Life and health
Which of the following is the closest term to an "authorized" insurer?
Admitted-
When transacting business in this state an insurer formed under the laws of another country is known as a
Alien insurer- alien insurer is defined as an insurer formed under the laws of another country
In which Medicare supplement policies are the core benefits found?
All plans- the benefits in plan A are considered to be core Benefits & must be included in other types.
When must inaurable interest exist in life insurance policy?
At the time of application
Which of the following would NOT be considered a misinterpretation on the part of the insurer
Backdating policies to secure a lower premium
Which of the following best describes fixed-period settlement option?
Both the principal and interest will be liquidated over a selected period of time.
Pete, the owner of a TV sales store, is the insured under a disability buy sell policy. Were Pete to die or become disabled, the policy would provide
Cash to Petes business partner to accomplish a buy out
Which of the following is true about credit life insurance?
Creditor is the policyowner -in a credit life insurance, the creditor is the policyowner & the beneficiary; the debtor is the insured
An individual has just borrowed $10,000 from his bank on a 5 year installment loan requiring monthly payments. What type of insurance policy would be best suited to this situation?
Decreasing term- a decreasing term policy's face amount decreases as the amount of debt is reduced
When doing business in this state an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign - a foreign insurer is one that is formed under the laws of another state
What type of insurance would be used for a return of premium rider?
Increasing term.-
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to groups insurance participants.
Which of the following best describes annually renewable term insurance?
It is level term insurance
Which of the following statements is true concerning the accidental death rider?
It will pay double or triple the face amount- the accidental death rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs writhing 90 days of such an accident
While you are reviewing Patrick's employers contributions to his health savings account with him, he asks you how the contributions affect his taxes. You should advise him that HSA contributions are
Not included in the individual taxable income
Sam has a life insurance policy from a participation company and receives quarterly dividends. Sam has instructed the company to apply his dividends to the policy to increase the death benefit. The dividend option that sam has chosen is called
Paid up additions- the annual dividend acts as a single premium each year to buy additional amounts of insurance
Another name for a substandard risk classification is
Rated
Insurance is the transfer of
Risk
Company Y had 20 employees on staff last year. Which of the following terms most precisely labels the company's group insurance classification
Small employer
An adjustable life policyowner can change which of the following policy features?
The coverage period. - typically, the policyowner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium paying period; increasing or decreasing the face amount coverage or changing the period of protection.
All the following statements concerning the use of life insurance as an executive bonus are correct except
The policy is owned by the company The policy is really owned by the employee
Of the following choices, which of the statements about occupational vs nonoccupational coverage is true?
Disability insurance can be written as occupational or nonoccupational
Which of the following is an example of a non qualified retirement plan?
Executive bonus plan- IRAs, profit sharing, and Keogh plans are all examples of plans that are or must be qualified by the IRS and will receive favorable tax treatment. In an executive bonus plan, the premiums paid are tax- deductible to the business as a salary expense and are taxable as income to the recipient.
To be eligible for a health saving account, an individual must be covered by a
High deductible health plan
Which of the following is true regarding a term health policy?
It is no renewable- the owner has no right of renewal
Which of the following statements is true concerning alteration of optional policy provisions?
An insurer may change the wording of optional provisions, as long as the change does not adversely affect the policyholder
Which of the following is NOT an advantage of an HRA for an employer?
HRAs are defined programs HRAs are defined contribution
In a group policy, who is issued a certificate of insurance?
The individuals insured
Which of the following is true regarding Medicare supplement policies?
They must be at least guaranteed renewable
All the following are features and requirements of the Living Needs Rider EXCEPT
Diagnosis must indicate that death is expected within 3 years - the Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with terminal illness that will result in death writhing 2 years
The insurance commissioner may examine the affairs of any insurer as often as necessary, but not less frequently that once every
5 years - the insurance commissioner must examine each insurer at least once every 5 years
Which of the following protects the insured from an unintentional policy lapse due to nonpayment of premium?
Automatic premium loan-automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse to a policy due to nonpayment of the premium
According to the provision of the patient protection and affordable care act, all the following are required care services EXCEPT
Cervical cancer exams for all women starting at age 40- cervical cancers exams as a preventive service will only be available for women at higher risk
Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?
Within 2 months - upon receipt of a written proof of death and the right to the claimant to the proceeds, the insurer must pay death claims within 2 months
Kindra's agent is ready to deliver her policy but has not yet received payment. Upon delivery, the agent collects her premium check, answers any questions that she may have, and then leaves. What did she forget to do?
