Insurance Exam Practice Questions

In disability income insurance, the own occupation definition of disability applies -For the first 2 years of a disability. -During the waiting period. -During the elimination period. -As long as an individual is unable to work.

For the first 2 years of a disability. The own occupation definition of disability usually applies to the first 24 months after a loss.

In disability income insurance, the own occupation definition of disability applies -During the elimination period. -As long as an individual is unable to work. -For the first 2 years of a disability. -During the waiting period.

For the first 2 years of a disability. The own occupation definition of disability usually applies to the first 24 months after a loss.After 24 months, if the insured is still unable to perform the duties of his or her own occupation, the definition of disability narrows to mean the inability to perform any occupation for which the insured is reasonably suited by education, training, or experience. This is a dramatic reduction in the insurer's liability because it is very likely that claimants can find something they can do for financial gain. The "own occ" definition is generally used for highly trained, skilled occupations such as surgeons, trial attorneys, etc.

Noncancellable

As with the noncancellable policy, coverage is generally not renewable beyond the insured's age 65.

A hospital indemnity policy will pay -income lost while the insured is in the hospital -all expense incurred by the stay in the hospital -any expenses incurred by the stay in the hospital mimus coinsurance payments and deductibles -A benefit for each day the insured is in the hospital

A benefit for each day the insured is in the hospital Hospital confinement indemnity policies pay specific amounts that depend on the amount of time the insured is confined to the hospital

All of the following are examples of risk retention EXCEPT -premiums -deductibles -copayments -self insurance

premiums Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.

Which of the following insurance options would be considered a risk-sharing arrangement? -surplus lines -reciprocal -stock mutual

reciprocal obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subcribers of tha reciprocal

Proof of loss

All life insurance or annuity contracts that provide disability benefits, including waiver of premium, must include a proof of loss provision. Contracts must establish when and how the insured must prove the disability. They must also allow for regular examinations of the insured by the insurer. The claim will not be invalidated or reduced if it is impossible for the insured to produce proof of disability within the time frame, provided such proof is furnished as soon as reasonably possible. Except in the absence of legal capacity, proof of loss must be provided no later than 1 year of the time proof would otherwise be required.

Which of the following individuals is eligible for a Health Savings Account? -Margaret is 68 years old BSuzie is a dependent on her parent's tax returns -Tomas is insured by a Low Deductible Health Plan (LDHP) -Allison is insured by a High Deductible Health Plan (HDHP)

Alsion ! To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance except for specific injury, accident, disability, dental care, vision care, or long-term care insurance, must not be eligible for Medicare, and can't be claimed as a dependent on someone else's tax return.

What phase begins after a new policy is delivered?

Free look period The free-look period occurs after a policy is delivered. This period allows the insured to review the policy and return it for a refund of the premium within a certain time interval.

When an insurer combines two periods of disability into one, the insured must have suffered a -Residual disability. -Presumptive disability. -Recurrent disability. -Partial disability.

Recurrent disability. Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

All of the following are marketing arrangements used by insurers EXCEPT -Reinsurance System -General Agency System -Direct Response Marketing System -Independent Agency System

Reinsurance System Reinsurance is a method used by insurers to protect against catastrophic losses

According to the proof of loss provision, which of the following must be specified in a contract that provides disability benefits? -A disclaimer that no benefits will be paid if proof of loss is not furnished -Specific losses that are covered and not covered -When and how an insured may prove a loss -How a claim can be invalidated

When and how an insured may prove a loss A contract that provides disability benefits must specify reasonable requirements as to the time, method and form of proof of disability (in other words, when and how an insured may prove a loss).

When does a person qualify to receive disability-related income? -When an insured is hospitalized for more than one week -When the insured is unable to perform his/her job duties -When the disability reaches a designated state of severity -When an injury is severe and the insured is not a dependent

When the insured is unable to perform his/her job duties A person must be unable to perform his/her occupation in order to be eligible for disability income benefits.

