Life and Health

ABC Health Insurance Company insures a risk without being notified that the insured already has existing coverage for the same risk. The policy that ABC issued contains the Insurance with Other Insurers provision. When a loss occurs, the total coverage that the insured had purchased (including the coverage that ABC was unaware of at the time of application) would pay $5,000. Had ABC been the only insurer, it would have paid $2,500. What amount is ABC liable to pay? A) $2,500.00 B) $1,750.00 C) $0.00 D) $1,250.00

$1,250.00 According to the Insurance with Other Insurers provision, benefits payable for expenses incurred are prorated if the insurer accepted the risk without being notified of other existing coverage for the same risk. The insurer is only liable to pay pro rata benefits in proportion to the amount of insurance with the insurer as it relates to the total amount of insurance under all policies. As a result, if ABC's policy would have paid a total of $2,500 for the claim and the benefit payable under all coverages totals $5,000, ABC must pay only half of the amount it would have otherwise paid (or $1,250).

Ken owns a participating whole life insurance policy that was issued with a $100,000 face amount and now has total death benefit protection of $120,000 because he uses the paid-up additions dividend option. If Ken were to borrow $10,000 from the policy, what would be the value of the policy's face amount (including paid-up additions)?

$100,000.00 Dividends paid on a participating life policy are, in effect, used as the premium for a single-premium life policy of the same type as the base policy that yielded the dividend. This paid-up addition accrues cash value and has the tax advantages of life insurance. The policyowner only needs to continue paying premium on the base policy. Unlike policy withdrawals, policy loans do not reduce the face amount of the policy. The actual benefit paid out could be reduced to the extent of outstanding loan and interest balances, but the face amount remains fixed while the policy is active. In this case, Ken applied the dividends from the base policy ($100,000 face amount) toward single-premium life policies, which have now added up to an additional $20,000, for a total of $120,000 in death benefit protection. If he borrows $10,000 from the policy, he will have $110,000 remaining in the policy's death benefit, but the face amount is still $100,000.

Frank owns and is insured by a participating whole life insurance policy with a death benefit of $85,000, including $35,000 of paid-up additions to the face amount. His basis in the policy is $30,000. The beneficiaries are his daughter and son, equally. If he dies today, what amount of this policy would be valued in Frank's estate? A) $55,000.00 B) $50,000.00 C) $0.00 D) $85,000.00

$85,000.00 Life insurance owned by the insured is included, at its full death benefit amount, in the insured's estate at death for estate valuation purposes.

Which of the following statements pertaining to partnership buy-sell plans is CORRECT? A) In a cross-purchase plan, the partnership is a party to the buy-sell agreement. B) By law, a partnership ceases to exist when a partner dies. C) A partnership buy-sell agreement can work if only 2 partners are involved. D) Homer and Wilbur are partners. Each buys an insurance policy to insure the life of the other. Therefore, their buy-sell agreement is an entity plan.

By law, a partnership ceases to exist when a partner dies. Because partnerships are dissolved automatically by the death of a partner, it is vital that a binding buy-sell agreement be established by the partners while they are living. In an entity plan, the insurance is owned by the partnership. In a cross-purchase plan, each partner owns insurance on the lives of the other partners.

A life insurance policy provides for monthly income payments if the insured dies at any time during the first ten years. The income period begins when the policy is issued and ends ten years later. What kind of policy is this? A) Family income. B) Family maintenance. C) Modified whole life. D) Modified endowment.

Family income. A family income policy is a combination of whole life and decreasing term covering a select period of years. If the insured dies within the specified period, the policy provides a certain monthly income from the date of death until the end of the specified period. This period is known as the "income period" and the monthly payments are accomplished by the term insurance. At the end of the specified period, the face amount of the whole life policy is payable to the beneficiary. If the insured lives beyond the specified income period, only the face amount of the whole life policy is payable.

What accident and health insurance renewability clause means the insurer cannot unilaterally change any provision while the policy is in force but can change premium rates by class? A) Noncancellable. B) Guaranteed renewable. C) Provisional. D) Transitional

Guaranteed renewable. An insurer cannot unilaterally change a guaranteed renewable accident and health insurance policy while the policy is in force. Nevertheless, it can change premium rates by class

Maria is covered as a dependent under her mother's employer-sponsored group health insurance plan. Which of the following events will NOT end her participation in the plan? A) She reaches the specified age that no longer qualifies her as a dependent. B) She moves out on her own and gets a full-time job. C) She gets married. D) Her mother leaves her job and converts her insurance to an individual policy.

Her mother leaves her job and converts her insurance to an individual policy. Under an employee's conversion rights, eligible dependents are also covered under the new, individual policy. Her eligibility will cease, however, if Maria gets married, is no longer a dependent, or no longer qualifies as a dependent due to age.

An employee is eligible to continue his health insurance under COBRA rules. Which of the following statements is CORRECT? A) His coverage under COBRA will be identical to that which he had under his group plan. B) His coverage can be continued even if the employer terminates the entire health plan. C) He can continue the coverage for up to 36 months, even if he obtains new coverage elsewhere. D) He can increase the benefits he will receive from his plan up to 102% of his previous coverage.

His coverage under COBRA will be identical to that which he had under his group plan. An eligible employee is entitled to coverage that is identical to his previous plan. Under COBRA rules, his coverage will be terminated if he obtains insurance elsewhere. To be insured under 2 policies will violate the prohibition on gain without loss and will result in overinsurance. The actual coverage will be the same as his original plan, but the premium may be increased up to 102% of the previous rate. Coverage will end if the entire plan is terminated.

