Texas Insurance

What would be the deductible for basic surgical expense insurance?

$0 As with the other types of basic medical expense coverage, there is no deductible, but coverage is limited.

maximum penalty for each violation? (cease and desist)

$1,000

maximum penalty for insurance code violations

$25,000

maximum penalty for all violations?(cease and desist)

$5,000

An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. The insured is hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay?

$900 The insured will pay the $500 deductible, plus 20% of the remainder: $2,500 (total bill) - $500 (deductible) $2,000; 20% of $2,000 = $400; $500 (deductible) + 20% (coinsurance) = $900.

What is the shortest possible elimination period for group short-term disability benefits provided by an employer?

0 days If an employer provides short-term disability benefits for its employees, the elimination period can be nonexistent, and the benefits can last as long as two years.

What percentage or portion of the benefit paid by an individually-owned disability income policy is taxable?

0% Premiums are paid with after-tax dollars, so the benefits are not income taxable

For how many days of skilled nursing facility care will Medicare pay benefits?

100 days Treatment in a skilled nursing facility is covered in full for the first 20 days. From days 21 to 100, the patient must pay the daily copayment. There are no Medicare benefits for a skilled nursing facility beyond 100 days.

What is a penalty tax for nonqualified distributions from a Health Savings Account (HSA)?

20% An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty.

OBRA requires employer health plans to provide primary coverage for individuals with end-stage renal disease before Medicare becomes primary for how many months?

30 months OBRA requires ESRD to be covered by an employer for 30 months before Medicare becomes the primary mode of coverage.

waiting period to reapply if license is denied or revoked

5 years

At what age may an individual make withdrawals from an HA for nonhealth purposes without a penalty?

65 After age 65, a withdrawal from an HA used for a nonhealth purposes will be without a penalty, although taxed.

Which of the following persons would be required to hold a producer license?

A nonresident agent who negotiates insurance contracts There are exclusions for those who are required to be licensed; generally, persons who work with insurers but do not participate in the sale, solicitation, or negotiation of insurance contracts are not required to be licensed.

Decreasing Term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

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

An unfair trade practice It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association.

When an annuity is written, whose life expectancy is taken into account?

Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract.

Employer contributions made to a qualified plan

Are subject to vesting requirements

How long does an insurer have to contest fraudulent misstatements made in a health insurance application?

As long as the policy is in force An insurer can contest a fraudulent misstatement as long as the policy is in force. For all other misstatements, the statute of limitation usually runs out after 2 years.

SIMPLE plans require all of the following EXCEPT

At least 1,000 employees. A SIMPLE plan is available to small businesses that employ not more than 100 employees receiving at least $5,000 in compensation from the employer during the previous year.

When must insurable interest exist in a life insurance policy?

At the time of application

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill The accelerated benefits provision allows for an early payment of a portion of the death benefit when the insured is terminally ill.

Which of the following is NOT true regarding an annuity certain?

Benefits stop at the annuitant's death. Annuities certain are short-term annuities which limit the amount paid to a certain fixed period or until a certain fixed amount is liquidated. There are no life contingencies.

Representations are written or oral statements made by the applicant that are

Considered to be true best to the applicants knowledge.

What does "renewable" mean in a term insurance policy?

Continue coverage for another term without evidence of insurability The renewable provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability.

What does "renewable" mean in a term insurance policy?

Continue coverage for another term without evidence of insurability. The renewability provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability.

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

Costs of training a replacement

Which of the following is a specified dollar amount the insured must pay before the insurer will pay the policy benefits?

Deductible A deductible is a fixed dollar amount the insured must pay first before the insurer provides a covered service or pays the policy benefits

An insurer who deliberately makes a malicious statement about another insurance company is guilty of an illegal trade practice called..

Defamation.

Which of the following is NOT a cost-saving service for insurance companies?

