Simulated Exam

A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective?

Immediately

Which of the following settlement options in life insurance is known as straight life?

Life income

In long-term care (LTC) policies, as the benefit period lengthens, the premium

Increases.

Which of the following would be a typical maximum benefit offered by major medical plans?

$1 million

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000

S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct?

100%

What is the elimination period for Social Security disability benefits?

5 months

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?

A minor son of the insured

An insured is receiving hospice care. His insurer will pay for painkillers but not for an operation to reduce the size of a tumor. What term best fits this arrangement?

Cost-containment

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium.

Which of the following is an eligibility requirement for all Social Security Disability Income benefits?

Have attained fully insured status

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period

Which of the following is TRUE regarding variable annuities?

The annuitant assumes the risks on investment.

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

attained age

When a producer is suspected of being in violation of an insurance law or regulation, which of the following would require the producer to stop committing the act of violation?

A cease and desist order

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy.

When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis?

Reimbursement

To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?

18 months

What is a penalty tax for nonqualified distributions from a health savings account?

20%

The minimum number of credits required for partially insured status for Social Security disability benefits is

6 credits.

How long is an open enrollment period for Medicare supplement policies?

6 months

How many eligible employees must be included in a contributory plan?

75%

Which of the following groups would probably be covered by blanket insurance?

A university's sports team

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's

Ancestry.

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of

Concealment.

Which agreement specifies how a business will transfer hands when one of the owners dies or becomes disabled?

Disability Buy-Sell

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

Which of the following is NOT covered by Health Maintenance Organizations (HMOs)?

Elective services

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?

Fraud

Health Savings Accounts (HSAs) are designed to

Help individuals save for qualified health expenses.

To be eligible for a Health Savings Account, an individual must be covered by a

High-deductible health plan.

In health insurance, if a doctor charges $50 more than what the insurance company considers usual, customary and reasonable, the extra cost

Is not covered.

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

If a dental plan is integrated, it is combined with what type of plan?

Medical

A husband and wife are covered under a group health insurance plan at his place of employment. When she gave birth to their first child, what must he do in order to have coverage for their child?

Notify the insurer within 31 days in order for coverage to continue without any evidence of insurability

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

Which of the following will be included in a policy summary?

Premium amounts and surrender values

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are

Tax deductible.

Which is NOT true about beneficiary designations?

The beneficiary must have insurable interest in the insured.

What type of information is NOT included in a certificate of insurance?

The cost the company is paying for monthly premiums

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

The customer's associates, friends, and neighbors provide the report's data.

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What provision allows for this?

Unpaid premium

In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received?

no tax

An insured wants to name her husband as the beneficiary of her health policy. She also wishes to retain all of the rights of ownership. The insured should have her husband named as what type of beneficiary?

revocable

Fines levied by the director in lieu of license revocation or suspension must be paid within

30 days

How soon must nonresident producers notify this state's Director of change of address?

30 days

The residency requirement for SCHIP is that an individual be a resident of South Carolina for at least

30 days.

What is the amount a physician or supplier bills for a particular service or supply?

Actual charge

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following?

Adjust the benefit in accordance with the increased risk

In disability income insurance, if an insured is considered disabled if they cannot perform any job they are suited for by prior education, training or experience, they fall under which definition of total disability?

Any occupation

Who is an insurance producer?

Any person licensed to sell, solicit or negotiate insurance

All of the following qualify for Medicare Part A EXCEPT

Anyone who is willing to pay a premium.

An insured is the recipient of an Accidental Death and Dismemberment (AD&D) policy purchased by his employer. The policy pays triple indemnity in case of accidental death. If the insured died as a result of an accident stipulated in the policy, how will the benefits paid be taxed?

Benefits received are considered income tax free.

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an

Captive agent.

To legally transact insurance in this state, an insurer must obtain which of the following?

Certificate of Authority

Any payment to a producer from an insurer that is contingent on the sale of an insurance policy or contract is called a

Commission.

Which of the following expenses is NOT covered by a health insurance policy?

Funeral

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

Implied

The amount of disability benefits that an insured receives often depends upon the insured's

Income at the time of the application.

