Life Insurance Practice Test
15-year decreasing term
A 15-year mortgage is best protected by what kind of life policy? A) modified whole life B) 15-year level term C) 15-year decreasing term D) adjustable life
Payor Provision
A father who dies within 3 years after purchasing a Life Insurance Policy on his infant daughter can have the policy premiums waived under which provision? a) Payor Provision b) Accelerated Benefits Provision c)Assignment Provision d) Waiver of Premium Provision
A condition that may increase the likelihood of a loss occurring
A hazard can be best described as A) The potential for loss B) The tendency for poorer than average risks to seek out insurance C) A condition that may increase the likelihood of a loss occurring D) A risk that has the potential for both loss and gain
Whole life
A life insurance policy that provides a policyowner with cash value along with a level face amount is called: A) whole life B) level term C) credit life D) ordinary life
The policy's face amount
A life insurance policy's limit of liability would be A) determined by the department of insurance B) the policy's face amount C) the total premiums paid D) determined by the insurance companies reinsurer
Variable life
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as: A) adjustable life B) graded premium life C) variable life D) modified whole life
Health Maintenance Organization (HMO)
A medical care provider which typically delivers health services at its own local medical facility is known as a? A) Health maintenance organization B) regional provider C) multiple employer trust D) preferred provider organization
Employer stock
ESOPs are typically invested in A) Non-qualified plans B) IRAs C) Employer stock D) Annuities
Return of Premium Rider
Henry buys a $10,000 whole life policy in 2003 and pays an annual premium of $100. He dies five years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did Henry include on the policy? A) accelerated death benefit rider B) return of premium rider C) family income rider D) term rider
Pay the face amount, minus the past due premium
Henry had an annual life insurance premium payment due Jan 1. He died Jan 10 without making the premium payment. What action will the insurer take? A) collect premium from M's estate B) deny the claim C) pay the face amount, minus the past due premium D) subtract past due premium from cash value
30 pay life
Henry is a 40-year-old applicant, who would like to retire at age 70. He's looking to buy life a insurance policy with level premiums permanent protection, and be paid up at retirement. Which of these should Henry purchase? A) 30 pay life B) term to age 70 C) universal life D) adjustable life
Whole life policy with another insured rider
Henry purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10 year term coverage for his wife on the same policy. Which of these did he purchase? A) joint policy B) joint survivor policy C) whole life policy with another insured rider D) whole life policy with a guaranteed insurability option
Nondeductible contributions and tax free distributions
How are Roth IRAs treated for tax purposes? A) nondeductible contributions and tax free distributions B) deductible contributions and taxable distributions C) distributions taxable as capital gains D) distributions taxable as income tax
Binding receipts always provide insurance which starts from the date of receipt
How does a conditional receipt differ from a binding receipt? A) Conditional receipts always provide insurance which starts from the date of receipt B) Binding receipts always require an initial premium payment C) Binding receipts always provide insurance which starts from the date of receipt D) Conditional receipts always require an initial premium payment
12 months
How long is a person expected to be disabled in order to receive social security disability benefits A) 4 months B) 6 months C) 12 months D) 18 months
5 years
How long must life agents keep their transaction records? A) 3 years B) 4 years C) 5 years D) 6 years
When the state prohibits it by law
If an individual has an accidental death and disbursement policy and dies, an autopsy can be performed in all these situations except A) when the cause of death is unknown B) when the state prohibits this by law C) when consent for the autopsy is not obtained D) when foul play was a contributing factor
Non cancellable
If an insurance company issued a disability income policy that it can not cancel or for which it cannot increase premiums, the type of renewability that best describes this policy is called? A) non cancellable B) conditionally renewable C) cancellable D) guaranteed renewable
Medicare part B
Individuals age 65 or older are exclusively eligible for which optional program? A) Medicare part A B) Medicare part B C) MET's D) long term care
Excluded by the Insurer
Insurance benefits NOT covered due to an Act of War are? a) Excluded by Insurer b) Assigned to a reinsurer c) Given a longer probation period d) Charged a higher premium
45 days
Joan's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify her of this denial. How many days from reinstatement application date does the insurance company have to notify her of the denial before the policy will be automatically placed back in force? A) 10 days B) 30 days C) 45 days D) 60 days
Exclusion
John is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event John was killed, while flying as a student pilot? a) Misrepresentation b) Exclusion c) Collateral Assignment d) Concealment
Level Term
John needs life insurance that provides coverage for only a limited amount of time, while also paying the lowest possible premium. What kind of policy is needed? A) limited pay life B) graded premium C) level term D) endowment
$20,000 death benefit
John pays on a $20k 20 year endowment policy for 10 years, and dies from an automobile accident. How much will the insurance company pay the beneficiary? A) return plus premium paid B) cash value plus interest C) $20,000 death benefit D) face amount plus interest
