Life Exam 1

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. what amount would his beneficiary receive as a a settlement

$200,000. The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies

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

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

Within how many days must an insured notify the insurer of a child's birth and pay any required fees?

31 days Texas insurance law specifies the insurer be notified within 31 days of the birth of a dependent child

Once the person meets the Stringent requirements for disability benefits under Social Security, how long is the waiting period before any benefits will be paid?

5 months Under Social Security disability benefits, a person will have to wait five months before any benefits will be paid. Actual benefit payments start with the six month of disability

An insured's long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged $100 per day. How much will the insurance company pay?

$120 a day Most LTC policies will pay the benefit amount in specific fixed dollar amount per day, regardless of the actual cost of care

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

An insured borrows money form the bank and makes a collateral assignment of a part of the death benefit to secure the loan A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as a security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan.

Which statement accurately describes the Change of Beneficiary provision?

Any policy that has a death benefit must also have a change of beneficiary provision Any policy that has a death benefit must also have a Change of Beneficiary provision. This allows the policyowner to change the beneficiaries without the original beneficiary's' consent, unless that person was designated as an irrevocable beneficiary

An agent is ready to deliver a policy to an applicant but has yet to received payment. Upon delivery, the agent collects the applicants premium check, answers any questions the applicant may have, and then leaves. What did he 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 insured's health status has not changed since the policy was approved

An insured's premium increases as a result of her age. Which type of policy does she have?

Attained Age Attained Age policies allow the insurer to increase premiums as the insured ages

What document describes an insured's medical history, including diagnoses and treatments?

Attending Physician's Statement An Attending Physicians Statement (APS) is the best way for an underwriter to evaluate an insured's medical history. The report includes past diagnoses, treatments, length of recovery time, and prognoses.

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

Attending physician Home health care is care provided in one's home and could include occasional visits to the person's home by registered nurses, licensed practical nurses, licensed vocational nurses, or community based organizations like hospice. Home health care might include physical therapy and some custodial care such as meal preparations.

Which of the following is NOT required on an illustration used in the sale of a life insurance policy?

The name of the primary and secondary beneficiaries Other required items include the name and business address of producer or insurer's authorized representative; the name, age and sex of proposed insured; underwriting or rating classification upon which the illustration is based; and the initial death benefit.

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits The "Owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream

All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only Key person coverage may be funded by any type of life insurance

All of 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 owned by the employee

On a health insurance application, a signature is required from all of the following individuals EXCEPT

The spouse of the policyowner Every health insurance application requires the signature of the proposed insured, the policyowner (if different than the insured), and agent who solicits the insurance

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities. Equity Indexed annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner, Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities

Which provision states that the insurance company must pay Medical Expense claims immediately?

Time of Payment Claims The Time payment of claims provision requires that claims will be paid immediately upon receipt of proofs of loss except for periodic payments, which are to be paid as specified in the policy

What is the purpose of the Life insurance Guaranty Association?

To help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company All admitted insurers must be a member of the Insurance Guaranty Association as a condition of their license. The insurer Guaranty Association is in existence to protect policy owners and beneficiaries against losses caused by the insolvency of an Insurance Company

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial statement will worsen even more with the upcoming medical expenses. What option could the insured utilize?

Viatical Settlement A viatical statement allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically receive a percentage of the policy's face value from the person who purchases the policy

What is the name of the insured who enters into a viatical settlement?

Viator Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract

An agent and an applicant for a life insurance policy fill out and sign the application. However the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will the coverage begin?

When the agent delivers the policy, collects the initial premium, and the application competes an acceptable Statement of Good health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery, in this case, the applicant will most likely need to fill out a Statement of Good health

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than

With the policy If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium

Upon the submission of a death claim under a life insurance policy, when must the insurer pay the policy benefit?

Within 2 months Upon receipt of a written proof of death and the right of the claimant to the proceeds, the insurer must pay death claims within 2 months

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

Benefit payment amounts are not guaranteed Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license

All of the following apply to short-term disability plans EXCEPT

Both group and individual plans are renewable Short-term disability plans are not renewable

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interests are liquidated together over the selected period of time

The provision that provides for the sharing of expenses between the insured and the insurance company is

Coinsurance The larger the percentage that is paid by the insured, the lower the required premium will be

When delivering a policy, which of the following is an agent's responsibility?

Collect payments at time of delivery The agent has the responsibility to deliver the policy to the insured and to collect any premiums that may be due at the time of delivery

Which of the following provisions states the insurer's right to change premium amounts?

Continuation Provision The Renewal Provision, also known as a "Continuation Provision", must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Contracts of adhesion Insurance policies are written by the insurer and submitted to the insured on a take-it-or-leave-it basis, The insured does not have any input into the contract, but simply adheres to the contract

What is the main difference between coinsurance an copayments?

