation: Life insurance policies are valued contracts, which means they pay a stated amount in the event of a loss. Life insurance contracts, unlike contracts of indemnity, do not try to judge the actual amount of the loss. Because John bought a life insurance policy insuring his life for $1 million, that is the amount the policy paid when he died, regardless of the amount he paid in premiums. A contract of indemnity, on the other hand, limits the benefit to the amount of the insured's actual loss.

Blackstone Insurers is incorporated in New York, where it also has a certificate of authority to transact insurance. What type of insurer is Blackstone in New York? certified insurer alien insurer foreign insurer admitted insurer

admitted insurer Explanation: An admitted insurer is a company that has received a certificate of authority, which allows the company to transact insurance within the state. It certifies that the company has met the state's requirements for conducting the business of insurance. A company not holding a certificate of authority is an unauthorized insurer in that state.

Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as: implied selection adverse selection exposure reduction risk avoidance

adverse selection Explanation: Adverse selection is the tendency of persons more likely to have a claim to buy and keep insurance. For example, individuals with a family history of cancer may be more likely to buy health insurance and to keep it in force than individuals without such family history.

Ed is totally disabled from an accident and is now eligible for Social Security disability benefits. When will benefit payments begin? immediately within three months after five months after nine months

after five months Explanation: A person who is eligible for Social Security disability benefits is subject to a waiting period before benefits are paid. This waiting period is five consecutive months following the start of a disability. During this time, benefits are not paid, and the person must remain totally disabled.

When an insurer employs field agents, who is responsible for delivering a new policy to a policyholder? insurance company agency for which the agent works agent Department of Insurance

agent

After paying the initial premium for a disability income policy, Suri was injured in an accident. She received disability income payments for the next 12 months. These payments were far more than the amount of the premium she paid. This is characteristic of contracts that are: adhesive aleatory conditional unilateral

aleatory Explanation: An insurance policy is an aleatory contract, which means that one party may receive a benefit that is entirely out of proportion to the consideration he or she is giving. In this case, Suri only made one premium payment but received a much larger benefit in return.

Most major medical policies have which of the following types of deductibles? monthly deductibles annual deductibles quarterly deductibles lifetime deductibles

annual deductibles Explanation: Most major medical policies have per-year deductibles. That is, the insured must pay the full deductible each year. After the annual deductible is paid, the insurer pays any claims the insured submits for the rest of the year.

The basic purpose for two-tiered fixed annuities is to encourage contract owners to: surrender their contract at retirement annuitize their contract at retirement begin taking periodic withdrawals from the contract at retirement exchange the contract for a new deferred annuity at retirement

annuitize their contract at retirement Explanation: A two-tiered deferred annuity creates an incentive to annuitize the contract by crediting a higher rate of interest on contracts that are annuitized than on those that are surrendered or depleted through periodic withdrawals.

An agent for ABC Insurance Company meets with a client. The agent shows the client ABC's sample policies, refers to the ABC rate book, and gives the client an ABC business card. The client assumes that ABC has appointed the agent to represent it. What kind of authority does the agent have? implied authority apparent authority express authority imputed authority

apparent authority Explanation: Apparent authority is authority that a third party (such as a prospect) assumes that an agent has, based on the agent's actions or words. The contract does not create this type of authority and the insurer does not intend it. In this case, the client could reasonably assume that the agent has unlimited binding authority because the agent has ABC Insurance Company's business cards, rate book, and sample policies.

In forming the insurance contract, who gives something of value as consideration? applicant alone insurer alone applicant and insurer no one

applicant and insurer Explanation: Consideration, in the context of a contract, means something of value that both parties to the contract give. In an insurance contract, both parties give consideration. The insurance company promises to pay the amount specified in the contract, and the applicant pays the first premium.

When may a disability income insurance policyowner exercise the future increase option rider? at any time as long as the insured can provide evidence of insurability at specified dates in the future as long as the insured can provide evidence of insurability at any time, without the need to provide evidence of insurability at specified dates in the future, without the need to provide evidence of insurability

at specified dates in the future, without the need to provide evidence of insurability Explanation: A future increase option rider lets the insured periodically buy more coverage under the policy without providing evidence of insurability. It can only be exercised at specified points in the future.

The typical guaranteed insurability rider lets policyowners buy a specified amount of additional insurance on select policy anniversaries until a specified maximum age. The anniversaries are usually at which interval? at one-year intervals at two-year intervals at three-year intervals at five-year intervals

at three-year intervals Explanation: The typical guaranteed insurability rider lets policyowners buy a specified amount of additional insurance on policy anniversaries. Such anniversaries are usually in three-year intervals nearest the insured's age of 25, 28, 31, 35, 37, and 40.

Sam's contract with the insurer he represents authorizes him to solicit insurance applications. Which of the following is implied by Sam's authority? authority to perform underwriting functions authority to contact prospective clients to arrange sales meetings authority to represent other insurance companies authority to set policy premiums

authority to contact prospective clients to arrange sales meetings Explanation: Implied authority comes from the powers that the insurer normally gives its agents. Although the authority to contact prospects to arrange sales meetings is generally not expressly given in the agent's contract, the authority to solicit applications implies this authority.

Which of the following would cover daily hospital room and board and miscellaneous expenses, such as drugs, X-rays, lab fees, dressings, and use of the operating room and supplies? basic medical expense (indemnity) plans basic hospital expense (indemnity) policies basic physician expense (indemnity) policies basic surgical expense (indemnity) policies

basic hospital expense (indemnity) policies Explanation: Basic hospital expense indemnity policies cover only hospital costs, including daily hospital room and board and miscellaneous expenses, such as drugs, X-rays, lab fees, dressings, and use of the operating room and supplies.

Which of the following covers surgeons' fees and costs associated with surgery, which can include fees for an assistant surgeon, anesthesiologist, or even the operating room if it is not covered as a miscellaneous hospital item? basic medical expense (indemnity) plan basic physician expense (indemnity) policy basic surgical expense (indemnity) policy basic hospital expense (indemnity) policy

basic surgical expense (indemnity) policy Explanation: Basic surgical expense insurance is designed to cover surgeons' fees and related costs associated with surgery, which can include fees for an assistant surgeon, anesthesiologist, or even the operating room if it is not covered as a miscellaneous hospital item.

Under an individual disability income policy, which provision specifies the length of time for which the insured can receive benefits? disability definition provision benefit amount provision benefit period provision cost of living adjustment provision

benefit period provision Explanation: The benefit period provision specifies the length of time the insured will receive monthly benefits. Benefit periods can range from one to five years or up to age 65, as defined by the contract.

Sandy's insurance company has assigned a price or dollar amount to a surgical procedure that she will undergo. The insurer will pay Sandy a percentage of this assigned price. Coverage is based on the: usual, customary, and reasonable fees benefits schedule customary and usual expenses pricing schedule

benefits schedule Explanation: Medical expense insurance can provide coverage or benefits on a benefit schedule. Under this approach, the insurer assigns a price, or certain dollar amount or unit value, to each specific procedure or charge. The insurer than pays some percentage of this assigned price. Or, the insurer may pay the full amount.

When the insurer assigns a dollar amount or unit value to each medical treatment, procedure, or expense, the insurer will pay benefits on the basis of the policy's: benefits schedule usual and customary charges basic medical expense plan hospital expense plan

benefits schedule Explanation: Under a benefit schedule, a health insurer has pre-determined values for certain medical or health services. The amount the insured receives is based on these pre-determined values.

