Life Insurance Exam

a. The premium has not been paid by the due date, but is still in the grace period b. The outstanding policy loan exceeds the face amount of the policy c. The outstanding policy exceeds the cash value of the policy d. A policy loan interest payment has not been paid C

1. An insurance company may cancel a life insurance policy under which of the following conditions?

a. Transference b. Reinsurance c. Participation d. Mutuality B

1. An insurance company that cedes a portion of an insured's coverage to another insurer is said to be engaged in:

a. Adhesion contract b. Indemnity contract c. Contract of utmost good faith d. Contract of principle C

1. An insurance contract is said to be a(n) ________ because there is a mutual reliance of truthfulness on both parties

a. Money paid to an insurance company for benefits provided in the policy b. A legal contract between an insured and insurer c. Money paid to an insured for benefits payable d. Investments made by an insurance company A

1. An insurance premium can be defined as:

a. Registered with FINRA b. License for variable life and annuities contracts c. A valid insurance license d. All of these D

1. An insurance producer must have which of the following in order to sell variable life insurance policies?

a. Insurance company b. Client c. Client and insurance company d. State of Alabama A

1. An insurance producer represents the:

a. Rebating b. Coercion c. Defamation d. Intimidation A

1. An insurance producer who offers a potential client something of value as an incentive to purchase insurance is engaging in:

a. Face amount of the policy b. Number of years covered by the policy c. Age of the insured d. Premiums paid A

1. An insured owns a policy which includes a disability income rider. The disability benefit amount paid to the insured is based on the:

a. Principle of unilateral b. Concept of adhesion c. Principle of indemnity d. Concept of estoppel C

1. An insured should be restored to the approximate financial condition occupied before the loss occurred. This is called the:

a. Aleatory contract b. Adhesion contract c. Unilateral contract d. Mismatched contract A

1. An insurer pays a large claim for medical expenses after the insured has only one premium payment. This is an example of a(n)

a. Pay the benefits in full b. Adjust the benefits c. Deny the claim d. Return the premiums paid, but deny the claim B

1. Anita is an office clerk at the time she purchases a disability income policy. She later changes her career to a king crab fisherman. If she ever becomes injured on the boat, the change of occupation provision states that the insurer can:

a. Unilateral b. Conditional c. Aleatory d. Guaranteed B

1. Ed has an insurance policy with an insurance company. Before Ed's policy will pay a claim, certain events must occur. Because of this, an insurance policy is considered to be:

a. Part A b. Part B c. Custodial care d. None of these B

1. Eligible participants are required to make premium payments for which part of Medicare?

a. Disability policy b. Medicare part D policy c. Long-term policy d. Blanket policy C

1. Extended residence in a nursing home is covered by a(n):

a. One year b. Two year c. Three year d. Four year A

1. Generally, how long is a benefit period for a major medical expense plan?

a. Multiple employer welfare arrangements b. Multiple employer trusts c. Managed health care systems d. Nonprofit organizations C

1. Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are both considered to be:

a. Non-tax deductible to the employer/nontaxable to the employee b. Tax deductible to the employer/nontaxable to the employee c. Tax deductible to the employer/taxable to the employee d. Non-tax deductible to the employer/taxable to the employee B

1. How are employer-paid premiums for employee group health insurance normally treated for tax purposes?

a. Daily b. Monthly c. Quarterly d. Annually B

1. How frequently does a disability income policy pay benefits?

a. Policy fees b. State and local taxes c. Assessments against other admitted insurers in Alabama d. Licensing fees charged to new producers C

1. How is the Alabama life and disability insurance guaranty association able to pay claims for insolvent insurers?

a. One year b. Two years c. Three years Four years C

1. How long must a producer keep complete records pertaining to his/her insurance transactions?

a. The annual premium divided by the number of employees b. The entire premium paid in a year c. Half of the premium paid in a year d. Nothing D

1. If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee?

a. 6 months b. 1 year c. 2 years 3 years C

1. If a long-term care policy in Alabama has been in effect for more than ____, the insurer CANNOT contest any material representation on the application

a. Have passed the state exam for the lines of the authority in which licensure is sought b. Be licensed as an insurance producer c. Be appointed by an insurer d. All of these D

1. If an individual would like to sell insurance for an insurance company, he/she must:

a. Six months b. One year c. Two years d. Three years C

1. If an insured commits suicide, a life insurance policy's face amount will be paid only after the policy has been in force at least:

a. $2,400 (2000 - 200 + 1,500 - 200 = 3,100 x .80) b. $2,600 (2,000 + 1,500 = 3,500 x .80 = 2,800 - 200) c. $2,640 (2,000 + 1,500 = 3,500 - 200 = 3,300 x .80) d. $2,800 (2,000 + 1,500 = 3,500 x .80) C

1. If an insured under a Major Medical policy with a $200 deductible and an 80% coinsurance clause incurred the following covered expenses: hospital room and board $2,000; surgeon's fee $1,500. How much would the policy pay?

a. Pay the premiums through an automatic deduction from their bank account b. Have a higher total outlay of dollars for the coverage for that year c. Have a higher total outlay for the coverage for that year d. Have the same outlay of dollars for the coverage B

1. If insurance premiums are paid more frequently than annually, the policyowner can expect to:

a. Noneligible b. Noncontributory c. Eligible d. Contributory D

1. If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?

a. Be regulated by the National Association of Health Maintenance Organizations b. Have a complaint system to resolve written complaints from enrollees c. Be examined by the insurance commissioner every six months d. be regulated by the insurance commissioner, but cannot be assessed an administrative penalty for violations of the law B

1. In Alabama, all Heath Maintenance must:

a. A non-admitted company b. An alien company c. A domestic company A foreign company C

1. In Alabama, an insurance company incorporated and licenses to do business in this state is called:

a. The actual amount of commissions paid b. Twice the amount of the commissions paid c. Three times the amount of the commissions paid d. Four times the amount of the commissions paid D

1. In Alabama, an insurer who violates state laws for the payment of insurance commissions may be fined up to:

a. The moment of birth b. When the premium is paid for the additional coverage c. After a 30-day probationary period d. After a 60-day waiting period A

1. In Alabama, when are newborns covered under a health policy?

a. Which type of life insurance a client should apply for b. How much life insurance a client should apply for c. Which company a client should use when applying for life insurance d. What the maximum amount the client can spend on life insurance B

1. In life insurance, the needs approach is used mostly to establish

a. Changes on the application can only be made by the Commissioner b. Changes on the application must be consented to in writing c. Changes on the application are never allowed d. Statements made on the application are always considered warranties B

1. In regard to insurance applications, which of the following statements is true?

a. Guaranteed b. Warranties c. Representations d. Irrevocable C

1. In regards to a life insurance policy or an annuity contract, all statements made on the application are considered to be:

a. Term insurance does not build cash value b. Whole life insurance has a lower premium per $1,000 of coverage c. Whole life does not build cash value d. Term life insurance does not pay a death benefit A

1. In which of the following ways does term life insurance and whole life insurance differ?

a. Never changes b. Adjusts after a claim is processed c. Adjusts based on the insured's health d. Adjusts annually D

1. Individual disability income policies normally have a premium that:

a. Agent's report b. MIB report c. Inspection report d. Attending physician's report C

1. Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

a. Insurable interest b. Insurance exchanges c. Law of large numbers and risk pooling d. Population table data C

1. Insurance companies determine risk exposure by which of the following

a. Contributory policies b. Non-contributory policies c. Participating policies d. Non-participating policies C

1. Insurance policies issued by companies which allow their policyholders to participate in the favorable experience of the company through payment of dividends are known as:

a. Contributory policies b. Non-contributory policies c. Participating policies d. Non-participating policies D

1. Insurance policies issued by companies which are owned by stockholders and do not pay policy dividends are knows as:

a. Limited coverage b. Workers' compensation coverage c. Occupational coverage d. Nonoccupational coverage D

1. J has a disability income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind if coverage is this?

a. $0 b. $100,000 c. $25,000 d. $50,000 C

1. J has an accidental death and dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. what is the MAXIMUM J will receive from his policy?

