disability income and related insurance, PASS THAT TEST

what is the difference between occupational and non-occupational coverage?

occupational coverage provides benefits for disabilities resulting from accidents or sicknesses that occur on or off the job. Non-occupational coverage, on the other hand, only covers disabilities that results from accident or sickness is occurring off the job.

describe residual disability

residual disability is a type of disability income policy that provides benefits for loss of income when a person returns to work after a total disability, but it's still not able to work as long or at the same level he or she works before becoming disabled.

what is the purpose of a buy-sell agreement?

the buy-sell agreement specifies how the business will pass between owners when one of the owners dies or becomes disabled.

the key person Insurance, who pays the premium, who is the beneficiary and the insured?

the contract is owned by the business so the premium is paid by the business and the business is a beneficiary the key employee would be the insured.

how long does an elimination period usually last? State your answer in terms of a range.

the illumination periods found in most policies range from 30 days to 180 days

what is the purpose of key person disability insurance?

the key person's economic value to the business is determined in terms of the potential loss of business income which would occur as well as the expense of hiring and training a replacement for the key person.

when is it okay to discriminate when determining disability income policy premiums?

the more hazardous the applicants occupation, the higher the premium the insurance company will charge.

what is a probationary period? How is it different from an elimination period?

the probationary period is a waiting.

what provision can reduce the disability benefit based upon the insured's current income?

the relation of earnings to Insurance provision allows the insurance company to limit the insurance benefits to his or her average income over the last 24 months

if an insured is disabled and has a waiver of premium benefit, generally what happens to the premiums paid during the waiting period?

this benefit allows the insured, when disabled, to forgo paying the premiums once he or she qualifies for benefits.

how are Income replacement contracts typically written?

typically these contracts are written in accordance with the any occupation definition for disability.

in regards to Social Security, what does the term fully insured mean?

very first as someone who has earned 40 quarters of coverage and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits.

What percentage of individually-owned disability income benefits is taxable? A0% B50% C100% DAmount paid by insured

A

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? AResidual disability BRecurrent disability CPartial disability DIncome replacement

A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss. a

Alexander has a policy with his ex-wife as its beneficiary. What provision allows him to change the beneficiary to his new wife? A Change of beneficiary B Absolute assignment C Entire contract D Payment of claims

A. Correct! The change of beneficiary mandatory provision allows the policyowner to change the beneficiary designation.

Under the L&H Guaranty Association, the maximum benefit one contract holder may receive in benefits, regardless of the number of contracts held is A. $5,000,000 B. $100,000 C. $300,000 D. $1,000,000

A. $5,000,000 With respect to any one contract holder covered by unallocated annuity contract $5,000,000 in benefits, regardless of the number of contracts held by that contract holder

How is the Commissioner of Insurance selected for the office? A. Elected in a general election for a 4-year term B. Elected in a general election for a 2-year term C. Appointed by the Governor for a 4-year term D. Appointed by the Governor for a 2-year term

A. Elected in a general election for a 4-year term The Commissioner of Insurance is the chief officer of the Insurance Department and is elected by the people of the state to serve a 4-year term

As it pertains to group health insurance, COBRA stipulates that A. Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense B. Retiring employees must be allowed to convert their group coverage to individual policies C. Terminated employees must be allowed to convert their group coverage to individual policies D. Group coverage must be extended for terminated employees up to a certain period of time at the former employer's expense

A. Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense COBRA required employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for up to 18 months to 36 months. The employee can be required to pay up to 102% of the coverage's premium

In North Carolina, statutes, rules, and regulations that govern insurance companies, insurance transactions, and insurance agents are known as the A. Insurance Code B. State Constitution C. State Administrative Rules D. Code of Conduct

A. Insurance Code In North Carolina, the legislature has made and implemented state statutes which, collectively, are known as the Insurance Code

Which of the following is true regarding coverage for a disabled child that has reached the limiting age? A. The child must be allowed to remain a dependent upon his or her parent's policy B. The insurer may not require proof of the dependent child's incapacity C. The insurer may require proof of the dependent child's incapacity every 6 months. D. The child is no longer eligible to be a dependent

A. The child must be allowed to remain a dependent upon his or her parent's policy Life and heath insurance policies may not be allow for coverage of a dependent child to end when the child reaches the limiting age state in the policy if the child is incapable of self-sustaining employment because of a handicap and depends on the policyholder for support and maintenance. The insurer may require proof of the dependent child's incapacity as often as necessary, but not more frequently than once each year after the child reaches the limiting age.

