INSURANCE

Best Insurers just created an advertising campaign in which to publicize the new health insurance policy that it is offering. The company asks you for advice about which of the following items may be used alone in the advertisements. You inform them correctly that their advertisements must contain

Best Insurers' full name.

How long is the typical elimination period of a business overhead expense (BOE) policy?

15 to 60 days; BOE policies have brief elimination periods, typically 15 to 60 days.

After the deductible is paid, the insured can expect Medicare Part A to cover all eligible hospital expenses without a copayment for up to:

60 days

A worker can choose to collect permanently reduced Social Security retirement benefits as early as what age?

62

All the following statements about annuity death benefits are correct EXCEPT:

All annuities provide a death benefit if the owner or annuitant dies after the contract has been annuitized.

Which of the following types of health plans covers a variety of conditions or medical services?

comprehensive plans

Regardless of the interest earned by the index underlying an indexed annuity, the actual amount credited is limited by the contract's:

participation rate and rate cap

For which of the following purposes are annuities most often used?

retirement planning

Under Texas insurance law, the definition of total disability in a disability income policy CANNOT include

the person's inability to engage in any occupation whatsoever.

Dental plans commonly group covered treatment and benefits into how many classes?

three

Partial withdrawals from a non-MEC universal life insurance policy are taxable:

when withdrawals exceed the sum of the premiums paid into the policy

An insured has a comprehensive major medical insurance policy with a $1,000 deductible and 80/20 coinsurance. She incurs a bill of $11,000. What will she pay in total?

$3,000; The insured must pay the deductible ($1,000) plus the 20 percent coinsurance on the remaining balance ($10,000 × 20 percent = $2,000). This is a total of $3,000.

How many Social Security credits must a worker earn to qualify for Social Security disability benefits?

40 credits; A worker becomes fully insured and eligible for all Social Security benefits (including disability benefits) with 40 credits.

Blue Sky Cruise Lines wants to buy group health coverage for its passengers. It would be most likely to buy

blanket health insurance.

Which governments regulate group health insurance?

both state and federal

Which of the following is NOT characteristic of a major medical plan?

coverage of cosmetic surgery; Major medical plans typically exclude cosmetic surgery, occupational injuries and illness, and routine vision and dental care.

Which type of health insurance plan is particularly suitable for the senior insurance market?

medicare plan

To be considered currently insured, a worker must have earned how many quarters of coverage in the 13-quarter period before he or she dies?

six

Tom is employed by Acme Industries and covered by its group long-term disability income policy. Acme pays 80 percent of the premium. Tom pays 20 percent of the premium. He becomes disabled and receives a monthly benefit payment. How much of this benefit will NOT be taxed as income?

20% The percentage of the premium that Tom paid is the percentage of benefits that will not be taxable income. In this case, Tom paid 20 percent of the premium, so 20 percent of the benefit is not taxable income to Tom.

Ben, a single working father, dies at age 50. How much will his only dependent child, Tom (age 15), receive from Social Security in a lump-sum death benefit?

255

Which of the following are NOT reimbursable flexible savings account (FSA) expenses?

elective cosmetic surgery and visits to non-licensed medical practitioners; Examples of nonreimbursable FSA expenses include elective cosmetic surgery and treatments by non-licensed medical practitioners.

Who establishes the standards of eligibility for employee participation in an employer's group health plan?

employer

Unlike a supplemental major medical plan, a comprehensive major medical plan:

is not combined with other medical expense insurance; Unlike a supplemental major medical policy, a comprehensive major medical insurance policy is a stand-alone plan that is not combined with any other form of medical expense coverage.

Which occupation would qualify for a disability income policy that pays benefits on the basis of the "own occupation" definition of disability?

lawyer

Group short-term disability (STD) coverage typically has a maximum benefit period of:

less than 2 year; Group plans with maximum benefit periods of less than two years are short-term disability plans.

A tax-qualified long-term care insurance policy lets policyowners deduct premiums as a medical expense while also receiving:

limited tax-free benefits

Which will make an insurer liable for a claim arising from the insured's use of an intoxicant or narcotic?

A physician prescribed the narcotic or intoxicant for the insured; The insurer is liable for a loss sustained or contracted while the insured was intoxicated or under the influence of a narcotic prescribed by a physician.

Jake owns one life insurance policy, but has several health insurance policies covering disability, medical expenses, and dental care. Why might he have multiple health insurance policies?

A single health insurance policy cannot cover all health risks; No one health insurance policy covers all risks. Instead, a single policy or single plan likely covers only a single risk. In some cases, a single policy may cover two or more related risks, such as medical care and dental care.

As tax incentives to set up a qualified employer retirement plan, all the following statements are correct EXCEPT:

Benefit distributions are taxed only if withdrawn prior to retirement and are tax free if distributed at retirement; Benefit distributions are taxed whenever and however paid.

Dave receives Social Security retirement benefits. His wife Cathy is still working. Which statement about Cathy's Social Security spousal benefit is CORRECT?