A distribution from a qualified retirement plan before age 59' is generally subject to: ordinary income taxation only a 10 percent premature distribution penalty tax only both ordinary income taxation and a 10 percent premature distribution penalty tax no taxation

both ordinary income taxation and a 10 percent premature distribution penalty tax Explanation: In addition to ordinary income taxation, plan distributions made before the participant turns age 59' may also be subject to a 10 percent premature distribution tax penalty.

Don is a small business owner. Which of the following types of business health insurance would serve his needs if he wants coverage that will pay the bills if he becomes disabled and unable to work? key person disability insurance business overhead expense insurance long-term care insurance disability buy-out insurance

business overhead expense insurance Explanation: Disability buy-out insurance provides funds to buy the business interest of a disabled owner or partner. It pays a lump-sum benefit if an owner or partner is totally disabled, which is used to buy the disabled owner's interest.

Jason has owned a whole life insurance policy for seven years. If he takes a loan from the policy, the insurer can charge a fixed interest rate of up to 10 percent annually. can charge a fixed interest rate only. can charge a fixed or variable interest rate of up to 8 percent annually. cannot charge interest on the loan.

can charge a fixed interest rate of up to 10 percent annually. Explanation: Insurers can charge a fixed interest rate of up to 10 percent annual interest on policy loans. Insurers can also charge an adjustable interest rate, with the maximum rate based on the average monthly published interest rate determined by Moody's corporate bond index. Adjustable rates must be determined at least once every 12 months.

Tom is a career agent of ABC Insurance Company. He sells insurance products only for ABC. Tom is a: broker captive agent independent agent wholesaler

captive agent Explanation: Under the captive or career agency system, the agent is employed by a single insurance company.

The death benefit of a permanent life insurance policy such as a whole life insurance is equal to: subaccount investments plus cash value cash value plus the face amount the policy's reinsurance value cash value plus the insurer's net amount at risk

cash value plus the insurer's net amount at risk Explanation: The total death benefit is a combination of accumulated cash value and the insurer's net amount at risk. The combination equals the death benefit, or face value, of the policy.

ABC Insurance Company wants to become licensed in Florida to sell insurance products. Which of the following must it receive in order to transact insurance? certificate of appointment certificate of licensure certificate of authority articles of incorporation

certificate of authority Explanation: The Director issues certificates of authority to qualified insurers, which permits them to transact insurance business in Florida. The certificate specifies the kinds of insurance that the insurer is authorized to transact.

What is not required to obtain an insurance producer's license? residency in state satisfaction of state prelicensing requirements character assessment intent to serve the general public

character assessment Explanation: A prospective insurance agent must meet certain state requirements regarding prelicensing and must intend to actively engage with the general public. The applicant does not undergo an official character assessment.

Written rules for how claims and appeals are handled must be fair and timely in accordance with ERISA's requirements for: information disclosure accountability claims procedures and appeals administration

claims procedures and appeals Explanation: ERISA's claims procedures and appeals function requires written rules for how claims must be filed and how participants can appeal if they are denied covered services. Claims appeals processes must be fair and timely.

Phil just began participating in his company's 401(k) plan. During the first four years of his employment, he will not be vested at all in the employer's contributions to the plan. In the fifth year, he will be 100 percent vested. Which vesting schedule is the employer using? percentage vesting increment vesting cliff vesting graded vesting

cliff vesting Explanation: Under a cliff vesting schedule, the participant is zero percent vested in a plan's contributions or benefits for the first four years of participation. Then, in the fifth year, he or she is 100 percent vested.

Which of the following provisions, found in all major medical insurance policies, states that the insured must pay a certain percentage of the covered costs after the deductible is satisfied? stop-loss provision carryover credit provision co-insurance provision payment of claims provision

co-insurance provision Explanation: Most major medical policies include a co-insurance or co-payment provision, which states that, in addition to the deductible, the insured must pay a certain percentage of the covered costs.

Which type of Medicare supplement marketing method fails to disclose that the purpose of the contact is the solicitation of insurance? twisting cold lead advertising high pressure sales tactics illegal inducement

cold lead advertising Explanation: Agents and insurers are prohibited from engaging in cold lead advertising, or failing to disclose that the intent of the advertising is to sell insurance and that an agent or insurance company will contact the prospect.

As a field underwriter, what does an agent do for the insurance company? set the premium help actuaries assess a risk apply the law of large numbers collect information from an applicant

collect information from an applicant Explanation: Field underwriting describes the activities an agent does when taking applications for insurance. This includes requesting information from prospective insureds and helping them fill out their paperwork.

The act of deliberately withholding material facts when applying for insurance is called: concealment collusion twisting waiver

concealment Explanation: Concealment is deliberately withholding material facts when applying for insurance. If the concealed facts would affect the insurer's decision to offer the insurance policy, the insurer can void the insurance contract.

An insurance company keeps a policy in force only if the policyowner pays the premium because the policy is what kind of a contract? unilateral personal aleatory conditional

conditional Explanation: An insurance contract is conditional, which means that the policyowner must do certain things to keep it in force. For example, a contract will stay in force on the condition that the owner continues to pay premiums. A contract will pay out benefits on the condition that the policyowner gives certain information, such as proof of death or proof that medical costs were paid.

An Oregon resident buys a health insurance policy from a company domiciled in New York. The policy says that if any provision is in conflict with Oregon laws, the laws of Oregon will prevail. Which provision states this? legal actions consideration conformity with state statutes entire contract

conformity with state statutes Explanation: Any provision of a health insurance policy that, on its effective date, conflicts with the statutes of the state in which the insured resides is amended to conform to the minimum requirements of the statute.

An annuity settlement option with a life contingency is one that: pays annuity benefits for a specified period of time whether the annuitant lives or dies during that period. terminates annuity benefit payments if the annuitant is alive upon reaching his or her life expectancy continues annuity benefit payments for as long as the annuitant lives, even if it surpasses the annuitant's life expectancy requires there to be two or more annuitants who will receive annuity benefit payments before annuitization is permitted

continues annuity benefit payments for as long as the annuitant lives, even if it surpasses the annuitant's life expectancy Explanation: An annuity settlement option with a life contingency is one that continues annuity payments for as long as the annuitant lives, even if it surpasses the annuitant's life expectancy.

Conrad obtained a life insurance agent's license primarily to write insurance for his family members and friends. Which unfair trade practice has Conrad engaged in? controlled business coercion rebating misrepresentation

controlled business Explanation: The Department will not grant or continue a license if it believes that an agent will use the license primarily to engage in controlled business. Controlled business is insurance that is written primarily on the lives, property, or risks of the agent or of the agent's family members, employer, or business associates.

Jake is covered by his own group health insurance plan as well as by his wife's group plan. Which provision in Jake's plan will prevent overinsurance? claims procedures coordination of benefits coinsurance provision stop-loss provision

coordination of benefits Explanation: A coordination of benefits (COB) provision establishes the priority in which health insurance plans pay their claims. This avoids the duplication of benefits by allowing a plan to reduce its benefits when it is not the insured's primary insurance plan.

Besides key person life insurance, which of the following types of life insurance plans exists solely for the employer's benefit? deferred compensation plan executive bonus plan corporate-owned life insurance split-dollar life insurance

corporate-owned life insurance Explanation: Aside from key person life insurance (which serves a clear business need), there is one type of life insurance plan that exists solely for the employer's benefit: corporate-owned life insurance (COLI). A COLI is any type of individual life insurance taken out by a company on the lives of its employees for the exclusive benefit of the company.