Conversion
John was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called? A) replacement B) conversion C) transformation D) reinstatement
Covers business losses due to the death of a key employee
Key person insurance is intended to A) allow a key person to purchase the business B) help retain key employees by offering added benefits C) give premium grade benefits to key employees D) cover business losses due to the death of a key employee
expenses incurred
LTC policies usually pay for eligible benefits using the following method A) delayed B) fee of service C) expenses incurred D) respite
Annually
Life insurance surplus must be distributed to policy owners at what frequency? A) monthly B) quarterly C) semi annually D) annually
Limited pay life
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called: A) adjustable life B) renewable term C) limited pay life D) joint life
Deductible
Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n) A) capitation B) exclusion C) limitation D) deductible
dental work
Medicare Part A and Part B do NOT pay for: A) dental work B) hospitalization C) skilled nursing care D) physical therapy
Skilled nursing facility care
Medicare Part A covers which type of care? A) skilled nursing facility care B) major medical facility care C) custodial facility care D) respite facility care
Those enrolled as a full-time student
Medicare is intended for all of the following groups EXCEPT? 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 D) those 65 or older
Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance
Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT A) mikes policy will develop no cash value over the policy's term B) Ike may eventually take out a policy loan C) Ike will have a level premium D) Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance
Unnecessary Replacement
Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n) A) Illegal transaction B) Immediate annuity C) Deferred annuity D) Unnecessary replacement
activities of daily living (ADLs)
Rating an individuals need for long term care benefits can be measured by A) deductibles B) gatekeeper authority C) activities of daily living D) custodial need
Renewable
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? A) renewable B) increasing C) level D) decreasing
Expires at the end of the policy period
Term insurance has which of the following characteristics? A) expires at the end of the policy period B) build cash value C) has non-forfeiture options D) endows at the end of the policy period
Amount of premium payments and when they are due
The Consideration clause in a life insurance contract contains what pertinent information? A) summary of benefits B) offer and acceptance C) entire contract D) amount of premium payments and when they are due
Insuring Agreement
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n) A) entire contract provision B) consideration clause C) insuring agreement D) assignment agreement
No cost
The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is A. $25 per appointment B. $50 per appointment C. $75 per appointment D. no cost
68 year old male covered by Medicare
The individual most likely to buy a Medicare Supplement policy would be a(n) 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
Avoid selecting a disproportionate number of bad risks
The objective of underwriting is to A) Assign the highest premium possible B) Avoid selecting a disproportionate number of good risk C) Decline as many application as possible D) avoid selecting a disproportionate number of bad risks
Closed panel
The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n)? A) closed panel B) open panel C) co-op panel D) capitation panel
20-Pay Life accumulates cash value faster than Straight Life
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? A) straight life accumulates faster than limited pay life B) 20-pay life accumulate cash value faster than straight life C) cash value accumulation of both 20-pay life and straight life depend on the insurer's financial rating D) 20-pay life and straight life accumulate cash value at the same rate
Pure Risk
A situation in which there are only the possibilities of loss or no loss A) pure risk B) particular risk C) speculative risk D) fundamental risk
Term insurance into permanent insurance
A terminated employee that has exercise the conversion privilege is able to convert- A) only after providing evidence of insurability B) without paying for the premiums C) permanent insurance into term insurance D) term insurance into permanent insurance
does not guarantee a return on its investment accounts
A variable insurance policy A) guarantees a minimum rate of return B) does not allow the policy owner to assume the investment risk C) does not guarantee a return on its investment accounts D) does not guarantee an assignment provision
Gold
According to the PPACA, the medical enrollment tier that has 80% actuarial value is called A) platinum B) gold C) silver D) bronze
20%
After the annual deductible is met, a medicare part b patient will pay__ of the remaining covered expenses A) 0% B) 20% C) 50% D) 100%
Combination of term and whole life insurance
All of these are characteristics of an adjustable life policy, except? A) adjustable premiums B) adjustable premium payment period C) combination of term and whole life insurance D) face amount can be adjusted using policy dividends
Coordination
All of these are examples of cost sharing in a health insurance policy EXCEPT A) copayments B) deductibles C) coinsurance D) coordination
Modified Whole Life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for: A) variable life B) modified whole life C) universals variable life D) variable annuity
Long term care is covered by Medicare part C
All of these statements concerning Medicare are true EXCEPT A) medicare is primarily funded by federal payroll and self-employment taxes B) long term care is covered by Medicare part C C) hospice is covered by Medicare part A D) doctors services are covered by Medicare part B