Which of the following statements regarding the renewability of small employer group health insurance is NOT correct? A) An insurer may refuse to renew a plan if the small employer was found guilty of fraud while enrolling members of the plan. B) An insurer has the right not to renew a plan for a small group employer if doing so would financially impair the insurer. C) If a plan is being renewed, it must be renewed for all members of the group. D) If an insurer is not renewing a health plan for a small employer, it must provide 30 days' notice.

If an insurer is not renewing a health plan for a small employer, it must provide 30 days' notice. Every plan must be renewable with respect to all eligible persons and eligible dependents, except for those reasons that permit a carrier to deny issuance of a plan (e.g., fraud, failure to pay premiums, threat of insolvency, or failure to comply with the insurer's requests). When refusing to renew a plan, the insurer must provide at least 50 days' advance notice of its intent not to renew.

Louis has 3 individual health insurance policies and is concerned that the benefits may overlap. What is likely to happen in the event he makes a claim for coverage under all three policies? A) If the claim is made after the policies have been in force for at least two years, the insurer is obligated to pay all claims and pay any excess premiums directly to Louis or his beneficiary, regardless of the number of insurers covering the risk. B) If one insurer covers the risk, it will pay the claim and any premiums that apply to any excess will be returned to Louis. C) If two or more insurers cover the same risk, there is a presumption of fraud. All policies will be canceled and all premiums will be refunded. D) If two insurers cover the same risk, they will divide claims equally and refund any excess premiums to Louis.

If one insurer covers the risk, it will pay the claim and any premiums that apply to any excess will be returned to Louis. Regardless of the number of insurers involved or how long the policies have been in force, the insurers will refund excess premiums to the insured. If one insurer covers the risk, the insurer will either pay up to a specified maximum or pay benefits under the policy elected by the insured. The payment that applies will be determined by the Other Insurance with This Insurer provision that is included in the insurer's policies. If 2 insurers cover the risk, benefits will be prorated. They will not be divided equally.

Doreen is appointed by an insurance company to transact insurance on its behalf. She collects her clients premiums and has them sign paperwork. By what authority can she do so? A) Apparent. B) Fiduciary. C) Express. D) Implied.

Implied. Implied authority is not expressly granted but is assumed to have been given in order to transact the principal's business. It is incidental to express authority because not every detail of an agent's authority can be specifically noted.

Mark's medical expense policy states that it will pay a flat $75 per day for room and board for each day of hospitalization. The policy pays benefits on which basis?

Indemnity. Medical expense policies written on an indemnity basis pay a daily benefit for each day of hospitalization, regardless of the actual expenses.

Which of the following statements is NOT correct regarding variable life insurance in Pennsylvania? A) All variable life policies must be filed for approval with the commissioner. B) Investment risk is the responsibility of the insurer. C) Variable life insurance is a security. D) The separate account is primarily composed of stocks and bonds.

Investment risk is the responsibility of the insurer. Owners of variable life insurance policies assume the policy investment risk, unlike fixed policies in which values can be guaranteed.

Which of the following statements describes franchise insurance? A) It may be issued to individuals with or without evidence of insurability. B) It is available only to persons who deliver materials to a central point. C) It is treated in the same manner as any group insurance plan. D) It is issued only to certain businesses that are owned by individuals.

It may be issued to individuals with or without evidence of insurability. Franchise insurance is coverage issued as individual accident and health insurance policies distributed on a mass merchandising basis. It is administered by group methods with or without evidence of insurability.

A) Life insurance is an ideal medium for funding a buy-sell agreement because, for a reasonable premium, it makes money available when needed to activate the sale of the business. B) In a sole proprietor buy-sell agreement, the sole proprietor is the owner of the policy. C) Concerning disposition of the business after the proprietor's death, the only alternatives open to a sole proprietor are to dissolve the business or leave it to an heir as a bequest. D) A buy-sell agreement for a sole proprietor can be drafted by the proprietor or the life insurance agent.

Life insurance is an ideal medium for funding a buy-sell agreement because, for a reasonable premium, it makes money available when needed to activate the sale of the business. When a sole proprietor dies, the business can come to a sudden halt unless some arrangement has been made beforehand to continue the business. A buy-sell agreement funded by a life insurance policy purchased by an employee (or other party) on the life of the proprietor will transfer the business from the owner to the other party at an agreed-upon price. The agreement must be drafted by an attorney.

Mary, age 70, recently purchased a nonqualified immediate annuity to supplement her retirement income and through it will receive a lifetime income of $800 per month. Which of the following statements most correctly describes how this income will be taxed? A) Mary will not pay income tax until the sum of payments received equals her basis, at which point all future payments are fully taxable. B) Mary will pay income tax each year on just a portion of the payments received, and when she has fully recovered her basis, all future payments are taxable. C) Mary will pay income tax each year on just a portion of the payments received, and when she has fully recovered her basis, all future payments will not be taxed. D) Mary will pay income tax on the full amount received each year until the sum of payments equals the amount she paid for the annuity (her basis), at which point all future payments are not taxed.

Mary will pay income tax each year on just a portion of the payments received, and when she has fully recovered her basis, all future payments are taxable How benefits will be taxed in retirement will always be an important part of any senior planning. The exclusion ratio calculation identifies the amount of each annuity payment that is a tax-free return of basis. The remaining amount of each annuity payment is taxable as ordinary income. Once the annuity's cost basis is fully returned, however, the full amount of any further payments is fully taxable.