a. Optional issue b. Guaranteed issue c. Conditional issue d. Mirroring Medicare B

1. Jackie has just enrolled in Medicare Part B for the first time. He cannot be refused or rated for a Medicare Supplement policy as long as he applies for coverage within 6 months of enrolling in Part B. What is this requirement called?

a. 1 month b. 3 months c. 6 months d. 12 months C

1. Jackie took out a Medicare supplement insurance policy and has a preexisting condition. In this situation, a preexisting condition for which medical advice was given or received within ____ of the effective date of coverage.

a. Jan can take out a policy loan without Jim's permission b. Jim does not need permission from Jan to take out a policy loan c. Jim can remove Jan as beneficiary d. Jim needs Jan's permission to borrow the policy's loan value D

1. Jan is named irrevocable beneficiary of Jim's life insurance policy. Which of the following statements is correct?

a. Adjustable life b. Variable universal life c. Modified endowment contract (MEC) d. Annuity D

1. Janet is retied and looking to invest a lump-sum of money through an insurance company. Which product would be best suited for this?

a. Only the premiums paid into the policy. No death benefit b. The original face amount of life insurance listed on his policy c. The amount of insurance that his premiums would have purchased at his correct age d. Nothing C

1. John has recently died, and it was discovered that he was actually ten years older than what was listed on his life insurance policy. What will the insurer pay his beneficiary?

a. A surrender penalty b. Tax on the interest earned c. A surrender penalty and tax on the interest earned d. No tax and no penalty B

1. John is an annuitant who has surrendered his annuity at age 55. What will he pay?

a. Hazardous selection b. Speculative selection c. Adverse selection d. Pure selection C

1. John purchases insurance because he expects to experience a loss. This is known as:

a. 6 b. 12 c. 24 d. 36 B

1. Julio, the insurance provider, has allowed his license to lapse. He would like to reinstate his license without retaking a pre-license course or passing a written examination. To do this, Julio must reinstate the license within ___ months from the renewal date.

a. Major medical b. Long-term care c. Medicare supplement d. Medicaid C

1. Katherine is a retiree and was recently hospitalized for 10 days. Which type of insurance policy would best cover her for excess hospital expenses?

a. A periodic income to the annuitant for life b. Income payments to a beneficiary after her death c. A guaranteed maximum benefit A periodic income for a stated number of years A

1. Kim has purchased a straight life annuity. What will this type of annuity provide her with?

a. Equity indexed life b. Modified life c. Graded life d. Universal life A

1. Paula has an insurance policy that has a guaranteed minimum cash value, a guaranteed death benefit, fixed premiums, and grows at a rate reflected by a selected fund index. Which type of life policy fits this description?

a. Excludes coverage for any aviation passenger older than a limiting age b. Excludes coverage when the insured is riding in any kind of air travel c. Excludes coverage when the insured is riding in certain kinds of air travel C

1. The aviation exclusion:

a. Hazard b. Adversity c. Peril d. Risk C

1. The cause of a loss is referred to as a:

a. Principle of adhesion b. Unilateral doctrine c. Doctrine of reasonable expectations d. Contract of authority C

1. The exclusions and conditions in an insurance contract are required to be conspicuous, plain, and clearly stated. There should be no surprise when an insurance company denies a claim for a hidden clause. This is called the:

a. Preferred b. Standard c. Substandard d. Subpar C

1. The highest premium payment would be charged to which risk classification?

a. Unemployed 64-year-old female b. 62-year-old male covered by Medicaid c. 68-year-old male covered by Medicare d. Uninsured 60-year-old male C

1. The individual most likely to buy a Medicare Supplement policy would be a(n):

a. Purchase a long-term care policy regardless of insurability b. Receive a tax credit to offset the cost of a long-term care policy c. Shelter assets from the spend-down requirements of Medicaid d. Live in a nursing home with their spouse C

1. The long term care partnership program is designed to allow seniors to:

a. Number of dependents b. Unearned income from the previous year c. Earned income from the previous year d. Debt-to-income ratio C

1. The maximum's amount of coverage placed on a disability income policy is based on the insured's:

a. 10 days b. 14 days c. 30 days d. 45 days C

1. The minimum grace period for a life insurance policy sold in Alabama is:

a. The health of the annuitant b. The gender of the annuitant c. The annuitant's payout period selection d. The age of the annuitant C

1. The monthly benefit an Annuity Certain is determined by:

a. 7 b. 10 c. 20 d. 31 C

1. The notice of claim provision states that the insured notify the insurance company within ___ days of the claim

a. Morbidity experience b. Mortality experience c. Internal risk d. Adverse selection A

1. The number of an insurance company's health insureds that is expected to become sick or injured is called:

a. The retention of risk b. The transfer of risk c. The reduction of risk d. The avoidance of risk B

1. The objective of insurance is

a. With proof of insurance only b. Without proof of insurability c. With no change in premium d. Using the insured's attained age only B

1. The option to convert term life insurance to a permanent form of coverage can normally be executed:

a. The blackout period b. The elimination period c. The waiting period d. The restricted period A

1. The period of time during which a surviving spouse does not qualify for Social Security survivor or retirement benefits is called:

a. Monthly b. Annual c. Quarterly d. Semi-annual A

1. The premium payment mode which results in the highest total premium is:

a. Tax-deductible to the employer b. Partially deductible to the employee c. Tax-deductible to the employee d. Taxable income to the employee A

1. The premiums paid by an employer for his employee's group life insurance are usually considered to be:

a. Settlement options b. Dividends c. Viatical options d. Accelerated benefits A

1. The proceeds of a life insurance policy can be paid in a form other than a lump-sum payment. These forms of payment are called:

a. The cost of providing group disability insurance to the employees b. Fixed business expenses c. The owner's loss of income d. All business-related expenses and salaries' B

1. The reason for a business having Business Overhead Expense Disability Plan is to cover:

a. Credits b. Reserves c. Surplus d. Retention B

1. The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called:

a. Injuries sustained while committing a felony b. Injuries while serving in the military c. Self-inflicted injuries d. All of these D

1. The waiver of premium provision normally excludes which of the following disabling acts?

a. Guaranteed b. Never guaranteed c. Interest sensitive d. Held in a separate account C

1. Tim has a universal life policy. The cash value growth in his policy is:

a. Her policy can be returned for 100% refund of the premium within 10 days from the date the policy is delivered b. A claim must be paid even if the insured has already returned the policy c. Neither of these statements are true d. Both are true A

1. Tina has an insurance with a 10-day free look provision. Which of these statements is correct?

a. Any occupation b. His/her current occupation c. Any occupation that reflects the employee's education level Any occupation that the employee is qualified and willing to do A

1. To be eligible for Social Security disability benefits, an employee must be unable to perform:

a. The "own occupation" definition b. The "any occupation" definition c. The "waiver of premium" definition d. The "accidental means" definition A

1. Total disability can be defined as "the insured's inability to perform the occupation for which he/she is reasonably qualified by education, training, or experience." For disability income insurance purposes, this definition is known as:

a. Waiver of premium benefit b. Residual disability benefit c. Rehabilitation benefit d. Recurrent disability benefit B

1. Trent has a permanent, partial disability where he is paid 50% of his previous income. Trent is covered by a:

a. Only for occupational-related disabilities b. An insured's premiums for as long as the insured remains totally and completely disabled c. A monthly income for as long as the insured remains totally and completely disabled d. None of these C

1. Typically, a disability income rider will pay:

a. 4 b. 5 c. 6 d. 7 B

1. Under Alabama's annuity disclosure regulation, the disclosures must be mailed to the applicant within ____ business days if the application is taken over the phone.

a. Self-insurance b. Capitation c. Fee-for-service d. Open panel B

1. Under a health maintenance organization, service provides are paid a fixed monthly fee for each member. This concept is called:

a. Corporation b. Employee c. Employer d. Labor union B

1. Under a trustee group life policy, who would be eligible for a certificate of coverage?

a. Portion of the premiums paid for by the employer may be a tax deduction b. Portion of the premiums paid for by the employee may be a tax deduction c. Portion of the death proceeds are taxable to the beneficiary d. Portion of the death proceeds are taxable to the estate A

