ExamFx Insurance Licensing
Existing insurers must provide policyowners with a policy summary for the existing life insurance how soon after a request? a)5 days b)10 days c)20 days d)31 days
a)5 days Existing insurers must provide policyowners with a policy summary for the existing life insurance within 5 days of a receipt of request.
All of the following actions by a producer may be grounds for license revocation or suspension EXCEPT a)Employing a person who has ever been convicted of a felony. b)Misrepresenting policy provisions. c)Having a license revoked in another state. d)Soliciting insurance for an unauthorized insurer.
a)Employing a person who has ever been convicted of a felony. The statute of limitation for convictions of a felony or crime of moral turpitude is 10 years. All of the other actions are subject to license suspension or revocation.
Which of the following is responsible for setting regulations pertaining to independent insurance producers and their required record retention? a)The Commissioner b)The producer c)The state legislature d)The insurer The Commissioner is responsible for setting insurance regulations regarding the minimum time length and the manner in which independent insurance producers must maintain records.
a)The Commissioner The Commissioner is responsible for setting insurance regulations regarding the minimum time length and the manner in which independent insurance producers must maintain records.
How many days after the completion of an examination must the Commissioner prepare a final report of its results? a)30 days b)60 days c)90 days d)180 days
b)60 days After an examination of an insurers accounts, transactions, records, documents and other pertinent information has been concluded, the Commissioner must issue a report within 60 days.
In replacement transactions, what is the term used for the issuer of the original policy that is being replaced? a)Replacing insurer b)Existing insurer c)Primary insurer d)Current insurer
b)Existing insurer The existing insurer issued the existing policy. The replacing insurer proposes the issuing of a policy that will replace the existing policy.
How long must producers maintain records of continuing education completion? a)2 years b)3 years c)4 years d)Indefinitely
c)4 years Producers must maintain a record of CE course completion for at least 4 years.
Bill is approaching retirement age and is concerned about having proper coverage, should he have to be placed in a Long Term Care facility. Bill's producer told him that LTC policies would provide necessary coverage at all of the following levels, EXCEPT a)Intermediate. b)Skilled. c)Acute. d)Custodial.
c)Acute. Acute care is provided by medical insurance.
Which of the following is NOT required for license reinstatement? a)Reinstatement fee b)Proof of continuing education completion c)Licensing examination results d)License renewal fee
c)Licensing examination results A producer's license that has been expired for no longer than 1 year may be reinstated if the producer files a reinstatement application with the Commissioner; pays the license renewal fee and a reinstatement fee of $100; and submits proof of completion of the continuing education requirements.
What is the purpose of the Maryland Health Insurance Plan? a)To provide protection to the insured against insolvent insurers b)To promulgate and regulate Iowa health insurance laws c)To provide health insurance to individuals who have been denied coverage d)To provide coverage for children in families with limited income
c)To provide health insurance to individuals who have been denied coverage The Plan provides access to affordable, comprehensive health benefits for medically uninsurable residents of this state.
Which of the following would authorize the commingling of premiums with the agent's personal funds? a)A third party signature b)The official seal of the insurer c)Commingling is never allowed d)A letter of consent from the principal
d)A letter of consent from the principal A letter of consent is required on the stationery of the producer authorizing the commingling of premiums with the agent's personal funds. The letter of consent remains in effect until cancelled and requires at least 30 days written notice.
When handling premium funds in the conduct of their business, insurance producers are acting in a a)Crediting capacity. b)Financial capacity. c)Special capacity. d)Fiduciary capacity.
d)Fiduciary capacity. Money designated as premium belongs to the insurance company. The producer is handling this money in a position of trust. Fiduciary is the term that refers to the handling of money.
If an individual covered as a dependent under a group life policy no longer qualifies as a dependent, which of the following is true? a)The dependent can convert group coverage to an individual policy, with evidence of insurability. b)The insured employee must pay increased premiums in order to continue coverage for the dependent. c)The insurer must cancel the dependent coverage. d)The dependent may convert group coverage to an individual policy, without evidence of insurability.
d)The dependent may convert group coverage to an individual policy, without evidence of insurability. If a dependent no longer qualifies for dependent coverage, most plans allow those covered dependents to convert their dependent group coverage to an individual policy, without having to provide evidence of insurability.
