EXAMFX CH. 3-8
Q: An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
A: $10,000, no tax consequence
Q: Underwriting a group health insurance plan that is paid for by the employer requires all of the following EXCEPT
A: Individual members of the group may select the level of benefits for their own coverage.
Q: The type of dental plan which is incorporated into a major medical expense plan is a/an
A: Integrated dental plan.
Q: When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
A: Interest only
Q: In long-term care insurance, what type of care is provided with intermediate care?
A: Occasional nursing or rehabilitative care
Q: An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy?
A: 10 days
Q: Which of the following disability income policies would have the highest premium?
A: 15-day waiting period / 10-year benefit period
Q: In the event a policy lapses due to nonpayment of premium, within how many days would the policy be automatically reinstated once the outstanding premium is paid?
A: 45 days
Q: To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
A: 6 credits
Q: For how long is an insurance company allowed to defer policy loan requests?
A: 6 months
Q: In order to maintain coverage under COBRA, how soon from termination of employment must an employee exercise extension of benefits?
A: 60 Days
Q: Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within
A: 90 days of a loss.
Q: A hospital indemnity policy will pay
A: A benefit for each day the insured is in a hospital.
Q: Group health insurance is characterized by all of the following EXCEPT
A: Adverse selection.
Q: All of the following are examples of third-party ownership of a life insurance policy EXCEPT
A: An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
Q: Which of the following is TRUE about a class designation?
A: Beneficiaries are not identified by name.
Q: A tax-sheltered annuity is a special tax-favored retirement plan available to
A: Certain groups of employees only.
Q: Which of the following is NOT an activity of daily living (ADL)?
A: Talking
Q: Who determines the eligibility and contribution limits of an HRA?
A: The employer REASON: Health Reimbursement Accounts (HRAs) are open to employees of companies of all sizes; however, the employer determines eligibility and contribution limits.
Q: Which of the following is NOT a feature of a noncancellable policy?
A: The insurer may terminate the contract only at renewal for certain conditions.
Q: Which of the following would an accident-only policy NOT cover?
A: Surgery to repair a wrist damaged by tendonitis.
Q: Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
A: The beneficiary will only receive payments of the interest earned on the death benefit.
Q: An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy?
A: The capital amount in a lump sum
Q: What is the maximum period of time during which an insurer may contest fraudulent misstatements made in a health insurance application?
A: As long as the policy is in force
Q: All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT
A: Being age 65.
Q: In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?
A: Blackout Period
Q: Which of the following best describes fixed-period settlement options?
A: Both the principal and interest will be liquidated over a selected period of time.
Q: If more than one family member covered under the same major medical policy is injured in the same accident, the family only has to pay one deductible. This is due to the
A: Common accident provision.
Q: A health insurance policy that pays a lump sum if the insured suffers a heart attack or stroke is known as
A: Critical illness.
Q: The HMO Act of 1973 required employers to offer an HMO plan as an alternative to regular health plans if the company had more than 25 employees. How has this plan since changed?
A: Employers are no longer forced to offer HMO plans.
Q: All of the following are business uses of life insurance EXCEPT
A: Funding against the company's general financial loss.
Q: An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
A: $3,000
Q: What is the advantage of reinstating a policy instead of applying for a new one?
A: The original age is used for premium determination.
Q: Which of the following is NOT true of life settlements?
A: The seller must be terminally ill.
Q: An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
A: The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
Q: Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
A: Third-party ownership
Q: All of the following are true regarding the guaranteed insurability rider EXCEPT
A: This rider is available to all insureds with no additional premium.
Q: A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as
A: Usual, customary and reasonable.
Q: Social Security Supplement (SIS) or Social Security Riders would provide for the payment of income benefits in each of the situations below EXCEPT
A: When the amount payable under Social Security is more than the amount payable under the rider.
Q: Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
A: Withdrawals are not taxable.
Q: All of the following are examples of third-party ownership of a life insurance policy EXCEPT?
A:An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
Q: All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT
A:Being age 65.
Q: Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
A: Term rider
Q: Nonforfeiture values guarantee which of the following for the policyowner?
A: That the cash value will not be lost
Q: What happens if a non-member physician is utilized under the Point-Of-Service plan?
