HEALTH and LIFE INSURANCE
Which of the following can remove the Insurance Commissioner from office? a) Governor b) Voters c) NAIC President d) Insurance Guaranty Association
A The Commissioner is appointed by the Governor and may also be removed from office by the Governor, if such action is required.
A policy with a 31-day grace period implies a) The policy benefits must be paid within 31 days after a claim is submitted. b) The policy will not lapse for 31 days if the premium is not paid when due. c) The policyholder may return the policy for a full refund within 31 days. d) The policy is incontestable after 31 days of delivery.
B A mandatory provision of life insurance policies requires that a grace period be provided. The grace period is the period of time after the premium due date in which premiums may still be paid before the policy lapses for nonpayment of the premium.
All of the following are dividend options EXCEPT a) Paid-up additions. b) Fixed-period installments. c) Accumulated at interest d) Reduction of premium.
B Fixed-period installments is a settlement option, and not one of the dividend options.
A licensed producer must inform the Commissioner of a change of name within a) 2 weeks. b) 30 days. c) 90 days. d) 1 year.
B Licensees must inform the Commissioner of a change of their residential or business address, legal name, or email address within 30 days of the change.
All of the following statements about Medicare supplement insurance policies are correct EXCEPT a) They are issued by private insurers. b) They cover the cost of extended nursing home care. c) They cover Medicare deductibles and copayments. d) They supplement Medicare benefits.
B Medicare supplement policies (Medigap) do not cover the cost of extended nursing home care. Medigap plans are designed to fill the gap in coverage attributable to Medicare's deductibles, copayment requirements, and benefit periods. These plans are issued by private insurance companies.
When is the earliest a policy may go into effect? a) After the underwriter reviews the policy b) When the application is signed and a check is given to the agent c) When the first premium is paid and the policy has been delivered d) When the insurer approves the application
B The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.
Who is responsible for issuing a certificate of authority? a) The Insurance Department b) The Commissioner c) The NAIC d) The Governor
B When an insurance company has proven that it is compliant with Indiana insurance laws, the Insurance Commissioner can issue a certificate of authority so the company can start conducting business. It is illegal for an insurance company to transact insurance without this certificate.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a) A misrepresentation. b) A required statement. c) A legal representation of the Association. d) An unfair trade practice.
D It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association.
A new insurance company wants to begin conducting insurance in Indiana. What will it need to receive before it can legally open for business? a) Commissioner's Certificate b) Governor's Statement of Approval c) Title of Incorporation d) Certificate of Authority
D When an insurance company has proven that it is compliant with Indiana insurance laws, the Insurance Commissioner can issue a certificate of authority so the company can start conducting business. It is illegal for an insurance company to transact insurance without this certificate.
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) 10 days b) 25 days c) 30 days d) 45 days
45 days (If a policy premium is not paid by the end of the grace period, and the policy lapses, an insured may pay the outstanding premium and have the policy reinstated. If the insurer does not refuse reinstatement within 45 days from the date the conditional receipt was issued, the policy will be automatically reinstated.)
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 copayments or deductibles, how much will the excess plan pay? a) $10,000 b) $7,500 c) $5,000 d) $0
5,000 Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable.
Which of the following is NOT true regarding a flexible spending account? a) It does not have limits on contributions. b) It operates on "use-or-lose" basis. c) It provides an opportunity to receive benefits on a pretax basis. d) It is a cafeteria plan.
A A Flexible Spending Account (FSA) is a form of cafeteria plan benefit funded by salary reduction. The employees are allowed to deposit a certain amount of their paycheck into an account before paying income taxes. FSA benefits are subject to annual maximum and "use-or-lose" rule.
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? a) Only written statements can be considered fraud. b) Omissions of material fact on insurance application are fraud. c) False statements about financial condition of an insurer are unlawful. d) Statements made with the intent to deceive are unlawful.
A According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud.
The term "fixed" in a fixed annuity refers to all of the following EXCEPT a) Diagnostic and preventive care b) A broad coverage area c) A low monthly premium d) Low cost deductibles
A Dental expense insurance is a form of medical expense health insurance that covers the treatment, care and prevention of dental disease and injury to the insured's teeth. An important feature of a dental insurance plan which is typically not found in a medical expense insurance plan is the inclusion of diagnostic and preventive care (teeth cleaning, fluoride treatment, etc.).
