Simulated Exam #2

Independent rating agencies evaluate all of the following factors of an insurer to assess their financial strength EXCEPT A) number of agents B) operating expenses C) loss experience D) investments

A) number of agents *While not all firms rate the same companies or use the same criteria, the main indicators of financial strength are the insurer's loss experience, reserves, investment performance, management and operating expenses.

An insurer may NOT contest an individual life insurance policy after it has been in force for how long? A) 30 days B) 2 years C) 1 year D) the insurer can contest the policy for the life of the policyholder

B) 2 years *An insurer may not contest a policy after it has been in force for 2 years, unless the insured fails to pay the premiums.

A social insurance supplement (SIS) rider pays a monthly benefit A) during the policy's benefit period while the insured remains disabled B) in addition to workers' comp benefits C) until the insured begins receiving Social Security benefits D) for partially and totally disabled insureds

A) during the policy's benefit period while the insured remains disabled *The social insurance supplement (SIS) rider pays benefits to an insured who is totally disabled while the insured remains disabled and only as long as regular benefits are payable. It does not pay in addition to Social Security or workers' comp for the period the insured is disabled.

One of the requirements of a qualified LTC policy is the inability of an insured to perform some number of the ADLs by themselves. Which is considered a measurement of the most impaired person? A) eating B) bathing C) continence D) dressing

A) eating *The activity that provides a measure of the most impaired person is eating. Bathing is the measurement attributed to the least impaired person. The other activities are dressing, toileting, transferring, and continence.

Annuity payments are taxable to the extent that they represent interest earned rather than capital returned. What method is used to determine the taxable portion of each payment? A) exclusion ratio B) marginal tax formula C) surtax ratio D) annuitization ratio

A) exclusion ratio *An exclusion ratio is applied to each benefit payment the annuitant receives to determine the amount that is excluded from taxation: investment in the contract is equal to the exclusion ratio divided by the expected return. The investment in the contract is the amount of money paid into the annuity. The expected return is the annual guaranteed benefit the annuitant receives, multiplied by the number of years she will receive benefits.

Malia purchases a $50,000 5-year level term policy. Which of the following statements about Malia's coverage is NOT correct? A) if Malia dies after the specified 5 years, only the policy's cash value will be paid B) if Malia lives beyond the 5 years, the policy expires and no benefits are payable C) the policy provides a straight, level $50,000 of coverage for 5 years D) if Malia dies at any time during the 5 years, her beneficiary will receive the policy's face value

A) if Malia dies after the specified 5 years, only the policy's cash value will be paid *If an insured lives beyond the 5-year period, the policy expires and no benefits are payable. There are no cash values in term policies.

Which annuity settlement arrangement guarantees to pay at least a minimum amount equal to the original investment? A) installment refund annuity B) period certain annuity C) joint and full survivor annuity D) pure life annuity

A) installment refund annuity *An installment refund annuity assumes that the total annuity fund will be paid to the annuitant, his beneficiary, or both.

Which of the following acts is NOT part of soliciting insurance? A) performing clerical work for an insurance agency B) approaching a prospect in person C) approaching a prospect through the mail D) completing an insurance application

A) performing clerical work for an insurance agency *In general, the solicitation of insurance is the act of approaching people by any means, including the mail or in person, with the intent of inducing them to buy insurance. Soliciting also includes the actual sale of an insurance policy, including the completion of an application.

LTC policies must have a provision regarding reinstatement that allows which of the following? A) reinstatement of a lapsed policy if the insurer gets proof of cognitive impairment or functional incapacity of the insured B) no reinstatement of a lapsed policy because of loss of the insured's functional capacity C) reinstatement of a lapsed policy if reinstated within 2 years of the lapse D) automatic reinstatement of a lapsed policy regardless of the reason for the lapse if the insured is over age 80

A) reinstatement of a lapsed policy if the insurer gets proof of cognitive impairment or functional incapacity of the insured *LTC policies must contain a reinstatement provision in the event a lapse occurs and the insurer is provided proof of cognitive impairment or functional incapacity.

ERISA requires certain information concerning group insurance plans be made available to all of the following EXCEPT A) the Dept. of Commerce B) the IRS C) plan participants and their beneficiaries D) the Dept. of Labor

A) the Dept. of Commerce *ERISA requires the reporting and disclosure of certain information regarding group insurance plans to be made available to plan participants and their beneficiaries, the IRS and the Dept. of Labor.

If an insured does not exercise the option to increase coverage under a guarantee insurability rider, what is the result? A) the coverage will not change and the option automatically expires B) the policy is canceled C) the premiums on the underlying policy are lowered proportionately because no increase in insurance coverage was purchased D) the insurer automatically increases the coverage, per the amount stated in the option

A) the coverage will not change and the option automatically expires *When no purchase is made under a guaranteed insurability option, the option for that particular age expires automatically. There is not change in the underlying policy. Normally, the insured will have 90 days in which to exercise an optional purchase.

All individual accident and health insurance policies delivered in PA must state the following EXCEPT A) the policy's conformity with federal guidelines B) the identification of each rider C) the date on which the insurance takes effect D) the policy's exceptions

A) the policy's conformity with federal guidelines *All individual health policies delivered in PA must state the entire premium, the policy's exceptions and reductions, the date on which the insurance takes effect, the persons insured and identification of each form and rider.

Nonresidents may be licensed to sell insurance in PA under which of the following circumstances? A) they hold a valid license in their state of residence B) they completed the pre-licensing curriculum C) they are moving to the state within 10 days D) they passed the state exam

A) they hold a valid license in their state of residence *An individual who is currently licensed as a resident insurance producer in another state or territory may apply to the Dept. for a nonresident insurance producer license for the equivalent lines of authority as the individual is licensed in his home state.