When is the insurability conditional receipt given? -when the premium is paid at the time of the application -after the application has been approved and the premium has been paid -When an insured individual needs to obtain an insurability receipt for tax purposes -if the application is approved before the premium is paid

When the premium is paid at the time of the application Coverage becomes effective as of the date of the receipt, provided the application is approved. This receipt is provided to the applicant when the initial premium is paid at the time of the application

A producer who fails to segregate the premium money from his own personal funds is guilty of -theft -commingling -larceny -embezzlement

commingling it is illegal for insurance producers to commingle premiums collected from the applicant with their own personal funds

Medicaid is sponsored by what kind of sources -federal -state -federal and state -private companies

federal and state Medicaid is sponsore at both state and federal levels.

Which of the following is NOT a feature of a noncancellable policy? -The insurer may terminate the contract only at renewal for certain conditions. BThe premiums cannot be increased beyond the amount stated in the policy. CThe guarantee to renew coverage usually applies until the insured reaches certain age. DThe insured has the right to renew the policy for the life of the contract.

he insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?- -waiver -utmost good faith -estoppel -material misrepresentation

material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful it is very likely that the policy would not be issued.

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? -retention -reduction -transfer -avoidance

reduction

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

What percentage of individually-owned disability income benefits is taxable? -0% -50% -100% -Amount paid by insured

0% Premiums are paid with after tax dollars. Benefits are not income taxable.

An insured's disability income policy includes an additional monthly benefit rider. For how many years can the insured expect to receive payment from the insurer before Social Security benefits begin? -5 -3 -2 -1

1 The additional monthly benefit rider stipulates that the insurer will pay benefits comparable to what Social Security would pay. After a year, the insurer ends the benefit and assumes that Social Security will begin benefit payment. Additional Monthly Benefit (AMB) Some insurance companies offer the Additional Monthly Benefit rider in the approximate amount that Social Security would pay. The benefit only is provided for one year. It is then anticipated that Social Security benefits would commence at the end of one year.

What is the maximum period that an insurer would pay benefits in accordance with an Additional Monthly Benefit rider? -For the duration of the disability or the contract, depending on which ends first -1 month -1 year -2 years

1 year The Additional Monthly Benefit rider stipulates that the insurer will pay benefits comparable to what Social Security would pay. After a year's time, the insurer ends the benefit and assumes that Social Security will then begin benefit payment.

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? -7 days -10 days -31 days -60 days

10 days The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

If an employer provides long-term group disability insurance for its employees, what percentage of monthly wages are lower-paid employees eligible to collect? -33 and 1/3% -50% -66 and 2/3% -90%

66 and 2/3% If an employer provides long-term group disability insurance for its employees, the benefit period may be limited to age 65, and benefits will be limited to 50% of the monthly wages for higher-paid employees and 66 and 2/3% of the monthly wages for lower-paid employees.

In which of the following cases would an "any occupation" disability income policy pay the benefits? -The insured is unable to perform any jobs in the field related to the insured's education and experience. -The insured is unable to perform the duties of his or her specific occupation. -The insured changes jobs and is injured as a result of a more hazardous occupation. -The insured's family has unexpected expenses due to the insured's disability.

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.

Any Occupation

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. "Own occupation" is the more liberal definition and therefore provides a better benefit for the insured. Although some companies still utilize the two-tier approach by combining both definitions in a single disability income policy, from an underwriting standpoint, it is much easier for an insurance company to justify the "any occupation" definition when agreeing to issue a policy.

All of the following are correct about the required provisions of a health insurance policy EXCEPT -Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. -A grace period of 31 days is found in an annual pay policy. -The entire contract clause means the signed application, policy, endorsements, and attachments constitute the entire contract. -A reinstated policy provides immediate coverage for an illness.

A reinstated policy provides immediate coverage for an illness. Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.

When the policy premium wasn't submitted with the application, what should the agent obtain from the insured upon policy delivery? -medical report -conditional contract -unilateral contract -a statement of good health

A statement of good health THe inital premium is nor paid until the policy is delivered, then most insurance companies requirethat when the agent collects the premium, they must obtaina statement signed by the insured testifying to the continued good health.

