Health and Life Comprehensive Exam

A minor aged ______ years or older may contract for insurance on his or her own life. A 15 B 10 C 14 D 12

A

An insurer may reserve the right to defer the payment of a cash surrender value for up to _________ months after demand is made and the policy is surrendered. A 6 months B 3 months C 1 month D 2 months

A

Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage. A Actual loss experience of the group B Credit rating of all participants C Actual loss experience of everyone in that zip code D The plan sponsor's credit rating

A

Which rider would eliminate coverage for a preexisting condition? A Impairment Rider B Lifetime Benefit Rider C Return of Premium Rider D None of these

A

A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n): A Contract of Adhesion B Aleatory Contract C Conditional Contract D Unilateral Contract

A. A Contract of Adhesion is submitted on a take it or leave it basis.

The type of policy that can be changed from one that does not accumulate cash values to one that does is a: A Convertible term policy B Permanent policy C Universal life policy D Variable life policy

A. A convertible term policy can be changed from a term policy, with no cash values, to a permanent insurance policy, which accumulates cash value.

The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of a: A Nonqualified plan B Qualified plan C 401(k) D Keogh Plan

A. A nonqualified plan does not meet IRS or ERISA requirements as to participation, funding, vesting and other factors.

Under Workers' Compensation, a disability that is a permanent physical impairment leaving the individual incapable of performing the previous regular occupation, but capable of performing some other type of work, is a: A Permanent partial disability B Temporary disability C Recurrent disability D Residual disability

A. A permanent partial disability is one that is defined under Workers' Compensation law as a permanent physical impairment rendering the person unable to do previous regular job duties but allowing other job duties, resulting in a partial loss of earning power.

Unless revoked or suspended, an insurance producer license will remain in effect for: A As long as the license renewal fee is paid and the continuing education requirements are met B 2 years C To age 65 D 3 years

A. A producers license will remain in effect as long as state continuing education requirements are met and all fees are paid. The state does require a license to be renewed on a biennial basis, however, as long as all requirements are met the license stays in effect.

Accident and Health Insurance provides coverage for two major categories of perils. They are: A Accidental injury and sickness B Driving under the influence and driving while intoxicated C On the job and off the job D Automobile and home health care

A. Accidental injury and sickness are the general perils insured. Intentional losses are excluded.

Under the Legal Actions Mandatory Uniform Provision, an insured must wait at least _____ days after providing proof of loss before he or she can take legal action against the insurer. A 60 days B 180 days C 45 days D 90 days

A. An insured must allow a reasonable passage of time for an insurer to live up to its contractual obligations. In this case, reasonable is 60 days.

An insurer which is formed under the laws of another country is a(n): A Alien insurer B Domestic insurer C Non-authorized insurer D Foreign insurer

A. An insurer that is incorporated or organized in another country is called a alien insurer.

Which of the following statements is NOT true about the tax treatment of Social Security? A Employee paid payroll deductions for Social Security are tax deductible to the employee B Taxes to finance Social Security benefits are paid equally by employees and employers C Employers may take a tax deduction for contributing on behalf of their employees D Self-employed people must pay both the employer and the employee share of Social Security taxes

A. Employees may not take a tax deduction for their share of the contribution to Social Security.

Michelle is 65 and starting to receive Social Security benefits. To receive Medicare Part A, she needs to: A Do nothing B Enroll in Medicare Part B at the same time C Complete an open enrollment application along with the first months premium D Complete an open enrollment application

A. Enrollment in Part A is automatic for individuals entitled to Social Security benefits. These persons are eligible for Part A benefits as of the first day of the month in which they reach age 65.

Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider: A The insured remains eligible for all provisions B All provisions in the policy are now voided C No benefits would be available due to the 6 month elimination period usually required, which would exceed the 2 months remaining on the rider D The waiver of premium will only continue for the remaining two months

A. Even if the waiting period for a disability extends past the normal cutoff date of age 60, the insured is still eligible for all provisions in the policy.

The reinsurance agreement that allows the reinsurer an opportunity to reject coverage for individual risks or price them higher due to their higher risk is known as a(n) ___________ agreement. A Facultative B Residual C Treaty D Reciprocal

A. Facultative

A licensee must inform the Commissioner of a change of legal name or address within ______ days of the change. A 30 B 90 C 180 D 10

A. If a licensee has a change of legal name or address that is currently on file with the state, the licensee has 30 days to notify the Commissioner of the change.

Required/Mandatory Provision 'Proof of Loss' indicates that except in the absence of the insured's legal capacity, if it was not reasonably possible for the insured to provide proof of loss as required in a policy, the latest time the proof of loss may be furnished is: A 1 year from the time proof is otherwise required B 6 months from the time proof is otherwise required C 5 years from the time proof is otherwise required D Within 60 days of the time proof is otherwise required

A. If it is not reasonably possible to provide proof of loss to the insurer within 90 days, the proof of loss must be provided within one year, unless legally incapacitated. In this case, the insured was not legally incapacitated.

Which is the proper term for a company owned by its policyowners? A A mutual insurance company B A domestic insurance company C A reciprocal insurance company D A charitable insurance company

A. In a mutual insurance company, the policyowners share ownership of the company.

Incidental limitations refer to which of the following? A The amount of life insurance that may be included in a qualified retirement plan B Taxation of Roth IRAs C Roth IRAs D Annuity payout options

A. Incidental limitations are limits imposed by the IRS to be sure life insurance death benefits in a qualified plan are secondary or incidental to the plan's other benefits. Retirement benefits must be the primary goal of a qualified plan.

An indeterminate premium policy offers: A A low initial premium with succeeding premiums based on the company's investment return, mortality and expenses B Whole life insurance with a flexible payment schedule of premiums and flexible face amount of coverage C An interest sensitive premium on a whole life policy D A limited payment schedule

A. Indeterminate premium policies specify two premium rates: a guaranteed maximum and a lower rate the insured actually pays. The lower rate is set for a set period of time. The company may increase premiums due to mortality experience, expenses and investment return, but the increase cannot be more than is stated as the maximum in the policy.

Which part of Medicare requires premium payments by most eligible participants? A Part B, Medical Insurance/Outpatient B Custodial care C Intermediate care D Part A, Hospital Insurance

A. Medicare Part B is an optional coverage and requires payment of a monthly premium by the insured.

Under Optional Provision 'Unpaid Premiums', when premiums are unpaid at the time a claim is submitted, the insurer may: A Deduct unpaid premiums from benefits before paying the claim B Charge interest on any overdue premiums due at the time of the claim C Deny the claim because the policy has actually lapsed due to unpaid premiums D Require the unpaid premium be paid before allowing any claim to be processed

A. Optional Provision 'Unpaid Premiums' states that if any premium are unpaid when a claim is submitted, the unpaid premium may be deducted from the claim amount before it is paid.

Each of the following is a source of life insurance policy dividends, except: A Guaranteed cash value accumulations B Additional interest earnings C Reductions in operating expenses D Savings in mortality

A. Policy dividends in participating policies are produced by the same three factors used to arrive at premiums: mortality rates, assumed interest, and operating costs. Dividends are never guaranteed and therefore are not certain to be included in any cash value accumulations.

The head of the state department of insurance has all of the following powers, except: A Creating and establishing new premium rates for insurance companies operating in the state B Imposing penalties for violations of the insurance code, including but not limited to fines, suspensions or revocations of licenses and Certificates of Authority, and requesting that the Attorney General prosecute a violator C Approving rates and rate increases for regulated lines of insurance D Subpoenaing witnesses and administering oaths in order to further any examination, investigation, or hearing on insurance matters

A. Premium rates are created by an insurance company actuarial department, NOT the department of insurance.

Which of the following policies would allow the business to deduct premiums paid? A Business overhead expense insurance B A disability income policy on a key employee with the employer paying the premiums and is also the beneficiary C An individually purchased disability income policy paid for through employee payroll deduction D A disability income policy used to fund a Buy-Sell Agreement

A. Premiums paid for disability policies, whether held on key employees or put in place to fund a buy-sell agreement, are not deductible. A business overhead expense policy is sold and marketed as a business loss income policy and therefore qualifies as a tax deductible business expense.