Which of the following would NOT be eligible for coverage under a small employer group health insurance plan in Indiana? a) A seasonal employee who works at least 30 hours a week b) A new full-time hire who has met the waiting period requirement c) A partner in the small business who works on a full-time basis d) A sole proprietor who works 35 hours a week
A Employee who work the minimum of 30 hours per week and who have satisfied the waiting period requirements are eligible for coverage (including sole proprietors or partners). Temporary, seasonal or substitute employees are excluded from coverage.
Which of the following is NOT a feature of a guaranteed renewable provision? a) The insurer can increase the policy premium on an individual basis. b) The insured has a unilateral right to renew the policy for the life of the contract. c) Coverage is not renewable beyond the insured's age 65. d) The insured's benefits cannot be reduced.
A Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.
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 b) Basic Surgical c) Point-based medical d) Conversion factor
A In a relative-value approach, a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery.
Which statement is NOT true regarding a Straight Life policy? a) Its premium steadily decreases over time, in response to its growing cash value. b) The face value of the policy is paid to the insured at age 100. c) It usually develops cash value by the end of the third policy year. d) It has the lowest annual premium of the three types of Whole Life policies.
A Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
Which of the following best describes the MIB? a) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. b) It is a government agency that collects medical information on the insured from the insurance companies. c) It is a member organization that protects insured against insolvent insurers. d) It is a rating organization for health insurance.
A The Medical Information Bureau (MIB) is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.
An insured notifies the insurance company that he has become disabled. What provision states that claims must be paid immediately upon written proof of loss? a) Time of Payment of Claims b) Incontestability c) Physical Exam and Autopsy d) Legal Actions
A The Time of Payment of Claims provision specifies that claims are to be paid immediately upon written proof of loss.
Which of the following best describes what the annuity period is? a) The period of time during which accumulated money is converted into income payments b) The period of time from the accumulation period to the annuitization period c) The period of time during which money is accumulated in an annuity d) The period of time from the effective date of the contract to the date of its termination
A The annuity period is the time during which accumulated money is converted into an income stream.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? a) Size of each installment b) Predetermined length of time stated in the contract c) Length of income period d) Amount of interest
A The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.
According to the law of agency, a producer always represents the a) Insurance company. b) Client. c) Public. d) State Insurance Department.
A Under agency law, producers legally represent the insurance company with which they are contracted.
All of the following statements concerning Accidental Death and Dismemberment coverage are correct EXCEPT a) Death benefits are paid only if death occurs within 24 hours of an accident. b) Accidental death benefits are paid only if death results from accidental bodily injury as defined in the policy. c) Dismemberment benefits are paid for certain disabilities that are presumed to be total and permanent. d) Accidental death and dismemberment insurance is considered to be limited coverage.
A Under an Accidental Death and Dismemberment insurance policy, the death benefit will be paid if the accidental death occurs within 90 days of the accident, not 24 hours.
Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.
A Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.
Which of the following applies to the 10-day free-look privilege? a) It is granted only at the option of the agent. b) It permits the insured to return the policy for a full refund of premiums paid. c) It allows the insured 10 days to pay the initial premium. d) It can be waived only by the insurance company.
B A policyowner may return a policy for any reason during the free-look period and receive a full refund.
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 insured's loss of earnings after recovery from a disability? a) Income replacement b) Residual disability c) Recurrent disability d) Partial disability
B A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss.
All of the following are correct about the required provisions of a health insurance policy EXCEPT a) The entire contract clause means the signed application, policy, endorsements, and attachments constitute the entire contract. b) A reinstated policy provides immediate coverage for an illness. c) Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. d) A grace period of 31 days is found in an annual pay policy.
B Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.
Which of the following long-term care benefits would provide coverage for care for functionally impaired adults on a less than 24-hour basis? a) Home health care b) Adult day care c) Residential care d) Assisted living
B Adult day care is designed for those who require assistance with various ADLs on a daily basis, but not around the clock. Custodial care is usually the only service provided by adult day care facilities.
A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? a) The insured will have to select a plan from which to collect benefits. b) The benefits will be coordinated. c) Neither plan would pay. d) Each plan will pay in equal shares.
B Benefits will be coordinated when individuals are covered under two or more health plans.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. b) The beneficiary will receive the greater of the money paid into the annuity or the cash value. c) The owner's estate will receive the money paid into the annuity. d) The insurance company will retain the cash value and pay back the premiums to the owner's estate.
B If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever is greater.
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a) Binding contracts. b) Contracts of adhesion. c) Unilateral contracts. d) Aleatory contracts.
B Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.