Cathy can choose either the spousal benefit or the worker's benefit.

Cindy, age 51, withdraws $15,000 from her 401(k) plan so that she can buy a new boat. All the following statements regarding this are correct, EXCEPT:

Cindy can avoid any penalty taxes if she can demonstrate to the IRS that the boat was essential to her financial well-being.

Which statement correctly describes how corporate-owned deferred annuities are taxed?

Income tax is payable annually on that year's gain in the contract.

What is the effect of a binding receipt given to an applicant?

It guarantees coverage during the underwriting period even if the insured turns out to be uninsurable; If the applicant is found to be uninsurable, he or she is still covered from the time the receipt was given until the insurer notifies the applicant that it will not issue a policy.

Jessica, age 48, owns a traditional IRA that she funded with tax-deducted contributions and which is now worth $300,000. Which of the following correctly describes the tax consequences of converting her IRA to a Roth IRA?

She would have to pay income taxes on the entire $300,000.; If Jessica converts her traditional IRA to a Roth IRA, she must pay taxes on the entire amount.

To qualify for accelerated benefits from a life insurance policy on a tax-free basis, an insured must meet all of the following qualifications, EXCEPT:

approved by the insurance company as meeting its definition of terminally ill

Under the legal actions provision, when can an insured take legal action against an insurer?

at least 60 days after the insured gives proof of loss to the insurer; The insured cannot take legal action against the insurer until at least 60 days after the insured gives proof of loss to the insurer.

Country Life Insurers is a small insurance company with $10 million of assets in its general account. These assets would most likely be invested in

conservative and safe investments; The assets in Country Life Insurers' general account are subject to state law limitations on types of investments and percentage limits on investing in different asset classes. Typically, general account assets tend to be restricted to investments that are conservative and safe in order to minimize risk.

The time limit on certain defenses provision in a health insurance policy is like which provision in a life insurance policy?

incontestable clause; The time limit on certain defenses provision is like the incontestable clause in life insurance.

Which optional provision limits the total coverage that a single insurer assumes with respect to any one insured, regardless of the number of policies the insurer issued to this person?

other insurance in this insurer; The other insurance with other insurers provision is like the other insurance with other insurer provision. However, it extends to coverage with multiple insurers of which the primary insurer had prior knowledge.

The purpose of health insurance is to:

protect against the financial cost of accidental injury and illness; Health insurance protects against the financial cost of accidental injury and illness.

What part of employer-funded group life insurance coverage-if any-is tax exempt for employees?

the value of the first $50,000 of coverage

For annuities sold by life insurers, payment options can be separated into what two categories?

those with a life contingency and those without one

An insured's health insurance policy pays a flat rate of $200 a month if she becomes disabled, regardless of her actual income. What kind of policy does she have?

valued policy; Valued policies pay a fixed sum that is stipulated in the contract. A policy that pays a flat rate of $200 a month in case of disability is a valued contract.

Ralph's AGI is $100,000. His unreimbursed medical expenses are $10,000. He also paid $10,000 for health insurance premiums. How much is Ralph's medical expense deduction?

$12,500; Taxpayers can deduct unreimbursed medical expenses that exceed 7.5 percent of AGI. Ralph's AGI threshold is $7,500 ($100,000 × 7.5% = $7,500). His unreimbursed medical expenses total $20,000. He can deduct expenses greater than $7,500 ($20,000 - $7,500 = $12,500). Ralph can deduct $12,500.

Noncontributory group health insurance plans must cover what percentage of those who are eligible to participate?

100 percent

To avoid immediate taxation of IRA funds paid to the IRA owner in a rollover IRA transaction, the owner must deposit the funds into the new IRA within how many days of receiving them?

60 days; An IRA owner has 60 days to complete a rollover IRA transaction after receiving funds for transfer. If the funds are not deposited within 60 days, they are subject to tax and a potential tax penalty.

Which statement does NOT describe the standard Medicare supplement plans?

A plan may be cancelled if the insured's health significantly deteriorates.

Which statement is correct about state administration of Medicaid?

All states base Medicaid eligibility on financial need.

Centennial Computers just laid off Ed, Nancy, Bill, and Jenna. Under Texas law, Centennial must provide continued health insurance coverage for at least six months to

Bill, age 40, who is still looking for a new job and wants to continue the group coverage; Under Texas law, employers must provide continued coverage for six months after the date the employee, member, or dependent elects to continue the group coverage. Of all the employees that were laid off, only Bill must be covered for six months.

Which statement about profit-sharing plans is correct?

Contribution limits for profit-sharing plans are the same as those that apply to all defined contribution plans.; Profit-sharing plans provide some flexibility for the employer. For example, an employer does not have to make contributions every year. However, to remain qualified, the plan must be maintained with substantial and recurring contributions, and contribution limits are the same as apply to all defined contribution plans.

Which statement about disability income insurance (DI) policies is correct?

DI benefits are paid if the insured is under the regular care of a physician and gives periodic proof of loss, unless the disability is total and permanent; No DI benefits are paid if the insured is not under the regular care of a physician and does not give periodic proof of loss. (This requirement does not apply if the disability is total and permanent.)