How can an annuity payout an income benefit income tax free? A Purchase the annuity within a Roth IRA account B When the annuity payout is going to the estate of the deceased C When the annuitant is over age 70 1/2 D When the annuity was purchased as a Traditional IRA with premiums tax deductible

A. Purchase the annuity within a Roth IRA account

Which of the following statements regarding claims payments is NOT included in the following Required Provisions 'Time of Payment of Claims' & 'Payment of Claims'? A All of the answers listed B Claims for payment of periodic indemnities must be made no less often than once a month C The insurer may pay benefits directly to hospitals and/or medical practitioners unless the insured has specifically stated otherwise D In order to facilitate payment, the insurer may pay an indemnity up to $1000 to certain people who appear to be entitled to it

A. Required Provisions 'Time of payment of claims' and 'Payment of claims' Stipulate how, when and to whom are benefits to be paid. Claims for periodic indemnities are to be paid at least once a month, if death occurs payments are paid to a named beneficiary or to the estate of the insured in the event of no named beneficiary, benefits may be paid directly to the provider or to the insured depending on the payment method indicated, (indemnity or fee for service). To facilitate payment the insurer may pay up to $1,000 to certain people who appear to be entitled to it.

A limited pay life policy: A Requires premium payments for a specified number of years or until a specified age is reached B Start off with small premium payments and then they increase, but only up to a specified limit C Is offered in limited face amounts only D Can only be purchased by individuals on a specified limited income

A. Requires premium payments for a specified number of years or until a specified age is reached

Dental policies that limit benefits to specified maximums per procedure, with first dollar coverage are: A Scheduled B Reimbursement C Non-scheduled D Blanket

A. Scheduled policies provide first dollar coverage, but limit benefits to specified maximums per procedure.

Upon written demand by a person aggrieved, the Commissioner must hold a hearing within: A 30 days after receipt of the demand B 14 days after receipt of the demand C 10 days after receipt of the demand D 20 days after receipt of the demand

A. The Commissioner must hold a hearing if required by law, or upon written demand by a person aggrieved within 30 days of the demand received.

If a company wishes to share information about a customer's health with a third party: A The customer must actively opt-in to allowing the disclosure B The company must pay a fee to the customer before the information may be shared C The customer must pay a fee for this privilege D The customer must opt-out of allowing disclosure immediately

A. The Gramm-Leach-Bliley Act is a consumer protection to privacy act. Health information, such as that acquired during a medical exam, is subject to an opt-in standard, meaning that companies may not share information without getting specific permission to do so.

The Life and Disability Insurance Guaranty Association provides a maximum liability benefit in the event an insurer becomes insolvent. The benefit amount is limited to: A $100,000 for cash value on one life and $300,000 for all benefits B $100,000 for cash value on one life and $250,000 for all benefits C $50,000 for cash value on one life and $150,000 for all benefits D $100,000 for cash value on one life and $500,000 for all benefits

A. The Life and Disability Insurance Guaranty Association is to the insurance industry what FDIC is to the banking industry. It protects insureds against insurer insolvency for amounts up to: $100,000 cash value on one life and $300,000 for all benefits.

The _________ alerts insurer home office underwriters of errors, omissions, or misrepresentations made on insurance applications. A MIB B Medical Doctors Association C State Insurance Inspection Department Report D Federal Insurance Information Bureau

A. The MIB is supported by insurance companies and it collects medical information about an applicant's health as reported by insurance companies after underwriting.

'Annuity Period' refers to which of the following? A The time during which payments are made to the annuitant B The process in determining the cost basis of an annuity C The time in which the annuity is accumulating and earning interest D The period of time in which an annuity is subject to a 10% premature withdrawal penalty

A. The annuity period begins when the annuitant starts to receive payments from the accumulated funds in the annuity policy. This is also referred to as 'the Annuitization period'.

In a universal life policy, the two adjustments usually made to the cash value account are: A Cost of insurance protection is charged and current interest is credited B Cost of insurance protection is credited and current interest is charged C Guaranteed interest is credited as long as the insurer has had a favorable investment return D Premiums and guaranteed interest are charged

A. The cash value account is charged for the insurance protection provided, and interest is credited at the current interest rate, usually monthly in a universal life policy.

ency for poor risks to seek and be covered for insurance more than average risks is known as: A Adverse selection B Adverse hazard C Adverse risk D Adverse rating

A. The definition of adverse selection is: the tendency for poor risks to seek and be covered for insurance more than average risks. In other words: people that are considered uninsurable will seek out insurance to a greater extent than those that are insurable.

Each of the following would be found in the insuring clause of an insurance policy, except: A General information about the named insured B Conditions under which benefits are payable C General scope of coverage D Definitions

A. The insuring clause is the provision that states the insurance company's promise to pay. It defines who is insured by whom and for what. It does not provide the general information about the insured, such as: name, age, etc., these would be found on the policy cover page.

If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, the policyowner can borrow up to: A The entire accumulated cash value of $6,000, less interest for 1 year B The total amount of premiums paid into the policy C 50% of the accumulated cash value D Never more than the full face amount of the policy

A. The maximum loan amount available on a permanent policy is typically the total amount of cash value minus 1 years interest; therefore it may never exceed the total amount of cash value in the policy.

Which statement concerning individual A&H policy renewal provisions is most correct from the perspective of the insured? A The more favorable the renewal provision to the insured, the higher the cost B Renewal provisions only apply to property and casualty contracts and are not included under individual A&H policies C The more favorable the renewal provision to the insured, the lower the cost D The renewal provision has no impact on the cost of the policy to the insured

A. The more favorable a renewal provision is to the insured, the higher the premium will be. A Noncancellable policy will cost the most because its premium may not be changed in the future

Distributions from a qualified retirement plan: A Are received tax-free only if they result from previously taxed contributions B May only be received in interest only payments C Are always fully taxable D Are always received tax-free

A. The part of each qualified retirement plan payment representing previously taxed contributions to the plan can be received tax free. Example: Roth IRA or Roth 401(k).

All of the following are true regarding the States Second Injury Fund, except: A It is used to relieve the state of any burden for Workers' Compensation benefits B It promotes the employment of previously injured or handicapped workers C It is funded by assessments against insurers and those who self insure D It limits the employers liability for a previously disabled employees second injury

A. The state requires all insurance companies and self insured companies to contribute to the state's 2nd injury fund to help cover costs of employees 2nd injuries. Its primary purpose is to promote employers to hire people with disabilities and give them a chance. It is not used to relieve the state burden of Workers' Compensation at all.

With regard to the waiver of premium rider, after the disability a policyowner normally: A Need not repay the premiums paid by the company during disability B Must reapply for the insurance C Must prove insurability to continue the policy on an annual basis D Must repay the premiums paid by the company during disability

A. The waiver of premium rider exempts the disabled policyowner from paying premiums during the term of disability, so the premiums do not need to be paid back

Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying: A Interest in periodic payments to Wilma B Equal lump sum payments to both Wilma and Pebbles immediately C $100,000 total death benefit amount to Wilma immediately D Nothing, until a period of 5 years has elapsed

A. Under the interest option the insurer invests policy proceeds for the beneficiary and pays the interest earned to the beneficiary as income as stipulated in the beneficiary designation. Wilma will have the right of withdraw after 5 years.

When medical expense policies do not state specific benefit dollar benefit amounts, but instead base payments upon the charges for like services in the same geographical area, benefits are designated as which of the following? A Usual, customary, and reasonable charges B Specified charges C Blanket charges D Scheduled charges

A. Unscheduled UCR plans allow policies to stay ahead of inflation and avoid constant restructuring as medical costs increase. Different regions of the country have different standard rates for the same procedures, therefore, UCR allows insurers to adjust the average costs for procedures in any given area.

Which of the following Annuities is generally not backed by the insurer's general account assets? A Variable B Indexed C Fixed D Market Value Adjustment

A. Variable

If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company will: A Continue the waiver of premium rider B Cancel the waiver of premium rider C Void the policy D Increase the premium

A. When a waiver of premium exists on a life policy, it must be left in place as long as premiums are paid on the policy, even if risk increases for the insurer

A policy that pays surgical expense benefits does not schedule the approved benefit payable for every type of surgery. Instead, surgeries not listed are paid on the basis of a comparison to one or more types of commonly-performed major surgeries that are scheduled. Under this arrangement, the unscheduled surgeries are paid on the basis of: A Their relative value B Their stated value C Their common value D Their limited value

A. When benefits are paid for an unscheduled type of benefit or procedure, they determine the value by selecting a more common procedure that is comparable and assign a relative value to it.