To avoid adverse selection, insurers determine many different factors and rely on an extensive amount of information before issuing a policy. This process is called A) underwriting B) accrediting C) evaluating D) undersigning

A) underwriting *Insurers use many different sources of information when evaluating a risk, using a process known as underwriting.

A complaint record must be kept for at least A) 3 years B) 4 years C) 1 year D) 2 years

B) 4 years *Everyone engaged in the insurance business must maintain a complete record of all the complaints received during the preceding 4 years. The record must list the total number of complaints, their classification by line of insurance, the nature of each complaint and the time it took to process each complaint.

What is the minimum grace period that an individual accident and health insurance policy must include, if the premiums are due weekly? A) 90 days B) 7 days C) 20 days D) 2 days

B) 7 days *All individual accident and health insurance policies must contain a grace period for the payment of overdue premiums, except for the first premium. The grace period is 7 days for weekly premium policies, 10 days for monthly premium policies, and 31 days for annual premium policies.

Which of the following is a federal and state program designed to help provide needy persons, regardless of age, which medical coverage? A) Medigap B) Medicaid C) workers' comp D) Medicare

B) Medicaid *Medicaid is a federal and state program designed to help provide needy persons, regardless of age, with medical coverage.

Chantal applied for life insurance on November 1, but she did not submit a premium payment with the application. She underwent a physical exam on November 10, which she passed, and the results of that exam were forwarded to the insurance company. The policy was issued by the company on November 15, and the agent delivered the policy to Chantal on November 17, at which time she paid the first premium. When did Chantal's coverage become effective? A) November 15 B) November 17 C) November 10 D) November 1

B) November 17 *In situations where the applicant does not submit a premium with the application, the issuance of the policy (if she is found to be insurable) and its delivery to the applicant constitute the contractual offer. The applicant accepts the company's offer when the first premium is paid, and it is on that date that the contract becomes effective.

All of the following are required LTC standards EXCEPT A) requiring an applicant to sign a Notice Regarding Replacement, if necessary B) a 10-day free-look period C) a clearly visible notice on the policy that is guaranteed renewable D) providing a shopper's guide and an outline of coverage

B) a 10-day free-look period *The required free-look period for a LTC insurance policy is 30 days. All of the other statements are marketing standards.

A Med Supp policy that contains restricted network provisions is known as A) an HMO B) a Medicare SELECT policy C) a LTC policy D) an individual health policy

B) a Medicare SELECT policy *A Medicare select policy or Medicare select certificate means, respectively, a Med Supp policy or certificate that contains restricted network provisions.

What are members of group health policy given that shows evidence of insurance? A) a certificate of qualified benefits B) a certificate of coverage C) a master policy D) a coverage notification

B) a certificate of coverage *Members each receive a certificate of coverage that provides evidence of insurance, who is covered by the plan and a summarization of the benefits.

Individual life insurance policies must include all of the following provisions EXCEPT A) a misstatement of age provision B) a conversion provision C) an entire contract provision D) an incontestability provision

B) a conversion provision *An individual life insurance policy must include provisions for entire contract, incontestability, and misstatement of age. A conversion provision is required only in group insurance policies.

All of the following specify owners' rights in a health insurance policy EXCEPT A) an incontestable provision B) an unpaid premium provision C) a grace period provision D) a reinstatement provision

B) an unpaid premium provision *The unpaid premium provision of a health insurance policy does not pertain to owners' rights; it is designed to protect the rights of the insurer. The required provisions protect the insured, while the optional provisions, such as the unpaid premium provision, protect the insurer.

Changes made to a policy must be A) approved in writing by the insured and initialed by the agent B) approved in writing by an executive officer of the insurance company C) approved in writing by the insured, agent and executive officer of the insurance company D) approved in writing by the insured and initialed by one of the insurer's executive officers

B) approved in writing by an executive officer of the insurance company *Under the "entire contract" provision, any changes made to a policy must be approved in writing by an executive officer of the insurance company and attached to the policy in the form of an amendment.

Which of the following options is designed to protect the policyowner should the policy be in danger of lapsing for nonpayment of premiums? A) waiver of premium B) automatic premium loan C) guaranteed insurability D) premium exclusion

B) automatic premium loan *Under the automatic premium loan provision, the cash values will be used to pay the premium if the premium due has not been paid by the end of the grace period.

All of the following conditions or medical procedures may be excluded from coverage under an individual accident and health insurance policy EXCEPT A) cosmetic surgery B) childhood immunizations C) an injury covered by worker's comp D) nervous disorders

B) childhood immunizations *All health insurance policies issued in PA must include benefits for childhood immunizations. These policies must provide coverage for medically necessary booster doses of all immunizing producers used in childhood immunizatinons.

The failure to conspicuously disclose that an advertisement for a Med Supp policy is intended to solicit an insurance purchase and that an insurance producer or company will contact the prospect is known as A) unfair discrimination B) cold-lead advertising C) high-pressure advertising D) rebating

B) cold-lead advertising *The illegal marketing practice of cold-lead advertising fails to disclose in a conspicuous manner that a purpose of the marketing method is the solicitation of Med Supp insurance and that an insurance company or producer will contact the prospect.

All of the following benefits are available under Medicare EXCEPT A) home health care visits for a speech therapist B) custodial care C) skilled nursing care following a hospital stay of at least 3 days D) hospital expenses

B) custodial care *Medicare provides benefits for hospital stays, skilled nursing and home health care visits under Part A.

Statements made by a producer which are false and derogatory with regard to the financial condition of another producer would be considered which of the following? A) intimidation B) defamation C) unfair discrimination D) coercion

B) defamation *Defamation is making, issuing, publishing or circulating any oral or written statement that is false or maliciously critical of or derogatory to the financial condition of any person, and that is meant to injure the person.

