Final Exam - Life Insurance Test

The sections of an insurance contract which limit coverage are called

exclusions

Basic Medical Expense Insurance

has lower benefit limits than Major Medical insurance

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". how can this be interpreted?

if Toms employment is terminated, 20% of the funds would be forfeited

The insured and insurance company will share the cost of covered losses under which health policy feature?

payment of claims

What provision that defines to who the insurer will pay benefits to is called:

payment of claims

a policyowner is able to choose the frequency of premium payments through what policy feature

premium mode

A Medicare supplemental policy may be cancelled for which of the following reasons.

premium not paid by the insured.

Which of these statements accurately describes the waiver of premium provision in the accident and health policy

premiums are waived after the insured has been totally disabled for a specific time period

which of the following is considered to be a time period after a health policy is issued during which no benefit are provided for an illness.

probationary period

all of are considered sources of underwriting information about an applicant EXCEPT

rating services; These are: inspection report, credit report, medical information bureau

Which of these provisions require proof of insurability after a policy has lapsed

reinstatement

Which of the following types of organizations are prepaid group health plans, where member pay in advance for the services of participating physicians and hospitals that have agreements.

HMO

A medical care provider which typically delivers health services at its own local medical facility is known as a

HMOs - Health Maintenance Organization

An applicant MUST receive an Outline of Coverage when an application is taken for a(n)

Medicare Supplement Policy

Medicare part c is

Medicare advantage plan, combo of part a and b. covers all medical services that are needed

When will a hearing be held after a notice of hearing, alleging participation in an unfair or deceptive act, is served to a licensee or insurer by the Commissioner?

No sooner than 6 days

which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract

which of these is considered a statement that is assured to be true in every aspect

warranty

at what point does a whole life insurance policy endow.

when the cash value equals the death benefits (maturity of the contract)

What is the minimum benefit period that must be offered by a long-term care policy

12 months

___ % of continuing education must be completed in the classroom or equivalent

50

which of the following statements best describes dental care indemnity coverage?

Services are reimbursed after insurer receives the invoice". Dental care indemnity plans reimburse services only after the carrier received the bill

A policy of adhesion can only be modified by whom?

insurance company

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

20K death benefit

When can a policyowner change a revocable beneficiary?

anytime

A policy loan is made possible by which of these life insurance policy features?

cash value provision

As a condition for the loan, a bank requires the borrow to purchase a credit insurance from a specific company. What is the bank guilty for?

coercion

Which of the following is not included in a life insurance illustration.

company's mortality table

T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company

Does not have to make any further payments

J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application five years ago was found to be understated by ten years. Which of the following actions will the insurance company take?

The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age

Additional coverage can be added to a Whole Life policy by adding a(n)

decreasing term rider

C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?

720 $400 ded. plus 20 percent of remaining cost

Which of the following best describes a warranty

Statement guaranteed to be true

Which of the following actions does the commissioner of insurance does not have the power to conduct

activate a company's Finical reserves

How long does the coverage normally remain on a limited-pay life policy

age 100 or until death

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20 pay life

a new general property and casualty licensee must complete at LEAST ____ hours of continuing education with 24 months of initial licensure.

24 hours of continuing education within 24 months after initial licensure.

An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?

31 days

Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage.

6 months - if a pre-existing waiting period applies, the policy must not exclude coverage for any pre-existing conditions that occurred more than 6 months prior to the effect date of coverage. These conditions cannot be excluded beyond six months after the policy is issues.

the guarantee of insurability option provides a long-term care policyowner the ability to:

Buy additional insurance coverage at a later date - without evidence of insurability

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Collateral assignment

Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?

Each partner must own a policy on the other partners

Which of these statements about a guaranteed insurability option rider is not true

Evidence of Insurability is required when the option is exercised.

Which of these characteristics is consistent with a straight life policy

Premiums are payable for as long as there is insurance coverage in force

An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to

The next step the insurance company will take is to determine if the applicant is an acceptable risk by completing standard underwriting procedures.

T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the

beneficiary

accidental death coverage is provided to commercial airline passengers in which of the following types of policies

blanket accident policy

B, an insurance agent, tells his clients that their rights may be impaired if they fail to complete a release form within a given period of time. B may be found guilty of

coercion

Which of the following correctly explains the actions an agent should take if a customer wants to apply for insurance policy?

complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.

T is given a receipt After completing a life insurance application and paying the initial premium. Under this situation, T's coverage is

conditional, depending on the insurer's underwriting policies

K has an Accidental Death and Dismemberment (AD&D) insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

daughter - with a common disaster provision, a policy owner can be sure that if both the insured and the primary beneficiary die within a short time, the death benefits will be paid to the contingent beneficiary.