Which of the following cannot be excluded from coverage under an individual accident and health insurance policy? an injury that is covered by workers' compensation cosmetic surgery to repair the insured's face that was scarred by fire an injury sustained while trying to rob a bank an injury sustained while attempting suicide

cosmetic surgery to repair the insured's face that was scarred by fire Explanation: Cosmetic surgery is not covered by an individual accident and health insurance policy, except when needed because of a covered sickness or injury.

Comprehensive major medical plans provide a broad range of coverage. They most likely cover all of the following, EXCEPT: hospital expenses, surgeons' and doctors' fees, and nursing care physical and occupational therapy, diagnostic tests, and lab fees cosmetic surgery, experimental procedures or treatment, and alcohol and drug abuse treatment medical supplies and equipment and ambulatory costs

cosmetic surgery, experimental procedures or treatment, and alcohol and drug abuse treatment Explanation: A comprehensive major medical plan combines the coverage of basic hospital, basic surgical, basic physician, and supplemental major medical into one complete, comprehensive plan. Such plans are likely to cover hospital expenses, surgeons' and doctors' fees, and nursing care.

In a universal life insurance policy, an insurer will make all of the following monthly adjustments EXCEPT: crediting to the policy any premiums it received since the last month crediting to the policy the interest on the cash value for the previous month deducting from the policy the cost of insurance and an expense charge deducting a surcharge from the cash value to cover the possibility that the insured has become uninsurable

deducting a surcharge from the cash value to cover the possibility that the insured has become uninsurable Explanation: Once a life insurance policy of any type is issued, insurers cannot change the premium to reflect the possibility (or certainty) that the insured has become uninsurable.

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? defamation rebating unfair discrimination coercion

defamation Explanation: It is considered defamation to publish or circulate a false, deceptive, or misleading statement about—or a statement that is maliciously critical of or derogatory to—the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business.

A financial product that lets consumers save money in a tax-deferred manner and may eventually be used to provide income that is guaranteed for life best describes a(n): whole life insurance policy universal life insurance policy deferred annuity immediate annuity

deferred annuity Explanation: Deferred annuities are used to accumulate a sum of money over time, tax deferred, possibly for later annuitization. They can be funded with either a large single premium or periodic premium payments.

Which type of health insurance benefit is paid weekly or monthly due to injury or sickness and is based on the insured's wages? disability insurance medical expense coverage blanket coverage scheduled coverage

disability insurance Explanation: Loss of income or disability insurance is a valued contract that pays weekly or monthly benefits due to injury or sickness. The benefit is based on a percentage of the insured's earnings.

Six months ago, Bill surrendered his life insurance policy for its cash value. He now realizes his mistake and asks to reinstate his coverage. The insurance company is obligated to do which of the following? get a written request for reinstatement ask for repayment of back premiums, plus interest, and proof of insurability request payment of back premiums, plus interest, and a new application do nothing as the company has no contractual obligation to the policy owner at this point

do nothing as the company has no contractual obligation to the policy owner at this point Explanation: Reinstatement is not possible if the policy has been surrendered and the cash value has been paid to the policyowner.

Statewide Insurers maintains its home office in Tampa, where it was incorporated. In Florida, Statewide Insurers is considered a: domestic insurer foreign insurer alien insurer national insurer

domestic insurer Explanation: Statewide Insurers is considered a domestic insurer since it was formed under Florida law.

Which of the following terms categorize insurers by their location or domicile? domestic and international internal and external private, state, and national domestic, foreign, and alien

domestic, foreign, and alien Explanation: Insurers are categorized by their location or domicile as either foreign, domestic, or alien.

From a life insurance regulatory perspective, the primary problem with stranger-originated life insurance (STOLI) is that it is: taking up too big a share of the insurance industry's market viewed negatively by the general public not properly regulated essentially wagering on a stranger's life

essentially wagering on a stranger's life Explanation: Most people do not understand viatical settlements enough to have an opinion on them. Many state insurance regulators deem STOLI agreements to be nothing more than a wager on someone's life. Accordingly, it is broadly discouraged in most jurisdictions, and illegal in some states.

Jerry's life insurance policy instructs him to pay the premium to the insurer's home office. However, he has sent his payments to his agent for many years, and the agent has forwarded them to the insurer. What legal principal will prevent the insurer from now requiring that Jerry send the premiums to the home office? estoppel waiver misrepresentation fraud

estoppel Explanation: In this case, the insurance company has allowed Jerry to send payments to his agent instead of directly to the home office for years. As a result, the insurer has given up its right to have payments sent to the home office. The insurer is estopped from later asserting its right to receive direct payment.

Jim's policy expired due to nonpayment of premium. His agent sends him a statement the following month without noting the lapse. If Jim pays the premium and later suffers a loss for which he files a claim, what will prevent the insurer from denying the claim? estoppel utmost good faith reasonable expectations waiver

estoppel Explanation: This situation creates an estoppel. Jim was sent a renewal statement that reasonably led him to believe his policy was still in force, and he acted with this belief. The insurer is therefore prevented from denying the claim on the basis that the policy had lapsed.

The Department cannot suspend or revoke an agent's license for which of the following reasons? failing to meet projected sales goals violating the Code of Ethics engaging in rebating intentionally violating the insurance laws

failing to meet projected sales goals Explanation: The Department can suspend or revoke an agent's license for all of the reasons listed except for failing to meet his or her projected sales goals.

When underwriting an individual disability income policy, the insurer will NOT consider which as a source of income and insurance protection? other individual disability policies the applicant owns group disability insurance benefits the applicant receives Social Security disability benefits the applicant receives family income and inheritances available to the applicant

family income and inheritances available to the applicant Explanation: An insurer limits the amount of coverage an applicant can buy, based on the amount of coverage he or she already has. The insurer will consider what other private disability policies the applicant owns, the group insurance disability benefits the person will be entitled to, and whether the person is eligible for Social Security or other governmental disability coverage.

After Bob and Ellen's first child is born, the couple wants to add the baby to their policy, while increasing Ellen's coverage. They would probably buy which of the following? spouse/other insured term rider children's term rider family term rider living benefits rider

family term rider Explanation: Many children can be covered under a children's term rider.

Insurers must keep records of their insurance transactions for how many years after the transaction was completed? five four three two Explanation: Agents and insurers must keep records of their insurance transactions at their place of business for at least five years after the transaction was completed.

five Explanation: Agents and insurers must keep records of their insurance transactions at their place of business for at least five years after the transaction was completed.

If a group health insurance policy terminates, an employee can elect to convert coverage provided he or she has been insured under the plan for how long before it terminates? two years three years five years six years

five years Explanation: To be eligible to convert to an individual policy, an employee or member must have been continuously insured for at least five years before the date of termination.

Variable life insurance policies offer all of the following EXCEPT: flexible premium payments a guaranteed minimum death benefit cash values a variety of subaccount investment choices

flexible premium payments Explanation: Variable life insurance policyowners have a variety of subaccounts from which to choose, all of which are maintained in the insurer's separate account.

Long Life Insurance Company is incorporated in Georgia but transacts insurance in Florida. Which type of insurer is Long Life considered in Florida? alien foreign domestic nonadmitted Explanation: Long Life Insurance Company would be considered a foreign insurer in Florida since it was formed under the laws of a state, district, territory, or commonwealth of the United States other than Florida.

foreign Explanation: Long Life Insurance Company would be considered a foreign insurer in Florida since it was formed under the laws of a state, district, territory, or commonwealth of the United States other than Florida

What unfair trade practice has a person committed if he knowingly and with intent to defraud files an insurance claim that is false? twisting fraud rebating churning

fraud Explanation: A person commits insurance fraud if he or she submits an insurance application that contains false, incomplete, or misleading information.

