Chapter 9 Life insurance license

According to the PPACA rules, what percentage of health care costs are covered under a bronze plan?

60%

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense?

100%

Which of the following individuals will be eligible for coverage on the health insurance marketplace?

A permanent resident lawfully present in the US (to be eligible, the individual must be a US citizen. Medicare recipients are not eligible for coverage in the marketplace)

Which of the following would best describe total disability?

A person's ability to work is significantly reduced or eliminated for the rest of his/her life

Which of the following is NOT true regarding worker's compensation? A) Benefits vary from state to state B) Benefits are regulated by the state government C) Benefits are offered by the insurer D) Benefits are not regulated by the federal government

Benefits are offered by the insurer (The state government regulates workers compensation benefits, which vary from state to state)

All of the following are true regarding key employee disability income insurance EXCEPT A) Benefits are paid to the employer to retrain a new person B) Premiums are not tax deductible for the employer C) Benefits are taxable to the employer D) the employer owns the policy

Benefits are taxable to the employer ( Key person disability income premiums are not deductible to the business, but the benefits are received income tax free by the business)

Which of the following is NOT true of disability buy-sell coverage? A) Premium payments are deductible to the business B) The policies provide funds for the business organization to purchase the business interest of a disabled partner C) Benefits are considered taxable income to the business D) It is typically written to cover partners of corporate officers of closely held business

C) Benefits are considered taxable income to the business ( The buy-sell coverage benefits are tax free)

Alexander has a policy with his ex-wife as the beneficiary. what provision allows him to change the beneficiary to his new wife?

Change of beneficiary ( The change of beneficiary mandatory provision allows the policy-owner to change the beneficiary designation)

The purpose of managed care health insurance plans is to

Control health insurance claims expenses ( Manages care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan)

Contributory

Employee pays all

Which of the following is NOT a metal level of coverage offered under the patient protection and Affordable Care Act?

Iron

The mode of premium payment

Is defined as the frequency and the amount of each payment

In an individual long-term care insurance plan, the insured is able to deduct premiums from taxes. What income taxation will be imposed on the benefits received?

No tax ( Daily benefits from the LTC policy are received income tax free, as long as they do not exceed the daily cost of long-term care [LTC])

Which of the following is correct regarding the taxation of group medical expense premiums and benefits?

Premiums are tax deductible and benefits are NOT taxed ( Premiums paid by the employers for group medical expense insurance are tax deductible for the employer as a business expense. also, policy benefits paid out to the employee are not taxable as income to the employee)

Workers compensation benefits are regulated by which entity?

State government

noncontributory?

The employer pays all

Worker's compensation insurance covers a workers medical expenses resulting from work related sickness or injuries and covers loss of income from

Work related disabilities

Which of the following is NOT true regarding partial disabilities? A) Benefit payments are typically 50% of the total disability benefit B) An insured would qualify if he couldn't perform some of his normal job duties C) This is a form of insurance that covers part-time workers D) The insured can still report to work and receive benefits

this is a form of insurance that covers part-time workers ( Partial disability covers full-time working insured's who are unable to perform some, not not all, of their regular job duties and can no longer work full time, which ultimately results in loss of income.)

A noncontributory group disability income plan has a 30 day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive?

$12,000, all of which is taxable ( In noncontributory group plans, the EMPLOYER PAYS the entire cost, so the income benefits are included in the employee's gross income and taxed as ordinary income)

An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. if the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable?

$3,000 (on a partially contributory insurance, only the portion of benefits related to the premium paid by the employer is taxable to the employee)

An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. the insured suffered a loss of $15,000. Disregarding any co-payments or deductibles, how much will the excess plan pay?

$5,000 ( once the primary plan has been paid its full benefit, the insured submits a claim to the secondary, or excess, provider for any additional benefits payable.

The sole proprietor of a business makes a total salary of $50,000 a year. This year his medical expenses have reached of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses?

$50,000 (The proprietors of a business may deduct the cost of a medical expense plan because they are considered to be self employed individuals not employees)

An insured is covered under 2 group health plans-under his own and his spouses. He has suffered a loss of $2,000. After the insured paid the $500 deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer?

$500 ( Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. the insured, then will be reimbursed for out-of-pocket costs)

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceeded what percentage of their adjusted gross income?

10% ( Most people who itemize their deductions can claim deductions for un-reimbursed medical expenses, those that are not covered by health insurance, that exceeds 10% of their adjusted gross income)

Under the affordable care act, what percentage of preventive care must be covered without cost sharing?

100%

S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct?

100% (Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self employed individuals not employees.)

The patient protection and affordable Care Act mandates that insurers provide coverage for adult children of the insured up to the age of?

