General CA Ins Law-Basic Ins Concepts and Principles

Chapter: Health/Disability Insurance Which of the following is NOT a standard level of care? A Intermediate nursing care B Hospice care C Home care and community-based care D Custodial care

B Hospice care Correct! Skilled nursing care, intermediate nursing care, custodial care, home health care, home care and community based care are considered standard levels of care. Hospice care is not a standard level of care. (CIC10232.1)

Chapter: Life Insurance For an insurance contract to be valid in the State of California, when must insurable interest exist? A At any time prior to the issue of a policy on the beneficiary B At the time at which a claim for indemnification is made C At the time at which the first premium is paid D At the time of application for a policy on the insured

D At the time of application for a policy on the insured Correct! Insurable interest must be established at the time of application and remains valid for the duration of the policy as long as premiums remain current.

Chapter: General California Insurance Law According to California Insurance Code, which of the following can be classified as an insurable event? A Pure risks B Unpredictable losses C Speculative risks D Extreme levels of loss

A Pure risks Correct! Any event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him/her, may be insured against. The more predictable a loss, the more insurable it becomes. Only pure risks are insurable. Speculative losses are uninsurable.

Chapter: Life Insurance All life and disability policies issued to individuals who are age 65 or older must offer a right-to-return period of at least how long? A 20 days B 30 days C 90 days D 10 days

B 30 days correct! Seniors must be given at least 30 days to examine the policy and, if not satisfied, return it for a full refund.

Chapter: Life Insurance For how long must agents keep records of insurance transactions? A 20 years B 5 years C 10 years D 15 years

B 5 years correct! Agents must keep records associated with insurance transactions for at least 5 years. The Commissioner can audit these records at any time.

Question 7 of 8 Chapter: Health/Disability Insurance Basic elements of the outline of coverage include all of the following EXCEPT A A statement concerning Alzheimers coverage and other cognitive impairments. B That an "inflation guard" is required. C That benefits will not increase unless an "inflation guard" option is chosen. D Renewal and termination provisions.

B That an "inflation guard" is required. correct! Based on the outline of coverage for an LTC policy, the insured will have a free look period to review all the policy provisions and decide to keep or return the policy for a refund. The outline includes that the cost of care will increase over time but that the benefits will not unless an inflation protection option is chosen, and it will include the renewal and termination provisions. A statement concerning Alzheimer's coverage and coverage for other cognitive impairments must be included as well.

Question 7 of 8 Chapter: Health/Disability Insurance If an agent wants to handle workers compensation cases, what type of license must he/she obtain? A Industrial B Casualty C Accident and Health D Workers Compensation

C Accident and Health correct! Those agents who handle workers compensation claims must obtain an accident and health agent's license.

Chapter: Health/Disability Insurance Which of the following would be exempt from the jurisdiction of the California Department of Insurance? A Agent transacting insurance in the state of California. B Health care service plan. C Admitted insurer subject to jurisdiction in Nevada. D Insurer that provides coverage for chiropractic services.

C Admitted insurer subject to jurisdiction in Nevada. Correct! All entities that provide coverage designed to pay for health care providers' services and expenses must be under the jurisdiction of the California Department of Insurance unless they show that while providing the services they are subject to the jurisdiction of another agency of this or another state or the federal government.

Chapter: General California Insurance Law Insurance is the transfer of A Hazard. B Peril. C Risk. D Loss.

C Risk.

Chapter: General California Insurance Law According to the California Insurance Code, every applicant must notify the Commissioner in writing of any change of address A Within 60 days. B Within 10 days. C Within 30 days. D Immediately.

D Immediately. Correct! Each applicant must notify the Commissioner immediately of any change in address.

If an insured intentionally failed to communicate information related to an implied warranty, which of the following may occur? A The insured will be fined. B The insurer may increase premiums at anniversary date. C The insurer will cancel the policy and retain the premiums paid. D The insurer may rescind the contract.

D The insurer may rescind the contract. Correct! According to CIC 338, an intentional and fraudulent omission on the part of one insured to communicate information of matters proving or tending to prove the falsity of a warranty entitles the insurer to rescind.

Chapter: Life Insurance Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation A Be fined a sum of $1,000. B Be fined a sum of $10,000. C Be administratively suspended from licensing for a period of 180 days. D Be fined a sum of $5,000.

A Be fined a sum of $1,000. Correct! An agent who violates the replacement provision of the Code will be fined a $1,000 for the first offense.

An intentional or unintentional concealment entitles the affected party to which of the following? A Rescission of a contract. B Estoppel. C Waiver of concealed conditions. D Subrogation of a contract.

A Rescission of a contract. Correct! Concealment, whether intentional or unintentional, entitles the affected party to rescind the insurance policy.

Which of the following is the closest term to an "authorized" insurer? A Licensed B Legal C Admitted D Certified

C Admitted Correct! Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

Chapter: Health/Disability Insurance A long term care policy sold in California includes insurance designed to provide which of the following? A Care given in an acute care center of a hospital B Medicare supplement coverage C Major medical expense coverage D Institutional care and home care

D Institutional care and home care Correct! Long-term care insurance includes disability-based long-term care policies but does not include insurance designed primarily to provide Medicare supplement or major medical expense coverage. Acute care is not covered by LTC insurance.

Chapter: Property and Liability Basics When an insurer cancels an automobile insurance policy for a reason other than nonpayment of premium, the insurer must meet all of the following requirements EXCEPT A Offer the insured to renew the policy at a different rate. B Send a 20-day notice. C Inform the policyowner about the automobile liability assigned risk plan. D Explain the reason for policy cancellation.

A Offer the insured to renew the policy at a different rate. Correct! Notice of policy cancellation may be effective only if mailed or delivered by the insurer to the policyowner at least 20 days prior to the effective date of cancellation, accompanied by the reason for cancellation. The insurer must also notify the insured about the existence of the automobile liability assigned risk plan.

What is the major difference between a Stock Company and a Mutual Company? A Ownership B Amount of death benefit C Number of producers D Types of whole life policies

A Ownership Correct! Mutual companies are owned by policyholders, while stock companies are owner by stockholders.

Chapter: Health/Disability Insurance Which of the following is true regarding the regulation of providers? A Only health care service plan providers fall under the jurisdiction of the DOI. B Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. C Only the Department of Insurance can be the regulator for insurance providers. D There are no specifications on regulation of providers.

B Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. Correct! All entities that provide coverage designed to pay for health care providers' services and expenses must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

Chapter: Health/Disability Insurance In reference to the standard Medicare Supplement benefits plans, what does the term "standard" mean? A All plans must include basic benefits A - N. B Coverage options and conditions are developed for average individuals. C All providers will have the same coverage options and conditions for each plan. D Coverage options and conditions comply with the law, but will vary from provider to provider.