Ask her to sign a statement of good health- if the premium is not collected until the policy is delivered, the agent must receive a statement of good health, which acknowledges that the insurers health status has not changed since the policy was approved
Under the accidental death and dismemberment (AD&D) coverage, what type of benefits will be paid to the beneficiary in the event of the insureds accidental death?
Principal sum- AD&D coverage only pays for accidental losses and is thus considered a pure form of accident insurance. The principal sum is paid for accidental death. In case of loss of sight or accidental dismemberment, a percentage of that principal sum will be paid by the policy (capital sum)
An immediate annuity purchased with the face amount at death or with the cash value at surrender can be referred as which of the following ?
Settlement option
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?
$8,000, 60 days. - 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 agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating- when producers give or promise anything of value that is not specified in the policy, they are guilty of rebating
Todd has been informed that he has a hernia which requires repair. When Todd researches the cost, he learns that his insurance plan will cover 200 points worth of surgical expenses. Each point represents $10, which means that $2000 of his surgery will be covered by his insurance plan. What system is Todds insurance company using?
Relative value- in a relative value approach, a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery
An insured wants to name her husband as the beneficiary of her health policy. She also wished to retain all of the rights of ownership. The insured should have her husband names as what type of beneficiary?
Revocable
An insurance agent wants for a client to replace her current annuities plan with another one. He represents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. The policyowner ends up surrendering her original contract & replacing it with the new one. Which term best describes what the agent did?
Twisting -
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within
90 days of a loss
An insurance contract must contain all the following to be considered legally binding EXCEPT
Beneficiary's consent- the four essential elements of all legal contracts are offer and acceptance, consideration, competent parties, legal purpose
Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. In this case, total disability is defined as
Any occupation- more restrictive than other definitions
In universal life insurance the policy owner may skip a premium payment without lapsing the policy as long...
As the policy contains enough cash value
Variable life insurance is based on what kind of premium?
Level fixed
All the following are correct about the required provisions of health insurance policy EXCEPT
A reinstated policy provides immediate coverage for an illness - accidental injury is covered immediately but to protect the insurer agains adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date
Under the mandatory uniform provision notice of claim, the first notice of injury or sickness covered under an accident and health policy must contain
A statement that is sufficiently clear to identity the insured and the nature of the claims - "written notice of claim must be given to insurer within 20 days after the occurrence or commencement of any loss converted by the policy or as soon thereafter as is reasonably possible"
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?
Collateral assignment- the business owner could make a collateral assignment of his life insurance policy to the bank.
What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?
Conditionally renewable - the conditionally renewable provision is very similar to the optionally renewable provision. The primary difference is that conditionally renewable policies may be canceled for specific conditions contained in the policy but optionally renewable policies do not specify a condition or reason for cancellation.
The gatekeeper of an HMO helps to
Control special costs
Fixed annuities provide
Equal monthly payments for life, minimum guaranteed rate of interest, future income payments NOT hedge against inflation
In the executive bonus plan, who is the owner of the policy and who pays the premium?
Executive is the owner and the executive pays the premium
What is the minimum renew ability standard for long term care policies issued in this state?
Guaranteed renewable - all long term care policies or certificates issued in this state must be guaranteed renewable or noncancellable
What are two types of flexible spending accounts?
Health care accounts and dependent care accounts
An adjustable life policy owner can change the following policy features
Increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection
A return of premium term life policy is written as what type of term coverage?
Increasing- pays an additional death benefit to the beneficiary equally to the amount of the premiums paid
Which of the following is NOT true regarding a flexible spending account?
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 they paycheck into an account before paying income taxes. FSA benefits are subject to annual maximum and "use-or-lose" rule
Which of the following is NOT true if a major medical health insurance policy?
It is designed to pay on first dollar expense basis- A major medical policy usually has deductibles and a copayment requirement
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan. - a profit plan is one where the employer will contribute monies into and employees retirement plan when the company shows a profit
Buyers guide
Provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurers information
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments.
The interest earned on policy dividends is
Taxable - dividends are a return of unused premiums on which the insured had already paid taxes. Any interest earned is taxable as ordinary income
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term - children's term riders provide term instance with coverage expiring when the minor reaches a certain age
Which of the following is true regarding variable annuities?
The annuitant assumes the risk of investments. The payments that the annuitant invests into the variable annuity are invested in the insurers separate account.
In insurance, an offer is usually made when
The application is submitted- in insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurers underwriter approved the application and issues a policy
The owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability.
Variable life policy
The death benefit is adjustable and the cash values are not guaranteed.
