Accident, Life, and Health Insurance
b)
B)
A domestic insurer issuing variable contracts must establish one or more
a) General accounts b) Separate accounts c) Liability accounts d) Annuity accounts
a)
a)
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
a) $0 b) $50,000 (50% of the policy value) c) $100,000 d) $300,000 (triple the amount of the policy value)
An insured has a major-medical policy with a $500 deductible and a coinsurance clause of 80:20. If he incurs medical expenses of $4,000 the insurer would pay
a) $3,200 b) $3,500 c) $2,500 d) $2,800
What is the shortest possible elimination period for group short-term disability benefits provided by an employer?
a) 0 days b) 30 days c) 60 days d) 90 days
b)
b)
c)
c)
c) Totally tax deductible
c)
d)
d)
The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over what period of time?
a) 18 months b) 2 year c) 6 months d) 1 year
An insurance provider misses the due date for the license renewal fee. How long does the producer have to reinstate the license without passing a written exam?
a) 180 days b) 24 days c) 180 months d) 24 months
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association
a) A misrepresentation b) An accurate statement c) A legal representation of the Association d) An unfair trade practice
Who may complete a paramedical report?
a) A nursing assistant b) A registered nurse c) A spouse d) An underwriter
A hospital indemnity will pay
a) Any expenses incurred by the stay in the hospital, minus coinsurance payments and deductibles b) A benefit for each day the insured is in the hospital c) Income lost while the insured is in the hospital d) All expenses incurred by the stay in the hospital
The authority granted to an agent through the agent's contract is referred to as
a) Apparent authority b) Implied authority c) Absolute authority d) Express authority
When must insurable interest exist in a life insurance policy?
a) At the time of loss b) At the time of application c) At the time of policy delivery d) When there is a change of the beneficiary
Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer?
a) Basic Medical Expense b) Disability income c) Major Medical d) Dental Expense
Which of the following is TRUE about a class designation?
a) Beneficiaries must be part of the insured's immediate family b) It is not allowed c) It determines the succession of beneficiaries d) Beneficiaries are not identified by name
Under an individual disability policy the MINIMUM schedule of time in which claim payments must be made to an insured is
a) Biweekly b) Monthly c) Within 45 days d) Weekly
A man decided to purchase a $100,000 Annually Renewable Term Life Policy to provide additional protection until his children finished college. He discovered that his policy
a) Built cash values b) Required proof of insurability every year c) Decreased death benefit at each renewal d) Required a premium increase each renewal
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred accounts by the beneficiary?
a) Capital gains tax on distributions and no penalty b) Capital gains tax on distributions plus 10% penalty c) Income tax on distributions and no penalty d) Income tax on distributions plus 10% penalty
All of the following are Nonfortfeiture options EXEPT
a) Cash surrender b) Extended term c) Reduced paid-up d) Interest only
Shortly after a replacement transaction on a Medicare supplement policy the insured decided to cancel the policy but is unsure whether the free-look provision is active. The insured could find that information in the
a) Certificate of Coverage b) Notice Regarding Replacement c) Policy application d) Buyers guide
When an insurer offers services like preadmission testing, second opinions regarding surgery and preventive care, which term would best apply?
a) Claims reduction b) Claims discrimination c) Case management provision d) Cost reduction
When must an IRA be completely distributed when a beneficiary is not named?
a) December 31 of the year following the year of the owner's death b) Due date of the deceased owner's final tax return including extensions c)December 31 of the year that contains the fifth anniversary of the owner's death d) Due date of beneficiary's tax return including extensions
The death benefit under the Universal Life Option B
a) Decreases by the amount that the cash value increases b) Increases for the first few years of the policy and then levels off c) Remains level d) Gradually increases each year by the amount that the cash value increases
The gatekeeper of an HMO helps
a) Determine which doctors can participate in an HMO plan b) Control specialist costs c) Determine who will be allowed to enroll in an HMO program d) Prevent double coverage
Which policy component decreases in decreasing term insurance?
a) Dividend b) Premium c) Face amount d) Cash value
Which concept is associated with exclusion ratio?