C All providers will have the same coverage options and conditions for each plan. correct! In reference to the standard Medicare Supplement benefits plans, the term "standard" implies that all providers will have the same coverage options and conditions for each plan.

Chapter: Life Insurance The attempt to "save" an original policy from replacement or lapse is called A Misrepresentation. B Fraud. C Conservation. D A misdemeanor.

C Conservation. Correct! Conservation is an attempt to "save" the original policy when the insured is considering replacement. This allows the insured to make an informed decision instead of blindly assuming that replacing the policy would be the best decision. Requirements During the time of taking the application and underwriting, an agent must do the following: When the client already has life insurance, the applications will require a signed statement by the client confirming his or her intentions to replace, as well as a signed statement from the agent determining whether he or she knows/suspects that a replacement may be involved. The application will ask for information on all current life insurance policies the client has. If there may be a replacement, there is another separate disclosure form, a "Notice Regarding Replacement of Life Insurance." This must be signed by the client and agent at time of application. On this form detailed information may also be listed concerning the current policy, including name and address of the current insurer(s), as well as policy number and amounts of coverage. A copy of this form (often a triplicate form) is to be left with the client for their records. Another must be sent in with the application, and the agent/branch office may retain the third. The new potential insurer is then required to send a copy of this disclosure to the original insurer. This allows the original insurer to contact the client and address any of their concerns. This attempt to "save" the original policy is called conservation. As long as it is done truthfully, this allows the client to better make an informed decision. Conservation is good and should be encouraged in the best interest of the client. Copies of materials or information used in replacement or conservation should be left with the client. Remember, notifying the original insurer is not meant to protect the interests of the original agent; it's for the consumer protection. If an existing insurer attempts conservation, it has 20 days to give the policyowner an outline of the current policy to help him or her make this fair comparison. When annuities are involved, the disclosure information must be in the contract summary. The replacing insurer may request the existing insurer to furnish it with a copy of the summaries or ledger statement, which must be within 5 working days of the receipt of the request. Replacement rules do not apply in the following situations: Replacing credit life insurance; Replacing group life insurance or group annuities; When converting or changing the current policy (with the same insurer); and Transactions where the replacing insurer and the existing insurer are the same (a new policy). The burden of following the replacement rules falls on the replacing insurer to ensure that its agents are following these guidelines properly. This includes making sure the applications and disclosures properly ask replacement questions and returning to the agent any applications not correctly completed. The replacing and existing insurers must retain evidence of all signed applications and disclosures, as well as other materials used in replacement or conservation, for no less than 3 years. If the proposed new policy is underwritten and is then delivered to the client, the client has a 30-day free-look period to evaluate the policies. Within this time period, if the client chooses to decline the new policy, the insurer must issue a full refund, no questions asked. The replacing insurer must provide a notice stating that the owner has a right to an unconditional refund of all premiums on the front of the policy jacket or on the cover page of its life insurance policy or annuity contract or, alternatively, as a separate written document which is delivered with the life insurance policy or annuity contract. When an agent isn't used in the sales process (example: direct response or internet marketing), the replacing insurer must present to the client a disclosure similar to the one described earlier, as soon as a replacement is suspected, even if that means presenting the disclosure when the actual policy is delivered (usually via mail). To maintain this standard, the insurer should still ask on the application what life insurance the applicant currently has, as well as whether a replacement is involved. Not using agents does not excuse companies of their replacement responsibility. If the client, in his or her haste to save a month's premium, cancels the original policy or just fails to pay it, and then passes the grace period, then the first policy will lapse. The client will then get declined or rated by the new insurer during the underwriting process. If he or she decides against obtaining the new policy, then the person has lost the first policy and is now uninsurable. The client may have trouble reinstating and may be unable to get insurance with the new company. An agent should never leave a client in a worse condition (without any insurance) than the condition in which the client was found. If a client insists on canceling or changing his or her current coverage before the proper time, the agent should have the client write and sign a letter saying he or she is acting contrary to the agent's advice. Hurting a client in the replacement process is an easy way for an agent to open himself or herself up to administrative troubles with the Department of Insurance and potential legal liability in court. The following are replacement considerations: Even though the policies may be similar, the newer policy may be more expensive because the client is older and potentially not as insurable. Changing the current policy may make more sense than starting over with a new policy. The client might not have to worry about starting the incontestability period over as he or she might with a new company. Will the new company honor any incontestability periods that have already been met with the first company? Are premiums in either policy guaranteed, or can either change over time? If so, when or how often? If cash value, does the current policy have a surrender charge? Would a 1035 exchange benefit the client? Sample Disclosure (CIC 10509.4(d)) NOTICE REGARDING REPLACEMENT REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY Are you thinking about buying a new life insurance policy or annuity and discontinuing or changing an existing one? If you are, your decision could be a good one, or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed benefits. Make sure you understand the facts. You should ask the company or agent that sold you your existing policy to give you information about it. Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest. We are required by law to notify your existing company that you may be replacing their policy. ____________________ ____________________ ____________________ (Applicant) (Agent) (Date)

The failure to disclose known facts is known as A Fraud. B Warranty. C Misstatement. D Concealment.

D Concealment. Correct! According to CIC 380, neglecting to communicate that which a party knows, and ought to communicate is concealment.

Chapter: Property and Liability Basics Which of the following is a characteristic of a purchasing group? A It is considered a self-insured group. B A purchasing group must be domiciled in California. C It assumes and spreads the liability exposure of each member among all of the members. D It purchases liability insurance covering all members on a group basis.

D It purchases liability insurance covering all members on a group basis. correct! The purpose of a purchasing group is the purchase of liability insurance on a group basis.

Which of the following is NOT a license in the state of California? A Solicitor B Insurance agent C Life broker D Life-only agent

correct! There is no such license as "life broker" or "health broker."

Chapter: Life Insurance According to the Insurance Code, what is the minimum age that a person must be to qualify as a "senior citizen?" A 55 B 60 C 65 D 70

B 60 correct! Senior citizens are at least 60 years of age.

In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following? A Truthfulness of such statements being made. B Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. C Interpretation that the seller places on such information in the agreement. D Amount of information that has been previously disclosed through the inquiry process.

B Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. Correct! Materiality is to be determined not by the event, but solely by the influence of the facts upon the party to whom the communication is due, in forming his/her estimate of the disadvantages of the contract.

Representations in insurance contracts qualify as A Expressed warranties. B Misrepresentations. C Facts. D Implied warranties.

D Implied warranties correct! Representations in insurance contracts qualify as implied warranties.

All records relating to insurance application and delivery must be maintained by the insurer for a period of A 5 years after policy delivery or initial application if no policy was issued. B 3 years after policy delivery or 3 years after initial application if no policy was issued. C 4 years after policy delivery or initial application if no policy was issued. D 2 years after policy delivery or 3 years after initial application if no policy was issued.

