LAH Exam

What is a term health policy? is it renewable or nonrenewable?

-Basic health coverage -Its nonrenewable

Does the COBRA Act require all employers to provide extended group health coverage to all employees?

-No, it only applies to terminated employees -The number or age of employees is irrelevant

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?

0%

• Which of the following is the closest term to an "authorized" insurer?

Admitted

• If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association that would be considered

An unfair trade practice

• Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health care?

Attending physician

• The act of voluntarily giving up insurance by the insured is called

Cancellation

• An insurance producer just sold an insurance policy to his sister. What kind of business is this?

Controlled

• A long stretch of national economic hardship causes a 7% rate of inflation. Devonne notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that caused this change?

Cost of living rider

• If an insured changes his payment plan from monthly to annually, what happens to the total premium?

Decreases

• All other factors being equal, which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?

Greatest

What policy protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment?

Insurance Guaranty Association

• Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer

A woman divorces her husband at age 35 and collects distributions on her retirement plan as a result. What penalties will she have to pay?

None

• Under which of the following organizations are the practicing providers compensated on a fee-for-service basis?

PPO

• Which of the following is the most common time for errors and omissions to occur on the part of an insurer?

Policy delivery

• All of the following are considered to be basic benefits of an HMO plan EXCEPT

Prescription drugs

• An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable

Spouse

• In a group life insurance policy, the employer may select all of the following EXCEPT

The beneficiary

• Peril is most easily defined as

The cause of loss insured against

What is the purpose of COBRA?

To provide continuation of coverage for terminated employees

• Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

• An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?

o $8,000, 60 days o Generally, IRA rollovers must be completed within 60 days from the time the money is taken out of the first plan. If the distribution from the first plan is paid directly to the participant, 20% of the distribution must be withheld by the payor.

• An insured has a variable life policy with a $100,000 face amount. At one time, the cash value exceeded $100,000 and was worth $150,000. During this time, the policy face amount was increased to $150,000. In the following year, the cash value took a significant decline and was worth only $70,000. What was the policy's face amount adjusted to?

o 100,000 o Because the cash value decreased, the policy face amount was lowered back down to the original $100,000. It cannot be lower than the guaranteed minimum of $100,000.

• Which of the following statements about group life is correct?

o The cost of coverage is based on the ratio of men and women in the group

• All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

o The policy is owned by the company.

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

-$102 -The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.

• Which of the following is INCORRECT concerning taxation of disability income benefits?

-If paid by the individual, the premiums are tax deductible. -If an individual purchases his or her own disability insurance with before-tax dollars, any benefits paid are tax free, but the premium is not tax deductible. If an employer pays the premium, the employer may deduct the premium as a business expense. Any benefits paid to an employee are taxable, unless it is for the permanent loss of a body part, or loss of use of a body part.

What is an 1035 exchange?Which of the following is NOT an allowable 1035 exchange?

-Provision which allows the policyholder to transfer funds to a new policy without having to pay taxes -A whole life insurance policy is exchanged for a term insurance policy

• According to OBRA, what is the minimum number of employees required to constitute a large group?

100

• To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?

18 months

• A temporary license in this state is valid for what time period?

180 (6 months)

• HIPAA applies to groups of

2 or more

• What is the minimum number of continuing education hours must producers complete every 2 years?

24

What is the period of coverage for events such as death or divorce under COBRA?

36 months (3 years)

• In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?

5

• If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply?

5 days

• How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people?

6

Which employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Employees insured under the plan for at least 5 years

• All of the following are characteristics of a Major Medical Expense policy EXCEPT

Low Maximum limits

• If a dental plan is integrated, it is combined with what type of plan?

Medical

• In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received?

No tax

• Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss?

Notice of claim

• Who is involved in completing the agent's report?

Only the agent

• Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

Replacement Rule

• Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

The Fair Credit Reporting Act

• The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured estate

All of the following are characteristics of a Universal Life policy EXCEPT ***

The planned premium pays for mortality charges and expenses and any excess is returned to the policy owner

• Which of the following would NOT qualify as a small employer?

o A partnership that has 100 employees during 25% of its business days o The term "small employer" applies to any person or entity actively engaged in business or self-employment for at least 3 consecutive months that employs no more than 50 eligible employees on 50% of business days during the preceding 12 months.

• Which of the following conditions would a disability income policy most likely NOT require in order to qualify for benefits?

o A specified income status prior to the disability

• What is a material misrepresentation?

o A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company o A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

• Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain

o A statement that is sufficiently clear to identify the insured and the nature of the claim.

• Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

o Aleatory

• Which of the following individuals is eligible for a Health Savings Account?

o Allison is insured by a High Deductible Health Plan (HDHP

• Who can make a fully deductible contribution to a traditional IRA?

o An individual not covered by an employer-sponsored plan who has earned income

• All other factors being equal, the least expensive first-year premium payment is found in

o Annually Renewable Term. o Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

• A father purchased a policy to provide coverage on himself, his wife, and their two children. All of them would need to prove insurability EXCEPT

o Any children born to them after the inception of the contract

• Which of the following is NOT true of Section 1035 Policy Exchanges?

o Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days. There is no specific time

• Employer contributions made to a qualified plan

o Are subject to vesting requirements

• SIMPLE Plans require all of the following EXCEPT

o At least 1,000 employees. o A SIMPLE plan is available to small businesses that employ not more than 100 employees receiving at least $5,000 in compensation from the employer during the previous year.

