Insurance Exam Part 2
Under which of the following circumstances do the benefits under COBRA continuation coverage expire? Employee has become uninsurable All group health plans are eliminated by the employer Employer moves headquarters to another state Employee becomes permanently disabled
All group health plans are eliminated by the employer- One of the disqualifying events that can result in the termination of continuing coverage under COBRA is when the employer terminates all group health plans.
Medicaid is funded by both the federal and state governments. Insurer Beneficiary Reinsurer Insured
Insured- In a contract of adhesion, any confusing language would be interpreted in the favor of the insured.
A characteristic of Preferred Provider Organizations (PPOs) would be: Discounted fees for the patient Not allowed to see out-of-network physicians Physicians are paid on a capitation basis A primary care physician is required
Discounted fees for the patient- Under Preferred Provider Organizations, patient fees are discounted in return for using listed providers.
XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is 25% 50% 75% 100%
100%- Most noncontributory group health plans require 100% participation by eligible employees.
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary? Medicaid Long-term care Medicare Her group health plan
Her group health plan- If the employer has more than 20 employees, the group health plan generally pays first.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take? Collect premium from M's estate Deny the claim Pay face amount minus the past due premium Subtract past due premium from cash value
Pay face amount minus the past due premium- In this situation, the insurer would pay the death benefit less the past-due premium.
If an individual has an Accidental Death and Dismemberment policy and dies, an autopsy can be performed in all these situations EXCEPT When the cause of death is unknown When the state prohibits this by law When consent for the autopsy is not obtained When foul play was a contributing factor
When the state prohibits this by law- Applicable state laws that prevent an autopsy take precedence.
Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim? $2,100 $2,020 $2,000 $100
$2,100- In this situation, $10,000 x 20% coinsurance + $100 deductible = $2,100.
J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay $1,600 $2,000 $3,600 $8,000
$3,600- In this situation, $2,000 + 20% of the remaining bill = $3,600.
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary? $100,000 $50,000 Refund of premiums paid plus interest No claim will be paid because cause of death was from natural causes
$50,000- In this situation, the beneficiary is entitled to receive $50,000.
A Business Overhead Expense policy covers any loss of income by the business owner covers business expenses such as rent and utilities covers employee wages only reimburses the company for any reduction in sales due to the owner's disability
Covers business expenses such as rent and utilities- Business Overhead Expense insurance covers eligible expenses for utilities, rent, and staff.
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay? The total premiums paid minus any policy loans Nothing $50,000 $100,000
$50,000- The suicide occurred outside the Suicide clause period (normally 1-2 years), thus the face amount will be paid.
Which statement regarding the Misstatement of Age provision is considered to be true? Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered Requires that a new policy must be applied for if a misstatement of age is found on the current policy Misstatement of Age provision is valid only during the contestable period Insurer may void the policy if a misstatement of age is discovered
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered- The Misstatement of Age provision states an adjustment be made in the amount of insurance if the age of the insured is misstated.
How are surrender charges deducted in a life policy with a rear-end loaded provision? Deducted from the death benefit Deducted when the policy is discontinued Deducted from policy's cash value Deducted when assigned to another policyowner
Deducted when the policy is discontinued- In a policy with a rear-end loaded provision, surrender charges are deducted when the policy is discontinued.
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT? If the employee had a qualified medical leave from work, lost wages can be reimbursed If the employee paid for qualified medical expenses, the reimbursements may be tax-free Any unused amounts are added to employee's gross income Health insurance premiums can be reimbursed to the employee
If the employee paid for qualified medical expenses, the reimbursements may be tax-free- Under a Health Reimbursement Arrangement, reimbursements may be tax free if the employee paid for qualified medical expenses.
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy? increase face amount decrease face amount increase premium-paying period decrease premium payment
Increase face amount- All of these actions can be taken by a policyowner without proof of insurability except for increasing the fa
How are policyowner dividends treated in regards to income tax? Dividends are not taxable Interest on accumulations is taxed Taxed as ordinary income Taxed as capital gains
Interest on accumulations is taxed- If the dividends exceed the total premium payments for the insurance policy, the excess dividends are considered taxable income.