A 5 years after policy delivery or initial application if no policy was issued. B 3 years correct! As dictated by CIC 10508, all records relating to insurance application must be maintained for 5 years after policy delivery or initial application.

Chapter: Life Insurance In 2000, a law firm purchased a buy-sell agreement policy on each of its partners. In 2005, one partner left to start a new practice; however, the firm continued to pay the premiums on the policy. In 2007, the former partner died. The partners of the firm filed a claim on the policy to collect the death benefit despite the fact that the deceased was NOT part of the firm or its leadership. The insurer A Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application. B Can legally sue the firm for insurance fraud and WILL NOT pay a claim due since the insurable interest no longer exists. C Will pay the death claim to the beneficiary since the premiums were current although according to contract law, insurable interest MUST exist at the time of claim. D Will refund "unearned" premiums and WILL NOT pay the claim since the insurable interest no longer exists.

A Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application. correct! Insurable interest must be established at the time of application and remains valid for the duration of the policy as long as premiums remain current. When Insurable Interest is Required in Life Insurance Policies (CIC 10110) An important question to ask in providing life insurance is, "On whose life can you buy life insurance, and when is it allowed?" Naturally, individuals may buy life insurance on themselves. Even though they will be "departed," it is presumed by the company that the individuals who bought the policies care about those "loved ones" they leave behind. In this case, the individual buys the policy and owns the policy. He or she has control over it to increase, decrease, cancel coverage, or change provisions. Luckily, one may not buy insurance on strangers or mere friends; their consent is required. The insurance company would deem this too risky and frankly--a little suspicious. Remember, in theory, there's no profit in insurance. One cannot speculate on the continuation of someone else's life. Insurance is meant to indemnify one against the effects of the loss insured against. The insurer will require what is called insurable interest. Insurable interest can be determined by asking the following questions: If the insured dies, will the policyowner (or his/her dependants) suffer a financial hardship or be left at an economic disadvantage? Does the insured owe the policyowner money or some sort of current or future economic support? Do the insured and policyowner have a close enough relationship that they share common economic and/or familiar goals? Do the insured and policyowner have a common ownership interest in property? According to state law, every person has insurable interest in the following: Himself or herself; Any person upon whom he/she depends wholly or in part for education or support; Any person under a legal obligation for the payment of money or respecting property or services which may be delayed or prevented by death or illness (for example, child support); and Any person upon whose life any estate or interest vested in him/her depends. A simple way to determine whether insurable interest exists is by remembering the term blood and business. Blood refers to family relations such as husband and wife, parent and child, or brother and sister. Family members who support one another or have common goals such as purchase of a home or business, often buy life insurance to ensure either support or goals will be met after one of them dies. Insurance will often be used in alimony and child support. So, included in this are former family relations as well. As a part of a divorce decree, the spouse paying alimony/support may also have to maintain (pay for) life insurance on him- or herself. In this case, the other spouse owns the policy. This way, if the payor/insured dies, support will still be paid in some way. Business refers to relationships such as business partnerships/co-owners, employers and key-employees, and creditors (lenders) and debtors (borrowers). It is important to note here that insurable interest only applies to the policyowner, not the beneficiary. Neither the policyowner nor the insured need to establish insurable interest when designating a beneficiary. Anyone--a complete stranger, business, or charitable organization--can be a beneficiary as long as he or she is willing to accept the money. Insurable interest applies to all types of insurance. You wouldn't buy auto insurance on a car that you do not own. There must be an insurable/ownership interest. When it comes to insurable interest, there is one difference between life and health insurance and property and casualty insurance: when must the insurable interest exist? With life and health, insurable interest must exist at the time of application but not necessarily at the time the loss occurs (CA Ed. Obj.II.A.6. - CIC 10110). If it's not obvious why someone is going to own a policy on someone else's life (i.e. same address and last name), the agent should note the relationship on the application so that the underwriter is clear as to the insurable interest. With P&C, the interest must exist both at the time of application, and when the loss occurs.

An insurer, by filing a notice of appointment on behalf of an applicant, shall be deemed to have declared that the applicant has had experience or instruction in insurance or that the necessary instruction will be given within A 60 days after issuance of license. B 30 days after issuance of license. C 20 days after issuance of license. D 10 days after issuance of license.

B 30 days after issuance of license. Correct! An insurer must provide instruction in insurance within 30 days after the filing a notice of appointment.

According to the California Law, if an insurer includes a fraudulent claim clause in the contract regarding the legal ramifications of a false claim, the clause must be preceded by which of the following statements? A "State law requires that insurance fraud be reported to county, state and federal authorities for the maximum prosecution allowed by law." B "WARNING! The following conditions are in accordance with California Law." C "For your protection, California Law requires the following to appear on this form." D "The legal ramifications only apply to insurance professionals."

C "For your protection, California Law requires the following to appear on this form." Correct! If an insurance contract contains the following message: "Any person who knowingly presents false or fraudulent claim for the payment of loss is guilty of a crime and may be subject to fines and confinement in state prison," it must also include the following statement: "For your protection, California Law requires the following to appear on this form."

Chapter: General California Insurance Law According to the California Law, if an insurer includes a fraudulent claim clause in the contract regarding the legal ramifications of a false claim, the clause must be preceded by which of the following statements? A "For your protection, California Law requires the following to appear on this form." B "The legal ramifications only apply to insurance professionals." C "State law requires that insurance fraud be reported to county, state and federal authorities for the maximum prosecution allowed by law." D "WARNING! The following conditions are in accordance with California Law."

A "For your protection, California Law requires the following to appear on this form." correct! If an insurance contract contains the following message: "Any person who knowingly presents false or fraudulent claim for the payment of loss is guilty of a crime and may be subject to fines and confinement in state prison," it must also include the following statement: "For your protection, California Law requires the following to appear on this form."

