Chapter 16 Michigan Life, Accident, and Health Insurance Law

The effective date of credit insurance coverage is the date the: A) debt was incurred. B) insurance is applied for. C) loan application is filed. D) loan is approved.

A

How many days does an insurer have to pay benefits after a proof of loss form was received in order to avoid a 12% interest penalty on the claim? A) 90 B) 15 C) 60 D) 30

C

In regards to health care benefits, anyone insured who commits a fraudulent insurance act is guilty of a felony and subject to A) a fine of $100,000 B) imprisonment for up to a year and/or a fine of $50,000 C) imprisonment for up to four years and/or a fine of up to $50,000 D) imprisonment for up to 20 years

Up to 4 years And Find up to 50,000

Tim completed his continuing education requirements in Michigan but forgot to pay the fee to renew his license. He may reinstate his license without retaking the examination if he does so within A) 12 months B) 60 days C) 30 days D) 6 months

A

The Commissioner must examine the books, records, documents, and papers of domestic insurance companies at least A) once every five years B) once every year C) twice every year D) once every three years

A All other insurance companies doing business in Michigan may be examined at any time.

In Michigan, all life and health advertisements must be: A) filed with the attorney general's office. B) maintained at the insurer's home office. C) filed with the commissioner. D) preapproved by the commissioner before being made public.

B A complete file of all life insurance advertisements must be maintained at the insurer's home office for a minimum of four years.

A producer in Michigan must complete 24 hours of continuing education every two years. Of those 24 hours, how many hours have to be devoted to the study of ethics in insurance? A) 6 B) There is not an ethics requirement C) 2 D) 3

3

Which of the following is the means by which the Commissioner approves an insurer and grants it the power to transact insurance business in Michigan? A) The Commissioner issues a certificate of authority to the insurer. B) The Commissioner is not involved with the insurer. C) The Commissioner sends an approval letter to the insurer. D) The Commissioner issues a license to the insurer.

A

Which of the following statements regarding credit life and health insurance is NOT correct? A) Credit health insurance pays a lump-sum benefit if the debtor is disabled. B) Credit health insurance can be issued as an individual policy. C) The commissioner must approve all policy rates and applications. D) Credit life insurance cannot exceed the total indebtedness of the debtor.

A Credit accident and health insurance coverage provides indemnity for payments due while the debtor is disabled and unable to make payments. Credit life insurance coverage pays a lump sum benefit upon the debtor's death.

Which one of the following statements regarding the free look period for variable life insurance policies is CORRECT? A) Variable life insurance policies provide a policyholder with a free look period of 45 days. B) The free look period is 10 days after the receipt of the policy or 45 days after the date of the application, whichever is later. C) Variable life insurance policies provide a 10-day free look provision. D) Variable life insurance policies are exempt from the requirement to provide policyholders with a free look period.

B

The Commissioner may issue a temporary license, without an examination, for up to how many days? A) 60 B) 365 C) 180 D) 90

C 180

Which of the following statements is NOT correct regarding maintenance of an insurance license? A) In an emergency, the commissioner may suspend a license to protect the public interest. B) To keep licenses in effect, producers must complete 24 hours of approved continuing education every 2 years. C) The commissioner may revoke a license if a producer was convicted of a felony. D) An insurance license can be revoked by the producer's company for violation of insurance laws.

D An insurance license can be revoked by the commissioner for violation of insurance laws. A producer's employing company has only appointment authority.

If, after a hearing, the Commissioner believes a producer has violated licensing laws, the Commissioner can: A) initiate a federal court action. B) sue the producer on behalf of the public. C) cancel any policy purchased by a customer of the producer. D) fine the producer a maximum of $2,500 for each violation.

D If, after a hearing, the Commissioner determines that a producer knowingly violated an insurance regulation, the Commissioner may assess a maximum penalty of $2,500 for each violation, up to a combined total of $25,000. If a producer committed a violation but did so unknowingly, the fine is a maximum $500 per violation.

Which of the following is considered an insurance counselor? A) A chartered life underwriter. B) A person licensed as an insurance counselor. C) An attorney who gives advice or counsel regarding insurance policies. D) A commissioned life insurance counselor.

B A person may not call himself or herself an insurance counselor or consultant unless he or she is licensed as such by the commissioner. This requires an application and successful completion of a written exam. Producers who give customary advice during the normal scope of their duties and attorneys-at-law are exempt, so long as they do not represent themselves to be licensed insurance counselors or consultants.

Which of the following statements is NOT correct regarding a managing general agent? A) An MGA must be licensed. B) An MGA can negotiate reinsurance. C) An MGA must be an employee of an insurer. D) An MGA may manage all of the insurance business of an insurer.

C An employee of the insurer is not considered a managing general agent.

If benefits are not paid on a timely basis to the insured, the insurer must pay the insured A) 15% interest on the claim B) a one time payment of $5,000 in addition to the claim C) 12% interest on the claim D) 25% interest on the claim

C An insurer must pay on a timely basis to its insured or entity directly entitled to benefits under its insured's contract of insurance. The insurer must pay to its insured 12% interest on claims not paid on a timely basis. In Michigan, this date is 60 days after the proof of loss. Failure to pay claims on time is an unfair trade practice, unless the claim is in dispute.

All of the following statements are TRUE regarding the Commissioner EXCEPT the Commissioner A) does not write insurance statutes and laws. B) must be a citizen of Michigan. C) must be a tax paying resident of Michigan. D) may hold stock in any insurer and have an indirect role in management of insurer's affairs.

D

How long is the Commissioner's term of office? A) Two years. B) Five years. C) Three years. D) Four years.

