Insurance Exam Part 1
Which provision is NOT a requirement in a group life policy? Conversion Grace period Incontestable period Accidental
Accidental- An AD&D provision is not required in a group life policy.
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the agent applicant's spouse National Association of Insurance Commissioners (NAIC) applicant's physician
Applicant's physician- Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured's physician.
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? F The dissolved partnership E's family E's estate
F- In this situation, the proceeds from E's life insurance policy will go to F. Insurable interest only needs to exist at the time of application.
What type of renewability guarantees premium rates and renewability? Optionally renewable Conditonally renewable Noncancellable Guaranteed renewable
Guaranteed renewable- Guaranteed renewable policies provides guaranteed renewability and premium rates.
Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy? Issue the policy with a diabetes exclusion Issue the policy with an altered Time of Payment of Claims provision Issue the policy with a rating Decline the applicant
Issue the policy with an altered Time of Payment of Claims provision- The insurance company may take all of these actions EXCEPT issue the policy with an altered Time of Payment of Claims provision.
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used? Irrevocable Contingent Primary Revocable
Revocable- With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most? The cost The nonforfeiture options The contestable period The assignment of ownership
The cost- In this situation, the cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.
Which of the following statements is true about most Blue Cross/Blue Shield organizations? They are the same as private insurance companies They are federally sponsored They are nonprofit organizations They are owned by hospitals and physicians
They are nonprofit organizations- Most Blue Cross/Blue Shield organizations are considered to be nonprofit.
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? Before the appointment is scheduled Upon completion of the application At the policy's delivery When the insurer receives the MIB report
Upon completion of the application- An applicant for life insurance must be informed of their rights upon completion of the application.
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? Deferred Flexible Variable Fixed
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?- Correct.
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used? Binding Initial Premium Conditional Contingent
Conditional- A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company? Variable Life Interest-sensitive Life Universal Life Annuity
Annuity- In this situation, an annuity would be recommended.
Before a life insurance policy is issued, which of these components of the contract is required? Applicant's signature on application Beneficiary's signature A conditional receipt Attending Physician Statement (APS)
Applicant's signature on application- A signature on an application is required before a life policy will be issued.
P is a Major Medical policyowner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim? Claim will be denied and policy terminated Claim will be partially paid Claim will be paid Claim will be denied
Claim will be denied- If a person is injured while committing an illegal act, health insurance will not cover the expense of the injury.
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? Level term policy Whole life policy Limited-pay policy Decreasing term policy
Decreasing term policy- A life insurance policy written for a specified period of time with a death benefit that changes regularly according to a schedule is a decreasing term policy.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? If the primary beneficiary is a minor at the time of the insured's death If the primary beneficiary dies before the insured If the insured died of accidental causes If the insured died of natural causes
If the primary beneficiary dies before the insured- A contingent beneficiary will receive the policy proceeds if the primary beneficiary dies before the insured's death.
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n) Flexible Premium Deferred annuity Variable annuity Immediate annuity Straight Life annuity
Immediate annuity- Immediate annuities start providing income payments usually starting within 30 days from the purchase date. Deferred annuities start providing income payments after the first year.
Which of the following BEST describes a short-term medical expense policy? Conditionally renewable Noncancellable Guaranteed renewable Nonrenewable
Nonrenewable- A typical short-term medical expense policy is best described as nonrenewable.
The provision that defines to whom the insurer will pay benefits to is called Entire Contract Proof of Loss Claim Forms Payment of Claims
Payment of Claims- The Payment of Claims provision in an Health Insurance policy states to whom claims will be paid.
When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits? Residual Disability Presumptive Disability Recurrent Disability Partial Disability
Recurrent Disability- In this situation, the insurer will provide the same benefits without a new elimination period under the Recurrent Disability benefit.
Which of these provisions require proof of insurability after a policy has lapsed? Insuring Conversion Reinstatement Consideration
Reinstatement- Most insurers require evidence of insurability be provided upon reinstatement of a lapsed policy.
R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity? Residual Disability Recurrent Disability Presumptive Disability Occupational Disability
Residual Disability- A residual disability benefit is usually a percentage of the total disability benefit for periods when the insured is unable to perform some of the duties of his/her occupation.
The provision in a health insurance policy that interrupts premiums being paid to the insurer while the insured is disabled is called the Probation Period Grace Period Waiver of Premium Elimination Period
Waiver of Premium- The Waiver of Premium provision in a health insurance contract suspends the insurer's right to receive premiums during a covered period of disability.
The clause in an Accident and Health policy which defines the benefit amounts the insurer will pay is called the Insuring clause Contestable clause Consideration clause Free-look provision
Insuring clause- The Insuring clause states the amount of benefits to be paid in an Accident and Health policy.
Pre-hospitalization authorization is considered an example of managed care PPO care Medicaid Major Medical insurance
Managed care- Pre-hospitalization authorization is the insurer's approval of an insured entering a hospital. Many health policies require this as part of an effort to manage costs.
Which Accident and Health policy provision addresses preexisting conditions? Proof of Loss Legal Actions Time Limit on Certain Defenses Payment of Claims
Time Limit on Certain Defenses- The Time Limit on Certain Defenses provision limits the period during which an insurer can deny a claim on the basis of a preexisting condition.
Which of the following BEST describes how pre-admission certifications are used? Used to assist in underwriting Used to prevent nonessential medical costs Used to minimize hospital lawsuits Used to help process claims
Used to prevent nonessential medical costs- Pre-admission certification is used to prevent unnecessary medical costs.