Chapter: Property and Liability Basics When an auto insurance policy is cancelled for nonpayment of premium, how many days' notice must the insurer provide to the policyowner? A 10 days B 15 days C 20 days D 30 days

A 10 days correct! Notice of policy cancellation may be effective only if mailed or delivered by the insurer to the policyowner at least 20 days prior to the effective date of cancellation, or 10 days' notice when cancellation is for nonpayment of premium, accompanied by the reason for cancellation. Policy Cancellation/Failure to Renew (CIC 481.5, 660-669.5, 670, 673, 675-679.6) Auto Insurance: Notice of policy cancellation may be effective only if mailed or delivered by the insurer to the policyowner at least 20 days prior to the effective date of cancellation, or 10 days' notice when cancellation is for nonpayment of premium, accompanied by the reason for cancellation. When a policy of automobile liability insurance is canceled, other than for nonpayment of premium, the insurer must notify the named insured of his or her possible eligibility for automobile liability insurance through the automobile liability assigned risk plan. No admitted insurer licensed to issue motor vehicle liability policies may cancel, or refuse to renew, a motor vehicle liability insurance policy covering drivers hired by a commercial business establishment merely for the reason that those drivers have been convicted of violations of the Vehicle Code or the traffic laws of any subdivision of the state which were committed while operating private passenger vehicles not owned or leased by their employer. In addition, insurers may not nonrenew a policy solely on the basis of the age of the insured. Liability insurance policy: A policy of liability insurance issued to a local public entity or state agency as a named insured may not be cancelled or have renewal declined for reasons other than nonpayment of premium unless notice is mailed to the named insured at least 45 days prior to the effective date of nonrenewal or at least 60 days prior to the effective date of cancellation. Such notice need not be sent if a renewal notice stating a premium for an additional period of coverage has been sent the named insured at least 45 days before cancellation or expiration of an existing policy and such premium has not been tendered the insurer before such cancellation or expiration. Homeowners policy: The arbitrary cancellation of the insured's homeowners policy solely on the basis that the policyholder has a license to operate a family home day care at the insured location will subject the insurer to administrative sanctions authorized by the Insurance Code unless any of the following is true: There has been a material misrepresentation of fact The risk has changed substantially since the policy was issued Nonpayment of premium The insurer no longer writes homeowners policies. Financed insurance policy: Lenders may not exercise the right to cancel a financed insurance policy because of the default of the insured under a premium payment loan agreement until the lender has given the insured a 10 days' notice of cancellation.

Chapter: Life Insurance What is the maximum amount of coverage that may be extended to the insured's dependents under a group life insurance policy? A 100% of the insurance on the life of the insured employee B 75% of the insurance on the life of the insured employee. C 50% of the insurance on the life of the insured employee D 30% of the insurance on the life of the insured employee

A 100% of the insurance on the life of the insured employee correct! In group policies, insurance coverage can be extended to the dependents of the insured employee. The coverage, however, cannot exceed 100% of the insurance on the life of the insured employee.

What is reinsurance? A An agreement between a ceding insurer and assuming insurer B An agreement between originating insurer and ceding insurer C An agreement between a domestic insurer and a foreign insurer D An agreement between an insurer and an insured

A An agreement between a ceding insurer and assuming insurer Correct! The originating company that procures insurance on itself in another insurer is called the "ceding insurer." The other insurer is called "assuming insurer."

HeartBeat, Inc. submits a rate plan to the Commissioner's office on the first of the month and immediately implements this new rate plan the next day prior to receiving the Commissioner's approval. This type of rate plan is known as A File and Use. B Open Competition. C Prior Approval. D Use and File.

A File and Use. correct! File-and-use laws require that the rate plan be filed prior to marketing the plan; however, such laws provide that once the plan is filed, the insurer does not have to wait for Commissioner approval to begin marketing the plan. Review ContentNext Question

Chapter: Health/Disability Insurance All of the following are true in regards to 24 Hour Coverage EXCEPT A It can be distributed through a life insurance policy. B Employees are covered around the clock. C It reduces litigation concerning cause of injury or disease. D Gaps in coverage are reduced as employees get coverage for both occupational and nonoccupational injuries and diseases.

A It can be distributed through a life insurance policy. correct! The terminology "24 Hour Coverage" comes from the fact that employees are covered "around the clock", i.e. 24 hours a day, 7 days a week, 365/366 days a year. While they are working, employees are covered under the Workers Compensation part of the policy. Off-the-job they are covered under the nonoccupational part. 24 Hour Coverage does not include distribution through a life insurance policy.

Chapter: Health/Disability Insurance All applicants for long term care insurance receive an outline of coverage which A Must be presented at the time or initial solicitation for LTC insurance. B Describes in detail all of the terms and conditions of the LTC insurance. C Must be presented at the time the policy is delivered. D Is an advertisement about long term care insurance benefits.

A Must be presented at the time or initial solicitation for LTC insurance. correct! The Code requires agents to provide the prospect with an outline of coverage at the time of initial solicitation or before they begin the application process. (CIC 10233.5)

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A Mutual B Reciprocal C Nonprofit Service Organization D Stock

A Mutual Correct! Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid. Review ContentNext Question

Chapter: Health/Disability Insurance "Qualified" long term care policies covering "home care" must provide benefits if the insured is impaired in at least two of the six activities of daily living (ADL). "Impaired" means A Needs substantial "hands on" or "standby" assistance with ADLs B Can't perform any of the ADLs C Has Parkinson's disease D Needs occasional help with the ADLs

A Needs substantial "hands on" or "standby" assistance with ADLs correct! To qualify for benefits, the requirement is for "human assistance" (hands on) or "continual substantial supervision" (standby) when performing the ADLs. (CIC 10232.8) Home Care Required Benefits (CIC 10232.8) Long-term care policies which intend to be federally tax-qualified (benefits received not subject to income tax), and to provide benefits for care received in a person's home or other community-based setting, will qualify an insured for benefits if he/she is determined to be a chronically ill individual who is impaired in at least 2 of the activities of daily living (ADLs) or if the person has a severe cognitive impairment. To be considered a chronically ill individual or to have a severe cognitive impairment, a person's condition must be assessed by a health care practitioner who is not an employee of the insurer. The 6 defined activities of daily living are the following: Eating - taking in food and feeding oneself; Bathing - bathing without assistance; Continence - bowel and bladder control; Dressing - clothing oneself; Toileting - personal cleansing and grooming; Transferring - mobility, being able to move from one place to another in the home. A cognitive impairment is an organic process (or the result of an accident) which results in a person's inability to understand or appreciate the nature of his/her surroundings and the danger he/she represents to himself/herself or others. Impaired means that the individual requires either substantial supervision (stand-by assistance) or actual hands-on assistance with his/her ADLs.

Chapter: General California Insurance Law Concealment as defined by the California Insurance Code is A Neglect on the part of insured to communicate all information known to be material to the insurer. B Failure to communicate information that should be known. C Statement based on the best knowledge and belief of the person giving the information. D Neglect on the part of insured to communicate the information waived by the other party.

A Neglect on the part of insured to communicate all information known to be material to the insurer. Correct! Concealment is a legal term for the intentional withholding of information by the insured that is material to the insurer (i.e. critical in making an underwriting decision). Information that is known or should be known, waived by the other party or immaterial to the risk, does not need to be communicated in a contract. Review ContentNext Question

Chapter: Property and Liability Basics Bob surrenders his policy. What return of premium will he receive? A Prorated premium for the insured days in the future that he has already paid for, minus other deductions related to losses B Nothing C His last premium payment D All premiums that he has paid up to this point

A Prorated premium for the insured days in the future that he has already paid for, minus other deductions related to losses Correct! If Bob's policy was created for a definite period of time and he ends coverage early, he can receive a prorated refund (refund for the amount of time that he paid for but will not be insured), minus any claim for loss or damage.