The Medicare Advantage Program offers all of the following to Medicare beneficiaries EXCEPT: A) health maintenance organizations (HMOs). B) provider-sponsored organizations (PSOs). C) Medicaid. D) preferred provider organizations (PPOs).

Medicaid. The Medicare Advantage Program (Medicare Part C) gives Medicare beneficiaries a variety of alternatives from which to obtain Medicare-covered services. Medicare participants are also able to take advantage of tax-free health savings accounts (HSAs) for routine medical bills and a government-funded, high-deductible health plan (HSA plan) for catastrophic expenses. The program also offers a combination of private fee-for-service health plans, self-funding, and private contracts with doctors for particular services. Medicaid offers assistance with medical costs to low-income individuals.

Which of the following is NOT available to Medicare beneficiaries through the Medicare Advantage Program? A) HMOs. B) PSOs. C) PPOs. D) Medicaid.

Medicaid. The Medicare Advantage Program gives Medicare beneficiaries a number of alternatives from which to obtain Medicare-covered services. Medicare participants are also able to take advantage of tax-free medical savings accounts (MSAs) for routine medical bills and a government-funded high deductible MSA health plan (MSA plan) for catastrophic expenses. The program also offers a combination of private fee-for-service health plans and self-funding, and private contracts with physicians for particular services. Medicaid offers assistance with medical costs to low-income individuals.

A Medicare supplement policy that contains restricted network provisions is known as a: A) Medicare SELECT policy. B) HMO. C) long-term care policy. D) individual health policy.

Medicare SELECT policy. A Medicare select policy or Medicare select certificate mean respectively a Medicare supplement policy or certificate that contains restricted network provisions.

Which of the following is an optional provision in an individual accident and health insurance policy? A) Change of beneficiary. B) Reinstatement. C) Time limit on defenses. D) Misstatement of age.

Misstatement of age. Individual accident and health insurance policies must contain provisions for reinstatement, time limit on defenses, and change of beneficiary. A misstatement of age provision is optional. However, if it is included in a policy, the Commissioner must approve the wording.

Which of the following statements about long-term care insurance policies is NOT correct? A) Most offer unlimited lifetime coverage rather than set, maximum coverage periods. B) Most begin to pay benefits when an insured becomes cognitively impaired or needs ongoing assistance in two or more activities of daily living. C) They sometimes offer inflation riders to help keep pace with increases in long-term care costs. D) Most are indemnity plans.

Most offer unlimited lifetime coverage rather than set, maximum coverage periods Most long-term care policies do not offer unlimited lifetime coverage; rather, they provide maximum coverage periods that generally extend from two to six years.

Angela's fiance gets a job with an architectural firm of 20 employees. He obtains medical expense coverage through his employer's group plan. Angela and her fiance marry, and he lists Angela as a dependent under his plan. She becomes pregnant. What coverage, if any, can she expect from her husband's group policy? A) Medical care during pregnancy is not covered. B) Routine maternity care is partially covered because of Angela's status as dependent. C) Routine maternity care will be covered in full. D) Care for complications arising from the pregnancy is excluded.

Routine maternity care will be covered in full., was correct!. Although individual health plans commonly exclude routine maternity care from coverage, group medical expense plans must provide maternity benefits. This is the result of a 1979 amendment to the Civil Rights Act, which requires plans covering 15 or more people to treat pregnancy-related claims no differently than any other allowable medical expense. However, the Act does not require insurers to pay for expenses arising from an abortion except when the mother's life would be endangered if the fetus were carried to term, or where medical complications have arisen from an abortion.

What is the main difference between Medicare SELECT and standard Medigap insurance? A) SELECT policies provide more coverage for nursing home and convalescent care. B) SELECT policies generally have higher premiums because they provide more benefits than standard Medigap policies. C) SELECT insurers have specific hospitals, and sometimes specific doctors, that must be used to be eligible for full benefits. D) SELECT insurers operate on a managed care system while standard Medigap insurers do not.

SELECT insurers have specific hospitals, and sometimes specific doctors, that must be used to be eligible for full benefits. Medicare SELECT is the same as standard Medigap insurance in nearly all respects. The main difference between the two types of insurance is that each SELECT insurer has specific hospitals, and in some cases, specific doctors, that must be used (except in an emergency) in order to be eligible for full benefits.

Jim has just received a lump-sum payment from his individual disability income policy provider. Which of the following is the best explanation for this payment?

Some individual disability income policies include a partial refund of premium if no claims are made after a certain period of time. Termination of Social Security benefits will not result in a lump-sum benefit payment. Monthly benefits begin when a policy's elimination period ends

Which of the following statements pertaining to sources of insurability information is CORRECT? A) When conducting an inspection report, an investigator cannot interview an individual who actually knows the applicant. B) Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved, and to replace the application in unusual cases. C) The insurance agent completes the medical report on a life insurance applicant. D) An insurer cannot use an unfavorable credit report to reject an applicant for insurance.

Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved, and to replace the application in unusual cases. Special questionnaires are used to obtain additional information when an extra hazard or risk (e.g., skydiving) may be involved and to replace the application in unusual cases. A medical report, if required, is completed by a physician or paramedic, not by the agent. An unfavorable credit report can be used to reject an applicant. Investigators do interview individuals who are personally acquainted with the insurance applicant.