1. Under federal tax laws, what is the tac treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?

a. 10,000 b. $7,500 c. $5,000 d. $2,500 A

1. Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:

a. Common stock b. Money market securities c. Insurer's corporate business account d. Junk bonds C

1. Variable annuities may invest premiums in each of the following, EXCEPT:

a. This occurred while traveling b. This is considered a job-related accident c. This was an accident d. None of these B

1. Wayne is covered under a nonoccupational group health policy. He is hurt while traveling for business and requires a lengthy hospital stay. His group health policy refuses to pay for hospital expenses because

a. The premium remains constant over the term of the policy while the protection is increased b. The premium remains constant over the term of the policy while the protection is reduced c. The premium increases over time while the protection remains constant d. The premium and the protection remain constant for the term of the policy D

1. What describes a level term policy?

a. Disability income b. Elective plastic surgery c. Long-term care expenses d. Usual, customary, and necessary expenses D

1. What do Major Medical policies typically cover?

a. Periodic payments b. Death benefits c. Lump-sum benefit d. None of these C

1. What does Disability Buy-Sell insurance provide?

a. Children b. Employers c. Families d. Wage earners D

1. What does a disability income policy normally cover?

a. The right to convert to permanent coverage b. The insured's level premium c. The insured's insurability d. The right to borrow against the cash value C

1. What does renewable term guarantee?

a. A disability program b. A hospital and medical expense insurance program c. Offers assistance in making health insurance premiums d. Part D provides payment for surgeon expenses B

1. What is Medicare?

a. A certificate that contains a copy of the application and the attached policy b. A certificate issued to each individual covered by the group life insurance c. A certificate issued to the employer that serves as the master policy d. A certificate that is filled out when a claim is filed B

1. What is a certificate of insurance?

a. When the applicant receives the policy and pays the initial premium b. When the MIB report is received c. Upon a completed medical exam Upon policy approval A

1. A $20,000 life insurance policy is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?

a. The employee's family b. Company Y c. Company X d. The employee's estate C

1. A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. if this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?

a. Prior preferred rating b. Prior use of marijuana c. Prior lapsing of policy d. Prior bankruptcy judgement B

1. A MIB report may disclose which of the following:

a. Domestic admitted b. Foreign admitted c. Domestic non-admitted d. Foreign non-admitted D

1. A ____ _____ company is one that is domiciled in another state and has NOT received a license to do business in Alabama

a. Business overhead expense insurance b. Buy-sell plan c. Disability income insurance d. Key person disability insurance A

1. A business owner has disability coverage that covers business expenses (other than income, cost of capital goods, and other specified expenses). What kind of disability coverage is this?

a. A portion of the policy proceeds to the assignee b. The entire amount of the policy proceeds to the assignees c. The cash value to the assignee d. The cash value and face amount to the assignee A

1. A collateral assignment allows a policyowner to assign:

a. Each partner is responsible for purchasing his/her own individual life insurance policy b. Each partner must own a policy on the other partners c. A master policy is purchased and paid for by the company that covers all the partners d. A master policy is purchased by the company and paid equally among the partners B

1. A cross purchase buy-sell agreement is in place for ABC company's four founding partners. What would this agreement require if the agreement is funded with individual life insurance?

a. Previous employer b. New employer c. Employee d. Workers' compensation C

1. A departing employee has decided to continue his group coverage through COBRA. Who pays the premium in this situation?

a. Full-time student over the age of 21 b. Full-time student over the age of 26 c. Physical or mental disability d. None of these C

1. A dependent child can receive continuation of coverage under the parents' policy for which of the following conditions?

a. 7 days b. 10 days c. 14 days 31 days B

1. A disability policy in Alabama that is paid on a monthly basis is required to have a grace period of:

a. Warranty policy b. Optionally renewable policy c. Noncancellable policy d. Guaranteed renewable policy C

1. A disability policy must be renewed, cannot be cancelled until age 65, and may not have an increase in premium for any reason is called a(n):

a. Not require coordination of benefits with Workers Compensation b. Usually pay-short-term benefits of less than 2 years in duration c. Typically cover occupational losses d. Usually pay long-term benefits of more than 2 years duration B

1. A group disability income policy will:

a. Straight life installment annuity b. Straight life with period certain annuity c. Joint and survivor life annuity d. Survivorship with period certain annuity C

1. A husband and wife are receiving annuity payments. When the husband dies, the wife still receives annuity payments for life. What kind of annuity is this?

a. Survivorship life policy b. Joint life policy c. Renewable life policy d. Adjustable life policy A

1. A husband and wife purchase a life insurance policy that covers both of them. The policy paid nothing when the husband died. Two years later, the wife dies, and a death benefit is paid to the beneficiary. Which type of policy is this?

a. Obtaining a license through fraud b. Not paying state income tax c. Being convicted of a felony d. Being convicted of a misdemeanor D

1. A licensed Alabama insurance producer would NOT be disciplined by the Commissioner of Insurance for:

a. Medical history b. Hobbies c. Gender d. Weight C

1. A life insurance application may be rejected on the basis of all of these EXCEPT

a. Interest only option b. Lump sum option c. Fixed amount option d. Life income option A

1. A life insurance beneficiary has chosen a settlement option in which the principal never decreases unless the beneficiary makes a withdrawal. This settlement option is called the:

a. Must be a whole life policy b. Must contain a conversion privilege c. Is required to contain a revocable beneficiary d. Is used largely in estate-planning as well as business situations D

1. A life insurance policy owned by a third party:

a. The amount of coverage will be much less than the original coverage b. The premiums will be higher than the original policy c. The policy's cash value will stop accumulating The premiums will be lower than the original policy A

1. A life insurance policyowner has just exercised the policy's reduced paid-up option. Which of these statements is true?

a. Solicit insurance b. Sell insurance c. Issue policies d. Collect premiums C

1. A life insurance producer's agency agreement normally authorizes the license to do all of the following, EXCEPT:

a. 1 b. 2 c. 3 d. 4 B

1. A long term care insured must be unable to perform a minimum ___ activities to receive benefits.

a. Continually renewable b. Guaranteed renewable c. Unconditionally renewable d. Optionally renewable B

1. A long term care policy has a minimum renewability level of:

a. A fraternal benefit society b. A stock insurer c. A mutual insurer d. The life and health insurance guaranty association A

1. A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as:

a. The reduced paid-up coverage amount minus $250 b. The reduced paid-up coverage amount minus $5,000 c. The reduced paid-up coverage minus $5,250 d. The reduced paid-up coverage amount C

1. A policyowner with a $100,000 whole life policy has a cash value of $10,000. There is an outstanding loan of $5,000 and a past-due premium of $250. If the policyowner chooses the reduced paid-up option and then later dies, what will the beneficiary receive?

a. Agree to credit check before loan is approved b. Agree to forfeit the policy if loan is not repaid c. Pay back the loan amount to keep the policy's cash value at its maximum d. Pay back the interest to keep the policy active C

1. A policyowner with an automatic premium loan provision must:

a. Negotiated fee-for-service b. Capitation c. Closed panel d. Prepaid basis A

1. A preferred provider organization contract typically uses which payment arrangement?

a. IRA b. Keogh plan c. SIMPLE plan d. 403(b) plan B

1. A retirement plan intended for a sole proprietor and his/her employees would be a(n):

a. Individual retirement account b. Inclusive plan c. Keogh plan d. Defined contribution plan A

1. A retirement plan that can be started by an employee, even if another plan is in existence, is called a(n):

a. A premium that is higher than for a normal risk b. A premium that is lower than for a normal risk c. A premium that is the same as a normal risk d. The applicant being declined for coverage A

1. A substandard or special class risk typically results in:

a. Mandatory income tax withholding on the transfer amount b. Paying transfer fees c. Paying trustee fees d. Ever paying income taxes on the distributions A

1. A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:

a. Is mandatory in all term life policies b. Waives the premium when the policyowner becomes unemployed c. Waives the premiums when the policyowner becomes totally disabled Requires the policyowner to repay all waived premiums C

