Insurance exam 7/3/19
aleatory
After paying the initial premium for a disability income policy, Suri was injured in an accident. She received disability income payments for the next 12 months. These payments were far more than the amount of the premium she paid. This is characteristic of contracts that are: adhesive aleatory conditional unilateral
$44,000
Ben owns a $100,000 policy on his life. He sells the policy to his younger brother, Bart, for $50,000. Bart names himself beneficiary and is now responsible for paying the policy's annual $1,500 premium. Four years after the sale, Ben dies and Bart receives the policy's $100,000 death benefit. Under the transfer-for-value rule, what is Bart's taxable "gain" on the policy? $6,000 $44,000 $50,000 $38,000
the expected return
Pamela owns a fixed deferred annuity that she will annuitize next year when she retires. Which of the following is a key factor in determining the percentage of her monthly annuity payment that will be subject to tax? - her marginal income tax rate - the expected return - the interest rate credited to the annuity - the capital gains tax rate
vaccinations and routine eye care and eyeglasses
Part B of the Medicare program provides additional benefits beyond hospitalization with the exception of: - doctors' services, inpatient and outpatient medical and surgical services, and supplies - physical and speech therapy and occupational therapy - diagnostic tests and medical supplies - vaccinations and routine eye care and eyeglasses
long-term care partnership policy
Felix buys an insurance policy that will pay benefits if he needs long-term care and also protects some assets from the spend-down requirement if he applies for Medicaid assistance. Which type of policy does Felix own? - individual long-term care policy - Medicare supplement policy - long-term care partnership policy - life insurance policy with a long-term care rider
straight life income
For a given amount of annuitized funds, which life contingency option provides for the highest monthly payment? - straight life income - life income with refund guarantee - life income with period certain - joint and survivor income option
universal life insurance
For which of the following types of life insurance is a cost-of-living (COL) rider generally unnecessary and therefore unavailable? universal life insurance straight whole life insurance level term life insurance adjustable life insurance
whole life insurance
For which one of the following types of life insurance policies would a fixed premium payment plan be required? whole life insurance adjustable life insurance universal life insurance variable universal life insurance
Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are tax free.
Ginger operates an accounting business as a sole proprietor. She pays $1,600 each month in premiums for a medical insurance policy covering herself and her family. Which of the following statements correctly describes the tax treatment of this policy? - The premiums are not tax deductible, and benefit payments are tax-free. - The premiums are tax deductible only to the extent Ginger's medical expenses exceed 10 percent of her adjusted gross income, and benefit payments are tax-free. - Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are tax free. - Ginger can deduct 100 percent of the premiums paid for her health insurance policy, and benefit payments are taxable.
contingent beneficiary
Susie was the intended recipient of death benefit proceeds from a life insurance policy insuring her husband, but she died a few months before him. Per the policy's beneficiary designation, the proceeds were paid to their son, Abe, who is considered the: contingent beneficiary tertiary beneficiary collateral beneficiary primary beneficiary
It primarily covers hospital-related expenses
Why would a basic medical expense policy not be a good form of coverage for a person who visits his doctor very often? - It has a high deductible. - It covers accidental injuries only. - It primarily covers hospital-related expenses. - It is only available on a group basis.
The employer is not required to make the same amount of contributions every year
Which statement about profit-sharing plans is correct? - It is a type of defined benefit plan. - The employer is not required to make the same amount of contributions every year. - Both the employer and employee contribute to the plan. - The employer is not required to contribute every year.
The benefit period is the same as the loan period
Which statement is correct about a benefit period in a credit disability insurance policy? - The benefit period is slightly longer than the loan period. - The benefit period is the same as the loan period. - The benefit period is shorter than the loan period. - The benefit period is not tied to the loan period.
both institutional and home care
A comprehensive long-term care insurance policy is required to provide benefits for which of the following? - Nursing facility care only - Residential care only - both nursing facility and residential care - both institutional and home care
the appointing insurer
According to the laws of agency, an insurance agent appointed by an insurance company acts on behalf of: the client the agency the state insurance department the appointing insurer
ten-year convertible term life policy
Alan and his wife are expecting their first child. Alan wants the most death protection that he can get for the smallest amount of premium, at least while he's starting his family. Ideally, he would like to be able to upgrade his coverage to a whole life policy at some point. Which of the following products would you recommend? - whole life insurance policy - variable life insurance policy - universal life policy - ten-year convertible term life policy
key person life insurance
All the following are types of nonqualified employee benefit plans EXCEPT: deferred compensation plan executive bonus plan salary continuation plan key person life insurance
The war and commission of a felony exclusions are required by law.