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

decreasing policy term

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

decreasing term policy

what is the purpose of the US patriot act

detect and deter terrorism

Which contract permits the remaining partners to buy-out the interest of a disabled business partner?

disability buy-sell plan allows the remaining partners to buy out the interest of the disabled business partner.

B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?

disability income

Which of the following does SS not provide benefits for.

dismemberment

When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the

entire contract provision

How often must an insurance agent license normally be renewed?

every two years

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

exclusion - specified hazards listed in a policy for which benefits will not be paid

Which of the following nonforfeiture options offers the highest death benefits

extended terms

Who makes the legally enforceable promises in a unilateral contract?

insurance company

Credit life insurance is

insurance issued on a debtor to cover outstanding loan balances

The _____ clause identifies which losses resulting from an accident or sickness are insured by the policy.

insuring clause

which of the following coverage is best described as a short-term medical policy

interim coverage

a policyowner would like to change the beneficiary on an accidental death and dismemberment (AD&D) insurance policy and make the change permanent. Which type of designation would fulfill this need.

irrevocable

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?

legal purpose - insurable interest

Basic Hospital and Surgical policy benefits are

lower than the actual expenses incurred

A catastrophic illness would be best covered by which of the following health insurance plans?

major medical

during a sales presentation for a participating life insurance policy, a agent must:

make the prospect understand that dividends are not guaranteed.

Which of these factors do NOT play a role in underwriting of a life insurance policy.

marital status

On an Accidental Death and Dismemberment (AD&D) insurance policy, who is qualified to change the beneficiary designation?

policy owner

a statement made by an insured in an insurance application that must be true to the best of the one's knowledge, and which becomes a part of the contract is known as?

representation

When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following?

residual disability

which provision allows a portion of any used medical benefits to be restored following a particular amount of benefit has been used, or after the policy has been in effect for a particular period of time?

restoration of used benefit

Pre-hospitalization authorization is considered an example of

returning a portion of a premium as inducement to purchase insurance.

which of the following is not a required provision in group life policies

right to loan - they do include: free look, incontestible and conversion

To terminate an agent's appointment, an insurance company must

send the termination notice to the Texas Department of Insurance

P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?

sign an enrollment card.

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

social security

Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?

term

what type of insurance are credit policies issued as?

term - type of insurance use is decreasing term

Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?

the agent

On a life insurance policy, who is qualified to change the beneficiary designation

the policy owner

The advantage of reinstating an original life policy is

the premiums are based on a younger age

Which Accident and Health policy provision addresses preexisting conditions?

time limit on certain defenses

T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called

time limit on certain defenses (incontestability) provision limits the lime during which the insurance company may challenge the validity

The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

universal

How long does an insurance company appointment remain in force

until terminated

which best describes how pre-admission certification is used.

used to prevent nonessential medical costs

The provision in a health insurance policy that suspends premiums being paid to the insurer while the insured is disable is called the:

waiver of premium

What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?

waiver of premium policy

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

proceeds will go to the contingent beneficiary. If the primary b. dies before the insured, the contingent beneficiary will receive the proceeds when the insured dies.

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

revocable

which of these is not an example of doing insurance business?

selling shares of stock

Before a life insurance policy is issued, which of these components of the contract is required?

signature on an application

which of the following is a requirement for obtaining a Texas insurance agent license.

Be honest, reliable and trustwothy

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?

PPO

Which if these statements is incorrect regarding Preferred Provider Organizations (PPO)

PPO are not a type of managed healthcare. PPOs are considered managed health care. Also, In-network PPN providers offer members better coverage of incurred expenses, prices are negotiated in advance for PPO providers, and PPO normally have more providers to choose from compared to HMO

an insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that he

insurer dates the policy

Insurers may request a hearing within ___ if their policy is rejected

20 days

Which of the following statements about health coverage for newborns is NOT true.

coverage is limited to congenital defects. THESE are all correct. Coverage includes treatment for congenital defects, begins at birth, coverage continues after the first 31 days upon payment of first premium.

which of the following is a valid reason for an enrollee to be cancelled by a Health Mainenance Organization HMO?

nonpayment of coverage

In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?

2 years

A potential client, age 40, would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct.

20-pay life accumulates cash value faster than straight life.

V is insured under an individual Disability Income policy with a 30-day Elimination period. On July 1, he is involved in an accident and temporarily disabled. He returns to work on December 1. How many months of benefit are payable?