Newborn children are automatically covered under an insured's individual health insurance policy for how long? from birth to the first birthday from birth to 30 days from birth to the end of the first calendar year from birth to the policy renewal date

from birth to 30 days Explanation: Dependent children are covered by their parents' health insurance from the moment of birth. The policyholder must notify the insurer of a child's birth within 30 days and pay the premium to continue health coverage for the child beyond the 30-day period.

In a back-end loaded universal life contract, when and from where does an insurer deduct administration fees? directly from the premium before it is credited to the policy's cash value from full or partial surrenders during the first 10 or so policy years. at the end of each policy year twice each year from the cash value

from full or partial surrenders during the first 10 or so policy years. Explanation: To cover the costs of administering a product as complex as universal life insurance, insurers charge fees that may be assessed either as a front-end load directly from every premium payment or as a back-end surrender charge on partial or full surrenders. Policy surrender charges decline over time. While 10 years is common, surrender charges may extend for the first 15 policy years or longer.

If Chris is eligible for Social Security disability benefits, what is his work status? fully insured completely insured currently insured partially insured

fully insured Explanation: If Chris is eligible for Social Security disability benefits, his work status is not considered currently insured.

An agent meets with a prospect and learns that he already owns a life insurance policy. He is interested in replacing it with a new policy. Which must the agent do? notify the Commissioner that replacement may occur obtain an affidavit from the applicant acknowledging that the new policy will cover all of his life insurance needs inform the applicant that he may return the recommended policy within 45 days of delivery for a full refund of premium give the applicant the 'Notice Regarding Replacement'

give the applicant the 'Notice Regarding Replacement' Explanation: A producer must determine whether the sale of a life insurance policy will replace an existing policy. If so, the producer must list all existing life insurance policies that will be replaced and must give the applicant a comparison statement signed by the producer. The producer must also give the applicant a "Notice to Applicants Regarding Replacement of Life Insurance."

An insurance company sends a proposed insurance policy to an applicant with instructions to accept the policy in writing by December 15 or it will be withdrawn. What must the applicant do to accept the policy? give verbal or written acceptance by December 15 give verbal acceptance before December 15 give written notice on or before December 15 give written notice within a reasonable time

give written notice on or before December 15 Explanation: Under common law, an offeree who wants to accept an offer must abide by every condition in the offer. If written notice must be provided by a certain date, that condition must be met.

Which action must a life insurance policyowner take to assign his or her rights in a policy to a third party? notify any revocable beneficiaries under the policy obtain the third party's written consent give written notice to the insurer of the assignment submit the assignment to the Office of Insurance Regulation for prior approval

give written notice to the insurer of the assignment Explanation: The assignment provision sets the procedures that a policyowner must follow in order to transfer ownership rights to a third party. Typically, policyowners must notify the insurer in writing of the assignment, and the company will accept the transfer.

Whittier Insurance Company is a newly incorporated insurer in Florida. In which of the following investments would it typically NOT be allowed to invest? gold and currencies real estate securities common stock of subsidiaries

gold and currencies Explanation: Insurers may typically invest in corporate bonds, cash equivalents, interest-bearing securities, mortgages, real estate, policy loans, and obligations of federal, state, and local governments. Insurers may also invest in the common stock, preferred stock, debt obligations, and other securities of a subsidiary.

Lindsey can afford disability income coverage equal to 40% of her gross earnings. She wants to later increase the coverage to the maximum 60% permitted by the insurer, but worries that she might not be insurable in the future. Which rider should she buy? future benefits guaranteed insurability accelerated benefits guaranteed benefits

guaranteed insurability Explanation: A guaranteed insurability rider allows insureds to increase their disability income policy's level of benefits or scope of coverage in the future without having to prove insurability. Such riders enable insureds to buy extra amounts of coverage on specified dates, normally policy anniversaries.

An annuity's accumulation period can be as short as a month or as long as many years. That statement describes which of the following? fixed and variable annuities fixed and deferred annuities immediate and deferred annuities fixed and retirement annuities

immediate and deferred annuities Explanation: Under a fixed premium deferred annuity, the owner makes ongoing, fixed, and level premium deposits of specific amounts. The owner makes these deposits at specified times (annually, quarterly, monthly) during the contract's accumulation period. An owner typically buys a fixed premium annuity contract when he or she wants a specific amount of future income.

An insured is injured on a construction job and cannot continue his line of work. He takes a teaching position at a vocational college, earning $2,000 a month less than his previous salary. Which policy would address his need to restore his level of income to a pre-disability level? disability income policy residual disability policy credit disability policy income replacement policy

income replacement policy Explanation: An income replacement, or pure loss of income policy, bases its benefits on the amount of income the client lost, in this case $2000 per month.

What type of contract are medical expense insurance policies? presumptive contracts valued contracts indemnity contracts bilateral contracts

indemnity contracts Explanation: A medical expense insurance contract is a contract of indemnity. This means that the benefit cannot be greater than the contract owner's actual loss or the face amount of the policy, whichever is less. A valued contract, such as a life insurance policy, pays a stated amount regardless of the amount of the loss.

Question 5 of 6 Eric is a single, self-employed young man of modest means who needs a small amount of life insurance, primarily as a burial fund. Which one of the following types of insurance is most designed for this need? industrial insurance ordinary insurance group insurance whole life insurance

industrial insurance Explanation: Ordinary life offers individual coverage in a variety of permanent plans, in any face amount. However, an individual of modest means, like Eric, who only needs burial insurance, would not necessarily make ordinary life his first choice.

Patty is interested in buying a life insurance policy. Her agent asks if she has any existing policies. She does, and says that she would cancel her current policy if she bought the policy from the agent. What is the agent now obligated to do? inform Patty of the consequences of replacing the policy withdraw the policy from consideration because Patty already has life insurance ask to see the existing policies and then cancel them send copies of the existing policies to his insurance company so that the company can cancel the policies

inform Patty of the consequences of replacing the policy Explanation: The producer must inform the applicant of the real and potential consequences of replacing the policy and must act only in the applicant's best interests. The producer and the applicant must sign a form indicating that the required disclosures have been made and that the applicant understands the consequences of the replacement.

Enrollees in a group health plan must be given a summary plan description in accordance with ERISA's requirements for: information disclosure fiduciary responsibilities claims procedures and appeals accountability

information disclosure Explanation: ERISA requires that group health plan enrollees be given written information about the plan in a summary plan description. It describes what the employer-sponsored plan covers and the rules that must be followed to obtain benefits under the plan.

While meeting with her insurance customer, Ben, Ann sees that he is chain smoking. Yet he notes on his application that he is a nonsmoker. What should Ann do at this point in the application process? leave the meeting to avoid confronting him with the fact allow Ben to complete the application as he wishes, and then correct it later insist that Ben be truthful and avoid misrepresentation not say anything because her name is not on the application

insist that Ben be truthful and avoid misrepresentation Explanation: A fraudulent insurance act is committed if a person knowingly and with intent to defraud misrepresents a material written statement as part of an application or for any benefit under a policy.

An employer's plan has a two-month waiting period. It also has 'grandfather' status under the Affordable Care Act and a pre-existing condition exclusion period. How many months after the waiting period ends will benefits begin? two months three months four months insufficient information

insufficient information Explanation: The question cannot be answered without knowing the length of the pre-existing condition exclusion period.

