Insurance test questions

A 40-year-old worker who takes a $9,000 distribution from her traditional IRA to use as a down-payment on her first home will pay a penalty tax of: $4,500 $1,800 $0 $900

$0 *while most premature distributions are subject to a 10% penalty tax, there is no penalty when the withdrawn funds are used to purchase a first-time home

Andrea earned $3,000 each month before she was injured in an accident. Now she works part-time and earns $1,000 a month. Her disability income policy pays a $2,000 monthly benefit for total disability. The policy uses a flat rate to determine benefits for partial disability. How much will Andrea receive? $0 $2,000 $1,500 $1,000

$1,000

Ralph's AGI is $100,000. His unreimbursed medical expenses are $11,000. He also paid $10,000 for health insurance premiums. How much is Ralph's medical expense deduction? $11,000 $10,000 $20,000 $7,500

$11,000 *taxpayers can deduct medical expenses that exceed 10% of their AGI. Ralph's AGI threshold is $10,000 (10% of AGI); his unreimbursed medical expenses total $21,000. Ralph can deduct expenses greater than $10,000, so his deductible amount is $11,000 ($21k - $10k = $11k)

An insured's dental plan has an annual benefit limit for an individual. What is the typical range for this limit? $1,000 to $2,000 $500 to $1,000 $2,000 to $3,000 $3,000 to $4,000

$2,000 to $3,000

Pam is a vice president employed by Gulf, Inc., where she has $300,000 in coverage under the company's noncontributory group life insurance plan. What portion of that coverage is taxable to Pam? $50,000 $250,000 $300,000 $0

$250,000 *the IRS Table I value of the first $50,000 of employer-paid group life coverage is tax exempt for employees.

Ben, a single working father, dies at age 50. How much will his only dependent child, Tom (age 15), receive from Social Security in a lump-sum death benefit? $0 $255 an amount equal to one month's worth of the deceased worker's primary insurance amount $750

$255 *SS provides a lump sum of $255 to dependents when a covered worker dies

Agent Thompson received a letter from the Department of Insurance asking her to provide proof of completing the continuing education requirements. Within how many days must Agent Thompson respond to the Department's inquiry? 20 30 10 45

10 days

In addition to ordinary income taxation, what else is a distribution from a modified endowment contract (MEC) before age 59½ subject to? 20 percent premature distribution tax penalty on the policy's full death benefit 10 percent premature distribution tax penalty on the policy's full death benefit 10 percent premature distribution tax penalty on the withdrawn amount 20 percent premature distribution tax penalty on the withdrawn amount

10% premature distribution tax penalty on the withdrawn amount

Noncontributory group health insurance plans must cover what percentage of those who are eligible to participate?

100%

With a traditional whole life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy

100% of the cash value, less any outstanding debt against the policy

How many days does the insurer have to provide claim forms to the insured after receiving a notice of claim? 30 10 15 60

15 days

How long is the typical elimination period of a business overhead expense (BOE) policy?

15 to 60 days

HIPAA guarantees the availability of health insurance coverage in the individual market for eligible individuals who have had at least how many months of aggregate creditable coverage? 18 12 24 6

18 months

A disability buy-out insurance policy typically has an elimination period of:

18 to 24 months

Employers with fewer than how many employees are exempt from COBRA requirements? 20 50 75 100

20

A claimant on a health insurance policy must give written notice of the claim to the insurer within how many days following a loss? 20 14 10 7

20 days

Tom is employed by Acme Industries and covered by its group long-term disability income policy. Acme pays 80 percent of the premium. Tom pays 20 percent of the premium. He becomes disabled and receives a monthly benefit payment. How much of this benefit will NOT be taxed as income? 20% 100% 60% 80%

20% *the percentage of the premium paid is the percentage of benefits that will not be taxable as income. tom paid 20% of the premium, so 20% of the benefit is not taxable

A producer's commission for the sale of a Medicare supplement policy in the first year following its effective date cannot exceed what percentage of the commission paid for servicing the policy in the second year? 150 100 25 200

200%

If a group health insurance policy terminates, an employee can elect to convert coverage provided he or she has been insured under the plan for how long before it terminates? 6 months 12 months 3 months 9 months

3 months

Major medical plans often allow health care expenses to be credited to next year's deductible requirement if they are incurred within how many months before the end of the current calendar year? 2 months 6 months 3 months 1 month

3 months

Horace buys a Medicare supplement insurance policy but decides not to keep it. How many days does he have to return it for a full refund of the premium? 30 14 21 10

30 days

Suzanne's group health insurance policy terminated on December 31. Within how many days must she apply for a conversion policy? 60 30 45 31

31 days

Which of the following types of qualified retirement plan can include life insurance in the plan funding? 403(b) plan 412(i) plan. SEP plan. 401(k) plan

412(i) plan

A totally disabled person must pass a waiting period of how long before Social Security disability benefits are paid?

5 months

The FICA tax is split between an employee and employer, with the employee paying how much? one-third (33 percent) of the total tax three-quarters (75 percent) of the total tax one-half (50 percent) of the total tax one-quarter (25 percent) of the total tax

50% of the total tax

What is the maximum length of time that a Medicare supplement policy can exclude individuals from coverage based on pre-existing medical conditions? 6 months 3 months 12 months 24 months

6 months

After the deductible is paid, the insured can expect Medicare Part A to cover all eligible hospital expenses without a copayment for up to:

60 days

With a variable life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy

75-90% of the cash value, less any outstanding debt against the policy

Under the proof of loss provision of a health insurance policy, how long does the insured have to give written proof of loss to the insurer? 120 days 10 days 90 days 30 days

90 days

How does a family income policy differ from a family maintenance policy? A family income policy combines whole life insurance with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term.

A family income policy combines whole life with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance

ABC, Inc. does not want an insured group health plan and it does not want to entirely self-insure, either. What can ABC do? It must self-insure its group plan. It may self-fund part of its plan and have the balance covered by the state's guaranty fund It must buy a group insurance plan. ABC can self-insure part of its plan and insure the rest with an insurance company.

ABC can self-insure part of its plan and insure the rest with an insurance company

Acme Insurers recently started an advertising campaign in Pennsylvania for its new life insurance policies. Which statement is TRUE? Acme can compare its products to competitors only if such comparisons are fair and complete. Acme may not use paid endorsements in the advertisements. Acme's advertisements cannot mention other competitors or products. Acme may not use testimonials in the advertisements.