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? -SEC -AM Best -NAIC -Consumer's guide

AM Best AM Best assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer

What document grants express authority to an agent? -Agent's contract with principal -Agent;s insurance license -Fiduciary contract -State Provisions

Agent's contract with the principal

In insurance, an offer is usually made when -the insurer approves the application and receives the initial premium -the agent hands the policy to the policyholder -an agent explains a policy to a potential applicant -An applicant submits an application to the insurer

An applicant submits an application to the insurer In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

Because an agent is using stationery with the logo of the an insurance company, applicant for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? - express -implies -assumed -apparent

Apparent apparent authority( perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of the circumstances the principal created

What is the maximum period of time during which an insurer may contest fraudulent misstatements made in a health insurance application? -90 days after the effective policy date -6 months after the effective policy date -1 year after the effective policy date -As long as the policy is in force

As long as the policy is in force An insurer can contest a fraudulent misstatement as long as the policy is in force. No other statement or misstatement made in the application at the time of issue will be used to deny a claim after the policy has been in force for 2 years.

In a replacement situation, all of the following must be considered except: -Limitations -Benefits -Exclusions -Assets

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.

At what point must an Outline of Coverage be delivered? -At the time of application or upon delivery of policy -upon delivery of the policy only -at any point up to 30 days after policy delivery -at the time of application only

At the time of application or upon delivery of policy n Outline of Coverage must be delivered at the time of application or upon delivery of the policy.

In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is -More limited in duration. -Broader in duration. -Broader in general. -More limited in general.

Broader in general. A policy that uses the accidental bodily injury definition will provide broader coverage than a policy that uses the accidental means definition.

A business wants to make sure that if a key employee becomes disabled, the business will be protected from any resulting loss. Which kind of insurance will protect the business? -Business Loss -Business Disability -Individual Disability -Management Loss

Business Disability A business can purchase Business Disability Insurance in order to protect itself from losses resulting from the disability of key employees.

Most scheduled plans provide firs-dollar benefits without -exclusions and condition -coinsurance - premiums -copays

Coinsurance and Deductibles Scheduled/basic plans pay benefits from a list of procedures up to the amount shown in the schedule. Most plans provide first-dollar benefits without coinsurance or deductibles.

The purpose of managed care health insurance plans is to -Control health insurance claims expenses. BProvide for the continuation of coverage when an employee leaves the plan. CProvide access to the largest number of physicians as possible. DCoordinate benefits.

Control health insurance claims expenses. Managed care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan.

According to the Future Increase Option Rider (FIO), which of the following is NOT a qualifying event to increase an insured's benefit level? -Marriage -Birth of a child -Death of a spouse -Age 40

Death of a spouse The FIO rider allows insureds to increase their benefit levels to certain amounts at specific times without proof of insurability. The following are the typical occasions when an insurer allows for a benefit increase: ages 25, 28, 31, 34, 37 and 40; marriage; and the birth of a child.

What is the goal of the HMO? ALimiting the deductibles and coinsurance to reduce costs BProviding health services close to home -Early detection through regular checkups DProviding free health services

Early detection through regular checkups The goal of the HMO is early detection so members are encouraged to participate in regular checkups. In this way the HMO hopes to catch disease in its earliest stages when treatment has the greatest chance for success.

Elimination Period

Elimination period is a waiting period that is imposed on the insured from the onset of disability until benefit payments commence. It is a deductible measured in days, instead of dollars. The purpose of the elimination period is to eliminate coverage for short-term disabilities in which the insured will be able to return to work in a relatively short period of time. The elimination periods found in most policies range from 30 days to 180 days.

ABC insurance company receives an incomplete application and issues the policy anyway. Six months later ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions? -Estoppel -Adhesion -Unilateral -Consideration

Estoppel ABC had waived its right to receive answers to the missing information once the policy was issued; therefore, they are estopped from enforcing those waived rights. Waiver and Estoppel Waiver is the voluntary act of relinquishing a legal right, claim or privilege. Estoppel is a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived. Estoppel is a legal consequence of a waiver.

Long-Term Disability (LTD)

Group long-term disability plans are often reserved for management employees. The elimination period will usually coincide with the benefit period of the short-term disability plan. The benefit period may be to age 65. Lower-wage employees are usually limited to 66 and 2/3 % of monthly wage, while higher-wage employees are limited to 50% of monthly wage.