If an insured has an outstanding loan of $5,000 on a policy with a face amount of $25,000, at death the company will: A Pay the beneficiary $20,000, after subtracting the amount of the outstanding loan B Cancel the policy C Pay the beneficiary the full $25,000 face amount D Institute a required loan repayment schedule before allowing the death claim to be processed

A. When death occurs and a policy loan is still outstanding, the loan is subtracted from the policy's face value and the balance is paid according to the beneficiary designation.

A variable life policy: A Death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum B Guarantees a minimum return on the cash value account C Has a fixed death benefit D Has flexible premiums that can be changed as well as frequency

A. he death benefit of a variable life policy varies with the value of the separate account, but this benefit must never drop below the policy's face amount, which is the guaranteed minimum.

In a universal life policy, the two adjustments usually made to the cash value account are: A Cost of insurance protection is charged and current interest is credited B Premiums and guaranteed interest are charged C Guaranteed interest is credited as long as the insurer has had a favorable investment return D Cost of insurance protection is credited and current interest is charged

A. Cost of insurance protection is charged and current interest is credited

In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as: A Competent parties B Restricted persons C Considerations D Agreement

A. Only competent parties, those considered legally competent under the law, may enter into a valid contract.

An insured may find it more difficult to qualify for benefits, but will enjoy a lower premium, when a more restrictive definition of _________ is found in a Disability Income policy. A Benefit B Disability C Transplant D Rehabilitation

B

An insured should receive necessary claim forms within _____ days after notice of claim. A 5 B 15 C 20 D 10

B

_______ income benefits received by an employee are subject to taxation in proportion to the amount of premium that the employer paid. That income attributable to the employee's premium is not taxable. A Dental B Disability C Medical D Long-Term Care

B

A whole life policy: A Requires the insured to pay premiums to age 65 and endows at age 120 B Requires the insured to pay premiums for life and endows at age 100 C Is a single premium policy that endows at a specific age specified in the contract D Requires the insured to pay premiums to age 90 and endows at age 100

B.

Which of the following policies could be expected to have the lowest premium? A Endowment to age 65 B Whole life C 10-pay life D Single pay life

B.

Before Cranston was disabled, he was a full time engineer earning about $70,000 annually. Now, two years later, he is able to work part-time, earning about $25,000 annually. It is likely that Cranston would be classified as: A Totally disabled B Partially disabled C Permanently disabled D Completely disabled

B. A partial disability means the person cannot perform every duty of his or her occupation, but one or more important duties of the occupation can be done.

Social Security disability benefits become available to eligible workers after a waiting period of: A 1 year B 5 months C 90 days D 30 days

B. After a disabled worker satisfies the two eligibility tests for Social Security disability, there is a 5 month waiting period before the benefits can begin.

A Medicare Supplement Policy must include, as a core benefit, Medicare Part B coinsurance in the amount of _______. A 15% B 20% C 10% D 25%

B. All Medicare Supplement Policies must cover as a core benefit the 20% Medicare Part B coinsurance for medical insurance.

An annuity or pure endowment contract must provide a grace period of: A 20 days B 1 month of at least 30 days C 4 weeks D 15 days

B. Annuities or pure endowments must provide a grace period of 1 month of at least 30 days.

Eligibility for the payment of benefits under a long-term care insurance policy may require either a deficiency in the ability to perform no more than _______ of the activities of daily living or the presence of cognitive impairment. A 4 B 3 C 0 D 5

B. Benefit eligibility may not be more restrictive than requiring either cognitive impairment or the inability to perform no more than 3 ADLs. This is referred to as the benefit trigger. Most insurance companies only require 2 ADLs, but no company can be any more restrictive than to require 3 ADLs.

Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________. A Long-term disability B Total disability C Short-term disability D Partial disability

B. Residual Disability provides benefits for loss of income after the insured returns to work usually following a total disability.

Death benefits paid under Workers' Compensation: A Are limited to two times your annual salary B Include both a one-time burial allowance and a weekly benefit for a surviving spouse and /or children C Are not provided D Are $1,000 and must be requested within 90 days from the date of death

B. Death benefits under Workers' Compensation provide two types of benefits. Up to a certain dollar amount is provided as a burial allowance, and the state also provides weekly income payments for a surviving spouse and/or children.

The most effective way to ensure that the applicant will accept the policy when it is issued is: A To collect the initial premium upon policy delivery, not at the time of application B To have the applicant pay the initial premium at the time of application C To deliver the policy with a gift certificate to a local restaurant D Offer to pay the first premium for them

B. Evidence shows that collecting the initial premium with the application is more effective in having the insured accept the policy when it is issued.

For nonroutine treatments, a comprehensive policy generally pays: A For catastrophic health losses only B A specified percentage of the reasonable and customary charges C 100% of the medical expenses D For inpatient hospital treatment only

B. For nonroutine treatment, a comprehensive policy pays a percentage, such as 75% or 80%, of the reasonable and customary charges. The patient pays an annual deductible and whatever expense remains.

As compared to individual disability income policies, group disability income policies are generally: A Written an occupational basis only B Less costly and have more liberal provisions C Less costly and is more heavily underwritten than an individual plan D More costly than an individual disability policy

B. Group disability policies are generally less expensive and contain fewer limitations and exclusions. It is usually written on a non-occupational basis, because Workers' Compensation covers occupational.

If the Commissioner denies a request for an extension to comply with the continuing education requirements, the licensee must complete the continuing education requirements within _______ days after being notified of the denial. A 60 B 30 C 45 D 20

B. If the Commissioner denies a request for an extension regarding the continuing education requirements, the licensee has 30 days to comply.

Insurers generally calculate premiums on: A A monthly basis B An annual basis C A weekly basis D A daily basis

B. Insurers generally calculate premiums on an annual basis, and then pro-rate according to the mode selected. The more frequent the premium, the more overall the cost. This allows the insurer to recoup any additional costs associated with administering premium modes on a more frequent basis.

The relationship of a person who acts on behalf of a company whereby the person's actions can bind the company is known as: A Surplus lines or excess insurance B The law of agency C The law of large numbers D Brokerage business

B. Law of agency

Which of the following is NOT a characteristic of life insurance as property? A It may be paid for in installments B It requires a fund portfolio manager C It requires no physical maintenance D It creates an immediate estate

B. Life insurance creates an immediate estate, can be paid for over time, but unlike property, requires no physical maintenance. Fund managers are not necessary because life insurance companies place funds into their general account. Fund managers are only required in a stock fund.

With a modified premium whole life contract, premium payments: A Are invested in the stock market B Are lower in the early years of the contract C Are modified throughout the life of the plan and may fluctuate at the insurer's discretion D Never change for the life of the policy

B. Lower in the early years

Which of the following might be eligible to participate in an MSA? A Betty, is unemployed and currently on Medicaid B Charles, who works for a small bakery with only 15 employees C Henry, who is retired and on Medicare Part A only D Dan, who is employed by a large company with over 200 employees

B. MSAs are limited to self-employed individuals or individuals employed by a small employer having 50 or fewer employees.

Which of the following provided the federal government the right to regulate the insurance industry, regarding fraud and false statements? A HIPAA Act B McCarran/Ferguson Act C COBRA Act D Gramm-Leach-Bliley Act

B. McCarran/Ferguson Act is considered to be the Fraud and False Statement Act which gives the federal government the right to regulate the industry regarding fraud. It makes fraud a federal offense.

A Medicare SELECT policy differs from a regular Medicare Supplement (Medigap) policy in that it: A Is provided through Medicaid B Is a managed care version of the traditional Medicare Supplement policy C Provides more coverages D Costs more

B. Medicare SELECT is a version of the standard Medigap policies that operates with preferred providers, it is the managed health care version of a traditional Medicare Supplement policy. It operates similar to a PPO and provides the same types of coverage and typically costs less.

Each of the following statements about policy loans is correct, except: A The loan value of a policy cannot exceed the current cash value B Policy loans may be made on any type of policy C If a policy has cash value, the insurance company cannot refuse to lend the policyowner money D A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value

B. Policy loans, made from policy cash values, can only be made from permanent policies that accumulate cash value. They are not available on term policies.