Denial of coverage Cost-saving services include the following: controlled access of providers, large claim management, preventive care, hospitalization alternatives, second surgical opinions, preadmission testing, catastrophic case management, and risk sharing.

Which of the following features of a dental expense plan is NOT typically found in a medical expense insurance plan?

Diagnostic and preventive care Dental expense insurance is a form of medical expense health insurance that covers the treatment, care and prevention of dental disease and injury to the insured's teeth. Medical expense plans usually do not include diagnostic and preventive care.

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

Disability buy-sell The disability buy-sell agreement specifies how a business will pass between business owners if one of the owners dies or becomes disabled.

A waiver of premium rider will most likely be included with which of the following types of health insurance policies?

Disability income A waiver of premium rider generally is included with guaranteed renewable and noncancellable individual disability income policies. It is a valuable rider because it exempts the insured from paying the policy's premium during total disability.

The policy issued and the application for insurance are combined together to form the

Entire contract. The entire contract provision stipulates that a copy of the insurance application must be attached to the policy issues.

Which of the following statements is correct regarding taxation of long-term care insurance?

Excessive benefits may be taxed. While regular LTC benefits are received income tax free by the insured, excessive benefits are taxable as ordinary income.

If taken as a lump sum, life insurance proceeds to BENEFICIARIES are passed

FREE of federal income taxation.

Which of the following is an example of a peril?

Fire is a peril (a cause of loss). Smoking is a hazard, which increases the chance of loss. Death would be considered a loss. Gambling is a speculative risk

If the insured is NOT required to pay a deductible, what type of coverage does the insured have?

First dollar First-dollar coverage does not require the insured to pay a deductible.

If the beneficiary wants a guarantee that policy proceeds will be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period Under the fixed-period settlement option, a specified period of years is selected, and equal installments are paid to the beneficiary. This option does not guarantee income for the life of the beneficiary; however, it guarantees that the entire principal will be distributed

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

Foreign - a foreign insurer is one that is formed under the laws of another state

A Medicare supplement plan must have at least which of the following renewal provisions?

Guaranteed renewable. Medicare supplement policies must be issued guaranteed renewable.

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards. Conditions such as lifestyle and existing health, or activities such as scuba diving are hazards and may increase the chance of a loss occurring.

Fixed annuities may provide all of the following EXCEPT

Hedge against inflation. Fixed annuities provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money, and offer a guaranteed interest rate. A disadvantage of fixed annuities is that the purchasing power that they afford may be eroded over time due to inflation.

An insurer devises an intimidation strategy to secure a large portion of the insurance market. Which of the following best describes this practice?

Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

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

Immediately Coverage for accidents is effective immediately after policy reinstatement, but the insurer may impose a 10. day waiting period for coverage for sickness.

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

Income at the time of application. To prevent overinsurance, the amount of disability benefits that will be paid to an insured is usually limited to a percentage of the insured's income at the time of application.

The benefits received by the business in a disability buy-sell agreement are

Income tax free. In disability buy-sell policies, because the premiums are not tax deductible to the business, the benefits are received income tax free by the business.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

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

When a beneficiary receives payments consisting of both principal and interest portions, which part(s) is/are taxable as income?

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

Which of the following sources will most likely provide information for an investigative consumer report on an insurance applicant?

Interviews with neighbors and associates The information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the applicant.

When an employee covered under an HA changes employers, what happens with the HA account?

It remains with the employer. HAs remain with the originating employer and do not follow employees to new employment.

In which of the following scenarios would an "any occupation" disability income policy pay the benefits?

J cannot perform any jobs in the field related to his education and experience. A policy that has an "any occupation" provision will only provide benefits when the insured is unable to perform any of the duties of the occupation for which they are suited by reason of education, training, or experience.

Which of the following policies would NOT offer a policy loan option?

Level term life A policy loan option is found only in policies that contain cash value. Term life policies do not have cash value.

What type of policy shortens the premium paying period but allows the coverage to continue to age 100?