If a death benefit from a life insurance policy is not paid out in a timely manner, when does the interest begin to accrue? a) 60 days after the death of the insured b) After 30 days from the date the benefit is due c) Immediately d) After 2 months from the date the proof of death is received
B Interest on death benefit begins to accrue after 30 days from the date the benefit is due. The interest rate should be the same as the loan rate.
A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay? a) 10 days b) 15 days c) 25 days d) 45 days
B probationary period refers to the amount of time that coverage is not available for illness-related disabilities, so it would not apply to a broken leg. The elimination period, however, is the time that must elapse between the onset of the disability and when benefits will start being paid. In this case, the individual is considered disabled for 45 days, and the benefits will start to be paid after 30 days. So, the client will receive benefits for 15 days.
An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This would indicate that his policy was written with a 30-day a) Probationary period. b) Disability period. c) Elimination period. d) Blackout period.
C The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.
In Indiana, controlled business is a) Illegal. b) Unregulated. c) Limited to 25% of a producer's annual commission income. d) Limited to 25% of a producer's annual gross premium income.
C An insurance license is intended to be issued to those that will solicit and serve the general public, not to allow a person to avoid paying commissions to another producer for the writing of their own insurance business. When 25% or more of a producer's total commissions earned in a year is from controlled business, the Commissioner will deem that writing that business was the purpose of the license and take action to suspend or revoke such license.
All of the following cases show when a Small Employer Medical plan cannot be renewable EXCEPT a) When the Commissioner/Director finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or may impair the carrier's ability to meet its contractual obligations. b) When the small employer carrier elects to nonrenew all of its health benefit plans delivered or issued for delivery to small employers. c) When the employer chooses to renew the plan. d) For nonpayment of required premiums.
C As well as noncompliance with the carrier's minimum participation requirements, noncompliance with the carrier's employer contribution requirements, repeated misuse of a provider network provision, all of the above are exceptions to replacement.
Which policy component decreases in decreasing term insurance? a) Dividend b) Premium c) Face amount d) Cash value
C Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
In life insurance, producers are permitted to share or split commissions, providing that a) The Insurance Department knows of the arrangement. b) There is a written agreement between the producers. c) Both are properly licensed or the recipient is not involved with the sale of said insurance. d) The insured knows and agrees to the arrangement.
C For producers to receive commissions from the sale of insurance, they must either be properly licensed for that line of insurance or not involved with the sale, solicitation, or negotiation of the insurance sold.
An expired license can be reinstated within 12 months without the requirement of an examination if a) The producer is in good standing. b) The producer was severely injured or disabled during that time. c) The producer met the continuing education requirements before license expiration. d) The producer has been licensed for more than 5 years.
C If a producer has completed all of the required continuing education hours and allows his/her license to lapse, the license can be reinstated within 12 months. After that point, a written examination is required.
Which of the following is TRUE regarding the annuity period? a) It is also referred to as the accumulation period. b) It is the period of time during which the annuitant makes premium payments into the annuity. c) It may last for the lifetime of the annuitant. d) During this period of time the annuity payments grow interest tax deferred.
C The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
A business entity may be licensed as an insurance producer if a) A business entity is in good standing with the Commissioner of Insurance. b) All employees of the business entity are licensed as insurance producers. c) An employee who holds a producer's license is designated as a compliance officer. d) A business entity is a brokerage firm.
C The Commissioner will approve a business entity's license if the required fees are paid and the business entity has designated an individual producer to be responsible for the compliance with the insurance laws and rules in Indiana.
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a) $20,000 b) $25,000 c) $50,000 d) The face amount will be determined by the insurer.
C The face of the term policy would be the same as the face amount provided under the whole life policy.
Which of the following best describes fixed-period settlement option? a) The death benefit must be paid out in a lump sum within a certain time period. b) Income is guaranteed for the life of the beneficiary. c) Both the principal and interest will be liquidated over a selected period of time. d) Only the principal amount will be paid out within a specified period of time.
C Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.
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) Approved the application b) Issued the policy c) Neither approved the application nor issued the policy d) Both approved the application and issued the policy
C When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.
A person was diagnosed with cancer five months before the effective date of their Medicare supplement policy. When losses were reported by the insured to be covered by the Medicare supplement policy, coverage was denied. This is an example of excluding benefits based on a) The limiting law of Medicare. b) Policy rate discrimination. c) Waiver of coverage. d) A pre-existing condition.
D A Medicare supplement cannot exclude or limit benefits for losses incurred more than 6 months from the effective date based on a pre-existing condition.
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? a) Domestic b) Alien c) Nonadmitted d) Foreign
D A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance.
