XCEL Chapter 11, XCEL Finial Study PRE-EXAM

What does the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 allow an employee to do? A. In the event of employment termination, group health insurance can be kept if the employee pays the premiums B. Receive a tax credit to help offset the cost of health insurance C. Remain on their current coverage for 30 months D. In the event of employment termination, group health insurance can be kept if the employer pays the premiums

In the event of employment termination, group health insurance can be kept if the employee pays the premiums

All of the following are characteristics of a Group Life Insurance Plan EXCEPT? A. Group underwriting B. Master contract C. Individual underwriting D. Probationary period

Individual underwriting

The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT? A. charities B. political organizations C. insurance sales calls D. surveys

Insurance sales calls

Without a Section 125 Plan in place, what would happen to an employee's payroll contribution to an HSA? A. It would be considered taxable income to the employee B. The employee would not be allowed to an HSA C. The employer would pay payroll tax and FICA on the contribution amount D. The employer would not be allowed to deduct the contribution from the employee's pay

It would be considered taxable income to the employee

Which type of life insurance is normally associated with a Payor Benefit rider? A. Juvenile insurance B. Family income insurance C. Spouse insurance D. Term rider

Juvenile insurance

The authority granted to a licensed producer is provided via the? A. producer's apparent authority B. written contract C. Law of Agency D. Principal Capacity

Law of Agency

How do insurers predict the increase of individual risks? A. Law of large numbers B. U.S. Census C. Average mortality incidents D. Experience of morbidity

Law of large numbers

Insurance companies determine risk exposure by which of the following? A. Insurable interest B. Insurance exchanges C. Law of large numbers and risk pooling D. Population table data

Law of large numbers and risk pooling

Which contract element is insurable interest a component of? A. Competent parties B. Offer and acceptance C. Consideration D. Legal purpose

Legal purpose

All of the following are examples of pure risk EXCEPT? A. Losing money at a casino B. Injured while playing football C. Falling at a casino and breaking a hip D. Jewelry stolen during a home robbery

Losing money at a casino

What is the contract called that is issued to an employer for a Group Medical Insurance plan? A. Master policy B. Certificate of coverage C. Provisional policy D. Document of coverage

Master policy

Sonya applied for a health insurance policy on April 1. Her agent submitted the information to the insurance company on April 6. She paid the premium on May 15 with the policy indicating the effective date being May 30. On which date would Sonya have coverage? A. April 1 B. April 6 C. May 15 D. May 30

May 30

What makes an insurance policy a unilateral contract? A. Only the insured pays the premium B. Only the insured can change the provisions C. Only the insurer is legally bound D. Only the insured is legally bound

Only the insurer is legally bound

According to the Health Insurance Portability and Accountability Act (HIPAA), when can a group health policy renewal be denied? A. There have been too many claims in the previous year B. The size of the group has increased by more than 10% C. Participation or contribution rules have been violated D. Participation or contribution rules have been changed

Participation or contribution rules have been violated

What is known as the immediate specific event causing loss and giving rise to risk? A. Peril B. Hazard C. Loss factor D. Liability

Peril

Which situation accurately describes a reduced paid-up nonforfeiture option? A. Policy has a decreased face amount B. Face amount of the new policy equals that of the original policy C. Cash value is surrendered to policyowner D. Premiums must continue to be paid

Policy has a decreased face amount

Which of the following would evidence ownership in a participating health insurance contract? A. Stock ownership B. Irrevocable beneficiary status C. Policy ownership D. Collateral assignment

Policy ownership

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? A. Policy loans are disallowed B. The premium payments will be tax deductible C. Pre-death distributions are typically taxable D. Withdrawals will be prohibited

Pre-death distributions are typically taxable

Coordination of Benefits regulation applies to all of the following plans EXCEPT? A. Group vision plan B. Preferred Provider Organization plan C. Self-funded group health plan D. Group health plan

Preferred Provider Organization plan

Decreasing term life insurance is often used to? A. provide retirement funds B. provide coverage for a home mortgage C. accumulate cash value D. provide coverage for estate taxes

Provide coverage for a home mortgage

How are survivorship life insurance policies helpful in estate planning? A. Provide funds to help fund retirement B. Provide funds to help pay taxes C. Provide funds for funeral expenses D. Provide tax deductions for premium payments

Provide funds to help pay taxes

Which of these techniques will remove the risk of losing money in the stock market by never purchasing stocks? A. Risk reduction B. Risk transference C. Risk avoidance D. Risk retention