All of the following distributions from a qualified plan are exempt from the 10 percent penalty tax on premature distributions, EXCEPT:

Distributions made because the participant needs the funds to pay for homeowners insurance premiums; A distribution taken to pay homeowners insurance premiums would be subject to the 10 percent penalty tax on premature distributions, if taken before age 59½.

Which of the following must HMO members use to receive covered care?

HMO's network of providers and caregivers; Members must use the HMO's network of providers and caregivers to receive covered care.

Which is NOT true about the delivery of health insurance policies?

If the application did not include the first premium, the producer collects the premium and a surcharge when delivering the policy; An applicant may submit an application without the first premium. If a policy is then issued, the producer must deliver the policy, collect the initial premium, and get a statement of continued good health from the insured. A surcharge is not imposed.

Howard, 33, and Mary, 32, want to fund their 13-year-old daughter's college education. Which of the following is the most appropriate advice about using a deferred annuity for this purpose?

It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59½ may be subject to a tax penalty.

Which statement about the waiver of premium rider in a disability income (DI) policy is correct?

It is usually a standard provision; Older policies provided premium waivers only through an optional rider, but most policies today include a waiver of premium provision for no additional premium.

John, a Texas resident, is covered under a credit life insurance policy while he pays off a car loan. Coverage is paid through December, when his loan is scheduled to be paid off. If John pays off the car loan in September (3 months early), which of the following describes what the credit life insurance company must do with respect to a premium refund?

It must refund the premium for the 3 month period following the date John paid off the loan; A credit life insurance company is required to refund the unearned premium that was paid for the period following the loan pay-off.

Which statement most correctly describes the tax treatment of policy loans from a non-MEC whole life insurance policy?

Life insurance policy loans are not taxed.

Martha was covered by a $50,000 group life insurance policy through her employer. After losing her job and deciding to take an early retirement, she talked to her agent about converting the group policy to individual coverage. Her agent informs her correctly that

Martha can be issued a conversion policy with no more than $50,000 in coverage; The amount of coverage provided by Martha's individual policy cannot exceed the amount of life insurance in effect at the time her employment was terminated. In this case, Martha can buy an individual policy that provides $50,000 in coverage.

Which statement describes states' administration of Medicaid?

Medicaid services vary from state to state.

Which statement describes the benefit triggers in tax-qualified and non-tax-qualified long-term care insurance plans?

Medical necessity triggers benefits under non-tax-qualified plans.

Which statement does NOT describe Medicare supplement policies?

Medicare adjusts its deductibles and copayments to match insurers' benefits.

Which statement about group disability income (DI) insurance is correct?

Plans can offer benefit periods for short-term disability and long-term disability; Most group disability plans are not portable. In contrast, individual DI policies follow the insured from job to job.

Which of the following sections of the Tax Code deals with the exchange of life insurance policies and annuities?

Section 1035

The tax-free exchange of a life insurance policy for an annuity is sometimes called a:

Section 1035 exchange

Which of the following statements accurately describes the difference between a joint and survivor (J&S) annuity settlement option and a joint life settlement option?

The J&S option continues payments until the second annuitant dies, while the joint life option terminates payments upon the first annuitant's death.

All of the following statements about the interest rates on deferred annuities are correct EXCEPT:

The guaranteed minimum rate is usually 5 to 6 percent.

Which statement is CORRECT about a guaranteed renewable disability income policy?

The insurer can increase the premium if it increases the premium for all policies in the same class.

ABC Company ends its group health plan with one insurer and buys another plan from another insurer. What happens to the deductibles and coinsurance payments that ABC's employees made under the previous plan?

The new insurer applies a portion of them to the new plan.

that a written release is required from the existing insurer

The notice of replacement for health insurance applicants contains an acknowledgement of all of the following EXCEPT

Which statement correctly describes the tax treatment of unreimbursed medical expenses?

They may be deducted from taxable income if they exceed a certain percentage of AGI.

To qualify for coverage under the Children's Health Insurance Program (CHIP), a child must be

a U.S. citizen or legal permanent resident.

Under the misstatement of age provision in John's individual health insurance policy, what can the insurer do if it discovers that John inadvertently listed the wrong age in his application?

adjust the benefits

Which of the following is least likely to want blanket insurance?

an employer looking for comprehensive medical insurance for its employees

A policyowner can change his or her beneficiary under which of the following circumstances?

at any time unless the original designation was irrevocable

Workers' compensation plans offer all of the following benefits to covered workers EXCEPT:

business overhead expense coverage; A business overhead expense policy covers certain overhead costs of a small business owner upon his or her disability. Workers' compensation does not cover these costs.

Which of these expenses is NOT covered under a business overhead expense (BOE) disability policy?

business owner's salary; While the salaries of the owner's employees can be covered, the owner's salary cannot be covered with a BOE policy; the owner would need his or her own DI policy for that purpose.

