Health insurance prep test

What percentage or portion of the benefit paid by an individually-owned disability income policy is taxable? A. 50% B. 0% C. Amount paid by the insured D. 100%

A. 0% Premiums are paid with after-tax dollars, so the benefits are not income taxable

What percentage or portion of the benefits paid by an individually-owned disability income policy is taxable? A. 0% B. 100% C. 50% D. Amount paid by the insured

A. 0% Premiums are paid with after-tax dollars, so the benefits are not income taxable.

S is a solo proprietor of a business and owns a medical expense plan. What is the maximum percentage of the plan cost that S may deduct? A. 100% B. 50% C .10% D. 25%

A. 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.

At what age may an individual make withdrawals from an HSA for nonhealth purposes without a penalty? A. 65 B. 62 C. 59 1/2 D. 55

A. 65 After age 65, a withdrawal from an HSA used fir a nonhealth purposes will be without a penalty, although taxed.

What is the maximum amount that can be contributed to an MSA of the high-deductible plan for individuals? A. 65% B. 75% C. 50% D. 35%

A. 65% The maximum amount than can be contributed to an MSA is 65% of the high-deductible plan for individuals or 75% of the family deductible for those with family coverage.

Which of the following is an example of a limited accident and health policy? A. A dread disease policy B. A long-term care policy C. A Medicare policy C. A basic medical policy

A. A dread disease policy Limited risk policies cover specific illness or accidents.

The premium charged for the Guaranteed Insurability rider is based upon A. Attained age B. Issue age C. Dependents ages D. Average age

A. Attended age Guaranteed renewable means that the insured has the right to keep the policy until a specific age; therefore, it is based on the attained age of the insured.

Which of the following features of a dental expense plan is NOT typically found in a medical expense insurance plan? A. Diagnostic and preventative care B. Medical records C. Low cost deductibles D. A low monthly premium

A. Diagnostic and preventative care 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. Medical expense plans usually do not include diagnostic and preventative care.

A wavier of premium rider will most likely be included with which of the following types of health insurance policies? A. Disability Income B. Limited benefit C. Hospital indemnity D. Basic medical

A. Disability Income A wavier of premium rider generally is included with guaranteed renewable are noncancellable individual disability income policies. It is a valuable rider because it exempts the insured from paying the policy's premium during total disability.

If the insured is NOT required to pay a deductible, what type of coverage does the insured have? A. First Dollar B. Major Medical C. Comprehensive D. Reimbursement

A. First Dollar First-Dollar coverage does not require the insured to pay a deductible.

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the A. Insurer. B. Department of Insurance. C. Policyowner. D. Insured.

A. Insurer. While acting within the authority of the contract given by the insurer, the acts of an agent/producer are considered to be the acts of the insurer.

How does reinsurance benefit the insure? A. It helps protect against catastrophic losses. B. It frees the insurer from it liabilities C. It allows the insurer to collect higher premiums. D. It helps differentiate between policies

A. It helps protect against catastrophic losses. Reinsurance is a method used by insurers to protect against catastrophic losses.

In which of the following scenarios would an "any occupation" disability income policy pay the benefits? A. J cannot perform any jobs in the field related to his education and experience. B. M needs to cover expenses for college tuition following a disability. C. N's family has unexpected expense due to N's disability. D. L is unable to perform any duties of her specific occupation.

A. J cannot perform any jobs in the field related to his education and experience. A policy that has an "any occupation" provision will only provide benefits when the insured is unable to perform any of the duties of the occupation for which they are suited by reason of education, training, or experience.

An out-of-sate producer wants to start selling insurance in this state. What type of license should the producer obtain? A. Nonresident B. Limited C. Surplus Lines D. Temporary

A. Nonresident A nonresident producer is a producer who is domiciled and licensed as a resident producer in another state.

All of the following is included in the definition of " transacting insurance" EXCEPT A. Obtaining an insurance license B. Soliciting a policy C. Negotiating coverage conditions D. Advising a policyowner regarding a claim

A. Obtaining an insurance license An insurance transaction means the carrying on of buisness in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.