An insurance company that is incorporated in and has its home office in Connecticut with an agency in PA is classified as what kind of company with respect to PA? A) alien B) foreign C) domestic D) fraternal

B) foreign *Insurers are classified by their state of domicile and are either domestic, foreign or alien. A domestic insurer is formed under the laws of PA and has its home office in the state. A foreign insurer is incorporated in a state other than PA and has an office in PA. An alien insurer is domiciles in a country other than the US. A fraternal insurer is organized under a lodge system with a representative form of government and can be chartered in any state.

All of the following provisions are required in an individual health and accident policy EXCEPT A) physical exam and autopsy provision B) insurance with other insurers provision C) entire contract provision D) grace period provision

B) insurance with other insurers provision *There are 2 provisions that address insurance with other insurers that may be included in an individual health and accident policy, but these provision are optional. The other 3 provisions listed in the answer choices are mandatory.

Care that is provided on an intermittent basis by licensed nurses is known as A) custodial care B) intermediate care C) skilled nursing care D) home health care

B) intermediate care *There are 3 levels of LTC. Skilled nursing care is provided on a 24-hour basis, 7 days per week and may only be performed by licensed nurses under a doctor's orders. Intermediate care is intermittent care and is also provided by licensed nurses under a doctor's orders; however, care is provided fewer than 7 days a week, or less than 8 hours per day. Custodial care may be provided by someone without medical training who is hired to help the insured in performing ADLs.

Bill names his church as the beneficiary of his $300,000 life insurance policy. When Bill dies, who is responsible for the income taxes payable on the lump-sum proceeds received by the church? A) Bill's church B) no income tax is payable on the death proceeds C) Bill's estate D) Bill's estate and church split the tax

B) no income tax is payable on the death proceeds *Lump-sum proceeds payable upon the insured's death are not subject to income tax, no matter who the beneficiary is

A grandfathered health policy is A) your grandfather's health insurance B) one that existed prior to the Affordable Care Act C) a policy that has expired D) one that is specifically for grandfathers

B) one that existed prior to the Affordable Care Act *A grandfathered health policy is one that before the passing of the Affordable Care Act. This type of policy is not required to comply with many of the rules that apply to more recent health plans.

An individual with a temporary license may do all of the following EXCEPT A) perform any acts necessary to keep a deceased producer's business going until the estate is settled B) procure new insurance C) maintain the business of a disabled producer D) renew the business of a deceased producer

B) procure new insurance *An individual with a temporary license may not solicit, negotiate or procure new business. He/she is authorized to wind down the business affairs of a deceased or disabled producer.

Which of the following would NOT be required of a producer who wants to sell variable annuities? A) successfully passing the required exams B) registration with the National Association of Insurance and Financial Advisors C) having a valid producer life insurance license and completing the state variable annuity certification, if required D) registration with the Financial Industry Regulatory Authority (FINRA)

B) registration with the National Association of Insurance and Financial Advisors *To sell variable annuities, a producer must have a valid life insurance license and be registered with FINRA. To be registered with FINRA, the producer must first pass the applicable securities exams. To obtain a life insurance license, the producer must also first pass the state life insurance exam. Being a member of the National Association of Insurance and Financial Advisors (NAIFA) is not required to sell variable annuities.

A producer must do which of the following when a new insurance policy is sold? A) warn the applicant about the risks of replacement B) send the insurer the applicant's signed statement disclosing whether the new insurance will replace existing insurance C) give the applicant a copy of the producer's certificate D) inform the Commissioner that a new policy has been sold in PA

B) send the insurer the applicant's signed statement disclosing whether the new insurance will replace existing insurance *The producer must sent the insurer a statement, signed by the applicant, stating whether or not the new insurance product will replace an existing insurance product.

What is the difference between a stock insurer and a mutual insurer? A) stock insurers have certificate holders and mutual insurers have policyholders B) stock insurers have shareholders and mutual insurers have policyholders C) stock insurers have policyholders and mutual insurers have certificate holders D) stock insurers have policyholders and mutual insurers have shareholders

B) stock insurers have shareholders and mutual insurers have policyholders *A stock insurer is an incorporated insurer with capital that is divided into share and owned by shareholders. A mutual insurer is owned by its customers, who are known as policyholders.

Jake and Sue signed a contract whereby Sue agreed to pay half of the life insurance proceeds to Jake if he murdered her estranged husband. The contract between Jake and Sue would not be enforceable in court because A) Jake could not legally accept the contract B) the contract lacks a legal purpose C) the contract lacks consideration D) Jake and Sue are not considered competent parties

B) the contract lacks a legal purpose *To be legally enforceable, a contract must have a legal purpose. This means that the goal of the contract and the reason the parties enter into the agreement must be legal. A contract wherein Jakes agrees to kill Sue's spouse in exchange for half of the insurance proceeds would be unenforceable in court because the contract does not have a legal purpose.

Which of the following statements regarding insurance is NOT true? A) all types of insurance are implemented through a contractual agreement between the insurance owner and the insurer B) there are no physical hazards in life and health insurance C) all types of insurance indemnify the insured against financial loss D) all types of insurance are based on the law of large numbers

B) there are no physical hazards in life and health insurance *There are many types of physical hazards in life and health insurance, such as diabetes and heart and lung conditions. These can be identified through tests and medical equipment.

Which of the following statements regarding childhood immunizations in PA is CORRECT? A) they are covered by health insurance policies for low-income insureds only B) they must be covered by all health insurance policies issued in PA C) they must be excluded from health care policy coverage D) they are covered only for those eligible for Medicaid

B) they must be covered by all health insurance policies issued in PA *All health insurance policies delivered in PA must include benefits for childhood immunizations. They must cover medically necessary booster doses of all immunizing agents used in childhood immunizations.