All the following statements about standard policy exclusions are correct EXCEPT: - If an insurer excludes a risk from coverage, then it is not covered, and the insurer will not pay the policy's benefit if death results from that risk. - Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. - The war and commission of a felony exclusions are required by law. - The war exclusion usually excludes paying the death benefit if the death directly resulted from war.
life insurance
Although most insurance policies are personal contracts between the insurer and the policyowner, which type is not a personal contract? - life insurance - homeowner's policy - automobile policy - professional malpractice insurance policy
agent or producer
An errors and omissions insurance policy protects the: agent or producer underwriter beneficiary policyowner
legal delivery
An insurer issues a new life insurance policy that has conditions attached to it, and instructs the producer to personally deliver it to the policyowner with an explanation of the conditions. This is an example of what kind of delivery? personal delivery special delivery legal delivery constructive delivery
indemnity insurance
Another name for traditional or fee-for-service health insurance is: Blue Cross/Blue Shield indemnity insurance doctors and surgeons insurance managed care
the applicant and the person whose life is to be insured
As it applies to life insurance, the insurable interest rule is based on the relationship between which two entities? - the insurance company and the applicant - the applicant and the beneficiary - the agent and the applicant - the applicant and the person whose life is to be insured
the applicant's MIB report
As part of the field underwriting process for health insurance, producers must provide the following types of information to applicants EXCEPT: the applicant's MIB report a buyer's guide a policy summary a notice of information practices
adhesion
Because the insurance company and the insurance applicant do not negotiate the terms of an insurance policy, the policy is what kind of contract? adhesion aleatory executory unilateral
up to five times the coverage under the family term rider
Children covered by a family term rider can convert their coverage to permanent coverage at age 21 without proof of insurability. The converted policy's face value is typically which of the following amounts? - one-half of the base whole life policy's face amount - the same amount as the term insurance provided under the family term rider - up to two times the coverage under the family term rider - up to five times the coverage under the family term rider
Dana must pay income tax on the entire $125,000 distribution
Dana has made $85,000 in deductible contributions to her traditional IRA which is now worth $125,000. What are the tax consequences if she takes a lump sum distribution of her entire IRA account? - Dana must pay income tax on $50,000 of the distribution. - Dana must pay income tax on $85,000 of the distribution. - Dana must pay income tax on the entire $125,000 distribution. - No income tax is owed on the distribution.
retention
Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk? retention avoidance reduction transfer
the insurer that transfers its loss exposure to another insurer in a reinsurance transaction
How is a primary insurer defined? - the insurer that accepts ceding business and assumes a part of another insurer's loss exposure - the insurer that transfers its loss exposure to another insurer in a reinsurance transaction - an insurer that writes only one line of coverage an insurer that is domiciled in - California but is certified to transact insurance in other states
75 percent of the deceased worker's PIA
If the 55-year-old surviving spouse of a deceased covered worker has a child under age 16, he or she is entitled to a surviving spouse's benefit equal to: - nothing, until he or she reaches age 62 - 50 percent of the deceased worker's PIA - 75 percent of the deceased worker's PIA - 100 percent of the deceased worker's PIA
the Insurance Commissioner
In a life insurance transaction that involves a policy replacement, who of the following does not have specific duties and responsibilities as set forth in the California Insurance Code? - the replacing agent - the replacing insurer - the existing insurer that attempts to conserve the business - the Insurance Commissioner
viatical settlement provider
In a viatical settlement arrangement, the party who enters into the arrangement with the policyowner is called a: - viatical settlement provider - viator - viatical settlement broker - viatical settlement purchaser
100 percent
In general, non-contributory plans must cover what percentage of those who are eligible to participate? 50 percent 75 percent 80 percent 100 percent
the insured's Social Security full retirement age
In modern disability income insurance policies with a noncancelable renewability provision, the policy is noncancelable until: - 60 months after policy issue - the insured reaches age 62 - the insured's Social Security full retirement age - the insured reaches age 70
Plan A
Insurers that offers Medicare supplement policies for sale in California are required to offer, at a minimum, which of the following plans? Plan A Plan B Plan C Plan D
applicants who ask for very high amounts of life insurance or business insurance
Insurers use inspection reports to verify the information applicants provide to agents and examiners. Who is most likely to be the subject of an inspection report? - business life insurance applicants who have already been issued high amounts of life insurance - applicants whom the agent does not know well - all applicants - applicants who ask for very high amounts of life insurance or business insurance
adverse selection
Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as: - implied selection - adverse selection - exposure reduction - risk avoidance
John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term.