An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer? A$0 B$500 C$1,000 D$2,000

B Correct! Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs.

After appointing an agent, how long does an insurer have to file with the Commissioner the form detailing the agent's name, address, and other needed information? A. 15 days B. 30 days C. 45 days D. 60 days

B. 30 days Insurers have 30 days to file, in a form prescribed by the Commissioner, the names, addresses, and other information required by the Commissioner for its newly appointed agents.

Which one of the following is an eligibility requirement for social security disability income benefits? A. Currently employed status B. Fully insured status C. Experiencing at least one year of disability D. Being at least 50 years of age

B. Fully insured status -only available if the worker is fully insured( 5 month waiting period)

What is a license suspension period for a second offense of violating state rules regarding records or reports A. Up to 6 months B. Up to 1 year C. Up to 3 years D. Permanently

B. Up to 1 year For the first offense, a person may have his or her license suspended or revoked for between 1 and 6 months. For the second offense, a license may be suspended for 1 year.

If an insured changes his payment plan from monthly to annually, what happens to the total premium? AIncreases BDecreases CStays the same DDoubles

Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount. b

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? ASalvage BAppraisal CSubrogation DArbitration

C After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss.

Which of the following statements about occupational vs. nonoccupational coverage is TRUE? AIndividual disability policies never cover nonoccupational injuries. BOnly group disability income policies can be written on an occupational basis. CDisability insurance can be written as occupational or nonoccupational. DGroup medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries.

C Correct! All disability insurance can be written on either an occupational or nonoccupational basis.

When an insurer combines two periods of disability into one, the insured must have suffered a AResidual disability. BPresumptive disability. CRecurrent disability. DPartial disability.

C. Correct! Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

The required privacy disclosure notice must be provided by the insurer to current policyholders at least once in any period of A. 3 months B. 6 months C. 12 months D. 24 months

C. 12 months In the case of a policy holder, the notice required must be provided at least once in any period of 12 consecutive months during which the policy is in effect.

An agent in Ohio wants to become an agent in North Carolina. The Commissioner will waive certain examination requirements, provided that Ohio would waive these same requirements if a North Carolina agent sought licensure in Ohio. What term does this describe? A. Rebating B. Indemnity C. Reciprocity D. Residency

C. Reciprocity Reciprocity occurs when the state in which the person resides accords the same privilege to residents of North Carolina

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of A. Misrepresentation. B. Rebating. C. Twisting. D. Defamation.

C. Twisting. Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.

Under which of the following circumstances would a pretext interview be permissible? A. a third party is conducting the interview B. the insurer needs to obtain confidential info C. the insurer suspects criminal activity and fraud D. the applicant for insurance fails to provide pertinent info to underwriters

C. the insurer suspects criminal activity and fraud A pretext interview may be used to obtain information from a person for the purpose of investigating a claim where, based upon specific information available for review by the Commissioner, there is a reasonable basis for suspecting criminal activity, fraud, material misrepresentation, or material nondisclosure in connection with the claim.

Workers compensation insurance covers a worker's medical expenses resulting from work related sickness or injuries and covers loss of income from ATemporary job layoffs. BWork-related disabilities. CJob termination. DPlant or office closings.

Correct! All states have workers compensation laws, which were enacted to provide mandatory benefits for employee's work related injuries, illnesses, or death. B

Which statement accurately describes the Change of Beneficiary provision? ABeneficiaries can only be changed in the event of divorce, death, or severe psychiatric disorders. BChanging beneficiaries requires the consent of the original beneficiary. CAny policy that has a death benefit must also have a Change of Beneficiary provision. DSpouses are automatically irrevocable beneficiaries, with the exception of divorce or death.

Correct! Any policy that has a death benefit must also have a Change of Beneficiary provision. This allows the policyowner to change beneficiaries without the original beneficiary's consent, unless that person was designated as an irrevocable beneficiary. C

Under what condition are group disability income benefits received by an employee NOT taxable as income? AWhen the employee is 59 ½. BWhen the amount of the benefit is equal or less than the amount of contributed by the employer. CWhen the benefits received are equal or less than the employee's percentage of the contribution. DWhen the employer makes all the premium payments.