Benefits paid for customary charges incurred during examination by an ophthalmologist or optometrist are included in A) basic physician's expense insurance B) vision care insurance C) disability income insurance D) surgical expense insurance

B) vision care insurance *Vision care coverage, normally found in a group health insurance policy, usually pays for reasonable and customary charges incurred during eye exams by ophthalmologists and optometrists.

Of the following workers, who would qualify for the most favorable terms and rates on a disability income policy? A) Brenda, who is 26 and a bulldozer operator B) Eileen, age 37, who travels weekly for work as a consultant C) Jeremy, who is 56 years old and is a financial advisor D) Derek, age 19, who is working at his first job as an auto mechanic

C) Jeremy, who is 56 years old and is a financial advisor *Jeremy would most likely have the lowest rates and most liberal definitions or disability on his policy based on his occupation. While the other people are younger, their jobs are considered more hazardous, including Eileen, who has more opportunity for an injury or illness since she is constantly traveling.

Anna applied for a $2 million life insurance policy and paid the first premium but was later found to be uninsurable. The agent gave her a receipt that guarantees coverage until the insurer formally rejects her application. Which type of receipt did Anna receive? A) approval B) conditional C) binding D) insurability

C) binding *With a binding receipt, coverage is guaranteed, even if Anna is later found to be uninsurable, until the insurer formally rejects the application. However, because the underwriting process can take several weeks, this can place the insurer at considerable risk. Accordingly, binding receipts are almost never used in life insurance.

Equity index life insurance policy values are determined by a specified participation rate and A) dividends from stocks in a particular stock market index B) aggressive investment in the stock market C) indirect links to a stock market index D) flexible premium payments

C) indirect links to a stock market index *Equity index life insurance links policy values, based on a specified participation rate, to potential increases in a particular market index, such as the Standard & Poor's 500 Index. The life insurance policy is not participating in the actual stock market index or in the actual stocks that are in that index. Consequently, it does not benefit from the dividends of those stocks. Equity index or equity linked universal life insurance allows a conservative indirect link to a stock market index and allows a certain participation percentage of increase based on the increase in the stock market index. While it is true that the premium payments are flexible, this question is about how equity index life insurance policy values are determined; it is not about how policy values might be affected, which is where flexible premiums come into play.

Which of the following is NOT an optional provision? A) other insurance with this insurer B) relation of earnings to insurance C) insuring clause D) insurance with other insurers

C) insuring clause *The insuring clause states the types of losses which are covered by the policy and the insurer's promise to pay the insured in the event of a covered loss. This provision is neither mandatory or optional. Other insurance with this insurer, insurance with other insurers and relation of earnings to insurance are all optional provisions.

Which of the following statements regarding the respite care provision under a LTC policy is CORRECT? A) it pays a benefit for the insured to return home for short visits B) it pays a benefit for the insured to take a break at an approved day spa or adult day care facility C) it pays a benefit for a family caregiver to get away from her duties for a short period of time D) it pays a benefit to reimburse other family members who provide care for the insured

C) it pays a benefit for a family caregiver to get away from her duties for a short period of time *The respite care provision pays the cost of either bringing in a substitute provider to the insured's home or moving the insured to a care facility for a period of time. Its purpose is to give an unpaid caregiver (such as a spouse or other family member) relief from their daily duties.

How does an insurer treat benefits that are payable for expenses incurred when the company accepted the risk without being notified of other existing coverage for the same risk? A) it deducts them B) it eliminates them C) it prorates them D) it estimates them

C) it prorates them *Benefits payable for expenses incurred are prorated in cases where the company accepted the risk without being notified of other existing coverage. This limits over-insurance and is known as the "insurance with other insurers" provision.

Which of the following statements pertaining to a temporary insurance agreement is CORRECT? A) it provides term insurance protection until the policy is converted to permanent insurance B) coverage begins when the application is signed and the premium is paid, assuming any required medical exam is scheduled within 3 days C) it provides temporary coverage until an application is rejected or the policy is issued D) it provides protection against death by accident, but not death from natural causes

C) it provides temporary coverage until an application is rejected or the policy is issued *A temporary insurance agreement, also called a binding receipt, is just that: temporary coverage until an application is rejected or the policy is issued.

The privilege of accessing the cash value of an insurance policy if it is surrendered is known as the A) entire contract provision B) reinstatement provision C) nonforfeiture provision D) conversion privilege

C) nonforfeiture provision *After a life insurance policy has been in effect for a specified amount of time, the policy may provide access to the policy's cash value. Under certain circumstances, the money can be used to pay for a premium that is in default, paid as a lump-sum in cash, or paid as a cash amount in return for the surrender of the policy. Policies must explain the mortality table and interest rate used to calculate the cash surrender values. A conversion privilege is found in a group life policy; it allows for a terminated plan member to convert the group policy to an individual policy under certain circumstances. The reinstatement provision allows for reinstatement of a lapsed policy. The entire contract provision stipulates that the application and policy itself comprise the entire contract of insurance.

When is "total disability" defined as the insured's inability to perform substantial and material duties of his regular occupation? A) during the life of the policy B) during the first 90 days after the loss begins C) previously during the first 24 months after the loss begins D) in individual disability income policies only

C) previously during the first 24 months after the loss begins *Insureds are considered to be totally disabled if they cannot perform the duties of their own profession for a specific period. Previously, this was 2 years. After this 2-year period, an individual would be considered totally disabled only if he were unable to engage in any occupation for which the insured was suited by training, education, and experience. Many insurers now offer total disability coverage in an individual's own occupation for up to 5 years, 10 years, to age 65, or life, depending on the insured's occupation classification.