Conservation
An agent's attempt to stop the replacement of an existing life insurance policy is known as A) preservation B) prevention C) conservation D) concealment
Life agent
An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n): A) adjuster B) analyst C) life agent D) insurance solicitor
Modified Endowment Contract (MEC)
An insurance policy written after 1988 that fails to pass the seven-pay test is A) an endowment policy B) a modified life policy C) a single premium contract D) a modified endowment contract
Full face amount minus any past due premiums
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period? A) refund of all premiums paid, plus interest B) refund of all premiums paid C) full face amount, minus any past due premiums D) full face amount
Stop-loss
An insured is protected from the expense of a catastrophic illness by which of the following health insurance provisions? A) self insurance B) stop loss C) deductible D) reimbursement
31 days
An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision? A) 7 days B) 10 days C) 20 days D) 31 days
The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
An insurer having a large number of similar exposure units is considered important because A) The insurer can decrease its reserves B) The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums C) Its financial rating will improve D) The greater the number insured, the more premiums it collects
$300,000
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from an accident on a commercial flight, what will the policy pay B's beneficiary? A) $100,000 B) $200,000 C) $300,000 D) $400,000
Who the policy owner is and what rights the policy owner is entitled to
What does the ownership clause in a life insurance policy state? A) Who the policy owner is and what rights the policy owner is entitled to B) who the beneficiary is and what rights the beneficiary is entitled to C) ownership cannot be assigned after the incontestable period D) allows policy owner to adjust the death benefit and premium amount at any time
Notice of appointment must be submitted to the Commissioner
What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer? a) Notice of appointment must be submitted to the Commissioner b) Notice of appointment must be submitted to the insurer c) Penalty is assessed to the insurer and life agent d) Application is automatically turned away
100% of the insured's Primary Insurance Amount (PIA)
What is the maximum Social Security Disability benefit amount an insured can receive? A) 50% of the insureds primary insurance amount PIA B) 75% of the insureds primary insurance amount PIA C) 100% of the insureds primary insurance amount PIA D) 100% of the insureds primary insurance amount PIA, minus any monies received from a retirement plan
2
What is the minimum number of activities of daily living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits A) 1 B) 2 C) 3 D) 4
Modified premium, ordinary life, single premium
What is the proper order of initial life insurance premiums, from lowest to highest? A) ordinary life, single premium, modified premium B) modified premium, ordinary life, single premium C) single premium, modified premium, ordinary life D) ordinary life, modified premium, single premium
Level
What kind of premium does a whole life policy have? A) decreasing B) adjustable C) level D) deferred
Flexible premiums
What kind of special need would a policy owner require with an adjustable life insurance policy? A) level premiums B) flexible premiums C) flexible nonforfeiture options D) level death benefits
Family Maintenance Policy
What policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? A) family lump sum policy B) family maintenance policy C) family survivor policy D) family income policy
Term
What type of life insurance are credit policies issued as? A) whole B) variable C) term D) universal
Universal life
What type of life insurance incorporates flexible premiums and an adjustable death benefit? A) endowment policy B) modified whole life C) decreasing term D) universal life
copy of the signed authorization
When an insurance company requests an attending physician's report the request must be accompanied by a A) Conditional receipt B) Buyer's guide C) Copy of the signed authorization D) Policy illustration
Change of Occupation Provision
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates? A) relation of earnings to insurance provision B) change of occupation provision C) conformity of state statutes provision D) modified occupation provision
upon death of the last insured
When is the face amount paid under a Joint Life and Survivor policy? A) when policy reaches maturation B) upon death of the first insured C) upon death of last insured D) when one of the insureds becomes disabled and no longer able to make premium payments
Entire contract
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract? A) consideration B) entire contract C) free look D) insuring
Policy owner controls where the investment will go and selects the amount of the premium payment
Which is true concerning a Variable Universal Life policy? A) Policy owner controls where the investment will go and selects the amount of the premium payment B) The policy owner has no say where investments go but can choose the premium mode C) the investment vehicle for this type of policy is held in the insurers general portfolio D) the death benefit can vary but the policy owner has no say in the premium amount paid
Single premium
Which mode of payment is NOT used by health insurance policies? A) monthly premium B) annual premium C) single premium D) semi annual premium
Part of the premium is paid by the employee
Which of the following describes a contributory group insurance plan? A) all of the premium is paid by the employer B) part of the premium is paid by the employee C) employees are not eligible for policy dividends D) federal government contributes a portion of the employees premium