Copayment is a set dollar amount With both, copayment and coinsurance provisions, the insured shares part of cost for services with the insurer. Unlike coinsurance, a copayment has a set dollar amount that the insured will pay each time certain medical services are used

A waiver of premium provision may be included with which kind of insurance policy?

Disability income A waiver of premium rider generally is included with guaranteed renewable and noncancelable individual disability income policies. It is a valuable provision because it exempts the insured from paying the policy's premium during periods of total disability

The insurance policy. together with the policy application and any added riders form what is known as

Entire Contract When a policy is issued, a copy of the application, any riders and amendments are attached to the back of the policy and become part of the entire contract

The provision in a health insurance policy that ensures that the insurer cannot refer to any document that is not contained in the contract is the

Entire contract clause Entire contract is a mandatory provision that is required by law

All of the following are dividend options EXCEPT

Fixed-Period Installments Fixed-Period installments is a settlement option, and not one of the dividend options

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal benefit society Fraternal insurers operate on the basis of a lodge or chartable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance

Which of the following health insurance plans does NOT require an insured to pay a deductible?

HMO While HMOs require an insured to pay a copay, deductibles and coinsurance are not required

Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information

Held or transmitted in any form Under the Privacy Rule for HIPAA, Protected information includes all individually identifiable health information held or transmitted by a covered entity or its business associate in any form or media, whether electronic, paper or oral. This is called protected health information (PIH)

Which of the following must be included in all life insurance advertisements?

Identity of the actual insurer The Identity of the actual insurer must be stated in all advertisements

Which of the following riders would NOT increase the premium for a policyowner?

Impairment rider The impairment rider excludes a specific condition from coverage, therefore, reducing benefits. An insurance company will not charge extra for a rider that reduces benefits

In which if the following locations would skilled care most likely be provided?

In an institutional setting Skilled nursing care is performed under the direction of a physician, usually in an institutional setting

All of the following are differences between individual and group health insurance EXCEPT

Individual insurance does not require medical examinations, while group insurance does require medical examinations. In individual coverage, policies are issued based upon individual underwriting. In a group plan, everyone is covered for the same coverage and there is no individual underwriting section

Stranger-originated life insurance policies are in direct opposition to the principle of

Insurable Interest Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest

All advertisements 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

Who makes up the Medical Information Bureau?

Insurers The Medical Information Bureau is made up of insurers so companies can compare the information they have collected on a potential insured with information other insurers may have discovered

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate While equity index annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate

Which of the following best describes annually renewable term insurance?

It is a level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at lowest cost

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

It is term coverage that is convertible to permanent insurance at or prior to the child reaching maximum coverage age Children's rider is term insurance covering all of the children in the family, including newly born children, and is convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by the IRS

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy The premium does not change on the inclusion of additional children; it is based on an average number of children

Which statement is NOT true regarding a Straight Life policy?

Its premium steadily decreases over time, in response to its growing cash value Straight life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit

An individual covered under a group life policy may convert the policy to any of the following EXCEPT

Level Term Individuals and dependents insured on a group life policy may convert to an individual policy issued by the same insurer. They can convert into any individual policy except term life

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

Lump sum Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient choses an optional mode of settlement

What is the term for how frequently a policyowner is required to pay the policy premium?

Mode The premium mode is the manner or frequency the policyowner pays the policy premium

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check form the insurance company that was not taxable. This year, she did not receive a check form the insurer. From what type of insurer did the insured purchase the policy?

Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply?

No coverage will apply, since the injury could have been foreseen An accidental means clause states that if the insured meant to do whatever caused their injury, no coverage applies since the resulting injury should have been foreseen.

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Others-Insured rider The others-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance

What is the major difference between a stock company and a mutual company?

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

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21

A Guaranteed renewable health insurance policy allows the

Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class Coverage is guaranteed, but rates can be adjusted for the entire class

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the application a

Premium receipt When collecting the initial premium, the agent should issue the applicant a premium receipt

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense The business cannot take a tax deduction for the expense of the premium. However, if the employee dies, the benefits paid to the business are usually received tax free

When a whole life policy lapses or is surrendered prior to maturity, the cash vale can be used to

Purchase a single premium policy for a reduced face amount When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all the premiums paid. which rider is attached to the policy?

Return of Premium The return of premium rider pays the beneficiary not only the face amount of the policy but also the amount that had been paid in premiums. The rider stipulates that death must occur prior to a certain age in order for the premium amount to be returned. The return of Premium Rider is funded by using increasing term insurance

Which is the best way to change an application?