John has a $200,000, 20-year level term policy. Which statement is true? - John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive the policy's cash value if he is alive at the end of the coverage term, and the premium will increase annually. - John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will increase annually. - John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive the policy's cash value if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term. - John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term.
The insurer may decide to pay the cash value either in a lump sum or monthly installments
Len decides to surrender his policy for its cash value. All the following statements concerning his decision are correct EXCEPT: - The insurer may decide to pay the cash value either in a lump sum or monthly installments. - The policy is canceled and the insurer's responsibility under the terms of the contract ends. - The policy cannot be reinstated. - The insurer will send Len a check for the policy's cash surrender value.
Aa DI policy will not replace full gross income, since doing so promotes malingering
Liz earns a gross salary of $3000 per month and is covered under her employer's group disability income policy. She becomes totally disabled and receives a monthly benefit payment of $1,800 per month. The benefit does not match her original salary because: - Federal law mandates that DI policies cannot pay benefits exceeding 60% of the insured's gross income. - Aa DI policy will not replace full gross income, since doing so promotes malingering. - The employer is trying to minimize the cost of her disability. - The employer contributes the difference to match the original salary.
April 1 the year after next
Melissa turns 70 on August 1 this year. Her first required distribution from her 401k plan must be taken no later than what date? December 31 of this year April 1 of next year December 31 of next year April 1 the year after next
It is an aleatory contract
Tim paid only the first premium for his health insurance policy before he was diagnosed with cancer. Nevertheless, the insurance company paid all of the expenses for his medical treatment. Which characteristic of an insurance policy resulted in the insurer paying much more than the premium it received? It is a unilateral contract. It is an aleatory contract. It is a personal contract. It is a contract of adhesion.
flat daily amounts
What are common benefit limits in long-term care insurance policies? - sliding scale amounts - flat monthly amounts - specified annual amounts - flat daily amounts
market value adjustment
What are funds withdrawn before a market value adjusted annuity (MVA) surrender charge period ends subject to? market value adjustment surrender charge interest adjustment withdrawal penalty
an implied warranty
What does a representation in an insurance contract qualify as? an implied warranty an express warranty a good faith promise a tort
avoid overinsurance
What is the goal of the relation of earnings to insurance provision? - assure the insured that complete coverage is being provided - avoid overinsurance - permit the insured to collect disability income benefits that exceed pre-disability income - protect the insurer against adverse selection
Ralph must pay the premiums, which the disability waiver will repay if Ralph is still disabled at the end of the policy's waiting period.
When Ralph is injured in an accident at home, he asks that the disability waiver of premium rider go into effect. How will the policy's premiums be handled during the waiting period? - The premiums are paid under an automatic policy loan provision. - Ralph may suspend premium payments but will be expected to catch up at the end of the waiting period if the disability waiver is not activated. - Ralph must pay the premiums, and they will not be repaid if the disability waiver is not activated. - Ralph must pay the premiums, which the disability waiver will repay if Ralph is still disabled at the end of the policy's waiting period.
