Life and Health - Chapter 6 Quiz - Markets and Social Security
In which market are Certificates of Insurance issued to insured individuals? Group Industrial Individual Franchise
Group In the group market, no individual policies are issued. The employer receives the Master Contract and the employees or members receive Certificates of Insurance. Relevant content:6.1 Group Insurance Market
___________ restrict the insurer's underwriting criteria for group policies. Federal laws State and federal laws NAIC and Insurance Department rules and regulations State laws
State and federal laws State and federal laws restrict the insurer's underwriting criteria for group policies. Relevant content:6.1 Group Insurance Market
The 31 days in which the employee may change his/her group policy to an individual policy upon termination and without evidence of insurability, is known as: Change of Policy Provision The Contestable Period The Conversion Period Ownership Rights Provision
The Conversion Period As the name implies, the Conversion Period is the period in which an employee may convert the group term death benefit to an individual permanent policy upon termination and without evidence of insurability. Relevant content:6.1 Group Insurance Market
All of the following are characteristics of Home Service (Industrial) Insurance, except: Industrial policies generally have a face amount of $1,000 or less The Grace Period is 10 days A Debit Agent sells policies house-to-house The settlement option is a lump sum payment
The Grace Period is 10 days The Grace Period under industrial policies is 4 weeks, not 10 days. Relevant content:6.2 Specialized Plans
Which of the following statements is FALSE regarding Credit Life Insurance? Usually the individual debtor pays the premium monthly The insurance will terminate if the debt is prepaid or refinanced The creditor must apply the insurance proceeds to the discharge of the loan The amount of coverage is dependent upon the duration of the loan
The amount of coverage is dependent upon the duration of the loan The amount of the coverage is dependent upon the amount of indebtedness, not the duration of the loan. Relevant content:6.2 Specialized Plans
All of the following are parties to a life insurance contract, except: The beneficiary The insured The insurer The policyowner
The beneficiary While beneficiaries are named, they are not a party to a life insurance policy. Relevant content:6.4 Third-Party Ownership
A partnership involving four equal partners is valued at $1,800,000. Under a Buy-Sell Agreement (Cross Purchase Plan), the amount of the policy on the life of each partner would be: $1,800,000 $150,000 $450,000 $900,000
$150,000 Each partner's ownership share equals $450,000, thus each partner would own a $150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 x $150,000 = $450,000). There would be a total of 12 (4 x 3) policies (12 x $150,000 each = $1,800,000). Relevant content:6.3 Business Uses of Life Insurance
If enrolled in an accredited elementary or secondary school, a covered child can continue receiving Survivor Benefits up to what age? 21 20 19 17
19 Children may continue receiving survivor benefits up to age 19 if enrolled in an accredited elementary or secondary school. Relevant content:6.5 The Social Security System
A partnership has 3 partners who each have an equal ownership interest in their $3,000,000 business. How many policies would have to be purchased under a traditional cross purchase buy-sell agreement plan? 9 3 1 6
6 There would need to be 6 policies purchased in a traditional cross purchase buy-sell agreement plan (3x2). Each partner would be acquiring a policy on the other two partners. Relevant content:6.3 Business Uses of Life Insurance
The widow or widower's Social Security blackout period lasts until a surviving, non-remarried spouse reaches age ________. 62 65 60 50
60 The blackout period ends at age 60. Relevant content:6.5 The Social Security System
Social Security Retirement Benefits are available as early as age _______ but are less than if paid at the full retirement age. 64 63 62 65
62 Social Security Retirement Benefits start as early as age 62, but at a reduced amount. Relevant content:6.5 The Social Security System
Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit? $350 $355 $255 $250
$255 A one-time benefit of $255 is paid to a surviving spouse or child if he/she is eligible for Social Security benefits. Relevant content:6.5 The Social Security System
Generally, children receive Social Security Survivor Benefits until age ________. 17 16 15 18
18 Children generally receive benefits up to age 18. They may receive benefits up to age 19 only if they are still in school. Relevant content:6.5 The Social Security System
A Social Security retirement benefit recipient will receive the greatest benefit starting at which of the following ages? 63 1/2 65 62 60
65 The earlier retirement benefits are requested and received, the smaller they are. Relevant content:6.5 The Social Security System
Which of the following is a requirement in order for a third-party ownership policy to be issued by a life insurance company? An annual premiums must be paid with the application Insurable interest must exist between the policyowner and the insured A proper beneficiary must be named The policy must be for no more than $100,000
Insurable interest must exist between the policyowner and the insured Insurable interest must exist at the time of policy issuance in order for the insurer to issue the policy. Relevant content:6.4 Third-Party Ownership
Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is all of the following, except: Insured Policyholder Premium payor Beneficiary