Correct! Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income. c

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? ANeither plan would pay. BEach plan will pay in equal shares. CThe insured will have to select a plan from which to collect benefits. DThe benefits will be coordinated.

Correct! Benefits will be coordinated when individuals are covered under two or more health plans. D

When a disabled dependent child reaches the age limit for coverage, how long does the policyowner have to provide proof of dependency in order for the dependent to remain covered under the policy? A10 days B15 days C31 days D60 days

Correct! Every policy providing coverage for a dependent child until a specified age will not terminate that coverage if the child is dependent upon the insured and is incapable of self-support because of physical or mental handicaps. Proof of the dependency is required within 31 days of the child attaining the maximum age. c

Which of the following premium modes would result in the 2 est annual cost for an insurance policy? AMonthly BQuarterly CSemi-annual DAnnual

Correct! If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have additional expenses in billing the premium. a

A noncontributory group disability income plan has a 30-day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive A$12,000, all of which is taxable. B$14,000, none of which is taxable. C$14,000, all of which is taxable. D$12,000, none of which is taxable.

Correct! In noncontributory group health plans, the employer pays the entire cost, so the income benefits are included in the employee's gross income and taxed as ordinary income. A

All of the following are true regarding Key Employee Disability Income insurance EXCEPT AThe employer owns the policy. BBenefits are paid to the employer to retrain a new person. CPremiums are not tax deductible for the employer. DBenefits are taxable to the employer.

Correct! Key person disability income premiums are not deductible to the business, but the benefits are received income tax free by the business. d

The purpose of managed care health insurance plans is to A Coordinate benefits. B Control health insurance claims expenses. C Provide for the continuation of coverage when an employee leaves the plan. D Give the insured an unlimited choice of providers.

Correct! Managed care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan. b

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income? A5% B7% C10% D15%

Correct! Most people who itemize their deductions can claim deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 10% of their adjusted gross income. C

An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay? A$10,000 B$7,500 C$5,000 D$0

Correct! Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable. c

The mode of premium payment A Is defined as the frequency and the amount of the premium payment. B Is the factor that determines the amount of dividends in a policy. C Is the method used to compute the cash surrender value of the policy. D Does not affect the amount of premium paid.

Correct! The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly. a

Workers Compensation benefits are regulated by which entity? AFederal government BState government CEmployer DInsurer

Correct! The state government offers and regulates Workers Compensation benefits, which vary slightly from state to state. b

Which of the following determines whether disability insurance benefits are taxed? AWhether the premiums were tax deductible BState statutes CContract provisions DIf the total of benefits paid meets the minimum state taxation standard

Correct! The taxation status of benefits is often determined by whether the premium has been tax deducted. A

Which of the following definitions would make it easier to qualify for total disability benefits? AThe more liberal "own occupation" BThe more strict "any occupation" CThe more liberal "any occupation" DThe more strict "own occupation"

Correct! Total disability is defined differently under some disability income policies. The more liberal "own occupation" definition of disability makes it easier to qualify for benefits.

A policyowner has a health insurance policy with his wife listed as the primary beneficiary. He would like to change the primary beneficiary to his sister. Which of the following is true? AUnless the policy designated the current beneficiary as irrevocable, the policyowner can make the change at any time. BThe policyowner can only change the primary beneficiary with the current beneficiary's consent. CThe beneficiary may only be changed if a court deems the change acceptable. DThe policyowner will have to cancel this policy and apply for a new one with a new primary beneficiary.

Correct! Unless a beneficiary is designated as irrevocable, the insured can change beneficiaries without the consent of the former beneficiary. a

A provision found in insurance policies which prevents the insured from collecting twice for the same loss is called AConsent to settle loss. BRight of salvage. CAppraisal. DSubrogation.

Correct! When the insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company. D

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? A50% B60% C90% D100%

D

The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called AWorkers compensation. BNonoccupational coverage. CUnemployment coverage. DOccupational coverage.

D Correct! Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness.