Group vs. Individual Plans

Group plans differ from individual plans in a variety of ways. Listed below are the most common differences between group and individual disability plans: Group plans usually specify the benefits based on a percentage of the worker's income, while individual policies usually specify a flat amount. Short-term group plans usually provide maximum benefit periods of 13 to 26 weeks, with weekly benefits of 50% to 100% of the individual's income. Individual short-term plans have maximum benefit periods of 6 months to 2 years. Group long-term plans provide maximum benefit periods of more than 2 years, with monthly benefits usually limited to 60% of the individual's income. Group disability plans also have minimum participation requirements. Usually, the employee must have worked for 30 to 90 days before becoming eligible for coverage. Group plans usually make benefits supplemental to any benefits received under workers compensation. Some group disability plans limit coverage to only nonoccupational disabilities.

A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? ANoncancellable BNondiscriminatory CIndemnity DGuaranteed

Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.

HIPAA applies to groups of AMore than 2, fewer than 50. B2 or more. CAt least 10. DAt least 100.

HIPAA applies to groups of two or more.

Which of the following health care plans would most likely provide the insured/subscriber with comprehensive health care coverage? AGroup dental insurance plan BMedical-surgical expense plan CBasic medical expense plan DHealth Maintenance Organization plan

HMOs provide a package of comprehensive health care services that include routine physicals, immunizations, well baby care, family planning, etc., as well as the treatment of sickness and injury.

Reinstatement

If the premium has not been paid by the end of the policy's grace period, the policy will lapse (terminate). This provision stipulates under what conditions the insured may reinstate coverage. Reinstatement is automatic if the company or an authorized representative accepts the policy premium and does not require a reinstatement application. However, if a reinstatement application is required and a conditional receipt is issued for the payment of the policy premium, the company may approve or disapprove the reinstatement application. Coverage is automatically reinstated if not refused within 45 days from the date the conditional receipt was issued. Accidents will be covered immediately following the reinstatement; however, sickness is covered only after 10 days. This helps to protect the insurer from adverse selection. Coverage for accidents is immediate when reinstatement occurs, but coverage for sickness may have a waiting period of about 10 days.

Under which of the following disability income plans would the benefits be subject to income tax? -Key person -Partnership buy-out -Group -Individual

In group disability income policies, benefit payments that are attributed to employee contributions are not taxable, but benefits payments that are attributed to employer contributions are taxable to the employee.

Which of the following is true regarding health insurance? -Disability coverage is excluded - It provides death benefit coverage -It only covers expense related to health care -it could provide payments for loss income

It could provide prayments for loss of income Health insurance is a generic term, encompassing several types of insurance contracts, which, though related, are designed to protect against different risks. It provides coverage for expenses related to health care, loss of income, and disability income.

Which of the following is NOT true regarding a flexible spending account? -It does not have limits on contributions. BIt operates on "use-or-lose" basis. CIt provides an opportunity to receive benefits on a pretax basis. DIt is a cafeteria plan.

It does not have limits on contributions. A Flexible Spending Account (FSA) is a form of cafeteria plan benefit funded by salary reduction. The employees are allowed to deposit a certain amount of their paycheck into an account before paying income taxes. FSA benefits are subject to annual maximum and "use-or-lose" rule.

Short Term Disability

It is not uncommon for an employer to provide short-term disability benefits for all of the company's employees. The elimination period could be as short as 0 days and the benefit period not longer than 2 years, but the benefit period could be 6 months or 1 year.

HIPAA Requirements

Legislation that took effect in July 1997 ensures "portability" of group insurance coverage and includes various required benefits that affect small employers, the self-employed, pregnant women, and the mentally ill. HIPAA (Health Insurance Portability and Accountability Act) regulates protection for both group health plans (for employers with 2 or more employees) and for individual insurance policies sold by insurance companies. HIPAA includes the following protection for coverage: Group Health Plans: Prohibiting discrimination against employees and dependents based on their health condition; and Allowing opportunities to enroll in a new plan to individuals in special circumstances. Individual Policies: Guaranteeing access to individual policies for qualifying individuals; and Guaranteeing renewability of individual policies.