a) Dividend distribution b) How exclusion riders affect an insurance premium c) Policy provisions d) Annuity payments
An insured has medical insurance coverage through 2 different providers, both covering the same expenses on an expense-incurred basis. Neither company knows in advance that the insured has coverage through any other insurers. The insured submits a claim to both insurers. How should the claim be handled?
a) Each insurer should pay a proportionate amount of the claim b) One of the insurers will pay fully, while the other will not pay any benefits c) Once the insurers discover the duplicate coverage, the policies would most likely be cancelled, and no claim paid. d) The insured should receive full benefits from each insurer.
Which of the following describes the tax advantage of a qualified retirement plan?
a) Employer contributions are not taxed when paid out to the employee b) The earnings in the plan accumulate tax deferred c) Distributions prior to age 59 1/2 are tax deductible d) Employer contributions are deductible as a business expense when the employee receives benefits
The provision that states that both the printed contract and a copy of the application from the contract between the policyowner and the insurer is called the
a) Entire contract b) Certificate of insurance c) Aleatory contract d) Master polcy
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
a) Equity Indexed Universal Life b) Variable Universal Life c) Universal Life Option A d) Universal Life Option B
How often will the Commissioner examine a company in the state of New Hampshire?
a) Every 3 years b) Annually c) Every other year d) Every 5 years
How often must CE requirements be met?
a) Every year for the first three years and then every 2 years thereafter b) Every year for the first five years and then every 2 years thereafter c) Every year d) Every 2 years
Most scheduled plans provide first dollar benefits without
a) Exclusions and conditions b) Coinsurance and deductibles c) Premiums d) Copays
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be passed to the children when they reach a certain age. Which settlement option should the policyowner choose?
a) Fixed amount option b) Interest only option c) Life income with period certain d) Joint and survivor
What is the maximum period that an insurer would pay benefits in accordance with the Additional Monthly Benefit rider?
a) For the duration of the disability or the contract, depending on which ends first b) 1 month c) 1 year d) 2 years
When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is the money placed?
a) Forwarded to an investor b) Each contract's separate account c) The annuity owners account d) The insurance company's general account
All of the following are business uses of life insurance EXCEPT
a) Funding against financial loss caused by the death of a key employee b) Funding business continuation agreements c) Funding against general company financial loss d) Compensating excecutives
Fixed annuities provide all of the following EXCEPT
a) Future income payments b) Hedge against inflation c) Equal monthly payments for life d) Minimum guaranteed rate of interest
Life insurance death proceeds are
a) Generally not taxed as income b) Taxable to the extent that they exceed 7.5% of the beneficiaries adjusted gross income c) Taxed as capital gain d) Taxed as ordinary income
The primary purpose of licensing is to
a) Generate income for the insurance department b) Satisfy a federal requirement that all person involved in insurance to be licensed c) Ensure high standards to the insuring public d) None of the above
Which of the following is true about the requirements regarding HIV exams?
a) HIV exams may not be used as a basis for underwriting b) The applicant must give prior informed written consent c) Results may be disclosed to the agent and the underwriter d) Prior informed oral consent is required from the applicant
How does a member of an HMO see a specialist?
a) HMOs do not cover specialists b) The member is allowed to choose his or her own specialist c) The primary care physician refers the member d) The insurer chooses the specialist
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?
a) He will not have to pay a penalty, regardless of his age b) He cannot withdraw money from his MEC before age 59 1/2 c) He will have to pay a penalty if he is younger than 59 1/2 d) He will have to pay a penalty regardless of his age
All of the following would be different between qualified and nonqualified retirement plans EXEPT
a) IRS approval requirements b) Taxation on accumulation c) Taxation of withdrawals d) Taxation on contribution
Which of the following is INCORRECT concerning taxation of disability income benefits?
a) If the insured paid the premiums, any disability income benefits are tax free b) If the benefits are for a permanent loss, the benefits paid to the employee are not tax taxable c) If paid by the individual, the premiums are tax deductible d) If the employer paid the premiums, income
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?