Which benefits would a disability plan most likely pay?

Income lost by the insured's inability to work

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

Income tax on distributions and no penalty.

Insurance that would pay for hiring a replacement for an important employee who becomes disabled is called

Key employee disability insurance.

All of the following are requirements for a nonresident license EXCEPT

Passing this state's licensing examination.

Which of the following would NOT fall into the category of costs associated with death?

The expense of a vacation for surviving family members

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment.

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium.

A health insurance policy may cover all of the following risks EXCEPT

War-related injuries.

An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer?

$500

An insured was involved in an accident and could not perform her current job for 3 years. If the insured could reasonably perform another job utilizing similar skills after 1 month, for how long would she be receiving benefits under an "own occupation" disability plan?

2 years

An insured is admitted to the hospital for surgery on a herniated disk. The insurance company monitors the treatment and progress in order to make sure that everything proceeds according to the insurer's schedule. This is called

Concurrent review.

What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?

Conditionally renewable

Which of the following includes information regarding a person's credit, character, reputation, and habits?

Consumer report

Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer's right to change premium amounts?

Continuation provision

A key person insurance policy can pay for which of the following?

Costs of training a replacement

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated.

Which of the following is NOT considered to be a basic service, under a nonscheduled plan?

Dentures

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable.

A policy which covers medical costs related to a specific condition is called a

Dread Disease Policy.

An applicant has a history of heart disease in his family, so he would like to buy a health insurance policy that strictly covers heart disease. What type of policy is this?

Dread disease coverage

The provision that states that both the printed contract and a copy of the application form the contract between the policyowner and the insurer is called the

Entire contract.

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

Fair Credit Reporting Act

Which provision allows the policyholder a period of time, while coverage is in force, to examine a health insurance policy and determine whether or not to keep it?

Free Look Period

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss.

Medicaid provides all of the following benefits EXCEPT

Income assistance for work-related injury.

Which of the following best describes annually renewable term insurance?

It is level term insurance.

In which of the following situations is it legal to limit coverage based on marital status?

It is never legal to limit coverage based on marital status.

Which of the following statements is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person.

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

Life expectancy

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT

Loss of the owner's income.

An insurance company wants to obtain the insurance history of an applicant. Which source releases coded information to insurers regarding information included on previous insurance applications?

Medical Information Bureau

What is the term for how frequently a policyowner is required to pay the policy premium?

Mode

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

An underaged child is covered under her father's group health policy although she lives with her mother. The father's health insurance company

Must allow claims to be submitted by the mother even without approval by the father.

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report.

The primary eligibility requirement for Medicaid benefits is based upon

Need

Which of the following best describes gross annual premium?

Net premium plus expenses

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives?

None

The part of Medicare that helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care and hospice care, is known as

Part A

Pertaining to insurance, what is the definition of a fiduciary responsibility?

Promptly forwarding premiums to the insurance company

Regarding long-term care policies, which of the following would NOT be included in activities of daily living?

Sleeping

Which is true about a spouse term rider?

The rider is usually level term insurance.

Which state has jurisdiction over a group policy that covers individuals that reside in more than one state?

The state in which the policy was delivered

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Utmost good faith.

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Variable

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance?

Workers Compensation

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

decreases

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000

All of the following could own group life insurance EXCEPT

A group needing low-cost life insurance.

The free-look provision allows for which of the following?

A right to return the policy for a full premium refund

Long-term care insurance policies must cover which of the following?

Alzheimer's disease

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

An unfair trade practice.

Which concept is associated with "exclusion ratio"?

Annuities payments

Which of the following statements regarding Business Overhead Expense policies is NOT true?

Benefits are usually limited to six months.

A woman obtains health coverage through the Marketplace on October 1. Two weeks later she finds out that she is 3 months pregnant. Which of the following is true about coverage for pregnancy?

Pregnancy will be covered immediately.

What type of licensee represents the insurance company?

Producer

In respect to the consideration clause, which of the following is consideration on the part of the insurer?

Promising to pay in accordance with the contract terms