Which type of care re-establishes functional use to natural teeth? a) Functionality b) Repair c) Restorative d) Fillings
c) Restorative Restorative care re-establishes functional use to natural teeth, such as the application of fillings and crowns.
Which of the following is TRUE of a qualified plan? a)It may discriminate in favor of highly paid employees. b)It may allow unlimited contributions. c)It has a tax benefit for both employer and employee. d)It does not need to have a vesting schedule.
c)It has a tax benefit for both employer and employee. A qualified plan is approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.
Who can make a fully deductible contribution to a traditional IRA? a)Anybody; all IRA contributions are fully deductible regardless of income level b)Someone making contributions to an educational IRA c)A person whose contributions are funded by a return on investment d)An individual not covered by an employer-sponsored plan who has earned income
d)An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.
Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? a)Employee benefits are tax deductible the year in which they were received. b)Benefits received by the employee are free from federal income tax. c)Premiums paid by the employer are deductible as a business expense. d)Employee paid premiums may be deducted if certain conditions are met.
a) Employee benefits are tax deductible the year in which they were received For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense. However, any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee.
A situation in which a person can only lose or have no change represents a)Pure risk. b)Speculative risk. c)Adverse selection. d)Hazard.
a)Pure risk. Pure risk refers to situations that can only result in a loss or no change. Pure risk is the only type insurance companies are willing to accept.
Which of the following will NOT be covered under an individual health insurance policy? a)The applicant's house help b)The applicant's adopted child c)The applicant d)The applicant's spouse
a)The applicant's house help Individual health policies can cover the applicant and the applicant's spouse and children. Underwriting includes all of the people who would be insured under the plan.
The authority granted to an agent through the agent's contract is referred to as a)Absolute authority. b)Express authority. c)Apparent authority. d)Implied authority.
b)Express authority. Express powers are written into the contract between the insurer and the agent.
Regarding long-term care coverage, as the elimination period gets shorter, the premium a)Gets lower. b)Gets higher. c)Remains constant. d)Premiums are not based on elimination periods.
b)Gets higher. LTC policies also define the benefit period for how long coverage applies, after the elimination period. The benefit period is usually 2 to 5 years, with a few policies offering lifetime coverage. Obviously the longer the benefit period, the higher the premium will be; and the shorter the elimination period, the higher the premium will be.
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?a)Conditional b)Unilateral c)Unidirectional d)Aleatory
b)Unilateral In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?a)$10,000 b)$7,000 c)$3,000 d)$13,000
c)$3,000 If $100,000 of life insurance proceeds were used in a settlement option paying $13,000 per year for 10 years, $10,000 per year would be income tax free (as principal) and $3,000 per year would be income taxable (as interest).
Long-term care policies MUST cover a)Alcoholism. b)A pre-existing condition. c)Alzheimer's disease. d)Treatment payable by Medicare.
c)Alzheimer's disease. While normally mental and nervous disorders or disease are excluded in long-term care policies, Alzheimer's disease is not. The rest are all possible exclusions.
What is the official name for the Social Security program?a)Defined Benefit Retirement Insurance b)Qualified Pension Plan c)Old Age Survivors Disability Insurance d)Social Insurance Program
c)Old Age Survivors Disability Insurance Social Security is formally called Old Age Survivors Disability Insurance - OASDI.
Which of the following is a feature of a variable annuity?a)Payments into the annuity are kept in the company's general account. b)Interest rate is guaranteed. c)Securities license is not required. d)Benefit payment amounts are not guaranteed.
d)Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.
All of the following are true about group disability Income insurance EXCEPT a)Benefits are usually short term. b)The waiting period starts at the onset of the injury or sickness. c)The longer the waiting period, the lower the premium. d)Coverage applies both on and off the job.
d)Coverage applies both on and off the job. Employees who are injured on the job are covered by Workers Compensation insurance. Group Disability Income insurance is designed to cover employees only while they are off the job, so the coverage is considered to be nonoccupational in nature.
What is the term for the entity that an agent represents regarding contractual agreements with third parties?a)Client b)Designee c)Insured d)Principal
d)Principal An agent represents the principal, acting on the entity's behalf in contractual agreements with third parties.