Limited pay Limited-pay whole life is designed so that the premiums for coverage will be completely paid-up well before age 100.

What type of policy shortens the premium paying period but allows the coverage to continue to the age of 100?

Limited pay. Limited-pay whole life is designed so that the premiums for coverage will be completely paid-up well before age 100.

An elderly woman wants to purchase a policy that will provide coverage in case she cannot perform activities of daily living. Which of the following policies will be most suitable for this insured?

Long-term care In recommending the purchase of a long-term care insurance policy, an agent must make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. Somebody who cannot perform activities of daily limit will benefit from an LTC policy.

Which of the following is the basis for a claim against an insurance policy?

Loss Claims result from losses by a peril insured against in an insurance policy.

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?

Making comparisons between different policies Making accurate comparisons of policies is not illegal.

In a single employer group plan, what is the name of the policy issued to the group sponsor?

Master contract

In group insurance, what is the policy called?

Master policy In group insurance the policy is called the master policy and is issued to the policyowner, which could be the employer, an association, a union, or a trust.

A long-term care insurance shopper's guide must be provided in the format developed by which of the following entities?

NAIC A long-term care insurance shopper's guide must be provided in the format developed by the National Association of Insurance Commissioners (NAIC)

An insured purchased a disability income policy with a 20-day probationary period. If the insured is hospitalized with an illness two weeks after the policy was issued, what will the policy pay?

Nothing Loss by illness is not covered if it occurs during the probationary period.

All of the following is included in the definition of "transacting insurance" EXCEPT

Obtaining an insurance license. An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

An insured had paid only part of her total number of IRA premiums before she died. What effect will this have on the insured's estate?

Only the premiums paid will be included in the estate If a person dies before paying all of IRA premiums, only the amount paid would be included in the estate; the remaining premium amounts would not be deducted

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner. What dividend option could she use?

Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned.

Which of the following reasons for an early distribution of funds from a qualified retirement plan would incur a 10% penalty?

Participant's debt The following are exceptions to the early distribution penalty rule: participant's death or disability, a divorce decree, distribution as a series of equal payments over the participant's life expectancy, a loan from the plan, or a qualified rollover.

An individual buys a flexible premium deferred life annuity with 20-year period certain. What would the beneficiary receive if the annuitant died 5 years after beginning the annuity phase?

Payments for 15 years With any period certain, death of the annuitant within the stated period will provide payments to the beneficiary only for the remainder of the period certain.

Which renewability provision will be most likely used in a travel accident policy?

Period of time The period of time (term) provision means that the policy will only last a certain period of time and cannot be renewed. A travel accident only policy will only provide coverage during the dates the insured is traveling

Which of the following plans is a combination of an HMO and a PPO plan?

Point of Service Point-of-Service (POS) plans are a combination of HMOs and PPOs.

In what type of a medical insurance plan does the provider receive a scheduled fixed amount for care to the insured and no additional compensation regardless of the services provided?

Prepaid Under a prepaid plan, the health care providers are paid for services in advance, whether or not any services are provided.

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

Reduce the benefit in accordance with the increased risk If the insured makes a change to a more hazardous occupation, upon claim, benefits will be reduced to that which premiums paid would have purchased assuming the more hazardous occupation.

An insured may reactivate a lapsed life insurance policy within a specified period of time, with proof of insurability. Which policy provision allows this?

Reinstatement A lapsed policy may be reinstated within a specified period of time (usually 3 years) by paying back premiums, and proving insurability.

If an agent fails to obtain an applicant's signature on the application, the agent must

Return the application to the applicant for signature

A policyowner wants to name her husband as the beneficiary on her disability policy. She also wishes to retain all of the rights of ownership. What beneficiary classification is appropriate in this situation?

Revocable If the beneficiary is named as revocable, the policyowner will be able to change the beneficiary at any time. Her husband would receive any death benefit.

Which of the following may contribute to an HR-10 plan?