A policyowner is reading a statement on the first page of his health insurance policy , which says : This is a limited policy." What is the Name of this statement? -Policy Limitation Notice -Statue of Limitations -Limited Benefit Statement -Limited Policy Notice

Limited Policy Notice It is required by law that a Limited Policy Notice must be printed on the first page of insurance policies. The statement reads "this is a limited policy," which means that the benefits offered by the policy are limited.

A health insurance plan which involves financing, managing, and delivery of health care services and involves a group of providers who share in the financial risk of the plan or who have an incentive to deliver cost effective service, is called AManaged care plan. BPreferred care plan. CLimited care plan. DSelf-insurer.

Managed care plans Managed care plans strive to deliver quality health care services on a cost effective basis.

What type of benefit helps to pay for accidental injuries that are not severe enough to qualify as disabilities? -Basic Accidental Injury -Accidental Death & Dismemberment -Medical Reimbursement Benefit -Partial Disability Inc

Medical Reimbursement Benefits MRB help to pay medical costs for accidental injuries that are not considered to be disabling.

An insured severely burns her hand, but is not classified as disabled. Which of the following types of coverage would cover at least a portion of the insured's medical expenses? -Accidental death & dismemberment -Partial disability -Medical reimbursement benefit -Medical expense compensation

Medical reimbursement benefit Medical reimbursement benefits help to pay medical costs for accidental injuries that are not considered to be disabling.

In a POS plan, benefits for covered services when self-referring (without having your primary care physician arrange for the service) are generally ALess expensive. BThe same cost. CSelf-referral is not allowed. DMore expensive.

More Expensive Benefits for covered services when self-referring (without having your primary care physician arrange for the service) are generally more expensive.

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? -No benefits -Full benefits -Partial benefits -Full benefits until the blindness lifts

NO benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because the insured's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits.

If payment of a premium is required to provide health insurance coverage for a child of the insured, the insured may be required to notify the company of the child's birth and pay the premium within -30 days. -60 days. -90 days. -180 days.

New York law specifies that the insurer be notified within 30 days of the birth of a newborn.

A 37-year-old owns a policy with a Guaranteed Insurability Rider. The policyowner would like to increase the benefit amount offered by the policy. What documentation will be required? -No documentation -Proof of insurability -Medical records -Attending physician's report

No documentation Guaranteed Insurability Rider allows an insured to increase the benefit level to a specific predetermined amount at certain times or on certain occasions without proof of insurability.

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? -Full -50% -25% -None

None General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.

The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called -Nonoccupational coverage. -Unemployment coverage. -Occupational coverage. -Workers compensation.

Nonoccupational coverage. Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness.

How long after the date of issue may an insurer cancel an accident and health policy?

Once a policy is in effect, an insurer has 90 days to cancel a policy by written notice.

What does the relation of earnings to insurance rule prevent? -Overinsurance -Insuring a person for too long -Duplicate insurance with another carrier -Charging too much for premiums

Overinsurance The relation of earnings to insurance rule is designed to protect an insurer from overinsuring disability cases. Before submitting payment, the insurer monitors the income of the insured for a period of time. The goal of this monitoring is to make sure that the income the insured receives while on disability is not greater than the income that the insured receives while working.

What is the major difference between a stock company and a mutual company? -Types of whole life policies -Ownership -Amount of death benefit -Number of producers

Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders.

All of the following are examples of risk retention except: -premiums -copayments -deductibles -self- insurance

Premiums Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.

Which of the following describes taxation of individual disability income insurance premiums and benefits? -Premiums are tax deductible, and benefits are taxable. -Premiums are not tax deductible, and benefits are not taxable. -Premiums are not tax deductible, but benefits are taxable. -Premiums are tax deductible, but benefits are not taxable.

Premiums are not tax deductible, and benefits are not taxable. In individual disability income, benefits are not taxable, and premiums are not tax deductible

After the elimination period, a totally disabled insured qualified and started receiving benefits from his disability income policy that has a waiver of premium rider. What will most likely happen to the premiums paid into the policy during the elimination period? -Premiums will be retained by the company, but no further premium will be required for the duration of the disability. -Premiums will be prorated. -Premiums will be waived. -Premiums will be refunded.