Which of the following is NOT taken into account when using the needs approach to determine the proper amount of insurance protection? A) family's preretirement period needs B) family's dependency period needs C) projected future earnings of the breadwinner and the number of years she expects to work D) amount of the family's retirement income needs

C) projected future earnings of the breadwinner and the number of years she expects to work *The needs approach for determining how much insurance protection is needed requires an analysis of the family's financial needs, including the dependency, preretirement and retirement periods, if the breadwinner dies. Future earnings are part of the human life value approach, but not the needs approach.

All of the following are powers and duties of the Insurance Commissioner EXCEPT A) conducting complaint hearings B) issuing cease and desist orders C) prosecuting producers who violate state insurance laws D) appointing examiner

C) prosecuting producers who violate state insurance laws *Producers who violate state insurance laws are prosecuted by the attorney general.

According to the National Association of Insurance Commissioners' standardized model Med Supp policy, insurers must offer coverage for all of the following core benefits EXCEPT A) the coinsurance amount of Medicare Part B - eligible expenses, regardless of hospital confinement, subject to the Medicare Part B deductible B) Medicare Part A - eligible hospital expenses not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period C) the Medicare Part A deductible D) coverage under Medicare Parts A and B for the first 3 pints of blood or equivalent (unless replaced according to federal regulations)

C) the Medicare Part A deductible *All Med Supp policies must provide certain core benefits, including coverage for Medicare Part A - eligible hospital expenses not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period; the coinsurance amount of Medicare Part B - eligible expenses, regardless of hospital confinement, subject to the Medicare Part B deductible; and, coverage under Medicare Parts A and B for the first 3 pints of blood or equivalent. Although Plan A does not provide coverage for the Medicare Part A deductible, other Med Supp policies (Plans B through J) cover this deductible.

An accidental death and dismemberment (AD&D) policy rider's principal sum is equal to A) principal twice B) a reimbursement policy C) the death benefit on the base life insurance policy D) double consideration

C) the death benefit on the base life insurance policy *An AD&D principal sum is paid out if the insured dies within 90 days of an accident. The principal sum paid from the rider is equal to the death benefit on the base life insurance policy. Essentially, this could be considered a double death benefit or double indemnity. Principal sum: full benefit paid, if insured dies or loses 2 limbs or the loss of sight in both eyes in an accident.

Which of the following statements regarding policy dividends is CORRECT? A) they are not available to insureds after a specified age, such as 60 B) though they may vary from year to year, they are guaranteed to be paid each year C) they are the difference between the gross premium charged and the actual experience of the insurer D) they are issued on nonparticipating policies

C) they are the difference between the gross premium charged and the actual experience of the insurer *Policy dividends issued on participating policies (policies in which the insureds may participate in the operating and investment results of the insurer) are a reflection of favorable operations, investment or mortality results. They are never guaranteed. In fact, most states require life insurance proposals that contain dividend illustrations to state that future dividends are not guaranteed.

Josie has been totally disabled for 2 years. During that time, the insurance company has paid all premiums (a total of $1,200) on her $25,000 life policy, which has a waiver of premium clause. If Josie dies now, the insurance company will pay a death benefit of A) $23,300 B) $23,800 C) $12,500 D) $25,000

D) $25,000 *The waiver of premium rider only waives the policyowner's responsibility of paying the life policy premiums if she suffers a disability and is unable to work after 90 days. The waiver of premium only waives the policyowner's responsibility to pay; it does not accelerate any portion of the death benefit to the insured. Therefore, Josie's life policy pays its death benefit of $25,000.

A company has 1,200 eligible employees for its group life insurance program, and the company pays the total premium. How many employees must be insured to initiate the plan? A) 1,000 employees B) 900 employees C) 600 employees D) 1,200 employees

D) 1,200 employees *If a group life insurance plan is noncontributory (employer pays total premium), 100% of eligible persons must be insured.

Kevin, the insured in a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be paid? A) both Kevin's and Lynda's estates, equally B) the proceeds will escheat to the state C) Lynda's estate D) Kevin's estate

D) Kevin's estate *Under the Uniform Simultaneous Death Act, if the insured and primary beneficiary are killed in the same accident and there is not sufficient evidence to show who died first, the policy proceeds are distributed as if the insured died last. Kevin's estate would receive the proceeds because Lynda, the beneficiary, was deemed to have predeceased Kevin and no other beneficiary was named.

What is an authorized insurer? A) a producer who is authorized by the Commissioner to transact insurance business in PA B) a policyholder who has a legal contract with an insurance company C) a producer who has the authority to represent an insurance company D) a company that is authorized by the Commissioner to transact insurance business in PA

D) a company that is authorized by the Commissioner to transact insurance business in PA *An authorized insurer is one that has a certificate of authority from the Commissioner to transact insurance business in PA.

If an annuitant has a refund annuity and dies before the annuity income begins, her beneficiary will receive A) nothing B) a predetermined lump-sum cash payment C) a lump-sum cash payment equal to the starting annuity fund D) a lump-sum cash payment equal to the starting annuity fund, less the amount of income already paid to the deceased

D) a lump-sum cash payment equal to the starting annuity fund, less the amount of income already paid to the deceased *If an annuitant has a cash refund annuity and dies after the annuity income begins, the beneficiary will receive a lump-sum cash payment equal to the annuity fund, less the amount of income already paid to the deceased.