Acme can compare its products to competitors only if such comparisons are fair and complete

Which statement about Blue Cross and Blue Shield contracts with insureds and providers is correct? Enrollment in Blue Cross and Blue Shield plans is optional, but enrolled members get better rates. Blue Cross and Blue Shield plans were the first pre-paid health plans that enrolled members or subscribers. Blue Cross and Blue Shield plans do not require enrollment. Blue Cross and Blue Shield plans are the only pre-paid health plans that enroll members or subscribers.

BC and BS plans were the first prepaid health plans that enrolled members or subscribers

Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid? Sue Reggie's estate Mary Carl

Carl

Which of the following must HMO members use to receive covered care? the nearest provider or caregiver any licensed health care practitioner or caregiver providers and caregivers selected by the state HMO association HMO's network of providers and caregivers

HMO's network of providers and caregivers

Jan and David both work for Acme Motors and earn $50,000 of taxable income annually. If Jan contributes to Acme's 401(k) plan this year and David does not, which of the following statements is true? Jan's taxable income will increase above $50,000. Jan's and David's taxable income will be the same. David's taxable income will be lower than Jan's. Jan's taxable income will be lower than David's.

Jan's taxable income will be lower than David's

When does the grace period end for FSA contributions made to a group plan's prior year? April 15 December 31. March 1 March 15

March 15

When does the annual election period (AEP) for Part D occur?

October 15 -- December 7

What kind of managed care plan combines the features of other plans?

POS plan *Point-of-Service plans combine the cost controls of an HMO with the flexibility that a preferred provider organization (PPO) and traditional medical insurance policy have with respect to the selection of health care providers

Which statement regarding Simplified Employee Pension (SEP) plans is correct? Employer contributions are made to a single account from which participant retirement benefits are drawn. SEP plans do not accept employee contributions. Employers are required to contribute to a SEP every year. Employer contributions can be subject to a five-year cliff vesting schedule.

SEP plans do not accept employee contributions

Which statement regarding a Savings Incentive Match Plan for Employees (SIMPLE) plan is correct? SIMPLE plans are available only to employers with 100 or fewer employees. Employers must match employee contributions up to 5 percent of the employee's annual compensation. SIMPLE plans must be set up as a 401(k)-type plan. Employers fund their accounts with after-tax contributions.

SIMPLE plans are only available to employer's with 100 employees or less

Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy? She must move to Pennsylvania. She must surrender her Ohio license. She must be sponsored by a producer licensed in Pennsylvania. She must show her Ohio license is in good standing.

She must show her Ohio license is in good standing

Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request? The insurer divides the annual premium by 12 and then adds a modest charge. The insurer simply divides the annual premium by 12. The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year. The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12.

The insurer divides the annual premium by 12 and then adds a modest charge

Which one of the following statements about variable life insurance is correct? Variable life policyowners can invest all of their premiums in the insurer's general account. Subaccounts are managed within the insurer's general account. Variable life policyowners can choose flexible premium payment schedules. With a variable life insurance policy, the policyowner assumes most of the investment risk.

With a variable life insurance policy, the policyowner assumes most of the investment risk.

Which of the following is NOT a required provision in a market-value adjusted annuity? 60-day grace period incontestability provision misstatement of age provision nonforfeiture benefit

XXX 60-day grace period XXX

Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT: The policy provides $300,000 of coverage until Andrea reaches age 55. The policy will generate a cash value that is payable at age 55. It is possible that Andrea could convert the term policy to a life insurance policy that provides coverage for Andrea's entire life even if she becomes uninsurable. The premium for the policy stays the same until the policy expires.

XXX The policy will generate a cash value that is payable at age 55 XXX

All of the following statements about key person life insurance are correct, EXCEPT: The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Key person, or key employee, life insurance is an example of third-party ownership. Life insurance used as key person life is normally owned by the business rather than the insured.

XXX Upon the insured employee's death, the employee's surviving family receives the policy benefit XXX

Who would NOT be eligible for Medicare enrollment? a person who is 65 years old a person under age 65 who has received Social Security disability benefits for six months a person with end-stage renal disease a person who has amyotrophic lateral sclerosis

XXX a person who is under 65 who has received SS disability benefits for 6 months XXX *Medicare coverage is available to those at least 65 years old or have received SS disability benefits for at least 2 years, have end-stage renal disease, or have amyotrophic lateral sclerosis

Term life insurance is well suited for all the following needs EXCEPT: mortgage protection a source of emergency cash for any financial need inexpensive protection until the policyowner can afford permanent life insurance protection while the family children are living at home or attending college

XXX a source of emergency cash for any financial need XXX

When selling a long-term care insurance policy, the insurer or agent must provide the applicant with all of the following EXCEPT: a Notice to Applicant Regarding Replacement of Accident and Health Insurance, if applicable a suitability guide an option to buy inflation protection an outline of coverage

XXX a suitability guide XXX *must suitability standards in determining if LTC is appropriate for the client, but do not have to present this guide to the client

In accordance with Section 1035 of the Tax Code, a deferred fixed annuity may be exchanged on a tax-free basis for all the following types of products EXCEPT: a whole life insurance policy a deferred variable annuity a tax-qualified long-term care insurance policy an immediate fixed annuity

XXX a whole life insurance policy XXX *Section 1035 permits the tax-free exchange of an annuity for any other type of annuity ONLY

In accordance with Section 1035 of the Tax Code, a deferred fixed annuity may be exchanged on a tax-free basis for all the following types of products EXCEPT: a deferred variable annuity an immediate fixed annuity a tax-qualified long-term care insurance policy a whole life insurance policy

XXX a whole life insurance policy XXX *the tax-qualified LTC insurance policy is a permitted exchange

All of the following statements regarding the annuity purchase rate (APR) are correct EXCEPT: For any settlement option involving a life contingency, the APR (and thus the payment amount) is lower for women than men. At any age, the APR is the same for every annuity settlement option. The APR is the amount of periodic income provided for every $1,000 of annuitized principal. The APR varies by age, gender, and settlement option.

XXX at any age, the APR is the same amount for every annuity settlement XXX

Which statement is NOT correct about the income tax implications of the premiums paid and benefits received under a medical expense insurance policy? Benefits are added to gross income. Premiums may be deducted under certain conditions. Benefits are tax-free income. Premiums are unreimbursed medical expenses.