Self-employed plumber HR-10 plans are for self-employed persons.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?

Spouse. If an annuity contract holder dies before the effective starting date, the contract's interest continues to be taxable, unless the beneficiary is a spouse, in which case, the tax can be deferred.

Which of the following would be responsible for making premium payments in an HMO plan?

Subscriber Subscribers (also referred to as participants or members) are individuals who sign up for pre-paid health plans, such as HMOs, and are responsible for paying the premiums.

Which of the following transaction in an annuity will cause immediate taxation of the interest earned?

Surrendering the annuity for cash One-sum cash surrenders result in immediate taxation of the interest earned

A 403 (b) tax-sheltered annuity is available for

Teachers and nonprofit organizations Tax-sheltered annuities, commonly referred to as 403 (b) plans, are designed for teachers and not-for-profit organizations.

In insurance, an offer is usually made when

The application is submitted. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when the insurer approves the application and issues a policy.

Peril is most easily defined as

The cause of loss insured against

In group insurance, the contract is between

The employer and the insurer

If an insured dies during the grace period, What is the insurance company obligated to pay?

The face amount minus any owed premium If the insured dies during the grace period, the insurer will pay the death benefit, but will deduct any unpaid premiums.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the policy proceeds will go to

The insured's estate. In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.

Which of the following will vary the length of the grace period in health insurance policies?

The mode of the premium payment The grace period in health policies is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

Which of the following is true regarding optional benefits in long-term care policies?

They are available for an additional premium. Optional benefits, such as guarantee of insurability and return of premium, are available with Long-Term Care policies for an additional premium.

What is the main purpose of requiring licenses for persons involved in transacting insurance?

To protect the general public Insurance producers are subject to licensing laws to ensure that they are competent and properly qualified in their field, and to protect the public interest.

Two individuals are in the same risk and age class, yet they are charged different rates for their health insurance policies based on marital status. What is this practice called?

Unfair discrimination Permitting individuals of the same class to be charged a different rate for the same insurance or discriminating based on the applicant's marital status is the unfair trade practice of discrimination.

The waiver of cost rider is found in what type of insurance?

Universal Life The waiver of cost rider is found in universal life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

Which of the following life insurance policies has two death benefits options?

Universal life Universal life offers one of two death benefit options to the policyowner. Option A is the level death benefit option, and Option B is the increasing death benefit option

Which of the following determines Whether disability insurance benefits are taxed?

Whether the premiums were tax deductible Taxation of insurance benefits is often determined by whether or not the premiums were taxed.

What type of policy provides permanent protection?

Whole life

What type of licensee represents the insurance company?

agent

Events or conditions that increase the chances of an insured loss occurring are referred to as

hazards Conditions such as lifestyle and health status, or activities such as scuba diving are hazards and may increase the chance of a loss occurring.

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the

insurer

All advertisements, regardless of their source, are the responsibility of the

insurer The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them.

If a retirement plan or annuity is "qualified", this means

it has favorable tax treatment. A qualified retirement is approved by the IRS, and gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.

An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain?

nonresident A nonresident producer is a producer who is domiciled and licensed as a resident producer in another state.

Increasing Term Insurance

pays an increasing death benefit and has increasing premium as the policyholder ages.

Level Term

premiums and death benefits stay the same for the life of the policy

What is the primary purpose of a 401(k) plan?

retirement. Profit sharing plans are qualified plans where a portion of the company's profit is contributed to the plan and shared with employees. The main purpose of a 401(k) qualified plan is accumulating for retirement.

Which of the following is NOT the consideration in an insurance policy?

the application given to a perspective insured Consideration is something of value transferred between the two parties to form a legal contract.

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

All of the following benefits are available under Social Security EXCEPT

welfare benefits Social Security provides retirement, disability, and survivor benefits; it is not a welfare program.