26

What is the maximum age for qualifying for a catastrophic plan?

30

When a disabled dependent child reaches the age limit for coverage, how long does the policy-owner have to provide proof of dependency in order for the dependent to remain covered under the policy?

31 days ( Every policy providing coverage for a dependent child until a specified age will not terminate that coverage if that child is dependent upon the insured and is incapable of self support because of mental or physical handicaps. Proof of dependency is required within 31 days of the child attaining the maximum age)

All of the following statements concerning workers compensation are correct EXCEPT? A) Workers compensation laws are establish by each state B) All states have workers compensation C) Benefits include medical, disability income and rehabilitation coverage D) A worker receives benefits only if the work related injury was not his/her fault

A worker receives benefits only if the work related injury was not his/her fault

Under which condition would an employee's group medical benefits be exempt from income taxes?

An employee's group medical benefits are generally exempt from taxation as income ( Group medical and dental benefits are received tax free to employees.)

Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. in this case, total disability is defined as

Any occupation- More restrictive ( If total disability is defined as any occupation, it means the coverage will apply only if the insured cannot find any means of income whatsoever. This is more strict than own occupation, where a person merely has to prove that they cannot perform the job for which they were previously trained)

Which statement accurately describes the change of beneficiary provision?

Any policy that has a death benefit must also have a change of beneficiary provision

An individual is insured under his employers group disability income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?

Benefits that are attributable to employer contributions are fully taxable to the employee as income.

Partially contributory

Both the employer and employee pay for premiums

What type of insurance is sold to small business owners that must meet overhead expenses such as rent or utilities following a disability

Business overhead expense (Business overhead expense (BOE) insurance is a unique type of policy that is sold to small business owners who must continue to meet overhead expenses such as rent, utilities, employee salaries, installment purchases, leased equipment , etc.

Group disability income insurance premiums paid by the employer are?

Deductible by the employer as an ordinary business expense

Which type of insurance provides funds for a business organization to purchase the business interest of a disabled partner?

Disability buy-sell ( Premiums are NOT tax deductible, but benefits are received as income tax-free)

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid in by the employer?

Disability income ( The part of the benefit that is provided by the employers contribution is income taxable to the employee)

Which of the following statements about occupational Vs. Nonoccupational coverage is TRUE?

Disability insurance can be written as occupational or nonoccupational ( all disability insurance can be written on either an occupational or nonoccupational basis)

**Concerning group medical and dental insurance, which of the following statements is INCORRECT? A) Premiums paid by the employer are tax deductible as a business expense B) Employee paid premiums may be deducted if certain conditions are met C) Employee benefits are tax deductible in the year in which they were received D) Benefits received by the employee are free from federal income tax

Employee benefits are tax deductible in the year in which they were received ( For group medical and dental expense insurance, any premium paid by the employer is deductible as a business expense. however any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee)

Which of the following statements is correct concerning taxation of long-term care insurance?

Excessive benefits may be taxable

Which of the following is INCORRECT concerning taxation of disability income benefits? A) If the benefits are for a permanent loss, the benefits paid by the employee are not taxable B) If paid by the individual, the premiums are tax deductible C) If the employer paid the premiums, income benefits are taxable to the insured as ordinary income D) If the insured paid the premiums, any disability income benefits are tax-free

If paid by the individual, the premiums are tax deductible (benefits are paid tax-free, but the premium is not tax deductible)

the benefits received by the business in a disability buy-sell policy are

Income tax free ( in disability buy-sell policies, whether cross purchase or entity, the benefits are received income tax free by the business, but the premiums are not deductible to the business)

The patient protection and affordable care act includes all of the following provisions EXCEPT A) No lifetime dollar limits B) Coverage for preventive benefits C) Individual tax deductions for premiums paid D) Right to appeal

Individual tax deductions for premiums paid ( The act does not offer tax deductions for health insurance premiums. The act does offer a tax credit, which is different from a tax deduction. All of the other provisions are included in the Act)

Under workers compensation, which of the following benefits is NOT included? A) Medical and rehabilitation B) Income benefits C) Death benefits D) Legal benefits

Legal benefits

A woman's health insurance policy dictates which doctor she is allowed to see. Her health providers share an assumed risk for their partners and encourage preventive care. what best describes the health system the woman is using?

Managed care ( There are 5 distinguishing features of managed care: controlling access to providers, comprehensive case management, risk sharing, preventative care and high-quality care)

Under the Affordable Care Act, which classification applies to health plans based on the amount of coverage costs?

Metal level classification

Which of the following premium modes would result in the highest annual cost for an insurance policy?