a) Income tax on distributions plus 10% penalty b) Capital gains tax on distributions and no penalty c) Capital gains tax on distributions plus 10% penalty d) Income tax on distributions and no penalty
According to agency law, the producer always represents the
a) Insurance company b) Client c) Public d) State Insurance Department
What is surplus lines insurance?
a) Insurance placed with an unauthorized insurer b) Additional insurance placed on itemized risks c) Any insurance on items worth more than $25,000 d) Insurance in excess of a standard policy's coverage
An insurance producer may not act as an agent of an insurer unless the insurance producer
a) Is planning on working only for that insurer b) An appointed agent of that insurer c) Signs a temporary statement guarantying cooperation and honesty d) Is licensed for that line of insurance
Which of the following is true about the premium on the childrens rider in a lifetime insurance policy?
a) It decreased when the oldest child reaches the age of 21 b) It increased when a newborn baby is added to the policy c) It decreases when an adopted child is added to the policy d) It remains the same no matter how many children are added to the policy
Which of the following best describes the MIB?
a) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance b) It is a government agency that collects medical information on the insured from the insurance companies c) It is a member organization that protects insured against insolvent insurers d) It is a rating organization for health insurance
What is the purpose of a conditional receipt
a) It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue b) It is intended to provide coverage on a date earlier than the date of the issuance of the policy c) It guarantees the applicant that the policy will be issued in the amount applied for in the application d) It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company
Which Universal Life option has a gradually increasing cash value and a level death benefit?
a) Juvenile life b) Term insurance c) Option B d) Option A
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?
a) Limited coverage b) Claims saving c) Cost containment d) Selective coverage
All of the following are characteristics of a Major Medical Expense policy EXEPT
a) Low maximum limits b) Deductibles c) Blanket coverage d) Coinsurance
In major medical insurance policies, when the insured's share of coinsurance reaches a certain amount, the insured is no longer obligated to pay it. This feature is known as
a) Maximum benefits b) Deductible c) Coordination of benefits d) Stop-loss
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
a) Must be informed of the source of the report b) Are entitled to obtain a copy of the report from the party who ordered it c) Must be advised that a copy of the report is available to anyone who requests it d) May sue the reporting agency in order to get inaccurate data corrected
An insurance producer is also the instructor of a 3-hour ethics course held once a year. To maintain certification, the producer
a) Must take 24 hours of continuing education courses b) Is not required to take any continuing education courses c) May apply for a continuing education waiver from the Insurance Commissioner d) Must take 18 hours of continuing education courses
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
a) Needs to borrow money b) Has earned enough credits c) Becomes disabled d) Becomes terminally ill
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are
a) Never tax deductible b) Partially tax deductible depending on the income level c) Tax deductible d) Deducted based on the income level
Which renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date?
a) Noncancellable b) Optionally renewable c) Conditionally renewable d) Guaranteed renewable
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
a) Nonforfeiture options b) Guaranteed insurability option c) Dividend options d) Guaranteed renewable option
Premium payments for personally-owned disability income policies are
a) Not tax deductible b) Eligible for tax credits c) Tax deductible d) Tax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions
Premiums paid by self-employed sole proprietors or partners for medical expense insurance are
a) Not tax deductible b) Partially tax deductible c) Totally tax deductible d) Taxable
Every small employer carrier must actively offer to small employers at least how many health benefit plans?
a) One plan b) 2 plans c) 3 plans d) There is no minimum
Which of the following is NOT a characteristic of a group long-term disability plan?
a) The benefit can be up to 66 and 2/3% of one's monthly income b) The benefit can be up to 50% of one's yearly income c) The elimination period is the same as in the short-term plan's benefit period d) The benefit period may be to age 65
An insured carries health insurance with two different providers and is covered on an expense incurred basis. He has an appendectomy and files the claims to both insurers. Neither company is notified in advance that the insurer has other coverage. What should each insurer pay?
a) Only one should pay the full amount b) Nothing. The insured lied about the dual nature of his coverage, so the insurers are not responsible for covering the claims c) The full amount d) A proportionate amount
What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?