A temporary license may be issued to all of the following individuals EXCEPT A) a deceased producer's personal representative until new personnel is trained to run the business B) a person holding a power of attorney for a producer in the armed forces C) the surviving spouse of a deceased producer in order to sell the business D) a person selling insurance for the estate of a deceased producer

D) a person selling insurance for the estate of a deceased producer *Temporary licenses may be issued to a producer's spouse, designee or personal representative if the producer dies, becomes disabled, or enters active military service.

Specialized risks that admitted insurers are not able to cover may often be obtained through A) the government B) a residual insurer C) a competitor D) a surplus lines insurer

D) a surplus lines insurer *When a risk is either too large or too specialized for an authorized insurer to underwrite, coverage can be obtained from a surplus lines insurer who is non-admitted or does not have a certificate of authority from the state.

Under the misstatement of age provision in a health insurance policy, what can an insurer do if it discovers that an insured gave a wrong age at the time of application? A) assess a penalty B) increase the premium C) cancel the policy D) adjust the benefits

D) adjust the benefits *Under the misstatement of age provision in a health insurance policy, if an insurer discovers that an insured gave a wrong age at the time of application, it can adjust the benefits. Benefit amounts payable in these cases will be what the premiums paid would have purchased at the correct age.

Which of the following situations is the best example of unfair discrimination? A) an insurer refuses to issue a policy to an applicant whose credit history suggests an inability to financially support the policy being applied for B) an insurer refuses to issue a policy to an applicant who has been treated for drug dependence on 2 separate occasions in the previous 5 years C) an insurer assigns a premium rating to an applicant who weighs 30 pounds more than a typical person of that age and sex D) an insurer assigns a premium rating to an applicant because of studies that suggest members of the applicant's race have a shorter than average life expectancy

D) an insurer assigns a premium rating to an applicant because of studies that suggest members of the applicant's race have a shorter than average life expectancy *Unfair discrimination occurs when an insurer charges 2 people of equal risk different rates or provides disparate services or benefits based solely on differences in race, religion, physical ability, national origin or location of residence.

The period during which annuity benefits are received is called A) accumulation period B) earnings period C) payout period D) annuitization period

D) annuitization period *The annuitization period is the "taking out" time. This is the period of time following the accumulation of the annuitant's payments (principal and interest) during which annuity benefits are received. The accumulation period is the "putting in" time.

All of the following statements regarding a hospital indemnity plan are correct EXCEPT A) the plan pays a flat dollar amount as a daily benefit each day the insured is hospitalized B) payment is made directly to the insured, not the insurer C) the benefits from the policy may be used toward deductibles and coinsurance payments D) another name for the plan is a hospital expense plan

D) another name for the plan is a hospital expense plan *The other name for a hospital indemnity plan is a hospital income plan. The benefit may be used any way the insured sees fit; however, it is not designed to reimburse the insured for the expenses of being in the hospital.

A producer who converts premiums for his own use most accurately describes which of the following? A) concealment B) fraud C) misrepresentation D) breach of fiduciary duty

D) breach of fiduciary duty *An insurance producer shall be responsible in a fiduciary capacity for all funds received or collected as an insurance producer and shall not, without the express consent of the insurance entity on whose behalf the funds were received, mingle the funds with the producer's own funds, or with funds held by the insurance producer in any other capacity.

When Lisa applied for a life insurance policy, the agent issued a receipt stating that coverage is effective as of the date of application, if the applicant is found to be insurable under the company's underwriting rules. This type of receipt is known as A) acceptance receipt B) binding receipt C) inspection receipt D) conditional receipt

D) conditional receipt Lisa received a conditional receipt from the agent. This type of receipt states that the coverage is effective as of the date of application, if the applicant is found to be insurable under the company's general underwriting rules. Some conditional receipts make coverage effective on the date of application or on the date of a required medical exam, whichever is later.

Beth's health insurance policy contains a provision that allows her to renew coverage up to age 65. However, the policy also states that should Beth lose her job, the insurance company will cancel the policy, regardless of Beth's age. In terms of renewability, what type of policy does Beth have? A) cancelable B) optionally renewable C) guaranteed renewable D) conditionally renewable

D) conditionally renewable *A conditionally renewable policy allows an insurer to terminate the coverage, but only in the event of one or more conditions stated in the contract. These conditions cannot apply to the insured's health. Most frequently, they are related to the insured reaching a certain age or losing gainful employment.

Which of the following riders provides changes in the benefit payable based on changes in the Consumer Price Index (CPI)? A) payables rider B) Social Security rider C) guaranteed insurability rider D) cost-of-living adjustment (COLA) rider

D) cost-of-living adjustment (COLA) rider *The cost-of-living adjustment (COLA) rider allows for indexing the monthly or weekly benefit payable under a disability policy to changes in the Consumer Price Index (CPI).

A basic medical expense policy is usually written with first-dollar coverage, which means it does not have a A) coinsurance clause B) stop-loss provision C) corridor deductible D) deductible

D) deductible *Basic medical expense policies are often referred to as first-dollar insurance coverage because they provide for the payment of all losses up to the specified limit without any use of deductibles.

What mandatory provision states that the insured is entitled to either 31 days or one month to pay an overdue premium, during which time the policy will continue in force? A) replacement B) entire contract C) reinstatement D) grace period

D) grace period *A grace period is a 31-day or 1-month time period for payment of any premium (except the first), during which time the death benefit coverage continues in force.

Ramon's premium payment was due on June 1, but the company did not receive it until June 28. Which policy provision kept Ramon's policy from lapsing? A) automatic premium loan B) facility-of-payment C) reinstatement D) grace period

D) grace period *If policyowners forget or neglect to pay their premiums by the date they are due, the grace period allows an extra 30 days, or 1 month, during which premiums for fixed premium policies may be paid to keep the policies in force.