Any extra premium charged for the waiver of premium rider: A Must be paid separately and in addition to the primary premium B Does not apply to the policy's cash value C Earns interest and increases the cash value of the policy D Increases the face amount of the policy

B. Premium for the waiver of premium rider helps meet the cost of providing the rider. It does not apply to the policy cash values.

Statements made on the application are considered true to the best of the applicant's knowledge and belief are considered to be: A Waivers B Representations C Concealments D Warranties

B. Representations are statements made and believed to be true to the best of a person's knowledge. Warranties are statements of absolute truth.

Warren and Wilma have a joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a: A Level term policy B Survivorship or second-to-die policy C Reduced paid up policy D Variable life policy

B. Survivor or second-to-die policies cover two lives and pay proceeds only when the second insured dies.

TEFRA is intended to: A Regulate and standardize Medicare supplement plans B Prevent group plans from discriminating in favor of key employees C Require labor unions to establish a trust for employee pension accounts D Regulate social insurance programs

B. TEFRA which stands for Tax Equity and Fiscal Responsibility Act of 1982 is intended to prevent group plans from discriminating in favor of key employees, including officers, the top 10 interest-holders in the employer, etc. Maximum benefits are required in plans when benefits for key employees might be greater than for other employees. This act promotes equal benefits.

erm insurance differs from permanent insurance in that term: A Builds cash value and provides limited death benefit options only B Builds no cash value, pays a death benefit only C Provides a variety of living benefits D Costs more than permanent insurance

B. Term insurance provides death benefits only, at lower premiums, with no cash value accumulation or living benefits.

The Medicare home health care benefit will provide for which of the following services? A Prescription drugs B Medical supplies C Groceries D Hospitalization care

B. The Medicare home health care benefit is not the same benefit that is found in LTC policies, and is strictly limited to services provided by participating home health agencies that provide skilled nursing or therapeutic services in the home only.

What is the name of the person named in the annuity policy to potentially receive any residual benefits? A Annuitant B Beneficiary C Owner D Insured

B. The beneficiary is the individual or person named in the contract to potentially receive benefits if the owner and/or annuitant die prior to annuitization or if the settlement option selected offers any residual benefit after the annuitant's death.

In many jurisdictions, permanent policies are required to have some cash value by the end of: A The second year B The third year C The fourth year D The first year

B. The cash value amount and its increase varies by policy, but many states require that permanent policies show some cash value by the end of the third policy year.

An annuity or pure endowment contract may be reinstated within __________ from the default in premium payments, unless the cash surrender value has been paid. A 6 months B 1 year C 3 months D 2 years

B. The contract may be reinstated within 1 year after default, if the cash surrender value has not been paid.

Which of the following provides the basis for the benefit amount paid to an insured under a disability income rider? A The elimination period B The face amount of the policy C The length of time income payments are to be paid out D The amount of monthly benefit selected

B. The face amount of the policy

An individual long-term care insurance policy may not be terminated for nonpayment of premium unless the insurer has give notice to the insured and any designated persons at least _____ days before the effective date of the termination. A 60 B 30 C 45 D 20

B. The notice must provide a 30 day grace period from the date of its mailing. Every insured may designate at least 1 additional person to receive notice of a lapse or of termination for nonpayment of premium.

Which of these is a Mandatory Uniform Provision? A Conformity with State Statutes B Legal Actions C Misstatement of Age D Illegal Occupation

B. The only choice which is a Mandatory Uniform Provision is Legal Actions. All other responses are Optional Uniform Provisions.

The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a: A Joint life and survivorship annuity B Refund life annuity C Pure life annuity D Joint life annuity

B. The only type of annuity option that provides payments to the annuitant for life with a guarantee that pays out an amount at least equal to the purchase price of the annuity in the event the annuitant dies before receiving the entire purchase price, is a refund life annuity.

Which of the following could initiate the Accelerated Benefits Provision or Rider of a life policy? A A total disability not reducing life expectancy B A condition that is terminal C Inability to perform some activities of daily living D A presumptive disability

B. The qualifying event in the Living Needs rider is the terminal status of the insured (i.e. projected to die within 1 or 2 years).

A group deferred annuity or an individual deferred annuity would be most likely used: A To fund a defined contribution plan B To fund a defined benefit plan C Neither answer D Both answers

B. When a group deferred annuity is used to fund a defined benefit plan, specified amounts of deferred annuity are bought by the employer each year to provide the 'defined benefit' for the employee at retirement, thus providing a guaranteed defined benefit at retirement.

When converting a group life policy to an individual policy, the departing group member's new policy must be a: A Fixed deferred annuity B Permanent or whole life policy C Decreasing term policy D 20 year term life policy

B. When converting group coverage to individual, the new coverage must be of a permanent type of coverage. You cannot convert term to term.

All of the following are elements of a contract, except: A Offer and acceptance B Authority C Consideration D Legal purpose

B. All enforceable contracts must include these characteristics: offer and acceptance (agreement), considerations, competent parties, and legal purpose. Authority is not considered one of the elements of a legal contract.

Failure to take a required minimum distribution (RMD) can lead to a ________ tax penalty. A 20% B 50% C 15% D 10%

B. 50%

How are employer paid premiums on a group life insurance plan treated for tax purposes? A A barter transaction B As an ordinary and necessary business expense C As compensation in lieu of cash D As a personal expense paid on behalf of the employee

B. As an ordinary and necessary business expense

Which of the following is considered not to be an Essential Health Benefit? A Behavioral health treatment B Personal care C Mental health services D Ambulatory patient services

B. Personal care

Part A of Medicare pays for: A None of the answers listed B Dental expenses C Hospital expenses D Outpatient expenses

C

Right to Examine is the same as: A Waiting Period B Elimination Period C Free Look Period D Probationary Period

C

The grace period for an individual health insurance policy being paid on a quarterly basis is: A 7 days B 45 days C 31 days D 10 days

C

The maximum liability of the Life and Disability Insurance Guaranty Association for cash values, for any one life is: A $300,000 B $200,000 C $100,000 D There is no limit

C

Which of the following is required to sign the application for insurance? A Producer only B Insurer only C Producer and the applicant D Producer and the insurer

C

Which product, offered by insurers is specifically designed to allow an individual's savings to be distributed to him/her periodically over his/her entire life, regardless of how long he/she lives? A Universal Life Insurance B Participating Whole Life C Annuities D Variable Life Insurance

C Annuities

The main benefit of 501(c)9 trusts is: A That distributions from the trust are always received tax-free B Contributions to these trusts are not tax deductible at all C Contributions to these trusts may be deducted immediately, instead of when benefits are distributed D Costs of setting up these trusts are always lower than other types of plans

C Contributions to a 501(c)9 trust can be deducted immediately, where as contributions to regular self-funded plans may not be deducted until benefits are distributed. Maintaining these trusts may be high enough to eliminate any tax advantages offered. Distributions may be taxable.

Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? A Proof of Loss B Time limit on Certain Defenses C Waiver of Premium D Payment of Claims

C Waiver of Premium is a rider (or provision) in a policy. It is neither a mandatory nor optional policy provision under the Model Act.

All of the following are life insurance policy prohibited provisions, except: A Limiting the time to bring legal action against an insurer to less than 1 year B Backdating a policy more than 6 months to save age in order to lower the policy premium C Voiding a policy for failing to repay any policy loan or loan interest when the total outstanding policy debt is greater than the policy's cash value D Settlements for less than the face amount plus dividends minus the sum of outstanding policy loans, loan interest, and unpaid premium

C.

Which of the following are included in Part I of a Health Insurance Application? A Medical background B Present health C The gender of the applicant D Family health history

C.

A plan in which employees select health benefits from a variety of coverage options, based on their individual coverage needs is a: A COBRA continuation plan B HIPAA plan C Cafeteria plan D Staff model plan

C. A cafeteria plan is a plan in which employees select health benefits from a variety of coverage options, based on their individual and family needs.

_________ consist(s) of the amount of premium that is returned to the policyowner if the insurer achieves lower mortality and expense costs than expected. A A policy loan B The death benefit C A dividend D The cash value

C. A participating insurer's dividend consists of the amount of premium returned to the policyowner if the insurer achieves lower mortality and expenses than expected.