XXX benefits are added to gross income XXX

Which statement is NOT correct about the income tax implications of the premiums paid and benefits received under a medical expense insurance policy? Premiums are unreimbursed medical expenses. Benefits are tax-free income. Benefits are added to gross income. Premiums may be deducted under certain conditions.

XXX benefits are added to gross income XXX

John would like to buy life insurance to provide for his family in case he dies prematurely. Using the needs approach to answer this question, his producer will gather all the following pieces of information, EXCEPT: risk profile assets and liabilities economic value current income

XXX economic value XXX

Which statement about HMOs is NOT correct? The network of providers is limited to a town or city. They are responsible for the availability, accessibility, quality, and cost of the health care they deliver. Premiums are paid monthly, quarterly, semi-annually, or annually. People apply to join an HMO.

XXX the network of providers is limited to a town or city XXX

The following statements about flexible spending accounts (FSAs) are correct, EXCEPT: An FSA is a group benefit that an employer can offer to its employees. Employees can use FSA funds to pay costs that their employer's health plan covers. Employees can use FSA funds to pay for partially covered costs. An FSA allows employee contributions on a pre-tax basis.

XXX employees can use FSA funds to pay costs that their employer's health plan covers XXX *employees can use FSA funds for qualified medical expenses and costs that their employer's health plan does NOT cover

Which statement about group health insurance is NOT correct? Group health insurance is available only for natural groups. Qualifying for group coverage is easier than qualifying for individual coverage. Many Americans' health care coverage is provided through a group insurance plan. Group health insurance has higher premiums than individual insurance.

XXX group health insurance has higher premiums than individual insurance XXX

All the following statements regarding the disclosure that must be made with accelerated benefits riders are correct EXCEPT: The disclosure must provide a brief description of accelerated benefits and definitions of conditions triggering payment of benefits. Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested. The disclosure must explain the effect paying accelerated benefits will have on the policy's cash value, death benefit, premium, and policy loans. Some states require that the disclosure must note that receiving accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits.

XXX insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested XXX

All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT: Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death. Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. Joint life insurance is especially popular in the estate planning market. Survivorship life insurance pays the death benefit upon the death of the second insured.

XXX joint life insurance is especially popular in the estate planning market XXX

Which would NOT be considered a natural group that is eligible for group insurance? large family employee group trade association alumni association

XXX large family XXX

Which level of care is NOT commonly covered under a long-term care insurance policy? medical care skilled nursing care custodial care intermediate care

XXX medical care XXX *there are 3 levels of LTC: skilled nursing care, intermediate care, and custodial care

All of the following statements about policy loans from a non-MEC life insurance policy are correct EXCEPT: Policy loans are fully taxable if not repaid. Policy loans are loans made by the insurer, which uses the policy's cash value as collateral. Policy loans accrue interest. Any unpaid loan amounts reduce the amount of the death benefit.

XXX policy loans are fully taxable if not repaid XXX

All of the following statements about the funding of Social Security benefits are correct, EXCEPT: The FICA tax is split between a worker and his or her employer. Self-employed workers pay a lower FICA tax than employees. Social Security benefits are funded through payroll taxes. The FICA tax is allocated between OASDI and Medicare.

XXX self-employed workers pay a lower FICA tax than employees XXX

What is NOT correct about the coordination of benefits in group health insurance plans? Spouses' plans pay equal benefits for covered dependent children. Group health policies pay benefits before Medicare or other government programs pay theirs. Only after a primary plan pays its full benefit will a secondary plan pay its benefit. It specifies how insurers will coordinate benefit payments with other plans.

XXX spouse's plans pay equal benefits for covered dependent children XXX

All the following statements about family term riders with life insurance are correct EXCEPT: Spouses are provided more coverage than children under a family term rider. A family term rider essentially combines the coverages of another insured rider and a children's term rider into a single rider. The policyowner can add or drop family members on a family term rider but must prove insurability if adding insureds other than newborn children. Children covered by this rider can convert their coverage to permanent coverage at age 21 without proof of insurability.

XXX spouses are provided more coverage than children under a family term rider XXX

All the following are parties to an annuity contract EXCEPT: the beneficiary the owner the agent the annuitant

XXX the agent XXX

All the following statements about ordinary (straight) whole life insurance are correct EXCEPT: The insured pays premiums for his or her entire life. Premiums remain level. The death benefit increases during the early policy years and then levels off. It has a steadily increasing cash value.

XXX the death benefit increases during the early policy years and then levels off XXX

To be eligible to participate in an employer's Simplified Employee Pension (SEP) plan, an employee must meet all the following requirements EXCEPT: The employee must have received a minimum specified amount in annual compensation. The employee must be 21 or older. The employee must have worked for the employer during at least three of the previous five years. The employee may not be a key employee or executive.

XXX the employee may not be a key employee or executive XXX

Which is NOT characteristic of a prepaid dental plan? Dental services are rendered under contract, regardless of cost or frequency of use. The insured pays a deductible. The insured is charged a copayment for treatment. A monthly subscription fee is paid to the service provider for covered services.

XXX the insured pays a deductible XXX

Which statement about the taxation of qualified long-term care insurance policies is NOT correct? Benefits paid to a chronically ill insured are not taxed, up to certain limits. Premiums may qualify for the medical expense deduction. The limits on tax-free benefits are annually adjusted. The limit of the deductible premium decreases with the insured's age.

XXX the limit of the deductible premium decreases with the insured's age XXX *the limit INcreases with age

All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT: If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends. The paid-up policy will not build any more cash value. A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis. A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid.

XXX the paid-up policy will not build any more cash value XXX

All the following statements about standard policy exclusions are correct EXCEPT: Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. The war exclusion usually excludes paying the death benefit only if the death directly resulted from war. The war and commission of a felony exclusions are required by law. If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk.

XXX the war and commission of a felony exclusions are required by law XXX

Mary inherited $10 million several years ago. She has just bought a life insurance policy to help preserve her estate. All of the following statements regarding this are correct EXCEPT: The policy's death benefit can be used to pay Mary's estate settlement costs. The policy's death benefit can help eliminate the need to sell assets to pay estate taxes when Mary dies. To keep policy proceeds out of her estate, Mary should make sure she is the owner. The policy's death benefit can be used to pay Mary's debts when she dies.