Which is the amount that is paid for dismemberment under an accidental death and dismemberment (AD&D) insurance policy?

capital sum

Which is characteristic of dental insurance indemnity policies?

deductibles and co-insurance

John is thinking about buying major medical expense coverage for himself and his family. He has determined that his family will require all of the services listed below. Which of the following will NOT be covered by his policy?

dental check-ups for his teenage son

When an applicant applies for a health insurance policy, a producer is NOT required to:

determine the premium rate; The underwriter, not the producer, determines the premium rate to be charged for the policy.

Jenny is considered fully insured under Social Security, which qualifies her for which of the following benefits?

disability benefits, survivor benefits, and retirement benefits

If a claim is filed under a health insurance policy because the insured died, the insurer has the right to:

order an autopsy to determine the cause of death; The insurer can order an autopsy to determine the cause of death. The insurer must pay for the autopsy.

The purpose of the social insurance supplement (SIS) rider on a disability income (DI) policy is to:

pay additional monthly benefits until Social Security disability benefits begin; The SIS rider provides additional monthly benefits before social insurance program benefits begin. The additional benefits are reduced or ended when the social insurance program benefits begin.

Which of the following is NOT a method used for providing accelerated benefits?

percentage of death benefit method; While several alternative methods for providing accelerated benefits exist, the percentage of death benefit method is not a recognized method

Which type of services do long-term care insurance policies NOT cover?

physician and surgical care for insureds in nursing homes

CHIP coverage is provided through which of the following?

private insurers

Before leaving on a business trip, Alison bought a round-trip travel accident policy at the airport. What type of policy did she buy?

specified accident coverage

Tony pays the premium for his individual health insurance policy on the first of every month. However, he went on a 30-day trip and forgot to pay the premium. His policy must contain a grace period of at least

ten days

Under either a benefit schedule or usual, customary, and reasonable charge method, benefit payments are based on:

the stipulated amount or the amount charged, whichever is lower

Into how many categories do indemnity dental plans classify covered treatment and benefits?

three categories

What is the principal purpose of Medicaid?

to provide health care and health-related services to people with low incomes

When enrolling in a group health plan, eligible employees do NOT:

undergo individual underwriting

Which of the following is most designed to discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising?

market-value adjusted annuities

All the following statements regarding Section 529 prepaid tuition plans are correct EXCEPT:

Prepaid tuition plans can be used to cover elementary and secondary school tuitions as well as college tuitions.; These plans can only be used with participating in-state public colleges and universities.

Which statement correctly describes the income tax treatment of employer-funded group life insurance coverage on a covered employee?

The value of coverage exceeding $50,000 is taxable to the employee; below that, it is tax free.

When received in a lump sum, how are life insurance death benefits commonly taxed to the beneficiary?

They are generally income tax free to the beneficiary.

The premiums that a company pays for corporate-owned life insurance (COLI) on the lives of its employees are generally:

not tax deductible

Which of the following is a type of Section 529 plan that lets parents "prepay" a child's tuition at participating in-state public colleges and universities?

prepaid tuition plan; Available in about a dozen states, a prepaid tuition plan is a state-sponsored plan that lets parents "prepay" a child's tuition at participating in-state public colleges and universities.

After buying a health insurance policy, the insured takes a job that increases the risk of injury. What will the insurer do to accommodate the increased risk?

reduce benefits; The change of occupation provision allows the insurer to reduce benefits.

What must an insurer do under a cancelable policy?

refund any advance premiums before canceling the policy; The insurer must refund any advance premiums paid before canceling the policy.

When using illustrations to sell a life insurance policy, an agent can

show the policy's guaranteed death benefits before non-guaranteed values; Guaranteed death benefits, surrender values, and other benefits must be clearly labeled as guaranteed and must be shown before non-guaranteed values.

In which one of the following ways are Section 529 prepaid tuition plans and education savings plans similar?

tax treatment of distributions; Distributions are income tax free from both types of plans as long as they are used for qualifying educational expenses.

Annuities offer all the following benefits EXCEPT

tax-free distributions upon the annuity owner's death or retirement

When Matthew met with a potential client, he used a life insurance illustration to show how the policy's cash value would grow over the client's lifetime. Matthew could include all of the following in the illustration without violating Texas regulations EXCEPT

a statement that the policy is a type of investment and savings plan; When using an illustration to sell a life insurance policy, the agent cannot represent the policy as anything other than a life insurance policy.

Under Texas law, an individual life insurance policy is NOT required to contain a(n)

accelerated benefit provision; An insurance policy can include an accelerated benefits provision or rider, but it is not mandatory.

Premiums that are paid into a variable annuity acquire:

accumulation units

In accordance with Section 1035 of the Tax Code, all the following exchanges are permitted on a tax-free basis EXCEPT:

A deferred annuity exchanged for a whole life insurance policy.

Which of the following best explains why Section 1035 of the Tax Code does NOT permit a tax-free exchange of an annuity for a life insurance policy?

