Missed Questions

Which of the following best defines the term "home office"? a) The insurer's business address b) Any insurance office in the Commonwealth c) The insurer's principal administrative office d) The insurer's domicile

c) The insurer's principal administrative office Home office means either the insurer's home office or the principal administrative office that will provide policy services.

Agent P has a life license. How many hours of CE must be completed to complete Agent P's requirement? a) 8 b) 10 c) 12 d) 16

d) 16 Any agent who holds one type of license must complete 16 hours of continuing education. Any agent who holds more than one type must complete 24 hours of continuing education.

An agent willfully violates an insurance law. What is the maximum fine for each offense? a) $5,000 b) $7,500 c) $1,500 d) $2,000

a) $5,000 The Commissioner may fine a person committing a willful violation of any Virginia insurance code up to $5,000 for each offense.

Who is responsible for establishing and maintaining a system by which recommendations to consumers can be monitored and supervised? a) Insurers b) The Commission c) The Better Business Bureau d) Individual agents

a) Insurers An insurer is responsible for devising a system by which agent recommendations to consumers can be monitored and supervised. Such systems must have written procedures for agents to follow and methods of periodic reviews for individual agencies. The systems may be monitored by the insurer themselves or may be contracted to a third party.

Donald purchased a Life Insurance policy from company A. The agent told Donald that depending upon the company's investments and expense factors, the cash values could be more or less than those shown in the policy at issue time. Donald's policy is a/an a) Interest-sensitive Whole Life. b) Credit Life. c) Annual Renewable Term. d) Adjustable Life.

a) Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.

Ashley purchases a $90,000 annuity with a single premium and begins taking payments 2 months after that. What type of annuity does Ashley have? a) Immediate b) Whole life c) Deferred d) Level

b) Whole life With an immediate annuity, distribution starts within 1 year of purchase.

If an insured's eligibility for group health insurance terminates and the person is not eligible to receive replacement group benefits or Medicare, coverage can be extended for 12 months if the person was covered under the plan for at least a) 6 months. b) 12 months. c) 2 months. d) 3 months.

d) 3 months. The present group coverage may continue for 12 months immediately following the date of the insured's eligibility termination if the individual has been insured under the group plan for at least 3 months.

Which types of insurance companies marketing long-term care insurance coverage must establish procedures to assure that any comparison of policies by its agents will be fair and accurate? a) Any company that uses any form of media to market policies that yield no less than 20% of its business. b) Mutual and stock companies. c) No companies are required to establish marketing procedures. d) Every company is required to establish marketing procedures.

d) Every company is required to establish marketing procedures. Every insurer marketing long-term care coverage must establish marketing procedures to assure that any comparison of its policies by its agents is accurate and fair. Companies must also have marketing guidelines to ensure that excessive insurance is not sold or issued to clients.

Which of the following allows the dividend to be used to pay up policy premiums sooner than originally planned? a) Acceleration of endowment b) Reduction of premium c) Paid-up addition d) Paid-up insurance option

d) Paid-up insurance option With the paid-up insurance option, the dividend is used to pay the policy premiums sooner than originally planned.

Most methods used to determine the suitability of a particular annuity recommendation to a client are based on information regarding all of the following EXCEPT a) The client's financial status. b) The client's insurability. c) The client's tax status. d) The client's investment objectives.

b) The client's insurability. The most pertinent information off of which an agent makes annuity recommendations to clients concerns such things as the client's financial status, tax status, investment objectives, and overall financial status. Insurability is not a factor in the purchase or exchange of annuities.

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of a) Coercion. b) Twisting. c) Controlled business. d) Rebating.

d) Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.

Which of the following describes the tax advantage of a qualified retirement plan? a) Distributions prior to age 59½ are tax-deductible. b) Employer contributions are deductible as a business expense when the employee receives benefits. c) Employer contributions are not taxed when paid out to the employee. d) The earnings in the plan accumulate tax deferred.

d) The earnings in the plan accumulate tax deferred. Contributions are tax deferred, and earnings on the money in the plan accrue on a tax-deferred basis.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a) Any type of insurance policy may be used. b) The employer pays a bonus to a selected employee to fund the policy. c) It is considered a nonqualified employee benefit. d) The policy is owned by the company.

d) The policy is owned by the company. The policy is owned by the employee.