Variable universal life
The death benefit is adjustable, and the cash values are not guaranteed.. While the death benefit may decrease and increase( depending on the investment performance of the underlying sub account) it cannot go below a guaranteed minimum face amount.
Who bears all of the investment risk in a fixed annuity?
The insurance company
An insured purchases a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10- year term?
The insured may renew the policy for another 10 years but at a HIGHER premium rate
At the time of annuitization of variable annuity, which of the following CANNOT fluctuate?
The number of annuity units
A life insurance policy owner skips her premium payment, but the policy does not lapse. Instead, the premium amount is deducted from the cash value of the policy. What type of policy is this?
Universal life- the policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again.
In forming an insurance contract, when does acceptance occur?
When an insurer approves s prepaid application
Immediate annuity distribution starts:
Within 1 year of purchase
All the following are dividend options EXCEPT
Fixed- period installment - it's a settlement option not dividend option
Your client wants to know what the tax implications are for the contributions to a health savings account. You should advise her that the contributions are
Tax deductible- contributions to HSAs by individuals are deductible , even if the taxpayer does not itemize. Contributions by an employer are not included in the individuals taxable income
Insurable interest can be best described by which of the following?
The applicant must experience a financial loss due to an accident or sickness that befalls the insured
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
Which of the following is true regarding variable annuities?
The annuitant assumes the risk of investment-
An insurer wants to obtain information from investigators regarding an insured. What must the insurer do in order to legally acquire this information?
Present the insured with a disclosure authorization notice- this notice states the insurers information collection practices and how the information will be used.
HMOs that contract with outside physicians to provide health care service to their subscribers compensate those providers on a
Capitation Basis- HMOs generally pay the provider a fixed amount per subscriber in exchange for the medical services agreed upon
When a policy is surrendered for its cash value,
Coverage ends and cannot be reinstated
Under workers compensation, which of the following benefits are NOT included?
Legal benefits- under workers compensation, medical and rehabilitation benefits, income benefits, and death benefits are all included
Roland had $500 left in his health reimbursement account when he quits his job. What happens to that money?
Roland can have access to it at his previous employers discretion.
What are the personal uses of life insurance?
Survivor protection, estate creation and conversation, cash accumulation and liquidity
A variable annuity has a pay out that is
Contingent upon the profitability of the investment portfolio- a variable annuity is a variable from the standpoint that the annuitant may receive varying rates of return on the funds that are paid into the annuity
Which of the following provisions states the insurers right to change premium amounts?
Continuation provisions
Which of the following is NOT true regarding uniform mandatory provisions concerning claims?
An insured must notify the insurer of a claim of forms prescribed by the insurer-
Cameron is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he feels he can afford at this time, he wants to be sure that additional coverage will be available in the future. He should include in this policy a
Guaranteed insurability option - the guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specified times without proving insurability
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
Illegal- it is is illegal to a participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly
A health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective?
Immediately. - coverage for accidents is immediate when reinstatement occurs but coverage for sickness may have a waiting period of about 10 days
Which of the following riders would NOT increase the premium for a policyowner?
Impairment rider- the impairment rider excludes a specified condition from coverage, therefore, reducing benefits. An insurance company will not charge extra for a rider that reduces benefits
Issue age policy premiums increase in response to which of the following factors?
Increased benefits- the premiums of issue age policies can only increase in response to an increase in benefits
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
Mutual- funds not paid out after paying claims & other operating costs are returned to the policy owners in the form of a dividend. If all funds are paid out, no dividends are paid.
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?
None- general disability policies do not cover losses by war, military service, intentionally self-inflicted injuries, overseas residence or injuries suffered while committing or attempting to commit a felony
The dividend option in which the policyowner uses dividends to purchase a term policy for a year is referred to as the
One year term option
Which renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date?
Optionally renewable - in an optionally renewable, it is the insurers OPTION as to whether to renew or not
A participating insurance policy may do which of the following?
Pay dividends to the policy owner
Which renewability provisions are you most likely to see on a travel accident policy?
Period of time- the period of time (term) provision means that the policy will only last a certain period of time and cannot be renewed. It will be cancelled at the end of the term for which it was purchased. A travel accident only policy will provide coverage during the dates the insured is traveling
The primary beneficiary of her husbands life policy found that no settlement option was stated in the policy on the date of her husbands death. Who will select the settlement option in this case?
The beneficiary- If a settlement option is not selected by the policyowner before the insured dies, then the beneficiary can choose the option
Which statement accurately describes group disability income insurance?
The extent of benefits offered is determined by the insured income - group plans usually specify the benefits based on a percentage of the workers income
An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. The results in a long hospitalization period. Which of the following is true?