Assets in a separate account are valued at: A Their market value first quoted to the applicant B Their market value at any given time C Their market value on the date of valuation D Their guaranteed rate of interest

C. A separate account's assets must be valued at market value on the date of valuation or, if there is no readily available market, as provided under the contract's terms.

Each of the following would be an element in the definition of fraud, except: A Withholding of known material facts B Intentional material misrepresentation with the intent of causing injury to another party C An individual warrants a fact stated on the application D A false statement on the application that is material to the acceptance of the risk

C. A warranted fact is one guaranteed to be true. Although no statement on an application is regarded as warranty, no fraud is involved if a statement is guaranteed to be true.

Policies are considered incontestable after: A 6 months B 9 months C 2 years D 3 months

C. According to Required Provision 'Time limit on certain defenses' (incontestable) the period is 2 years, after which the policy generally cannot be voided for any misstatements (except fraudulent misstatements).

John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John? A Medicaid pays the medical expenses B Health covers medical; disability covers income C John is liable for all expenses D His health policy pays all expenses

C. According to the Intoxicants and Narcotics Provision (an Optional Uniform Provision), the insurer may deny coverage for John's injuries, making John liable for all expenses.

Information about an applicant's work behavior or character gathered from neighbors or co-workers would be included on an? A APS B Agent's Report C Inspection Report D MIB

C. An Inspection Report is a general report of the applicant's finances, character, morals, work, hobbies and other habits. It is sometimes called a Consumer Investigative Report.

An insurance contract is an aleatory contract. This means: A Statements made in the application are guaranteed to be true in all respects B Parties to the contract must have the legal capacity to enter into the contract C Equal value is not given by both parties to the contract D The contract must be for a legal purpose

C. An aleatory contract is a contract of unequal values exchanged.

A company that is licensed to sell insurance in a particular state is: A A foreign company B A nonadmitted company C An authorized company D A domiciled company

C. An authorized company is one that is licensed to sell insurance in a particular state. It is also considered to be an admitted company.

Managed Health Care attempts to contain costs by controlling the behavior of participants in all of the following ways, except: A Preventive Care B Controlled Provider Access C Partial Case Management D Copayments and/or coinsurance

C. Comprehensive Case Management is employed as opposed to partial.

Which of the following is NOT considered one of the essential elements of a contract? A Legal Purpose B Offer and Acceptance C Conditions D Competent Parties

C. Conditions

In the context of replacement, the term 'conservation' means any attempt by the: A All the answers listed B Insured to cancel the policy in an attempt to conserve premium dollars C Existing insurer or its agent to continue existing life insurance in force D Insured to negotiate a lower premium with the agent

C. Conservation is any attempt by the existing insurer or agent to conserve the business. An agent is generally notified when another insurer is attempting to replace the policy previously written by the existing agent. This agent will then attempt to maintain the coverage written by contacting the insured to discuss the two policies and compare benefits.

In order to make sure that a creditor of the insured is not paid more than the outstanding loan at time of claim, the policyowner should: A Specify a dollar amount the creditor should receive at time of claim B Name the creditor as a primary beneficiary C Purchase a decreasing benefit policy that matches the loan repayment schedule D Indicate the percentage of the face amount the creditor will receive

C. Credit insurance or decreasing term insurance is the best way to accomplish this.

The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following? A Morbidity table B Exclusion C Probationary period D Waiting period

C. Disability policies may exclude coverage for illnesses for a short period of time (such as 7 to 10 days) after a new policy takes effect to avoid claims for preexisting conditions. Accidental injuries are never subject to a probationary period.

What is a postmortem dividend? A A second dividend declared after the initial dividend had been paid out B A dividend declared and paid out at least one year after an insured's death C A dividend earned, but not yet paid, in the year of the insured's death and paid with the death claim D A dividend declared but held for future payout

C. Dividends earned during the year of the insured's death are called postmortem dividends and are paid as part of the death claim addition to the policy's face amount.

All Medicare supplement (or Medigap) policies must: A Offer a 10 day free look provision B Provide the same benefits as Medicare Part A C Have the same core benefits D Provide the same benefits as Medicare Part B

C. Federal law dictates that all Medicare supplement or Medigap policies must have the same 5 core benefits as found in Core Plan A.

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company: A Applies the remaining cash values into a deferred annuity B May apply the cash values to purchase additional paid up insurance C Will automatically institute the extended term option D May exercise any nonforfeiture option it deems appropriate

C. Generally the extended term option is used automatically when a cash value policy has lapsed, and the policyowner does not choose another nonforfeiture option or make an effort to reinstate the policy.

Under what circumstances do major medical policies usually provide for restoration of benefits? A Under no circumstances do major medical policies provide restoration of benefits B Restoration of benefits must occur every policy anniversary regardless of the amount of benefits exhausted C Restoration usually occurs after a specified dollar amount of benefits has been exhausted and after the insured has proven insurability D Anytime benefit limits have been exhausted

C. Generally, in a Major Medical Policy, the restoration of benefits provision will restore lifetime maximums after a stated dollar amount has been reached. The insured usually must prove insurability. Major Medical Policies typically don't operate as commercial insurance policies, as commercial insurer's generally restore benefits with each policy anniversary.

When underwriting group life insurance: A The underwriter requires complete family history from each employee B The underwriter requires each employee to have a paramedical exam C The underwriter generally focuses on the group as a whole, rather than on individual members D The underwriter generally focuses on individual members of the group, rather than the group as a whole

C. Group life insurance is usually written on a group basis as opposed to an individual basis. The underwriter focuses on the average age, size, industrial classification, sponsor, experience rating and personnel turnover history of the group to determine the group rate classification.

When an employee pays part of the premiums for group disability insurance: A All of the disability income benefits are received totally income tax free to the employee B All of the employee paid premiums are tax deductible to the employee C The benefits are received tax free to the extent that the employee paid the premiums D All of the disability income benefits received by the employee are fully taxable

C. If an employee pays 50% of the premium, then 50% of the benefit is received tax-free. If an employee pays 100% of the premium, the entire benefit will be received tax-free. The benefits are received tax free to the extent that the employee has participated in premium payments

It is the _________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state. A Secretary of State B State Senate C State Insurance Commissioner D State Congress

C. In order for an insurer to operate as an admitted or authorized insurer, the insurer must hold a Certificate of Authority issued by the State Insurance Commissioner, Superintendent, or Director.

An insured with an individual LTC policy is deducting the premiums he is paying for the plan on his income taxes. Once he begins to receive benefits from this plan, what will be the tax consequences on this income? A 7.5% is taxable B Tax-deferred C Not taxable D Fully taxed

C. LTC benefits are usually not subject to federal income tax.

Which of the following statements about the average number of people who die each year is true? A It is called the predictability rate B It is called the principle of indemnity C It is called the mortality rate D It is called the principle of life insurance

C. Life insurance is based on the mortality rate, which is the statistical probability of death in a large population of insureds

Which statement best describes the term reserve? A That amount insurer's maintain in reserve to guarantee that they can profit from future death claims B That amount that enables the insurer to provide sales bonuses and incentives for their commissioned sales staff C That amount that, when increased by future premiums on outstanding policies, and interest on those premiums will enable the company to meet future death claims D That amount, required by law, that the company must hold in reserve to pay only cash value accumulations on permanent insurance policies

C. Life insurers are required to keep a certain amount of money in reserve so it will be available to pay future death claims.

The Coordination of Benefits Provision is designed to: A Encourage insureds to purchase and maintain as much additional coverage as possible B Prevent overinsurance C Give insureds as much coverage as possible while eliminating overinsurance D Permit insurers the right to pay or not pay a claim at their discretion

C. Many working couples are doubly covered by group health insurance. Coordination of Benefits is designed to eliminate overinsurance, while giving insureds as much coverage as possible.