Premiums will be refunded. Premiums that were paid by the insured during the elimination period are usually refunded once the insured qualifies to begin receiving benefits.

Presumptive Disability

Presumptive Disability is a provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits. Some disability policies provide a benefit when people simply meet certain qualifications, regardless of their ability to work. The presumptive disability benefit provides a benefit for dismemberment (the loss of use of any two limbs), total and permanent blindness, or loss of speech or hearing. Some policies require actual severance of limbs rather than loss of use.

What is the term for the entity that an agent represents regarding contractual agreements with third parties -client -designee -insured -principal

Principal An agent represents the principal, acting on the entity's behalf in contractual agreements with third parties

While repairing the roof of his house an insured accidentally falls off and breaks his arm and sustains a head injury that results in total blindness of both eyes. His policy contains an Accidental Death & Dismemberment Rider. What is the extent of benefits that he will receive? -Reciprocal Amount -Principal Sum -Capital Sum -50% of the Principal

Principal Sum The insured dies, the insurer pays the full amount, also known as the "principal sum", which is also paid if the insured loses sight in both eyes or loses two limbs. If the insured lives but loses a hand or foot or the sight in one eye, the insured will be paid a percentage of the principal sum, usually 50%, which is called the "capital sum".

Pertaining to insurance, which if the definition of a fiduciary responsibilitY? -Helping insured to file claims -Performing reviews of insured's coverage -Offering additional coverage to clients -Promptly forwarding premiums to the insurance company

Promptly forwarding premiums to the insurance company Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.

Under which provision can a physician submit claim information prior to providing treatment? AAnticipatory Treatment BSuspended Treatment CProspective Review DConcurrent Review

Prospective Review Under the prospective review or precertification provision, the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.

What would a physician utilize if he/she wanted to know if a treatment is covered under an insured's plan and at what rate it will be paid? AConcurrent review BComprehensive review CSupplementary chart -Prospective review

Prospective review Under the prospective review or precertification provision, the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.

which is true regarding the Uniform Individual Accident and Sickness Policy provisions Law? -There are 10 mandatory Provisions -There are twelve optional policy provisions -Provisions maybe reworded by the insurer -The purpose of the provision is tos define the right of the polic holder; there is a separate law outline the rights of insurers.

Provisions maybe reworded by the insurer The Uniform Individual Accident and Sickness Policy Provisions Law defines the Rights and Duties of both the insurer and the policyholder. Although the wording of the provisions may change from the insurer to insurer, the provisions are essentially the same and are required by law to be included in all health insurance policies. The wording of the provisions may be altered, provided that the changes would not be detrimental to the policyholder or beneficiary.

An insurer is preparing to pay disability income benefits to an insured. In order to prevent overinsurance, the insurer monitors the income of the insured before submitting payment. Which rule corresponds to this behavior? -Income tracking -Income monitoring phase -Relation of earnings to insurance -Overinsurance prevention

Relation of earnings to insurance The relation of earnings to insurance rule is designed to protect an insurer from overinsuring disability cases. Before submitting payment, the insurer monitors the income of the insured for a period of time. The goal of this monitoring is to make sure that the income the insured receives while on disability is not greater than the income that the insured receives while working.

Which health insurance provision describes the insured's right to cancel coverage? -Insuring clause -Cancellation provision -Renewal provision -Policy duration provision

Renewal provision Renewability provisions are included in each health insurance contract and outlines both the insurer's and insured's right to cancel or renew coverage. This is considered to be a very important provision required by HIPAA, the federal Health Insurance Portability and Accountability Act of 1996.

Regarding cost containment in medical plans, what type of review process do employers and insurers use to evaluate the utilization review process and the effectiveness of the professionals involved in large insurance claims? AConcurrent review BProspective review CPreventive review -Retrospective review

Retrospective review Under the retrospective review process, employers and insurers can evaluate the utilization review process and the effectiveness of the professionals involved in large claims. These reviews include hospital bill audits.