Which of the following statements about annuities is NOT correct? A) The 10% penalty tax on early distributions does not apply to distributions made to the annuity owner after separating from service from the employer after the owner reaches age 55. B) The 10% penalty tax on early distributions does not apply to distributions made to pay for higher education. C) Annuities may be appropriate investments for both individuals and corporations. D) The 10% penalty tax is imposed on the interest earned and withdrawn, not on the principal.

The 10% penalty tax on early distributions does not apply to distributions made to pay for higher education Individuals often purchase annuities to provide retirement income while businesses may use them to provide a guaranteed income at retirement for employees without having to administer a formal retirement plan. To ensure that annuities are used for retirement purposes, a 10% penalty tax is imposed on distributions from a deferred annuity to a person who has not yet reached age 59½. This penalty is imposed on the interest earned and withdrawn, not on the principal. However, the penalty tax does not apply to distributions made to an annuity owner who separates from service from an employer and has reached age 55. The penalty is also inapplicable to distributions made under a deferred annuity contract purchased by the employer at the termination of a qualified plan and held until the taxpayer separates from service.

Which of the following statements about enhanced ordinary life (economatic) products is NOT correct? A) Policy dividends or additional premiums may used to purchase paid-up insurance. B) Economatic products combine some features of whole life insurance and term insurance. C) The cash value from an existing traditional whole life policy cannot be rolled over into enhanced ordinary life product. D) Enhanced ordinary life products and universal life products have many similar features.

The cash value from an existing traditional whole life policy cannot be rolled over into enhanced ordinary life product. Traditional whole life policies generally accumulate enough cash value to be rolled into an enhanced ordinary life product. An enhanced ordinary life (economatic) policy is a type of whole life policy that uses dividends to provide some form of level constant coverage. The purpose is to provide a whole life participating policy with a low premium. Typically, the face amount is reduced after a few years and dividends are used to purchase deferred paid-up whole life additions to fill the gap when the reduction in face amount occurs. The result is that the face amount remains at least equal to the original face amount.

Which of the following statements regarding the life insurance lump-sum cash payment settlement option is NOT correct? A) Under this settlement option the proceeds are generally received income tax free. B) The death proceeds under the lump-sum settlement include only the death benefit from the base life insurance policy. C) Most life insurance polices are distributed under the lump sum settlement option. D) It can be divided between 2 or more beneficiaries in any proportion selected by the policyowner.

The death proceeds under the lump-sum settlement include only the death benefit from the base life insurance policy. Most life insurance polices are distributed under the lump sum settlement option. The life insurance proceeds received under this settlement option are generally received income tax free and can be distributed between 2 or more beneficiaries in any proportion selected by the policyowner. The proceeds paid under this settlement would include the base policy death benefit, paid-up insurance additions, any accumulated dividends, and any applicable riders such as term insurance, accidental death, etc.

Tammy owns a participating whole life insurance policy for which she has elected the paid-up additions option. If the insurer declares a dividend of $500 in the current year, how will this amount be used with this dividend option? A) The insurer adds a paid-up unit of whole life insurance with a cash value that is equal to $500. B) The insurer adds $500 to the face amount of Tammy's base policy. C) The insurer adds a paid-up unit of whole life insurance with a $500 face amount to Tammy's base policy. D) The insured uses the $500 as if it were a single premium to purchase a unit of paid-up whole life insurance based on Tammy's attained age.

The insured uses the $500 as if it were a single premium to purchase a unit of paid-up whole life insurance based on Tammy's attained age., was correct!. The paid-up additions dividend option uses the annual policy dividend as if it were a single premium to purchase a paid-up whole life insurance policy.

For which of the following situations would a life income settlement using the joint-and-survivor option be suitable? A) The insured wants to use the proceeds to fund a trust to provide financial protection for his children. B) The insured wants to make sure his wife receives income for life, but if she predeceases him, he wants his daughter to receive the money according to the settlement option she chooses. C) The insured wants to use the proceeds to provide his son and daughter-in-law with income that will last as long as either is alive. D) The insured wants to split the proceeds equally between his son and daughter and wants to use the money to provide each with income for life.

The insured wants to use the proceeds to provide his son and daughter-in-law with income that will last as long as either is alive. The joint-and-survivor option makes the most sense when the goal is to provide a couple with income for as long as either is alive.

Social Security disability benefits are characterized by which of the following? A) The recipient must be unable to engage in any gainful employment. B) Reduced benefits are paid for partial disability. C) There is a 12-month waiting period to qualify for benefits. D) Benefits are based on a percentage of the recipient's preretirement income.

The recipient must be unable to engage in any gainful employment. If the individual is able to find any work, regardless of education or experience, he is not eligible to receive disability benefits under Social Security.

Which of the following persons may receive a temporary insurance agent's license? A) A representative of the Commissioner conducting an investigation. B) A surplus lines agent while studying for the life insurance agent's licensing exam. C) The surviving spouse of an agent who dies. D) An official agent of the insurance guaranty association

The surviving spouse of an agent who dies. A temporary license can be issued to a person who takes over the business of a disabled or deceased agent.

All the following statements regarding annuities owned by a corporation that cover key employees are correct EXCEPT: A) there are no income tax consequences to the key employee/annuitant. B) if the corporation surrenders the deferred annuity for its cash value, the amount of the cash surrender value is greater than the corporation's basis in the contract, subject to income taxation to the corporation. C) annuity benefits payable to the corporation with the key employee as annuitant are income tax free to the corporation. D) premiums paid by the corporation are not tax deductible.

annuity benefits payable to the corporation with the key employee as annuitant are income tax free to the corporation. Annuities that are owned by a corporation with a key employee as annuitant are treated the same, for tax purposes, as annuities owned by individuals. Annuity benefit payments are subject to taxation under the annuity taxation exclusion ratio rules.