A: The attending physician will be paid a fee for service, but the member patient will have to pay a higher coinsurance amount.
Q: The period of time immediately following a disability during which benefits are not payable is
A: The elimination period.
Q: Which of the following is true regarding elimination periods and the cost of coverage?
A: The longer the elimination period, the lower the cost of coverage
Q: The insuring clause of a disability policy usually states all of the following EXCEPT
A: The method of premium payment.
Q: Which of the following will vary the length of the grace period in health insurance policies?
A: The mode of the premium payment
Q: Which of the following is the best reason to purchase life insurance rather than an annuity?
A:To create an estate
Q: According to the rights of renewability rider for cancellable policies, all of the following are correct about the cancellation of an individual insurance policy EXCEPT
A:Unearned premiums are retained by the insurance company.
Q: Which of the following is NOT true regarding a flexible spending account?
A: It does not have limits on contributions.
Q: Which of the following is TRUE of a qualified plan?
A: It has a tax benefit for both employer and employee.
Q: What is necessary in order to be eligible to receive benefits from a long-term care policy?
A: The insured must be unable to perform some activities of daily living.
Q: What is the main purpose of the Seven-pay Test?
A: It determines if the insurance policy is a MEC.
Q: If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes
A: Modified endowment contract.
Q: Which of the following types of LTC is NOT provided in an institutional setting?
A: Home health care
Q: Which of the following riders would NOT increase the premium for a policyowner?
A: Impairment Rider
Q: In which of the following locations would skilled care most likely be provided?
A: In an institutional setting
Q: Life income joint and survivor settlement option guarantees
A: Income for 2 or more recipients until they die.
Q: Which type of a hospital policy pays a fixed amount each day that the insured is in a hospital?
A: Indemnity
Q: If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
A: It is only taxable if the cash value exceeds the amount paid for premiums.
Q: An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point?
A: Neither approved the application nor issued the policy
Q: Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives?
A: None
Q: All of the following are the most common variations in a Long-Term Care policy EXCEPT
A: Number of family dependents.
Q: Traditional IRA contributions are tax deductible based on which of the following?
A: Owner's income
Q: Don has both a basic expense and a major medical policy. He is injured in an accident, which requires several major surgeries. This quickly exhausts Don's basic expense policy. What must Don do before his major medical policy can pick up where the basic expense policy left off?
A: Pay a special deductible on his major medical policy
Q: Which of the following riders would NOT cause the Death Benefit to increase?
A: Payor Benefit Rider
Q: A guaranteed renewable health insurance policy allows the
A: Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class
Q: Certain conditions, such as dismemberment or total and permanent blindness, will automatically qualify the insured for full disability benefits. Which disability policy provision does this describe?
A: Presumptive disability
Q: Under the Accidental Death and Dismemberment (AD&D) coverage, what type of benefit will be paid to the beneficiary in the event of the insured's accidental death?
A: Principal sum
Q: Which nonforfeiture option provides coverage for the longest period of time?
A: Reduced paid-up
Q: A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
A: Survivor Protection
Q: The premiums paid by the employer in a business life insurance policy are
A: Tax deductible by the employer.
Q: All of the following would be different between qualified and nonqualified retirement plans EXCEPT
A: Taxation on accumulation
Q: An insured is involved in an accident that renders him permanently deaf, although he does not sustain any other major injuries. The insured is still able to perform his current job. To what extent will he receive Presumptive Disability benefits?
A: Full benefits
Q: As it pertains to group health insurance, COBRA stipulates that
A: Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense.
Q: At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
A: Guaranteed insurability.
Q: To be eligible for a Health Savings Account, an individual must be covered by a
A: High-deductible health plan.
Q: An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
A: Profit sharing plan
Q: An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?
A: Reduction of Premium
Q: Todd has been informed that he has a hernia which requires repair. When Todd researches the cost, he learns that his insurance plan will cover 200 points worth of surgical expenses. Each point represents $10, which means that $2000 of his surgery will be covered by his insurance plan. What system is Todd's insurance company using?
A: Relative value
Q: A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
A: Revocable beneficiary.
Q: An insured has endured multiple surgeries and hospitalizations for an illness during the last few months. Her insurer no longer bills her for medical expenses. Which of the following allows for that?
A: Stop-loss Limit