Benefits of social security

1 Retirement Income 2 Disability Benefits 3 Death Benefits 4 Survivors Benefits

S is a sole proprietor of a business and owns a medical expense plan. What is the maximum percentage of the plan cost that S may deduct?

100% Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self- employed individuals, not employees.

Department must send notice of violation within ___ days of findings

14 days

how old do you have to be to be a insurance agent?

18 years old

Ethics and consumer protection CE requirement

2 hours

Response from alleged violator must be within ______ days of receipt

20 days

Total CE hour requirements for renewal

24 hours

Policy loans must be available after how many policy years?

3 years

Suspected fraudulent acts must be reported to the Commissioner or law enforcement within __ days

30 days

At what age can a participant receive distributions from a qualified plan without incurring a 10% penalty?

59 1/2 Distributions from an IRA are subject to income taxation in the year the withdrawal is made. In case of an early distribution, prior to age 59 ½, a 10% penalty will also apply.

What is the maximum amount that can be contributed to an MSA of the high-deductible plan for individuals?

65% The maximum amount than can be contributed to an MSA is 65% of the high-deductible plan for individuals or 75% of the family deductible for those with family coverage.

Medical expense premiums are deductible as medical expenses if along with all of the other unreimbursed medical expenses, the total exceeds what percentage of the adjusted gross income of the insured?

7.5% Medical expense premiums are deductible as medical expenses, provided that when the premiums are added to all of the other unreimbursed medical expenses, the total exceeds 7.5% of the adjusted gross income

A temporary license is valid for

90 days

if a license has been expired for less then ___ days or less, it may be renewed by paying the renewal fee plus a 50% penalty

90 days

If an insurance agent is suspected to be in violation of an insurance law or engaged in an unfair business practice, the Department of Insurance will most likely issue

A cease and desist order.

Which of the following is an example of a limited accident and health policy?

A dread disease policy Limited risk policies cover specific illness or accidents.

HMO (Health Maintenance Organization)

A managed care organization that provides comprehensive medical services for a predetermined annual fee per enrollee. una pinche mafia

Free Look Provision

A policy provision required by state law that establishes a set number of days (usually 10) for the policy owner to review a newly issued policy.

Who would likely to establish a SEP?

A small employer A Simplified Employee pension plan (SEP) is a type of qualified plan suited for the small employer. SEP is an arrangement whereby an employee establishes and maintains an individual retirement account to which the employer contributes.

At what age can a participant receive distributions from a qualified plan without incurring a 10% penalty?

Age 59 1/2 Distributions from an IRA are subject to income taxation in the year the withdrawal is made. In case of an early distribution, prior to age 59 1/2, a 10% penalty will also apply.

Who is considered a nonresident agent?

An agent who is licensed in another state, but is allowed to transact insurance in this state Agents who reside and are licensed in one state may obtain a nonresident producer license in another state by meeting nonresident agent qualifications.

Alien Company

An insurance company incorporated in a country other than the United States.

Foreign Company

An insurer organized under laws of a state other than the one in which the insurance is written. For example, a company that is domestic to Texas would be considered to be "foreign" in all other states.

if an insurer makes a statement that its policies are guaranteed by the existence of the insurance guaranty association, that would be?

An unfair trade practice. It is an unfair trade practice to make an statement that insurer's policies are guaranteed by the existence of the insurance guaranty association.

What type of insurance is most commonly used for group plans?

Annually renewable term group insurance is usually written for employee-employer groups as annually renewable for term insurance.

Rebating

Any inducement offered in the sale of insurance products that is not specified in the policy.

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

Application. The policy application is one of the main sources of underwriting information for the company.

When must insurable interest exist for a life insurance contract to be valid?

At the time of application. In life insurance, insurable interest must exist at the time of application.

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill. The accelerated benefits provision allows for an early payment of a portion of the death benefit when the insured is terminally ill.

An insurance agent sold a health insurance policy to his sister. What type of transaction is this?