To enroll in an employer's qualified retirement plan, employees must: A) be at least 18 years old and complete 1 year of service. B) be at least 21 years old and complete 1 year of service. C) be at least 18 years old. D) complete 1 year of service.

be at least 21 years old and complete 1 year of service. In general, employees who are at least 21 years old and have completed 1 year of service must be allowed to enroll in a qualified plan. If the plan provides for 100% vesting upon participation, they may be required to complete 2 years of service before enrolling

With disability income insurance, a probationary period may NOT apply when the insured is disabled: A) by accidental injury. B) while at work. C) by sickness. D) while traveling.

by accidental injury. With disability income insurance, the probationary period generally applies to sickness, but not to accidents.

The time of payment of claims provision in an accident and health insurance policy requires that:

claims will be paid immediately after the insurer receives written proof of the loss. In an accident and health insurance policy, the time of payment of claims provision provides for immediate payment of the claim after the insurer receives written proof of the loss. The claim forms provision states that the insurer, no later than 15 days after receiving notice of the claim, must furnish the claimant with the forms required for filing proof of loss. The notice of claim provision requires that written notice be given to the insurer within 20 days after any loss.

When establishing premiums, insurers express the rate as a: A) percentage of the policy's face amount. B) cost per $1,000 of face amount. C) flat rate per risk. D) cost per insured individual.

cost per $1,000 of face amount. Premium rates for life insurance are expressed as an annual cost per $1,000 of face amount. Thus, if the cost is $12 per $1,000, the annual premium for a $50,000 policy would be $600 ($12 x 50).

Major medical policies may include any of the following types of deductibles EXCEPT: A) per cause. B) decreasing. C) corridor. D) flat.

decreasing. Major medical deductibles may be integrated, flat or corridor, but not decreasing. Decreasing deductibles are related to life insurance.

All of the following statements pertaining to dental insurance are correct EXCEPT: A) dental coverage usually includes a deductible provision, but not a coinsurance feature. B) a maximum dental benefit usually is specified for a calendar year. C) benefits normally are payable for most dental work, including cleanings, fillings and extractions. D) dental insurance generally is available in group plans, but seldom in individual policies.

dental coverage usually includes a deductible provision, but not a coinsurance feature. Dental coverage usually features both a deductible and a coinsurance provision.

All of the following statements regarding current assumption whole life insurance are correct EXCEPT: A) premium adjustments are usually made on an annual basis. B) during a period of relatively high interest rates the premiums could be reduced. C) it is also known as interest-sensitive whole life. D) during a period of relatively high interest rates the premiums could be increased.

during a period of relatively high interest rates the premiums could be increased. Current assumption whole life policies, also known as interest-sensitive whole life, offer flexible premium payments that are tied into current interest rate fluctuations. Depending on interest rate fluctuation, the insurer reserves the right to increase or decrease the premium within a certain range. During periods of low interest rates, premiums could be increased. During periods of high interest rates, premiums could be reduced. Premium adjustments are typically made on an annual basis.

All of the following are considered to be viable medical plan cost-saving options EXCEPT: A) specialized birthing centers. B) skilled nursing facilities. C) emergency room preadmission testing. D) hospice care.

emergency room preadmission testing. Emergency care must be provided when needed, so many plans waive the deductible and coinsurance. Preadmission testing would be impractical. The other three choices are proven cost reducers.

If an impairment rider is attached to a health insurance policy, it will:

exclude from coverage losses resulting from specified conditions. An impairment rider attached to a health insurance policy excludes coverage for losses that result from chronic conditions or physical impairments. Through such a rider, an otherwise substandard risk can be insured at a standard rate.

All of the following are levels of long-term care EXCEPT: A) skilled nursing care. B) custodial care. C) intermediate nursing care. D) hospital care.

hospital care The three levels of long-term care are skilled nursing care, custodial care, and intermediate nursing care. Skilled nursing care is continuous, around-the-clock care provided by licensed medical professionals under the direct supervision of a physician. Custodial care provides assistance in meeting daily living requirements, such as bathing, dressing, getting out of bed, and toileting, which is given under a doctor's order. Intermediate nursing care is provided by RNs, licensed practical nurses and nurses' aids under the supervision of a physician.

All of the following statements about a modified whole life policy are correct EXCEPT: A) cash value builds until the insured reaches age 100 so long as the policy is in force. B) it is basically an endowment policy. C) premiums are uniformly lower during the early years of the contract. D) the premium-paying period continues to age 100.

it is basically an endowment policy., was correct!. The modified whole life policy is a variation of the traditional whole life policy, not an endowment policy. The premiums in a modified whole life policy are lower in the early years of the policy's term and higher in its later years.

All of the following benefits are available through Social Security EXCEPT: A) disability benefits. B) old-age benefits. C) death benefits. D) medical expense benefits.

medical expense benefits. Social Security provides death benefits, old-age (retirement) benefits, and disability benefits to eligible workers.