a) Optionally renewable b) Noncancelable c) Guaranteed renewable d) Conditionally renewable
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
a) Paid at a fixed rate every year b) Taxable as ordinary income c) Guaranteed d) Not taxable since the IRS treats them as a return of a portion of the premium paid
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
a) Pay the policy proceeds up to an established limit b) Not pay the policy proceeds under any circumstances c) Automatically pay the policy proceeds d) Pay the policy proceeds only if it would have issued the policy
Joe did not remember to renew his insurance license before the due date. What must he do now to reinstate the license without having to take a written exam?
a) Pay three times the renewal fee within 24 days of the due date b) Pay double the amount of the unpaid renewal fee within 24 months of the due date c) Pay the usual renewal fee within 24 months of the due date d) Joe cannot reinstate his license now without passing a written exam
A life insurance policy has a legal purpose if both of which of the following elements exist?
a) Policyowners and named beneficiaries b) Insurable interest and consent c) Underwriting and reciprocity d) Offers and counteroffer
All of the following are examples of risk retention EXEPT
a) Premiums b) Deductibles c) Copayments d) Self-insurance
The Federal Fair Credit Reporting Act
a) Prevents money laundering b) Regulates consumer reports c) Protects customer privacy d) Regulates telemarketing
What provision can reduce the disability benefit based upon the insureds current income?
a) Pro rata provision b) Rehabilitation benefit c) Relation of earnings to insurance d) Waiver of monthly premium
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 insurer the difference. What provision allows this?
a) Proof of loss b) Payment of claims c) Unpaid premium d) Legal action
What is the advantage of having a qualified annuity?
a) Receiving a lump-sum settlement tax free b) Higher dividends c) Favorable tax treatment d) No filling with the IRS
When benefits are paid directly to the insured under a health insurance policy, the policy provides the benefits on what type of basis?
a) Reimbursement b) Service c) Limited d) Scheduled
In Long-Term Care policies, as the benefit period lengthens, the premium
a) Remains unchanged b) LTC premiums are not based on benefit periods c) Decreases d) Increases
Guarantee of insurability option in long-term care policies allows the insured to
a) Replace the existing LTC policy based on the original underwriting b) Secure the policy's non-forfeiture values regardless of the insured's age or health status c) Increase benefit levels without providing proof of insurability d) Add dependents to the plan without providing proof of their insurability
As it pertains to group health insurance, COBRA stipulates that
a) Retiring employees must be allowed to convert their group coverage to individual policies b) Terminated employees must be allowed to convert their group coverage to individual policies c) Group coverage must be extended for terminated employees up to a certain period of time at the employers expense d) Group coverage must be extended for terminated employees up to a certain period of time at the former employees expense
During replacement of life insurance, a replacing insurer must do which of the following
a) Send a copy of the Notice Regarding Replacement to the Department of Insurance b) Obtain a list of all life insurance policies that will be replacing c) Guarantee a replacement for each existing policy d) Designate a new producer for a replaced policy
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?
a) She would not receive any benefits b) 3 years c) 2 year d) 1 month
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance
Which of the following may NOT be included in an insurance company's advertisement?
a) That its policies are covered by a state Guaranty Association b) Their policies' limitations or exclusions c) The name of a specific agent d) An identification of a limited policy as a limited policy
A 60-year old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
a) The amount of the distribution is reduced by the amount of a 20% withholding tax b) No taxes are due since the plan participant is over age 59 1/2 c) There is a 10% early withdrawal penalty d) The amount distributed is subject to ordinary income tax
Which of the following will NOT be covered under an individual health insurance policy?
a) The applicants adopted child b) The applicant c) The applicant's spouse d) The applicant's house help
An insured loses her left arm in an accident that is cover by her Accident Death and Dismemberment policy. What benefit will she most likely receive from this policy?
a) The capital amount in monthly installments b) The principal amount in monthly installments c) The capital amount in lump sum d) The principal amount in lump sum
Which of the following statements about group life is correct?