Risk avoidance

An insurer's claim settlement practices are regulated by the? A. Securities and Exchange Commission (SEC) B. National Association of Claims Adjusters (NACA) C. National Association of Insurance Commissioners (NAIC) D. State insurance departments

State insurance departments

The type of multiple protection coverage that pays on the death of the last person is called a(n)? A. joint life policy B. survivorship life policy C. annuity joint policy D. dual life policy

Survivorship life policy

Which of the following is typically NOT eligible for coverage in a group health policy? A. Full-time employee B. Temporary employee C. Business owner D. Partner in a partnership

Temporary employee

Which of the following policies does NOT build cash value? A. Term B. Straight Life C. Endowment D. Variable Life

Term

What does the word "level" in Level Term describe? A. The period of coverage B. The face amount C. The premium payments D. The cash value

The face amount

What is a corridor in relation to a Universal Life insurance policy? A. The gap between the total death benefit and the policy's cash value B. The gap between when a claim is filed and when the death benefit is received C. The amount of interest that has accumulated in the policy's cash value D. The point in time when the policy's cash value reaches $0

The gap between the total death benefit and the policy's cash value

The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is? A. The shorter the payment period, the lower the premium B. The longer the payment period, the higher the premium C. The shorter the payment period, the higher the premium D. The payment period has no affect on the premium payment

The shorter the payment period, the higher the premium

Under a contract of adhesion? A. there is the potential for an unequal exchange of value B. the insurer's obligations are dependent upon certain acts of the insured individual C. the terms must be accepted or rejected in full D. only one party makes any kind of enforceable promise

The terms must be accepted or rejected in full

Legal purpose is a term used in contract law meaning? A. there must be an offer and acceptance B. the contract must be aleatory C. there must be legal reasons for entering into the contract D. the contract must be a contract of adhesion

There must be legal reasons for entering into the contract

Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? A. Tom's spouse B. Bob's estate C. Bob's spouse D. Tom

Tom

A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called? A. whole life B. group life C. credit life D. universal life

Universal life

Which type of policy combines the flexibility of a universal life policy with investment choices? A. Adjustable universal life policy B. Flexible universal life policy C. Variable universal life policy D. Modified universal life policy

Variable universal life policy

When are group disability benefits considered to be tax-free to the insured? A. When the recipient pays the premiums B. When the employer pays the premiums C. When both the employer and recipient pay the premiums D. When benefits paid are equal to or lower than the recipient's salary

When the recipient pays the premiums

A non-contributory health insurance plan helps the insurer avoid? A. adverse selection B. state compliance C. the underwriting process D. tax deductions

adverse selection

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called? A. risk retention B. preexisting conditions C. law of large numbers D. adverse selection

adverse selection

A type of group that has a constitution and bylaws and has been organized for purposes other than obtaining insurance is called a(n)? A. employer group B. employee group C. association or labor group D. multiple coalition

association or labor group

According to life insurance contract law, insurable interest exists? A. when any business relationship exists B. at the time of application C. at the time of death D. only when determined by a judge

at the time of application

The purpose of the Coordination of Benefits provision in group accident and health plans is to? A. avoid overpayment of claims B. reduce out-of-pocket costs C. reduce adverse selection D. lower the cost of premiums

avoid overpayment of claims

All of the following are elements of an insurance policy EXCEPT? A. definitions B. other insurance C. claim forms D. conditions

claim forms

Susan is insured through her Group Health Insurance plan and changed her coverage to an individual plan with the same insurer after her employment was terminated. This change is called a(n) A. crossover B. conversion C. exchange D. extension of benefits

conversion

An employee under a group insurance policy has the right to name a beneficiary and the right to? A. remain on the group plan in the event of employment termination B. cash surrender the existing policy C. change the policy provisions D. convert to an individual policy in the event of employment termination

convert to an individual policy in the event of employment termination

Under the Health Insurance Portability and Accountability Act (HIPAA), the employee's new Group Health Plan will verify Creditable Coverage so that the A. employee's benefits still owed can be claimed B. employee cannot be excluded from the new employer's health plan C. employee's waiting period for coverage of a preexisting condition can be reduced under the new employer's health plan D. new health insurance carrier will have a clear record of any chronic conditions that exist

employee's waiting period for coverage of a preexisting condition can be reduced under the new employer's health plan