Which of the following is subject to PA's replacement regulations? A) annuities B) group life insurance C) individual credit life insurance D) individual life insurance

D) individual life insurance *Several kinds of life insurance products are exempt from replacement regulations, including annuities, credit life insurance, many kinds of group life insurance and variable life insurance.

Javier purchased a LTC insurance policy with an optional benefit that provides a yearly increase in benefits. His policy offers A) an insurability option B) a return of benefits option C) nonforfeiture benefits D) inflation protection

D) inflation protection *Inflation protection is an optional benefit that provides for automatic annual increases in benefits based on a cost-of-living adjustment (COLA). The increase is stated as a percentage and is compounded annually.

Which of the following statements regarding a conditional receipt is CORRECT? A) it is given when the application is completed B) it is given at the time of policy delivery C) it is given pending acceptance by the applicant of additional riders D) it is given only if the initial premium has been submitted with the signed application

D) it is given only if the initial premium has been submitted with the signed application *The conditional receipt means that if the coverage is accepted as applied for and an initial premium is submitted with the application, the policy will be in force from the date the application is signed. The receipt is not provided simply by completing the application. At the time of policy delivery, the policy would have already been approved and coverage would no longer be conditional. It is also not given pending acceptance of additional riders or changes in the policy.

Which of the following statements does NOT describe a fixed annuity? A) it provides a guaranteed rate of interest B) it is invested in the insurer's general account C) it guarantees income payments will last the annuitant's lifetime D) it will produce income benefits that are adjusted to keep pace with inflation

D) it will produce income benefits that are adjusted to keep pace with inflation *The benefit of investing in the insurer's general account is that all annuity contract values, including the monthly payment, are guaranteed. In exchange for this guarantee, annuity payments are fixed and will not increase to keep pace with inflation.

Which of the following statements regarding basic forms of whole life insurance is NOT correct? A) a single premium life policy is purchased with a large one-time-only premium B) the owner of a 30-pay life policy will owe no more premiums after the 30th year the policy is in force C) generally, straight life premiums are payable, at least annually, for the duration of the insured's life D) limited payment life provides protection only for the years during which the premiums are paid

D) limited payment life provides protection only for the years during which the premiums are paid *Although premium payments are limited to a certain period, the insurance protection extends until the insured's death or to age 100.

What tool do life insurance actuaries use to help establish premium rates based on the probabilities of death at various ages? A) morbidity table B) survivor table C) annuity table D) mortality table

D) mortality table *A mortality table is used to help establish life insurance premium rates, since it helps actuaries predict the number of deaths and, thus, the number of insurance claim an insurer could expect to experience in any given year. Morbidity tables predict disabilities.

Under a Keogh (HR-10) plan, employers A) have the option to choose the percentage amount and which employees the contribute to B) can choose to not contribute to their employees C) must contribute to their eligible employees, but at a percentage of the employer's choice D) must contribute the same percentage to their eligible employees as they contribute to their own plans

D) must contribute the same percentage to their eligible employees as they contribute to their own plans *Under a Keogh (HR-10) plan, employers must contribute the same percentage to their eligible employees as they contribute to their own plans.

The party to whom the life insurance policy cash values belong is the A) insurer B) insured C) beneficiary D) policyowner

D) policyowner *The accumulation that builds over the life of a policy is referred to as the policy's cash value. It belongs to the policyowner, who may or may not be the insured.

Angela's fiancé gets a job with an architectural firm of 20 employees. He obtains medical expense coverage through his employer's group plan. Angela and her fiancé marry, and he lists Angela has a dependent under his plan. She becomes pregnant. What coverage, if any, can she expect from her spouse's group policy? A) care for complications arising from the pregnancy is excluded B) routine maternity care is partially covered because of Angela's status as a dependent C) medial care during pregnancy is not covered D) routine maternity care will be covered in full

D) routine maternity care will be covered in full *Employers cannot discriminate with group benefits based on age, handicaps, sex, pregnancy or maternity.

Which of the following items is NOT typically covered under a medical expense policy's miscellaneous expense benefit? A) use of the OR B) lab fees C) x-rays D) surgeon's fees

D) surgeon's fees *The miscellaneous expense benefit covers hospital "extras," such as: x-rays, lab fees, and use of the OR. It does not cover a surgeon's fees, which would be covered under a surgical expense policy.

Under Social Security, a fully insured worker is a A) worker who pays her premiums monthly for the coverages selected B) worker who has a death benefit of $1 million C) worker who has been working for 1 year D) worker who has paid into Social Security for 10 years, earning 40 credits

D) worker who has paid into Social Security for 10 years, earning 40 credits *To be eligible for disability benefits, a worker must be fully insured, which means that the worker has earned 40 credits, or worked about 10 years while contributing to Social Security.

Susan is the receptionist at an insurance agency. She is currently studying for her life insurance license. One day at lunchtime, Carla comes in the office to pay her auto insurance premium. Susan talks to her about the importance of life insurance, and Carla immediately completes an application and gives Susan a check for the premium. Carla leaves the agency believing she is covered by life insurance. Susan acted with A) apparent authority B) illegal authority C) implied authority D) express authority

A) apparent authority *Carla was led to believe that Susan had the authority to issue the policy because she accepted the application and premium. Even though Susan does not have the authority to write the contract, the insurance company may be legally bound to provide coverage.

Which of the following statements applies to both grandfathered and non-grandfathered health plans? A) dependent coverage must be extended to adult children until age 26 B) any mistake, even an honest one, on an application is grounds for cancellation of a policy C) preventive services must be provided free of charge D) pre-existing conditions may be excluded for all patients

A) dependent coverage must be extended to adult children until age 26 *Laws that protect consumers under both grandfathered and non-grandfathered health plans include the following: dependent coverage was extended to age 26; no lifetime dollar limits may be applied to essential health benefits (EHBs); and policies may not be canceled if a mistake on an application is an honest mistake.