The commissioner report any violations of insurance laws and regulations to the A. Guaranty Association B. Governor C. NAIC D. Attorney General

D. Attorney General The Insurance Commissioner is required to repot any violation of insurance law to the Attorney

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A. Alien B. Domestic C. Unauthorized D. Foreign

D. Foreign A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.

the commissioner has the power to examine and investigate the affairs of every insurance institution or agent doing business in North Carolina to determine which of the following? A. If the insurer stays active and conducts certain percent of business annually B. If the insurer has engaged in solicitations that include advertising and illustrations C. If the insureds have engaged in any conduct in violation of the General Statutes D. If the insurer remains solvent and conducts business in compliance with state laws and regulations

D. If the insurer remains solvent and conducts business in compliance with state laws and regulations The Commissioner has the power to examine and investigate the affairs of every insurance institution or agent doing business in North Carolina to determine if the insurer remains solvent and conducts business in compliance with state laws and regulations

Which of the following is NOT true regarding partial disability? A Benefit payments are typically 50% of the total disability benefit. B An insured would qualify if he couldn't perform some of his normal job duties. C This is a form of insurance that covers part-time workers. DThe insured can still report to work and receive benefits.

Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately results in a loss of income. Payment from partial disability is typically 50% of the total disability benefit. c

Under a Key Person disability income policy, premium payments AAre made by the employee and are tax-free. BAre made by the business and are tax-deductible. CAre made by the business and are not tax-deductible. DAre made by the employee and are not tax-deductible.

Premiums are nondeductible to the business; however, benefits are received tax-free by the business. c

Which of the following applies to partial disability benefits? APayment is limited to a certain period of time. BAn insured is entitled to a principal sum benefit for the partial loss of a limb. CPayment is based on termination of employment. DBenefits are reduced once an insured is no longer under a doctor's care.

The partial disability benefit is typically 50% of the total disability benefit, and is limited to a certain period of time. a

Which of the following statements regarding the Change of Beneficiaries Provision is false? AAll policies that allow a death benefit must at least provide the option of a change of beneficiary provision. BThe policyowner has the right to change beneficiaries in any case. CA policyowner can change beneficiaries without the consent of the former revocable beneficiary. DThe policyowner cannot change beneficiaries if he/she has chosen to have an irrevocable beneficiary, unless the policyowner has the permission of the irrevocable beneficiary.

The policyowner has the right to change beneficiaries unless he/she has chosen to have an irrevocable beneficiary. Otherwise, the policyowner can legally change beneficiaries, without the consent of the former beneficiary. b

An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance? ASocial Security Disability BWorkers Compensation CMajor Medical Insurance DLong-term Care

Workers Compensation provides employees with medical, income, death, and rehabilitation benefits in the event of work-related injury b

what is the difference between own occupation in any occupation?

a policy that has an any occupation provision will only provide benefits When the insured is unable to perform any occupation for which they are suited by reason of education, training, or experience. Own occupation is the more liberal definition and therefore provides a better benefit for the insured.

An insured misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued? a)Adjust the claim benefit to reflect the insured's true age b)Deny any claims and cancel the policy c)Deny paying a claim based on misrepresentation d)Pay the full amount of a claim because the contestable period has ended

a)Adjust the claim benefit to reflect the insured's true age The Misstatement of Age provision says that if a client has misstated her age, whether intentional or unintentional, they will adjust the benefit being paid. It doesn't matter when the mistake was found.

According to the Future Increase Option Rider (FIO), which of the following is NOT a qualifying event to increase an insured's benefit level? a)Death of a spouse b)Age 40 c)Marriage d)Birth of a child

a)Death of a spouse The FIO rider allows insureds to increase their benefit levels to certain amounts at specific times without proof of insurability. The following are the typical occasions when an insurer allows for a benefit increase: ages 25, 28, 31, 34, 37 and 40; marriage; and the birth of a child.

Which of the following is NOT true of a major-medical health insurance policy? a)It is designed to pay on a first dollar of expense basis. b)It usually has a maximum benefit amount. c)The benefits are subject to deductibles. d)It is designed to cover hospital and medical expenses of a catastrophic nature.

a)It is designed to pay on a first dollar of expense basis. A major medical policy usually has deductibles and a copayment requirement. Basic medical, but not major medical, expense policies pay on a first dollar basis.