Which party makes the only enforceable promise in an insurance contract? insurance company insured beneficiary agent

insurance company Explanation: An insurance contract is unilateral. This means that only one party'the insurer'makes an enforceable promise to pay benefits if certain things happen or conditions are met. The insured makes no enforceable promise and must only continue paying premiums to keep the policy in force.

Which two parties form a contract for life insurance? agent and insurer agent and beneficiary insurer and beneficiary insurer and policyowner

insurer and policyowner Explanation: The two parties to a life insurance policy are the insurer and the policyowner, who may or may not be the insured. In most cases, the policyowner is the insured.

All of the following are prohibited insurer practices EXCEPT: accessing the MIB records on an applicant without the applicant's approval declining an application for life insurance based on genetic testing information obtained on the proposed insured. failing to notify a life insurance applicant that her application was declined because of information obtained in a credit report. investigating insurance applicants

investigating insurance applicants Explanation: Applicants must grant approval for insurers to access and use MIB information pertaining to them, something that is requested by the insurer in the application.

Which of the following types of life insurance beneficiary designation can be changed only with the beneficiary's consent? revocable beneficiary contingent beneficiary per stirpes beneficiary irrevocable beneficiary

irrevocable beneficiary Explanation: Once a person has been designated as an irrevocable beneficiary, the life insurance policyowner cannot change the beneficiary without that beneficiary's consent.

What are the responsibilities of the Office of Insurance Regulation and the Department of Financial Services? conducting credit checks and licensing agents and insurers writing the state's insurance laws issuing rules and regulations to administer the insurance laws prosecuting criminal violations of the insurance laws

issuing rules and regulations to administer the insurance laws Explanation: The Department of Financial Services and the Office of Insurance Regulation are responsible for issuing rules and regulations to administer the insurance laws.

An insurer issues a new life insurance policy that has conditions attached to it, and instructs the producer to personally deliver it to the policyowner with an explanation of the conditions. This is an example of what kind of delivery? personal delivery special delivery legal delivery constructive delivery

legal delivery Explanation: While personal delivery of every new policy is recommend, this is not the answer to the question.

What are insurers legally required to maintain in order to guarantee the payment of insurance claims and benefits? separate accounts legal reserves fiduciary funds capital assets

legal reserves Explanation: Florida requires insurers to maintain a minimum amount of legal reserves to guarantee the payment of life insurance claims and benefits.

Your client has a $100,000 deferred annuity and wants to receive monthly payments for as long as he lives with a lump sum payment payable to the beneficiary should he die before the $100,000 is fully paid out. What settlement option would you recommend to achieve that objective? life income with period certain fixed period payout option straight life income life income with refund guarantee

life income with refund guarantee Explanation: The life income with refund guarantee payout option pays the annuitant an income for life no matter how long he or she lives, and the refund guarantee provides that the balance is paid to the chosen beneficiary.

Thomas, a licensed health insurance agent, plans to sell variable annuities. Which of the following licenses must he obtain before he can sell variable annuities? life insurance agent's license life and health insurance agent's license license issued by the Financial Industry Regulatory Authority life insurance agent's license and a license issued by the Financial Industry Regulatory Authority

life insurance agent's license and a license issued by the Financial Industry Regulatory Authority Explanation: To sell variable insurance products, an individual must be licensed as a life insurance agent and must also hold a license issued by the Financial Industry Regulatory Authority.

Marty has no surviving family members. He is concerned about how he will pay for custodial or nursing home care if he ever needs it. Which will provide sufficient coverage for this type of care? Medicare supplement insurance Medicare Advantage Medicare long-term care insurance

long-term care insurance Explanation: Long-term care insurance covers nursing home services, home health care services, adult day-care services, residential community living services, and respite care services (providing temporary respite for a family member who has assumed caregiving responsibilities). Medicare and Medicare supplement policies provide few benefits for long-term care assistance.

An insurance policy provides financial protection against: hazards risks losses caused by perils losses caused by hazards

losses caused by perils Explanation: Hazards are dangers, such as slippery floors or unhealthy habits. Hazards lead to or cause perils, which in turn cause loss. Exposure refers to the state of being subject to a possible loss.

Under which of the following settlement options are the insurer's responsibilities under the contract fulfilled upon the death of the insured? lump-sum cash payment interest only fixed amount fixed period

lump-sum cash payment Explanation: Under a fixed period settlement option, the insurer makes payments consisting of both principal (proceeds) and interest over a period selected by the policyowner or beneficiary. The insurer retains some responsibility over the proceeds until they are fully distributed.

When an insured dies, what are the two main categories of needs that arise? lump-sum needs and ongoing income needs lump-sum needs and funds to pay final expenses lump-sum needs and funds to pay estate taxes and settlement costs ongoing income needs of survivors and funds to pay monthly expenses

lump-sum needs and ongoing income needs Explanation: When an insured dies, the two most basic categories of needs that arise are immediate needs that require a lump-sum cash amount (such as to pay final expenses and estate taxes) and an ongoing income stream to cover monthly expenses.

A primary purpose of long-term care is to: maintain functionality find a permanent cure for the illness or disability prolong life prevent the spread of disease

maintain functionality Explanation: The goal of long-term care is not to cure an illness but to allow an individual to attain and maintain an optimal level of functioning.

Which information is not to be included in the first part of an insurance application? name and address occupation medical information beneficiary information

medical information Explanation: The applicant's name, address, DOB, and occupation would go in the first part of an insurance application. Information concerning the applicant's medical history would go in the second part.

What was the forerunner to the health savings account (HSA)? health maintenance organization (HMO) preferred provider organization (PPO) medical savings account (MSA) provider sponsored organization (PSO)

medical savings account (MSA) Explanation: The medical savings account (MSAs) was the predecessor to the HSA. First introduced in the late 1990s, MSAs are no longer available. However, those that predate HSAs may be continued.

The amount of the benefit paid under an indemnity policy can never be: more than the face amount of the policy less than the face amount of the policy less than the actual loss the owner incurs more than the loss or the policy's face amount, whichever is less

more than the loss or the policy's face amount, whichever is less Explanation: A contract of indemnity is one under which the benefit cannot be more than the actual loss the contract owner incurs or more than the face amount of the policy, whichever is less.

The life insurance Buyer's Guide helps prospective buyers determine all of the following EXCEPT: type of insurance to buy most qualified insurer amount of insurance to buy most suitable policy

most qualified insurer Explanation: The life insurance Buyer's Guide helps prospective buyers determine what kind of insurance they need, how much insurance they should buy, and how to find a suitable policy that best suits their needs and objectives.

Anya owns an individual health insurance policy. For which reason may the insurer cancel her policy? paying premiums within the grace period moving outside the insurer's network of providers developing a chronic illness changing occupations

moving outside the insurer's network of providers Explanation: An insurer may refuse to renew or discontinue individual health coverage if the insured no longer lives within the service area of the insurer's network of providers.

Which type of insurer is incorporated, owned by its policyholders, but does not have capital stock? stock insurer mutual insurer authorized insurer domestic insurer

mutual insurer Explanation: A mutual insurer is an incorporated insurer that is owned by its policyholders, who hold policies as their evidence of ownership. A mutual company does not have permanent capital stock and has a governing body elected by its policyholders.

One of the ways in which a PPO controls its members' medical costs is by: charging high deductibles contracting with the least expensive specialists employing less experienced physicians negotiating fees with contracted physicians

negotiating fees with contracted physicians Explanation: A physician who contracts with a PPO generally offers medical services to members at a discounted rate.

