North Carolina Life and Health State Exam Simulator

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

- $0 - The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.

N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is:

- $1,250 - After the 30-day Elimination period has been satisfied, the total benefit paid on this claim is $1,250 ($500+$500+$250).

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?

- $300,000

The policyholder has how many days to return an Accident/Health Insurance Policy and receive a full refund on premiums?

- 10

XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is:

- 100%

An insurer must provide an insured with claim forms within __ days after receiving notice of a loss.

- 15

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

- 20% is withheld for income taxes - A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. Once the rollover takes place to a new custodian, the remainder of the distribution is made.

Under the Affordable Care Act (ACA), health coverage is provided for dependents up to the age of

- 26

Under a Group Health Insurance Policy, continuation shall be available only to an employee who has been insured immediately prior to the date of termination for a period of AT LEAST

- 3 months

AT LEAST how many days before the effective date of a rate increase must an insurer provide written notice to individual accident and health policyowners?-

- 30

A life insurance policy can be reinstated upon meeting company requirements within a maximum of

- 5 years

Every insurance agent/broker MUST maintain all records, books, and documents for insurance transactions for a period of not less than

- 5 years

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

- 50%

Eligible employees must be added to group health coverage NO LATER than how many days after their first day of employment?

- 90

P received Disability income benefits for 3 months then returns 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 recurrent disability

Which of the following Dividend options results in taxable income to the policyowner?

- Accumulation at Interest - While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy.

An example of false advertising would be

- An insurer exaggerating its dividends in a magazine advertisement

Which type of contract liquidates an estate through recurrent payments?

- Annuity

Any changes made on an insurance application requires the initials of whom?

- Applicant - When an applicant makes a mistake in the information given to an agent in completing the application, the applicant can have the agent correct the information, but the applicant must initial the correction.

Which of the following is the MOST important factor when deciding how much Disability Income coverage an applicant should purchase?

- Applicant's monthly income - In determining how much Disability Income insurance a prospective insured should purchase, the most important factor to be considered is the insured's monthly income.

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:

- Applicant's physician

In a qualified retirement plan, the yearly contributions to an employee's account:

- Are restricted to minimum levels set by the IRS

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

- Aviation exclusion

In order to establish a Health Reimbursement Arrangement (HRA), it MUST:

- Be established by the employer

N has a Major Medical policy that only pays a portion of N's medical expenses. N is responsible for paying the remaining balance. This provision is known as:

- Coinsurance

Before a Health Policy is issued or delivered, the form, classification or risks, and premium rates MUST be filed with the

- Commissioner of Insurance

Insurance agents MUST obtain a license from North Carolina's

- Commissioner of Insurance

The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the:

- Cost of insurance

All of the following statements about health coverage for newborns are correct EXCEPT

- Coverage during the first year is limited to congenital defects

Which statement regarding the Misstatement of Age provision is considered to be true?

- Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered

A Business Overhead Expense policy:

- Covers business expenses such as rent and utilities

Making false statements about the financial condition of another insurance company is called

- Defamation

What is the purpose of the U.S.A. Patriot Act?

- Detect and deter terrorism

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:

- Determine if the applicant is an acceptable risk by completing standard underwriting procedures - With a conditional receipt, the insurance company will complete standard underwriting procedures before making a decision about whether to insure the applicant.

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

- Dismemberment

Insurers organized under the laws of North Carolina are called

- Domestic companies

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

- Dread disease insurance

Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?

- Entire Contract

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?

- Equity index insurance

The sections of an insurance contract which limit coverage are called:

- Exclusions

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

- Fair Credit Reporting Act - The Fair Credit Reporting Act of 1970, or FCRA, established procedures for the collection and disclosure of information obtained on consumers through investigation and credit reports.

When L applies for a Health Insurance Policy, L unintentionally fails to list a previous visit to a cardiologist. If the insurance company contests the policy, it MUST do so within 2 years

- From the date of issue - In this situation, the insurance company must contest the policy within 2 years from the date of issue.

Continuation of coverage of a group Hospital, Surgical, and Major Medical Policy MUST include

- Hospital expenses

With a Basic Medical Expense policy, what does the hospitalization expense cover?

- Hospital room and board

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?

- If the primary beneficiary dies before the insured

The type of annuity that can be purchased with one monetary deposit is called a(n):

- Immediate annuity

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n):

- Immediate annuity - Immediate annuities start providing income payments usually starting within 30 days from the purchase date.

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

- Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

How does an indexed annuity differ from a fixed annuity?

- Indexed annuity owners receive credited interest tied to the fluctuations of the linked index

Which of these retirement plans can be started by an employee, even if another plan is in existence?