Allowing a tax-free exchange of an annuity for life insurance would enable taxable annuity gain to escape taxation via the life insurance death benefit.

Which of the following statements regarding variable annuity annuitization is correct?

Annuitization under a variable annuity contract provides income payments that can fluctuate up or down.

Which statement about current declared interest rates on deferred fixed annuities is correct?

Beyond the initial rate period, renewal rates can be changed at any time

How long is the standard free-look period?

10 days

Frank's first income payment under a variable annuity is $1,950. The value of each accumulation unit in each of the sub-accounts in Frank's contract is $10 at the time of annuitization. How many annuity units does Frank have?

195

Which of the following types of qualified retirement plan can include life insurance in the plan funding?

412(i) plan.; A 412(i) plan is a defined benefit plan that uses whole life insurance and deferred annuities in its funding.

The flat benefit amount for partial disability is usually what percent of the full disability benefit?

50 percent; A flat benefit payment for partial disability is usually 50 percent of the benefit paid for total disability.

Which of the following actions is taken if the amount of OASDI benefits that a family receives, based on the earnings of a single worker, exceeds the maximum family retirement benefit?

Future benefits payable to the family members will be reduced proportionately.

Which of the following is true regarding life insurance illustrations?

Guaranteed values must be shown separately and before non-guaranteed values; Guaranteed values must be shown separately and before non-guaranteed values.

All the following organizations are eligible to set up a 403(b) tax-sheltered annuity plan for their employees EXCEPT:

a hardware store

Laura was injured in an accident. She incurred $1,000 in medical bills. Even though she was not disabled or lost any income, her disability income policy paid for these expenses because it has:

a nondisabling injury provision; Some disability income policies have a nondisabling injury provision, which pays for medical expenses or treatment that the insured incurs because of accidental injuries. The policy pays the benefit even if the injury does not produce a lasting disability.

At age 49, Caleb took a $15,000 distribution from his deferred annuity. In addition to paying income tax on the $15,000 withdrawal, what else will Caleb probably have to pay?

a penalty tax of $1,500

Which of the following need NOT be included in an advertisement that is considered an invitation to contract?

a statement that the Texas Department of Insurance has approved the advertisement; An invitation to contract advertisement need not include a statement that the ad has been approved by the Texas Department of Insurance.

What period follows the onset of disability, during which no benefits are payable?

elimination period; The elimination period in a disability income policy is the period after a disability starts during which no benefits are payable. It is also called the waiting period.

Due to the high cost of health insurance, most people get health insurance coverage through

employer or association group plans; Most Americans have health insurance coverage through their employers' group plans or through their membership in an association that offers group coverage.

Which provision lets a policyowner return the policy to the insurer for a refund of the premium?

free-look; Under the free-look (or right to examine) provision, a policyowner can return the policy to the insurer within a certain time and get a full refund of the premium.

Social Security benefits are a function of a worker's average indexed monthly earnings and primary insurance amount (PIA). What is a worker's PIA?

the amount of the retirement benefit the worker will receive at normal retirement age

Whether a variable annuity's monthly income rises, falls, or stays level depends largely on which of the following?

the assumed interest rate (AIR) selected by the contract owner

Pam is a vice president employed by Gulf, Inc., where she has $300,000 in coverage under the company's noncontributory group life insurance plan. What portion of that coverage is taxable to Pam?

250,000

Which statement is correct about residual benefit payments?

The insured must lose at least 20 percent of pre-disability income before benefits begin; The insured must usually sustain a loss of at least 20 percent of pre-disability earnings because of the injury or sickness. If the insured's income loss drops below 20 percent, residual disability benefits normally end.

Thomas suffered a debilitating injury in a car accident and then filed a claim under his individual disability income policy. Which of the following statements is correct?

The policy's elimination period must be no greater than 90 days for benefit periods of one year or less.

Which statement about disability reducing term insurance policies is correct?

The purpose of the policy is to cover the term of a loan; The purpose of a disability reducing term insurance policy is to cover any outstanding loan the business may have if the owner becomes disabled.

Which provides health insurance coverage?

medical expense plan (MEP)

Who would NOT be eligible for Medicare enrollment?

a person under age 65 who has received Social Security disability benefits for six months

Frank is a PPO member and just received information from his insurer which lists all of the covered services and benefits under his plan. As a PPO member, Frank is also entitled to all of the following information EXCEPT

an explanation of his legal remedies if he disagrees with the insurer's decision, including his right to arbitration and mediation.

Which rider adds a death benefit to a disability income policy?

annually renewable term rider; A life insurance rider can be added to a disability income policy to provide a death benefit if the insured dies. The insured need not be disabled at the time of death for the death benefit to be paid. This rider is often provided in the form of annually renewable term life insurance.

Which type of business disability insurance helps the owners purchase the share of a totally disabled partner?

disability buy-out insurance

Although HMOs provide benefits absent from traditional medical expense plans, they do NOT cover:

dread diseases; Dread diseases are covered by a form of medical expense indemnity insurance unrelated to HMOs.