Controlled business. When agents sell policies on themselves, their family, or coworkers, this is called "controlled business." In most states, the amount of controlled business cannot exceed the amount of all the other business written by an agent.

Which rider, when added to a disability income policy, provides for changes in the payable benefits based on change in the consumer price index?

Cost of living adjustment The cost of living adjustment (COLA) rider helps protect the insured against inflation. Under this rider the insured's monthly benefit will be increased automatically, based on the consumer price index.

An insurer who deliberately makes a maliciously critical statement about another insurance company is guilty of an illegal trade practice called

Defamation. Defamation is making statements which are maliciously critical as to the financial condition of any insurer and which are intended to injure any person engaged in the business of insurance.

An annuitant has been making periodic premium payments into an annuity. The income payments are scheduled to begin 2 years after the annuity purchase . what type of annuity is it?

Deferred Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after the 1 year from the date of purchase.

What does "level" refer to in level term insurance?

Face Amount. Level term policies maintain level death benefit (or face amount) throughout the term of the policy.

If the insured is NOT required to pay a deductible, what type of coverage does the insured have?

First Dollar. First-dollar coverage does not require the insured to pay a deductible.

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

Illegal. It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create monopoly.

An insured's hospital policy states that it will pay him a flat fee of $75 a day for each day of hospitalization. The policy pays benefits on what basis?

Indemnity Indemnity policies do not pay expenses or bills; they provide the insured with a stated benefit amount for each day the insured is confined in a hospital.

An insured's hospital policy states that it will pay him a flat fee of $75 per day for each day he is hospitalized. The policy pays benefits on what basis?

Indemnity Indemnity policies do not pay expenses or bills; they provide the insured with a stated benefit amount for each day the insured is confined in a hospital

Who would be allowed catch-up contributions in an individual qualified plan?

Individuals age 50 or older. Individuals who are age 50 or older are entitled to make additional catch-up contributions.

Who would be allowed catch-up contributions in a qualified plan?

Individuals who are age 50 or older. Individuals who are 50 or older are entitled to make additional catch-up contributions

Domestic Company

Insurance company doing business in the state in which it is incorporated.

The department of Insurance is responsible for all of the following

Issuing Certificates of Authority. Examining Insurers and Producers. Enforcing the Insurance Code.

If a retirement plan or annuity is "qualified", this means

It has favorable tax treatment. A qualified retirement plan is approved by the IRS, and gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.

How does reinsurance benefit the insurer?

It helps protect against catastrophic losses Reinsurance is a method used by insurers to protect against catastrophic losses.

Which of the following is true regarding the taxation of the premium in group accidental death and dismemberment policies?

It is deductible as an ordinary business expense Premiums for group accidental death and dismemberment policies are deductible to the employer as an ordinary business expense.

When an employee covered under an HRE changes employers, what happens with the HRA account?

It remains with the employer. HRA's remain with the originating employer and do not follow employees to new employment.

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Life income with period certain. If the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain.

Which type of care is NOT covered by Medicare?

Long term Hospice care, which includes respite care and hospital care are included in Medicare Part A. Long-term care is a separate type of coverage.

in group insurance, what is the policy called?

Master policy In group insurance the policy is called the master policy and is issued to the policyowner, which could be the employer, an association, a union, or a trust.

a medicare supplement plan must have at least which of the following renewal provisions?

Medicare supplement policies must be issued guaranteed renewable.

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is

Modified Endowment Contract Any life insurance policy that develops cash value faster than a seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life contract.

Which of the premium modes would result in the highest annual cost for life insurance policy?

Monthly. If the policy owner chooses to pay the premium more frequently than annually, there will be an additional charge (loading), so the overall premium would be higher.

Which renewability provision are you most likely to see on a travel accident policy?

Period of time. The period of time (term) provision means that the policy will only last a certain period of time and cannot be renewed. A travel accident only policy will only provide coverage during the dates the insured is traveling.

An underwriter may reject an application for health insurance based upon which of the following factors?