A policyholder is entitled to which of the following under an individual accident and health policy? -Return of unearned premiums -Refusal of cancellation -Return of earned premiums -Extension of renewal period

Return of unearned premiums Most policies are cancelable, which means the insurer may cancel at any time with proper notice while retaining any earned premium. Only unearned premiums must be refunded. Cancellation and Renewability The insurer has the right to cancel an individual accident and health policy within the first 90 days after its issue, as long as the insurer provides a 10-day notice to the insured. The insurer must return any unearned premium on a pro-rata basis. Typically, disability income policies are renewable until the insured's age 65. The continuation of coverage rider provides that the insured can renew the policy after age 65 as long as they are actively and gainfully working full-time.

Your client has a Social Insurance Supplement (SIS) rider on his disability policy. After he becomes disabled, he receives payments from the company. Shortly thereafter, he also begins receiving Social Security benefit payments. Which of the following will happen? -Both plans will continue to pay fully. -The SIS payment will be reduced dollar-for-dollar by the Social Security benefit payment. -Social Security will discontinue benefits until the SIS rider expires. -The SIS rider will discontinue paying benefits.

The SIS payment will be reduced dollar-for-dollar A Social Insurance Supplement (SIS) rider pays a disability benefit in an amount close to what Social Security would pay. If Social Security benefit payments begin, the SIS payment will be reduced dollar-for-dollar by the Social Security benefit payment.

An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy? -The insured is in an accident and incurs a large claim. -The insured does not pay the premium. -The insured reaches the maximum age limit specified in the policy. -Within two years of the application, the insurer discovers a misrepresentation.

The insured is in an accident and incurs a large claim. The company may not cancel coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract.

Which of the following is NOT a characteristic of a group long-term disability plan? -The benefit can be up to 50% of one's yearly income. -The elimination period is the same as in the short-term plan's benefit period. -The benefit period may be to age 65. -The benefit can be up to 66 and 2/3% of one's monthly income.

The benefit can be up to 50% of one's yearly income. The maximum benefit is based upon monthly income.

Relation of Earnings to Insurance

The danger of being over-insured is always a potential risk with health insurance coverage, but this is especially true regarding disability income. The concept of indemnity must be protected. All disability income insurers use the Relation of Earnings to Insurance rule which allows the insurer to check the income of the insured for a specified period of time prior to the submission of an income claim. There will be a percentage cap that the insurer will enforce. A disability income insurer does not want a situation where there is no incentive for an insured to seek rehabilitation because that insured is receiving a greater income while disabled than he/she received while working. This is also why if an insured is covered by multiple policies, insurers are liable for only a proportionate amount of the disability benefits the insured will receive. This is figured by comparing the amount a single insurer will pay with the amount that would be paid by all insurers. However, the total monthly benefits cannot drop below the lesser of $200 or the sum of the monthly benefits specified in coverage.

Grace Period

The grace period is a period of time after the premium due date in which premiums may still be paid before the policy lapses for non payment of the premium. Although the grace period may differ according to the individual state laws, in most cases a grace period cannot be less than Seven days for weekly premium policies, 10 days from monthly premium policies, and 31 days for all other modes. Coverage will continue in force during the grace.

Guaranteed Renewable

The guaranteed renewable provision is similar to the non cancellable provision, with the exception that the insurer can increase the policy premium on the policy anniversary date. As with the noncancellable policy, coverage is generally not renewable beyond the insured's age 65.

Noncancellable

The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy (note that the policy may call for an increase in a certain year, such as "age 65," but that must be stated in the original contract). The insured has the right to renew the policy for the life of the contract; the insurer cannot increase the premium above the amount for which the policy was originally issued. However, the guarantee to renew coverage usually only applies until the insured reaches age 65, at which time the insured is usually eligible for Medicare. For disability income insurance the policy will be renewed beyond age 65 only if the insured can provide evidence that he or she has continued to work in a full-time job.

When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis? -service -reimbursement -scheduled -limited

The insured is responsible to pay the provider, and the policy reimburses the insured for covered expenses.