In which instance may 3 licensees share commissions? a) When at least 2 are licensed for the appropriate line of insurance from which the commission comes b) Three licensees may never share a commission. c) Sharing of commissions is at the discretion of the insurer. d) When all 3 are licensed for the same line of insurance from which the commission comes

d) When all 3 are licensed for the same line of insurance from which the commission comes No insurer may pay any compensation, fee, or commission for services as agent or broker unless that person was licensed as an agent or broker at the time of the transaction. Licensees may share commissions, as long as each license is licensed for the same line of insurance at the time of transaction.

When a client is considering replacing existing health insurance, all of the following would be areas of concern EXCEPT a) Reciprocity. b) Time limit on certain defenses. c) Pre-existing conditions. d) Waivers for impairments.

a) Reciprocity. When a new health insurance policy is issued, the insurer may contest statements on the application for 2 years. Also, certain claims could be denied because of waivers for impairments or pre-existing conditions provisions in the policy. Reciprocity refers to writing insurance across state lines.

Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option? a) Size of each installment b) Predetermined length of time stipulated in the contract c) Length of income period d) Amount of interest

a) Size of each installment The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.

All of the following statements concerning an employer sponsored non-qualified retirement plan are true EXCEPT a)The employer can receive a current tax deduction for any contributions made to the plan. b)The plan is a legal method of accumulating money for retirement needs. c)The plan can discriminate as to who may participate. d)The plan is not approved for favorable tax treatment by the IRS.

a)The employer can receive a current tax deduction for any contributions made to the plan. Employers do not receive a current tax deduction for any contributions made to a non-qualified plan. The plans are legal; however, they do not qualify for any favorable tax treatment under the IRS rules.`

If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she have earned to receive benefits? a) 40 credits b) 12 credits c) 20 credits d) 6 credits

b) 12 credits Persons disable between ages 24 and 31 can qualify for benefits if they have credit for having worked half of the time between age 21 and the start of the disability. For example, if Joe becomes disabled at age 27, he would need 12 credits (or 3 years' worth) out of the prior 6 years (between ages 21 and 27).

All of the following are true of the federal tax advantages of a qualified plan, EXCEPT a) Contributions made to a qualified plan are not counted as income to the employee for income tax purposes. b) At distribution, all amounts received by the employee are free of taxes. c) Employer contributions made to a qualified plan are tax deductible as ordinary business expense. d) Funds accumulate on a tax-deferred basis.

b) At distribution, all amounts received by the employee are free of taxes. Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.

Which of the following is true regarding the taxation of accelerated benefits? a) Benefits are taxed as income, up to an amount specified by the insurer. b) Benefits are not taxed. c) Benefits are eligible for a 50% tax reduction. d) Benefits are eligible for a 75% tax reduction.

b) Benefits are not taxed Accelerated benefits are paid when insureds endure financial hardship due to severe illness. They may request immediate payment of some portion of the policy's death benefit, usually 50-100%, depending on the insurer. Benefits are not taxable

All of the following LTC coverages would encourage an insured to receive care at home EXCEPT a) Home health care. b) Child care. c) Custodial care in insured's house. d) Respite care.

b) Child care. Custodial care, respite care, home health care, and adult day care are all coverages used to reduce the necessity of admission into a care facility.

The provision that provides for the sharing of expenses between the insured and the insurance company is a) Divided cost. b) Coinsurance. c) Stop-loss. d) Deductible.

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

Regarding long-term care (LTC) benefit periods, as the benefit period lengthens, the premium a) LTC premiums are not based on benefit periods. b) Decreases. c) Increases. d) Remains unchanged

b) Decreases. LTC policies define the benefit period for how long coverage applies, after the elimination period. The benefit period is usually 2 to 5 years, with a few policies offering lifetime coverage. Obviously the longer the benefit period, the higher the premium will be.