Prescription drug usage Blindness, generic characteristics, or sexual orientation may not be used by underwriters to deny coverage.

An insured owns a disability policy and is in an accident which leaves him permanently blind. Which of the following policy provisions would qualify the insured for benefits, even if he were able to resume working?

Presumptive disability The presumptive disability provision specifies which conditions will automatically qualify the insured for full disability benefits.

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the anuitant's death?

Pure Life A pure life annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before the entire benefit has been paid out, payments cease and there is no refund of payments to survivors.

An agent who offers a cash reward to a prospect for buying a policy is guilty of..

Rebating. Rebating includes premiums payable to the policy, Special favors or services, advantages in dividends or benefits, stocks, bonds, securities, and similar inducements not specified in the policy.

An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?

Rebating. Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy.

The annuity period is best defined as the time during which the annuitant

Receives payments. The annuity period, also referred to as the annuitization period, liquidation period, or pay-out period, is the time when money is distributed to the annuitant.

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

Return the application to the applicant for a signature. All applications must have the appropriate authorized signature.

which type of medicare policy requires the insured to use specific healthcare providers and hospitals?

SELECT. Medicare SELECT polices require the insured to use specific healthcare providers and hospitals, EXCEPT in emergency situations. In return, the insured pays a lower premium.

An annuity would normally be purchased by an individual who wants to

Secure income for retirement. The main purpose of an annuity is to liquidate an estate and provide income for retirement.

Which of the following best describes the underwriting process for life insurance?

Selection, classification, and rating of risks Underwriting is a risk selection and classification process.

Which type of life insurance policy generates immediate cash value?

Single Premium Single premium whole life policy generates immediate cash value due to the lump-sum premium payment made to the insurer.

which type of life insurance policy generates immediate cash value?

Single premium whole life policy generates immediate cash value due to the lump-sum premium payment made to the insurer.

accelerated benefits paid under a life insurance policy are received...

TAX FREE when accelerated benefits are paid under a life insurance policy to a terminally ill insured, the benefits are received tax free.

The advantage of qualified plans to employers is

Tax-deductible contributions. Qualified plans have these tax advantages: Employer contributions are tax deductible and are not taxed as income to the employee; the earnings in the plan accumulate tax deferred; lump sum distributions to employees are eligible for favorable tax treatment.

The advantage of qualified plans to employers is

Tax-deductible contributions. Qualified plans have these tax advantages: employer contributions are tax deductible and are not taxed as income to the employee; the earnings in the plan accumulate tax deferred; lump-sum distributions to employees are eligible for favorable tax treatment.

Which of the following best describes taxation during the accumulation period of an annuity?

Taxes are deferred. The interest accumulated in an annuity is the tax base, but the taxes are deferred during the accumulation period.

Which of the following sets the limits for a Health Reimbursement Account (HRA)?

The employer HAs have no statutory limit. Limits may be set by employer, and rollover at the end of the year based on employer discretion.

IN an insurance transaction, who does a licensed agent represent?

The insurer Under agency law, agents/producers legally represent the insurance company.

In an insurance transaction, licensed agents legally represent which of the following?

The insurer.

how does a member of an HMO see a specialist?

The primary care physician MUST refer the member

Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Unfair discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance or discriminating based on the applicant's marital status in unfair trade practice of discrimination.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty A warranty is a statement guaranteed to be true. Breach of warranties can be considered grounds for voiding the policy.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty. A warranty is a statement guaranteed to be true. Breach of warranties can be considered grounds for voiding the policy.

what type of policy provides permanent protection?

Whole life. Whole life policies are referred to as permanent protection, and as long as the premium is paid, coverage will continue for the life of the insured.

Point of Service (POS)

a combination of a PPO and HMO plan using a contracted network of providers and PCP as Gate Keeper to control referrals. out-of-network services incur higher deductible

Short-Term Disability Insurance

a disability lasting not more than 2 years