a) The cost of coverage is based on the ratio of men and women in the group b) The premiums are higher than in an individual policy because there is no medical exam c) The group sponsor receives a Certificate of Insurance d) The policy can be converted to an individual term insurance policy
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
a) The customer has no knowledge of this action b) The customer's associates, friends, and neighbors provide the reports data c) They provide additional information from an outside source about a particular risk d) They provide information about a customer's character and reputation
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
a) The data of medical exam b) The data of policy delivery c) The date of issue d) The date of application
What method is used to determine the taxable portion of each annuity payment?
a) The excise ratio b) The annuity ratio c) The marginal tax formula d) The exclusion ratio
All of the following are true of the Key Person disability income policy EXCEPT
a) The income may be used to find a replacement for the key employee b) Benefits are considered taxable income to the business c) Premiums are not deductible to the business d) It is typically written to cover key employees in the event they become disabled and are unable to work
Which of the following is NOT true regarding Equity Indexed Annuities?
a) The insurance company keeps a percentage of the returns b) They have guaranteed minimum interest rates c) They are less risky than variable annuities d) They earn lower interest rates than fixed annuities
Which of the following conditions would a disability income policy most likely NOT require in order to qualify for benefits?
a) The insured must provide proof of insurability b) A specified income status prior to the disability c) The insured must be under a physician's care d) The insured must be confined to the house
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
a) The insured would not need to prove insurability for a conversion policy b) The insured may convert coverage to an individual policy within 31 days c) The premium for individual coverage will be based upon the insured's attained age d) The insured may choose to convert to term or permanent individual coverage
An applicant is considered to be high-risk but not so much that the insurer wants to deny coverage. Which of the following is NOT true?
a) The insurer will issue conditional coverage b) The insurer can increase the premium c) The insurer can add exclusions to the policy d) The insurer can rate-up the policy
How does an HMO see a specialist?
a) The member is allowed to choose his or her own specialist b) The primary care physician refers the member c) The insurer chooses the specialist d) HMOs do not cover specialists
Which of the following best describes what the annuity period is?
a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments
Which of the following is true regarding health insurance underwriting for a person with HIV?
a) The person may not be declined for medical coverage solely based on HIV status b) A person may be declined for HIV but not AIDS c) The person may be declined d) The person may only be declined if he/she has symptoms
J transferred his life insurance policy to his son two years before his death. Which of the following is true?
a) The unpaid premiums on the policy will be deducted from J's taxable estate b) Because the policy has been transferred, it will not be included in J's taxable estate c) The entire face value of the policy will be included in J's taxable estate d) The interest portion of the policy will be included in J's taxable estate.
How are contributions to a tax-sheltered annuity treated with regards to taxation?
a) They are never taxed b) They are taxed as income for the employee c) They are taxed as income for the employee, but are tax free upon withdrawal d) They are not included as income for the employee but are taxable upon distribution
How are contributions to tax-sheltered annuity treated with regards to taxation?
a) They are taxed as income for the employee b) They are taxed as income for the employee, but are tax free upon withdrawal c) They are not included as income for the employee but are taxable upon distribution d) They are never taxed
Which provision states that the insurance company must pay Medical Expense Claims immediately?
a) Time of Payment of Claims b) Payment of Claims c) Legal Actions d) Relation of Earnings to Insurance
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?
a) Unfair discrimination b) Defamation c) Illegal d) A legal advertising strategy
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
a) Universal life b) Flexible life c) Variable life d) Adjustable life
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disability?
a) Waiver of Premium b) Payor Benefit c) Jumping Juvenile d) Juvenile Premium Provision
Which of the following describe the taxation of an annuity when money is withdrawn during the accumulation phase?
a) Withdrawn amounts are taxed on a first in, last out basis b) Taxes are deferred on withdrawn amounts, but a flat penalty is charged c) Taxes are deferred on withdrawn amounts. d) Withdrawn amounts are taxed on a last in, first out basis
Which of the following is considered to be a moral hazard?
a) Working as a firefighter b) Engaging in illegal activities c) Driving recklessly d) Smoking