Under most dental plans, what limitations are posed for denture replacement? a)Once every 5 years b)Once every 10 years c)No limitations d)Only the initial dentures are covered.
a)Once every 5 years Most dental plans limit coverage for repeated procedures. Dentures can only be replaced once every five years.
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a)Percentage of medical costs paid by the insurer b)Payments for life c)Yearly premium waiver and income d)Monthly premium waiver and monthly income
d)Monthly premium waiver and monthly income The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.
Which of the following is true regarding the spendthrift clause in life insurance policies? a)It is only used when the beneficiary is a minor. b)It is the same as irrevocable settlement clause. c)It can protect the policy proceeds from creditors of the beneficiary. d)It allows the beneficiary to select a different settlement option.
c)It can protect the policy proceeds from creditors of the beneficiary. The spendthrift clause in a life insurance policy prevents the beneficiary's reckless spending of benefits, and protects the policy proceeds from creditors of the beneficiary or policyowner.
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his a)Experience Rating. b)Group rate. c)Insurer's scheduled rate. d)Attained age.
d)Attained age. If an employee terminates membership in the insured group, the employee has the right to convert to an individual whole life policy without proving insurability. The insurer will determine what type(s) of policy an employee may convert to, but it must be issued at a standard rate, based on the individual's attained age.
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?a)Extended term b)Reinstatement c)Reduced paid-up option d)Automatic premium loan
d)Automatic premium loan Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply?a)Cost reduction b)Claims reduction c)Claims discrimination d)Case management provision
d)Case management provision Cost-saving services, also known as "case management provisions", include the following: controlled access of providers, large claim management, preventive care, hospitalization alternatives, second surgical opinions, preadmission testing, catastrophic case management, risk sharing, and providing high quality of care.
What percentage of individually-owned disability income benefits is taxable?a)0% b)50% c)100% d)Amount paid by insured
a)0% Premiums are paid with after tax dollars. Benefits are not income taxable.
How is emergency care covered for a member of an HMO? a)A member of an HMO can receive care in or out of the HMO service area, but care is preferred in the service area. b)A member of an HMO may receive care at any emergency facility, at the same cost as if in his or her own service area. c)HMOs have salaried member physicians, but they do not cover emergency care. d)An HMO emergency specialist will cover the patient.
a)A member of an HMO can receive care in or out of the HMO service area, but care is preferred in the service area. Emergency care must be provided for the member in or out of the HMO's service area. If emergency care is being provided for a member outside the service area, the HMO will be eager to get the member back into the service area so that care can be provided by salaried member physicians.
When an annuity is written, whose life expectancy is taken into account?a)Annuitant b)Beneficiary c)Life expectancy is not a factor when writing an annuity. d)Owner
a)Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.
An insured is the recipient of an Accidental Death and Dismemberment (AD&D) policy purchased by his employer. The policy pays triple indemnity in case of accidental death. If the insured died as a result of an accident stipulated in the policy, how will the benefits paid be taxed? a)Benefits received are considered income tax free. b)Benefits received will be taxed as capital losses. c)No taxes will be taken because no benefits will be paid. d)Benefits will be taxed as ordinary income.
a)Benefits received are considered income tax free. The life insurance portion or death benefit payable on an AD&D policy will be treated as non-taxable from the federal government.
Which of the following is NOT true of basic medical expense plans? a)Coverage for catastrophic medical expenses b)No deductibles c)First-dollar coverage d)Low dollar limits
a)Coverage for catastrophic medical expenses Basic medical expense plans were characterized by first-dollar coverage (no deductible) and low dollar limits, which meant they afforded no protection to an individual or family against catastrophic medical expenses that could be financially disastrous.
A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy? a)Family Protection Policy b)Universal Life Policy c)Family Income Policy d)Level Term Policy
a)Family Protection Policy Family protection insurance combines protection for all members of a family into one policy. It usually provides a permanent plan of insurance on the base insured, and term riders on other members of the family. Because they are all covered under a single policy, there is only one policy fee.