1. A waiver of premium:

a. A contract b. A business c. An agreement d. An alliance A

1. A written agreement that involves two or more parties and consideration is:

a. $1,000 b. $3,900 c. $4,000 d. $4,400 C

1. A.J has a major medical policy with $500 deductible and an 80% coinsurance clause. He incurs the following covered expenses under a recent hospitalization: $3,500 hospital room and board; $2,000 surgeon's fee. What will AJ's policy pay?

a. The CEO's estate b. The CEO's family c. ABC company XYZ company C

1. ABC company takes out a Key Employee policy on its CEO. The CEO leaves ABC company and begins working for XYZ company five years later. If this person were to die and the policy is still in force and unchanged, where would the death proceeds be directed.

a. Age 14 can contract for life, health, and accident insurance on their own lives b. Age 18 can begin receiving life insurance death benefits of up to $3,000 per year c. Age 15 can begin receiving life insurance death benefits of up to $3,000 per year d. Age 16 can contract for life insurance, but not health and accident insurance B

1. According to Alabama law, a minor

a. Are exempt from continuing education requirements b. Are not subject to producer licensing requirements c. Must be licenses as insurance producers d. Are subject to maximum commission earnings C

1. According to Alabama law, agents of health maintenance organization (HMO):

a. Adding more security to a high-risk building b. Choosing not to invest in the stock market c. Doctors pooling their money to cover malpractice exposures d. Buying an insurance policy to cover potential liabilities C

1. An example of risk sharing would be

a. Limited b. Franchise c. Long term care (LTC) d. Medicare C

1. An individual unable to perform two or more activities of daily living (ADLs) will trigger coverage from a _____ policy.

a. Inflation b. The risk of dying prematurely c. The risk of living longer than expected d. The risk of not having enough retirement income C

1. An individual who purchases a Life annuity is given protection against:

a. Risk reduction b. Risk transference c. Risk avoidance d. Risk retention C

1. An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in

a. A non-admitted company b. A domestic company c. An alien company d. A foreign company D

1. An insurance company licensed to do business in Alabama, but incorporated in another state, is called:

a. An admitted company b. A domestic company c. A foreign company d. An alien company A

1. An insurance company licensed to solicit insurance in a specific state is called:

a. A retirement plan that promises a specified benefit to the employee at retirement b. A retirement plan that only pays benefits to a corporation's officers c. A retirement plan that only invests in tax-sheltered annuities d. A retirement plan that promises a specified payment to the plan by the employer A

1. What is a defined benefit plan?

a. Pay benefits to an insured's employer to help find a replacement b. pay benefits for strictly work-related accidents c. pay benefits to maintain the insured's current standard of living d. pay benefits to reimburse for medical expenses C

1. What is a disability income policy designed to do?

a. Peril b. Hazard c. Loss factor d. Liability A

1. What is known as the immediate specific even causing loss and giving rise to risk?

a. Cash value b. Death proceeds c. Premiums d. Sales literature C

1. What is the applicant's consideration in an insurance contract?

a. 13 b. 14 c. 15 d. 16 C

1. What is the minimum age requirement for a minor in Alabama to purchase a life insurance policy?

a. State guaranty association b. Fair labor standards board c. Fair credit reporting act d. National Association of Insurance Commissioners C

1. What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?

a. Education level b. Wages c. Type of occupation d. Age B

1. What is the primary factor that determines the benefits paid under a disability income policy?

a. It details the commissions earned by the agent b. It guarantees a policy will be issued c. It allows the consumer to compare the costs of different policies d. It highlights the critical parts of the policy issued D

1. What is the purpose of a Policy Summary

a. The employer's right to limit contributions to a pension plan b. The employer's right to the employee's contributions in a retirement plan if employment terminates prior to retirement c. The employee's right to the employer's contributions in a retirement plan if employment terminates prior to retirement d. The employee's right to invest in any investment vehicle he/she chooses C

1. What is vesting?

a. Acceptable risks b. Special class risks c. Uninsurable risks Standard risks B

1. What kind of risk are amateur pilots normally classified as?

a. 25% b. 50% c. 75% d. 100% D

1. What percentage of eligible employees must be covered by noncontributory group insurance plans?

a. File a lawsuit b. Submit the claim in any form c. Wait for the claim form to arrive d. Resubmit the request for a claim form B

1. What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's claims forms provision?

a. Church plans b. Major medical plans c. Corporate d. Qualified plans A

1. What type of employee welfare plans are not subject to ERISA regulation?

a. Contributory plan b. Non-contributory plan c. Qualified plan d. Non-qualified plan A

1. What type of group insurance plan involves employees sharing the cost?

a. Arbitrage b. Facultative c. Excess d. Treaty D

1. What type of reinsurance contract involves two companies automatically sharing risk exposure?

a. Temporarily replace a disabled key employee b. Pay a disabled key employee's salary c. Pay for a disabled key employee's hospital expenses d. All of these A

1. What use does a business have for a key employee disability insurance policy?

a. No expenses are covered b. 50% of covered expenses c. 75% of covered expenses d. 100% of covered expenses D

1. What will the insurance company pay once the stop-loss is exceeded on a Major Medical policy?

a. Profitable b. Mutual c. Nonparticipating d. Participating D

1. When a policy pays dividends to its policyholders, it is said to be

a. Federal fair credit act violation b. Title 18 fraud violation c. Anti-money laundering violation d. Unfair trade practice violation C

1. When a policyowner cash surrenders a Universal Life insurance policy in its early year, this may be considered a red flag for a(n):

a. Employee must convert group term life coverage into an individual term life policy b. Employee must provide evidence of insurability for conversion c. Policy proceeds will be paid if the employee dies during the conversion period d. Policy proceeds will NOT be paid if the employee dies during the conversion period C

1. When an employee is terminated, which statement about a group term life conversion is true?

a. Distributed according to state law b. Distributed according to the family's wishes c. Not taxable d. Not subject to a creditor's claims A

1. When an estate is named beneficiary to a life insurance policy, the policy proceeds are:

a. When an insurer's stock portfolio underperforms b. When the risks accepted for insurance has a LOWER likelihood of experiencing loss than an average group c. When the risks accepted for insurance has a HIGHER likelihood of experiencing loss than an average group d. When total premiums exceed total claims for a calendar year C

1. When does "adverse selection" exist?

a. After all medical and personal information has been evaluated b. When insurer receives initial premium from the producer c. When the producer delivers policy and collects initial premium After application has been approved by the underwriters C

1. When does a life insurance contract become effective if the initial premium is not collected during the application process?

a. Annual limit b. Coinsurance limit c. Indemnity limit d. Stop-loss limit D

1. When medical expenses reach a certain dollar amount, the insured is no longer responsible for sharing the cost of expenses. The insurance company then pays 100% of the covered expenses. This major medical policy provision is called a(n):

a. Interest income b. Number of beneficiaries c. Mortality factor d. Operating expenses B

1. When the gross premium of a life insurance policy is computed, which of these factors is NOT included?

a. Premium reduction option b. Single premium option c. Paid-up additions option d. Cash option C

1. Which dividend option allows a policyowner to use his/her dividends to buy life insurance on a single premium basis?

a. State government b. Local government c. Federal government d. National Association of Insurance Commissioners (NAIC) A

1. Which entity is responsible for the majority of regulations imposed on the insurance industry?

a. Insuring b. Consideration c. Free look d. Payment mode A

1. Which health policy clause specifies the amount of benefits to be paid?

a. Designed for individuals who are enrolled in Medicare b. Must define all terms the same as the federal Medicare program c. Must include a minimum 20-day Free-Look provision Must not duplicate Medicare benefits B

1. Which is NOT true regarding Medicare Supplement policies?

a. Monthly premium b. Annual premium c. Single premium d. Semi-annual premium C

1. Which mode of payment is NOT used by health insurance policies?

a. Obtain prior approval from the NAIC for the medical service b. Obtain prior approval from the insurer for the medical service c. Take a physical examination prior to leaving the primary area d. Sign a liability waiver from the insurer prior to receiving medical care B

1. Which of the following actions is required by an insured who leaves the primary area of medical coverage and seeks medical care?