The group plan will not pay because the employee was injured at work. - because the employees injuries were work related, the group health policy would not respond. The insured would have to rely on workers compensation for coverage
An insured is covered under 2 group health plans-under his own and his spouses. He suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer?
$500- once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance
Insurance companies may be classified according to the legal form of ownership. The type of company organized to return any surplus money to their policyholder is
A mutual insurer - mutual companies are owned & controlled by their policyholders. Any surplus money is returned to the policyholders as dividends
Cross-purchase plan
A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners
All the following individuals may qualify for Medicare health insurance benefits EXCEPT
A person age 50!- under current federal laws, any of the described persons could qualify for Medicare, except for individual under age 65 who has no special circumstance
What document describes an insureds medical history, including diagnoses and treatments?
Attending physicians statement- an attending physicians statement (APS) is the best way for an underwriter to evaluate an insured medical history. The report includes past diagnoses, treatments, length of recovery time and prognoses
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all the following elements EXCEPT
Conditions - conditions are a part of the policy structure
When ken purchased his health policy he was a window washer. He has since changed occupations and now manages a library. Upon notifying the insurer of his change of occupation the insurer should
Consider decreasing the premium.
Which of the following is a specified dollar amount or a percentage of the cost of care that must be paid by an HMO member?
Copayment- a copayment is a species dollar amount or percentage of the cost of care that must be paid by the member.
All advertisement, regardless of their source of creation, are the responsibility of the
Insurer - the insurer whose policies are advertised in responsible for all its advertisements, regardless of who wrote , created, presented, or distributed them.
Which of the following entities has the authority to make changes to an insurance policy?
Insurers executive officer- only an executive officer of the company, not an agent, has the authority to make any changes to the policy. The insurer must have the insured written agreement change to the change
Which provision of a life insurance policy states the insurers duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring clause- the insuring clause states that the insurer agrees to provide life insurance for the names insured which will be paid to a designated beneficiary when proof of loss is received by the insurer. If no beneficiary is named, the policy proceeds will be paid to the insureds estate
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life- premium payments will cease at her age 65, but coverage will continue to her death or age 100
Which of the following special policies covers unusual risks that are NOT normally included under Accidental Death and Dismemberment coverage?
Special risk policy- the special risk policy will cover unusual types of risks that are not normally covered under AD&D policies. It covers only the specific hazard or risk identified in the policy, such as a race car driver test driving a new car
An insured has endured multiple surgeries and hospitalizations for an illness during the summer months. Her insurer no longer bills her for medical expenses. What term best describes the condition she has met?
Stop-loss limit - a stop loss limit is a specified dollar amount beyond which the insurer no longer participates in the sharing of expenses.
Who chooses a primary care physicians in HMO?
The individual member- when an individual becomes a member of an HMO, he or she will choose a primary care physician. Once chosen, the primary care physician will be regularly compensate for being responsible for the care of that member
An insured is involved in a car accident and is disabled. If the policy contains a waiver of premium rider, which of the following statements is true regarding the policy premiums?
The insured will have to Pay premiums for 6 months, after which the premiums will be reimbursed and subsequent premiums will be waived.
Which of the following is true regarding elimination periods and cost of coverage?
The longer the elimination period, the lower the cost of coverage. - the elimination period is a period of days which must expire after onset of an illness or occurrence of an accident before benefits will be payable.
The policyowner of a universal life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance
Which is true about a spouse term rider?
The rider is usually level term insurance- the spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65.
Which is generally true regarding insureds who have earned preferred status?
Their premium are lower- a preferred status indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to a consumer -disclosure statements will help the applicant to make more informed and educated decision about their choice of insurance
A man has been diagnosed with a form of leukemia that is associated with a high mortality rate. His oncologist has given him approximately six months to live. The man is already swamped with debt & realizes that his financial state will worsen even more with his upcoming medical expenses. What option could he utilize right now?
Viatical settlement - a viatical statement allows an insured with a life-threatening condition to sell his/her existing policy in order to receive benefits when they are most needed.
Manny has been injured in an accident. Although she is still receiving benefits from her policy, she does not have to pay premiums. Her policy includes
Waiver of premium rider - the waiver of premium rider causes the insurer to waive future premiums when an accident or disease causes a disability lasting at least six months
The rider in whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium- allows waives the premium if the insured owner has been totally disabled for a predetermined period
Social security supplement (SIS) or social security riders are used to supplement or replace benefits that might be payable under social security disability. In which of the following situations would these NOT provide for the payment of income benefits?
When the amount payable under social security is more than the amount payable under the rider