Both Universal Life and Variable Universal Life have a a) Increasing premium. b) Flexible premium. c) Level fixed premium. d) Decreasing premium.

b) Flexible premium. Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.

In comparison with the other primary types of term insurance sold, what kind of premium does level term have? a) Most level b) Highest c) Most inconsistent d) Lowest

b) Highest All other things being equal, of the three primary types of term insurance sold, level term has the highest premiums.

According to the incontestability provision, which of the following is a reason an insurer can deny a claim on a policy that has been in force for 2 years? a) Insured gave false medical information b) Insured stopped paying premiums c) Insured misstated his age d) Insured has disparaged insurer in public

b) Insured stopped paying premiums After a life insurance policy or an annuity has been in force for 2 years, an insurer can contest it for nonpayment of premiums.

Grace is the primary beneficiary of her grandfather's life insurance policy. Upon his death, she wants some income from the death benefit, but wants the face amount to be conserved. Which settlement option should she choose? a) Fixed amount option b) Interest only option c) Life income with period certain d) Delayed income option

b) Interest only option On the "interest only" settlement option, Grace would receive the interest earned by the face amount, but the face amount would remain.

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used? a) Fixed amount b) Lump sum c) Life income d) Fixed period

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

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) Paid-up additions. b) One-year term option. c) Paid-up option. d) Accelerated endowment.

b) One-year term option. The dividend is utilized to purchase one year term insurance.

A prospective insured receives a conditional receipt and dies before the policy is issued. The company will a) Automatically pay the policy proceeds. b) Pay the policy proceeds only if it would have issued the policy. c) Pay the policy proceeds up to an established limit. d) Not pay the policy proceeds under any circumstances.

b) Pay the policy proceeds only if it would have issued the policy. When a conditional receipt is given, the applicant and the company form what might be called a conditional contract, contingent upon conditions that exist at the time the application is signed, or when the medical exam is completed, if required. Unless the insurer can show a reason why the policy would not have been issued, or would have been in any way different than applied for, the coverage begins when the application was signed, or the date of the medical exam, whichever is later

Roland had $500 left in his Health Reimbursement Account when he quit his job. What happens to that money? a) Roland can use up the $500 as long as he has qualified medical expenses b) Roland can have access to the $500 at his previous employer's discretion c) Roland's previous employer must issue a check for $500 payable to him d) Roland may roll the $500 over into a HRA with his new employer

b) Roland can have access to the $500 at his previous employer's discretion Former employees, including retirees, can have continued access to unused HRAs, but this is at the employer's discretion.

Anna loses her left arm in an accident that is covered by her Anna loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will Anna most likely receive from this policy? a) The principal amount in monthly installments b) The capital amount in a lump sum c) The principal amount in a lump sum d) The capital amount in monthly installments

b) The capital amount in a lump sum Accidental Death and Dismemberment policies pay a capital amount (a percentage of the principal amount) for the loss of 1 limb or loss of sight in 1 eye. The principal amount is paid for death or, often, for the loss of 2 limbs or loss of sight in both eyes. Benefits are paid in a lump sum.

Which of the following is NOT true regarding partial disability? a) An insured would qualify if he couldn't perform some of his normal job duties. b) This is a form of insurance that covers part-time workers. c) The insured can still report to work and receive benefits. d) Benefit payments are typically 50% of the total disability benefit.

b) This is a form of insurance that covers part-time workers. Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately results in a loss of income. Payment from partial disability is typically 50% of the total disability benefit.

Which provision states that the insurance company must pay Medical Expense claims immediately? a) Relation of Earnings to Insurance b) Time of Payment of Claims c) Payment of Claims d) Legal Actions

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

How soon following the occurrence of a covered loss, or after the insurer becomes liable for periodic payments for income benefits, must an insured submit written proof of such loss to the insurance company? a) Within 60 days. b) Within 90 days or as soon as reasonably possible but not to exceed one year. c) As soon as possible. d) Within 20 days.

