Final Exam LIFE and HEALTH
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?
Residual Disability
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
Which of the following requires that an applicant for an individual Health Policy be notified of an investigation into his personal character, general reputation, and mode of living?
Insurance Information and Privacy Protection Act
Which of the following health insurance coverages is BEST suited for meeting the expenses of catastrophic illness?
Major medical
Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year. Z will become eligible to receive benefits starting on
March 1
J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?
Nonoccupational coverage
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to
P only
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA laws, which of the following statements is TRUE?
She does NOT need to provide evidence of insurability
P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?
Sign an enrollment card
insuring clause
The clause in an Accident and Health policy which defines the benefit amounts the insurer will pay is called the
Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
The correct answer is "Less restrictive". A policy that uses the "accidental bodily injury" definition of an accident is less restrictive than the one that uses the "accidental means" definition.
An agent that has been or is engaged in conduct that violates the Insurance Information and Privacy Protection Act shall be issued and served a statement of charges and notice of hearing by the Commissioner of Insurance. The date of such hearing shall be AT LEAST how many days after service of charges?
10
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
Approved premium rates for group health insurance shall be guaranteed by the insurer for an initial period of not LESS than how many months?
12
An insurer must provide an insured with claim forms within __ days after receiving notice of a loss.
15
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
An insured must notify an insurer of a medical claim within how many days after an accident?
20
Under the Affordable Care Act (ACA), health coverage is provided for dependents up to the age of
26
Under a Group Health Insurance Policy, continuation shall be available only to an employee who has been insured immediately prior to the date of termination for a period of AT LEAST
3 months
AT LEAST how many days before the effective date of a rate increase must an insurer provide written notice to individual accident and health policyowners?
30
According to the Information and Privacy Protection Act, when access to recorded personal information is requested following an adverse underwriting decision, the insurer must make the information available within how many business days?
30
If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds, the insurer must pay interest on the proceeds after how many days?
30
S is employed by a large corporation that provides group health coverage for its employees and their dependents. If S dies, the company must allow his surviving spouse and dependents to continue their group health coverage for a maximum of how many months under COBRA regulations?
36 months
M's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force?
45
Every insurance agent/broker MUST maintain all records, books, and documents for insurance transactions for a period of not less than
5 years
Eligible employees must be added to group health coverage NO LATER than how many days after their first day of employment?
90
An agent who sells an individual life insurance policy in North Carolina MUST deliver to the policyowner
A Policy Summary and Buyer's Guide
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?
A recurrent disability
C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
ABC is the policyowner, C is the insured, and ABC is the beneficiary
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider The means of providing life insurance on the children of a person who is covered by a life insurance policy is by a child term rider.
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
Commercial insurer
Before a Health Policy is issued or delivered, the form, classification or risks, and premium rates MUST be filed with the
Commissioner of Insurance
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Conditional receipt
Which of the following consists of an offer, acceptance, and consideration?
Contract
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Contributory
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurer has the right to change the premium rate for the overall risk class?
Correct. The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specified age. These usually have increasing premiums.
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following EXCEPT
Correct. Upon delivery of a rated life insurance policy, the Producer must obtain all of these EXCEPT a "Signed HIPAA disclosure". The HIPAA disclosure should be taken at the time of sale with the application.
What is the purpose of the Time of Payment of Claims provision?
Prevents delayed claim payments made by the insurer
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
The correct answer is "Portion of the premiums paid for by the employer may be a tax deduction". In a contributory plan, the employer may file a tax deduction for its share of the premium costs.
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
If an individual has an Accidental Death and Dismemberment policy and dies, an autopsy can be performed in all these situations EXCEPT
When the state prohibits this by law
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?