D

Which of the following individuals is NOT exempt from licensure in Michigan? A) Ricardo who has a bachelor's degree with a concentration in insurance from an institution approved by the Commissioner. B) Amy who is a salaried and engages in the administration or operation of employee benefits. C) Jon who has his CLU designation and needs only a life only license. D) Tina who works for an insurance producer on insurance sales and receives 10% of his commissions.

D A person who sells, solicits, or negotiates insurance is required to be licensed.

Which of the following is the responsibility of the replacing insurer when replacing a life insurance policy in Michigan? A) Notify the existing insurer of the replacement transaction within 3 business days following receipt of the application. B) Provide the applicant with copies of any sales proposals used for presentation to the applicant. C) Provide the applicant with a copy, on appropriate forms, of the notice to applicants regarding replacement of life insurance. D) Obtain a signed information statement from the applicant indicating that replacement is involved.

A All of the other answer choices are responsibilities of the producer.

Which of the following statements is NOT correct regarding a temporary insurance license in Michigan? A) A temporary license issued to wind down the affairs of a deceased producer may be issued for up to 180 days at the discretion of the Commissioner. B) An individual needs to pass an exam to be issued a temporary license. C) The Commissioner may require a person with a temporary license to have a sponsor who is a licensed producer. D) The Commissioner may revoke a temporary license if he suspects the license is endangering the public.

B A temporary license issued for someone else to complete the affairs of a deceased (or physically or mentally handicapped) licensed producer is issued for up to 180 days at the discretion of the Commissioner. There is no exam or prelicensing education required for a temporary license.

The maximum life insurance policy loan interest that may be charged on a fixed interest loan basis is: A) 18%. B) 8%. C) 4%. D) 7.4%.

B The maximum interest rate for a fixed rate policy loan is 8% per year (18% per year for an adjustable rate loan).

Enforcement of the Michigan insurance regulations is the responsibility of the: A) state legislature. B) state attorney general. C) Commissioner. D) governor.

C

The Commissioner can examine the books, records, documents, and papers of foreign insurance companies A) once every year B) once every three years C) at any time D) once every five years

C

The commissioner must decide whether to accept an application for an insurance license within: A) 120 days. B) 30 days. C) 60 days. D) 21 days.

C

The MINIMUM number of lives that must be covered under a group life insurance policy in Michigan is: A) 20 lives. B) 10 lives. C) 2 lives. D) 5 lives.

C A group policy in Michigan must include a minimum of two lives.

A change in a producer's home address must be reported to: A) the producer's customers within 1 year of the change. B) the insurance company within 6 months of the change. C) the Commissioner within 30 days of the change. D) the producer's manager.

C To maintain her license, a producer must report any change in her home address to the Commissioner within 30 days of the change and pay a recording fee. Failure to do so can result in a fine.

In Michigan, who is ultimately responsible for making sure the content of an insurance advertisement meets state law requirements? A) National Association of Insurance Commissioners. B) Producer. C) Insurer. D) National Association of Life Underwriters or the National Association of Health Underwriters.

c

Promising a return or profit NOT disclosed in the insurance policy is an example of: A) an illegal inducement. B) twisting. C) a false or fraudulent act. D) unfair discrimination.

A An illegal inducement can include payment of part of a producer 's commission, payment of a premium, or gifts, services or anything else of value given to the prospect to entice the purchase of insurance.

In Michigan, controlled business is permitted as long as it does not exceed what percentage of a producer's business in a 12 month period? A) 15% B) 6% C) 10% D) 25%

A Controlled business is insurance placed on the producer's own life or property, or that of his or her employees, employer or business associates. It is permitted as long as it does not exceed 15% of the total premiums written by a producer in any 12-month period.

Which of the following statements is CORRECT concerning a terminated appointment? A) It removes the producer's authority to represent a specific insurer. B) It cancels the producer's license with the state. C) It is effective after the insurer informs the producer of the termination. D) It cancels the producer's authority to represent any insurer in the state.

A Termination of an appointment cancels the producer's authority to represent a specific insurer. An insurer who terminates a producer's appointment must inform the commissioner within 30 days of the date of termination.

Under which of the following types of policies does an insured have to be notified whether current policy values are insufficient to maintain the policy, given guaranteed interest and expense rates? A) Credit life insurance. B) Universal life insurance. C) Blanket health insurance. D) Long-term care insurance.

B A universal life annual report must tell the policyowner whether the policy's current premium schedule or current cash values will be sufficient to maintain the policy for another year, given guaranteed interest, expense, and mortality loads.

If an individual or insurer violates the Commissioner's cease and desist order, they are subject to a maximum $10,000 fine for each violation. What is the maximum amount that the individual can be fined for all violations? A) There is no maximum B) $100,000 C) $30,000 D) $50,000

D and possible license suspension or revocation

When the Commissioner orders an administrative hearing, the agent charged with violating the insurance laws must be given how much notice before the hearing takes place? A) 30 days. B) 45 days. C) 10 days. D) 7 days.

10 days

A producer must pay a fee of how much with each change of address? A) There is not a fee B) $100.00 C) $3.00 D) $25.00

C

Under which condition may an insured convert a variable life policy to whole life? A) If the separate account fund fails to meet the performance level guaranteed by the insurer. B) During the 45-day free-look period. C) If the insurer changes the investment objective of the plan. D) During the 3-year reinstatement period.

C

From which source does the Michigan Life and Health Insurance Guaranty Association obtain its funds? A) State of Michigan General Revenue Fund. B) Proceeds of lottery ticket sales. C) Insurance agent licensing fees. D) Assessments of Association members.

D Association members pay assessments that are used to carry out the duties and responsibilities of the Association. The Association protects Michigan policyowners by guaranteeing, assuming or reinsuring an insurer's policies and by loaning money to impaired or insolvent insurers and paying their obligations.