A worker with Social Security coverage for disability benefits has a work status of:

fully insured; A worker who has Social Security coverage for disability benefits is fully insured. This means that the worker has collected the required number of credits under Social Security based on the number of years and amount of money the worker paid into the program.

Which kind of health insurance policy gives the insurer the right, at the time of policy renewal, to change the premium rate on a class basis?

guaranteed renewable

Jeanine was treated by a doctor and had to pay the full cost of the treatment herself. This probably means that

her treatment was for a condition not covered by the PPO.

What triggers payment of Medicare Part A benefits?

hospitalization

An insurer would use which of the following to limit or exclude coverage for an applicant's health condition?

impairment rider

What kind of insurance policy pays benefits to the business owner if an essential manager were to become disabled?

key person disability income insurance; Businesses can buy disability income policies on their key employees, partner, or working shareholder, and if the insured becomes disabled, the benefits are paid to the business.

Which account is no longer available to small employers and self-employed individuals as a means of paying for medical expenses?

medical savings accounts; Though the medical savings account was the first of the modern health care reimbursement programs and became widespread in 1996 through the Health Insurance Portability and Accountability Act (HIPAA), MSAs were available only through 2007. Individuals who owned an MSA in 2007 may continue to maintain the accounts.

The purpose of a "relation of earnings to insurance" provision in a disability income policy is to

prevent a person from receiving more from a disability insurance policy than he or she could have earned by working.

Which statement best describes the purpose for a business owning a key person disability income policy?

provide the business with funds to use for any purpose upon a key employee's disability; Key person disability income insurance provides the business with funds it may use for any purpose upon a key employee's disability.

Medical expense insurance that lets the insured get health care from an unrestricted group of providers is called:

any provider coverage

Group long-term disability (LTD) coverage typically has a maximum benefit period of:

at least 2 years; Group plans with maximum benefit periods of two years or more are long-term disability plans.

Offbeat Music Inc. has 40 full-time employees and wants to provide coverage for them under a small employer health benefit plan. To be eligible to do so, at least how many eligible employees must choose to participate in the plan?

30

Which of the following correctly describes the basic tax treatment of deferred annuity death proceeds paid out before the contract is annuitized?

A portion of the death benefit, essentially representing the interest earned by the annuity, is taxable.

Which statement is correct about the tax treatment of group disability income benefits?

An employee pays income tax on the percentage of benefits equal to the percentage of premium the employer paid.

The Smith family just became eligible for the Children's Health Insurance Program (CHIP) on January 1. Their children will be eligible to receive benefits under the program

April 1; Once the Smith family becomes eligible for CHIP, they must meet a three-month waiting period before they can use their benefits. Benefits will therefore begin on April 1.

Which statement is correct about the tax treatment of premiums in disability income insurance policies?

Employers can deduct premium payments made for employees.

Which statement describes the importance of Medicaid?

For many elderly Medicare recipients, Medicaid reduces the financial burden of long-term nursing home care and catastrophic illness.

Which statements is correct about underwriting group health insurance?

Insurers consider the risk characteristics of the group as a whole.

Which statement accurately describes the work of the MIB (Medical Information Bureau)?

It reports medical information about insurance applicants to member insurance companies.

Why is it relatively easy for employers to change group health care plans or insurers?

Most group health plans are written to provide benefits for only one year.

What is the tax treatment of premiums for key person disability income insurance?

Premiums are not deductible, but benefits are not taxed.

Which helped Medicare subscribers fill the gaps in Medicare coverage?

The insurance industry created Medicare supplement policies.

When might an insurer remove an impairment rider from a health insurance policy?

The insured's health improves.

Ginny's medical plan provides coverage for newborn children from their date of birth. She adopts a 5-year-old child on July 1. What benefits is she entitled to?

automatic coverage for the first 31 days following adoption, after which Jenny must pay a premium

A significant disadvantage that HMO members experience is:

care received from providers outside the network is not covered; With few exceptions, care provided to HMO members outside the network of providers is not covered.

The evidence of coverage that an employee receives under an employer-sponsored group disability income (DI) plan is the:

certificate of insurance; Under a group DI policy, the sponsoring organization is the policyowner and the individual employees or group members' coverage is evidenced by a certificate of insurance.

Disability income policies usually exclude coverage for:

self-inflicted injuries; Disability income policies typically exclude coverage for disabilities arising from injuries that result from acts of war, that are self-inflicted, and that arise from pre-existing conditions. They cover accidental injuries that result in disability.

Which level of long-term care provides continuous, 24-hour care delivered by licensed medical professionals who are under a doctor's supervision?

skilled nursing care

True or False: Major medical plans must be guaranteed renewable.

true

When choosing a health care provider from a PPO and managing out-of-pocket expenses, the insured can:

use a network provider for the lowest cost, or use a non-network provider for more flexibility; Using a network provider may incur only a copayment, but for more flexibility, the insured can use a non-network provider and pay a deductible in addition to the copayment.

