COI: Advanced

A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend? a) Guaranteed insurability b) Automatic premium loan c) Waiver of premium d) Payor rider

If the life insurance is for a child and the parent paying the premium dies or becomes disabled, the insurance company will waive the premium until the child reaches a predetermined age, such as 18 or 21. D)

According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? a) The insured died before the primary beneficiary. b) The primary beneficiary died before the insured. c) The deaths occurred at the same time. d) The estate of the primary beneficiary and the contingent beneficiary split benefits equally.

According to the Common Disaster clause, if it cannot be determined who died first, the insured or the primary beneficiary, it will be assumed the primary beneficiary died first, so the proceeds go to the contingent beneficiary. Proceeds will go the insured's estate only if there is no contingent beneficiary. B)

What is the difference between a straight life policy and a 20-pay whole life policy? a) The benefit settlement option b) The face amount and cash value c) Policy maturity date d) Premium payment period

A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years. D)

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was caused by an accident as defined in the policy? a) A Guaranteed Insurability Rider b) A Covered Peril Rider c) An Accidental Death Rider d) A Double Indemnity Rider The

Accidental Death Rider pays some multiple of the face amount if death is the result of an accident as defined in the policy. C)

Which of the following is true regarding coverage for drug and alcohol addiction treatment in group health insurance policies issued in this state? a) Coverage cannot be less than for any other physical illness. b) Coverage is optional and may be offered at the discretion of the insurer. c) Coverage is not available. d) Benefits provided must be the same as for any other illness.

All group health insurance benefit plans in Texas must provide for drug and alcohol addiction treatment on the same basis as the benefits provided for physical illness. Coverage amounts may be less, but must be sufficient to treat the chemical dependency. D)

An illustration used in the sale of a life insurance policy must include a label stating a) "Guaranteed items" b) "Subject to change" c) "Representation of insurance" d) "Life insurance illustration"

An illustration used in the sale of a life insurance policy must be clearly labeled "life insurance illustration" D)

An agent has created a new advertisement to help expand his business. Prior to use, the advertisement must be approved by a) The NAIC. b) The agent's supervisor. c) The Department of Insurance. d) The insurer's home office.

Before using an advertisement, an agent must file its contents with the home office of the insurer, and receive a written approval. D)

A dentist is off work for 4 months due to a disability. His dental assistant's salary would be covered by a) Business Overhead Insurance b) Disability Income. c) Key Employee Disability. d) Partnership Disability.

Business overhead insurance is designed to pay the ongoing business expenses of a small business owner while they are disabled and unable to work. It will provide the funds needed to pay the salary of employees other than the owners and their other ongoing business expenses, such as rent. A)

An agreement that is enforceable by law is known as what kind of contract? a) Legal b) Conditional c) Adhesion d) Unilateral

Contracts that contain all of the essential elements required by the state are enforceable in a court of law. Because insurance policies meet these requirements, they are enforceable as legal contracts. A)

A man is an attorney when he applies for a health policy. He decides to become a professional bungee jumper. He files a claim. What should happen? a) His coverage will be dropped. b) The man's workers comp will pay the claim in full. c) The insurance company will not pay the claim. d) The insurance company will pay the claim according to the benefits available if the correct premium had been paid?

If the insured makes a change to a more hazardous occupation, upon claim, benefits will be reduced to that which premiums paid would have purchased assuming the more hazardous occupation. D)

A Texas resident agent seeking to sell insurance to customers in another state needs a) A non-resident license in that state. b) A foreign agent's license in that state. c) A resident license in that state. d) A Certificate of Authority in that state.

It is not illegal to sell insurance to customers in another state, as long as an agent has a nonresident license in that state. Nonresident licenses are available without further exam since they are based upon reciprocal agreements between states. A)

Which of the following is TRUE of level term insurance? A) The policy endows at age 100 B) The policy offers non-forfeiture values C) It is temporary protection D) The premium will increase or decease based on current interest rates

Level term insurance is temporary protection. It is likely renewable at certain interval (5 year, 10 year etc.) The policy has a maximum renewal age (possibly 80). C)

A licensee who, for a fee or commission, offers to examine a life insurance policy, and gives advice regarding the policy, is known as? a) Life insurance general agent. b) Life and health insurance counselor. c) Legal reserve insurance agent. d) Insurance solicitor.

Licensees holding a life insurance counselor's license may charge a fee for informing and advising clients on policies. Such licensee must have been licensed as a life insurance agent for more than three years prior to qualifying as a counselor. B)

When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as a) Life settlement b) Estate conservation c) Estate creation. d) Liquidity.