XXX to keep the policy's proceeds out of the estate, mary should make sure she is the owner XXX

Medicare Part B benefits exclude coverage for: vaccinations medical and surgical services and supplies physical, speech, and occupational therapy outpatient diagnostic tests

XXX vaccinations XXX *part B covers: doctor's services; inpatient/outpatient medical and surgical services and supplies; physical, outpatient, and occupational surgical services and supplies; outpatient diagnostic tests and X rays; medical supplies; home health care and hospice care not covered by Part A

Each of the following is a step used to identify an ethical dilemma EXCEPT: Who are each of the stakeholders? What will happen if the ethical code is not adhered to? What is the motivation of each stakeholder? What are the relevant ethical and legal issues?

XXX what will happen if the ethical code is not adhered to? XXX *identification of an ethical dilemma does not consider what the consequences would be

In accordance with Section 1035 of the Tax Code, which of the following exchanges is permitted on a tax-free basis? an equity-indexed annuity for an equity-indexed life insurance policy a deferred market-value adjusted annuity for an immediate variable annuity a variable annuity for a variable life insurance policy a market-value adjusted annuity for a whole life insurance policy

a deferred market-value adjusted annuity for an immediate variable annuity *Section 1035 prohibits the exchange of any type of annuity product for any type of life insurance product, because to do so would allow taxable annuity gain to escape taxation via the life insurance death benefit

A person who incurs a deductible medical expense is eligible for reimbursement from: an FSA the health care provider the person's employer a trust fund

a flexibile spending account (FSA) *Any expense the IRS considers a deductible medical expense is eligible for reimbursement from an FSA

The non-working surviving spouse of a worker who is receiving OASDI retirement benefits is entitled to which of the following benefits from Social Security? a monthly benefit equal to the worker's PIA at the spouse's FRA a lump-sum benefit of $255, payable at the spouse's FRA nothing, since he or she is not paying FICA taxes a monthly benefit of 50 percent of the worker's PIA at the spouse's full retirement age (FRA)

a monthly benefit of 50% of the worker's PIA at the spouse's full retirement age (FRA)

Mary, a currently insured worker under Social Security, recently died. Her 85-year-old widowed mother, who was financially dependent on Mary, would be entitled to which of the following benefits under Social Security? a monthly benefit of 82.5 percent of Mary's PIA a monthly benefit equal to Mary's PIA a lump-sum benefit of $255 only no benefit, as survivor benefits are available to spouses and children only

a monthly benefit of 82.5% of Mary's PIA *The parents of a deceased worker are eligible to receive monthly survivor benefits if they are age 62 or older, and dependent on the covered worker for at least one-half of their financial support.

Which statement about the conversion provision in group health insurance policies is correct? An employee must complete an application and pay the first premium within six months after the date employment is terminated. A person will not have the right to convert a policy if it was terminated due to nonpayment of premium. An employee must provide evidence of insurability to convert to an individual policy. A person must prove that he or she was insured under the group policy for at least one year before termination.

a person will not have the right to convert a policy if it was terminated due to nonpayment of premium

Cash value withdrawals from a non-MEC life insurance policy are generally treated on a first-in/first-out (FIFO) basis for tax purposes, which means the first funds withdrawn are recognized as: a return of premiums accrued interest death benefit proceeds the policy's gain

a return of premiums *in a life insurance contract, premium payments are put into the contract first. as long as the policy is not an MEC, withdrawals are recognized first as a non-taxable return of premiums

Jackson is applying for a health insurance policy and will be taking an HIV test. Which party will be notified if the test results are positive? Jackson the Insurance Commissioner the policy beneficiary a third party designated by Jackson

a third party designated by Jackson *applicant must designate a 3rd party (physician or local health department) to receive positive results

Which provision allows part of a life insurance policy's death benefit to be paid while the policyowner is still living if he or she suffers from a terminal illness?

accelerated benefits provision

The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? guaranteed insurability rider accidental death benefit rider cost-of-living rider return of premium rider

accidental death benefit rider

Social Security's full retirement age (FRA), currently age 66, will gradually rise to what age for workers born in 1960 or later? age 70 age 66 and 2 months age 72 age 67

age 67

Which statement is correct about the waiting period in a group health insurance plan? A waiting period is the time that must pass before an employer can offer group health insurance to its employees. The waiting period begins when the probationary period ends. A waiting period is the same as an elimination period. All potential participants must have the same waiting period.

all potential participants must have the same waiting period

The purpose for a long-term care rider with a deferred annuity contract is to: allow the deferred annuity to be annuitized earlier than age 65 if the annuitant requires long-term care allow tax-free withdrawals from the deferred annuity if the annuitant requires long-term care allow withdrawals from the deferred annuity without a surrender charge if the annuitant is confined to a nursing home allow the annuity owner to assign the deferred annuity to a nursing home

allow withdrawals from the deferred annuity without a surrender charge if the annuitant is confined to a nursing home

Which statement regarding life insurance accelerated benefits is correct? An accelerated benefit rider pays out part or all of the policy's face value while the insured is still living. The insured must use these funds only for medical care. There is a cost, in the form of additional premium, in having the accelerated benefit rider or provision in the policy. Accelerated benefits are payable anytime the insured requires hospitalization.

an accelerated benefit rider pays out part of the policy's face value while the insured is still living

Under the integrated long-term care option, the beneficiary receives the remainder of the face amount as the death benefit at the insured's death. In this way, the long-term care integrated option is similar to which of the following? an accelerated benefits rider a disability income benefit rider term life insurance a family term rider

an accelerated benefits rider

Which of the following would be most appropriate for Haley, 55, if her primary objective is to ensure having an income she cannot outlive? life insurance CDs mutual funds an annuity

an annuity

Which rider adds a death benefit to a disability income policy? future increase option rider annually renewable term rider cost-of-living adjustment rider waiver of premium rider

annually renewable term rider

A two-tiered fixed annuity is designed to credit a higher rate of interest to: annuity owners who make automatic premium payments of a minimum amount into the annuity annuity owners who annuitize the contract annuity owners who maintain their annuity beyond its surrender charge period annuity owners who surrender the annuity and roll over the funds to a new deferred annuity

annuity owners who annuitize the contract

When can the owner of a deferred annuity select a settlement option? any time prior to annuitization any time before or after annuitization only when the contract is annuitized The choice of settlement option is built into the contract; the owner chooses a contract with the preferred settlement option.