Social Security Supplement (SIS) or Social Security Riders would provide for the payment of income benefits in each of the situations below EXCEPT a)When the amount payable under Social Security is more than the amount payable under the rider. b)When used to replace or supplement benefits payable under other social insurance programs. c)When the insured is eligible for Social Security benefits but before the benefits begin. d)If the insured has been denied coverage under Social Security.

a)When the amount payable under Social Security is more than the amount payable under the rider. These riders provide benefits when the amount payable under Social Security is less than the amount payable under the rider (in this case only the difference will be paid).

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? a)"Any occupation" - more restrictive than other definitions b)"Own occupation" - less restrictive than other definitions c)"Own occupation" - more restrictive than other definitions d)"Any occupation" - less restrictive than other definitions

b)"Own occupation" - less restrictive than other definitions In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered.

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? a)7 days b)10 days c)31 days d)60 days

b)10 days The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay? a)10 days b)15 days c)25 days d)45 days

b)15 days A probationary period refers to the amount of time that coverage is not available for illness-related disabilities, so it would not apply to a broken leg. The elimination period, however, is the time that must elapse between the onset of the disability and when benefits will start being paid. In this case, the individual is considered disabled for 45 days, and the benefits will start to be paid after 30 days. So, the client will receive benefits for 15 days.

What is the maximum age for qualifying for a catastrophic plan? a)26 b)30 c)45 d)62

b)30 Young adults under age 30 and individuals who cannot obtain affordable coverage (have a hardship exemption) may be able to purchase individual catastrophic plans that cover essential benefits.

Which of the following will NOT be considered unfair discrimination by insurers? a)Assigning different risk classifications to applicants based on gender identity b)Discriminating in benefits and coverages based on the insured's habits and lifestyle c)Charging applicants with similar health histories different premiums based on their ethnicity d)Cancelling individual coverage based on the insured's marital status

b)Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of a)Rebating. b)Misrepresentation. c)Concealment. d)Unfair claim practice.

b)Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

When an individual is covered under two health insurance policies that have duplicate benefits which could make a claim for benefits because of an injury or illness profitable, it is called a)Pro-rata coverage. b)Overinsurance c)Double indemnity coverage. d)Fraternal coverage.

b)Overinsurance Overinsurance is a term used to describe the situation that is created when an individual purchases duplicating coverage with the intent to collect from each policy for a single loss.

All of the following are true regarding key person disability income insurance EXCEPT a)The employee is the insured. b)Premiums are tax deductible as a business expense. c)The employer receives the benefits if the key person is disabled. d)The employer pays the premiums.

b)Premiums are tax deductible as a business expense. In key person disability insurance, the contract is owned by the business, the premium is paid by the business, and the business is the beneficiary. The key person is the insured, and the business must have the key person's consent to be insured in writing.

An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This results in a long hospitalization period. Which of the following is true? a)The group plan will pay depending on the employee's recovery. b)The group plan will not pay because the employee was injured at work. c)The group plan will pay. d)The group plan will pay a portion of the employee's expenses.

b)The group plan will not pay because the employee was injured at work. Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage.

In which of the following situations would Social Security Disability benefits NOT cease? a)The individual has undergone therapy and is no longer disabled b)The individual's son gets a part-time job to help support the family c)The individual reaches age 65 d)The individual dies

b)The individual's son gets a part-time job to help support the family Benefits cease when the individual reaches age 65, dies, or is no longer disabled. If a person has been receiving Social Security disability benefits at the time that he or she turns age 65, the disability benefits cease, and are replaced by Social Security retirement benefits. At death, family benefits will continue as survivor benefits. Benefits will continue for an adjustment period of three months if an individual no longer satisfies the definition of disability.

Which of the following is NOT a feature of a noncancellable policy? a)The insured has the right to renew the policy for the life of the contract. b)The insurer may terminate the contract only at renewal for certain conditions. c)The premiums cannot be increased beyond the amount stated in the policy. d)The guarantee to renew coverage usually applies until the insured reaches certain age.

b)The insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

Which characteristic does NOT describe managed care? a)Preventive care b)Unlimited access to providers c)High-quality care d)Shared risk

b)Unlimited access to providers There are five distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventive care, and high-quality care.