An incorporated insurer whose governing body is elected by the policyowners is a: A) combination insurer. B) mutual company. C) stock company. D) reciprocal insurer.

mutual company. An incorporated insurance company that does not have permanent capital stock is a mutual insurer. The policyowners own the company and elect its governing body. A stock insurer, on the other hand, is an incorporated insurance company with its capital divided into shares of stock owned by the stockholders. A combined stock and mutual insurer is also an incorporated insurance company with its capital divided into shares owned by the stockholders. However, both the stockholders and policyowners control the company.

An insurance company that is owned by its policyowners, who share the insurer's divisible surplus in the form of participating policy dividends, is known as a: A) mutual insurance company. B) reinsurance company. C) reciprocal insurance company. D) stock insurance company.

mutual insurance company. A mutual insurance company is an incorporated entity owned by its policyowners. It does not have capital stock, charges a fixed premium, and must maintain the same reserves as a stock company. It is common for mutual companies to sell participating policies in which the policyowners share the insurer's divisible surplus in the form of policy dividends.

A life insurance gross premium is: A) net single premium plus expense. B) interest plus expense less mortality. C) mortality costs plus loading. D) net single premium plus mortality

net single premium plus expense., was correct!. A life insurance gross premium is the amount a policyowner is expected to pay. It is comprised of the single amount needed to fund the future benefit (net single premium) and normal operating costs associated with providing coverage (expense).

A health insurance plan may pay benefits for all the following EXCEPT: A) dental work. B) a disabling injury or sickness. C) nursing home care. D) over-the-counter drugs.

over-the-counter drugs. Generally, nonprescription medicines are not covered by health insurance.

Assume lightning strikes a home and starts a fire that destroys its structure and contents. By insurance definition, the fire is the: A) risk. B) peril. C) hazard. D) proximate cause.

peril. A peril is the immediate specific event causing loss and giving rise to risk. When a building burns, fire is the peril.

To be considered qualified, a long-term care insurance policy must conform to requirements concerning all of the following EXCEPT: A) policy conversion. B) marketing standards. C) premium charges. D) policy replacement.

premium charges. To be considered a qualified contract, a long-term care insurance policy must follow NAIC's long-term care insurance model regulations, which address the following: policy replacement, conversion, marketing standards, prohibitions on limits and exclusions, and policy renewability, among other things.

Social Security is intended to do all of the following EXCEPT: A) provide a source of income for a reasonable standard of living during retirement. B) provide retirement and survivor benefits to a worker and his family. C) supplement a personal insurance plan. D) provide basic protection against financial problems arising from death, disability, and retirement.

provide a source of income for a reasonable standard of living during retirement. Social Security is designed to provide basic protection to all working Americans against the financial problems arising from death, disability, and aging. It is not designed to provide a source of income for a reasonable standard of living when a person retires.

A health insurance plan would require the naming of a beneficiary in order to: A) reallocate unused funds in a medical savings account (MSA) or health savings account (HSA). B) identify supplemental assets upon the termination of benefits. C) identify the recipient of the Social Security death benefit. D) indicate who is to receive benefits if the insured becomes disabled.

reallocate unused funds in a medical savings account (MSA) or health savings account (HSA)., was correct!. With an MSA or HSA, remaining assets in the savings account can be transferred to a spouse or other designated beneficiary.

Replacing insurers must do all of the following EXCEPT: A) receive a check for the difference in premium between the existing policy and the new policy. B) receive a list of the applicant's insurance policies that are to be replaced. C) send each existing insurer a written communication advising of the proposed replacement. D) inform their field representatives about replacement regulations.

receive a check for the difference in premium between the existing policy and the new policy. Replacing insurers must receive a list of the applicant's life insurance policies to be replaced, inform their field representative about replacement regulations, and send the existing insurer a written notice advising of the proposed replacement. The replacing insurer is not required to receive a check for the difference in premium between the existing policy and the new policy.

To provide a short rest period for a family caregiver, long-term care policies can cover: A) custodial care. B) respite care. C) home health care. D) temporary care.

respite care. Long-term care policies may offer respite care, which is designed to provide a short rest period for a family caregiver. Care is provided under two options: either the insured is moved to a full-time care facility or a substitute care provider moves into the insured's home for a temporary period, thus giving the family member a rest from caregiving activities.

John works for a mutual insurance company that was formed to handle the insurance needs of lawyers. The type of company that John works for is called a: A) fraternal benefit society. B) risk retention group. C) reciprocal insurer. D) reinsurer.

risk retention group. A risk retention group is a mutual insurance company formed to insure people in the same business, occupation, or profession, such as pharmacists, dentists, lawyers, or engineers. Risk retention groups tend to handle commercial liability exposures. Reinsurers, in contrast, insure other insurers, while the policyholders themselves insure the risks of other policyholders in a reciprocal insurer. Fraternal benefit societies are noted for their social, charitable and benevolent activities, and have memberships based on religious, national, or ethnic affiliations.

Fees for all of the following items typically are covered under a medical expense policy's miscellaneous expense benefit EXCEPT: A) surgeon's fees. B) laboratory fees. C) x-rays. D) use of the operating room.

surgeon's fees. The miscellaneous expense benefit covers hospital "extras," such as x-rays, laboratory fees, and use of the operating room. It does not cover a surgeon's fees, which would be covered under a surgical expense policy.

With an optionally renewable policy, the insurance company reserves the right to: A) modify the coverage if claims filed by the insured exceed an amount specified in the policy. B) cancel the policy anytime with 5 days' notice. C) increase the premium on a policy if benefits paid to an insured exceed a stated amount. D) terminate coverage at any policy anniversary date or premium due date.

terminate coverage at any policy anniversary date or premium due date. With an optionally renewable policy, the company reserves the right to terminate coverage at any policy anniversary date or premium due date but may not exercise this right between such dates.