Which of the following is NOT a common exclusion for a dental expense policy? A The 5-year replacement exclusion B The missing tooth exclusion C The preventative care exclusion D The cosmetic exclusion

C. Preventative care is rarely ever, excluded from a dental care policy, it is usually encouraged.

A producer who is acting as an agent is representing: A The insured and the insurer B Always the insured C Always the insurer D The insured, the applicant and the beneficiary

C. Producers that function as an agent always represent the insurance company. Only a broker may represent the insured.

An annuitant has a temporary annuity certain, and dies shortly after the payments start but before the certain period of 10 years has elapsed. Any money remaining is: A Paid out for the beneficiary's entire life B Placed into an insurance trust account C Paid to the beneficiary for the rest of the certain period D Subject to probate and will be disbursed according to state law

C. Since the income is guaranteed for 10 years, payments will be made to the beneficiary for the remaining 'certain period'.

Under a credit health policy, what is the maximum amount of any accidental death benefit included? A $50,000 B Double the amount of the original indebtedness C The amount of outstanding indebtedness at any given time D None of the answers listed

C. Since the objective of credit insurance is to pay off the outstanding debt in case of the insured's disability or accidental death, the accidental death benefit cannot exceed the amount of outstanding debt at any given time.

If a policy was issued at a higher premium due to a higher risk exposure, all of the following can be used to reflect the higher risk, except: A Flat rate B Rated-up Age C Declined D Table rate

C. Special restrictions and higher premiums are used for substandard risks. Declined is not a classification, only an underwriting decision

TSAs are tax-sheltered retirement programs for employees of all the following kinds of organizations, except: A Educational B Religious C Corporations D Charitable

C. TSAs / 403(b)s are qualified retirement plans for non-profit organizations. An organization that is incorporated would not be suited for a TSA.

The factors that determine the amount of each payment under the fixed period settlement option are: A Age of the beneficiary only B Length of the fixed period payout only C Length of the fixed period, face amount of the policy and interest D Length of the fixed period, face amount of the policy, interest, and age of the beneficiary

C. The amount of a fixed period settlement option payment is determined by the face amount of the policy, the interest it can earn, and the length of the fixed period the payments will be made. The age of the beneficiary is not required when determining the fixed period payout amount.

The nonforfeiture option that provides the most life insurance protection is the: A Reduced paid-up option B Cash surrender option C Extended term option D Paid up additions option

C. The extended term option provides the most life insurance protection of the available nonforfeiture options. Paid up additions are considered dividend options and are not considered a nonforfeiture option.

A certain major medical policy states a maximum number of days for which convalescent care will be paid as well as a maximum number of X-rays that will be paid for under any one claim. These are examples of: A Stand alone limits B Common policy limits C Inside limits D Designated benefits

C. The limits sometimes placed on specific coverages in a major medical policy are called inside or internal limits. These limits resemble scheduled benefits, as to the fact that they are stated in the policy as either maximum lifetime limits or limits per policy period. Either way they are stated inside the policy.

All of the following statements about noncancellable policies are true, except: A A noncancellable policy is also called a noncancellable and guaranteed renewable policy B The only right to cancel the noncancellable policy is for nonpayment of premium C The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date D The insurer may regain the right to cancel or not to renew when the insured reaches an age specified in the policy

C. The only right to cancel a noncancellable policy is nonpayment of premium, because it is guaranteed renewable to age 65. The only type of renewal provision that allows an insurer the right not to renew on the policy anniversary is the optionally renewable option.

In group insurance, the evidence of a contract between the insurer and the employer or association is: A The underwriting certificate of completion B The certificate of insurance C The policy D The approval certification

C. The policy itself is the evidence that a contract exists, whether it is an individual, association or group policy. In group insurance the policy is referred to as the master policy. Individual insureds do not receive a copy of the policy, since there is no agreement between the insureds and the insurer.

Collateral for a policy loan is: A The premiums applied to the cash value account minus the load B Not required at all C The cash value of the policy itself D Provided by the policy's death benefit

C. The policyowner may obtain a loan once there is sufficient cash value in the policy. This serves as the policy's collateral.

The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers. A Self-insured B Reciprocal C Residual D Reinsurance

C. The residual marketplace is a source of coverage of last resort for those who have been rejected by the voluntary marketplace insurers.

The waiting period from the start of a disability to be eligible to apply for Social Security disability is: A 12 months B 3 months C 5 months D 6 months

C. The waiting period to apply for Social Security is 5 full months from the start of a qualified disability.

To be able to start operations, a mutual company must have all of the following, except: A A minimum number of applications for insurance B The advanced premium payment for each application C A minimum number of stockholders D A minimum surplus as specified by the state

C. To be approved to start operations, a mutual company must have a minimum number of applications for insurance, the advanced premium payment for each application, and a minimum surplus. A mutual company is mutually owned by its policyholders, therefore, there are no stockholders.

One of your clients just reinstated his health insurance plan. When is coverage effective for sickness and accident? A Immediately for both accident and sickness B 10 days for accident and 48 hours for sickness C 10 days for sickness, and immediately for accidental injuries D 30 days for sickness, immediate coverage for accidents

C. Upon reinstatement, accidents are covered immediately and sickness after 10 days.

Which of the following statements is NOT true concerning a coordination of benefits situation? A The group insurer for the spouse of the person with the claim is secondary B Where children are involved, the primary group insurer is the insurer for the parent whose birthday comes first in the year C Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of claim D The group insurer for the person with the claim is primary

C. When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most possible coverage without allowing any overinsurance from occurring.

Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan? A If the loan amount, plus interest charged exceeds the face amount at death, the beneficiary would owe the insurance company the balance of the loan B A policyowner is not allowed to increase an existing policy loan C If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancel the insurance D If a loan payment is not established within one year, the insurance company may cancel the policy

C. When the outstanding loan balance plus interest is greater than the cash value, the policy will be lapsed with proper notification.

An individual purchased a fixed annuity with flexible premiums. When she annuitized the policy, she chose the Life Income 10-Year Certain option. What would the beneficiary receive if the annuitant dies 4 years after the annuity payout began? A The undistributed balance B Nothing C 6 more years of payments D 10 more years of payments

C. n any life annuitization option, distributions are made for as long as the annuitant lives. The period certain defines the minimum number of payments that will be made if the annuitant does not live as long as the guarantee period. Since the annuitant died 4 years following annuitization, 6 years of payments remain.

Which of the following would be considered a speculative risk? A The possibility your car is totaled in an auto accident B The possibility you will die on the job at a young age C The possibility the painting you bought might be a long-lost masterpiece D The possibility you will become disabled

C. A speculative risk is one in which there is a chance for either loss or gain. Example: Gambling, Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of gain, only a chance of loss exists.

A document that provides information to the home office of an insurer for underwriting purposes is called a(n): A Rider B Claim Form C Application D Amendment

C. An application is primarily an underwriting document for the insurer to assess potential risk.

The situation below that most likely calls for the purchase of term insurance is: A Mary is 44 years old, is a career school teacher and has no children B Roger is age 62 and is approaching retirement after working for a corporation for 30 years C George has two years of medical school to complete; he and his wife have one child D Kathy, age 60 and married, has two adult children, both of which are married

C. George has two years of medical school to complete: he and his wife have one child

With regard to life insurance policies, loading refers to: A Surrender charges applied to the cash surrender of the policy B The amount of money the insurance company reserves for expected mortality costs C Assignment of the appropriate share of the company's operating expenses to each policy D The amount the company anticipates for dividend payout

C. Operating expenses such as salaries, rent, taxes, etc., must be 'loaded' onto each policy in an appropriate share by insurers.