Andrea earned $3,000 each month before she was injured in an accident. Now she works part-time and earns $1,000 a month. Her disability income policy pays a $2,000 monthly benefit for total disability. The policy uses a flat rate to determine benefits for partial disability. How much will Andrea receive?

$1,000; A flat benefit payment for partial disability is a percentage of what would be paid for a total disability. This amount is typically 50 percent. As a result, if Andrea's policy pays $2,000 for total disability, she will receive 50 percent of this amount, or $1,000, as a partial disability payment.

Damien just bought a variable annuity from Delta Insurance Company. Which party bears the investment risk with respect to the assets in the separate account?

Damien; When Damien invests in a variable annuity, his assets will be invested in both a general and separate account. The assets in the separate account are likely to fluctuate in value, and Damien bears this investment risk.

Which health insurance policy provision requires the insurer to pay claims immediately after receiving proper proof of loss?

time of payment of claims; The time of payment of claims provision requires the insurer to pay claims immediately after receiving proper proof of loss. Ongoing income payments for disability claims must be paid at least monthly.

Kara is insured under a specified disease policy that covers medical expenses arising from cancer and leukemia. If she later develops tuberculosis and incurs medical expenses to treat the disease,

the policy will not pay any medical benefits.

HMOs must bond their officers for what amount?

100,000

A group health insurance policy is NOT required to provide

120 days of inpatient treatment for mental illness; Group health plans must provide coverage for treatment of serious mental illness, with a minimum of 45 days of inpatient treatment each year.

A disability buy-out insurance policy typically has an elimination period of:

18 to 24 months; The elimination period of a buy-out policy is generally much longer than in any other type of DI policy.

According to the Health Insurance Portability and Accountability Act (HIPAA), which of the following most correctly describes how accelerated life insurance benefits are taxed?

Accelerated benefits are not taxable if the insured meets the definition of being terminally ill or chronically ill.

Janson Automotive is a small family-owned business with 20 employees. If it offers a small employer health benefit plan, which of the following employees will be eligible for coverage?

Dora, who works 35 hours a week as a full-time office manager

Which of the following statements about Section 457 qualified plans is correct?

Earnings accumulate tax deferred.; Earnings accumulate tax deferred. Earnings and contributions are taxed only when withdrawn or distributed.

Which of the following describes a health savings account (HSA)?

It pays for health care services through a tax-exempt account in which tax-deductible contributions grow tax free and are not taxed when used to pay qualified medical expenses; An HSA is a way to finance the costs of health care services. It is a tax-exempt account that eligible people can set up in their names. People can make tax-deductible contributions to these accounts. The contributions grow tax free. When withdrawn to pay for qualified medical expenses, the distributions are tax free.

Which statement about HIPAA is NOT correct?

It protects those who lose coverage under an employer's health insurance plan.

Which statement regarding defined contribution qualified plans is correct?

Participants are always fully vested in their contributions, but employer contributions may not fully vest for several years; Defined benefit plans are required to distribute benefits in the form of lifetime annuitized payments. Defined contributions plans allow participants to choose how to receive their benefit at retirement, including a lump-sum payment.

Insurers that offer Medicare supplement insurance must, in addition to Plan A, offer at least:

Plan C or Plan F

Which plan gives employees insured by a group health plan a choice of benefits paid for by pre-tax salary?

Section 125 cafeteria plan

Debbie owns a noncancelable individual disability income policy. She receives benefits for one year and then returns to work. Which statement is correct about the policy's renewal?

The insurer must renew the policy if Debbie pays the premium.

Marty was covered by an individual health insurance plan for 13 months, and then under a group insurance plan for seven months. Suppose he applies for another individual health insurance plan 60 days after leaving the group plan. Which of the following is true of the policy's pre-existing condition exclusion period?

They will not apply.

When underwriting an experience-rated plan, the insurer will NOT examine which factor?

claims experience of similar groups

Which type of group health insurance plan bases premiums and benefits on the claims experience of similar groups in the region?

community-rated plan

Which occupation would NOT qualify for a disability income policy that pays benefits on the basis of the "own occupation" definition of disability?

construction worker

The cost-of-living adjustment (COLA) rider adjusts an insured's disability income benefit payments according to changes in the:

consumer price index; A COLA rider adjusts the benefit payments according to changes in the consumer price index (CPI). During times of inflation, the adjustment increases the payments. During times of deflation, the payments are reduced.

Which are NOT qualified, unreimbursed medical expenses for purposes of the medical expense deduction?

contributions to premiums for group AD&D insurance

Which health insurance provision prevents insureds from receiving full benefits from several different health insurance plans?

coordination of benefits

Paul is covered by his own group health insurance plan as well as by his wife's group plan. Which of the following provisions in Paul's plan will prevent overinsurance?

coordination of benefits provision

An insured has a basic hospital plan with a supplementary major medical plan. She incurs $10,000 in covered expenses. The basic plan pays the first $3,000. The supplementary plan has a $500 deductible. What kind of deductible does the supplementary plan have?

corridor deductible; A flat deductible is a stated sum the insured must pay before he or she can claim policy benefits.

