insurance final exam
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited-Pay Life
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell llows the remaining partners to buy out the interest of the disabled business partner.
Which of the following statements does NOT accurately describe the tax treatment of premiums and benefits of individual Accident and Health insurance?
Disability income policy premiums are tax-deductible, However, the benefits would be considered tax-free to the individual.
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Under a trustee group life policy, who would be eligible for a certificate of coverage?
Employee
The federal income tax treatment of employer-provided group health insurance can be accurately described as
Employee's coverage paid for by the employer is tax-deductible to the employer as a business expenditure
Which of these is considered a true statement regarding Medicaid?
Funded by both state and federal governments
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
A medical care provider which typically delivers health services at its own local medical facility is known as a
Health Maintenance Organization (HMO's)
Which type of provider is known for stressing preventative medical care?
Health Maintenance Organizations (HMO's)
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Her group health plan
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
What is being delivered during a policy delivery?
Insurance contract to the proposed insured
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition?
Insurer will likely treat as a pre-existing condition which may not be covered for one year
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the
Insuring clause
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need
Irrevocable
A policyowner's rights are limited under which beneficiary designation?
Irrevocable
Which of the following situations does a Critical Illness plan cover?
Leukemia is a type of cancer and would be covered
Comprehensive Major Medical policies usually combine
Major Medical with Basic Hospital/Surgical coverage
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
Which statement is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium. Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
What type of life insurance are credit policies issued as?
Term
Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of the current year's deducitble?
The Carryover provision permits expenses incurred during the last three months of the calendar year to be carried over into the new year if needed to satisfy the deductible for the next year.
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
A policy of adhesion can only be modified by whom?
The insurance company
Medicare is intended for all of the following groups EXCEPT
Those enrolled as a full-time student
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
The reason for a business having a Business Overhead Expense Disability Plan is to cover
fixed business expenses in the event the owner becomes disabled.
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums and/or face amount
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
free-look period has expired
A variable insurance policy does not what
guarantee a return on its investment accounts
With a Basic Medical Expense policy, what does the hospitalization expense cover?
hospital room and board
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Credit Life insurance is
issued in an amount not to exceed the amount of the loan. is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid.
Which statement regarding third-party ownership of a life insurance policy is true?
it is used extensively in estate-planning as well as business circumstances
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
policy proceeds
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
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?
$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
$2,000 + 20% of the remaining bill = $3,600.
M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim?
$2,200 - $200 deductible x 80% = $1,600.
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?
$50,000. The suicide occurred outside the Suicide clause period (normally 1-2 years), thus the face amount will be paid.
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay Life
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2
Which of these is an element of a Variable Life policy?
A fixed, level premium
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental Death and Dismemberment provision. provides benefits for death due to an accident or for the loss of one or more hands, feet, arms, legs, or loss of sight.
Under which of the following circumstances do the benefits under COBRA continuation coverage expire?
All group health plans are eliminated by the employer
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
Any changes made on an insurance application requires the initials of whom?
Applicant
An incomplete life insurance application submitted to an insurer will result in which of these actions
Application will be returned to the writing agent
When must insurable interest be present in order for a life insurance policy to be valid?
At the time of application
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is
Business Overhead Expense
Which statement about a whole life policy is correct?
Cash value may be borrowed against
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
Coinsurance
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Conditional
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
What type of group plan involves employees sharing the cost?
Contributory plan
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion
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
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
Which of these is considered a statement that is assured to be true in every respect?
Warranty
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will
adjust the death benefit to a reduced amount
Group life insurance policies are generally written as
annually renewable term
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
applicant's physician
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age
Medicare Part A and Part B do NOT pay for
dental work
What is the purpose of the U.S.A. Patriot Act?
detect and deter terrorism
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
exclusion
On a life insurance policy, who is qualified to change the beneficiary designation?
the Policyowner
A noncontributory group term life plan is characterized by
the entire cost of the plan is paid for by the employer
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and
the initial premium
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
An individual who purchases a Life annuity is given protection against
the risk of living longer than expected