4 months, after the 30 day elimination period has been satisfied, there will be 4 months of benefit payments.

how long can a cash surrender value payment be deferred by the insurance company under nonforfeiture law.

6 months after the demand for payment of the cash surrender value and surrender of the policy

All of the following statements regarding group health insurance is true, except:

An individual policy is given to each member. In group health, each member receives a certificate of insurance, not an individual policy.

which of the following benefits is not required under a group health plan for drug and alcohol treatment.

Does not included: transportation to and from a treatment facility but does included: outpatient and inpatient treatment and group therapy.

K is the insured under a life insurance policy owned by a third party. Which of these is true.

K has no ownership rights

T has Disability Income policy that pays a monthly benefit of $5000. If T becomes partially disabled, what can he likely expect?

Less than $5,000 per month benefit regardless of the cause a covered partial disability will typically result in less than $5K per month regardless of the nature of the disability

S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning

November 1st, the insured must wait 60 days after written proof or loss before legal action can be brought against the company.

which of following best describes a contingent beneficiary

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

Which of the following statements about a Guaranteed Renewable Health Insurance Policy is correct?

Premiums normally increase at the time of renewal.

which of the following statements is CORRECT about an agent who is taking an insurance application

The agent should have the applicant initial any changes made on the application

The investment gains from a universal life policy usually go towards

The cash value

Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges

The maximum amount considered eligible for reimbursement by an insurance company under a health plan

ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering

Unfair methods of competition

Life and health insurance policies are

Unilateral contracts. (Life and health insurance policies are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.)

Which of the following is an important underwriting principle of group life insurance.

everyone must be covered in the group.

Which of these provisions is NOT required in life insurance policies.

extended term/ These are: free look, grace period, entire contract

The type of annuity that can be purchased with one monetary deposit is called a(n)

immediate annuity

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)

immediate annuity

T applied for a Disability Income policy and has a history of back injuries. The insurer issued the policy with a statement that excludes coverage for back injuries. This statement is called a(n)

impairment rider

a 55-year-old recently received a $30,000 distribution from a previous employer's 401K plan, minus a 5K withholding. Which federal taxes apply if none of the funds were rolled over.

income taxes plus a 10% penatly tax $30k. All withdrawals from a qualified retirement plan are taxable as current income. Any withdrawls made before 59.5 is subject to an additional tax penatly of 10% of the amount withdrawn.

Which Unfair Trade Practice involves an agent telling a prospective client that a policies dividends are guaranteed.

misrepresentation

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

varaible life - has a level premium but allows the policyowner to choose from a selection of investment options

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has

waived one of its legal rights

Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of

31 days

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

applicant's physician

group health plans typically contain a coordination of benefits COB provision. This provision's purpose is to:

avoid duplication of benefits.

P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the

fair credit reporting act

What is the monetary penalty for willfully violating a cease-and-desist order.

fine up to $500

A life insurance policy may be rejected on the basis of all of these factors except

gender

an employee is covered under a company group life plan with a $50k death benefit. What is the MAX amount a spouse may be insured for under this program.

25K - group life insurance on an employee spouse may not exceed 1/2 of the amount of the insurance on the life of the insured employee under the group policy.

If an individual is covered under an accidental death policy and dies, an autopsy can be performed in all these situations, except:

EXCEPT: when state prohibits by law: reason they can: cause of death unknown, when consent for the autospy is not obtained, when foul play was contributing factor.

on January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issues the policy Jan 15. the producer delivered the policy on january 26 and collected the first premium. When did the coverage become effective?

January 26th

An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the

The Commissioner of Insurance

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)

Anti-Money Laundering violation -

S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?

full benefits are payable under the master contract

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):

is when a person purchases a life insurance only to sell to a third-party with no insurable interest. who would therefore be unable to legally purchase the original policy. STOLI is a way to circumvent the insurable interest requirement when purchasing a life insurance policy. To legally purchase a life insurance on someone else, the purchaser must have an insurable interest in that person's life. STOLI is prohibited in most states.

Periodic health claim payments MUST be made at least

monthly

The Notice of Claims provision requires a policyowner to

notify an insurer of a claim within a specific time

all of these statements about the commissioner of Insurance are true EXCEPT

the commissioner must be elected - the commission is appointed by the governor - and CAN: protects and ensures the fair treatment of consumers, ensures that Texas Insurnace law are executed, regulates the business of insurance in the state of Texas

Why would the Insurance Commissioner examine the records of an insurance company?

to determine the solvency of the company

An example of unfair claims settlement practice is

turning down a claim without providing the basis of denial

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT

unilateral, aleatory, and adhesion are all special features of insurance contracts. Bilateral is not.