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

A business entity conducting the business of insurance under an assumed name must notify the Bureau of Insurance within a specified number of days of their licensure. How many days? a) 60 b) 14 c) 30 d) 7

c) 30 Anyone (individual or a business entity) using an assumed or fictitious name must notify the Bureau of Insurance within 30 days of their licensure.

When and by whom must an agent's appointment be renewed with the Commission? a) Biennially by the agent b) Once an appointment is issued, it does not have to be renewed c) Annually by the insurer d) Biennially by the insurer

c) Annually by the insurer An agent's appointment must be renewed annually by the insurer by August 10.

Which of the following statements regarding Business Overhead Expense policies is NOT true? a) Any benefits received are taxable to the business. b) Leased equipment expenses are covered by the plan. c) Benefits are usually limited to six months. d) Premiums paid for BOE are tax-deductible.

c) Benefits are usually limited to six months. Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? a) Aleatory b) Unilateral c) Conditional d) Contingent

c) Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies, which put the burden of condition on either the insurer or the policyowner.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income? a) Neither principal nor interest b) Principal only c) Interest only d) Both principal and interest

c) Interest only If a beneficiary receives payments that contain both principal and interest portions, only the interest is taxable as income.

Alison wants to buy a health insurance policy. She returns her completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point? a) Approved the application b) Issued the policy c) Neither approved the application nor issued the policy d) Both approved the application and issued the policy

c) Neither approved the application nor issued the policy When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.

Which of the following must be present in all Medicare supplement plans? a) Outpatient drugs b) Plan C coinsurance c) Plan A d) Foreign Travel provisions

c) Plan A In order to standardize the coverage provided under Medicare supplement policies, the NAIC has developed standard Medicare Supplement benefit plans which are identified with the letters A through N. The benefits in Plan A are considered to be core benefits and must be included in the other types.

An insured has endured multiple surgeries and hospitalizations for an illness during the summer months. Her insurer no longer bills her for medical expenses. What term best describes the condition she has met? a) Maximum Loss Threshold b) Maximum Loss c) Stop-Loss Limit d) Out-of-Pocket Limit

c) Stop-Loss Limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction. b) The amount received is taxable income. c) The amount received is tax-free. d) The amount is subject to the exclusionary rule.

c) The amount received is tax-free. Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

Which of the following is true regarding benefits offered by Medicare supplement policies, in relation to Medicare benefits? a) Some supplemental benefits can duplicate Medicare benefits. b) There are no restrictions for benefit. c) The supplemental benefits cannot duplicate Medicare benefits. d) The supplemental benefits must duplicate Medicare benefits.

c) The supplemental benefits cannot duplicate Medicare benefits. Medicare Supplement Insurance policies may not duplicate benefits provided by Medicare.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a) Indemnity b) Representation c) Warranty d) Concealment

c) Warranty A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties, but representations. Representations are statements that are true to the best of the applicant's knowledge.

When a disabled dependent child reaches the age limit for coverage, how long does the policyowner have to provide proof of dependency in order for the dependent to remain covered under the policy? a) 60 days b) 10 days c) 15 days d) 31 days

d) 31 days Every policy providing coverage for a dependent child until a specified age will not terminate that coverage if the child is dependent upon the insured and is incapable of self-support because of physical or mental handicaps. Proof of the dependency is required within 31 days of the child attaining the maximum age.

What is the maximum period of coverage under COBRA? a) 60 days b) 31 days c) 12 months d) 36 months

d) 36 months The maximum period of coverage under COBRA is 36 months, in the event of the covered employee's death or divorce.

Which of the following authorities must present notice of appointment to an agent? a) Insurer b) Commission c) Federal Board of Insurers d) A & B

d) A & B The licensed agent must receive notice of appointment from the insurer, as well as from the Commission.