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose a)HR-10 (Keogh Plan). b)Section 457 Deferred Compensation Plan. c)403(b) plan. d)401(k) plan.
a)HR-10 (Keogh Plan). HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.
Which of the following is true regarding a term health policy?a)It is nonrenewable. b)It is conditionally renewable. c)It is guaranteed renewable. d)It is noncancellable.
a)It is nonrenewable. In term health policies, the owner has no rights of renewal.
Which of the following is TRUE regarding the annuity period?a)It may last for the lifetime of the annuitant. b)During this period of time the annuity payments grow interest tax deferred. c)It is also referred to as the accumulation period. d)It is the period of time during which the annuitant makes premium payments into the annuity.
a)It may last for the lifetime of the annuitant The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? a)Need is predicted using the number of years until the insured's retirement. b)Coverage is based on the predicted needs of that family. c)The death of an insured must be premature. d)It must be assumed that the death of the insured will occur immediately.
a)Need is predicted using the number of years until the insured's retirement. In the needs approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.
Which of the following statements is INCORRECT concerning Medicare Part B coverage? a)Part B coverage is provided free of charge when an individual turns age 65. b)Participants under Part B are responsible for an annual deductible. c)Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges. d)It is a voluntary program designed to provide supplementary medical insurance to cover physician services, medical services and supplies not covered under Part A.
a)Part B coverage is provided free of charge when an individual turns age 65. Those who desire Part B coverage must enroll and pay a monthly premium.
If an individual is covered by a policy that includes an Accidental Death & Dismemberment rider, what term describes the maximum benefits he will receive if he loses sight in both eyes as a result of a fire? a)Principal sum b)Reciprocal amount c)Capital sum d)Percentage of full amount
a)Principal sum If the insured dies, the insurer pays the full amount, also known as the "principal sum". Principal sum will most likely be paid out if the insured loses sight in both eyes or loses two limbs. If the insured lives but loses a hand or foot or the sight in one eye, the insured will be paid a percentage of the principal sum, called the "capital sum."
In respect to the consideration clause, which of the following is consideration on the part of the insurer? a)Promising to pay in accordance with the contract terms b)Offering a secondary policy to the applicant c)Offering an unconditional contract d)Explaining policy revisions to the applicant
a)Promising to pay in accordance with the contract terms The consideration clause requires the insurer to promise to pay in accordance to the terms stated in the contract.
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a)Revocable beneficiary. b)Secondary beneficiary. c)Contingent beneficiary. d)Irrevocable beneficiary.
a)Revocable beneficiary. The policyowner may change a revocable designation at any time and without the consent of the beneficiary. Irrevocable beneficiaries, on the other hand, have a vested interest in the policy, so the policyowner may not be able to exercise certain rights without their consent.
In a group policy, who is issued a certificate of insurance? a)The individual insured b)The health care provider c)The insurance company d)The employer
a)The individual insured The individuals covered under a group insurance contract are issued certificates of insurance. The certificate tells what is covered in the policy, how to file a claim, how long the coverage will last, and how to convert the policy to an individual policy.
Income replacement contracts agree a)To replace the insured's income up to a stated percentage if the insured suffers a loss due to a covered accident or sickness. b)To replace income if the head of the household is the primary insured, and he/she loses income due to a lay-off. c)To cover any accident on the job, but not accidents outside of his/her job. d)To replace the insured for his/her company, including hiring and training wages.
a)To replace the insured's income up to a stated percentage if the insured suffers a loss due to a covered accident or sickness. Income replacement contracts agree to replace the insured's income, considering all sources of income, up to a stated percentage if the insured suffers a loss due to a covered accident or sickness.
In a survivorship life policy, when does the insurer pay the death benefit? a)Upon the last death b)Upon the first death c)Half at the first death, and half at the second death d)If the insured survives to age 100
a)Upon the last death Survivorship life pays on the last death rather than upon the first death.
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?a)Variable b)Term c)Securities d)Stock
a)Variable Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy? a)Reporting and rejection of risks. b)Selection, classification, and rating of risks. c)Transacting of insurance. d)Issuance of policies.
b) Permanent. Unlike term insurance, permanent insurance provides lifetime death protection, including premature death, and a savings or investment option.