An insured owns a disability policy and is in an accident which leaves him permanently blind. Which of the following policy provisions would qualify the insured for benefits, even if he were able to resume working? A. Presumptive Disablity B. Any occupation C. Rehabilitation benefit D. Residual disability

A. Presumptive disability The presumptive disability provision specifies which conditions will automatically qualify the insured for full disability benefits.

An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of? A. Rebating B. Coercion C. Controlled Buisness D. Twisting

A. Rebating Rebating is defined as inducement of offered to the insured in the sale of insurance products that is not specified in the policy.

In insurance, an offer is usually made when A. The application is submitted B. The agent hands the policy to the policyholder C. The insurer approves the application and receives the initial premium D. An agent explains a policy to a potential applicant

A. The application is submitted In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when the insurer approves the application and issues a policy.

Which of the following sets the limits for a Health Rembursment Account (HRA)? A. The employer B. State Statutes C. State Statutes D. The insurer

A. The employer HRAs have no statutory limit. Limits may be set by employer, and rollover at the end of the year based on employer discretion.

Which of the following is true regarding optional benefits in Long-Term Care policies? A. They are available for an additional premium B. Only standard benefits are available with LTC policies C. They are offered at no additional cost to the insured D. They are automatically included in all policies

A. They are available for an additional premium. Optional benefits, such as guarantee of insurability and return premium, are available with Long-Term Care policies for an additional premium

For how many days of skilled nursing facility care will Medicare pay benefits? A. 20 days B. 100 days C. 150 days D. 60 days

B. 100 days Treatment in a skilled nursing facility is covered in full for the first 20 days. From days 21 to 100, the patient must pay the daily co-payment. There are no Medicare benefits for a skilled nursing facility beyond 100 days.

What is a definition of a unilateral contract? A. A contract under which each party must meet specific conditions B. A contract under which only one party makes an enforceable promise C. A contract that is prepared by one party and accepted by the other party as is D. A contract under which the parties exchange unequal values

B. A contract under which only one party makes an enforceable promise In a unilateral contract, only one of the parties to the contract is legally bound to do anything . The insurer is legally required to pay for covered losses; the insured, however, makes no legally binding promises under the contract.

Representations are statements made by the applicant for insurance that are A. The same as warranties B. Considered true to the best of the applicant's knowledge C. Guaranteed to be true D. Immaterial to the actual acceptability of the contract.

B. Considered true to the best of the applicant's knowledge Representations are statements made by applicants that they believe to be true to the best of their knowledge.

Which of the following is a specified dollar amount the insured must pay before the insurer will pay the policy benefits? A. Coinsurance B. Deductible C. Premium D. A nominal fee

B. Deductible A deductible is a fixed dollar amount the insured must pay first before the insurer provides a covered service or pays the policy benefits.

All else being equal, which of the following will NOT be considered unfair discrimination by insurers? A. Cancelling individual coverage based on the insured's marital status B. Discrimination in policy benefits based on the insured's habits and lifestyle C. Charging applicants with similar health histories different premium rates based on their ethnicity D. Assigning different risk classifications to applicants based on ethnicity

B. Discrimination in policy benefits based on the insured's habits and lifestyle Discrimination between individuals of the same class, with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination.

Which of the following is an example of a peril? A. Smoking B. Fire C. Death D. Gambling

B. Fire Fire is a peril (a cause of loss). Smoking is a hazard, which increases the chance of loss. Death would be considered a loss. Gambling is a speculative risk.

When doing business in this state an insurance company that is formed under the laws of another state is known as which of type of insurance? A. Alien B. Foreign C. Domestic D. Nonadmitted

B. Foreign A foreign insurer is formed under the laws of another state. A Nonadmitted or unauthorized insurer is an insurer that does not hold a Certificate of Authority and may not transact insurance.