a. Increase the premium b. Do not cover the substandard condition c. Limit the type of coverage d. Lengthen the contestability period D

1. Which of the following actions may NOT be taken by an insurance company to insure a substandard applicant for disability income coverage?

a. Issue the policy with a diabetes exclusion b. Issue the policy with an altered time of payment claims provision c. Issue the policy with a rating d. Decline the applicant B

1. Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a disability income policy

a. Hospital room and board b. Surgeon's fees c. Prescription medication d. Pain and suffering D

1. Which of the following are NOT covered under Major Medical policies?

a. Point-of-service plan (POS) b. Preferred provider organization (PPO) c. Medical information bureau (MIB) d. Health maintenance Organization (HMO) C

1. Which of the following are NOT managed care organizations?

a. Operates on a fee-for-service basis b. Members select preferred providers c. Consists of small employers who have joined to provide health benefits for their employees d. Provides full medical services that stress preventative medicine D

1. Which of the following best describes a health maintenance organization?

a. Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company b. Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company c. Complete the application and review the information prior to obtaining the customer's signature, then send the application off to the insurance company d. Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company C

1. Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

a. Cash surrender b. Reduced premium c. Reduced paid-up insurance d. Extended term C

1. Which of the following dividend options allows the continuation of cash value accumulation?

a. Income is paid until the principal amount decreases to zero b. A specified income amount will be paid to the payee c. A lifetime income can be paid to a second payee if the first payee dies d. A lifetime income will be paid to the payee A

1. Which of the following does NOT describe a life income settlement option?

a. Survivorship b. Dismemberment c. Disability d. Retirement B

1. Which of the following does Social Security NOT provide benefits for?

a. Having a child b. Getting married c. Reaching a specified age stated in the policy d. All of the above D

1. Which of the following events would allow a policyowner with a guaranteed insurability rider purchase additional life insurance?

a. Education level b. Occupation c. Age d. Lifestyle A

1. Which of the following is NOT a factor typically used by insurers to classify risk?

a. An airline insuring the lives of its passengers b. A corporation insuring the life of a key executive c. A person insuring his/her own life d. A husband insuring the life of his spouse A

1. Which of the following is NOT an example of insurable interest?

a. Face amount b. Cash value accumulation c. Premiums d. Policy dividends D

1. Which of the following is NOT guaranteed by a whole life policy?

a. Comprehensive dental care policies usually cover a percentage of reasonable and customary charges for non-routine treatment b. Comprehensive dental care policies usually cover all reasonable and customary charges for non-routine treatment c. Comprehensive health benefit plans always include dental insurance Specialized dental care is usually covered with the same maximums and deductibles as routine dental treatment A

1. Which of the following is a TRUE statement regarding dental insurance?

a. The withholding of information that should have been provided to an insurer is called concealment b. Warranties are statements that are NOT guaranteed to be true c. Representations are statements that ARE guaranteed to be true d. All statements made on an insurance application are considered to be warranties A

1. Which of the following is a true statement?

a. Reduced paid-up b. 1-year term c. Extended term d. Lump sum cash C

1. Which of the following is considered the "automatic" Nonforfeiture Option that most insurers will use?

a. Risk b. Hazard c. Indemnity d. Peril B

1. Which of the following is considered to be an event or condition that increases the probability of an insured's loss?

a. The principal amount gradually decreases to zero b. The principal amount never goes down c. The principal amount gradually increases based on the interest earned d. The principal amount is based upon the policyowner's age A

1. Which of the following is true concerning the fixed period option?

a. Health and savings accounts (HAS) and Flexible savings accounts (FSA) b. Carryover provision and a stop-loss provision c. Maximum lifetime benefit and a coinsurance provision None of these C

1. Which of the following limits an insurance company's total exposure under a major medical policy?

a. Disability income b. Death c. Unemployment d. Home health care D

1. Which of the following long term care plan typically provide benefits for?

a. Inducing the purchase of an LTC policy through force, fright, threat, or undue pressure b. Misrepresenting a material fact in selling an LTC policy c. Using direct mail to market an LTC policy d. Failing to disclose that the purpose of the marketing effort is insurance solicitation (cold lead advertising) C

1. Which of the following long-term care practices is permitted in Alabama?

a. Term rider b. Waiver of premium rider c. Automatic premium loan rider d. Guaranteed insurability rider A

1. Which of the following permanent life insurance policy riders add more coverage for a limited amount of time?

a. 1970 - Fair Credit Reporting Act b. 1959 - intervention by The Securities and Exchange Commission (SEC) c. 1999 - Financial Services Modernization Act d. 1945 - the McCarran-Ferguson Act A

1. Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated:

a. Asthma b. Leukemia c. Alcohol rehabilitation d. Severe car accident B

1. Which of the following situations does a critical illness plan cover?

a. The maximum premium an insurer can charge for their health insurance based on geography b. The maximum amount an employer can contribute to a contributory health plan c. The maximum deductible an insured can be charged d. The maximum amount considered eligible for reimbursement by an insurance company under a health plan D

1. Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?

a. Services are reimbursed before the insurer receives the invoice b. Services are reimbursed after insurer receives the invoice c. In-network dentists must always be used d. Very limited list of providers B

1. Which of the following statements BEST describes dental care indemnity coverage?

a. Discourages overutilization of the insurance coverage b. Minimizes the need for deductibles c. Discourages adverse selection d. Minimizes the waiting period A

1. Which of the following statements BEST describes the intent of a coinsurance clause in a major medical policy?

a. So long as the premiums are paid, the policy cannot be changed in anyway b. Noncancellable provisions are most commonly found in disability income policies c. The premium rate CAN be increased over time d. The premium rate CANNOT be increased over time C

1. Which of the following statements about a noncancellable policy is FALSE?

a. Substandard applicants are never declined by underwriters b. Substandard applicants are occasionally declined by underwriters c. Preferred risk applicants typically have better premium rates than standard risk applicants d. An applicant can be classified as substandard risk because of a hazardous job A

1. Which of the following statements about the classification of applicants is INCORRECT?

a. An issued policy can never change b. An issued policy can be changed by an authorized company officer without the policyowner knowing it c. An issued policy can never be changed by a producer A policy can be changed by the producer if the policyowner C

1. Which of the following statements concerning a life insurance policy is TRUE?

a. Changes in an insurance policy must be approved by an executive officer of the insurance company. b. Changes in an insurance policy must be endorsed on the policy or attached in a rider c. Agents are allowed to waive certain policy provisions d. Agents are never allowed to waive policy provisions C

1. Which of the following statements is NOT correct?

a. Savings b. profit c. Deposit d. None of these D

1. Which of the following terms may be used when describing the premiums for a life insurance policy advertised in Alabama?

a. Lifestyle of the applicant b. Number of dependents c. Future educational costs of the dependents d. Self-maintenance expenses D

1. Which of these factors does NOT influence an applicant's need for life insurance?

a. The application helps identify the applicant b. The application contains statements that become the basis for approving the policy c. When attached to the policy, the application becomes part of the contract d. When attached to the policy, the application becomes part of the insurance clause D

1. Which of these is NOT a reason the insurance application is important?

a. Self-employed individuals b. Employees c. Federal government d. Employers C

1. Which of these is NOT a source of funding for Social Security benefits?

a. An insurer's illustration for a variable life insurance policy b. A producer's prepared sales talk c. An insurer using descriptive sales material in a magazine d. A producer sending a Christmas card to a client D

1. Which of these is NOT considered a form of advertisement in Alabama?

a. Whole life insurance cannot build cash value b. Term life insurance cannot be converted or renewed c. Policy dividends cannot be guaranteed d. Policy dividends are always taxable C

1. Which of these is a correct statement?

a. Vitamins and supplements b. Prescription drugs c. Household expenditures d. Cosmetic procedures B

1. Which of these options can an individual use their medical flexible spending account to pay for?

a. No cash value accumulates b. Requires a conversion for coverage extending past age 70 c. Endows at age 70 and paid up at a stated time d. Endows at age 100 and paid up at a stated time D