Which of these is NOT considered to be a right given to a policyowner? Surrendering the policy's cash value Modify a provision in the insurance contract Assignment of ownership Change the beneficiary, if revocable
Modify a provision in the insurance contract- Changing contract provisions is not a policyowner right.
Which of the following statements is CORRECT about accelerated death benefits? The full face amount is available as an accelerated benefit Those on Social Security disability automatically qualify for this benefit This provision is usually provided with an increase in premium Must have a terminal illness to qualify
Must have a terminal illness to qualify- Accelerated death benefits provide for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury.
What does the ownership clause in a life insurance policy state? Who the policyowner is and what rights the policyowner is entitled to Who the beneficiary is and what rights the beneficiary is entitled to Ownership cannot be assigned after the incontestable period Allows the policyowner to adjust the death benefit and premium amount at anytime
Who the policyowner is and what rights the policyowner is entitled to- The ownership clause in a life insurance policy is a provision that indicates who is the policyowner and provides a general description of the owner's rights.
What action can a policyowner take if an application for a bank loan requires collateral? Utilize accelerated benefits provision Borrow against policy cash value and use as a down payment Assign policy ownership to the bank Name bank as beneficiary
Assign policy ownership to the bank- A policyowner may assign ownership of the policy to a bank as collateral.
For which of the following expenses does a Basic Hospital policy pay? Hospital room and board Prescription medication Surgical fees Physician's fees
Hospital room and board- A Basic Hospital policy pays expenses for hospital room and board, as well as other miscellaneous medical expenses incurred during hospitalization.
Which of the following statements BEST describes dental care indemnity coverage? Services are reimbursed before the insurer receives the invoice Services are reimbursed after insurer receives the invoice In-network dentists must always be used Very limited list of providers
Services are reimbursed after insurer receives the invoice- Dental care indemnity plans reimburse services only after the carrier receives the bill.
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and the initial premium agreeing to a physical examination delivery of policy disclosure of any medical conditions
The initial premium- The Consideration clause states that the policyowner's consideration consists of a completed application and the first initial premium.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of additional Term Life coverage at any time additional Term Life coverage at specified intervals additional Whole Life coverage at any time additional Whole Life coverage at specified times
Additional Whole Life coverage at specified times- A guaranteed insurability option in a Whole Life Policy permits the policyowner to purchase, without evidence of insurability, stated amounts of Whole Life insurance at specified times.
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period? Claims are denied under the Suicide clause of the policy Company pays twice the face amount under the double indemnity clause Claims are paid in full Premiums are returned under the Consideration clause
Claims are denied under the Suicide clause of the policy- Claims are denied under the Suicide clause of the policy.
The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n) closed panel open panel co-op panel capitation panel
Closed panel- A closed panel is when an HMO is represented by a group of physicians who are salaried employees and work out of the HMO's facility.
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to? Ex-wife Current wife Estate Split equally between the ex-wife and current wife
Ex-wife- D's ex wife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse.
Which of these are NOT an example of a Nonforfeiture option? Extended Term Reduced Paid-up Cash Surrender Life Income
Life Income- All of these are examples of Nonforfeiture options EXCEPT Life Income.
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? Variable Life Credit Life Universal Life Interest-Sensitive Whole Life
Variable Life- Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.
The part of a life insurance policy guaranteed to be true is called a(n) representation exclusion warranty waiver
Warranty- Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made? Automatic Policy Loan Assignment Grace Period Waiver of Premium
Automatic Policy Loan- The Automatic Policy Loan provision will keep a Whole Life policy in force if a required premium payment is not made and there is sufficient cash value.
What action will an insurer take if an interest payment on a policy loan is not made on time? cancel the policy if not paid within the grace period automatically add the amount of interest due to the loan balance subtract from any dividends owed disallow any further loans
Automatically add the amount of interest due to the loan balance- Unpaid interest from a policy loan is added to the loan balance if not paid by the due date.