The amount of disability benefits that an insured receives usually depends upon the insured's A. Number of dependents B. Income at the time of application C. Medical history at the time of application D. Marital status

B. Income at the time of application To prevent over insurance, the amount of disability benefits that will be paid to an insured is usually limited to a percentage of the insured's income at the time of application.

An insured hospital policy states that it will pay him a flat fee of $75 a day of hospitalization. The policy benefits on what basis? A. Service B. Indemnity C. Reimbursement D. Expense made

B. Indemnity Indemnity policies do not pay expenses or bill; they provide the insured with a stated benefit amount for each day the insured is confined in a hospital.

Who is involved in completing the agent's report? A. Attending physician and the agent B. Only the agent C. Only the underwriter D. The agent and the applicant

B. Only the agent Only the agent is involved in completing the agents report.

All of the following actions by a producer may be grounds for license revocation or nonrenewable EXECEPT A. Felony convictions B. Participating in controlled business C. Misrepresentation of policy terms to sell more policies D. Failure to complete continuing education by the due date

B. Participating in controlled business Participating in controlled business will only result in disciplinary action if it exceeds a certain percentage of total business written. Producers are allowed to conduct small amounts of controlled business.

Which of the following is NOT the consideration in an insurance policy? A. Something of value exchanged between parties B. The application given to a prospective insured C. The premium paid by the insured D. The promise to pay covered losses

B. The application given to the prospective insured Consideration is something of value transferred between the two parties to form a legal cintract.

In an insurance transaction, which of the following does a licensed agent represent? A. Brokers B. The insurer C. Policyowner D. The Department of Insurance

B. The insurer Under the agency law, agents/producers legally represent the insurance company.

An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage? A. $75 B. $102 C. $29 D. $100

C. $102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102)

What percentage or portion of the benefit paid by an individually-owned disability income policy is taxable? A. 50% B. 100% C.0% D. Amount paid by the insured

C. 0% Because Premiums are paid with after-tax dollars, so the benefits are not income taxable.

What type of licensee represents the insurance company? A. Consultant B. Advisor C. Agent D. Broker

C. Agent An agent is a licensed insurance producer appointed to represent one or more insurance companies.

When transacting insurance business in this state, an insurer formed under the laws of another county is known as what type of an insurer? A. Nonadmitted B. Limited C. Alien D. Foreign

C. Alien Alien insurer is defined as an insurer formed under the laws of another country.

All of the following qualify for Medicare Part A EXCEPT A. Anyone who qualifies through social security B. Anyone who is over age 65 C. Anyone who is willing to pay a premium D. Anyone who has the end-stage renal disease

C. Anyone who is willing to pay a premium For Medicare Part A, a person must be age 65 or otherwise qualify.

How long does an insurer have to contest fraudulent misstatements made in a health insurance application? A. Within 1 year after the effective policy date B. Statements on the application are incontestable C. As long as the policy in force D. Within 2 years of the policy application

C. As long as the policy is in force An insurer can contest a fraudulent misstatement as long as the policy is in force. For all other misstatements, the statute of limitation usually runs out after 2 years.

Which of the following is NOT a cost-saving service for insurance companies? A. Preventive care B. Second opinions C. Denial of Coverage D. Preadmission testing

C. Denial of coverage Cost-saving services include the following: controlled access of providers, large claim management, preventive care, hospitalization alternatives, second surgical options,

An insured is eligible for retirement., disability, and survivor benefits under Social Security. What insured status does this describe? A. Partially insured B. Currently insured C. Fully insured D. Guaranteed insured

C. Fully insured The fully insured statues refers to someone who has earned 40 quarters of coverage, and is entitled to receive Social Security retirement, Medicare, and survivor benefits.

Events or conditions that increase the chances of an insured loss occurring are referred to as A. Perils B. Exposures C. Hazards D. Risk

C. Hazards Conditions such as lifestyle and health status, or activities such as scuba diving are hazards and may increase the chance of loss occurring.

The benefits received by the business in a disability buy-sell agreement are A. Fully taxable B. Tax deductible C. Income tax free D. Partially taxable

C. Income tax free In disability buy-sell policies, because the premiums are not tax deductible to the business, the benefits are received income tax free by the business.