Start over with a fresh application Most companies require that the app be filled out with ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best way is to simply start over with a fresh application. If that is not practical, draw a lone through the incorrect answer and insert the correct one. The applicant must initial the correct answer

Which of the following riders is often used in business life insurance policies when the policy owner needs to change the insured under the policy

Substitute insured rider. The substitute insured rider, or change of insured rider, allows the policy owner to change the insured listed under the policy, subject to insurability. This rider is often used in business life insurance policies

The interest earned on policy dividends is

Taxable Dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income

Which of the following would be a qualifying event as it relates to COBRA?

Termination of employment due to downsizing Employee qualifying events include the termination of employment for reasons other than for misconduct; dependents' qualifying events include the death of the employee, divorce or legal separation

Which of the following would be required to obtain a Certificate of Authority?

The HMO In order to establish or operate a health maintenance organization, a certificate of authority form the commissioner is required

Which is true regarding obtaining underwriting sources

The applicant must be informed of the sources contacted and how the information is being gathered It is required by law that an insurer informs the applicant of all sources that will be contacted in determining the applicant's insurability, in addition to how the information will be gathered

Which of the following is true about the requirements regarding HIV exams?

The applicants must give prior informed written consent. A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.

The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or cash value If the annuitant dies during the accumulation period; the beneficiary receives benefits from the annuity; either the amount paid into the plan or the cash value, whichever is greater

The policyowner 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 The policyowner (insured) would need to prove insurability for the amount of the increase

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller If an insured withdraws a portion of the death benefit by the use of this rider, the benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.

An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This 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 The insured would have to rely on workers compensation for coverage

How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company?

Within 90 days or as soon as reasonably possible, but not to exceed 1 year The "Proof of Loss" provision states the claimant must submit a proof of loss within 90 days; however, if it is not possible to comply, the time parameter is extended to 1 year. The one-year limit does not apply if the claimant is not legally competent to comply with this provision

An insured submitted a notice of claim to the insurer, but never received claims forms, He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true?

The insured was in compliance with the policy requirements regarding claims. If claims forms are not furnished to the insured, the claimant is deemed to have complied with the requirements of the policy if he or she submits written proof of the occurrence, nature of loss, and extent of loss to the insurer

Which of the following is true regarding elimination periods and the 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 the onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period is, the lower the cost of coverage will be

The insuring clause of a disability policy usually states all of the following EXCEPT

The method of Premium Payment The insuring clause, usually on the first page of the policy, is the general statement that defines the insurance agreement and identifies the insured and the insurance company and states what kind of loss (peril) is covered

Which of the following definitions would make it easier to qualify for total disability benefits?

The more liberal "own occupation" Total disability is defined differently under some disability income policies. The more liberal "own occupation" definition of disability makes it easier to qualify for benefits.

Ray has an individual major medical policy that requires a coinsurance payment. Ray very rarely visits his physician and would prefer to pay the lowest premium possible. Which coinsurance arrangement would be best for ray?

50/50 After the deductible has been paid, the insurance company will pay a specified amount for a physicians visit, while the insured pays the remaining percentage, This is called "coinsurance". Plans will often be listed in a fraction format, with the first number representing the amount that will be paid by the insurer. The less the insurer must pay with coinsurance payments, the lower the premiums will be. Therefore, Ray should choose the 50/50 plan.

Benefit periods for individual short-term disability policies will usually continue from

6 months to 2 years Short-term disability is defined as a disability lasting not more than 2 years.

In order to maintain coverage under COBRA, how soon from termination of employment must an employee exercise extension of benefits?

60 days Under COBRA, terminated employees must exercise extension of benefits within 60 days of separation from employment

Which of the following statements is NOT true considering insurable interest as it applies to life insurance?

A debtor has an insurable interest in the life of a lender A lender has an insurable interest in the life of a debtor, but only to the extent of the debt, The debtor does not have an insurable interest in the life of the lender

Which of the following individuals will be eligible for coverage on the Health insurance Marketplace?

A permanent resident lawfully present in the U.S. To be eligible for health coverage on the Marketplace, the individual must be a U.S. citizen or national or be lawfully present in the United States, must live in the United States, and cannot be currently Incarcerated. Medicare recipients are not eligible for coverage in the Marketplace

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 identify the insured and the nature of the claim The insurance code requires that each policy must include, "Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible".

Which of the following long-term care benefits would provide coverage for care for functionally impaired adults on a less than 24-hour basis

Adult day care Adult day care is designed for those who require assistance with various ADLs on a daily basis, but not around the clock. Custodial care is usually the only service provided by adult day care facilities

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe

Aleatory In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price

What is twisting

An Illegal act in which an agent misrepresents the terms of an insurance or annuities contract or draws incomplete comparisons, in a way that would compel the insured to surrender the contract for the new one

The minimum interest rate on an equity indexed annuity is often based on

An index like standard & poor's 500 Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed indexed annuity has a guaranteed minimum interest rate. Interest rates on equity indexed annuities are often tied to a familiar index, such as the Standard and Poor's 500