Insured Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is the owner, premium payor, and beneficiary of a policy written upon each of the partners or shareholders who are the insureds. Relevant content:6.3 Business Uses of Life Insurance
To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. Probationary Conversion Elimination Open enrollment
Probationary A probationary period is set up to help reduce the chance of facing immediate claims. Relevant content:6.1 Group Insurance Market
Which of the following is true in regard to an Entity Purchase Plan? The business enters into an agreement to purchase the deceased's interest in the business The entity buys life insurance on non-owner key employees The owners are named as beneficiaries in the policy acquired It is an incentive plan for key employees
The business enters into an agreement to purchase the deceased's interest in the business An entity purchase plan is one in which life insurance provides the funds necessary to buy out the business interest of the deceased. Relevant content:6.3 Business Uses of Life Insurance
All of the following are characteristics of Credit Life Insurance, except: The insurance is either a form of individual coverage on the life of a debtor, or a form of group insurance issued to a creditor providing coverage for debtors The amount of the insurance benefit must not exceed the total amount of indebtedness The debtor generally is both policyowner and beneficiary This insurance is normally Decreasing Term and the amount of insurance reduces as the obligation reduces
The debtor generally is both policyowner and beneficiary The creditor (not the debtor) is normally both the policyowner and beneficiary. Relevant content:6.2 Specialized Plans
The Social Security Death Benefit is payable to the ____________. The next of kin The estate of the insured The named beneficiary The surviving spouse
The surviving spouse The Social Security Death Benefit is payable to the surviving spouse or minor children if they meet certain requirements. Relevant content:6.5 The Social Security System
Which of the following best describes Third-Party Ownership? A key employee buying a life insurance policy on him/herself A business partner buying a life insurance policy on him/herself A policy owned by one person insuring the life of another person A policy owned by the insured
A policy owned by one person insuring the life of another person When a policy is owned by someone other than the insured, it is a third-party ownership situation. Relevant content:6.4 Third-Party Ownership
All of the following are examples of third-party ownership, except: An entity purchase plan A cross purchase plan A key employee plan An employee voluntary life insurance plan
An employee voluntary life insurance plan A key employee plan, a cross purchase plan, and an entity plan all have an owner other than the insured. Relevant content:6.4 Third-Party Ownership
Which of the following is truly a Key Person (Key Employee)? The company's truck driver A rank-and-file employee An executive sales manager The company bookkeeper
An executive sales manager In a Key Person Insurance plan, the key person is part of the management team, is more highly paid than the other employees, is respected by customers and vendors, and has direct responsibilities for sales, production, or service. Relevant content:6.3 Business Uses of Life Insurance
Group Life Insurance is usually written as: Annual Renewable Term Increasing Term Contributory Term Decreasing Term
Annual Renewable Term Group Insurance is usually written as annual renewable term so that, based on a number of factors, the insurer may change the rate or the employer may change the plan. Relevant content:6.1 Group Insurance Market
Regarding Social Security survivor benefits, when the youngest child reaches age 16, the widow's/widower's _________ period begins and continues until the surviving (non-remarried) spouse reaches age 60. Probationary Elimination Blackout Waiting
Blackout When the youngest child reaches age 16, the widow's/widower's blackout period begins. Relevant content:6.5 The Social Security System
The Social Security Survivor Benefit is based on the Primary Insurance Amount of the: Recipient Survivor Deceased Beneficiary
Deceased The Social Security Survivor Benefit is based on the Primary Insurance Amount of the deceased. Relevant content:6.5 The Social Security System
Credit Life insurance is usually what type? Level Term Increasing Term Variable Term Decreasing Term
Decreasing Term Since the amount of the outstanding debt declines over time, decreasing term would make the most sense. Relevant content:6.2 Specialized Plans
The __________ allows an insurer to pay death benefits anyone it deems to be entitled in the absence of a designated beneficiary. Policy's Settlement Option Next of Kin Clause Facility of Payment Clause Creditor Collection Clause
Facility of Payment Clause A Facility of Payment Clause allows the insurer to pay the death benefit to a relative or anyone it deems is entitled in the absence of a designated beneficiary. Relevant content:6.2 Specialized Plans
For those individuals who have health issues, which of the following would be an insurance plan to consider? Variable Universal Life Joint Life Group Decreasing Term
Group If an individual has health issues, then a group insurance plan could be a valuable consideration. It offers the opportunity to obtain coverage without providing evidence of insurability. Relevant content:6.1 Group Insurance Market
All of the following are parties to a life insurance contract, except: The beneficiary The insurer The insured The policyowner