Which of the following statements is FALSE regarding credit health insurance? A Credit health insurance may be sold as either group or individual insurance B Even if the creditor pays the full cost of the insurance, the debtor must be made aware of the coverage C Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death D The accidental death benefit may not exceed the total amount of indebtedness, nor may the monthly disability benefit exceed the monthly loan payment amount

C. Credit health does not operate like an HMO and only covers with accidental death

If the insurer issues a health insurance policy without the initial premium, the producer must obtain a signed: A. Statement of increased health risk B. Rider that the policy is accepted C. Statement of Good Health D. Standard provisions endorsement

C. Statement of good health

Comprehensive dental plans usually provide: A Non-routine dental care without any regard to deductibles or coinsurances B Routine care such as preventative care is provided after satisfying a required deductible C Routine dental care services without deductibles or coinsurance D Routine care without deductibles, but subject to coinsurance

C.5

In Alabama, the Commissioner of insurance is: A Appointed by the house of representatives B Voted into office by primary elections C Appointed by the president of the United States D Appointed by the governor

D

Industrial life insurance is a form of life insurance written under policies with face amounts of: A $3,500 or less B $4,500 or less C $25,000 or less D $2,500 or less

D

Non-financial regulatory activities are known as: A Risky conduct B Hazardous conduct C Financial conduct D Market conduct

D

Once issued, the application becomes part of the ___________, when attached. A Part 1 B Part 2 C Agent's Report D Entire contract

D

All of the following are true regarding advertising in life insurance, except: A Advertisements may not omit the words 'life insurance' or 'annuity' from a policy's name B Premiums cannot be referred to as 'deposits', 'deposit premiums', or 'investments', they may be referred to as 'premiums' only C Any reference to policy dividends must state that they are not guaranteed D Premiums cannot be mentioned in an advertisement at all

D

An annuity or pure endowment contract must provide a grace period of: A 20 days B 15 days C 4 weeks D 1 month of at least 30 days

D

To reduce its exposure to claims from a substandard disability risk, an insurer may take all of the following actions, except: A Charge additional premium B Reduce the amount of benefit C Increase the elimination period D Remove all of the exclusion riders

D

George, who has a group policy, may upon leaving his place of employment: A Convert it to an individual term insurance plan, without proof of insurability B May continue his current coverage with no change in premium C May convert it to permanent insurance provided he does so within 90 days and can prove insurability D Convert it to permanent insurance without proof of insurability, within a specified period

D.

In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what else must the agent obtain to make the delivery complete? A Postage and handling fees B Additional payment reflecting lost interest C An affidavit from the applicant D A statement of good health

D.

Timothy owns an individual A&H policy, and in the event of an accident, he is required to prove only that the injury itself is unforeseen and unintended. Tim's policy is based on which of the following definitions of accident? A Accidental Death B Accidental Dismemberment C Accidental Means D Accidental Bodily Injury

D.

With a Business Overhead Expense Policy, all of the following are claims that are covered, except: A Employee labor B Office rent C Utilities D The salary or profit of the business owner

D. A Business Overhead Policy does not pay the owner's salary or profit. Virtually all other financial aspects of running a business are covered.

Medicare supplement policies must provide a 'free look' period of: A 25 days B 15 days C 20 days D 30 days

D. A Medicare Supplement policy must contain a 30-day free look provision on the first page in bold print.

A Medicare supplement policy may not limit benefits for losses incurred more than ________ from the effective date of coverage because they involve a preexisting condition. A 1 year B 90 days C 30 days D 6 months

D. A Medicare supplement policy may not limit benefits for losses incurred more than ________ from the effective date of coverage because they involve a preexisting condition.

Which of the following statements is FALSE regarding Medigap policies? A Losses resulting form sickness may not be treated differently than losses resulting from accidents B Except for nonpayment of premium, coverage may not be terminated on a spouse solely because the insurer has reason to terminate coverage on an insured C Medigap policies may not duplicate benefits provided by Medicare D A Medigap policy provides the same coverage as a Medicare policy

D. A Medigap policy supplements and fills the gaps of Medicare, it never duplicates Medicare.

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance: A On his own life at specified periods, but must prove insurability B Anytime before the age of 65 C On his own life at specified periods of time at a fixed guaranteed premium D On his own life at certain specified ages without proof of insurability

D. A guaranteed insurability rider guarantees that more permanent insurance can be purchased at specific ages without further proof of insurability at a rate based upon your attained age at the time the increase is purchased.

A producer must keep complete records pertaining to transactions under the producer's license for at least: A 1 year B 6 months C 3 months D 3 years

D. A producer is required to maintain client records for a period of at least 3 years.

The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except: A Transferring the proceeds of the policy B Encumbering the proceeds of the policy C Commuting the proceeds of the policy D Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations

D. A spendthrift clause is designed to protect life policy proceeds from the beneficiary's creditors and spending habits as well as to prevent the beneficiary from transferring, commuting or encumbering the proceeds. Once the claim has been processed and paid out as the policy stipulates, the beneficiary has all rights to the proceeds.

Which of the following can be listed on an illustration? A The insurer's name, producers name, address, and the policy generic name B The dividend option selected or any nonguaranteed elements C The proposed insured's name, age, gender, and the initial death benefit D All of the answers listed

D. All of these can and should be listed on a life insurance illustration.

Which of the following is NOT one of the categories of benefits incorporated by State Workers' Compensation Laws? A Medical benefits B Rehabilitation benefits C Disability benefits D Long-term care coverage

D. All state Workers' Compensation laws incorporate for categories of benefits: disability (loss of income), benefits, medical bills, survivor (death) benefits, and rehabilitation benefits. No long-term care coverage applies.

Which of the following would NOT be permitted as a Section 1035 policy exchange? A A life contract exchanged for an annuity contract B An endowment contract exchanged for an annuity contract C A life contract exchanged for an endowment contract D An annuity contract exchanged for a life contract

D. An annuity contract can only be exchanged for another annuity contract under IRC Section 1035 exchange rules.

If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax? A $21,000 B Zero C $18,000 D $3,000

D. Any proceeds from a surrendered or matured life insurance policy that exceed policy costs are subject to federal income tax. This is referred to as the cost recovery rule.

Which of the following best describes the consideration on the part of an insurer? A The offer of the contract B The purpose of the contract must be legal C The acceptance of the contract D The promise to pay in the event of a covered claim

D. Consideration is something promised, given, or done that has the effect of making an agreement a legally enforceable contract.

Controlled business may be defined as insurance sold: A To existing clients only B To anyone willing to buy C To individuals needing an increased amount of term insurance D To the producer, the producer's family and friends, and the producer's business associates

D. Controlled business is possessing a license solely for the purpose of writing business on one's own self, immediate family, relatives, employer and employees.

Who is Alabama's current Commissioner of Insurance? A Fob James B Bob Riley C Walter Bell D Jim Ridling

D. Currently: James (Jim) Ridling is the Commissioner of Insurance in the State of Alabama. In Alabama, the commissioner of insurance is appointed by the Governor. This is current as of July 2014. To verify who the Commissioner is at any given time, log on to the Alabama Department of Insurance at: www.aldoi.gov -- Because the Governor can change the Commissioner at anytime.

For hospital stays of over 90 days, patients can draw from a pool of 60 reserve days that may be used: A When ever needed B 0nce every 5 years C Every year D Once in a lifetime

D. During the lifetime reserve days, Medicare pays all but a portion of the hospital costs. For hospital stays over 90 days, patients can draw from a pool of 60 reserve days once in a lifetime.

ERISA sets minimum standards for pension plans primarily in the ______ industry. A Quasi-government B Public C Public and Private D Private

D. ERISA focuses in on the private industry pension plans.

A health benefit plan that provides coverage for surgical services for a mastectomy must provide screening mammography for women age 50 or older at least every: A 3 years B 5 years C 2 years D Year

D. Every health benefit plan must cover a mammography every year for women age 50 and older; every 2 years for women age 40-49; and a baseline mammogram one time for women between age 35-39.

On which of the following policies would any proceeds be taxable? A The death benefit proceeds of an individually purchased life insurance policy paid to a beneficiary B A key employee disability income policy paid for and owned by the business and the business is the beneficiary C A disability policy that is used to fund a buy-sell agreement D Business overhead expense insurance

D. Generally, when premiums are deductible, the policy proceeds will be taxed. When premiums are not deductible, proceeds are generally received tax free. When the business is also the beneficiary, typically the premiums are not tax deductible to the business.

Regarding group health insurance, which is true? A The premium payment is the responsibility of each individual B Individual underwriting is utilized C Each plan participant receives a policy D The plan sponsor is issued the Master Policy

D. In group health insurance, only the plan sponsor receives a copy of the Master Policy. Covered individuals receive a Certificate of Insurance. The plan sponsor is responsible for paying the premiums.

Jerry has selected a Life Income 10 year Period Certain. What happens to the income payments if he dies in year 4 after starting to receive income benefit payments? A The payments are increased by 60% and paid out for the balance of the time remaining on the guaranteed benefit B The payments are reduced by 40% then paid out to the surviving beneficiary for the remainder of their life C The payments end immediately with any residual values retained by the insurer D The payments continue for the balance of the Period Certain to a named beneficiary

D. Life Income 10 year Period Certain pays out for the longer of 10 years or the lifetime of the income benefit payment recipient. If they die prior to the end of the tenth year then their named beneficiary receives the balance of the years income benefit payments.