When does a life insurance contract become effective if the initial premium is not collected during the application process? After all medical and personal information has been evaluated When insurer receives initial premium from the producer When producer delivers policy and collects initial premium After application has been approved by the underwriters
When producer delivers policy and collects initial premium- Insurance becomes effective on delivery of the policy to the insured and payment of the initial premium to the producer.
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? $1,000,000 $500,000 $250,000 $0
$0- The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a $125,000 individual whole life policy $25,000 modified whole life policy $25,000 individual term life policy $25,000 individual whole life policy
$25,000 individual whole life policy- In this situation, a terminated employee may convert to a $25,000 individual whole life policy.
One becomes eligible for Social Security disability benefits after having been disabled for 3 months 5 months 6 months 12 months
5 months- Disability income benefits are paid to the covered worker in the amount of the PIA after a 5-month waiting period.
When does a Probationary Period provision become effective in a health insurance contract? At the policy's inception 30 days after the policy's inception When a claim is submitted When a covered loss occurs
At the policy's inception- The probationary period begins when a policy goes into effect. During this period, no benefits will be paid under the policy.
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan? Revocable assignment Beneficiary change Irrevocable assignment Collateral assignment
Collateral assignment- A policyowner using the Life Insurance policy as collateral for a bank loan normally would make a collateral assignment.
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take? Collect initial premium Collect initial premium along with a signed health statement Explain to the applicant the policy is no longer in effect due to change in health condition Collect initial premium and leave a binding receipt
Collect initial premium along with a signed health statement- In this situation, the producer should deliver the policy and obtain the premium payment along with a signed health statement.
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be converted to an individual permanent policy at an individual rate converted to an individual permanent policy at a group rate continued at an individual rate continued at a group rate
Converted to an individual permanent policy at an individual rate- In this situation, the insured can convert to a permanent policy at the individual rates.
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income? Indemnity Major Medical Travel Disability Income
Disability Income- Disability Income would reimburse an insured for loss of earnings if the insured became sick.
M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate? $2,000 a lump sum of six times the monthly benefit nothing earned, but unpaid benefits
Earned, but unpaid benefits- In this situation, any earned but unpaid benefits will be paid.
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the Entire Contract provision Insuring clause Time Limit on Certain Defense provision Legal Contract clause
Entire Contract provision- The Entire Contract provision states that the application and policy contain all provisions and constitute the entire contract.
When an employee is terminated, which statement about a group term life conversion is true? Employee must convert group term life coverage into an individual term life policy Employee must provide evidence of insurability for conversion Policy proceeds will be paid if the employee dies during the conversion period Policy proceeds will NOT be paid if the employee dies during the conversion period
Policy proceeds will be paid if the employee dies during the conversion period- An individual must apply for individual permanent coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.
An insured covered by life insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary? Proceeds will go to the primary beneficiary's estate Probate will decide who receives proceeds Proceeds will go to the contingent beneficiary Proceeds will go to the insured's estate
Proceeds will go to the contingent beneficiary- In this situation, the contingent beneficiary will receive the proceeds.
A Disability Income policyowner suffers a disability which was due to the same cause as a previous disability. Both disabilities occurred within a five-month period. The insurer may cover the second disability without a new elimination period under the Residual Disability provision Presumptive Disability provision Recurrent Disability provision Partial Disability provision
Recurrent Disability provision- In this situation, the insurer will provide the same benefits without a new elimination period under the Recurrent Disability provision.
An immediate annuity consists of a variable premium flexible premium single premium deferred premium
Single premium- An immediate annuity has a single premium.
What is Old Age and Survivors Health Insurance (OASDHI) also known as? Medicare Social Security Medicaid FICA
Social Security- Social Security, also known as Old Age, Survivors, and Disability Insurance (OASDI), was signed into law in 1935 by President Roosevelt as part of the Social Security Act.
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is the cost the health of the insured the amount of coverage being converted who will be beneficiary
The cost- The cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.
With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's monthly expenditures at the time of disability gross income at the time of purchase gross income at the time of disability occupation at the time of purchase
Gross income at the time of purchase- The insured's earned income at the time of purchase limits the amount of the monthly benefit that an insured may purchase in a Disability Income Policy.
What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision? File a lawsuit Submit the claim in any form Wait for the claim form to arrive Resubmit the request for a claim form
Submit the claim in any form- If forms are not furnished, the insured should submit the claim in any form, which must be accepted by the company as adequate proof of loss.
Which of the following statements about the classification of applicants is INCORRECT? Substandard applicants are never declined by underwriters Substandard applicants are occasionally declined by underwriters Preferred risk applicants typically have better premium rates than standard risk applicants An applicant can be classified as substandard risk because of a hazardous job
Substandard applicants are never declined by underwriters-A substandard risk is below the insurer's average risk guidelines. An individual can be rated substandard for a number of reasons and can even be rejected outright.
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? The gross premium is higher on a monthly payment mode as compared to being paid annually The gross premium is lower on a monthly payment mode as compared to being paid annually The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis
The gross premium is higher on a monthly payment mode as compared to being paid annually- A premium payment mode that is more frequent than an annual payment will result in a higher gross premium.
A level premium indicates the premium is fixed for a period stated in the contract, then becomes variable the premium can only be changed with the consent of the insurer the premium stays level until the policy's renewal date the premium is fixed for the entire duration of the contract
The premium is fixed for the entire duration of the contract- A level premium means that the premium remains fixed through the life of a policy.
Why is an applicant's signature required on a life insurance application? To attest that the statements on the application are warranties To attest that the statements on the application are accurate to the best of the applicant's knowledge To give Power of Attorney to the producer if needed To attest that all statements on the application are guaranteed to be true
To attest that the statements on the application are accurate to the best of the applicant's knowledge- An applicant's signature represents that the statements on the application are true to the best of the applicant's knowledge.