Monthly

The coverage provided by a disability income policy that does not pay benefits for losses occurring as a result of the insureds employment is called?

Nonoccupational coverage ( Most group disability income is nonoccupational coverage, covering insureds only off the job. the employer carries the workers compensation for on the job injuries or sickness.

which of the following applies to partial disability benefits?

Payment is limited to a certain period of time''( The partial disability benefit is typically 50% of the total benefit, and is limited to a certain period of time)

According to the PPACA metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that?

Platinum

A woman obtains health coverage through the marketplace on October 1st. Two weeks later she finds out she is 3 months pregnant . Which of the following is true about coverage for pregnancy?

Pregnancy will be covered immediately (All health insurance marketplace plans must cover pregnancy and childbirth, even if pregnancy begins before the coverage takes effect)

Which of the following is CORRECT regarding business overhead expense insurance? A) Benefits received are taxable income to the employee B) Premiums are not tax deductible C) Premiums are tax deductible D) Benefits received are received tax free

Premiums are tax deductible ( The premiums paid for BOE insurance is tax deductible to the business as a business expense. however, the benefits received are taxable to the business as received.

Which of the following are the main factors taken into account calculating residual disability benefits?

Present earning and earnings prior to the disability ( Residual disability will help pay for the loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to the disability

When an insurer combines two periods of disability into one, the insured must have suffered a

Recurrent Disability ( Recurrent disability is the period o time [usually within 3-6 months] during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability)

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insureds loss of earnings after recovery from a disability?

Residual disability ( A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss)

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses?

Subrogation ( After the insured accepted payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss)

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouses coverage. if one of them incurs hospital expenses, how will those expenses likely be paid?

The benefits will be coordinated ( Benefits will be coordinated when individuals are covered under 2 or more health plans)

What does Partially contributory health insurance mean?

The cost of disability insurance is paid partially by the employER and partially by the employEE. THE PORTION PAID BY THE EMPLOYEE IS RECEIVED TAX FREE, THE PORTION PAID BY THE EMPLOYER IS INCLUDED IN THE EMPLOYEES GROSS INCOME AND TAXED AS ORDINARY INCOME

What does fully contributory health insurance mean?

The employEE pays the entire cost of disability insurance premium. BENEFITS ARE INCOME TAX FREE BY THE EMPLOYEE

What does noncontributory health insurance mean?

The employER pays the entire cost of the disability insurance premium CAN BE TAXED AS ORDINARY INCOME

An employee insured under a group health policy is injured in a car wreck which performing her duties for her employer. This results in a long hospitalization period. Which of the following is true?

The group plan will not pay because the employee was injured at work ( Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage)

A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim...

The insurance through his company is the primary ( The policy that covers the person filing the claim will be considered the primary policy)

Which of the following definitions would make it easier to qualify for disability benefits?

The more liberal " own occupation"

Which of the following statements regarding the change of beneficiaries provision is false? A) All policies that allow a death benefit must at least provide the option of a change of beneficiary provision B) The policy-owner has the right to change beneficiaries in any case C) A policy-owner can change beneficiaries without the consent of the former revocable beneficiary D) The policy-owner cannot change beneficiaries if he/she has chosen to have an irrevocable beneficiary, unless the policy-owner has the permission of the irrevocable beneficiary

The policy-owner has the right to change beneficiaries in any case ( The policy-owner has the right to change beneficiaries unless he/she has chosen to have an irrevocable beneficiary. Otherwise the policy-owner can legally change beneficiaries without the consent of the former beneficiary)

A policy-owner has a health insurance policy with his wife listed as the beneficiary. he would like to change the primary beneficiary to his sister. Which of the following is true?

Unless the policy designated the current beneficiary as irrevocable, the policy-owner can make the change at any time

Which characteristic does NOT describe managed care? A) High-quality care B) Shared risk C) Preventive care D) Unlimited access to providers

Unlimited access to providers ( There are 5 distinguishing features of managed care: Controlled access to providers, comprehensive case management, risk sharing, preventive care, and high- quality care.)

Under what condition are group disability income benefits received by an employee NOT taxable as income? A) When the amount of the benefit is equal or less than the amount of contributed by the employer B) When the benefits received are equal or less than the employee's percentage of the contribution C) When the employer makes all the premium payments D) When the employee is 59.5 years of age

When the benefits received are equal or less than the employee's percentage of the contribution ( Benefits received by the employee that are attributable to his/her portion of the contribution are not taxable as income)

An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance?

Workers compensation

Under a key person disability income policy, premium payments

are made by the business and are not tax-deductible ( benefits are tax free by the business)

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

decreases

The bronze metal level covers what population?

general population