Chloe has a health reimbursement account. She pays $1,000 for unreimbursed prescription drugs, $2,000 in premiums for a long-term care policy, $500 for eye glasses, and $100 for non-prescribed vitamins and herbal remedies. She cannot use her health reimbursement account (HRA) to pay for which expense? prescription drugs LTC insurance premiums eye glasses non-prescribed vitamins and herbal remedies

non-prescribed vitamins and herbal remedies Explanation: A health reimbursement account is yet another way to finance health-care costs. Employees receive tax-free reimbursements for qualified medical expenses within an annual limit. Qualified medical expenses include premiums for health insurance and long-term care insurance, eye glasses, and health-care expenses not covered under another health insurance plan. Non-prescribed over-the-counter medications and vitamins are not eligible.

Belinda owns a $750,000 life insurance policy and received a $200 check for her first dividend payment from Alpha Insurers. How will this dividend payment be treated for income tax purposes? taxable as capital gain taxable as ordinary income partially taxable not subject to income tax

not subject to income tax Explanation: To the extent that dividends issued to participating policyowners do not exceed the policyowner's total premiums for the policy, they are not income taxable. In other words, they are generally received income tax free.

When classifying insurance risks, insurance underwriters most often use the: numerical rating system judgment method adverse selection system risk assessment scale

numerical rating system Explanation: Under the numerical rating system, credits are added for favorable risk factors. Debits are subtracted for adverse or unfavorable factors. This system has largely replaced the judgment method.

Which of the following is a requirement to operate as an insurance agency in Florida? appointment of at least two agents to manage the agency obtaining a license or registration from the state submitting an application and appointing the Office as its agent for service of process having transacted insurance in Florida for at least two years before applying for a license

obtaining a license or registration from the state Explanation: In Florida, insurance agencies must be licensed or registered. A full-time licensed general lines agent or life or health agent must be appointed to manage each agency.

When does a waiver of premium rider release the insured from paying the policy's premium? only when the insured is totally disabled when the insured is partially disabled A waiver of premium rider releases the insured from paying the policy's premium during a period of partial or total disability. during the elimination period when benefits are not payable

only when the insured is totally disabled Explanation: A waiver of premium rider releases the insured from paying the policy's premium during periods of total disability. The insured must usually pay the premium during the elimination period. If, after that period, the insured remains disabled, the waiver will be effective back to the first day of disability.

When does a waiver of premium rider release the insured from paying the policy's premium? only when the insured is totally disabled when the insured is partially disabled A waiver of premium rider releases the insured from paying the policy's premium during a period of partial or total disability. during the elimination period when benefits are not payable

only when the insured is totally disabled Explanation: A waiver of premium rider releases the insured from paying the policy's premium only during a period of total disability.

Dr. Jack provides services to HMO subscribers along with other nonmember patients. He is not an employee of the HMO and treats subscribers in his own office. Under which type of HMO does Dr. Jack work? open-panel HMO closed-panel HMO network HMO licensed HMO

open-panel HMO Explanation: Under an open-panel HMO, physicians provide services to HMO members along with other nonmember patients. Doctors are not salaried HMO employees, and they treat HMO subscribers in their own offices.

Sanjay applied for an individual health insurance policy in Florida. The agent gave him a document at the time of application that summarizes the type of coverage provided, the exceptions and limitations, and the conditions for renewal. Which document did Sanjay receive? outline of coverage suitability letter Buyer's Guide shopper's guide

outline of coverage Explanation: An individual or family accident and health insurance policy cannot be issued or delivered in Florida unless an outline of coverage is delivered with it. The outline of coverage summarizes the type of coverage provided, the exceptions and limitations, and the conditions for renewal. It also notifies the policyowner that the policy should be consulted for the governing provisions.

Who can NOT deduct the cost of qualified long-term care insurance premiums, subject to the age-based limits? sole proprietor business partners participants in a group health plan whose employer pays the premium president of a limited liability company

participants in a group health plan whose employer pays the premium Explanation: Sole proprietors, partners, and limited liability company (LLC) owners can deduct all of the premiums for their qualified long-term care policies, subject to the age-based limits.

Which is NOT subject to HIPAA privacy regulations? HMOs Physicians and hospitals Electronic billing services patient's family members

patient's family members Explanation: HIPAA privacy regulations govern those who collect, transfer, and exchange health and medical information about consumers.

Medicare Advantage includes a private fee-for-service (PFFS) plan, which provides for: prescription drug and durable equipment charges ambulance services payment of traditional Medicare services, plus certain additional services rehabilitative services

payment of traditional Medicare services, plus certain additional services Explanation: PFFS pays the Medicare private plan and then determines which additional services it will cover and what share of expenses the Medicare beneficiary will pay for those services.

Sandra, a single mom, takes out a 'jumping juvenile' life insurance policy insuring her newborn daughter Karen. Which of the following riders would pay the policy's premiums if Sandra dies or becomes totally disabled? payor benefit rider disability income rider newborn rider waiver of premium

payor benefit rider Explanation: If a person who pays life insurance premiums on a child's life becomes disabled or dies, a payor benefit rider ensures that the insurance stays in force by waiving the premium payment, typically until the payor recovers (in the case of disability) or until the child reaches a certain age (in the case of the payor's death).

Which characteristic about an insurance policy prevents the policyowner from transferring it to a third party without the insurer's consent? unilateral personal aleatory conditional

personal Explanation: Most insurance policies are personal contracts between the insurer and the policyowner. This means that the policyowner cannot transfer the agreement without the insurer's consent. Life insurance is an exception. The owner of a life insurance policy can do what he or she wants with the policy, such as using it as collateral on a loan or transferring it to a third party.

While completing an application for a health insurance policy, Dan discloses his partial blindness. The insurer will treat this blindness as a: peril moral hazard morale hazard physical hazard

physical hazard Explanation: A hazard is a characteristic that increases the chance of a peril occurring. A physical hazard is a physical characteristic, such as blindness, that increases the chance of loss. A physical hazard exists due to a person's physical condition as opposed to arising from his or her character.

A person who smokes heavily and drinks alcohol to excess exhibits what kind of an insurance risk? physical hazard moral hazard legal hazard planned hazard

physical hazard Explanation: Physical hazards are risks that arise from a person's condition, health, or habits. Moral hazards arise from a person's traits or characteristics that increase the chance of a loss.

Which of the following provides enrollees with access to limited health-care services through an exclusive panel of providers? HMO prepaid limited health service organization (PLHSO) prepaid health clinic discount medical plan

prepaid limited health service organization (PLHSO) Explanation: A prepaid limited health service organization (PLHSO) is a person or entity that, in return for a prepayment, provides or arranges access to limited health services for enrollees through an exclusive panel of providers.

The automatic premium loan (APL) provision does which of the following? provides cash for emergencies and opportunities prevents a life insurance policy from lapsing if the policyowner fails to pay a premium improves the policyowner's credit rating provides liquidity if the insured wants to increase a policy's face amount

prevents a life insurance policy from lapsing if the policyowner fails to pay a premium Explanation: The APL's purpose is to prevent a policy from lapsing if the policyowner fails to pay the premium. If elected, the APL provision directs the insurer to deduct an unpaid premium from the cash value of the policy as a loan.

The laws of agency govern the relationship between: agency and agent insurer and insured principal and agent insured and beneficiary

principal and agent Explanation: The laws of agency govern the relationship between a principal and its agent.

Which is not a means of regulating the insurance business? producer peer review state regulation federal regulation industry self-regulation

producer peer review Explanation: Producers do not regulate themselves. Regulation of insurance is now principally in the hands of the individual states, though the federal government and the industry itself have roles in this regulation.