Which of the following is NOT a standard life insurance policy nonforfeiture option? A) 1-year term insurance option B) extended term insurance option C) cash surrender option D) reduced paid-up (permanent) insurance option

A) 1-year term insurance option *Policyowners have 3 nonforfeiture options: cash surrender, reduced paid-up insurance and extended term insurance. The cash surrender option allows a policyowner to request an immediate cash payment of the cash value when the policy is surrenders. The reduced paid-up option lets the policyowner take a paid-up policy for a reduced face amount of insurance. The policyowner may also use the policy's cash value to buy a term insurance policy in an amount equal to the original policy's face value, for as long a period as the cash value will buy, by selecting the extended term option.

Which of the following statements pertaining to notice of claim and claim forms provisions in health insurance policies is NOT correct? A) Charlotte is injured on January 5. Later, she wishes to file a policy claim for expenses incurred in connection with the injury. Generally, she would be required to submit a notice of claim to the company by February 5 B) Rex, the insured in a disability income policy, has been totally disabled and receiving benefits for 25 months. The notice of claim provision in his policy requires that he submit proof of loss every 6 months C) furnishing claim forms is the responsibility of the insurance company D) Gail submits a notice of claim to her insurance company after she becomes totally disabled. The company must supply a claim form to her within 15 days

A) Charlotte is injured on January 5. Later, she wishes to file a policy claim for expenses incurred in connection with the injury. Generally, she would be required to submit a notice of claim to the company by February 5 *Generally, a claimant must notify the insurance company within 20 days of an accident under a health insurance policy. A proof of loss must be submitted within 90 days of the loss, but if it is not reasonably possible for the insured to do so, the deadline will be extended to 1 year. The company must supply its claim forms to the insured within 15 days of receiving the notice of claim.

The abbreviation PDP refers to which part of Medicare? A) Part D B) Part C C) Part A D) Part B

A) Part D *PDP stands for prescription drug plan. Medicare Part D makes prescription drug coverage available to people covered by Medicare Parts A & B.

All of the following are eligible to establish a health savings account (HSA) EXCEPT A) a group of unassociated individuals B) a large employer C) an individual family D) a small employer

A) a group of unassociated individuals *Employers, individuals and families can establish HSAs. Random groups of individuals, however, are not eligible.

Which insurers must use the uniform health insurance claim form developed by the PA Insurance Dept.? A) all insurers B) only public health insurers, such as the Dept. of Public Welfare & Medicaid C) no insurer is compelled to use the uniform claim form D) only private insurers who provide coverage for more than 500 insureds per group policy

A) all insurers *All insurers must use the uniform claim form, including such public health insurers as the Dept. of Public Welfare.

Denise, age 52, has a straight whole life policy and decides to stop paying premiums and take a paid-up policy for a reduced amount. Her paid-up policy will be A) whole life B) an annuity C) any type of policy she selects D) term insurance

A) whole life *When a policyowner decides to stop paying premiums and take a paid-up policy for a reduced amount, the paid-up policy will be the same kind as the original policy.

Disability income benefits for partial disability are payable to eligible insureds for a maximum of A) 1 to 3 months B) 3 to 6 months C) 2 years D) 1 year

B) 3 to 6 months *Disability income benefits for partial disability (an inability to perform 1 or more important job duties) typically are payable to eligible insureds for a max. of 3-6 months.

In PA, insurers must maintain all of their insurance advertisements on file for A) 5 years B) 4 years C) 2 years D) 3 years

B) 4 years *Each insurer must maintain a file containing every individual contract advertisement and typical blanket, franchise and group advertisements used by the company, and must indicate the form number of the contract advertised, along with the manner of distribution. The file must be kept for 4 years or until the next regular examination of the company, whichever is longer, and is subject to inspection by the Insurance Dept.

Major medical policies may include any of the following types of deductibles EXCEPT A) corridor B) decreasing C) family D) individual

B) decreasing *Major medical deductibles may be family, individual or corridor, but not decreasing.

Which of the following statements regarding a disability income rider is NOT correct? A) most disability income riders do not cover disabilities that develop after age 60 or 65 B) the only way to provide disability benefits in a life insurance policy is through a disability income rider C) a disability income rider is a form of health insurance D) a disability income rider does not provide benefits for partial or temporary disability

B) the only way to provide disability benefits in a life insurance policy is through a disability income rider *A waiver of premium rider (type of disability coverage) is generally included with guaranteed renewable and non-cancelable individual disability income policies. It is a valuable provision because it exempts the policyowner from paying premiums during period of total disability.

Decreasing term insurance could be recommended for all of the following EXCEPT A) for protection while a business loan is outstanding B) to protect a family while children are growing up C) to build a retirement fund D) for mortgage protection

C) to build a retirement fund *Decreasing term insurance is designed to address needs that decrease from year to year, such as mortgage or loan protection. By the end of the term period, the face amount decreases to nothing. This would not help create a retirement fund.

An insurance producer must be appointed by the A) state of PA B) broker C) policyowner D) insurer

D) insurer *An insurance producer must be appointed in writing by the insurance company in order to represent the company, sell its insurance, solicit applications, and (if authorized by the insurer) countersign policies on the insurer's behalf. An appointed producer represents the company and has the power to bind it to insurance contracts.

Which of the following is a liquid asset? A) precious gems B) farming equipment C) precious metals D) life insurance proceeds

D) life insurance proceeds *While life insurance proceeds are a liquid asset, precious metals, precious gems and farming equipment are considered hard or illiquid assets.