ExamFX Practice test

In order to be characterized as pure or insurable risk, the loss must be... 3 things

#1 the loss exposure must be large #2 the loss must be due to chance #3 the loss must be measurable — the loss does not have to be catastrophic

List 3 personal uses of life insurance & 1 circumstance that isn't a personal use of life insurance

#1 you buy life insurance to provide future income for a surviving spouse #2 an individual buys term insurance to help the family pay off the mortgage in case of premature death #3 an individual buys whole life insurance to fund his children's college education - not— purchasing insurance to fund a buy-sell agreement

What are the 3 recognized areas in which insurable interest exist ?

* policy owner insuring: - his/her own life - life of a family member ( relative or spouse) - life of a business partner - life of a key employee * a debtor does not have an insurable interest in the creditor

List 4 characteristics of term life insurance

* temporary protection * no cash value * less expensive * may be renewed

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

100%

Proof of loss forms must be sent to the insured within how many days of the notice of claim?

15 days

How long do terminated employees have to convert their coverage without evidence of insurability?

31 days

How long must the grace period be for annual premium payment modes

31 days

The number of credits required to be considered fully insured under social security is how many ?

40 quarters ( 10 years of work times 4 maximum annual credits)

The misstatement of age provision allows the insurer to do what?

Adjust the benefit at any time

When does a whole life policy endow or mature ? And what happens if the person reaches the endowment period?

Age 100 If they reach the age then the full face value is paid (minus any outstanding policy loans)

Who can make a fully deductible contribution to a traditional IRA ?

An individual under the age of 70 1/2 who has earned income

Which provision may be added to a permanent life policy , that insures that the policy will not lapse as long as there is cash value ?

Automatic premium loan option

The partial transfer of policy ownership rights and privileges in a policy to a bank or lender is called a/an what

Collateral assignment

What document must be made part of the entire contract ?

Copy of the original application

What do comprehensive plans cover?

Covers all accidents and sicknesses , unless stated in the policy as an exclusion

A blanket policy covers members of what?

Covers members of a particular group when they are participating in a particular activity *individuals are automatically covered *members do not receive a certificate of insurance

What type of rating system uses the actual claim of a group as a factor in developing the rates for coverage ?

Experience Rating

True or false? Legal action may be taken by the insured at any time?

False they must wait 60 days to take legal action

Slippery floors, habit of lying , reckless driving are all examples of what?

Hazards because they increase the chance of loss

To be eligible for a health saving account (HSA) an individual must be covered by which of the following plan?

High-deductible health plan

Medicaid will not provide benefits for this?

Income assistance for work related injuries

Which cost more? Individual coverage or group coverage and why?

Individual cost more The cost of group coverage is lower than the cost of individual coverage since the administrative costs and selling expenses found in group health insurance are far less

The minimum # of credits required for partially insured status is how many?

Insured must have earned 6 credits during the last 13- quarter period

a survivorship life policy insures who "similar to what other policy type" & the premium is based on what?

Insures two or more lives "like a joint life policy" and the premium is based on a joint age

Under which settlement option does the insurer retain the death benefit but pays the Benny the earnings on the death benefit ?

Interest only " is a dividend option" interest only settlement

What's underwriting & hows it accomplishes?

Is a risk selection and classification process, and it's accomplished by reviewing and evaluating information about an applicant & determining whether an applicant is insurable and at what premium rate

What's a capital sum

It's the capital amount that's usually 50% of the principal sum "total amount" , and it's paid for the loss of a single body part.

Part a Medicare is known as what and what does it cover ?

Known as hospital insurance Covers skilled nursing facility Hospitalization Hospice care *does not cover physicians services

Rank 3 annuities from lowest to highest on the amount of monthly income they would provide.

Life with refund option , life with 10 years certain, straight life

Name a private health plan

Medicare supplements "medigap"

What's a reason that an insurer could terminate a long term care insurance policy ?

Non payment of the premium

When insurers negotiate contracts with health care providers or physicians to provide health care services to subscribers at a favorable cost its called what?

Preferred provider organization "insurers negotiate the rates for specific procedures for their subscribers"

What type of care is respite care ?

Relief for the main care giver ?

Optionally renewable provision is similar to what provision and what's it do?

Renewability provisions.. is an optionally renewable provision that gives the insurer the option to terminate the policy for any reason on the date specified in the policy ( typically the renewal date ) insurer can increase the premium in any class

What is risk retention & 3 examples

Risk retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles , copayments, or self-insurance

A qualified plan may not favor whom?