personal
Which characteristic about an insurance policy prevents the policyowner from transferring it to a third party without the insurer's consent? unilateral personal aleatory conditional
Securities and Exchange Commission
Which does not rate the financial strength of insurance companies? A.M. Best Duff and Phelps Moody's Securities and Exchange Commission
medical and surgical care
Which expenses do Blue Cross Blue Shield plans cover? - hospital expenses - medical and surgical care - durable equipment charges - ambulance services
group insurance plans that cover two or more people
Which group plan does the Health Insurance Portability and Accountability Act (HIPAA) regulate? - group insurance plans that cover 100 or more people - group insurance plans that cover 50 or more people - group insurance plans that cover two or more people - group insurance plans that cover one person or more
to govern the authority granted agents to represent insurers
Which of the following best describes the purpose for the laws of agency? - to govern the relationships between agents - to regulate an insurance agency's business transactions - to regulate insurance agencies and their agents - to govern the authority granted agents to represent insurers
to request referrals from a client
Which of the following is not a requirement for an insurance agent? - to disclose to the client all pertinent information - to request referrals from a client - to disclose all pertinent information when handling a claim - to solicit business on the insurer's behalf
the relation of earnings to insurance provision
Which of the following optional health insurance policy provisions applies specifically to disability income insurance policies? - the relation of earnings to insurance provision - the unpaid premium provision - the cancellation provision - the conformity with state statutes provision
The FICA tax is allocated between OASDI and Medicare
Which of the following statements about the funding of Social Security benefits is correct? - Self-employed workers pay a lower FICA tax than employees. - In an employer/employee relationship, the employer pays the entire FICA tax. - The FICA tax applies to a worker's full annual income. - The FICA tax is allocated between OASDI and Medicare.
Policy dividends can be paid to policyowners under a variety of different options
Which of the following statements regarding life insurance policy dividends is correct? - Dividends are guaranteed in the policy. - Policy dividends are income taxable. - Policy dividends are paid only by stock insurance companies. - Policy dividends can be paid to policyowners under a variety of different options.
community-rated plans
Which of the following types of group health plans base premiums on characteristics of similar groups in the region where the group exists? experience-rated plans community-rated plans government issue plans participating plans
State laws typically set a maximum coverage limit that creditors can offer to borrowers
Which one of the following statements about credit life insurance is most correct? - Creditors can require borrowers to buy credit life insurance. - State laws typically set a maximum coverage limit that creditors can offer to borrowers. - Increasing term is most often used for credit life insurance. - If the borrower dies, the insurer will pay the death benefit of a credit life policy to the borrower's estate.
Accessing the cash value must be done through a partial surrender, not a loan
Which one of the following statements most correctly describes a universal life insurance feature that is NOT available with traditional whole life insurance? - The policyowner cannot withdraw money from the policy's cash value. - The policyowner can surrender the policy early without penalty. - Accessing the cash value must be done through a partial surrender, not a loan. - The policyowner can take loans from the policy.
Blue Cross Blue Shield plans
Which plans were the first to use risk pools and group or community ratings? Blue Cross Blue Shield plans indemnity plans HMO plans PPO plans
Guaranteed renewable coverage is generally less expensive than noncancellable coverage.
With respect to health insurance renewability provisions, which of the following statements is true? - Guaranteed renewable coverage is generally less expensive than noncancellable coverage. - Noncancellable coverage is offered primarily to blue-collar applicants. - Conditionally renewable coverage can be cancelled by the insurer anytime certain conditions arise. - An optionally renewable policy gives the insurer the option to require the insured to submit new evidence of insurability in order to renew the policy.
The employer must make substantial and recurring contributions for the plan to maintain its qualified status
With respect to profit sharing plans, which of the following statements is correct? - Employees must be permitted to contribute to the plan. - The employer must make contributions to the plan every year. - Plan contributions are made to a single plan account from which benefits are drawn when a plan participant retires. - The employer must make substantial and recurring contributions for the plan to maintain its qualified status.
within 40 days
XYZ Insurance Company receives notice of a claim filed by one of its policyowners. When must XYZ Company accept or deny the claim? - within 40 days - only after it has determined that the claim is not fraudulent - only after it has reviewed the policy application and has verified through an investigation that it has all information pertinent to the claim - within 10 days