What method do insurers use to protect themselves against catastrophic losses? A Reinsurance B Indemnity C Pro rata liability D Risk-management

A Reinsurance correct! Insurers use reinsurance to protect themselves from catastrophic losses. This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously. Reinsurance (CIC 620) Reinsurance is a contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities. The purpose of reinsurance is to protect insurers against catastrophic losses. The originating company that procures insurance on itself from another insurer is called the ceding insurer (because it cedes, or gives, the risk to the reinsurer). The other insurer is called the assuming insurer, or reinsurer. When reinsurance is purchased on a specific policy, it is classified as facultative reinsurance. When an insurer has an automatic reinsurance agreement between itself and the reinsurer in which the reinsurer is bound to accept all risks ceded to it, it is classified as a reinsurance treaty. Treaties are usually negotiated for a period of a year or longer.

Chapter: Health/Disability Insurance What is the education requirement for accident and health agents who want to sell 24-hour care coverage? A The same number of hours of training in workers compensation as required for a property or casualty broker-agent on the same subject. B There are no specific education requirements that authorize the life agent to sell workers compensation coverage. C 40 hours of prelicensing classroom training that includes workers compensation and employers' liability. D 24 hours of prelicensing classroom training in workers compensation coverage.

A The same number of hours of training in workers compensation as required for a property or casualty broker-agent on the same subject. correct! According to the California Insurance Code, the accident and health agents who want to sell 24-hour care coverage must complete an approved CE course on workers compensation and general principles of employer liability. The required number of hours must be equal to, but no greater than the required prelicensing hours for a property or casualty broker-agent on the same subjects.

Within how many days after the application was submitted must an insurer file a notice of agent appointment with the Commissioner if the insurer issues a policy written by the agent who is not specifically appointed by that insurer? A 10 days B 14 days C 15 days D 30 days

B 14 days Correct! If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment no more than 14 days after the agent submitted the insurance application.

Chapter: Health/Disability Insurance How many long term care policies can be sold to an insured within a 12-month period before the number of policies is considered to be unnecessary? A 1 B 2 C 3 D 4

B 2 correct! If the insured buys any more than 2 policies within 12 months, this is considered to be unnecessary and excessive. The exception to this rule is when a person buys a policy that allows him or her to consolidate coverage.

Chapter: Life Insurance What is the limiting age for dependent children of the insured employee in a group life plan (other than disabled children)? A 24 B 26 C 30 D 19

B 26 correct! The term "dependents" includes the insured's spouse and all children from birth until 26 years of age. Dependents of Insured Employees (CIC 10203.4) Under group insurance policies, insurance may be extended to insure dependents of the insured, in amounts in accordance with a plan that precludes individual selection. The amounts cannot exceed 100% of the insurance on the life of the insured employee. The premiums for the insurance on the dependents may be paid by the employer, the employee, or the employer and the employee jointly. The term dependents includes the insured's spouse and all children from birth until 26 years of age, or children older than 26 years of age who are both incapable of self-sustaining employment by reason of an intellectual disability or physical handicap, and are mainly dependent upon the insured employee for support and maintenance. A disabled child must first be insured within 31 days of having reached the limiting age. Proof of the incapacity and dependency may be required once a year after the first 2 years of the child's attainment of the limiting age. The premiums for the insurance on the dependents may be paid by the employer, the employee, or the employer and the employee jointly.

Chapter: Health/Disability Insurance If an agent wants to handle workers compensation cases, what type of license must he/she obtain? A Casualty B Accident and Health C Workers Compensation D Industrial

B Accident and Health Correct! Those agents who handle workers compensation claims must obtain an accident and health agent's license.

Chapter: Health/Disability Insurance In reference to the standard Medicare Supplement benefits plans, what does the term "standard" mean? A Coverage options and conditions are developed for average individuals. B All providers will have the same coverage options and conditions for each plan. C Coverage options and conditions comply with the law, but will vary from provider to provider. D All plans must include basic benefits A - N.

B All providers will have the same coverage options and conditions for each plan. Correct! In reference to the standard Medicare Supplement benefits plans, the term "standard" implies that all providers will have the same coverage options and conditions for each plan.

What is reinsurance? A An agreement between an insurer and an insured B An agreement between a ceding insurer and assuming insurer C An agreement between originating insurer and ceding insurer D An agreement between a domestic insurer and a foreign insurer

B An agreement between a ceding insurer and assuming insurer correct! The originating company that procures insurance on itself in another insurer is called the "ceding insurer." The other insurer is called "assuming insurer."

Chapter: Health/Disability Insurance Which of the following choices would define 24-hour coverage? A Coverage for the first 24 hours after the policy is issued. B An employee is provided with workers compensation coverage and medical insurance coverage. C A basic life insurance policy D Workers compensation coverage that is provided by the employer to the employee outside of work

B An employee is provided with workers compensation coverage and medical insurance coverage. correct! The concept of 24-hour coverage means that an employee is provided with both a workers compensation policy and some type of medical insurance coverage such as a disability insurance policy or health care service plan contract for injuries or illnesses that occur outside of work. The employee is basically covered 24 hours a day.

A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of A Warranty. B Concealment. C Misrepresentation. D Representation.

B Concealment. correct! According to CIC 380, neglecting to communicate that which a party knows and ought to communicate is concealment. Concealment is the legal term for the intentional withholding of information of a material fact that is crucial in making a decision. In insurance, concealment is the withholding of information by the applicant that will result in an imprecise underwriting decision. Concealment may void a policy. Concealment is the failure to disclose known facts. An injured party is entitled to rescind the policy regardless of whether the concealment was intentional or unintentional. Each party should have the reasonable expectation that the other is acting in good faith without attempting to conceal or deceive the other. Neither party of the contract is legally bound to provide information pertaining to matters of their own judgment or opinions, even in matters in question. The right to rescind the policy is permissible for an intentional and fraudulent omission on the part of either party. The following information does not need to be communicated in a contract: Known information; Information that should be known; Information that the other party waives; Information that is excluded by a warranty and not material to the risk; Information that is excepted from insurance and not material to the risk; and Information based on personal judgment.

What is an injured party entitled to receive if an intentional concealment is discovered? A $1,000 for any compensatory damages B Rescission of the policy C Nothing. Only intentional concealment is punishable. D No less than $500 and no more than $5,000 for compensatory damages

B Rescission of the policy Correct! An injured party is entitled to rescind the policy regardless of whether the concealment was intentional or unintentional.