A group Disability Income plan that pays tax-free benefits to covered employees is considered? A. non-contributory B. partially contributory C. group contributory D. fully contributory

fully contributory

Credit Accident and Health plans are designed to? A. permit creditors the ability to require that coverage be purchased through insurers of their choice B. provide permanent protection C. help pay off existing loans during periods of disability D. not permit free choice of coverage selection

help pay off existing loans during periods of disability

The conversion privilege under a group life plan allows an employee to convert to a(n)? A. family plan with another insurer B. individual plan with another insurer that has better rates C. individual plan upon employment termination D. individual policy in the spouse's name

individual plan upon employment termination

According to HIPAA, when an insured individual leaves an employer and immediately begins working for a new company that offers group health insurance, the individual? A. is eligible for coverage upon hire B. must wait 360 days to be eligible for coverage C. must continue coverage with the previous employer D. is eligible for only health insurance, not life or dental insurance

is eligible for coverage upon hire

A common exclusion with Vision plans is A. eyeglass frames B. the examination C. contact lenses D. lasik surgery

lasik surgery

A limited payment whole life policy provides? A. protection for 20 years B. lifetime protection C. protection for more than one person D. discounted premiums

lifetime protection

A life insurance policy that has premiums fully paid up within a stated time period is called? A. stated payment insurance B. limited universal insurance C. stated modified insurance D. limited payment insurance

limited payment insurance

An insurer's ability to make unpredictable payouts to policyowners is called

liquidity

The election of COBRA for continuation of health coverage will? A. increase the coverage and lower premium B. maintain the same coverage and increase premium C. increase out-of-pocket costs and lower premium D. decrease out-of-pocket costs and maintain same premium

maintain the same coverage and increase premium

A Renewable Term Life insurance policy can be renewed? A. at a predetermined date or age, regardless of the insured's health B. only if the insured provides evidence of insurability C. anytime at the policyowner's request D. typically with no change in premium

only if the insured provides evidence of insurability

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus? A. nonparticipating life insurance policy B. participating life insurance policy C. divisible surplus life insurance policy D. straight life insurance policy

participating life insurance policy

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the? A. mutual insurer B. reinsurer C. reciprocal insurer D. participating insurer

reinsurer

Under the subrogation clause, legal action can be taken by the insurer against the? A. responsible third party B. beneficiary C. policyowner D. State

responsible third party

Health insurance involves two perils, accident and ____. A. death B. sickness C. disability D. liability

sickness

A nonparticipating company is sometimes called a(n)? A. alien insurer B. mutual insurer C. reinsurer D. stock insurer

stock insurer

An insurer has the right to recover payment made to the insured from the negligent party. These rights are called? A. contributory B. indemnity C. estoppel D. subrogation

subrogation

Continued coverage under COBRA would be provided to a(n) A. former dependent of employee no longer of dependent status B. terminated employee C. divorced spouse of employee D. employee reaching full retirement

terminated employee

Converting a group plan to permanent life insurance requires? A. submitting proof of insurability B. paying a lower premium C. converting to term life insurance D. the conversion being applied for within 31 days of termination

the conversion being applied for within 31 days of termination

Insurance represents the process of risk? A. selection B. avoidance C. transference D. assumption

transference

A renewable Term Life insurance policy allows the policyowner the right to renew the policy? A. at anytime the policyowner chooses B. as many times as the policyowner chooses C. paying the same premium as before the renewal D. without producing proof of insurability

without producing proof of insurability

Who is responsible for assembling the policy forms for insureds? A. State Insurance Departments B. NAIC C. Insurance carriers D. Insurance producers

Insurance carriers

The cause of a loss is referred to as a(n) A. hazard B. adversity C. peril D. risk

Peril

Under a group life policy, the insurer will issue an individual _____ to the policyowner for delivery to each person insured. A. policy B. certificate C. application D. rider

certificate

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this? A. $0 B. $5,000 C. $10,000 D. $15,000

$10,000

Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?

$5,000

Sole proprietors are permitted tax deductions for health costs paid from their earnings in the amount of? A. costs that exceed 7 1/2 % of AGI B. costs that exceed 10% of AGI C. 100% of costs D. no deduction permitted

100% of costs

How many employees must an employer have for a terminated employee to be eligible for COBRA? A. 20 B. 30 C. 40 D. 50

20

Ron has a new employer and wishes to enroll in the company's group health plan. In determining whether his pre-existing health condition applies, Ron cannot have more than a ___ day gap without previous health insurance. A. 45 B. 63 C. 75 D. 90

63

Which of the following BEST describes a conditional insurance contract? A. A contract that requires certain conditions or acts by the insured individual B. A contract that has the potential for the unequal exchange of consideration for both parties C. A contract where one party "adheres" to the terms of the contract D. A contract where only one party makes any kind of enforceable contract