The maximum amount considered eligible for reimbursement by an insurance company under a health plan
In order to establish a Health Reimbursement Arrangement (HRA), it MUST
be established by the employer
Medicaid was designed to assist individuals who are
below a specific income limit
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age
All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT
bilateral
The following acts are examples of unfair methods of competition and deceptive practices in the business of insurance EXCEPT the use of
comparisons showing that a policy has higher benefits
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
conversion provision
The funds used by the Life and Health Insurance Guaranty Association to carry out its purpose are obtained from the
member companies
Every Group Health Policy providing benefits for chemical dependency treatments must include, for the life of the contract, a
minimum benefit of 16K
A policyowner is allowed to pay premiums more than once a year under which provision?
mode of premium
Periodic health claim payments MUST be made at least
monthly
If a company accepts a renewal premium payment that would extend coverage beyond the policy's MAXIMUM age limit, the company
must continue the coverage to the end of the period of time for which the premium was accepted
J purchased a Disability Income Policy that ONLY J can terminate and on which the rates will never increase above those illustrated in the policy. Which of the following types of policies did J purchase?
noncancelable
If an insurer has been notified by the Commissioner of Insurance that an individual Health Policy form does not comply with the state's laws, the insurer may
not issue the form in connection with any new application
The benefits under a Disability Buy-Out policy are
payable to the company or another shareholde
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
policyowner The correct answer is "policyowner". The policyowner (investor) benefits upon the death of the insured.
The Coordination of Benefits provision
prevents an insured covered by two health plans from making a profit on a covered loss
A major medical policy typically
provides benefits for reasonable and necessary medical expenses, subject to policy limits
All of the following actions are considered rebating EXCEPT
sharing commissions with other licensed and appointed agents
The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as
"Employee's premiums paid by the employer is tax-deductible to the employer as a business expenditure
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit If the insured dies before the endowment's maturity, the policy's face value — also known as the "death benefit" — is paid in a lump sum to any beneficiaries.
Any changes made on an insurance application requires the initials of whom?
Applicant
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
T is receiving $3,000/month from a Disability Income policy in which T's employer had paid the premiums. How are the $3,000 benefit payments taxable?
Benefits are taxable to T When a disability income insurance plan is paid for entirely by the employer, the premiums are deductible to the employer. The benefits, in turn, are taxable to the recipient.
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell
A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant?
Disability Income
B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?
Disability Income
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate?
Earned, but unpaid benefits
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at age 65 - An endowment policy is characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date (before age 100).
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?
Entire Contract
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
term insurance
Expires at the end of the policy period
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Her group health plan
The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the
Insuring clause
Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy?
Issue the policy with an altered Time of Payment of Claims provision
Which of these are NOT an example of a Nonforfeiture option? Extended Term Reduced Paid-up Cash Surrender Life Income
Life Income
The fund that assures policyholders payment of death benefits on Life Policies, if the company is insolvent at the time of the claim, is called the
Life and Health Insurance Guaranty Association
The rules and regulations of the Life and Health Insurance Guaranty Association in North Carolina apply to
Life and Health Policies issued by companies authorized in North Carolina
The health insurance program which is administered by each state and funded by both the federal and state governments is called
Medicaid
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
Modified Whole Life
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these is NOT a type of agent authority?
Principal
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K's estate if P dies within a specified time
What must the policyowner provide to the insurer for validation that a loss has occurred?
Proof of Loss
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
Which of the following terms is defined as any transaction in which new life insurance or a new annuity is to be purchased and existing life insurance or annuity is to be terminated or discontinued?
Replacement
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium. Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.
What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision?
Submit the claim in any form
Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party?
Subrogation
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
The correct answer is "Split-dollar". A split-dollar plan is an arrangement where an employer and an employee share in the cost of purchasing a life insurance policy on the employee. The employee is also allowed to name the policy beneficiary.
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
When applied to Whole Life insurance, the word "straight" denotes
The duration of premium payments
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate
Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT?
The income from the TSA is received income tax-free
G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G's policy, who is responsible for paying the medical bills?
The insured
In life insurance, the needs approach is used mostly to establish
how much life insurance a client should apply for
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following BEST describes how pre-admission certifications are used?