An insured has a Social Insurance Supplement rider in her disability income plan. Following a disability, she begins receiving benefit payments from the insurer. She then begins receiving Social Security benefits that are smaller than the SIS benefit payments. At that point, her insurer ends the SIS benefit payments. Which of the following best describes the situation? -The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit. -Miscommunication. The proper authorities should be notified in order to end Social Security payments so that the SIS rider will continue to pay. -Although a mistake may have occurred, the insured has no recourse. -This is typical of an SIS rider.

The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit. A Social Insurance Supplement (SIS) rider pays a disability benefit in an amount close to what Social Security would pay. If Social Security benefit payments begin, the SIS payment will be reduced dollar-for-dollar by the Social Security benefit payment. Therefore, completely ending SIS payment is illegal.

Which of the following is not a feature of a guaranteed renewable provision? -Theinsured's benefit cannot be reduced -The insured has a unilateral right to renew the policy for the life of the contract -coverage is not renewable beyond the insured's age 65 -The insurer can increase the policy premium on an individual basis

The insurer can increase the policy premium on an individual basis Guaranteed renewable provisoin has all the same features that the noncancellable procision does, wwiththe exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.

An insured has a heart attack 40 days after his new health insurance policy goes into effect. He has a quadruple bypass surgery and a long hospital stay. As a result, the insurer cancels the policy with a written notice 80 days after the effective policy date. Which of the following is true? -The insurer is cancelling the insured's policy on illegal grounds. -The insurer must pay a small benefit amount. -The insured must now pay all of the costs related to his heart attack and find a new insurer. -The insurer waited too long to cancel the coverage.

The insurer is cancelling the insured's policy on illegal grounds. An insurer can cancel a policy within 90 days of the effective coverage date, but it cannot cancel coverage based on a claim that was made prior to cancellation. Therefore, it is illegal for the insurer to cancel the policy in this context.

Which of the following not a feature of a noncancellable policy? - The insured has the right to renew the policy for the life of the contract -The insurer may terminate the contract only at renewal for certain conditions -The premiums cannot be increased beyond the stated amount in the policy -The guarantee to renew coverage usually applies until the insured reaches certain age

The insurer may terminate the contract only at renewal for certain conditions The insurance company can't cancel a noncancelable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract, however the guarantee to renew coverage usually only applies to age 65.

Which of the following is NOT the purpose of HIPAA? ATo provide immediate coverage to new employees who had been previously covered for 18 months BTo guarantee the right to buy individual policies to eligible individuals CTo prohibit discrimination against employees based on their health status DTo limit exclusions for pre-existing conditions

To provide immediate coverage to new employees who had been previously covered for 18 months HIPAA does not prohibit employers or providers from establishing waiting periods or pre-existing conditions exclusions, in which case the coverage to new employees would not be immediate.

An insured is admitted to the hospital for surgery on a herniated disk. The insurance company monitors the treatment and progress in order to make sure that everything proceeds according to the insurer's schedule. This is called -Comprehensive review. -Schedule of benefits. -Concurrent review. -Prospective review.

Under the concurrent review process, the insurance company will monitor the insured's hospital stay to make sure that everything is proceeding according to schedule and that the insured will be released from the hospital as planned.

An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What provision allows for this? -Proof of loss -Payment of claims -Unpaid premium -Legal action

Unpaid Premium If a premium is past due and the insurer owes claim payment, the amount of the premium will be deducted from the amount of the claim. For example, if a claim is worth $500 and the premium costs $200, the insured would receive the net total of $300 from his insurer.

The insurer must be able to rely on the statements in the application and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as -reasonable expectations -a warranty -implied warranty -Utmost Good Faith

Utmost Good Faith The insurer must be able to rely on the statements given by the insured in the application. The insured must be able to rely on the insurer's promise to pay covered losses.

An insured has been injured in an accident. Although he is still receiving benefits from his disability income policy, he does not have to pay premiums. This means that the policy includes -Benefit of payment clause. -Waiver of all payment. -Waiver of premium feature. -Return of premium rider.

Waiver of premium feature. Waiver of premium benefit allows the insured, when disabled, to forego paying the premiums once he/she qualifies for benefits.