any time prior to annuitization

If a Social Security benefit recipient has income from other sources, including wages and investment earnings, what percentage of Social Security benefits exceeding a combined income threshold may be income taxable? Up to a maximum of 50 percent of Social Security benefits will be subject to income taxation. Social Security benefits are never taxable, regardless of the amount of combined income earned. Anywhere from 50 percent to 85 percent of Social Security benefits will be subject to income taxation. All of his or her Social Security benefits will be subject to tax.

anywhere from 50-80% of SS benefits will be subject to income taxation

If a permanent life insurance policy lapses and the owner does NOT select a nonforfeiture option, the insurer will automatically: suspend coverage until the policyowner either reinstates or surrenders the policy apply the extended term insurance option surrender the policy and pay out the cash value apply the reduced paid-up option

apply the extended term insurance option

How is increasing term life insurance normally sold? as an endorsement as a permanent insurance policy as a stand-alone term life insurance policy as a rider attached to a permanent life insurance policy

as a rider attached to a permanent insurance policy

A producer must give an applicant a Notice Regarding Replacement no later than when?

at the time of application

By providing a schedule of benefits that does not allow individual selection of coverage and benefits, a group health plan: increases profits avoids adverse selection reduces claims limits coverage

avoids adverse selection

Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct? Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time. Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time. Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's.

barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time

Which statement describes the "pool of money" approach to benefits under a long-term care insurance policy? Benefits are defined as an annual sum of money from which money can be drawn during a defined benefit period. Benefits are defined as an amount that is replenished each year from which money can be drawn at any time. Benefits are defined as a percentage of a "pool" of money consisting of premiums paid by all policyowners. Benefits are defined as a total sum of money from which money can be drawn in any amount for as long as the money lasts.

benefits are defined as a total sum of money from which money can be drawn in any amount for as long as the money lasts

What favorable tax treatment do qualified long-term care insurance policies receive? Premiums are deductible, and benefits are not taxed. Premiums are not deductible, but benefits are not taxed. Premiums are deductible, but benefits are taxed. Benefits are not taxed, within limits.

benefits are not taxed, within limits

What will happen if a person starts receiving Social Security retirement benefits before reaching his or her full retirement age and continues to work and earn money that exceeds specified earnings limits? Benefits will be increased. Benefits will be permanently reduced. Benefits will not be affected. Benefits will be reduced each year until the worker attains full retirement age.

benefits will be reduced each year until the worker attains full retirement age

Brian contributes 10 percent of his salary to his company's 401(k) plan. His employer contributes a matching contribution of 4 percent of his salary. All the following statements regarding this arrangement are correct, EXCEPT: Brian's taxable income is reduced by the amount he contributed to his 401(k) plan account. Brian will not be taxed this year on the amount that his employer contributed to his account. Brian must be 100 percent vested in both his and his employer's contributions at all times. Brian's contributions to his 401(k) plan account are made with pre-tax dollars.

brian must be 100% vested in both his and his employer's contributions at all times

Scott is injured in an industrial accident at work and is eligible for workers' compensation. If he is also covered by an individual health insurance policy, the policy must pay for at least half of the expenses incurred. can exclude coverage for injuries covered by workers' compensation. must provide coverage for any expenses not covered by workers' compensation. must pay benefits for his injury.

can exclude coverage for injuries covered by workers' comp

Which is the amount that is paid for dismemberment under an accidental death and dismemberment (AD&D) insurance policy? principal sum primary amount capital sum indemnity amount

capital sum

To confirm that an individual was insured for a stated period, which of the following must a health insurer issue to an insured individual? certificate of insurance certificate of creditable coverage certificate of coverage certificate of authority

certificate of creditable coverage *a certificate of creditable coverage is a health insurer's written confirmation that the insurer insured an individual for the period stated. Another health insurer must accept this certificate in determining an individual's eligibility for coverage

Under an indemnity plan, the insured can: choose coverage on either a fee-for-service or pre-paid basis share the cost of the service and treatment with the provider negotiate the fee that will be charged for a medical service choose doctors and health care providers

choose doctors and health care providers

To receive tax-free benefits under a qualified LTC insurance policy, the insured must be: under a physician's care chronically ill terminally ill under treatment for a recurring medical condition

chronically ill

When underwriting an experience-rated plan, the insurer will NOT examine which factor? group size claims experience of similar groups group stability group composition

claims experience of similar groups

Producers who do not meet the standards of which of the following are a threat to the well-being of not only the consumer, but professionals within the insurance industry? competency honesty ethics loyalty

competency

Which statement about profit-sharing plans is correct? Both the employer and employee contribute to the plan. It is a type of defined benefit plan. Contribution limits for profit-sharing plans are the same as those that apply to all defined contribution plans. The employer is required to make the same amount of contributions every year.

contribution limits for all profit-sharing plans are the same as those that apply to all defined contribution plans

Which statement about health savings accounts is correct? They are offered through an HMO or PPO. Contributions are tax deductible. They are only available to individuals. They are available from federal agencies.

contributions are tax deductible *Contributions to health savings accounts are tax deductible and taxes are deferred until they are withdrawn. If used to pay qualified expenses, the withdrawals are not taxed

Which statement about Roth IRAs is correct? Earnings on contributions are taxed at capital gains tax rates when withdrawn. Contributions to a Roth IRA cannot be deducted. Contributions to a Roth IRA are deductible if the IRA owner meets the adjusted gross income limits. Contributions, but not earnings, are received tax free when withdrawn.

contributions to a roth IRA cannot be deducted *no income tax is imposed on distributions from a Roth IRA. interest and earnings grow in the account tax free when distributed

Which health insurance provision prevents insureds from receiving full benefits from several different health insurance plans? conversion privilege waiting period coordination of benefits subrogation

coordination of benefits *allows more than one applicable policy to pay benefits without exceeding the amount of the loss. Prevents the insured from profiting from the loss