The beneficiary While beneficiaries are named, they are not a party to a life insurance policy. Relevant content:6.4 Third-Party Ownership
In which market are Certificates of Insurance issued to insured individuals? Group Individual Franchise Industrial
Group In the group market, no individual policies are issued. The employer receives the Master Contract and the employees or members receive Certificates of Insurance. Relevant content:6.1 Group Insurance Market
Group life insures a group of people under a _____________. Single contract Number of policies Card of insurance Certificate of insurance
Single contract Group life insures a group of people under a single contract. Relevant content:6.1 Group Insurance Market
After the blackout period has ended, the widow or widower may receive a Social Security income benefit based on the ___________. FICA taxes that are paid by the employees PIA of the deceased spouse FICA taxes that are paid by employers Social Security Death Benefit
PIA of the deceased spouse The widow or widower may receive a Social Security income benefit based on the PIA of the deceased spouse. Relevant content:6.5 The Social Security System
All of the following are advantages of having a Buy-Sell Agreement in place, except: Premiums are tax-deductible The business value is pre-agreed upon It is an immediate and automatic method of transferring the deceased's interest The agreement is legally enforceable
Premiums are tax-deductible Premiums paid for a Buy-Sell Agreement life insurance policy are not tax-deductible. Relevant content:6.3 Business Uses of Life Insurance
A mandatory participation rate for noncontributory group plans is designed to: Achieve economies of scale Maximize the premium an insurer collects Reduce adverse selection Allow the employer to obtain the greatest premium discount
Reduce adverse selection Requiring 100% of eligible employees to participate in a noncontributory employer group life insurance plan reduces the risk of adverse selection. Relevant content:6.1 Group Insurance Market
Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: The premium will be higher than the group premium If she waits until the eligibility period has closed, the insurer may require evidence of insurability to reduce adverse selection She will be converting her group term benefit to an individual term benefit She has 31 days of eligibility to convert to the private plan without having to prove insurability
She will be converting her group term benefit to an individual term benefit She will be converting her group term life to an individual permanent policy. Relevant content:6.1 Group Insurance Market
Ultimately, who determines if a life insurance policy with an owner other than the insured will be issued? The insured The beneficiary The insurer The policyowner
The insurer Without insurable interest, the insurer will not issue the policy. Relevant content:6.4 Third-Party Ownership
Ultimately, who determines if a life insurance policy with an owner other than the insured will be issued? The insurer The beneficiary The policyowner The insured
The insurer Without insurable interest, the insurer will not issue the policy. Relevant content:6.4 Third-Party Ownership
In terms of planning out a company's budget, what must be taken into consideration if a group life insurance plan is in place? Those converting to an individual plan are most likely the least insurable The group rate will go down based upon an increase in the company's credit rating If it is a contributory plan, not all covered employees will pay their share of the premiums The insurer can increase the premium at renewal
The insurer can increase the premium at renewal An insurer providing a group life insurance plan can change the rate that it charges. That is important to know for a company's budgeting purposes. Relevant content:6.1 Group Insurance Market
A Credit Life Policy will be cancelled if: The loan is paid off or refinanced The premiums increase by more than 10% The coverage is less than the total debt outstanding The insurer's credit rating falls below A+
The loan is paid off or refinanced The credit life policy can be cancelled when the debt is paid off or is refinanced. Relevant content:6.2 Specialized Plans
All of the following are correct regarding Key Person Insurance, except: The policy primarily insures the employee's retirement plan The policy is owned by the employer The policy is source of funds to replace any lost revenue The policy can be term or permanent
The policy primarily insures the employee's retirement plan A Key Person Plan is intended to help a company recover from the loss of a key employee until a replacement is found. Relevant content:6.3 Business Uses of Life Insurance
What is the most important thing a buy-sell agreement establishes in the agreement? The insurance company issuing the coverage The dollar amount of the premium The amount of taxes owed The price of the business
The price of the business The buy-sell agreement establishes a price for the business so a proper amount of life insurance can be acquired to fund the acquisition. Relevant content:6.3 Business Uses of Life Insurance
Which of the following is a major risk to an employee covered under an employer's group life insurance plan? The sponsor is issued a master policy The sponsor can elect to discontinue the plan Open enrollment is offered on an annual basis Employers pick up all or part of the cost of the insurance
The sponsor can elect to discontinue the plan If employees are relying solely on an employer's group life insurance coverage for their protection needs, they need to be made aware that the plan sponsor can discontinue the plan. Relevant content:6.1 Group Insurance Market