- Individual Retirement Account (IRA)

Which of the following requires that an applicant for an individual Health Policy be notified of an investigation into his personal character, general reputation, and mode of living?

- Insurance Information and Privacy Protection Act

The Insurance Information and Privacy Protection Act is designed to limit or direct the information collection activities of all of the following EXCEPT

- Insurance regulators

In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:

- Insuring clause

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:

- Interest Only

Which of these arrangements allows one to bypass insurable interest laws?

- Investor-Originated Life Insurance - Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:

- Is blinded in an accident

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

- It is taxed as ordinary income

Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?

- Joint Life

L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?

- L's spouse dies at age 66.

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

- Life Annuity with Period Certain

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

- Life Income

The fund that assures policyholders payment of death benefits on Life Policies, if the company is insolvent at the time of the claim, is called the

- Life and Health Insurance Guaranty Association

All of the following are limited benefit plans, EXCEPT:

- Life insurance policies

Basic Hospital and Surgical policy benefits are:

- Lower than the actual expenses incurred

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:

- Marital deduction

A policyowner is allowed to pay premiums more than once a year under which provision?

- Mode of Premium

According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?

- Monthly - The time of payment for claims is usually specified in different policies as 60 days, 45 days, or 30 days. However, if the claim involves disability income benefits, the benefits must be paid not less frequently than monthly.

If a company accepts a renewal premium payment that would extend coverage beyond the policy's MAXIMUM age limit, the company

- Must continue the coverage to the end of the period of time for which the premium was accepted

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

- None

K works for XYZ Clothing Store from September through December each year. K works 45 hours a week for this period of time. The employer's Group Policy would consider K

- Not eligible for the insurance because as a seasonal employee K does not meet the definition of "employee" under North Carolina law

A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?

- Paid-Up Additional Insurance

Which of these characteristics is consistent with a Straight Life policy?

- Premiums are payable for as long as there is insurance coverage in force

What is the purpose of the Time of Payment of Claims provision?

- Prevents delayed claim payments made by the insurer

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:

- Probability of making timely premium payments

The Legal Actions provision of an insurance contract is designed to do all of the following, EXCEPT:

- Protect the producer

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called:

- Reinstatement

Which of the following terms is defined as any transaction in which new life insurance or a new annuity is to be purchased and existing life insurance or annuity is to be terminated or discontinued?

- Replacement

The Commissioner of Insurance may suspend or revoke the license of an agent who takes any of the following actions EXCEPT

- Represents more than one insurance company - Representing more than one insurance company is not a reason for suspension or revocation.

Agent J takes an application and initial premium from an applicant and sends 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?

- Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company

With Optionally Renewable Health policies, the insurer may:

- Review the policy annually and determine whether or not to renew it

Post-tax dollar contributions are found in:

- Roth IRA investments - No income tax deductions can be taken for contributions made to a Roth, but the earnings on those contributions are entirely tax-free when they are withdrawn.

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

- Self-maintenance expenses

P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?

- Sign an enrollment card

Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?

- Split-dollar plan - A split-dollar plan is an arrangement where an employer and an employee share in the cost of purchasing a life insurance policy on the employee. The employee is also allowed to name the policy beneficiary.

Which action by an insurance agent is considered rebating?

- Splitting commissions with a policyholder who has purchased additional coverage

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):

- Straight Life annuity - The Straight Life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

- Ten-Year Endowment

Which of the following factors affects the amount of monthly disability benefits payable under Social Security?

- The amount of the benefits available from other sources

T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?

- The insurer will rescind the policy, deny the claim, and recover all payments made

A level premium indicates:

- The premium is fixed for the entire duration of the contract

W gave W's age as 50 when W purchased a Life policy. At the time of W's death seven years later, the company discovered W's true age at issue had been 59. What would the normal procedure be under the misstatement of age provision in regard to the payment of the death claim?

- The proceeds would be reduced based on whatever the premium would have been if purchased at age 59

Which of the following statements is true about most Blue Cross/Blue Shield organizations?

- They are nonprofit organizations

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

- Those enrolled as a full-time student

Inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is

- Twisting

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

- Variable Life

Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?

- Variable Life

A written agreement to provide a Life Insurance Policy holder immediate cash in exchange for the sale and transfer of a Life Insurance Policy is a

- Viatical Settlement

What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?

- Waiver of Premium rider

When must insurable interest be present in order for a life insurance policy to be valid?

- When the application is made

According to North Carolina's rules on disclosure, a life insurance applicant is expected to be provided with

- a Buyer's Guide and Policy Summary