Which of the following sources will most likely provide information for an investigative consumer report on an insurance application? A. HIPPA B. Medical Information Bureau C. Interviews with neighbors and associates D. Agent's report

C. Interviews with neighbors and associates The information for investigative consumer reports is obtained through an investigation and interviews with associates, friends, and neighbors of the applicant.`

Which of the following is true regarding the taxation of the premiums in group accidental death and dismemberment policies? A. It is received tax-free by the employees B. It is deductible by the employees C. It is deductible as an ordinary business expense D. It is taxed to the employee as ordinary income

C. It is deductible as an ordinary business expense Premiums for group accidental death and dismemberment policies are deductible to the employer as an ordinary business expense.

Premium payments for personally-owned disability income policies are A. Elgible for tax credits B. Taxable to the insured's estate C. Not tax deductible D. Tax deductible

C. Not tax deductible Premiums paid for personally-owned individual disability income policies are not deductible.

Which renewability provision will be most likely used in a travel accident policy? A. Optionally renewable B. Guaranteed renewable C. Period of time D. Noncancellable

C. Period of time The period of time (term) provision means that the policy will only last a certain period of time and cannot be renewed. A travel accident only policy will only provide coverage during the dates the insured is traveling.

In what type of a medical insurance plan does the provider receive a scheduled fixed amount for care to the insured and no additional compensation regardless of the services provided? A. Reimbursement B. Fee-for-service C. Prepaid D. Indemnity

C. Prepaid Under a prepaid plan, the health care provider are paid for service in advance, whether or not any services are provided.

What is the main purpose of insurance regulation? A. Simplify insurance policies B. Prevent insurer insolvencies C. Protect the public D. Establish insurance rates

C. Protect the public The main purpose of insurance regulation is to protect the public's interest in matters concerning insurance.

A policyowner wants to name her husband as the beneficiary on her disability policy. She also wishes to retain all of the rights of ownership. What beneficiary classification is appropriate in this situation? A. Irrevocable B. Primary C. Revocable D. Contingent

C. Revocable If the beneficiary is named as revocable, the policyowner will be able to change the beneficiary at any time. Her husband would receive any death benefit.

Which type of Medicare policy requires the insured to use specific healthcare providers and hospitals? A. HMO B. Preferred C. SELECT D. Part D

C. SELECT Medicare SELECT policies require the insured to use specific healthcare providers and hospitals, except in emergency situations. In return, the insured pays lower premium amounts.

Which of the following would be responsible for making premium payments in an HMO plan? A. Insured B. Payor C. Subscriber D. Producer

C. Subscriber Subscriber (also referred to as participants or members) are individuals who sign up for pre-paid health plans, such as HMOs, and are responsible for paying the premiums.

For the purposed of insurance, risk is defined as A. An event that increase the amount of loss. B. The certainty of loss. C. The chance of loss. D. The cause of loss.

C. The chance of loss Risk, or the chance of loss occurring, is the basic reason for buying insurance.

Which of the following will vary the length of the grace period in health insurance policies? A. The policy term B. The amount of premium paid C. The premium payment mode D. The length of the elimination period

C. The premium payment mode The grace period in health policies is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Consideration C. Warranty D. Representation

C. Warranty A warranty is a statement guaranteed to be true. Breach of warranties can be considered grounds for voiding the policy.

What is a penalty tax for nonqualified distributions from a Health Saving Account (HSA)? A. 12% B. 8% C. 10% D. 20%

D. 20% An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty.

Medical expense premiums are deductible as medical expenses if along with all the other unreimbursed medical expenses, the total exceeds what percentage of the adjusted gross income of the insured? A. 15% B. 3.5% C. 5% D. 7.5%

D. 7.5% Medical expense premium are deductible as medical expenses, provided that when the premiums are added to all the other unreimbursed medical expenses, the total exceeds 7.5% of the adjusted gross income.