When replacing a policy, insurers require all of the following EXCEPT: A) a list of the applicant's existing life insurance policies to be replaced. B) the existing insurer's signed statement allowing the replacement. C) the applicant's signed statement as to whether the transaction will involve replacement. D) the agent's signed statement certifying that he or she knows that replacement may be involved.

the existing insurer's signed statement allowing the replacement. When replacement occurs, the existing insurer must provide the policyowner with a policy summary for the existing life insurance within ten days of receiving the written communication advising of the proposed replacement and the replacement notice.

Assured Insurance Company issues a health insurance policy it describes as noncancellable. This means that: A) the company cannot cancel the policy after the insured becomes eligible for Medicare. B) the company cannot cancel the policy for any reason. C) the insured is entitled to renew the policy indefinitely, though the insurer can change policy provisions. D) the insured can continue the policy by paying premiums until at least age 65.

the insured can continue the policy by paying premiums until at least age 65. A policy that is noncancellable or guaranteed renewable gives the insured the right to continue it in force by the timely payment of premiums at least until age 65 or until the insured becomes eligible for Medicare. The insurer cannot unilaterally change any provision while the policy is in force.

All of the following statements about participating policies are correct EXCEPT: A) they enable the policyowner to share in the earnings of the company. B) they are eligible for dividends. C) the annual premium rate is generally higher than that for nonparticipating policies. D) they are issued only by stock companies.

they are issued only by stock companies. Participating policies are issued by both stock and mutual companies. They are called participating because they are eligible for dividends, thus enabling policyowners to share in the earnings of the company. For this reason, the premium cost is generally higher for participating policies than for nonparticipating policies.

All of the following statements about mutual insurance companies are correct EXCEPT: A) they charge a fixed premium. B) they do not have capital stock. C) they must maintain the same reserves as a stock company. D) they are unincorporated.

they are unincorporated. A mutual insurance company is an incorporated insurer owned by its policyowners. It does not have capital stock, charges a fixed premium, and must maintain the same reserves as a stock company. It is common for mutual companies to sell participating policies in which the policyowners share the insurer's divisible surplus in the form of policy dividends.

All of the following statements about flexible spending accounts are correct EXCEPT: A) they provide reimbursement for medical expenses incurred. B) they may be provided as a stand-alone plan or as part of a traditional cafeteria plan. C) they may reimburse participants for all medical related expenses. D) they allow participants to pay for health care expenses with pre-tax dollars.

they may reimburse participants for all medical related expenses. A flexible spending account is a benefit provided by an employer that allows an employee to deposit a certain amount of his or her paycheck into an account before paying income taxes. During the year, the employee is then directly reimbursed from this account for eligible health care and dependent care expenses. Only qualified medical expenses are reimbursable, not all medical expenses. Eligible expenses include certain medical expenses, health care plan deductibles, and co-payments.

All of the following are rights of policy ownership EXCEPT: A) to determine the method of submitting claims. B) to designate a beneficiary. C) to assign the policy. D) to select a nonforfeiture option.

to determine the method of submitting claims. The rights of ownership include the right to pick a beneficiary, the method of distributing the proceeds, to assign the policy, to receive dividends, to cancel the policy, and to select a nonforfeiture option. The right to determine the method of submitting claims and the time period in which to do so is the right of the insurer.

The deductible amount for specified disease coverage cannot be more than: A) $250.00 B) $2,500.00 C) $500.00 D) $1,000.00

$250.00 Specified disease coverage has a deductible amount of no more than $250, an overall aggregate benefit limit of at least $5,000, and a benefit period of at least two years.

Under the required claim forms provision of a health insurance policy, an insurer must furnish the claim form to the insured within how many days after receiving a notice of claim? A) 21 days. B) 30 days. C) 10 days. D) 15 days.

15 days. Under the required claim forms provision of a health insurance policy, an insurer must furnish its claim form to the insured within 15 days after receiving notice of a claim. Otherwise, the claimant may submit proof of loss in any form that explains the occurrence, the character, and extent of the loss.

If a life insurance applicant is given a binding receipt, when does his or her coverage become effective? A) Date the applicant proves to be insurable. B) Date the receipt is given. C) Date the policy is delivered. D) Date the policy is issued.

Date the receipt is given. Under a binding receipt (or temporary insurance agreement), coverage is guaranteed at the time of application for the amount of insurance applied for. The temporary coverage continues until the policy is issued as requested, until the company offers a different policy or until the company rejects the application, but in no event for more than 60 days from the date the agreement was signed.

What is the MAXIMUM number of days of skilled nursing facility care for which Medicare will pay benefits? A) 60 days. B) 75 days. C) 25 days. D) 100 days.

100 days. Part A covers the costs of care in a skilled nursing facility as long as the patient was first hospitalized for three consecutive days. Medicare will cover treatment in a skilled nursing facility in full for the first 20 days. From the 21st to the 100th day, the patient must pay a daily copayment (up to $97 per day in 2000). There are no Medicare benefits provided for treatment in a skilled nursing facility beyond 100 days.

What is an authorized insurer? A) A company that is authorized by the commissioner to transact insurance business in Pennsylvania. B) A policyholder who has a legal contract with an insurance company. C) A producer who is authorized by the commissioner to transact insurance business in Pennsylvania. D) A producer who has the authority to represent an insurance company.