Used to prevent nonessential medical costs
A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
applicant's physician
In a qualified retirement plan, the yearly contributions to an employee's account
are restricted to maximum levels set by the IRS
One of the stated purposes of the Life and Health Insurance Guaranty Association is to
assist in the prevention of insurer insolvencies
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
decreasing term (no cash value)
Circulation of any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of an insurer is known as
defamation
Medicare Part A and Part B do NOT pay for
dental work
The reason for a business having a Business Overhead Expense Disability Plan is to cover
fixed business expenses
When L applies for a Health Insurance Policy, L unintentionally fails to list a previous visit to a cardiologist. If the insurance company contests the policy, it MUST do so within 2 years
from the date of the issue
To be licensed as an accident and health insurance agent in North Carolina, the applicant MUST
have successfully completed at least 20 hours of instruction approved by the Commissioner of Insurance
medicare
hospital and medical expense insurance program
Continuation of coverage of a group Hospital, Surgical, and Major Medical Policy MUST include
hospital expenses
An insurer receives proof of loss for an acceptable medical expense claim under an Individual Health Insurance Policy. Under the Time of Payment of Claims provision, the insurer MUST pay the benefits
immediately
An insurance company MUST clearly specify questions designed to obtain information solely for marketing research
in any insurance transaction
When must insurable interest exist for a life insurance contract to be valid?
inception of the contract
A policy of adhesion can only be modified by whom?
insurance company
The Insurance Information and Privacy Protection Act is designed to limit or direct the information collection activities of all of the following EXCEPT
insurance regulators
An insurance broker in North Carolina is a representative of the
insured
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the
insurer dates the policy
A policyowner would like to change the beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy and make the change permanent. Which type of designation would fulfill this need?
irrevocable
An agent who signs a blank contract application or policy of insurance
is guilty of a misdemeanor
All of the following are limited benefit plans EXCEPT cancer policies life insurance policies dental policies critical illness policies
life insurance policies
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
life settlement contract
The Notice of Claims provision requires a policyowner to
notify an insurer of a claim within a specified time
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning
november 1
Deductibles are used in health policies to lower
overuse of medical services
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT
partial withdrawal features beyond a surrender charge period
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
revocable
If the Commissioner of insurance finds that a licensed person has used fraudulent, coercive, or dishonest practices or has proved to be incompetent, untrustworthy, or financially irresponsible, the law allows the Commissioner to
suspend, revoke, or refuse to renew the agent's license
What type of life insurance are credit policies issued as?
term
What kind of life insurance product covers children under their parent's policy?
term rider
Which of these life insurance riders allows the applicant to have excess coverage?
term rider
consideration clause includes
the schedule and amount of premium payments
Which of the following statements is true about most Blue Cross/Blue Shield organizations?
they are nonprofit organizations
A disability elimination period is best described as a
time deductible
Inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is
twisting
A written agreement to provide a Life Insurance Policy holder immediate cash in exchange for the sale and transfer of a Life Insurance Policy is a
viatical settlement
Disability policies do NOT normally pay for disabilities arising from which of the following?
war
The part of a life insurance policy guaranteed to be true is called a(n)
warranty
What type of insurance offers permanent life coverage with premiums that are payable for life?
whole life
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
"Modified Premium Life". Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter.
The policyholder has how many days to return an Accident/Health Insurance Policy and receive a full refund on premiums?
10
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years -The correct answer is "10 years". In this situation, the family would receive an income from the policy for 10 years. Family Income Policies pay an income beginning at the insured's death and continues for a period specified from the date of policy issue.
XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is
100
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy?
Premiums are waived after the insured has been totally disabled for a specified time period
Which of the following actions is NOT possible with a Universal Life policy? Policy's cash value may be used to pay premiums Premium payments may be made at unscheduled times Premiums may be applied as a credit against income tax Face amount may be adjusted
Premiums may be applied as a credit against income tax
T is covered by two health insurance plans: a group plan through his employer and his spouse's plan as a dependent. Under the Model Group Coordination of Benefits provision, when T files a claim, his employer's plan is considered the
Primary carrier
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of Premium rider
Pre-hospitalization authorization is considered an example of
managed care Pre-hospitalization authorization is the insurer's approval of an insured entering a hospital. Many health policies require this as part of an effort to manage costs.
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
monthly