Chapter: Property and Liability Basics Any risk retention group must submit to an examination upon the request of the Commissioner within A 10 days. B 30 days. C 60 days. D 180 days.

C 60 days. Correct! Upon a request by the Commissioner to determine its financial condition, a risk retention group must submit to an examination if, after 60 days, the Commissioner in the jurisdiction in which the group is chartered and licensed has not initiated the examination.Risk retention groups cannot participate in this state's joint underwriting associations, California Automobile Assigned Risk Plan, Fair Access to Insurance Requirements Plan, and market assistance plans. A purchasing group that obtains liability insurance from an insurer not admitted in California or a risk retention group must inform each of the members of the group having a risk located in this state that the risk is not protected by an insurance insolvency guarantee fund in this state and the risk retention group may not be subject to all insurance laws and regulations of California. No person, firm, association, or corporation can procure liability insurance in this state from a risk retention group unless that entity is licensed as a fire and casualty broker-agent and is authorized to act as an insurance broker, except salaried employees or officers of a risk retention group, assuming that no part of the compensation of the person is on a commission basis or otherwise based on production of business. No person, firm, association, or corporation can procure liability insurance from an insurer not authorized to do business in California on behalf of a purchasing group located in this state unless the entity is licensed as a surplus line broker. A nonresident person may be licensed as a surplus lines broker for purposes of placing insurance on behalf of a purchasing group. There is no civil liability on the part of any agent or broker who places liability insurance coverage on behalf of any risk retention group which is incorporated and licensed in California if the risk retention group becomes insolvent.

Chapter: Health/Disability Insurance Which of the following insurance policies is always part of a "24 Hour Coverage" insurance plan? A A group nonoccupational health care services plan contract B A life insurance policy C A Workers Compensation Policy D A group nonoccupational disability insurance policy

C A Workers Compensation Policy correct! The California Insurance Code defines Twenty-Four Hour Coverage as "the joint issuance of a workers compensation policy with a disability insurance policy, health care services plan contract, or other medical insurance plan coverage for nonoccupational injuries and illnesses. This product shall not include a life insurance policy."

Chapter: General California Insurance Law An insurance company and its agents must notify all applicants and policyholders of information-gathering processes utilized for written application transactions A At the time of delivery of the policy when personal information is only collected from the applicant, an insured under the policy, or public records. B At the time of application for the policy when information is collected from sources other than the applicant, persons under the policy, or public records. C Both of these answers are correct. D Neither of these answers is correct.

C Both of these answers are correct. Correct! CIC 791.04 states that notice must be made at application when sources other than the applicant, persons under the policy, or public records are used, but at delivery when personal information is only collected from the applicant, an insured under the policy, or public records.

What document must an insurer receive in order to transact insurance in this state? A Admitted insurer license B Guarantee Association clearance C Certificate of authority D Commissioner's certificate

C Certificate of authority Correct! Before an insurer can transact insurance in this state, it must first obtain a Certificate of Authority from the Commissioner.

Chapter: Health/Disability Insurance If a new long-term care policy is replacing existing coverage, the agent should make sure that the new policy's benefits A Are exactly the same as the existing policy. B Have no relation to the existing policy. C Match or exceed the existing policy. D Are less than or equal to the existing policy.

C Match or exceed the existing policy. Correct! A long-term care policy must have benefits equal to or exceeding any existing coverage. Replacement Policies (CIC 10233.3, 10234.95, 10234.16) When long-term care insurance is replaced under any circumstances, except for an increase in benefits, the new contract may not limit or deny benefits for pre-existing conditions or impose a new elimination period beyond that which had already been satisfied under the original contract. It is also prohibited for an insurer to reduce payments made under a long term care policy for covered expenses paid out of pocket by or on behalf of an insured. Every insurer issuing LTC policies must be certain that its contracts are suitable and appropriate for each of its insureds. To this extent, each insurer must develop suitability standards that its agents must be aware of and trained to follow. Those standards include the following: Determining that the applicant has the ability to pay premiums for the proposed coverage; That the insurance meets the goals and objectives of the individual based on both the advantages and disadvantages of the coverage; and That the values and benefits of proposed coverage are equal to or exceed those of existing insurance. The Commissioner has determined that 3 or more long-term care transactions with the same insured within a 12-month period is considered inappropriate replacement and will not be allowed. Every application for long-term care insurance must contain at least one question designed to ascertain whether or not an applicant already has existing long-term care insurance. If it is determined that an existing policy will be terminated and replaced with new insurance, a replacement notice must be given to the applicant which informs him/her of the following: Whether his/her decision could be a good one; That current health conditions (pre-existing conditions) might not be covered immediately by the new policy; That he/she is encouraged to check with his/her existing insurer to make sure he/she knows and understands what his/her current coverage is; and That failure to disclose all relevant medical history could become the basis for denial of a claim or could even void the contract, with the insurer returning all premiums paid as if the policy had never existed.

The Gramm-Leach-Bliley Act was passed to A Allow consumers access to credit and private consumer reports. B Allow insurance companies access to medical information for underwriting purposes. C Protect private customer information filed with a financial institution. D Define insurance as interstate commerce.

C Protect private customer information filed with a financial institution. correct! The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.

All of the following must be specified in an insurance policy EXCEPT A The risks insured against B The period during which the insurance is in force C The financial rating of the insurer D The parties between whom the contract is made

C The financial rating of the insurer Correct! An insurance policy has 6 requirements: it identifies the parties to the contract; the life or property of the insured; insurable interest; the risks insured against; the period during which the insurance is to continue; and the amount of premium. The insurer's financial rating is not required to be specified in the insurance policy.

Chapter: Property and Liability Basics Which type of policy specifies the value of the insured object in the policy itself? A Limited B Open C Valued D Specified

C Valued Correct! Valued policies specify that the insured property will be valued at a specific sum. Open policies, on the other hand, do not specify a value up-front. The value is not determined until a loss occurs.

Which of the following persons represents several insurance companies but owns the records of the policies sold? A General agent B Direct writing agent C Independent agent D Exclusive agent

Correct! An independent agent represents more than one company at a time. He or she owns the records of all policies sold and is not controlled by any one insurance agency.

According to California Insurance Code, which of the following can be classified as an insurable event? A Speculative risks B Extreme levels of loss C Pure risks D Unpredictable losses

Correct! Any event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him/her, may be insured against. The more predictable a loss, the more insurable it becomes. Only pure risks are insurable. Speculative losses are uninsurable. Definition of Insurable Events (CIC 250) According to the California Insurance Code, "...any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against..." In other words, if a possible future event could result in loss or liability to a person, it may be insurable under the Insurance Code. These insurable events may never occur, but insurance policies can provide protection when those times come. The more predictable a loss becomes, the more insurable it becomes. The more unpredictable a loss, the less insurable it becomes. For example, a person cannot be insured against gambling loss or lottery outcomes because they are unpredictable. The law does not address a limit as to the level of loss that may be insured against; it only specifies the type of event that is insurable. The level of loss to be indemnified is agreed upon by the parties to the insurance contract.