N has a Major Medical policy that only pays a portion of N's medical expenses. N is responsible for paying the remaining balance. This provision is known as Assignment of Benefits Coinsurance Indemnity Co-deductible
Coinsurance- The provision in a Major Medical policy that requires the insurance company pay only part of a loss and the insured to pay the balance is known as coinsurance.
An insurance company receives E's application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet? Entire Contract clause MIB clause Insuring clause Consideration clause
Consideration clause- A health insurance contract is valid only if the insured provides consideration in the form of the full minimum premium and the statements made in the application.
Which of the following situations does a Critical Illness plan cover? Asthma Leukemia Alcohol rehabilitation Severe car accident
Leukemia- Leukemia is a type of cancer and would be covered under a Critical Illness plan.
The health insurance program which is administered by each state and funded by both the federal and state governments is called Long-term care Medicaid Medicare Supplemental Program Medicare
Medicaid- Medicaid is funded by both the federal and state governments and administered by individual states.
Which type of policy is considered to be overfunded, as stated by IRS guidelines? Modified Whole Life Modified Endowment Contract Variable Universal Life Interest-Sensitive Whole Life
Modified Endowment Contract- A policy that is overfunded to where it does not meet the 7-pay test is considered a Modified Endowment Contract.
Which of the following characteristics are associated with a large group disability income policy? No waiting periods No medical underwriting No elimination periods No limit of benefits
No medical underwriting- A large group disability income policy can be distinguished by no medical underwriting.
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company not responded to the claim. S can take legal action against the insurer beginning September 21 October 16 November 1 December 1
November 1- The insured must wait 60 days after written proof of loss before legal action can be brought against the company.
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges? The maximum premium an insurer can charge for their health insurance based on geography The maximum amount an employer can contribute to a contributory health plan The maximum deductible an insured can be charged The maximum amount considered eligible for reimbursement by an insurance company under a health plan
The maximum amount considered eligible for reimbursement by an insurance company under a health plan- Usual, customary, and reasonable (UCR) charges are the maximum amount the insurer will consider eligible for reimbursement under a health insurance plan.
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself? Policy Exclusion Incontestable Entire Contract Assignment
Entire Contract- The entire contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract.
Which of these is considered a true statement regarding Medicaid? Funded by both state and federal governments Intended to be used by individuals age 65 and older Provides disability income benefits Automatically covers those receiving Social Security disability benefits
Funded by both state and federal governments- Medicaid is funded by both the federal and state governments.
Which of these options can an individual use their medical flexible spending account to pay for? Vitamins and supplements Prescription drugs Household expenditures Cosmetic procedures
Prescription drugs- Prescription drugs are an allowable expense when paid for by a medical flexible spending account.
Which of the following statements about a Guaranteed Renewable Health Insurance policy is CORRECT? Premiums normally decrease at time of renewal Premiums normally increase at time of renewal Policy can renewed at any time by the company Policy can be cancelled at any time by the company
Premiums normally increase at time of renewal- A Guaranteed Renewable Health Insurance policy can have increasing premiums at time of renewal.
An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision? 7 10 20 31
31- The grace period is a minimum of 31 days for policies that are paid for on an annual basis.
M's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force? 10 days 30 days 45 days 60 days
45 days- Health insurance will automatically be placed back in force if the insurer fails to notify an applicant within 45 days that the reinstatement application was denied.
The Consideration clause in a life insurance contract contains what pertinent information? Summary of benefits Offer and acceptance Entire Contract Amount of premium payments and when they are due
Amount of premium payments and when they are due- The Consideration clause in a life insurance policy specifies the amount and frequency of premium payments that the policyowners must make to keep the insurance in force.
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled? Family Maintenance clause Payor clause Assignment provision Automatic Premium Loan provision
Payor clause- A Payor clause ensures that premiums will be waived for a Juvenile Life policy if the policyowner becomes disabled.
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy? Premiums may increase at time of renewal Premiums may increase at any time Policy may be renewed at the discretion of the insured Policy may be amended by insurer at any time
Premiums may increase at time of renewal- A Conditionally Renewable Health Insurance policy can increase premiums at time of renewal.