The sole proprietor of a business makes a total salary of $50,000 a year. This year, his medical expenses have reached a total of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses? a)$10,000 b)$25,000 c)$50,000 d)$75,000

c)$50,000 The proprietors of a business may deduct the cost of a medical expense plan because they are considered to be self-employed individuals instead of employees. The deduction cannot legally exceed the taxpayer's earned income for the year even if the cost of the medical expense plan exceeds this amount (in this scenario, $50,000).

An employer responsible for paying part or all of the premium for a group life or group health plan cannot willfully fail to pay the premium without first giving the employees how many days' advance notice? a)15 b)30 c)45 d)60

c)45 Any person, employer, or third-party administrator who is responsible for paying premiums on a group life or health plan cannot willfully fail to pay the premiums without first giving the employees at least 45 days' advance notice. Failure to follow this rule is a felony.

Which of the following must an insurer obtain in order to transact insurance within a given state? a)Business entity license b)Insurer's license c)Certificate of authority d)Producer's certificate

c)Certificate of authority All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.

Which of the following is the term for the specific dollar amount that must be paid by an HMO member for a service? a)Premium b)Cost share c)Copayment d)Deductible

c)Copayment A copayment is a specific dollar amount of the cost of care that must be paid by the member. For example, the member may be required to pay $5 or $10 for each office visit

An insurance institution or agent that discloses information in violation of the information privacy and disclosure statutes of North Carolina will be liable for a)The legal costs incurred by the client. b)Only such damages as can be proven in a court of law. c)Damages sustained by the individual to whom the information relates. d)Any legal action brought by the client within 5 years.

c)Damages sustained by the individual to whom the information relates An insurance institution, agent, or insurance-support organization that discloses information in violation shall be liable for damages sustained by the individual to whom the information relates. No individual, however, shall be entitled to a monetary award that exceeds the actual damages sustained by the individual as a result of a violation.

In disability income insurance, the time between the onset of an injury or sickness and when benefits begin is known as the a)Enrollment period. b)Probationary period. c)Elimination period. d)Qualification period.

c)Elimination period. On disability income insurance, the time between the onset of an injury or sickness and the time benefits begin is known as the waiting or elimination period.

What is another name for social security benefits? a)Disability and long-term care insurance b)Survivor benefits c)Old Age, Survivors, and Disability Insurance d)Medicare benefits

c)Old Age, Survivors, and Disability Insurance Social security benefits are also known as Old Age, Survivors, and Disability Insurance (OASDI).

Which of the following is correct regarding the taxation of group medical expense premiums and benefits? a)Premiums are not tax deductible and benefits are not taxed. b)Premiums are tax deductible and benefits are taxed. c)Premiums are tax deductible and benefits are not taxed. d)Premiums are not tax deductible and benefits are taxed.

c)Premiums are tax deductible and benefits are not taxed. Premiums paid by employers for Group Medical Expense insurance are tax deductible for the employer as a business expense. Also, policy benefits paid out to employees are not taxable as income to the employee.

All statements of the insured in any application for a policy of insurance are deemed a)Contractual considerations and must be unilaterally binding for the insured. b)Warranties. c)Representations. d)Either warranties or representations dependent upon the context in which they were written.

c)Representations. All statements or descriptions in any application for a policy of insurance, or in the policy itself, shall be deemed representations and not warranties. A representation, unless material or fraudulent, will NOT prevent a recovery on the policy.

If a licensee fails to notify the Commissioner of insurer insolvency, if known or suspected, and to provide a statement of relevant facts, which of the following is TRUE? a)The person will be subject to a fine. b)There will be no repercussions for that; reporting of insurer insolvencies is voluntary. c)The Commissioner may suspend or revoke the person's license. d)The Commissioner will issue a cease and desist order.

c)The Commissioner may suspend or revoke the person's license. It is the duty of any licensed person, or employee or representative of an insurance company to notify the Commissioner of any violations of the General Statutes of the Insurance Code, or insurer insolvency. The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who willfully fails to comply with this section of the Insurance Code.