Chapter: Life Insurance According to California law, all of the following may be covered as dependents under group life insurance EXCEPT A The insured's unmarried child, age 25. B Disabled children of the insured over age 26. C The insured's elderly parents living with the insured. D The insured's spouse.

Correct! In group insurance, there is no provision for dependent parents to be eligible for coverage. Dependent children, however, are eligible as described. (CIC 10203.4) Review ContentNext Question

Chapter: General California Insurance Law What do individuals use to transfer their risk of loss to a larger group? A Indemnity B Insurance C Insurable interest D Exposure

Correct! Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.

Insurance is the transfer of A Loss. B Hazard. C Peril. D Risk.

Correct! Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company.

Chapter: Life Insurance Within how many days of termination of employment must an employer give notice of the employee's right to convert the group policy to an individual policy? A 25 days B 5 days C 31 days D 15 days

D 15 days correct! The employer or the insurer must give the employee notice of his/her right to convert to individual coverage within 15 days of termination of employment (or at least 15 days prior to the expiration date of the conversion period).

Chapter: Life Insurance For how long must agents keep records of insurance transactions? A 10 years B 15 years C 20 years D 5 years

D 5 years Correct! Agents must keep records associated with insurance transactions for at least 5 years. The Commissioner can audit these records at any time.

Chapter: Health/Disability Insurance Which of the following insurance policies is always part of a "24 Hour Coverage" insurance plan? A A group nonoccupational disability insurance policy B A group nonoccupational health care services plan contract C A life insurance policy D A Workers Compensation Policy

D A Workers Compensation Policy Correct! The California Insurance Code defines Twenty-Four Hour Coverage as "the joint issuance of a workers compensation policy with a disability insurance policy, health care services plan contract, or other medical insurance plan coverage for nonoccupational injuries and illnesses. This product shall not include a life insurance policy."

When the California Insurance Code needs to be changed, the legislature must design and pass a bill. Once the bill is passed, it is presented to the Governor and becomes law if not returned to the legislature within what time frame? A A period of 14 days from submission to Governor's office B A period of 30 days or when the legislature reconvenes from a recess C A period of 90 days from the date of enactment D A specified period of 12-30 days

D A specified period of 12-30 days correct! The period is specified by the legislature and is between 12-30 days after being submitted to the Governor.

Chapter: Life Insurance A life agent's records must include which of the following? A All correspondence between the agent and the policy holder B A copy of the outline of coverage C All policies sold by the agent D All of these

D All of these Correct! Agents must keep all correspondence between the agent and policy holder, a copy of the outline of coverage, and all policies sold by the agent.

Chapter: Property and Liability Basics California prohibits a risk retention group from engaging in which of the following? A Contributing to the California Guarantee Association B Soliciting insurance to a person who is not eligible for membership C California Joint Underwriters Association D All of these

D All of these Correct! Risk retention group may not contribute to any insurance insolvency Guarantee Association funds, nor are its member protected by such plans. They are also not participants in any of the insurance residual markets in the state. The Contract (CIC 125-140 and USC, Title 15, 3901) Risk retention group means any corporation or other limited liability association that meets the following description: Primary activity consists of assuming and spreading all (or any portion) of the liability exposure of its group members; Does not exclude any person from membership in the group solely to provide group members with a competitive advantage over the person; Members are engaged in businesses or activities related in terms of the liability to which the members are exposed by virtue of their businesses, trades, products, services, premises, or operations; Activities do not include the provision of insurance (other than liability insurance) for assuming and spreading similar liability exposure of its group members and reinsurance with respect to the similar liability exposure of any other risk retention group (or any member of another group) which is engaged in businesses or activities so that the group (or member) meets the requirements for membership in the risk retention group which provides the reinsurance; and The name of the group includes the words "risk retention group." Purchasing group means any group which meets the following specifications: One of its purposes is the purchase of liability insurance on a group basis; Purchases the insurance only for its group members and only to cover their similar or related liability exposure; Is composed of members whose businesses or activities are related in terms of the liability to which members are exposed by virtue of any similar or common business, trade, product, services, premises, or operations; and Is domiciled in any state. The Federal Liability Risk Retention Act provides a means for a for-profit or nonprofit association or individual business to insure against liability. The Act was created for the following purposes: To regulate the formation and operation of risk retention groups and purchasing groups in California; To encourage Californians who are experiencing difficulty in obtaining liability coverage to form and operate risk retention and purchasing groups in this state; and To authorize the formation of a risk retention group for directors and officers of corporations (whether for profit or nonprofit) who are engaged in the same line of business with respect to the liability risks faced by those officers and directors. Each risk retention group is liable for the payment of premium taxes for business done or located within this state and must report to the Commissioner the gross premiums written, less returned premiums, on business done in California. The risk retention group is subject to taxation and any applicable fines and nonconformance fees on the same basis as a foreign admitted insurer. Surplus line brokers must report to the Commissioner the premiums for direct business for risks resident or located within this state which those licensees have placed with or on behalf of a risk retention group not chartered in California. Risk retention groups must comply with the laws of this state regarding deceptive, false, or fraudulent acts or practices. However, if the Commissioner seeks an injunction regarding that conduct, the injunction must be obtained from a court of competent jurisdiction. Any risk retention group must submit to an examination upon request by the Commissioner to determine its financial condition if the Commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination within 60 days after a request by California's Commissioner. Every application form for insurance from a risk retention group and every policy issued by a risk retention group must contain the following notice: "NOTICE: This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guarantee funds are not available for your risk retention group." Risk retention groups are prohibited from soliciting or selling insurance to any person who is not eligible for membership in that group or if the risk retention group is in a hazardous financial condition. Risk retention groups are not allowed to join or contribute financially to any insurance insolvency guarantee fund in California. Insureds are also not eligible for benefits under these funds. When a purchasing group obtains insurance covering its members' risks from an authorized admitted insurer, only risks located in this state will be covered by the state insurance guarantee fund. Risk retention groups cannot participate in this state's joint underwriting associations, California Automobile Assigned Risk Plan, Fair Access to Insurance Requirements Plan, and market assistance plans. A purchasing group that obtains liability insurance from an insurer not admitted in California or a risk retention group must inform each of the members of the group having a risk located in this state that the risk is not protected by an insurance insolvency guarantee fund in this state and the risk retention group may not be subject to all insurance laws and regulations of California. No person, firm, association, or corporation can procure liability insurance in this state from a risk retention group unless that entity is licensed as a fire and casualty broker-agent and is authorized to act as an insurance broker, except salaried employees or officers of a risk retention group, assuming that no part of the compensation of the person is on a commission basis or otherwise based on production of business. No person, firm, association, or corporation can procure liability insurance from an insurer not authorized to do business in California on behalf of a purchasing group located in this state unless the entity is licensed as a surplus line broker. A nonresident person may be licensed as a surplus lines broker for purposes of placing insurance on behalf of a purchasing group. There is no civil liability on the part of any agent or broker who places liability insurance coverage on behalf of any risk retention group which is incorporated and licensed in California if the risk retention group becomes insolvent.