Primary support for Medicare Part A comes from: A Federal bond fund B Local tax revenues C Medicaid D Social Security payroll taxes

D. Medicare Part A is supported primarily by Social Security payroll tax, while Part B is supported by the premiums paid by insureds and by general tax revenues.

The applicant, if other than the proposed insured, must have: A A relationship to the insured's named beneficiary B A valid state issued drivers license C The insured's permission to be the applicant D An insurable interest in the life of the insured

D. To establish insurable interest, the applicant must have an interest in the insured remaining alive.

An insurance company, upon receiving proof of death, may not delay a death claim settlement beyond a period of: A 3 months B 1 month C 6 months D 2 months

D. Upon receiving proof of death, an insurer may not delay a death claim settlement beyond 2 months or 60 days.

Which of the following would not be a situation in which the annuity premium dollars would qualify for an income tax deduction for the premium payor? A An employed individual purchasing a traditional IRA flexible premium deferred annuity each year from discretionary dollars B An employee purchasing a flexible premium deferred variable annuity within a traditional 401(k) plan through payroll deduction C A school teacher purchasing a periodic premium tax sheltered annuity (TSA) through payroll deduction D A married couple purchasing a flexible premium non-qualified deferred annuity to supplement their future retirement income

D. Non-qualified annuities are purchased with after-tax dollars therefore are not eligible for any up-front income tax deductions. Qualified plans will count annuity premium dollars as pre-tax contributions which would then allow for a tax deduction.

Part B of Medicare excludes which of the following medical expenses? A Outpatient hospital treatment B Clinical laboratory services C Home health care D A regular dental checkup

D. Part B does not cover routine dental services.

Loan values and retirement income are: A Considered part of the final expenses of life insurance B Features that are only available on term policies C Not available from any type of life insurance policy D Called the living benefits of life insurance

D. Permanent policies generally provide access to cash values, either by loan or surrender. Any values that can be accessed while living are referred to as living benefits.

Which of the following may an insurer purchase for its separate account? A More than 10% of the total issued and outstanding voting securities of any single issuer B Both answers are correct C Securities of a subsidiary of the insurer D Neither answer is correct

D. Separate accounts for variable annuities may not acquire: 1) Any securities of the insurer's subsidiary. 2) Over 10% of the total voting securities of any other issuer. This would be considered a conflict of interest and would provide companies an unfair advantage.

What type of disability income policies are most likely used to cover only nonoccupational disability as opposed to both occupational and nonoccupational? A Disability income rider to an individual life policy B Workers' Compensation C Long-term disability policies D Short-term disability policies

D. Short-term disability policies often exclude occupational disability because Workers' Compensation provides for occupational disabilities and they only provide income for a maximum of 2 years, while long-term disability policies generally cover both occupational and non-occupational disability.

A Taft-Hartley Trust is established by one or more: A Credit unions in the same area B Employees working for more than one employer C Employers in a Multiple Employer Trust D Labor unions or associations

D. The Taft Hartley Act requires that a Taft-Hartley Trust be established by one or more labor unions or associations. The benefit of establishing the trust is that funds are kept separate of the labor unions or associations funds and are managed by trustees that have no affiliation with the labor union or association.

Which provision allows medical expenses from the last 3 months of a calendar year to be used during the next calendar year to meet a deductible? A Family deductible B Stop loss provision C Common accident provision D Carryover provision

D. The carryover provision allows an insured to carry any expenses during the last part of the previous year, generally the last 3 months, to meet the deductible of the next year.

The first year commission for the sale of a Medicare supplement policy may be no more than ________ of the commission paid for selling or servicing the policy in the second year. A 100% B 50% C 500% D 200%

D. The first year commission is limited to 200% of the renewal commission. Renewals are paid for 5 years.

The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is called the: A Fixed amount option B Life income period certain option C Joint life option D Fixed period option

D. The fixed period option is the option under which a beneficiary receives a regular income for a fixed period of time.

According to the provisions of the Affordable Care Act, individuals must: A Get health insurance through their employer B Shift their health insurance to an exchange C Buy insurance through government sources D Get health insurance or pay a fine

D. The individual mandate requires insurance to get covered either through work, another private insurance, or state exchange; otherwise, regulatory issues will be faced.

Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son, Donald. Suppose that when Donald reaches age 21 his father presents him with the policy as a gift. Which of the following statements is NOT correct? A Donald has enjoyed protection against the problems of premature death B The face value of Donald's policy has increased by 5 times C The premium will continue to be based on his original age of 5 D Donald must change the beneficiaries immediately

D. The insured is not required to make any changes to the beneficiary designations. The insured does take over the payment of premiums which are based on the insured's original issue age. The face value has increased by 5x the original amount and will continue for the life of the plan.

The mathematical probability table used by insurance companies to determine loss due to sickness or injury is the: A Rate Table B Mortality Table C Claims Table D Morbidity Table

D. The morbidity Table is used by Insurance companies to determine premiums for Accident and Health Insurance.

Which of the following is true about a policy that pays for room and board expenses on a indemnity basis? A The policy pays only a percentage of what is considered to be usual, customary, and reasonable B The policy pays a percentage of the total cost per day in the hospital up to 30 days C The policy pays a stated amount per day in the hospital with no limit regardless of the number of days D The policy pays a specified, pre-established amount per day for a maximum number of days

D. The policy will pay the pre-established amount for each day of the hospital stay, up to a specified number of days listed in the policy.

The field underwriter is the _________ and is not a determiner of insurability. A Paramedical examiner B Medical doctor C Actuary D Producer

D. The producer is in the field soliciting applications for insurance and in effect is another pair of eyes and ears for the insurer in helping to issue policies to insurable prospects.

The waiver of premium rider normally expires at age: A 70 B 65 C 55 D 60

D. The waiver of premium rider generally expires when the insured reaches age 60

_________ refers to the jurisdiction where an insurer was formed or incorporated. A Authorized B Admitted C Approved D Domicile

D. Domicile refers to the jurisdiction either state or country where an insurer was formed or incorporated.

A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason. A 35 B 20 C 45 D 10

D. 10

All of the following statements regarding an insurance application are correct, except: A It is the primary source of information for underwriting purposes B It must be signed by at least the applicant and producer C It is a formal written request by an applicant to an insurer requesting a policy D It is not included as part of the contract

D. An insurance application is part of the contract

Which of the following is not true of Medicare Part B? A All recipients pay a monthly premium B Provides coverage for outpatient services C It is optional coverage for those eligible for Part A D All retirees are automatically covered

D. Medicare part B is a voluntary governmental program

A qualified plan pre-mature withdrawal tax penalty can be waived in all of the following circumstances, except: A Qualified educational expenses B Death C Disability D Buying a first vacation home

D.r

The insurance industry is primarily regulated at the _________ level.

State level

Which of the following would NOT be a likely consideration in determining premium rates for group health insurance? A Whether the company produced a profit or a loss in the previous year B Maximum indemnity period C Length of the waiting period D Degree of occupational hazard associated with the group

a. Important factors in determining group health policy rates include: average group age, length of eligibility period selected, maximum indemnity period selected and the groups occupational hazards associated with the group. Whether the company produces a profit or loss is not an underwriting consideration.

Required Provision 'Reinstatement' addresses reinstatement of a lapsed policy. According to this provision, when an insured applies for reinstatement and receives a conditional receipt, how long does the insurer have to approve or deny reinstatement before the policy will be automatically reinstated? A 120 days from the date of the conditional receipt B 45 days from the date of the conditional receipt C 20 days from the date of the conditional receipt D 90 days from the date of the conditional receipt

b. Required Provision 'Reinstatement' states that if the insurer does not inform the insured of policy reinstatement after premium payment and the issue of a conditional receipt, the policy is automatically reinstated within 45 days after the date of the conditional receipt.

A split-dollar plan: A Is part of an entity buy-sell agreement B Insures key employees and is for the sole benefit of the employer in the event of the employees death C Divides the cost of additional insurance for an employee between that employee and the company D Is a qualified retirement plan for the employee with which premiums are split between both the employer and employee

c. Divides the cost of additional insurance for an employee between that employee and the company