Life insurance proceeds can be used to pay for a variety of expenses, including federal estate taxes and state inheritance taxes. B(

Which of the following would NOT be considered a limited coverage policy? a) Special risk policy b) Accident-only insurance c) Travel policy d) Major medical expense insurance

Limited policies cover only expense incurred from specific diseases, or specific causes.

If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan? a) Immediately b) Within 10 days c) Within 30 days d) Within 90 days

Loan requests for payment of due premiums must be fulfilled immediately. Requests for any other reason may be deferred up to 6 months. A)

Medicare Part B covers all of the following EXCEPT a) Home health visits. b) Outpatient hospital services. c) Long-term care services. d) Doctor's services.

Medicare does not cover long-term care services. C)

Which of the following does NOT have to be included on the first page of a Medicare supplement policy? a) Continuation Provision b) The company's rights to change premiums c) Premium rates d) Renewal Provision

Medicare supplement policies must include a renewal or continuation provision that is appropriately captioned and on the first page of the policy. It must include any reservation by the insurance company of the right to change premiums and any automatic renewal premium increases based on the policyholder's age (attained age policies). C)

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done? a) Rebating b) Twisting c) Defamation d) Misrepresentation

Misrepresentation is the act of portraying sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This refers to all forms of communication. D)

What is the purpose of a benefit schedule? a) To provide the dates for the payment of benefits. b) To list the insured's copayments and deductibles. c) To state what and how much is covered in the plan. d) To include the average charges for procedures.

Some medical expense insurance plans contain a benefit schedule, which very specifically states exactly what is covered in the plan and for how much. C)

Under an HMO, child immunization costs cannot be charged for children under what minimum age? a) 3 b) 6 c) 7 d) 10.

Texas HMOs cannot charge for the immunization of children from birth through age 6. B)

Which of the following statements regarding HIV testing is NOT true? a) Test results must be sent to the department of insurance b) Testing may be waived at the discretion of the insurer. c) The insurer is responsible for the cost of HIV testing. d) Written consent from the applicant is required prior to the examination.

The Department does not require HIV test results. However, the insurer is required to. provide applicants with written policies and procedure concerning the internal dissemination of test results among producers and employees of the insurance company. A)

HMOs are known as what type of plans? a) Health savings b) Consumer driven c) Reimbursement d) Service

The HMO provides benefits in the form of services rather than in the form of reimbursement for the services of the physician or hospital. D)

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option? a) Extended term b) Paid up additions c) Cash surrender value d) Reduced paid up

The automatic nonforfeiture option is extended term. A)

If an insured is not entirely satisfied with a policy issued, the insured may return it to the insurance company and receive a refund of the entire premium paid, at which of the following times? a) Within 10 days when the policy was delivered b) Before any claim has been filed on the policy c) Within 10 days of when the policy was issued d) Within 10 days of when the insurer received the first premium

The free look period begins at the time the policy is delivered.

What is the purpose of the impairment rider in a health insurance policy? a) To provide disability coverage b) To identify pre-existing conditions c) To exclude coverage for a specific impairment d) To cover impairments that otherwise could not be covered

The impairment rider may be attached to a contract for the purpose of eliminating coverage for a specifically defined condition. C)

The provision that sets forth the basic agreement between the insurer and the insured and states the insurer's promise to pay the death benefit upon the insured's death is called the a) Payment of claims. b) Declarations. c) Consideration. d) Insuring clause

The insuring clause states the insurer's promise to pay the death benefit upon the insured's death and sets forth the basic agreement between the insurer and the insured. D)

If the insurance premiums were not tax deductible, what other taxation will this affect? A) Taxation of the policy's cash value B) Federal income tax C) Taxation of benefit D) Taxation of interest C) The taxation status of benefits is often determined by where the premiums had been taxed.

The taxation status of benefits is often determined by whether the premiums had been taxed. C)

Which of the following terms refers to solicitation, negotiation, effectuation or advising related to an insurance contract? a) Rescission b) Insurable Interest c) Insurance transaction d) Advertising

The term "insurance transaction" includes solicitation, negotiation, effectuation or advising related to an insurance contract. C)

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is a) Taxed as income on 50% of the excess. b) Assessed a fine of 10% of the excess. c) Taxed as ordianary income d) Not taxed.

Upon surrender or endowment, any cash value in excess of cost basis (premium payments) is taxable as ordinary income. C)

When an insured terminates membership in the insured group, the insured can convert to a) Whole life without proof of insurability b) Whole life with proof of insurability. c) Term without proof of insurability. d) Term with proof of insurability.

When a member terminates membership in a group, he or she can convert to whole life without proof of insurability. A)

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered a) Issued. b) Relinquished. c) Delivered. d) Mailed.

When the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered legally delivered. C)