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? a)4 credits b)6 credits c)10 credits d)40 credits
b)6 credits To be considered currently (or partially) insured, an individual must have earned 6 credits during the last 13-quarter period.
Which of the following does the Insuring Clause NOT specify? a)The name of the insured b)A list of available doctors c)Covered perils d)The insurance company
b)A list of available doctors The Insuring Clause lists the insured, the insurance company, what kind of losses are covered, and for how much the losses would be compensated.
The agent is known as the "Field Underwriter" because of the information he/she gathers for the insurer. This helps the insurer a)Reduce the number of staff underwriters. b)Avoid adverse selection. c)Comply with State law. d)Learn about the underwriting process.
b)Avoid adverse selection. The writing agent is normally the only insurance company representative that actually sees the applicant.
A group policy used to provide accident and health coverage on a group of persons being transported by a common carrier, without naming the insured persons individually is called a)Limited benefit policy. b)Blanket policy. c)Universal policy. d)Comprehensive policy.
b)Blanket policy. A single policy covering several certificate holders without naming the insureds individually is a blanket policy.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a a)Whole Life Policy. b)Convertible Term Policy. c)Renewable Term Policy. d)Decreasing Term Policy.
b)Convertible Term Policy. A convertible term policy has a provision that allows the policyowner to convert to permanent insurance.
Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? a)Employee paid premiums may be deducted if certain conditions are met. b)Employee benefits are tax deductible the year in which they were received. c)Benefits received by the employee are free from federal income tax. d)Premiums paid by the employer are deductible as a business expense.
b)Employee benefits are tax deductible the year in which they were received. For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense. However, any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee.
Which of the following expenses is NOT covered by a health insurance policy?a)Dental b)Funeral c)Hospital d)Disability
b)Funeral Health insurance policies cover losses caused by accidents and/or sickness. Funeral expenses are not expressly covered.
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 cannot withdraw money from his MEC before age 59½. b)He will have to pay a penalty if he is younger than 59½. c)He will have to pay a penalty regardless of his age. d)He will not have to pay a penalty, regardless of his age.
b)He will have to pay a penalty if he is younger than 59½. Any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life contract. All withdrawals are subject to taxation on a LIFO basis, and if withdrawals are made earlier than the age of 59½, a 10% penalty is imposed.
Which of the following factors about the insured determines the amount of disability benefit that the insured will receive?a)Age b)Income c)Gender d)Marital status
b)Income Disability benefits are paid to those who are unable to work as they normally would, due to an accident or illness. Benefits are designed to help the insured recover income lost as a result of the disability. The amount of benefits that an insured receives is determined by the insured's earned income and is usually limited to a certain percentage of that amount.
Which benefits would a disability plan most likely pay?a)Medical expenses associated with a disability b)Income lost by the insured's inability to work c)Rehabilitation costs d)Copayments
b)Income lost by the insured's inability to work Disability benefits are paid to those who are unable to work as they normally would, due to an accident or illness. Benefits are designed to help the insured recover income lost as a result of the disability. The amount of benefits that an insured receives is determined by the insured's earned income and is usually limited to a certain percentage of that amount.
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? a)Underwriter's Report b)Inspection Report c)Medical Information Bureau's report d)Agent's Report
b)Inspection Report Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the Fair Credit Reporting Act.
What is the benefit of choosing extended term as a nonforfeiture option? a)It can be converted to a fixed annuity. b)It has the highest amount of insurance protection. c)It matures at age 100. d)It allows for coverage to continue beyond maturity date.
b)It has the highest amount of insurance protection. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.
In group insurance, what is the policy called? a)Certificate of insurance b)Master policy c)Entire contract d)Certificate of authority
b)Master policy In group insurance the policy is called the master policy and is issued to the policyowner, which could be the employer, an association, a union, or a trust.
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 applies. The insured could find that information in the a)Certificate of Coverage. b)Notice Regarding Replacement. c)Policy application. d)Buyer's Guide.
b)Notice Regarding Replacement. The Notice Regarding Replacement must inform the applicant of the 30-day free-look provision of the replacing policy.
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.