An employee who suffers a short-term job-related injury may look to his or her employer to do which of the following? provide coverage under its group short-term disability income policy provide coverage through its group medical plan for the lost income provide coverage through workers' compensation insurance provide coverage through its long-term group disability plan

provide coverage through workers' compensation insurance Explanation: For short-term job-related injuries, an employer must provide workers' compensation insurance. Most short-term group disability plans do not provide coverage for on-the-job injuries.

James and Edwina have a 26-year-old daughter who is mentally handicapped and incapable of self-sustaining employment. To continue their daughter's health insurance coverage after she reaches the limiting age stated in their group policy, what must James and Edwina do? submit an affidavit attesting to her mental incapacity submit proof of their daughter's incapacity to the insurer every six months provide proof of their daughter's incapacity to the insurer within 30 days after she reaches the limiting age provide evidence that their daughter's incapacity is considered a pre-existing condition

provide proof of their daughter's incapacity to the insurer within 30 days after she reaches the limiting age Explanation: A health insurance policy that ends coverage for a dependent child upon reaching the limiting age specified in the policy must continue the coverage for a child who is incapable of self-sustaining employment due to mental retardation or physical disability and is chiefly dependent on the policyholder for support. The insurer is entitled to proof that the child is incapacitated and dependent on the insured parent within 30 days of the child reaching the limiting age.

An agent assures an insurance applicant that she will be insured for a certain amount. If the coverage is denied and the applicant relied on the agent's assurance to her detriment, the insurer could be liable to the applicant on the basis of: reasonable expectations warranty evidence of insurability estoppel

reasonable expectations Explanation: Because the applicant had a reasonable expectation that he or she had insurance coverage, this or her future claim for a loss may be upheld.

To boost her sales at the end of the year, Agent Trudy started offering potential clients a $250 cash gift card in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Trudy violated? twisting false information rebating churning

rebating Explanation: Agents cannot offer anything of value to induce someone to buy insurance, including a rebate of the premium, dividends, stocks or bonds, or paid employment. They also cannot pay or offer to pay anything of value that is not specified in the insurance contract. This unfair trade practice is known as rebating.

If Jack takes a new job that is less hazardous than the job he had when he obtained health coverage, what may the insurer do? cancel the policy take no action increase the benefits reduce the premium

reduce the premium Explanation: The change of occupation provision in health insurance policies permits the insurer to reduce the premium if the insured changes his occupation to one that is less hazardous than the one for which the premiums were set. Conversely, insurers may reduce the benefits if the insured changes his occupation to one that is more hazardous than the one for which the premiums were set.

Under which nonforfeiture option does permanent life insurance continue in force with no further need for premiums? cash surrender option extended term option reduced paid-up option cash withdrawal provision

reduced paid-up option Explanation: A paid-up policy under the reduced paid-up option requires no further premiums (nor can any be paid). The paid-up policy retains a cash value that will continue to grow throughout the life of the policy. However, it will grow much more slowly than during the period that premiums were being paid.

Genevieve wants to renew her Florida insurance agent's license. Which of the following is not a condition for renewal? submission of a renewal form fulfillment of continuing education payment of the renewal fee report of insurance sales made in the last two years

report of insurance sales made in the last two years Explanation: To continue a license, an agent must submit a renewal form, satisfy the continuing education requirements, and pay the required fee.

The statements that an applicant makes on an application for insurance are treated as: guarantees affidavits warranties representations

representations Explanation: An applicant's statements on an application for insurance are considered representations and not warranties.

The statements that an applicant makes in an application for an insurance policy are treated as: representations warranties conditional promises unconditional promises

representations Explanation: An applicant's statements on an application for insurance are considered representations and not warranties. A representation is a statement made at the time the contract was formed but not guaranteed by the maker to be true. A misrepresentation on the application allows the insurer to end the contract only if the misrepresentation was material.

The Commissioner of the Office of Insurance Regulation issued an order prohibiting Agent Theo from describing himself as a financial planner and senior insurance expert in his advertising materials. Agent Theo continues to use the marketing materials, despite the order. Which penalty may the Commissioner NOT impose? a fine of up to $50,000 license suspension or revocation restitution license suspension or revocation and a fine

restitution Explanation: If a person violates a cease and desist order, the Department or Office may impose a fine of up to $50,000, suspend or revoke the person's license, or impose a fine and suspend or revoke a license.

The federal Risk Retention Act of 1986 applies to which businesses? self-insuring businesses re-insurers credit life insurance companies high-risk business insurers

self-insuring businesses explanation- A risk retention group (RRG) is an insurance company that provides self-insurance services to its owner-members. These members all have a business, occupation, or professional relationship with one another.

How long is the entire initial enrollment period (IEP) under Medicare? four weeks one month three months seven months

seven months Explanation: The initial enrollment period (IEP) is a seven-month period that begins three months before a person is eligible for Medicare, includes the month in which the person turns age 65, and ends three months later.

Which option for inflation protection in a long-term care insurance policy increases the original benefit on a simple interest basis? simple inflation protection routine inflation protection compound inflation protection complex inflation protection

simple inflation protection Explanation: Simple inflation protection increases the original benefit on a simple interest basis, usually by 5 percent per year.

When selling individual life insurance, Mary tells prospects that Florida law requires them to purchase a long-term care rider, even though this is not true. Which unfair trade practice has Mary committed? sliding discrimination rebating churning

sliding Explanation: Telling applicants that they are required to purchase a specific ancillary coverage or product along with another insurance product, when it is not required by law, is considered sliding.

Roberta owns a whole life insurance policy and has requested that the beneficiary select a death benefit settlement option "without a life contingency". All of the following would meet this request EXCEPT: lump-sum cash payment fixed period option fixed amount option straight life income option

straight life income option Explanation: Lump-sum, interest-only, and temporary fixed payments of principal and interest are Roberta's options under the "without a life contingency" settlement option. Life income options include a life contingency.

A life insurance settlement option that pays benefit payments for as long as the payee lives but ceases payments at the payee's death whenever that occurs is called a: straight life income settlement option life income with period certain life income with refund joint and survivor life income

straight life income settlement option Explanation: Under the straight life income option the policy's proceeds are converted into payments that are made for the life of the payee. The payments stop upon his or her death.

Tammy is covered by her employer's group health plan and her husband's employer's plan. She incurs $6,000 in medical costs and submits a claim to her group plan, which pays $4,000 in benefits. What can Tammy do to pay the remaining $2,000? nothing, because the primary plan paid the amount of the claim that was a covered expense submit a claim for $5,000 to her husband's group plan appeal the primary plan's decision and seek an increase in its payment submit a claim for $2,000 to her husband's group plan

submit a claim for $2,000 to her husband's group plan Explanation: After Tammy's primary plan has paid its full benefit, she can submit a claim to a secondary plan. She can do so only to the extent that costs incurred were not covered by the primary plan. In this case, she can submit a claim for up to $2,000 to her husband's group plan, which is the secondary plan.

Which of the following activities does not violate the insurance code? telling clients that an agent holds a chartered financial consultant (ChFC) designation offering to share a commission if a client buys several insurance policies charging a fee that is more than the premium stated in the policy telling clients that an agent is certified to provide specialized financial advice to senior citizens

telling clients that an agent holds a chartered financial consultant (ChFC) designation Explanation: An agent can inform customers that he or she holds a designation as a certified financial planner (CFP), chartered life underwriter (CLU), chartered financial consultant (ChFC), or life underwriter training council fellow (LUTC), or a license to sell securities from the Financial Industry Regulatory Authority (FINRA), if this is true.