• Which of the following would NOT be true regarding a $100,000 20-year level term policy?

o At the end of 20 years, the policy's cash value will equal $100,000.

• Which of the following is a feature of a variable annuity?

o Benefit payment amounts are not guaranteed.

All of the following statements are correct regarding Credit Life Insurance EXCEPT

o Benefits are paid to the borrower's beneficiary.

• When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply?

o Case management provision

• An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act?

o Direct response marketing

• Which agreement specifies how a business will transfer hands when one of the owners dies or becomes disabled?

o Disability Buy-Sell

• All of the following statements concerning dividends are true EXCEPT

o Dividend amounts are guaranteed in the policy.

• If an annuitant dies before annuitization occurs, what will the beneficiary receive?

o Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

• All of the following actions can be described as twisting EXCEPT

o Explaining to client the advantages of permanent insurance over term and suggesting changing policies

• A man wants to buy a life insurance policy in which he can count on guaranteed minimum benefits. Which type should he buy?

o Fixed o Fixed life insurance policies offer minimum guaranteed or fixed benefits stated in the contract. The other type of policy, variable life, varies in its cash value because its value is based on the stocks that support it.

• A Universal Life insurance policy has two types of interest rate that are called

o Guaranteed and Current

• In order to minimize adverse selection, employer group dental plans may require employees who enroll after they were initially eligible to participate to do all of the following EXCEPT

o Increase benefits for a period of one year. o Dental claims expenses are substantially higher in the group dental plan the first year than in subsequent years. This is because individuals delay their dental needs until the dental plan becomes effective. To minimize the effects of this adverse selection, the insurer will utilize methods to combat this first year expense.

• Which of the following best describes the MIB?

o It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

• How is the amount of Social Security disability benefits calculated?

o It is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years.

• The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

o Joint and survivor

• 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?

o Material representation

• In cases where a covered employee is eligible for Medicare benefits to treat end-stage renal disease (ESRD) with dialysis or kidney transplant, which of the following is correct?

o Medicare is the secondary payer during the first 30 months of treatment. o Individuals eligible for Medicare because of end-stage renal disease (ESRD) and covered under the employer's group plan are primarily covered by the group health coverage for the first 30 months, then Medicare would become the primary health provider

• Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds?

o Optionally renewable

• Which of the following statements is INCORRECT concerning Medicare Part B coverage?

o Part B coverage is provided free of charge when an individual turns age 65. Those who desire Part B coverage must enroll and pay a monthly premium.

• Which of the following riders would NOT cause the Death Benefit to increase?

o Payor Benefit Rider o Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

• Which of the following is correct regarding Business Overhead Expense insurance?

o Premiums are tax deductible.

• Which nonforfeiture option provides coverage for the longest period of time?

o Reduced paid-up

• Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information contained in his/her report, the reporting agency must

o Respond to the consumer's complaint.

• A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

o Revocable beneficiary.

• When a group disability insurance policy is paid entirely by the employer, benefits paid to disabled employees are

o Taxable income to the employee.

• Which of the following may NOT be included in an insurance company's advertisement?

o That its policies are covered by a state Guaranty Association

• Which of the following is an example of apparent authority of an agent appointed by an insurer?

o The agent accepts a premium payment after the end of the grace period. o An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationery and signage may be either express (written) or implied (not written), but in either case, it is allowed.

• Under which of the following types of receipts will the coverage begin immediately even if the applicant is later found uninsurable?

o The deduction is permitted only if the sole proprietor or partner is covered under another medical expense plan.

• Which of the following describes the tax advantage of a qualified retirement plan?

o The earnings in the plan accumulate tax deferred.

• Which statement accurately describes group disability income insurance?

o The extent of benefits offered is determined by the insured's income.

• A man is enrolled in Part A of Medicare and not Part B. Three months into coverage, he applies for a Medicare supplement policy. Which of the following is true

o The insurer can deny coverage. o Under the Omnibus Budget Reconciliation Act (OBRA) of 1990, Medicare Supplement insurance may not be denied on the basis of an applicant's health status, claims experience, or medical condition during the first six months after a Medicare beneficiary age 65 or older first enrolls in Part B of Medicare. This is referred to as the "open enrollment period." In this case, the insured was enrolled in Part A coverage, so this law would not apply.

• Which of the following is true regarding underwriting for a person with HIV?

o The person may not be declined for medical coverage solely based on HIV status.

• A policy provision conflicts with state statutes. Which of the following will happen?

o The provision may be altered to conform to the state statutes if the Conformity with State Statutes provision is included in the policy.

• The amount of Social Security disability benefits is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over which years? Which years of income may be deleted from calculation?

o Their highest 35; lowest 5 o The amount of Social Security disability benefits is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. The lowest 5 years of income may be deleted from calculation.

• Annuity contracts grow tax deferred. That means that

o There is no current income taxation upon the growth in the annuity.

• What is the purpose of a Medicare Carve-out or Supplements?

o They pay deductibles or copayments that are not paid by Medicare.

• Which of the following is NOT the purpose of HIPAA?

o To provide immediate coverage to new employees who had been previously covered for 18 months o 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.

• When may an insurance company use suicide as a defense against paying a death claim

o When death occurs within a specified period of time after the policy was issued

• When would life insurance policy proceeds be included in the insured's taxable estate?

o When there are any incidents of ownership at the time of death

• Can an individual who belongs to a POS plan use an out-of-network physician?

o yes, and they may use any preferred physician, even if not part of the HMO