Conversion Privilege
Which of the following features of a group term life policy enables an individual to leave the group and continue his or her insurance, without providing evidence of insurability? A) owners rights clause B) incontestable period C) insuring agreement D) conversion privilege
Life insurance policies
Which of the following is NOT a limited benefit plan? A) cancer policies B) life insurance policies C) dental policies D) critical illness policies
Capitation
Which of the following is NOT associated with a major medical policy A) stop loss B) comprehensive C) deductible D) capitation
Non-medical
Which of the following is a life insurance policy that does NOT require a physical exam? A) non medical B) graded C) substandard D) non cancelable
New policy has higher premiums with fewer benefits
Which of the following is not a valid reason to replace an existing long-term care policy? A) new policy has better benefits B) new policy has higher premiums with fewer benefits C) new policy has lower premium D) insured's condition has materially improved
Entire Contract
Which of the following policy provision states that the producer does not have the authority to change the policy or waive any of its provisions? A) time limit on certain defenses B) reinstatement C) entire contract D) change of beneficiary
Services are reimbursed after insurer receives the invoice
Which of the following statements BEST describes dental care indemnity coverage? A) services are reimbursed for gore 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
It provides a minimum guaranteed Death benefit
Which of the following statements about a variable whole life policy is correct? A) it provides a minimum guaranteed death benefit B) it is a combination of a limited period endowment and a decreasing term policy C) it's premium and benefits are variable D) it has a guaranteed rate of return
It is taxed as ordinary income
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE? A) it is not taxable B) it is tax deductible C) it is taxed as capital gains D) it is taxed as ordinary income
States the scope, and limits of the coverage
Which of the following statements describes the purpose of the Insuring clause in an insurance policy A) specifies the additional time given to pay past due premiums B) states the scope, and limits of the coverage C) specifies a claim will be paid immediately upon receipt of proof of loss D) prohibits the insured from suing the insurer for at least 60 days after filing a written proof of loss
Risk is eliminated
Which of the following would NOT be accomplished with the purchase of an insurance policy? A) greater piece of mind B) risk is eliminated C) payments made for covered losses D) uncertainty is reduced
Term Rider
Which of these life insurance riders allows the applicant to have excess coverage? a) Automatic Premium Loan Rider b) Waiver of Premium Rider c) Guaranteed Insurability Rider d) Term Rider
PPO's are NOT a type of managed care systems
Which of these statements is INCORRECT regarding a Preferred Provider Organization (PPO)? A) PPOs normally have more providers to choose from as compared to an HMO B) Prices are negotiated in advance of PPO providers C) in network PPO providers offer members better coverage of incurred expenses D) PPOs are NOT a type of managed care systems
Interim Coverage
Which of these types of coverage is best described as a short term medical policy? A) interim coverage B) provisional coverage C) transitional coverage D) conversion coverage
When a member uses out-of-network providers, a higher monthly fee is charged
Which statement about Health Maintenance Organizations is NOT true? A) members minimize out of pocket expenses by using HMO network providers B) subscribers pay a fixed periodic fee to the HMO C) HMOs are known for stressing preventative care D) when a member uses out of network providers, a higher monthly fee is charged
Cash value may be borrowed against
Which statement about a whole life policy is correct? A) beneficiary may be changed only with the consent of the premium payroll B) death benefit can usually be adjusted C) cash value may be borrowed against D) premiums are flexible
Benefits are designed to replace the entire amount of the workers earnings
Which statement is NOT true regarding Social Security benefits? A) benefit eligibility is based upon fully insured status B) benefits are designed to replace the entire amount of the workers earnings C) disability is expected to continue for 12 months or result in death D) worker must be totally and permanently disabled for at least five months and unable to work again to be eligible for benefits
Employer pays the entire premium for Workers' Compensation coverage
Which statement is TRUE regarding Workers' Compensation coverage A) negligence is a factor in determining the employers liability B) workers compensation benefits are usually received in a lump sum C) employer pays the entire premium for workers compensation coverage D) the amount received from workers compensation is usually greater that the employee might receive if he or she sued a negligent employer
Modified Endowment Contract (MEC)
Which type of policy is considered to be overfunded, as stated by IRS guidelines? A) modified whole life B) modified endowment contract C) variable universal life D) interest-sensitive whole life
fully insured
Which type of worker has Social Security benefits available to them? A) Fully insured B) Currently insured C) Partially insured D) Presently insured
Gives the Policy Owner, additional time to Pay Past Due Premiums
With any insurance policy, what is the purpose of the Grace Period? a) Gives the policy owner, additional time to pay past due premiums b) gives the policy owner, additional time to file a lawsuit c) gives the policy owner, additional time to file a claim of LOSS d) gives the policy owner, additional time to provide proof of LOSS