A contract that requires certain conditions or acts by the insured individual

Which policy feature makes a universal life policy different from a whole life policy? A. A fixed cash value B. A flexible premium schedule C. A fixed death benefit D. The ability to take out a policy loan

A flexible premium schedule

All of these are valid options for an Adjustable Life Policy EXCEPT? A. The policy's premium can be increased or decreased B. The policy's death benefit can be increased or decreased C. A nonforfeiture option can be used to increase the death benefit D. The policy's protection period can be modified

A nonforfeiture option can be used to increase the death benefit

Which of the following is NOT considered advertising? A. A rating from a rating service company, such as A.M. Best B. An illustration C. A sales presentation D. Direct mailing from an agency

A rating from a rating service company, such as A.M. Best

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called A. A self-derived plan B. A multiple-employer plan C. A blanket plan D. A self-funded plan

A self-funded plan

Under a disability income policy, which provision would be payable if the cause of an injury is unexpected and accidental? A. Presumptive disability provision B. Absolute accidental provision C. Accidental death benefit provision D. Accidental bodily injury provision

Accidental bodily injury provision

What does the Group Life underwriting risk selection process help protect insurance companies from? A. Risk aversion B. Natural selection C. Adverse selection D. Risk management

Adverse selection

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as? A. Apparent B. Estoppel C. Aleatory D. Unilateral

Aleatory

Which of the following does Coordination of Benefits allow? A. Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid B. Allows both a group health plan and individual health plan to coordinate their benefit payments C. Allows the deductible to be spread out between all the health providers D. Allows each health provider to pay 100% of the claim

Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid

What is implied authority defined as? A. Authority given in writing to an agent in the agency agreement B. Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties C. Authority given to handle claims and process payments D. Authority given to an agent to act outside the scope of the agency agreement

Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties

Which of these factors would an insurer consider when determining whether to accept a group life plan? A. Number of dependents B. Incontestable period C. Average age D. Grace period

Average Age

Why are dividends from a mutual insurer not subject to taxation? A. Because insurance premiums are tax-deductible B. Because dividends are already subject to capital gains C. Because dividends are payable directly to the policyholder D. Because dividends are considered to be a return of premium

Because dividends are considered to be a return of premium

Which type of business insurance is meant to cover the costs of continuing to do business while the owner is disabled? A. Disability overhead policy B. Business continuation policy C. Disability buy-sell policy D. Business overhead expense policy

Business overhead expense policy

Insurable interest does NOT occur in which of the following relationships? A. Sister and brother B. Parent and children C. Business partners D. Business owner and business client

Business owner and business client

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider? A. Can be converted to permanent coverage without evidence of insurability B. Coverage can be different for each child C. Premiums on this rider are not required until the limiting age is reached D. Increases the policy's overall cash value

Can be converted to permanent coverage without evidence of insurability

The coverage, conditions, and limitations in the master policy of a group contract can be found in which document? A. Certificate of Authority B. Consumer report C. Coverage document D. Certificate of coverage and benefits

Certificate of coverage and benefits

Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this? A. Child term rider B. Payor rider C. Family maintenance rider D. Family income rider

Child term rider

In an insurance contract, the element that shows each party is giving something of value is called? A. offer B. acceptance C. consideration D. purpose

Consideration

Tim is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place? A. Coordination of benefits B. Conversion C. Extension of benefits D. Rollover

Conversion

What is the primary purpose of a rating service company such as A.M Best? A. Determine which insurer offers the best rates B. Determine which insurer offers the best policies C. Determine financial strength of an insurance company D. Determine which agent to use locally

Determine financial strength of an insurance company

An example of risk sharing would be? A. Adding more security to a high-risk building B. Choosing not to invest in the stock market C. Doctors pooling their money to cover malpractice exposures D. Buying an insurance policy to cover potential liabilities

Doctors pooling their money to cover malpractice exposures

The policyholder for a group health benefit plan is considered to be the A. Employee B. Employer C. Liaison D. Insurer

Employer

Which of the following would be considered a possible applicant and contract policyholder for group health benefits? A. Human resource department B. Employer C. Insured employee D. Insurance company

Employer

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this? A. Modified Endowment Contract B. Current assumptive whole life C. Credit life insurance D. Equity index whole life

Equity index whole life

When the principal gives the agent authority in writing, it's referred to as A. express authority B. implied authority C. apparent authority D. imposed authority

Express authority

A master contract and certificate of coverage can be found in which type of policy? A. Long-term B. Medicaid C. Group D. Medicare

Group

Which of the following is considered to be an event or condition that increases the probability of an insured's loss? A. Risk B. Hazard C. Indemnity D. Peril

Hazard