An insured has a basic hospital plan with a supplementary major medical plan. She incurs $10,000 in covered expenses. The basic plan pays the first $3,000. The supplementary plan has a $500 deductible. What kind of deductible does the supplementary plan have? corridor deductible per cause deductible annual deductible flat deductible

corridor deductible

Which of the following cannot be excluded from coverage under an individual accident and health insurance policy? cosmetic surgery to repair the insured's nose that was broken in a car accident an injury that is covered by Medicare injury sustained while on active duty in the military injury sustained while attempting suicide

cosmetic surgery to repair the insured's nose that was broken in a car accident

Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance? straight whole life current assumption whole life limited pay whole life graded premium whole life

current assumption whole life

What must the insured pay for Part A coverage beyond the 60th day of hospitalization? weekly coinsurance or copayment amount nothing daily coinsurance or copayment amount deductible

daily coinsurance or copayment amount

Guaranteed insurability riders are typically found in: medical expense policies disability income policies group plans long-term care policies

disability income policies

An insured's medical expense policy bases coverage on a benefit schedule. When the insured incurs a covered medical expense, the insurer pays: a percentage of the assigned price either a percentage or the full amount of the assigned price the full amount of the assigned price 80 percent of the assigned price

either a percentage or the full amount of the assigned price

Who determines the coverage and benefits offered under an employer's group plan?

employer

Who establishes the standards of eligibility for employee participation in an employer's group health plan?

employer

Which statement is correct about the tax treatment of premiums in disability income insurance policies? Premiums paid by an employer are taxable income to the employee. Only employers can deduct premium payments. Employers can deduct premium payments made for employees. Individuals can deduct premiums paid by employers.

employers can deduct premiums paid by employees *employers can deduct the premiums, which are not considered taxable income to employees. However, employees pay income tax on any benefits they receive

If a 65-year-old person defers Social Security retirement benefits, what must the person do to obtain Medicare coverage? pay the monthly premium enroll only in Part B enroll only in Parts B and C enroll in Part A

enroll in part A

Which statement is correct about enrollment in Medicare Part B? Enrollment does not require payment of a premium. A person is automatically enrolled in Part C after enrolling in Part B. Enrollment in Part A is not necessary. Enrollment in Part B is voluntary.

enrollment in part b is voluntary

In a modified endowment contract, the life insurance policy's cash value grows more quickly than is permitted by the Tax Code. This results primarily from which of the following? the policyowner buying two or more policies and combining them a policy that is paid up before age 120. excessively large premiums being deposited into the contract during the first seven years or less the policy's death benefit shrinking

excessively large premiums being deposited into the contract during the first seven years or less

At the end of a contract period, market-value adjusted annuity owners can do all of the following, EXCEPT: renew the contract withdraw funds annuitize the contract extend the contract term with a higher guaranteed rate

extend the contact term with a higher guarantee rate

The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called: field underwriting fiduciary process agency development due diligence

field underwriting

Where can a person set up a health care savings account (HSA)? city hall professional association post office financial institution

financial institution

An insured incurs $7,000 in covered medical expenses. Her comprehensive major medical policy requires her to pay $500 of those expenses before the policy will pay a benefit based on the remaining $6,500. What kind of deductible does the insured have? per cause deductible annual deductible flat deductible corridor deductible

flat deductible

Which of these will finance health care costs without using a high-deductible insurance plan? flexible spending accounts (FSAs) health savings accounts (HSAs) individual retirement accounts (IRAs) medical savings accounts (MSAs)

flexible spending accounts (FSAs)

Newborn children are automatically covered under an insured's individual health insurance policy for how long? from birth to the end of the first calendar year from birth to the first birthday from birth to the policy renewal date from birth to 31 days

from birth to 31 days *must pay premium beyond the 31 days

In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy? from the cash value after the premium has been deposited to it from the premium payment before it is credited to the policy's cash value once, when the first premium is paid at the start of each policy year

from the premium payment before it is credited to the policy's cash value

Which statement describes the taxation of a health savings account (HSA)? At age 65, the funds may be withdrawn without penalty and used for any purpose without being taxed. Funds grow tax free until the account holder reaches age 62½. A 10 percent penalty tax will apply to withdrawals not used to pay qualified medical expenses. Funds used to pay qualified medical expenses are not taxed.

funds used to pay for qualified medical expenses are not taxed *A 20% penalty tax will apply to withdrawals used for any other purpose

An outline of coverage contains all of the following information for a health insurance policyholder EXCEPT: conditions for renewal type of coverage provided description of benefits governing provisions of the policy

governing provisions of the policy

Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? 10-pay whole life single premium whole life graded premium whole life modified premium whole life

graded premium whole life

Policyowners can buy additional permanent life insurance in the future without proof of insurability under which type of rider? guaranteed insurability rider accidental death benefit rider term rider cost-of-living rider

guaranteed insurability rider

What forms the basis of a health savings account (HSA)? high-deductible, high out-of-pocket cost insurance plan with a tax-favored savings account medical savings account with a traditional insurance plan low-deductible, low out-of-pocket cost insurance plan with a tax-favored savings account moderate-deductible, moderate out-of-pocket cost insurance plan with a tax-exempt savings account

high-deductible, high out-of-pocket cost insurance plan with a tax-favored savings account

The motivation of stakeholders in an ethical dilemma involves all of the following EXCEPT: individual versus community truth versus loyalty honesty versus propriety justice versus mercy

honesty versus propriety *these represent behaviors, not the motivations

Structured settlements most commonly use: immediate fixed annuities deferred fixed annuities immediate variable annuities deferred variable annuities

immediate fixed annuities

The time limit on certain defenses provision in a health insurance policy is like which provision in a life insurance policy? reinstatement payment of claims grace period incontestable clause

incontestable clause

A cancellable policy allows the insurer to: ncellable policy allows the insurer to: reduce coverage increase premium impose surcharges for coverage cancel coverage without notice

increase premium

If a market-value adjusted annuity (MVA) is surrendered before the end of the contract term at a time when current market interest rates are lower than they were when the annuity was issued, the insurer will: maintain the same interest rate on the withdrawn funds and reduce the normal surrender charge maintain the same interest rate on the withdrawn funds and charge the normal surrender charge decrease the interest rate on the withdrawn funds and charge the normal surrender charge increase the interest rate on the withdrawn funds and charge the normal surrender charge

increase the interest rates on the withdrawn funds and charge the normal surrender charge

Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? group life insurance industrial life insurance ordinary term insurance ordinary whole life insurance

industrial life insurance

Which of the following options must be offered to all long-term care policyowners? waiver of pre-existing conditions clause inflation protection replacement protection guaranteed benefits clause

inflation protection

Which of the following is not considered nonpublic personal information? information provided on a claim form information contained on a consumer report obtained by an insurance company information provided on an insurance application the consumer's policy number

information provided on a claim form

Which statement about the taxation of accidental death and dismemberment policy benefits is correct? The death benefit is not taxed, but the dismemberment benefit is taxed. The beneficiary pays income tax on the death benefit. Interest earnings on benefits held by the insurer are taxed. Benefits paid in a lump sum are taxed.