What type of licensee represents the insurance company? A. Advisor B. Consultant C. Broker D. Agent

D. Agent An agent is a licensed producer appointed to represent one or more insurance companies.

Who is considerer a nonresident agent? A. An agent who is not a U.S. citizen B. An agent whose license has been revoked C. An agent who does not earn commissions in this state D. An agent who is licensed in another state, but is allowed to transact insurance in this state

D. An agent who is licensed in another state, but is allowed to transact insurance in this state Agents who reside and are licensed in one state may obtain a nonresident producer license in another state by meeting nonredient agent qualifications.

Which of the following is NOT one of the enrollment periods for Medicare Part A applicants? A. Special B. Initial C. General D. Automatic

D. Automatic There are three types of enrollment periods for Medicare Part A: Initial, general, and special.

Which of the following documents is issued by the state Department of Insurance to give an insurer permission to write insurance contracts in that state? A. Certificate of Insurance B. Binder C. Express Authority D. Certificate of Authority

D. Certificate of Authority All admitted or authorized insurers must receive a Certificate of Authority from the Department to transact insurance in the state.

Which of the following statements is correct regarding taxation of long-term care insurance? A. Premiums may be taxable as income B. Benefits may be taxable as ordinary income C. Premiums cannot qualify as a tax deduction D. Excessive benefits may be taxed

D. Excessive benefits may be taxed While regarding LTC benefits are received income tax free by the insured, excessive benefits are taxable as ordinary income

Which of the following is NOT a type of hazard? A. Morale B. Physical C. Moral D. Exposure

D. Exposure Hazards are conditions or situations that increase the likelihood of a loss. Hazards are classified as physical, moral, or morale.

In a replacement situation, all of the following factors must be considered EXCEPT A. Policy exclusions B. Policy benefits C. Insured's assets D. Coverage limitations

D. Insured's assets In a replacement situation the agent must be careful to compare the benefits, limitations and exclusions found in the current and the proposed replacement policy.

Which of the following is the basis for a claim against an insurance policy? A. Misrepresentation B. Material Change C. Hazard D. Loss

D. Loss Claims result from losses by a peril insured against in an insurance policy.

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A. Overstating returns on policy dividends B. Stating that the insurance policy is a share of stock C. Exaggerating the benefits provided in the policy D. Making comparisons between different policies

D. Making comparisons between different policies Making accurate comparisons of polices is not illegal.

Benefits periods for individual short-term disability policies will usually last for A. 90 days only. B. Up to 5 years. C. One to four weeks. D. No more than 2 years.

D. No more than 2 years Short-term disability is defined as a disability lasting not more than 2 years.

Which of the following is NOT the consideration in an insurance policy? A. The premium paid by the insured B. The promise to pay covered losses C. Something of values exchanged between parties D. The application given to a prospective insured

D. The application given to the prospective insured Consideration is something of value transferred between the two parties to form a legal contract

Peril is most easily defined as A. The chance of a loss occurring. B. Something that increases the chance of loss. C. An unhealthy attitude about safety. D. The cause of loss insured against.

D. The cause of loss insured against. Perils are the causes of loss insured against in an insurance policy

How does a member of an HMO see a specialist? A. The insurer chooses the specialist B. The member is allowed to choose any specialist C. HMOs do not cover specialist D. The primary care physician refers the members

D. The primary care physician refers the members In an HMO, the primary care physician must refer the member to the specialist.

Two individuals are in the same risk and age class, yet they are charged different rates for their health insurance policies based on martial status. What is this practice called? A. Adverse selection B. Twisting C. Underwriting D. Unfair discrimination

D. Unfair discrimination Permitting individuals of the same class to be charged a different rate for the same insurance or discriminating based on the applicant's marital status is the unfair trade practice of discrimination.

Which of the following determines whether disability insurance benefits are taxed? A. Policy provisions B. If the total benefit meets the minimum taxation standard C. State law D. Whether the premiums were tax deductible

D. Whether the premiums were tax deductible Taxation of insurance benefits is often determined by whether or not the premiums were taxed.