In the case of producer solicitation, at what point must a long-term care Shopper's Guide must be presented to the applicant? a) At the time of application b) Between the completion of the application and the delivery of the policy c) At the time of policy delivery d) Prior to the time of application
D A long-term care insurance shopper's guide must be provided in the format developed by the National Association of Insurance Commissioners (NAIC). The shopper's guide must be presented to the applicant prior to completing the application if solicited by a producer.
The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have? a) Restrictive b) Accidental Death c) Comprehensive d) Accident-only
D Accident-only policies cover medical benefits related to an accident. Medical conditions related to sickness are not covered.
What do long-term care policies offer to policyholders to account for inflation? a) They do not account for inflation. b) They automatically increase premiums to account for inflation. c) They pay a dividend that increases every 7 years. d) They offer the option of purchasing coverage that raises benefit levels accordingly.
D All long-term care insurance policies must also offer policyholders the option of purchasing coverage that raises benefit levels to account for reasonably anticipated increases in the costs of long-term care services covered by the policy.
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) 10 days b) 25 days c) 30 days d) 45 days
D If a policy premium is not paid by the end of the grace period, and the policy lapses, an insured may pay the outstanding premium and have the policy reinstated. If the insurer does not refuse reinstatement within 45 days from the date the conditional receipt was issued, the policy will be automatically reinstated.
All of the following are differences between individual and group health insurance EXCEPT a) In individual policies, the individual selects coverage options, while in a group plan all employees are covered for the same coverage which is chosen by the employer. b) Individual coverage can be written on an occupational or nonoccupational basis; group plans cover only nonoccupational. c) Individual policies are renewable at the option of the insured, while group usually terminates when the individual leaves the group. d) Individual insurance does not require medical examinations, while group insurance does require medical examinations.
D In individual coverage, policies are issued based upon individual underwriting. In group plan, everyone is covered for the same coverage and there is no individual underwriting selection.
Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to a) Creditors. b) Beneficiary of the death benefit. c) The spouse of the insured. d) The insured.
D Payments for loss of life benefits are to be made to the designated beneficiary. If no beneficiary has been named, payment proceeds are to be paid to the deceased insured's estate. Claims other than death benefits are to be paid to the insured or the insured's estate, unless otherwise assigned by the insured.
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? a) If the father is disabled for at least a year b) If the daughter is disabled for more than 3 months c) If the daughter is disabled for any length of time d) If the father is disabled for more than 6 months
D Payor benefit only pays if the owner, the father in this example, is disabled for at least 6 months.
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? a) Insurance Index b) Policy Summary c) Illustrations d) Buyer's Guide
D The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process. It is a generic guide that does not address the specific policy of the insurer, instead explaining life insurance in a way that the average consumer can understand.
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is a) Aleatory. b) Personal. c) Unilateral. d) Conditional.
D The contract is formed on the basis that certain conditions are met.
All of the following are true regarding the guaranteed insurability rider EXCEPT a) The insured may purchase additional coverage at the attained age. b) The insured may purchase additional insurance up to the amount specified in the base policy. c) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. d) This rider is available to all insureds with no additional premium.
D The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.
The Ownership provision entitles the policyowner to do all of the following EXCEPT a) Receive a policy loan. b) Assign the policy. c) Designate a beneficiary. d) Set premium rates.
D The insurer sets premium rates based upon underwriting considerations.
Which of the following statements is correct regarding a whole life policy? a) Cash values are not guaranteed. b) The policy premium is based on the attained age. c) The death benefit may increase or decrease during the policy period. d) The policyowner is entitled to policy loans.
D Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
All of the following statements about Medicare supplement insurance policies are correct EXCEPT a) They are issued by private insurers. b) They cover the cost of extended nursing home care. c) They cover Medicare deductibles and copayments. d) They supplement Medicare benefits.
They cover the cost of extended nursing home care.
Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.
a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.
a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. (Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.)
A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? a) The insured will have to select a plan from which to collect benefits. b) The benefits will be coordinated. c) Neither plan would pay. d) Each plan will pay in equal shares.
b Benefits will be coordinated when individuals are covered under two or more health plans.
#3. All of the following are characteristics of group life insurance EXCEPT a) Amount of coverage is determined according to nondiscriminatory rules. b) Individuals covered under the policy receive a certificate of insurance. c) Certificate holders may convert coverage to an individual policy without evidence of insurability. d) Premiums are determined by the age, sex and occupation of each individual certificate holder.
d) Premiums are determined by the age, sex and occupation of each individual certificate holder. (Premiums are determined by the age, sex and occupation of the entire group.)