Which services are associated with Standard & Poor's and AM Best? a)Storing medical information collected by insurance companies b)Rating the financial strength of insurance companies c)Investigating violations of The Fair Credit Reporting Act d)Providing employment histories for investigative consumer reports
b)Rating the financial strength of insurance companies Reports generated by Standard & Poor's and AM Best help prospective consumers to judge the financial security of various insurance companies.
An insured committed suicide one year after his life insurance policy was issued. The insurer will a)Pay nothing. b)Refund the premiums paid. c)Pay the policy's cash value. d)Pay the full death benefit to the beneficiary.
b)Refund the premiums paid. If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to a refund of premium.
When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis?a)Scheduled b)Reimbursement c)Service d)Limited
b)Reimbursement The insured is responsible to pay the provider, and the policy reimburses the insured for covered expenses.
Health insurance underwriting is best defined as a)Reporting and rejection of risks. b)Selection, classification, and rating of risks. c)Transacting of insurance. d)Issuance of policies.
b)Selection, classification, and rating of risks. The underwriting process is accomplished by reviewing and evaluating information about an applicant and applying what is known of the individual against the insurer's standards and guidelines for insurability and premium rates.
Which type of life insurance policy generates immediate cash value? a)Continuous Premium b)Single Premium c)Level Term d)Decreasing Term
b)Single Premium Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.
All of the following are beneficiary designations EXCEPT a)Primary. b)Specified. c)Tertiary. d)Contingent.
b)Specified. Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.
A health insurance policy may cover all of the following risks EXCEPT a)Medical expenses. b)War-related injuries. c)Dental expenses. d)Loss of income due to disability.
b)War-related injuries. Health insurance policies will not cover war-related sickness or injury.
What is the penalty for IRA distributions that are below the required minimum for the year?a)10% b)25% c)50% d)60%
c)50% If there are no distributions at the required age, or if the distributions are not large enough, the penalty is 50% of the shortfall from the required annual amount.
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? a)A privacy notice b)A buyer's guide c)A policy summary d)A notice regarding replacement
c)A policy summary A policy summary usually includes all the listed information, and must be delivered along with a new policy.
A 25-year-old individual wants to take measures now to make sure that after he retires, he will maintain a steady, guaranteed income. What would best help him do this? a)Stock investments b)High-interest savings account c)An annuity d)Life insurance
c)An annuity Annuities provide a source of guaranteed income for the annuitants, without having to worry about relying upon investments for income. Annuities are commonly used for a means to fund post-retirement income.
While a claim is pending, an insurance company may require a)The insured to be examined only once annually. b)An independent examination only once every 45 days. c)An independent examination as often as reasonably required. d)The insured to be examined only within the first 30 days.
c)An independent examination as often as reasonably required. While a claim is pending, an insurance company may require an independent exam as often as reasonably required.
Medicaid is sponsored by what kind of sources? a)Federal only b)State only c)Both state and federal d)Private companies
c)Both state and federal Medicaid is sponsored at both the state and federal levels. Most other standard health insurance programs are provided by private insurance companies.
Which of the following types of insurance policies is most commonly used in credit life insurance? a)Whole life b)Equity indexed life c)Decreasing term d)Increasing term
c)Decreasing term Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as decreasing term insurance.
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is a)Correctly insured. b)Permanently insured. c)Fully insured. d)Partially insured.
c)Fully insured. A worker is fully insured under Social Security if the worker has accumulated the required number of credits based on his/her age.
How are HMO territories typically divided? a)Community rating system b)By where the HMO can find the least expensive physicians c)Geographic areas d)Type of physician services available
c)Geographic areas The HMO offers services to those living within specific geographic boundaries (for example, along county lines). Persons who live within the boundaries are eligible to belong to the HMO, but if they do not live within the boundaries, they are ineligible.
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis?a)Nondiscriminatory b)Indemnity c)Guaranteed d)Noncancellable
c)Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called a)Accelerated benefits. b)Cost of living. c)Guaranteed insurability. d)Waiver of cost of insurance.
c)Guaranteed insurability. Guaranteed insurability is a rider that is included at the time of application (or can be added at a later date) which allows the insured to increase the amount of insurance without proving evidence of insurability.