Chapter: Life Insurance Where must agents keep records associated with insurance transactions? A There is no specified location, provided that agents can give the Commissioner easy access to records. B In any of their offices, as long as the office is located in this state. C All records must be transferred to the DOI within 90 days. D At their principal place of business

D At their principal place of business correct! Agents must keep records associated with insurance transactions for at least 5 years. The Commissioner can audit these records at any time.

If found material for underwriting, a misrepresentation A May be withdrawn. B Does not affect either of the parties. C Must have been in writing to affect a contract. D Can void a contract.

D Can void a contract. Correct! A misrepresentation is a written or oral declaration that is stated to intentionally distract, deceive or mislead a party to a contract. If found material for underwriting, it can void a contract.

Chapter: Health/Disability Insurance Which of the following categories of benefits are not covered by an LTC policy? A Respite care B Home care C Care given in a community setting D Care given in an acute care unit of a hospital

D Care given in an acute care unit of a hospital Correct! Care given in an acute care unit of a hospital is not covered by LTC insurance. Long-Term Care Insurance Definition Long-term care (LTC) insurance includes any insurance policy, certificate, or rider that provides coverage for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services that are provided in a setting other than an acute care unit of a hospital. Long-term care insurance includes all products containing any of the following benefit types: Institutional care including care in a nursing home; Convalescent facility; Extended care facility; Custodial care facility; Skilled nursing facility; Personal care home; Home care coverage including home health care; Personal care; Homemaker services; Hospice or respite care; or Community-based coverage including adult day care, hospice, or respite care. Long-term care insurance includes disability-based LTC policies, but does not include insurance designed primarily to provide Medicare supplement or major medical expense coverage.

Chapter: General California Insurance Law When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. What is this act called? A Misrepresentation B Fraud C Warranty D Concealment

D Concealment Correct! Concealment occurs when a person withholds a material fact that is crucial to making a decision. In insurance, this involves withholding information that would be crucial to underwriting decisions.

Chapter: Life Insurance When replacement of existing coverage is involved, extra requirements apply. The agent must A Present to the applicant a "Notice Regarding Replacement of Life Insurance" as described by the Code. B Have the applicant sign a copy of the "Notice Regarding Replacement of Life Insurance" as described by the Code. C Sign a copy of the "Notice Regarding Replacement of Life Insurance" as described by the Code and leave the copy with the applicant. D Do all of these.

D Do all of these. Correct! As directed by the CIC 10509.4 regarding replacement, a notice regarding replacement must be presented to clients at time of application; the applicant must also sign the notice and a copy of this notice must be left with the applicant.

Which of the following provisions requires an insurer to document all correspondence with an insured? A Unfair trade practices B Claims settlement C Entire contract D Errors and omissions

D Errors and omissions correct! Insurers are encouraged to document all conversations and correspondence that occurs with an insured, in the event that crucial errors and omissions should occur. The most common times for these errors are during the sales interview and policy delivery. It is essential to have proof of these interactions, in the events that an insured would sue the insurer.

Chapter: Property and Liability Basics All of the following are examples of insurable interest in property insurance EXCEPT A Fred and Ethel's personally owned vacation home. B Sally's own personal automobile. C Joe who is a partner in a thriving business. D Harry who is waiting for his distant cousin's beach-front property as part of his inheritance.

D Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. Correct! A mere contingent or expectant interest in anything, not based on any actual right or claim to that thing, nor upon any valid contract for the ownership or possession of it, is NOT considered to be an insurable interest in that thing.

Which of the following persons represents several insurance companies but owns the records of the policies sold? A Exclusive agent B General agent C Direct writing agent D Independent agent

D Independent agent Correct! An independent agent represents more than one company at a time. He or she owns the records of all policies sold and is not controlled by any one insurance agency. A producer is a legal entity, either human or corporate, that acts on behalf of, or in the place of, its principal. In insurance, the producer is the agent, and the principal is the insurer. An insurance agent must first establish a licensing relationship with the state or states within which the agent wishes to conduct business. This requires meeting educational standards and passing required tests for the type of insurance which will be sold. This licensing relationship is separate from, and can exist without, any agent/insurer relationship being established. The independent agent has contracts with more than one insurer and, ideally, is then in an enhanced position to offer clients a wide range of product options. When the time to renew a policy comes, the independent agent is said to own the renewal or own the expiration. This means that the independent agent can move the client to a different insurer for the renewal. This would best be done only if it is to the client's advantage. An ethical challenge facing the independent agent is to avoid moving clients simply to generate new or higher commissions. The exclusive or captive or career agent chooses to have a contract with one company. An agent may choose to do this when he or she finds the insurer's products to be of extraordinary quality and applicability and feels no need to have other insurer relationships. An agent might also make this choice because the insurer only allows its products to be sold through its own, exclusive agents. Exclusivity, depending on the viewer, can appear to be a positive or a negative. Positively, the agent can represent a product that would otherwise be unavailable to the client. Negatively, the agent is not able to search throughout the industry for a product which will be more to the client's advantage.

Chapter: Life Insurance In 2000, a law firm purchased a buy-sell agreement policy on each of its partners. In 2005, one partner left to start a new practice; however, the firm continued to pay the premiums on the policy. In 2007, the former partner died. The partners of the firm filed a claim on the policy to collect the death benefit despite the fact that the deceased was NOT part of the firm or its leadership. The insurer A Can legally sue the firm for insurance fraud and WILL NOT pay a claim due since the insurable interest no longer exists. B Will pay the death claim to the beneficiary since the premiums were current although according to contract law, insurable interest MUST exist at the time of claim. C Will refund "unearned" premiums and WILL NOT pay the claim since the insurable interest no longer exists. D Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application.

D Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application. Correct! Insurable interest must be established at the time of application and remains valid for the duration of the policy as long as premiums remain current.

Question 5 of 8 Chapter: Health/Disability Insurance Which of the following is true regarding the regulation of providers? A Only the Department of Insurance can be the regulator for insurance providers. B There are no specifications on regulation of providers. C Only health care service plan providers fall under the jurisdiction of the DOI. D Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

correct! All entities that provide coverage designed to pay for health care providers' services and expenses must be under the jurisdiction of either the Department of Insurance or other governmental agencies. Review ContentNext Question