Shareholders & top executives

Under a credit disability policy, payments will be made to the creditor by the insured until what point?

Until the insured can return back to work or until the debt is repaid

(LTC) May not be provided as what"to what"

As a rider to Medicare

What type of plans are HMOs & why?

They are service plans because HMOs provide benefits in the form of services rather than in the form of reimbursement for services of the physician or hospital

What is one reason someone would purchase an annuity concerning risk?

They may believe they will outlive their retirement income

This "title" makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance (without what)?

Title 18, US code , sections 1033-1034 - without a written letter of consent from an insurance regulatory authority

Bob receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy?

Single premium immediate annuity Immediate- any annuitization in 12 months or less from the effective date is an immediate annuity - a single premium annuity is where you only pay 1 single premium ..

List 3 privileges an owner of an adjustable life policy

*increasing or decreasing the premium * changing the premium payment mode * increasing or decreasing the face amount of coverage * changing the period of protection

In order for insurance contracts to be legally binding, what 4 elements must the contract contain?

1. Agreement- offer & acceptance 2. Consideration 3. Competent parties 4. & a legal purpose

What is required to be stated in the outline of coverage provided with a long term policy?

1. Basic info about the company 2. Right to return the policy for a refund 3. Policy # -basic info about supplementary policies is NOT required to be stated

The affordable care act mandates that insurers provide coverage for adult children of the insured until what age?

26- if the child is it eligible for other group coverage

Most policies will pay the accidental death benefits as long as the death is caused by the accident and occurs within how many days ?

90 days

An insured receives $50,000 from a $100,000 accidental death & dismemberment policy as a result of a lost arm in an accident. This benefit is consider a/an

A capital sum

What happens before the department of insurance issues a cease & desist order for unfair trade practices?

A hearing is held

The beneficiary chooses to receive the life policy proceeds in the form of monthly income at the rate of $3,000 per month, until principal and interest are exhausted. What settlement option did the Benny select?

Fixed amount

An annuity , issued by an insurance company , is the only type of investment that can guarantee what?

Guarantee a lifetime income that the annuitant cannot outlive

What does the automatic premium loan option do ?

If the premium is not paid out and the policy reaches the end of the grace period , the insurance company can borrow money from the cash value as a loan to prevent lapse

How can an individual on social security become eligible for Medicare ?

If they've been entitled to social security benefits for 2 years

What information do consumer reports include ?

Includes information regarding a persons credit, character, reputation & habits

What is apparent authority

Is the appearance or the assumption of authority based on the actions , words, or deeds of the agent

What's the purpose of the fair credit reporting act ?

Is to protect consumers against the circulation of inaccurate or obsolete information, & to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers

The most common exclusions are what

Military / war service Aviation Hazardous occupation

When does the guaranteed insurability rider allow the insured to purchase additional coverage ?

Specified future dates ( usually every 3 years ) or events ( such as marriage, or birth of a newborn child ) without evidence of insurability

Which rider would NOT increase the health policy premium for a policy owner?

The impairment rider

What's a collateral assignment ?

When you transfer enough control to the lender to ensure the repayment of a loan after death. If the loan is paid off before death the full control returns back to the insured

Which insurance is known for having a level premium with a fixed rate of return resulting in guaranteed cash value?

Whole life insurance

Fixed life insurance policies offer what?

Offer minimum guaranteed or fixed benefits stated in the contract

* Define modified whole life, ordinary whole life, single premium whole life "these are ranked lowest to highest for initial premiums"

Modified whole life - all the insured to pay a lower premium than traditionally/ordinary whole life for the first few years Single premium whole life- requires a large , one-time, upfront payment to begin the policy , thus it cost more than a traditional policy

What is experience rating

Is where premiums are determined by the loss experience of a particular group as a whole

Explain the impairment rider

It excludes coverage for specified conditions "Reduced benefits"

What does it mean when they say "life insurance creates an immediate estate"?

It means the beneficiary is immediately able to receive to policy face value in a lump sum upon the death of the insured

An annuitant is paying into an annuity that will be used to help supplement his retirement in a few years. His premium payments go into the insurers separate account & purchase accumulation units. What type of annuity did he purchase ?

A variable annuity * all variable products must be maintained in a separate account

Which Medicare supplemental plan are the core benefits found in?

All plans The benefits in plan A are considered to be the core benefits but must be included in all other plans