interest earnings on benefits held by the insurer are taxed

Which of the following most accurately describes who can be a life insurance policy beneficiary? The beneficiary must have an insurable interest in the insured. The beneficiary can be anyone as long as it is a natural person. The beneficiary must be a blood relative of the insured. It can be virtually any person or entity the policyowner chooses.

it can be virtually any person or entity the policyowner chooses

Which statement is correct about the MIB (Medical Information Bureau)? It makes its consumer information available to physicians. It compiles information about applicants' credit histories, lifestyles, and financial conditions. It collects medical information about insurance applicants. It reports applicants' claim histories.

it collects medical information about insurance applicants

If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium? It increases. It fluctuates up and down thereafter. It stays level. It goes down.

it goes down

Unlike a supplemental major medical plan, a comprehensive major medical plan: is not combined with other medical expense insurance enhances coverage from a basic medical expense plan has low benefit limits offers limited coverage

it is not combined with other medical expense insurance

When a person retires before full retirement age, what happens to the monthly income amount of his or her Social Security retirement benefits? It is forfeited. It is permanently reduced. It is delayed until the person reaches full retirement age. It is permanently increased.

it is permanently reduced

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Pennsylvania Life and Health Insurance Guaranty Association. What is true about this kind of assurance? It is highly regulated by the Insurance Department. It is required when selling to Medicare-eligible individuals. It is prohibited at all times. It is recommended when selling health insurance.

it is prohibited at all times

Which statement is correct about a buy-up option in a disability income insurance policy for professionals? It lets the insured buy more coverage in the future without evidence of insurability. It lets the insured buy coverage at rates for a higher occupational classification. It lets the insured increase the maximum benefit to 100 percent of pre-disability earnings. It lets the insurer increase the premium over time.

it lets the insured buy more coverage in the future without evidence of insurability

Stephen enrolled in a group health plan last year with a pre-existing condition. Which statement is correct about coverage for this condition? It can be excluded from coverage indefinitely. It must be covered like any other medical condition. It can be excluded from coverage for up to 24 months. It can be excluded from coverage for up to 12 months.

it must be covered like any other medical condition *The Patient Protection and Affordable Care Act (PPACA) prohibits pre-existing condition exclusions from group and individual medical plans issued after 1/1/14

If an employer sets up a profit-sharing plan, which statement is correct? It is not limited in the amount it may contribute to the plan on a participant's behalf. It must contribute the same amount to the plan each year. It must establish individual accounts for each participant. It must allow employees to contribute up to the maximum annual limit.

it must establish individual accounts for each participant

Under the Age Discrimination in Employment Act, an employer that reduces group health benefits for older employees must: reduce contributions for all employees reduce contributions for older employees maintain equal contributions for all employees increase contributions for older employees

maintain equal contributions for all employees

Which of the following statements regarding the life insurance return of premium rider is correct? Interest is included in the returned premium amount. It pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term.. The rider is available only with whole life insurance policies. If the insured dies during the policy term, the policy face amount is paid to the beneficiary as well as the sum or premiums paid.

it pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term

The charge-free withdrawals provision of a deferred annuity contract does which of the following? It exempts deferred annuity withdrawals from surrender charges and all taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge. It exempts deferred annuity withdrawals from surrender charges and penalty taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value on a one-time basis without imposing a surrender charge.

it permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge

What purpose does a mandatory minimum group size serve in underwriting group health insurance? It lowers the risk to any one person. It encourages the insurer to offer a group rate. It complies with state law. It spreads the risk and the administrative costs among numerous participants.

it spreads the risk and the administrative costs among numerous participants

How does Part C change the delivery of health care services under Medicare? It limits the coverage of Parts A and B. It increases accessibility to services for eligible individuals. It reduces the coverage of Parts and B. It uses managed care providers.

it uses managed care providers

Under which settlement option is an income paid until the second of two annuitants dies, at which point no further payments are made to anyone? life income with period certain option joint and survivor option joint and survivor with period certain option joint life option

joint and survivor option

The addition of Part C to Original Medicare (Parts A and B) provided Medicare-eligible individuals with: Medicare supplement insurance managed care and private fee-for-service plans long-term care coverage prescription drug coverage

managed care and private fee-for-service plans

Which statement most correctly describes the tax treatment of policy loans from a non-MEC whole life insurance policy? Life insurance policy loans are taxed as income. Life insurance policy loans are not taxed. Life insurance policy loans that exceed the premiums paid are taxed as income. Life insurance policy loans are taxed at capital gains rates.

life insurance policy loans are not taxed

Which of the following is most designed to discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising? market-value adjusted annuities traditional fixed annuities a variable annuity an indexed annuity

market value adjusted annuities

Any provider coverage has always been a characteristic of: HMOs PPOs medical expense indemnity policies managed care plans

medical expense indemnity policies

Which provides health insurance coverage? health maintenance organization (HMO) preferred provider organization (PPO) benefit schedule medical expense plan (MEP)

medical expense plan (MEP)

Which statement describes the benefit triggers in tax-qualified and non-tax-qualified long-term care insurance plans? Cognitive impairment must be severe to trigger benefits in non-tax-qualified plans. Inability to perform two of seven activities of daily living triggers benefits in tax-qualified plans Medical necessity triggers benefits under non-tax-qualified plans. Medical necessity triggers benefits in tax-qualified plans.

medical necessity triggers benefits under non-tax-qualified plans *tax qualified LTC plans require an inability to preform 2 out of SIX activities of daily living

What are policies that do NOT meet the IRS's definition of life insurance generally called? FIFO policies modified endowment contracts (MECs) LIFO policies nonqualified life insurance policies

modified endowment contracts (MECs)

Christina lives in a state that prohibits medical underwriting in the sale of health insurance. When she applies for an individual health insurance policy, the insurer: must use a single community rate to set the premium can charge a higher premium because of her health status can charge a lower premium because of her health status can reject her application because of her health status

must use a single community rate to set the premium

A PPO provides health care services at fees that are determined on what basis? negotiated, reduced fees usual, customary, and reasonable (UCR) charges for the area fees plus costs federal guidelines

negotiated, reduced fees *A PPO offers negotiated and reduced fees to the sponsoring organization's members or employees