If a policyholder takes a policy loan after the 4th year of the policy, and dies before the loan is repaid, what portion of the death benefit will be paid? a) The full death benefit will be paid. b) Any outstanding policy loan balance plus interest, plus 7.5% of the total loan, will be deducted from the policy death benefit. c) If a policy loan is outstanding at the time of death, no death benefit will be paid until the loan is repaid from the estate of the insured. d) Any outstanding policy loan balance plus interest will be deducted from the policy death benefit.

d) Any outstanding policy loan balance plus interest will be deducted from the policy death benefit. Any outstanding policy loan balance plus interest will be deducted from the policy death benefit in the case of the death of the insured.

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his a) Experience Rating. b) Group rate. c) Insurer's scheduled rate. d) Attained age.

d) Attained age. If an employee terminates membership in the insured group, the employee has the right to convert to an individual whole life policy without proving insurability. The insurer will determine what type(s) of policy an employee may convert to, but it must be issued at a standard rate, based on the individual's attained age.

Kevin and Nancy are married; Kevin is the primary breadwinner and has a health insurance policy that covers both him and his wife. Nancy has an illness that requires significant medical attention. Kevin and Nancy decide to legally separate, which means that Nancy will no longer be eligible for health insurance coverage under Kevin. Which of the following options would be best for Nancy at this point? a) Apply for social security benefits b) Apply for coverage under the same group policy that covers Kevin c) Convert to an individual insurance policy with 31 days so she won't have to provide evidence of insurability d) COBRA

d) COBRA Dependents of employees are eligible to receive group health insurance under the employee's plan. If the employee and the dependent become legally separated or divorced, or if the employee dies, the dependent will be eligible for COBRA benefits for up to 36 months. This is best for Nancy, since she has endured a long-term illness. Otherwise, being approved for individual health insurance would be difficult.

Pete is hospitalized with a back injury. Upon checking his disability income policy, Pete learns that he will not be eligible for benefits for at least 30 days. This would indicate that his policy was probably written with a 30-day a) Black-out period. b) Probationary period. c) Deductible. d) Elimination period.

d) Elimination period. The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.

The provision which states that both the printed contract and a copy of the application for the contract between the policyowner and the insurer is called the a) Total contract. b) Aleatory contract. c) Complete contract. d) Entire contract.

d) Entire contract. The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.

An insured owns a 20-year Return of Premium term life policy. If the insured is still alive after 20 years, the premiums will be refunded a) For the cash value only. b) Minus the insurer's cost of coverage. c) As taxable income. d) In full as nontaxable income.

d) In full as nontaxable income. Since the amount returned equals the amount paid in, the returned premiums are not taxable.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a) Reinstatement clause. b) Insuring clause. c) Misstatement of Age clause. d) Incontestability clause.

d) Incontestability clause. If an insurer wishes to contest any statements on an application, they must do so within the first two years.

An adverse underwriting decision may be based on which of the following: a) Personal information received from an insurance-support organization whose primary source of information is insurance institutions. b) That an individual previously obtained insurance coverage from a particular insurance institution or agent. c) That an individual previously obtained insurance coverage through a residual market mechanism. d) Information obtained from an insurance institution or agent responsible for a previous adverse underwriting decision

d) Information obtained from an insurance institution or agent responsible for a previous adverse underwriting decision An agent may receive information from an insurance institution responsible for a previous adverse underwriting decision that enhances his or her decision to make an adverse underwriting decision. If the decision is make an adverse underwriting decision, he or she must give the Commission notice.

During replacement of life insurance, a replacing insurer must do which of the following? a) Guarantee a replacement for each existing policy b) Designate a new producer for a replaced policy c) Send a copy of the Notice Regarding Replacement to the Department of Insurance d) Obtain a list of all life insurance policies that will be replaced

d) Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement

What describes the specific information about a policy? a) Illustrations b) Buyer's guide c) Producer's report d) Policy summary

d) Policy summary A policy summary describes the features and elements of the specific policy for which a person is applying.