1. Which of these statements accurately portray a whole life policy?

a. Under COBRA, terminated employees must provide evidence of insurability in order to convert to individual coverage b. Under COBRA, group coverage on a terminated employee ends of the date of termination c. Under COBRA, dependents of employees covered by group plans have the same extension and conversion privileges available to them as the employee All of these C

1. Which of these statements concerning COBRA is correct?

a. The incidents of fraud b. The coinsurance amount c. Overused of medical services d. Adverse selection C

Deductibles are used in health insurance policies to lower:

a. Within 15 days of the policy's cancellation date b. Within 30 days of the applicant receiving the conditional receipt c. Within 45 days of the date of the application d. Within 90 days of the policy being cancelled C

1. According to required provision 4, when an insured applies for reinstatement of a health insurance policy and receives a conditional receipt, how long does the insurer have to approve or deny?

a. A hospital only b. A physician only c. Themselves only d. Anyone designated by the insured D

1. After the insurance company receives a written request, an insured may have health insurance benefits paid to:

a. Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account b. Return to the customer, collect a new check made out to the insurance company, and send the new check off to the insurance company c. Cross of his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company d. Deposit the check in to his personal account, use the funds to purchase a cashier's check, and send the new cashier's check back to the insurance company B

1. Agent J takes an application and initial premium from an applicant and send the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?

a. Establishes maximum disclosure standards to annuitants b. Requires the delivery of a buyer's guide and a disclosure document to an annuity applicant c. Applies only to individual annuities Is designed to protect insurers B

1. Alabama's annuity disclosure regulation:

a. 20 b. 24 c. 28 d. 32 B

1. Alabama's continuing education law states that an insurance producer must report how many classroom hours every two years?

a. Promulgate insurance laws b. Conduct examinations and investigations of insurance matters c. Issue insurance licenses to qualified individuals d. Enforce Alabama's insurance laws A

1. Alabama's head of the Department of Insurance does NOT have the power to:

a. To receive the policy's face value b. To pay taxes on the entire amount surrendered c. To reinstate the policy if he changes his mind d. To pay taxes on the cash value in excess of premium paid D

1. Albert surrenders his whole life policy ten years after it was purchased. What can he expect?

a. Signed consent from the applicant must be provided in order to test for AIDS and HIV virus b. AIDS and HIV exams can be conducted in a discriminatory fashion c. The cost of any examination is paid for by the insurer d. The original application is the primary source of information used in the underwriting process B

1. All are true statements regarding the underwriting process, EXCEPT:

a. HRA is entirely funded by the employee b. HRA is entirely funded by the employer c. Reimbursement for eligible medical expenses is allowed d. HRA can be offered with other health plans A

1. All of these are characteristics of a Health Reimbursement Arrangement (HRA) EXCEPT

a. Survivorship b. Unemployment c. Disability d. Retirement B

1. All of these are considered to be a benefit under Social Security, EXCEPT:

a. Whole life insurance is the form of insurance typically used in group life insurance b. Term life insurance is the form of insurance typically used in group life insurance c. Group life insurance can cover a spouse and dependents d. Group life insurance can be converted to individual coverage upon employment termination A

1. All of these are correct concerning group life insurance, EXCEPT:

a. The company pays the premiums and names the beneficiary b. The key employee must sign the application c. The key employee names the beneficiary d. The company is the owner of the policy C

1. All of these statements concerning a Key Employee Life policy is true, EXCEPT:

a. For dependent children, the insurer for the parent whose birthday comes first in the year is considered primary b. The secondary insurer does pay benefits c. The secondary insurer does NOT pay benefits d. The group insurer for the spouse of the employee with the claim is secondary C

1. All of these statements concerning the coordination of benefits are true, EXCEPT:

a. Blanket policy b. Special risk policy c. Franchise health policy d. Self-insurance A

1. All students attending a large college would most likely be covered by which type of health policy?

a. The premium rate is only guaranteed b. The coverage only is guaranteed c. The coverage and premium rate are guaranteed d. Neither the coverage nor the premium rate are guaranteed C

1. Amy owns a disability income policy with a noncancellable renewal provision. Which of the following is guaranteed in her policy?

a. Capital sum b. Principal sum c. Primary sum d. Accelerated sum B

1. An accidental Death & Dismemberment (AD&D) policy will pay the _____ upon the accidental loss of two of the insurer's primary parts.

a. Dies instantaneously b. Dies within 30 days of the accident c. Dies within 60 days of the accident d. Dies within 90 days of the accident D

1. An accidental death rider claim is usually paid if the insured:

a. Issue the policy only when the initial premium check has cleared b. Determine if the applicant is insurable by investigating family health history c. Issue the policy on a standard basis d. Determine if the applicant is an acceptable risk by completing standard underwriting procedures D

1. An agent takes an individual disability income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to:

a. Agent b. Applicant's spouse c. NAIC d. Applicant's physician D

1. An applicant's medical information received from the MIB may be furnished to the:

a. Converted to an individual permanent policy at an individual rate b. Converted to an individual permanent policy at a group rate c. Continued at an individual rate Continued at a group rate A

1. An employee of 20 years recently retired at age 59 ½. The employee's group life contract can be:

a. Child of the insured b. Spouse of the insured c. Company d. All of these D

1. An example of a life insurance beneficiary is a(n):

a. No benefits are paid because the employee was terminated b. No benefits are paid because death was caused by an accident c. Full benefits must be paid by the employer d. Full benefits must be paid by the insurer D

1. Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plan's conversion option. Two weeks later, Ann dies in an automobile accident. How will this situation be handled?

a. Two months b. Three months c. Four months d. Five months B

1. Any individual who has failed two insurance licensing examinations must wait how long before taking it a third time?

a. Cost of living adjustment b. Future income option c. Rehabilitation option d. Social security adjustment B

1. At certain ages or dates, an insured can increase the slated benefit (within limits) under their disability income policy, regardless of health. Which policy rider BEST describes this?

a. 60 b. 65 c. 75 d. 100 D

1. At what age is an insured for life insurance considered statistically "dead?"

a. Upon policy surrender b. Upon the insured's death or reaching of the age of 100 c. Upon the insured reaching the age of 65 d. Upon the insured's death only B

1. At what point does a whole life policy pay the face amount?

a. Before the appointment is scheduled b. Upon completion of the application c. At the policy's delivery d. When the insurer receives the MIB report B

1. At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?

a. Major medical b. Blanket c. Disability income d. Indemnity C

1. B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?

a. Contingent beneficiary b. Revocable beneficiary c. Tertiary beneficiary d. Irrevocable beneficiary B

1. Barbara has the right to change the beneficiary designation on her life insurance policy. Barbara's beneficiary is a(n):

a. 20 b. 45 c. 90 d. 120 C

1. Bart is injured and provides notice of a health claim to his insurer. He later receives the required claims forms. Within how many days of the loss must Bart file proof of loss with the insurance company?

a. 70 ½ b. 65 c. 62 d. 59 ½ D

1. Beginning at what age can an IRA owner start making withdrawals and NOT be subjected to a tax penalty?

a. The insured only b. The producer only c. A hospital, physician, or surgeon d. Anyone the insured designates C

1. Benefits under a health insurance policy may (with the insured's written request) be payable to:

a. 1 month after the annuity is bough b. 3 months after the annuity is bought c. 6 months after the annuity is bought d. 12 months after the annuity is bought B

1. Bert purchased an immediate annuity with quarterly payments. When will this annuity start making payments?

a. Is considered a modified endowment contract b. Must build cash value c. Contains a grace period d. Must only be offered by mutual insurers C

1. Bob has an insurance policy that allows him to keep the policy in force until the next premium is due plus 30 days thereafter. Bob's policy:

a. Speculative risk b. Law of large numbers c. Perilous hazard d. Pure risk A

1. Buying land with the anticipation of it going up in value is an example of:

a. C is the policyowner, the insured, and the beneficiary b. ABC is the policyowner, C is the insured, and ABC is the beneficiary c. C is the policyowner and the insured, ABC is the beneficiary d. ABC is the policyowner, C is the insured, and her husband is the beneficiary B