Variable life and variable universal life insurance policies are regulated by whom? the Office of Insurance Regulation only the Department of Financial Services only the Securities and Exchange Commission only the Office of Insurance Regulation and the Securities and Exchange Commission

the Office of Insurance Regulation and the Securities and Exchange Commission Explanation: As insurance products, variable life and variable universal life insurance policies are regulated by the Office of Insurance Regulation. Because variable life insurance policies are also considered securities, they are governed by the Securities and Exchange Commission.

William purchased an annuity that will provide his wife, Anna, with monthly income payments for as long as she lives. In this scenario, what is Anna called? the agent the owner the annuitant the beneficiary

the annuitant Explanation: The annuitant is the person the owner chooses to receive the periodic annuity payments when the contract annuitizes.

The human life value approach to determining life insurance needs is essentially based on which of the following factors? the applicant's current income the applicant's financial goals the applicant's estimated net future earnings the applicant's current assets and liabilities

the applicant's estimated net future earnings Explanation: The biggest disadvantage of the human life value approach is that it does not take into account a family's actual economic needs. It does not calculate the actual cost to ensure a family's future.

Part 2 of a life insurance application generally covers: the agent's contact information and history with the insurance company the applicant's explanation for why he or she is applying for life insurance the applicant's personal information the applicant's medical history

the applicant's medical history Explanation: Part 2 of the application generally covers the applicant's health history.

All the following are factors an underwriter may consider when underwriting an individual disability income policy application EXCEPT: the applicant's age the applicant's occupation The applicant's health status the applicant's religion

the applicant's religion Explanation: State law everywhere prohibits discrimination based on race, creed, religion, sex, sexual orientation, or physical defects when underwriting an applicant for insurance.

The underwriter at the home office relies on many sources of information in deciding to accept, decline, or rate a risk. The most commonly used sources include all of the following, EXCEPT: the application a medical examination, if required an attending physician's statement (APS) the applicant's signed statement of intent

the applicant's signed statement of intent Explanation: A commonly used source of information used by underwriters in deciding to accept, decline, or rate a risk is not the signed statement of the applicant's intent.

According to the laws of agency, an insurance agent appointed by an insurance company acts on behalf of: the client the agency the state insurance department the appointing insurer

the appointing insurer Explanation: A principal is the party on whose behalf the agent acts. An agent is the party who acts for another. In the context of insurance, the agent acts on behalf of the insurance company, who is the principal.

Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer? nothing the full death benefit a return of premiums paid, plus interest a return of the premiums paid

the full death benefit Explanation: Because Wilson's suicide occurs after the exclusion period, the insurer will pay the full death benefit. If the suicide had occurred during the exclusion period, the insurer would return the premiums paid, plus interest.

The basic agreement between the insured and the company, stating the company's promise to pay the policy's face amount (the death benefit) to the named beneficiary, is contained in which one of following parts of the life insurance policy? the incontestability clause the entire contract provision the insuring clause the application

the insuring clause Explanation: The incontestability clause explains the time limit within which the insurer can take action to void the contract. It does not describe the basic terms of the insurance coverage.

Aaron purchased a variable annuity two years ago and receives an annual report from the insurer. Which of the following pieces of information must be included in Aaron's report? the number of units credited to the contract and the dollar value of a unit the annuity's cash surrender value the annuity's death benefit the value of the annuity's fixed account and the value of the guaranteed death benefit

the number of units credited to the contract and the dollar value of a unit Explanation: Insurers must provide an annual report to each annuity owner, which shows the number of units credited to the contract and the dollar value of a unit. The valuation must be dated no more than two months before the date the report is mailed.

In a few situations, premiums paid for a life insurance policy are tax deductible. These situations include all of the following, EXCEPT: the life insurance is a group policy that the employer pays for as an employee benefit expense the insured pays the premium of a life insurance policy he or she donated to a charitable organization. the insured pays the premium for life insurance owned by the ex-spouse as part of a divorce decree the policyowner intends to use the policy's cash value to help pay for his child's college education

the policyowner intends to use the policy's cash value to help pay for his child's college education Explanation: If the life insurance is a group policy that the employer pays for as an employee benefit expense, then the premiums are tax deductible by the employer as a business expense.

Which of the following primarily regulates life insurance companies? the federal government the state in which the policyowner resides the state in which the insurance company is domiciled the state in which the death benefit is filed

the state in which the insurance company is domiciled Explanation: The state in which the company is domiciled-not where the insured lives-regulates the business of insurance and controls insurance contracts issued within its borders.

What is the purpose of a disability reducing term insurance policy? to cover any outstanding loans a business might have if the business owner becomes disabled to reimburse a business for overhead expenses it incurs if the business owner becomes disabled to provide funds to a business when a key employee becomes disabled to provide funds to buy the interest of a business owner if he or she becomes disabled

to cover any outstanding loans a business might have if the business owner becomes disabled explanation: The purpose of a disability reducing term insurance policy is to cover any outstanding loans the business might have if the business owner becomes disabled.

Which of the following is not a requirement for an insurance agent? to disclose to the client all pertinent information to request referrals from a client to disclose all pertinent information when handling a claim to solicit business on the insurer's behalf

to request referrals from a client Explanation- Asking for a referral is a good practice after an agent has served a client's needs, but agents are not required to seek referrals from clients.

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What has Melanie engaged in? twisting rebating unfair discrimination defamation

twisting Explanation: A person cannot make a false or misleading statement or comparison about an insurance policy in order to induce someone to lapse, surrender, terminate, retain, or convert an insurance policy or buy a policy with another insurer.

Miguel purchased a permanent insurance policy that lets him vary premium payments and adjust the death benefit over the policy's term. After owning the policy for fifteen years, the policy's cash values had grown to the point that he decided not to pay premiums for the next six months. What type of policy does Miguel own? traditional life universal life paid-up whole life adjustable life

universal life Explanation: Universal life insurance is a flexible premium product that contains renewable term insurance and a cash value account. As long as the policy's cash value is sufficient to cover the monthly mortality and expense cost deductions, the policy will continue in force, regardless of whether the policyowner pays a scheduled premium or not.

All the following are standard life insurance policy dividend options EXCEPT: receiving dividends in cash leaving dividends with the insurer to accumulate at interest using dividends to buy additional paid-up life insurance using dividends to buy a new permanent life insurance policy without evidence of insurability

using dividends to buy a new permanent life insurance policy without evidence of insurability Explanation: Dividend options do not include using dividends to buy additional permanent life insurance (though using them to buy one-year term insurance is an option).

Jane asks her insurance agent to stop notifying her when her policy is due for renewal, and to notify her attorney instead. What has Jane done by giving up this right to get this notice? asked for a grace period asked for an estoppel waived a right declined coverage Explanation: Waiver occurs when a party to a contract voluntarily relinquishes a known right. In this case, Jane is giving up or waiving her right to personal notification of her policy renewal date.

waived a right Explanation: Waiver occurs when a party to a contract voluntarily relinquishes a known right. In this case, Jane is giving up or waiving her right to personal notification of her policy renewal date.

In which case is the amount payable for a covered service based on the amount that is typical for the area in which the service is performed? when coverage is paid according to a benefits schedule when coverage is paid on an any provider basis when coverage is paid on a medical expense basis when coverage is paid on a usual and customary or usual, customary, and reasonable (UCR) basis

when coverage is paid on a usual and customary or usual, customary, and reasonable (UCR) basis Explanation: Under a benefit schedule, a health insurer has pre-determined prices for medical or health services. The amount the insured receives is based on those prices.