What is the main purpose of the Seven-pay Test? a)It ensures that the policy benefits are paid out in 7 years. b)It guarantees the minimum interest. c)It determines if the insurance policy is a MEC. d)It requires level premium payments for 7 years.
c)It determines if the insurance policy is a MEC. The Seven-pay Test determines whether an insurance policy is "over-funded" or if it's a Modified Endowment Contract. In other words, the cumulative premiums paid during the first seven years of a policy must not exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs and interest.
According to the PPACA metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participants would cover the remaining 10%, what type of plan is that?a)Silver b)Gold c)Platinum d)Bronze
c)Platinum Bronze level benefit plans pay 60% of expected health care costs; silver level plans pay 70%; gold level plans pay 80%, and platinum level plans pay 90%.
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a)Survivorship insurance. b)Juvenile protection provision. c)Survivor protection. d)Life planning.
c)Survivor protection. Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.
All of the following coverages are usually included under a dental insurance plan EXCEPT a)Routine examinations. b)Braces and appliances. c)Teeth whitening. d)Oral surgery.
c)Teeth whitening. Diagnostic care and preventative care are both included in a dental insurance plan, including oral surgery, routine examinations, and braces or other appliances.
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?a)A corporation can be an annuitant as long as the beneficiary is a natural person. b)The contract can be issued without an annuitant. c)The annuitant must be a natural person. d)A corporation can be an annuitant as long as it is also the owner.
c)The annuitant must be a natural person. Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
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 a portion of the employee's expenses. b)The group plan will pay depending on the employee's recovery. c)The group plan will not pay because the employee was injured at work. d)The group plan will pay.
c)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 a viatical settlement, who is considered the viator? a)The insurer b)The third party c)The insured d)The policy beneficiary
c)The insured In a viatical settlement, the insured is considered the viator. Viators usually receive a percentage of the policy's face value from the third party who purchases the policy. The new owner continues to maintain premium payments and will eventually collect the entire death benefit.
Which of the following will vary the length of the grace period in health insurance policies?a)The length of time the insured has been insured b)The term of the policy c)The mode of the premium payment d)The length of any elimination period
c)The mode of the premium payment The grace period is 7 days on a policy with a weekly premium mode; 10 days if a monthly premium mode; 31 days on other premium modes.
Which of the following is NOT true regarding nonprofit health service plans in this state?a)They must provide individual with affordable health insurance. b)They must contribute to the improvement of the overall health status of the residents. c)They are regulated by the federal government. d)They are exempt from taxation.
c)They are regulated by the federal government. Nonprofit health service plans in this state are regulated by the provisions of the State Insurance Code, and as public benefit corporations, they are exempt from taxation.
When would a 20-pay whole life policy endow? a)After 20 payments b)In 20 years c)When the insured reaches age 100 d)At the insured's age 65
c)When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
What limits the amount that a policyowner may borrow from a whole life insurance policy?a)Premiums paid b)Amount stated in the policy c)Face amount d)Cash value
d)Cash value The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.
A man is injured while robbing a convenience store. How does his major medical policy handle the payment of his claim? a)50% of claim will be paid. b)If the man is not convicted, he will get 75% of his claim paid. c)The claim is paid in full. d)Claim is denied if his policy contains the Illegal Occupation provision.
d)Claim is denied if his policy contains the Illegal Occupation provision. This optional provision specifically excludes coverage for injuries incurred while performing an illegal act. The insurer will not be liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony or to which a contributing cause was the insured's being engaged in an illegal occupation.
What process will the insurance company use to monitor the insured's hospital stay to make sure that everything is proceeding according to schedule?a)Prospective review b)Corridor deductible c)Preventive review d)Concurrent review
d)Concurrent review Under the concurrent review process, the insurance company will monitor the insured's hospital stay to make sure that everything is proceeding according to schedule and that the insured will be released from the hospital as planned.
An insured is admitted to the hospital for surgery on a herniated disk. The insurance company monitors the treatment and progress in order to make sure that everything proceeds according to the insurer's schedule. This is called a)Prospective review. b)Comprehensive review. c)Schedule of benefits. d)Concurrent review.
d)Concurrent review. Under the concurrent review process, the insurance company will monitor the insured's hospital stay to make sure that everything is proceeding according to schedule and that the insured will be released from the hospital as planned.