1. C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?

a. $0 b. $400 c. $720 d. $1,000 C

1. C was injured while deep sea diving and requires a hospital stay. C has a major medical policy with 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered expenses are $2,000.

a. Ownership transfer option b. Viatical settlement agreement c. Accelerated benefit agreement d. Spendthrift option B

1. Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called?

a. Master policy b. Receipt of coverage c. Individual policy d. Certificate of insurance D

1. Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?

a. According to the occupation that pays the highest wage b. According to the occupation that is most hazardous c. According to the occupation where he has been employed the longest d. None of these B

1. Derrick is insured with a health insurance policy where occupation is used to classify risk. If he holds more than one occupation, how will the insurance company classify Derrick?

a. Don's plan is primary, and Marie's is secondary b. Marie's plan is primary, and Don's is secondary c. The older child is covered by Marie's plan and the younger child is covered by Don's plan d. The two insurance companies cover the children 50/50 B

1. Don and Marie are married, and each have a Major Medical plan provided by their employers. Don was born in August of 1969 and Marie was born in March of 1976. For their two dependent children,

a. Refund life annuity b. Survivorship life annuity c. Life annuity with period certain Straight life annuity A

1. Kris is receiving annuity payments that has not yet paid an amount which is equal to the purchase price of the annuity. If she were to die, her beneficiary would continue receiving annuity payments until this amount has been reached. What type of annuity is this?

a. Surgery fees b. Substance abuse c. Death d. Home health care D

1. Long term care policies provide benefits for:

a. Pay 100% of covered expenses b. Contain a deductible and coinsurance c. Require use of in-network facilities only d. Do not contain a deductible and coinsurance B

1. Major medical policies typically:

a. Mary's premium is probably less than Paul's b. Paul's premium is probably less than Mary's c. Both premiums should be the same None of these B

1. Mary and Paul have individual disability income policies that both pay a $5,000/month benefit. Mary's policy has a 30-day elimination period, and Paul's policy has a five-month elimination period. Which of the following statements is true?

a. Federal employees b. Disabled c. In poor health d. Below a specific income limit D

1. Medicaid was designed to assist individuals who are:

a. HMO, PPO, or a traditional insurer b. HMO only c. PPO only d. None of these A

1. Medicare Advantage (Medicare Part C) allows the utilization of benefits through a(n):

a. Age b. Income c. Health d. Employment A

1. Medicare eligibility is typically based on:

a. 50-year-old receiving Social Security Disability Income for 5 years b. 80-year-old Medicaid recipient c. 61-year-old Medicaid recipient d. 40-year-old with chronic kidney disease C

1. Medicare is NOT available to a(n):

a. Those enrolled as a full-time student b. Those receiving Social Security disability benefits for at least 24 months c. Those afflicted with chronic kidney failure Those 65 and older A

1. Medicare is intended for all of the following groups, EXCEPT:

a. Government insurance b. Available to those who are enrolled in a Medicare Supplement plan with income under $12,000 per year c. Original part A and B Medicare d. Available to those who are enrolled in Medicare part A and B D

1. Medicare part C is:

a. Cannot offer benefits that simply duplicate Medicare benefits b. cannot be more restrictive than Medicare c. cannot treat a loss due to injury differently d. all of these D

1. Medicare supplement policies marketed in Alabama:

a. $45,000 b. $50,000 c. $55,000 d. $60,000 C

1. Michael has a universal life policy with an increasing death benefit option. With an initial face amount of $50,000 and a value of $5,000, what would the actual death benefit be?

a. Increasing term b. Mortgage life c. Decreasing term d. Adjustable whole life C

1. Mortgage protection is typically covered with:

a. $1,500 b. $2,000 c. $2,500 d. $9,200 A

1. Nick has a major medical insurance policy with a $1,000 deductible, an 80% coinsurance clause, and a $1,500 stop-loss failure. He is hospitalized and incurs the following covered expenses: $10,000 hospital room and board, $2,500 surgeon's fee. What is Nick responsible for paying?

a. Full benefits b. Partial benefits c. A return of premiums paid d. No benefits A

1. On November 10, Ozzie's major medical policy is reinstated. He is later injured in an automobile accident on November 13 and immediately hospitalized. Ozzie is eligible for:

a. 3 months b. 5 months c. 6 months d. 12 months B

1. One becomes eligible for Social Security disability benefits after having been disabled for:

a. Fair Credit Reporting Act b. Medical Information Bureau c. Part III of the application d. Life insurance buyer's guide A

1. P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigation consumer report may be conducted according to the

a. 20,000 b. $14,000 c. $6,000 d. $0 D

1. P is self-employed and owns an individual disability income policy. He becomes totally disabled June 1 and receives $2,000 a month for the next 10 months. How much income is subject to federal income tax.

a. A presumptive disability b. An occupational disability c. A residual disability A recurrent disability D

1. P received disability income benefits for 3 months then return to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?

a. Immediate b. Retroactive c. Deferred d. Universal C

1. P, age 50, purchased an annuity that P will fund with $500/month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?

a. Binding receipt b. Conditional receipt c. Unconditional receipt d. Warranty receipt B

1. Pat applies for insurance, pays the initial premium, and receives a document from the agent. This document indicates that if the policy is issued, coverage begins on the date of the document. This document is called a (n):

a. Apparent authority b. Implied authority c. Express authority d. Conditional authority B

1. Pat the producer just sold an insurance policy to a client, explaining that he has authority to issue the policy. Pat was not specifically granted this power from the insurance company. Pat is exercising:

a. Carryover deductible b. Internal limit c. Corridor deductible d. Stop-loss limit C

1. Paul has a major medical policy which begins with basic first dollar coverage that pays up to its limits, then he must pay a certain dollar amount of covered expenses before the major medical portion steps in. the dollar amount Paul must pay is called the:

a. A paid-up term policy purchased with $10,000 b. A paid-up permanent policy purchased with $15,000 c. A paid-up permanent policy purchased with $10,000 d. A paid-up term policy purchased with $15,000 C

1. Peggy surrenders a permanent life insurance policy with a cash value of $15,000 and an outstanding policy loan of $5,000. If she chooses the reduced paid-up option, what will be the result?

a. Risk retention b. Preexisting conditions c. Law of large numbers d. Adverse selection D

1. People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

a. Weekly b. Monthly c. Quarterly d. Annually B

1. Periodic benefit payments must be made no less frequently than:

a. Not legal b. Taxable c. Not guaranteed d. Guaranteed C

1. Policy dividends for life insurance are:

a. 401k investments b. Traditional IRA investments c. SIMPLE investments d. Roth IRA investments D

1. Post-tax dollar contributions are found in:

a. Manager care b. PPO care c. Medicaid d. Major medical insurance A

1. Pre-hospitalization authorization is considered an example of:

a. 3 b. 4 c. 5 d. 6 C

1. Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for Social Security disability benefits

a. Upon being laid off from employer b. Upon paying a deductible c. Upon being examined by a physician d. Upon satisfying the elimination period requirement D

1. R becomes disabled and owns an individual disability income policy. When is eligible to receive disability benefits?

a. Decreasing term life insurance b. Adjustable life insurance c. Universal life insurance d. Credit life insurance D

1. Replacement regulation in Alabama does NOT apply to:

a. 7 days b. 14 days c. 21 days d. 31 days D

1. Required provision 3 states that the minimum grace period for all policies (except those with monthly or weekly premium modes) is:

a. The policy's face amount ($100,000) b. The accumulated cash value ($10,000 less interest) c. Twice the policy's accumulated cash value ($20,000 less interest) d. Twice the policy's face amount ($200,000) B

1. Rick owns a $100,000 life insurance policy with a cash value of $10,000. How much can he borrow up to?

a. Marital deduction b. Death benefits c. Section 1035 exchange d. Capital gains tax rate A

1. Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the:

a. Probability of loss b. Uncertainty of loss c. Absence of loss d. Dollar amount of a loss B

1. Risk is best defined as the:

a. Initial receipt b. Conditional receipt c. Unconditional receipt d. Interim receipt B

1. Rodney applies for an insurance policy and pays the first premium. The receipt given for the first premium is called a(n):

a. An absolute assignment b. A conditional assignment c. A collateral assignment A