A company that is authorized by the commissioner to transact insurance business in Pennsylvania. An authorized insurer is one that has a certificate of authority from the commissioner to transact insurance business in Pennsylvania.

Which of the following people could NOT be granted a temporary producer license? A) Employee of a licensed producer who becomes disabled. B) Designee of a licensed producer who is entering active service in the U.S. armed forces. C) An insurance client of a deceased producer. D) Widow of a deceased producer.

An insurance client of a deceased producer. The Commissioner may issue a temporary producer license when necessary to service an insurance business. Eligible licensees include widows of deceased producers, the designee of a licensed producer who enters active service in the U.S. military, and employees of a licensed producer who becomes disabled. An insurance client of a deceased producer would not qualify for a temporary license.

All of the following are examples of social insurance EXCEPT: A) Blue Cross and Blue Shield coverage. B) Social Security. C) Medicare. D) workers' compensation.

Blue Cross and Blue Shield coverage. Social insurance is provided by the federal and state governments and includes Social Security (death, old-age and disability benefits), Medicare, Medicaid and workers' compensation. Blue Cross and Blue Shield are examples of service insurers.

Which of the following is a common feature of group major medical insurance? A) Dismemberment benefits. B) Conversion privilege. C) Double indemnity. D) Triple indemnity

Conversion privilege. The double and triple indemnity and dismemberment provisions apply to accidental death and dismemberment (AD&D) policies, not to group major medical insurance policies. Group health plans allow insureds to convert to an individual medical expense policy with the same insurer if they leave their employment.

Which of the following coverages must be included in all Medicare supplement policies? A) Emergency care in a foreign country. B) Daily coinsurance amount for skilled nursing facility care. C) At-home recovery services. D) Cost of the first 3 pints of blood.

Cost of the first 3 pints of blood. Coverage for the reasonable cost of the first 3 pints of blood is part of the minimum benefits required for Medicare supplements.

Cybil is insured under a key-person life insurance policy owned by Delta Corporation and then quits her job. Which of the following statements is NOT correct? A) Delta can keep the policy in force. B) Delta can assign the policy. C) Cybil can convert the policy to an individual policy. D) Delta can surrender the policy for cash

Cybil can convert the policy to an individual policy. If Cybil leaves Delta Corporation, the company can surrender the policy for cash, assign the policy, or keep it in force, because there is no need to maintain an insurable interest. Cybil has no conversion right with respect to the key-person policy because she does not own the policy.

When there is no coverage available through an authorized carrier in the state, this insurance is referred to as:

Excess and surplus lines is the name given to insurance when there is no coverage available through an authorized carrier in the state where the risk arises or the risk is located, or for which there is no market through the original producer. This type of business must be placed through a licensed excess or suplus lines broker.

If total disability (loss-of-time) benefits from all disability income coverage for the same loss exceed the insured's monthly earnings at the time of disability, what is the insurer's liability to the insured?

The correct answer was: The insurer must pay the proportionate amount of benefits that the insured's earnings bear to the total benefits. If total disability (loss of time) benefits from all disability income coverage for the same loss exceed the insured's monthly earnings at the time of disability, the insurer is liable for that proportionate amount of benefits as the insured's earnings bear to the total benefits. Total indemnities must be the lesser of $200 or total benefits under applicable coverage.

Dan is a young man with a bright future, and he expects his income to increase over the next ten years. Under the disability income insurance policy he is considering, why might he add a guaranteed insurability rider? A) The rider will allow him to increase his benefit amount periodically without being required to show evidence of insurability. B) The rider will allow him to increase his benefit amount every time his income increases. C) If he becomes disabled, the rider will pay benefits in addition to any Social Security benefits he might receive. D) The rider will increase his benefits to reflect increases in the cost of living.

The rider will allow him to increase his benefit amount periodically without being required to show evidence of insurability. The future increase option provided under a guaranteed insurability rider has 2 key features: (1) increases to coverage amounts can be made at predetermined times, and (2) no evidence of insurability is required.

Twisting may involve any of the following actions on the part of a life or health insurance agent EXCEPT: A) making an incomplete comparison of 2 different policies. B) calling an insured to propose additional coverage. C) misrepresenting the provisions of a policyowner's existing policy to promote the sale of another policy. D) misrepresenting the terms of a proposed policy to a prospect.

calling an insured to propose additional coverage. Twisting involves misrepresentations and incomplete comparisons with the intention of coercing a sale. It does not involve the normal servicing of a client's account, such as proposing additional coverage when it would be appropriate and suitable for the client's needs.

Which of the following is a common benefit trigger for a long-term care policy? A) Prior hospitalization. B) Inability to operate a motor vehicle. C) Retirement. D) Cognitive or mental impairment.

was: Cognitive or mental impairment. A benefit trigger is an event or condition that must occur before policy benefits become payable. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the individual must be diagnosed as chronically ill to trigger benefits. Prior hospitalization can no longer be used as a trigger. Diagnosis of chronic illness can be based on two conditions: physical or cognitive illness. The physical diagnosis of a chronically ill individual is one who has been certified as being unable to perform at least two activities of daily living (ADLs), which are defined as eating, toileting, transferring (getting out of bed), bathing, dressing, and continence. A long-term care policy must take into account at least five of these ADLs. An individual would also be considered chronically ill if he requires substantial supervision to protect his health or safety because of severe cognitive impairment, and if the condition was certified within the previous 12 months.