Which of the following will NOT be an appropriate use of a deferred annuity?a)Accumulating retirement funds b)Accumulating funds in an IRA c)Funding a child's college education d)Creating an estate
d)Creating an estate Deferred annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children's college education. Unlike life insurance, annuities do not create an estate, but liquidate it.
The main purpose of ERISA is to ensure that a)Employees are able to extend group health coverage after termination of employment. b)Uniform policy terms and provisions are established for all insurers in all states. c)High quality care is available to all insured. d)Employees receive the pension and other benefits promised by their employers.
d)Employees receive the pension and other benefits promised by their employers. ERISA (Employee Retirement Income Security Act of 1974) was enacted to ensure that employees receive the pension and other benefits promised by their employers. It also incorporates and is tied to provisions of the Internal Revenue Code (IRC) designed to encourage employers to provide retirement and other benefits to their employees.
An insured is involved in an accident that renders him permanently deaf, although he does not sustain any other major injuries. The insured is still able to perform his current job. To what extent will he receive Presumptive Disability benefits? a)Partial benefits b)Full benefits for 2 years c)No benefits d)Full benefits
d)Full benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of at least two limbs (Loss of use does not qualify in some policies.), total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work.
What kind of policy issues certificates of insurance to insureds? a)Individual insurance b)Nonqualified annuity c)Any insurance d)Group insurance
d)Group insurance Individuals covered by group life insurance do not receive a policy, but receive a certificate of insurance from the master policy.
All of the following statements concerning Medicaid are correct EXCEPT a)Individual states design and administer the Medicaid program under broad guidelines established by the federal government. b)Individuals claiming benefits must prove they do not have the ability or means to pay for their own medical care. c)Persons, at least 65 years of age, who are blind or disabled and financially unable to pay, may qualify for Medicaid Nursing Home Benefits. d)Medicaid is a state funded program that provides health care to persons over age 65, only.
d)Medicaid is a state funded program that provides health care to persons over age 65, only. Medicaid is a government funded (both state and federal) program designed to provide health care to poor people of all ages.
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? a)The Entire Contract Provision b)The Consideration Clause c)Assignment Rights d)Owner's Rights
d)Owner's Rights Policyowners can learn about their ownership rights by referring to the policy.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?a)Premiums are tax deductible by the key employee. b)Premiums are tax deductible as a business expense. c)Premiums are taxable to the employee. d)Premiums are not tax deductible as a business expense.
d)Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
What would a physician utilize if he/she wanted to know if a treatment is covered under an insured's plan and at what rate it will be paid? a)Concurrent review b)Comprehensive review c)Supplementary chart d)Prospective review
d)Prospective review Under the prospective review or precertification provision, the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.
After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?a)Termination penalty b)Bail-out charge c)Inflation adjustment d)Surrender charge
d)Surrender charge If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.
Which of the following is NOT true regarding the annuitant?a)The annuitant's life expectancy is taken into consideration for the annuity. b)The annuitant receives the annuity benefits. c)The annuitant must be a natural person.d)The annuitant cannot be the same person as the annuity owner.
d)The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a)Any type of insurance policy may be used. b)The employer pays a bonus to a selected employee to fund the policy. c)It is considered a nonqualified employee benefit. d)The policy is owned by the company.
d)The policy is owned by the company. The policy is owned by the employee.
Annuity contracts grow tax deferred. That means that a)The annuitant's contributions are not taxed until the annuity is surrendered. b)As the annuity grows, only the interest is taxed. c)Upon surrender, all the benefits are received tax free. d)There is no current income taxation upon the growth in the annuity.
d)There is no current income taxation upon the growth in the annuity. Values that accumulate within an annuity contract are treated as tax-deferred growth. This means that as the annuity grows, there is no current income taxation upon the growth in the annuity.
Which of the following is TRUE for both equity indexed annuities and fixed annuities?a)They are both tied to an equity index. b)Both are considered to be more risky than variable annuities. c)They invest on a conservative basis. d)They have a guaranteed minimum interest rate.
d)They have a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
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)Flexible lifeb)Variable lifec)Adjustable lifed)Universal life
d)Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.