An employer applies for a group health insurance plan. The underwriter examines the employer's claims history and group composition. This indicates the plan will be issued on what basis?

experience rating

Juan went to the emergency room in the middle of the night because he was having a heart attack. If a non-network physician provides emergency care, then Juan's HMO

must pay for the care at its usual and customary rate or at an agreed rate, regardless of whether the physician is in the network or not.

Christina lives in a state that prohibits medical underwriting in the sale of health insurance. When she applies for an individual health insurance policy, the insurer:

must use a single community rate to set the premium

Nancy's disability income policy provides benefits if she has to reduce her working hours and has a reduction in earned income. Nancy's policy follows which definition of disability? the own occupation definition of total disability residual disability relation of earnings to insurance the any occupation definition of total disability

residual disability

Which tax deduction is available to a self-employed person who buys health insurance?

tax deduction for medical, dental, and long-term care insurance premiums

HIPAA treats premiums paid for tax-qualified long-term care insurance plans as medical expenses that qualify for what type of tax status?

tax-favored status

A business overhead expense policy does NOT provide:

tax-free benefits

A worker's eligibility for Social Security disability benefits and benefit amount does NOT depend on:

the worker's family status; Eligible workers are entitled to Social Security disability benefits regardless of their family status.

What is the main difference between medical savings accounts (MSAs) and health savings accounts (HSAs)?

their maximum deductible and the maximum annual out-of-pocket costs; The main difference between MSAs and HSAs is the amount of the maximum deductible and the maximum annual out-of-pocket costs.

Which of the following statements correctly describes the tax treatment of withdrawals from a modified endowment contract (MEC)?

Full withdrawals and policy loans from a MEC are treated on a LIFO (last-in/first-out) basis; in addition to income tax, MEC withdrawals taken before the owner's age 59½ are subject to a 10 percent penalty.

Which of the following statements about IRA rollovers is correct?

Funds can be rolled over tax free from one IRA to another; Rollover IRAs are commonly used as people move from job to job. Rather than have amounts from a qualified plan account distributed to him or her, a person can transfer the funds directly to an IRA. Funds can also be rolled over from one IRA to another.

For Social Security purposes, Brian is considered currently insured while Samantha is fully insured. Which of the following statements is correct?

Samantha is eligible for more Social Security benefits than Brian.

Which of the following statements regarding the taxation of death benefits paid from a group life insurance plan is correct?

The death benefit is income tax free, but interest earned on funds left with the insurer under a settlement option is taxable in the year earned.

Which statement is true about the elimination period in a disability income policy?

The disability must last through the elimination period before the insured can receive benefits; The elimination period is the time that must pass after a disability starts but before benefits are paid. The disability must last through this period.

Advertisements for indeterminate premium whole life policies sold in Texas must prominently set forth all the following terms EXCEPT

The fact that the nonguaranteed maximum premium can never be changed; Advertisements for indeterminate premium life policies must display the fact that the maximum premium is not guaranteed and may be changed.

If Sam makes a full or partial withdrawal from his deferred annuity before the contract annuitizes, which of the following statements applies?

Withdrawals are fully taxable until they equal the contract's gain (i.e., interest earnings), after which all subsequent withdrawals are tax free.

U.S. tax law requires IRA owners and other qualified plan participants to start taking required minimum distributions from their plans by April 1 of the year following the year the individual turns:

age 70.5; Failure to take an RMD by April 1 of the year after turning age 70½ results in a stiff penalty: 50 percent of the difference between the amount that was taken and the amount that should have been taken.

Which of the following is a type of Section 529 plan that builds a tax-free pool of money the account owner can use to pay for qualifying education expenses including tuition, fees, room and board, and books?

education savings plan; This type of 529 plan builds a pool of money for use in paying current and future education expenses. It does not "prepay" tuition.

The illegal occupation provision protects the insurer by letting the insurer deny a claim that arises:

from an insured's illegal activity; It allows the insurer to deny a claim that arises from the insured's participation in an illegal activity.

When acting in the best interests of applicants and insureds, producers must:

give all important information about a proposed policy; Producers must act in the client's best interests at all times. This means that producers must give all important information about a proposed policy.

Which annuity settlement option pays income for the annuitant's life, but no less than for a specified number of years?

life income with period certain

Any permanent life insurance that fails the Tax Code's definition of life insurance due to excessive funding is called a(n)

modified endowment contract

When used in group insurance, the probationary period is the time during which:

the employee must be employed before becoming eligible for group insurance benefits; The probationary period is the time during which the employee must be employed before becoming eligible for the employer's group insurance benefits.

Which of the following best describes income payments under the period certain-only annuity settlement option?

the longer the payout period, the smaller the amount of each monthly payment

Rollo made some misstatements on his application, and the insurer is contesting the beneficiary's claim for benefits. That means that the policy has been in force for less than how many years?

two; A life insurance policy in force for two years from its date of issue is incontestable, except for nonpayment of premiums.