Which statement accurately describes group disability income insurance? a)There are no participation requirements for employees. b)Short-term plans provide benefits for up to 1 year. c)The extent of benefits is determined by the insured's income. d)In long-term plans, monthly benefits are limited to 75% of the insured's income.

c)The extent of benefits is determined by the insured's income. Group plans usually specify the benefits based on a percentage of the worker's income. Group long-term plans provide monthly benefits usually limited to 60% of the individual's income.

According to the PPACA rules, what percentage of health care costs will be covered under a bronze plan? a)10% b)30% c)40% d)60%

d)60% Under the bronze plan, the health plan is expected to cover 60% of the cost for an average population, and the participants would cover the remaining 40%

How can a new physician be added to the PPO's approved list? a)Fill out the appropriate paperwork and wait the 12 month pre-certification period. b)Pay an annual fee for being on the PPO list. c)New physicians are only added once a year, and are selected by the PPO's Board of Directors. d)Agree to follow the PPO standards and charge the appropriate fees.

d)Agree to follow the PPO standards and charge the appropriate fees. Any physician or hospital that qualifies for and agrees to follow the PPO's standards and charges the established fees can be added to the PPO's approved list at any time. The providers may withdraw their name from the list at any time, as well.

Which of the following statements regarding Business Overhead Expense policies is NOT true? a)Premiums paid for BOE are tax-deductible. b)Any benefits received are taxable to the business. c)Leased equipment expenses are covered by the plan. d)Benefits are usually limited to six months.

d)Benefits are usually limited to six months. Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is a)More limited in general. b)More limited in duration. c)Broader in duration. d)Broader in general.

d)Broader in general. A policy that uses the accidental bodily injury definition will provide broader coverage than a policy that uses the accidental means definition.

In a basic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible? a)Full b)Half c)None d)Corridor

d)Corridor The basic expense policy will provide coverage on a first-dollar basis (no deductible). After the limits of the basic policy are exhausted, the insured must pay a corridor deductible before the major medical coverage will pay benefits. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage.

An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This would indicate that his policy was written with a 30-day a)Blackout period. b)Probationary period. c)Disability period. d)Elimination period.

d)Elimination period. The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.

If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company? a)Policyowners, as part of their premium b)Insured making payment c)Credit card company d)Insurer accepting payment

d)Insurer accepting payment Credit card payment fees are the responsibility of the insurer. In fact, it is one of the conditions for permitting the insurer to accept payments by credit card.

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply? a)No coverage will apply, since disability income policies cover sickness only. b)Coverage will apply since the break was accidental. c)Coverage will apply, but will be reduced by 50%. d)No coverage will apply, since the injury could have been foreseen.

d)No coverage will apply, since the injury could have been foreseen. An accidental means clause states that if the insured meant to do whatever caused their injury, no coverage applies since the resulting injury should have been foreseen.

Todd has been informed that he has a hernia which requires repair. When Todd researches the cost, he learns that his insurance plan will cover 200 points worth of surgical expenses. Each point represents $10, which means that $2000 of his surgery will be covered by his insurance plan. What system is Todd's insurance company using? a)Basic Surgical b)Point-based medical c)Conversion factor d)Relative value

d)Relative value In a relative-value approach, a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery.

Which of the following is NOT a feature of a guaranteed renewable provision? a)The insured has a unilateral right to renew the policy for the life of the contract. b)Coverage is not renewable beyond the insured's age 65. c)The insured's benefits cannot be reduced. d)The insurer can increase the policy premium on an individual basis.

d)The insurer can increase the policy premium on an individual basis. Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.

Which of the following is NOT a factor in determining qualifications for Social Security disability benefits? a)Worker's PIA b)Worker's age c)Number of work credits earned d)Worker's occupation

d)Worker's occupation A worker's specific occupation is not a factor in determining benefits, so long as the worker has earned the required amount of work credits.

once a Disability Policy is paying a claim, how long will it pay?

disability income insurance is designed to provide a reasonable and predetermined income to a disabled party for a set period of time subject to a time deductible termed and elimination period

how is the Social Security definition of disability different from that in most disability income policies?

disability, under Social Security, is defined as the inability to engage in any substantial gainful activity by reason of a medically determined physical or mental impairment that has lasted or is it expected to last 12 months or result in an early death. This definition is not as liberal as most definitions of disability found in policies marketed through insurance companies.