1. Ron turned over all rights in his policy over to an assignee. This is called:

a. Pay half the claim b. Pay the full claim c. Pay the claim minus September and October's premium payments d. Deny the claim D

1. S is the policyowner of a major medical policy. The premiums are paid monthly and due on the 1st of each month. S fails to make September's payment and is hospitalized October 15th. When S files the claim for this hospitalization, the insurer will likely?

a. Uses the $10,000 to purchase a reduced paid-up policy b. Uses the $10,000 to buy term insurance of the same face amount as her original policy c. Surrenders the $10,000 cash value and purchase an annuity d. None of these B

1. Susan owns a life insurance policy that has accumulated $10,000 in cash value in which she can no longer pay its premiums. If she elects to take the extended term option, which of these actions would she take?

a. Benefits are taxable to T b. Benefits are tax-free to T c. Benefits are partially taxable to T d. Benefits are taxable to T's employer A

1. T is receiving $3,000/month from a disability income policy in which T's employer had paid the premiums. How much are the $3,000 benefit payments taxable?

a. Paid to the beneficiary in a lump sum payment b. Paid to the beneficiary for the rest of the certain period c. Forfeited to the insurance company d. Paid to Terry's estate B

1. Terry owns a 20-year life annuity certain and dies before the period of 20 years has elapsed. What happens to any monies left?

a. Loan money to an insolvent insurance company b. Guarantee the obligations of an insurance company c. Provide money to satisfy the obligations of an insurance company d. All of these D

1. The Alabama Life and Disability Insurance Guaranty has the power to:

a. Issue insurance to qualified individuals b. Organize, supervise, and administer the Insurance department c. Change insurance laws d. Enforce Alabama's insurance code C

1. The Commissioner of Insurance may NOT do which of the following?

a. Insured's tax bracket b. Amount of the benefits available from other sources c. Nature of the disability d. Insured's education level B

1. The amount of monthly disability benefits payable under the Social Security is affected by which of the following factors?

a. Whole life policy b. Increasing term policy c. 20-year endowment policy d. Limited-pay policy B

1. The automatic premium loan provision is NOT used in which of the following policies?

a. Reports given to member companies contain information regarding the insurability of insurance applicants b. The proposed insured must give authorization before information can be given to member companies c. The MIB is a nonprofit agency which aids in underwriting insurance policies d. All of the above D

1. Which of these statements is true regarding the Medical Information Bureau (MIB)?

a. Risk classification b. Warranty review c. Insurable interest d. Inspection report A

1. Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

a. Lower expenses b. Higher interest earnings c. Lower mortality d. Higher reserves D

1. Which of these will NOT result in an increase in life insurance policy dividends?

a. Accelerated benefits b. Non-forfeiture c. Guaranteed renewable d. Waiver of premium D

1. Which provision allows a disability income policy to remain in force without further payments when the insured has become totally and permanently disabled?

a. Conversion b. Grace period c. Incontestable period d. Accidental D

1. Which provision is NOT a requirement in a group life policy?

a. Group was formed for a purpose other than acquiring insurance b. Group must establish president c. Group must have at least 10 members d. Group was formed for the purpose of acquiring insurance A

1. Which requirement must be met for an association to be eligible for a group life plan?

a. A life insurance illustration must contain information regarding the non-guaranteed elements of a policy over time b. a buyer's guide explains the purpose and structure of various policies available c. a buyer's guide and policy summary must be provided to an applicant prior to policy delivery d. All of these D

1. Which statement concerning Alabama's life insurance solicitation regulations is true?

a. Interim insurance b. Permanent insurance c. Bilateral insurance d. Temporary insurance B

1. Which type of life insurance policy combines insurance protection with an accumulation of cash value?

a. Guaranteed insurability rider b. Return of premium rider c. Waiver of premium rider d. Cost of living rider D

1. Which type of life insurance rider allows a policyowner to increase the level of coverage to keep up with inflation?

a. Short-term disability plans b. Group life plans c. Workers' compensation d. Managed care plans D

1. Which type of plan normally includes hospice benefits?

a. Convertible term b. Decreasing term c. Increasing term d. Renewable term A

1. Which type of term policy allows the policyowner to switch to permanent insurance?

a. Blue Cross Blue Shield b. Medicare c. Medicaid d. Tri-Care C

1. Which welfare program provides assistance to the needy?

a. The insurance company b. The insured c. Both the insurance company and the insured d. Themselves A

1. Who does the insurance agent legally represent?

a. Chairman of the board b. Bondholders c. Stockholders d. Policyholders D

1. Who elects the governing body of a mutual insurance company?

a. The beneficiary b. The policyowner c. The insured d. The insurer B

1. Who is considered the individual that retains all rights, values, and options of an insurance policy?

a. Uninsured 45-year-old male b. Unemployed 62-year-old male c. 69-year-old female covered by Medicare d. 62-year-old female covered by Medicaid C

1. Who would most likely own a Medicare supplement policy?

a. Conditions are placed on the insurer's promise to perform b. The values exchanged are not equal c. Only one party makes a legally enforceable promise d. One party writes the contract and the other party must accept the contract as written D

1. Why are insurance contracts said to be contracts of adhesion?

a. Statements and representations on the application are part of the consideration for issuing a policy b. The National Association of Insurance Commission (NAIC) requires all questions be answered c. The Medical Information Bureau (MIB) requires this for an insurer to be a member d. Statements and representations are considered guarantees A

1. Why must an insurance applicant answer all questions on the application?

a. The key employee is the owner of the policy b. The company is the owner of the policy c. The key employee typically pays the premiums d. The company typically allows the key employee to name the beneficiary B

1. With key employee life insurance,

a. The premium decreases at renewal b. The face amount increases at renewal c. Proof of insurability is needed for renewal d. The premium increases at renewal D

1. With renewable term insurance

a. Level premium b. Renewable premium c. Constant premium d. Convertible premium A

1. With term life insurance, which of the following types of premium remains the same for the entire policy period?

a. 20 b. 30 c. 40 d. 50 B

1. Within how many calendar days must all clean electronic health insurance claims be paid in Alabama?

a. 10 b. 20 c. 30 d. 40 C

1. Within how many days of a written demand must the Commissioner of Insurance hold hearing?

a. Guaranteed assignable b. Guaranteed renewable c. Optionally cancellable d. Noncancellable B

1. X is insured with a disability income policy that provides coverage until age 65. This policy allows the insurer to change the premium rate for the overall risk class assigned. Which of these renewability features does this policy contain?

a. Participating insurer b. Non-admitted insurer c. Replacing insurer Existing insurer C

1. XYZ Insurance Company issued a new life policy to an insured that replaced an existing policy. XYZ Insurance Company is considered to be the:

a. 20-pay life policy b. Endowment policy c. Straight life policy Adjustable policy B

A policyowner can collect the face amount on what type of policy?

a. Losing money at a casino b. Injured while playing football c. Falling at a casino and breaking a hip d. Jewelry stolen during a home robbery A

All of the following are examples of pure risk EXCEPT

a. Show evidence of insurability to resume coverage b. Repay only the interest on $3,000 c. Repay $3,000 in waived premiums d. Resume paying premiums again D

Shawn has a waiver of premium rider on his life insurance policy. He becomes disabled for 3 years, during which the insurance company waives $3,000 in premiums. When Shawn recovers, he must:

a. Dependent agency system b. General agency system c. Managerial system d. Direct response system B

The life and health insurance marketing system utilizing non-employee agents that represent just one insurance company and are often paid an allowance to cover office expense and staffing is the:

a. Fabrication b. Concealment c. Misrepresentation d. Omission B

The withholding of facts in an insurance application is called

a. Frequency of premium payments b. Amount of payment amount c. Policy's face amount d. The insured D

Which of the following provisions may NOT be adjusted in an adjustable life policy?

a. All statements made on an application are considered to be warranties b. A representation is valid as long as it is true c. A representation made by an applicant is guaranteed to be true d. A warranty is not guaranteed to be true B

Which of these statements regarding an insurance application is true?