Ashleigh needs health insurance while she is unemployed. Which kind of policy is best for her? guaranteed renewable policy nonrenewable term policy policy that is renewable at the option of the insurer conditionally renewable policy

nonrenewable term policy

The premiums that a company pays for corporate-owned life insurance (COLI) on the lives of its employees are generally: not tax deductible tax deductible up to an IRS limit per employee that is changed annually tax deductible up to a corporate limit set by the IRS annually taxable to the corporation

not tax deductible

To be eligible for standard group health insurance, a group must qualify on the basis of its: members' health number of members sponsor's wealth members' average age

number of members *to qualify, group must be of minimum size (at leasy 10 members)

An insured is injured and files a claim under his disability income insurance policy. When does the elimination period begin? on the date the insured gets medical treatment for the injury on the date of injury on the policy's effective date on the date the claim is filed

on the date of injury

To protect a policy from unintentionally lapsing, long-term care applicants may designate a person to receive notice of lapse or termination of the policy due to nonpayment of premium. How often must insureds be given the right to change this written designation? annually once every two years only when the insured requests a change once every five years

once every two years

ABC Insurers issues both fixed and variable annuities. How many separate accounts must it maintain? one three two five

one

For purposes of small group health insurance, the minimum number of members that a group can have is: ten five one or two 20

one or two

Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option? one-year term life insurance extended-term insurance one-year permanent insurance renewable term insurance

one-year term life insurance

When does a fixed deferred annuity contract provide a death benefit? never; only life insurance policies have death benefits only if the annuitant dies after the contract is annuitized only if the contract owner or annuitant dies during the accumulation period only if the owner purchased a death benefit rider with the annuity

only if the contract owner or annuitant dies during the accumulation period

Cal bought a $100,000 universal life policy ten years ago. He has paid $8,000 in premiums into the policy. He now decides to surrender the policy for its full $15,000 cash value and must pay taxes on $7,000 of that cash value. Which one of the following most correctly describes the type of tax that is applicable in this case? estate tax capital gains tax transfer-for-value tax ordinary income tax

ordinary income tax

An employee is injured on the job and receives benefits under the employer's group long-term disability plan. Which source of income will NOT reduce these benefits? personal savings government benefits workers' compensation other disability insurance

personal savings

With respect to the transfer-for-value rule, which of the following situations would result in the new owner being subject to tax on the policy's gain upon the insured's death? policy is sold by the current owner to the insured person policy is sold to a business partner (or the partnership) of the current owner the premium is for a policy the insured purchased to assure his family's financial security policy is sold by the insured to a neighbor in exchange for cash

policy is sold by the insured to a neighbor in exchange for cash

Which of the following explains why a traditional waiver of premium rider does not work with a universal life insurance policy? Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies. Expense and mortality charges for a universal life policy are unbundled from the premium, whereas for traditional life insurance policies they are bundled into the premium. Premium payments can be occasionally missed with a universal life insurance policy, whereas they cannot be skipped with a traditional life insurance policy. Universal life insurance policies have more administrative expenses than traditional life insurance policies.

premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies

What is the tax treatment of premiums for key person disability income insurance? Premiums are deductible, but benefits are taxed. Premiums are deductible, and benefits are not taxed. Premiums are not deductible, and benefits are taxed. Premiums are not deductible, but benefits are not taxed.

premiums are not deductible, but benefits are not taxed *key person DI insurance is a discretionary expense, so the business cannot deduct the premiums from taxable income. However, benefits paid to the business are not paid as income

Under the payor benefit rider of a juvenile life insurance policy, which of the following happens if the payor becomes disabled before the maximum age specified in the rider? Premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first. The juvenile policy becomes paid-up. Premiums are waived until the payor recovers. Premiums are waived until the insured child reaches a certain age.

premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first

Which statement is correct about the taxation of health insurance expenses? Premiums paid for individual disability income insurance are not deductible. Unreimbursed medical expenses are not deductible. Premiums paid for medical expense insurance are not deductible. Premiums paid for qualified long-term care insurance are not deductible.

premiums paid for individual disability income insurance are not deductible

Which statement is correct about the taxation of health insurance expenses? Premiums paid for medical expense insurance are not deductible. Unreimbursed medical expenses are not deductible. Premiums paid for individual disability income insurance are not deductible. Premiums paid for qualified long-term care insurance are not deductible.

premiums paid for individual disability income insurance are not deductible

When asking themselves questions that concern legal risks, control risks, ethical risks, and culture risk, what are producers doing? identifying ethical dilemmas creating a conflict of interest adopting a code of ethics preventing ethical dilemmas

preventing ethical dilemmas *when producers can fully and accurately answer these questions, they are more likely to prevent ethical dilemmas

The automatic premium loan (APL) provision does which of the following? prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities provides liquidity if the insured wants to increase a policy's face amount improves the policyowner's credit rating

prevents a life insurance policy from lapsing if the policyowner fails to pay a premium

After a disability income policy has been issued, what period of time must pass before the insured may file a claim for benefits? exclusionary period benefit period probationary period elimination period

probationary period

The guaranteed renewability provision in a health insurance policy guarantees that the policy can be renewed until the insured: files at least three claims within a year buys another health insurance policy stops paying the premium reaches age 65

reaches age 65

The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability convert the term policy to a permanent life insurance policy renew the policy with a higher face amount without having to provide evidence of insurability renew the policy at lower current rates rather than guaranteed renewal rates

renew the policy at lower current rates rather than guaranteed renewal rates

Due to the increasing cost of health insurance, employers with group health insurance plans usually: require all employees to take a reduction in salary equal to their share of the premium ask participating employees to contribute to the premium through direct payroll deposits to the insurer require all employees to reimburse the employer for their share of the premium require participating employees to contribute to the premium through payroll deductions

require participating employees to contribute to the premium through payroll deductions

Which statement about return of premium riders is correct? Return of premium riders are not available in all states. They refund the entire premium to the insured only if no claims are filed against the policy. They prevent the insured from receiving a premium refund if any claims are filed. They are available at no additional cost.

return of premium riders are not available in all states

Under the transfer-for-value rule, which of the following ownership transfers of a life insurance policy is a taxable transfer? sale of the policy to the current owner's brother a sale of the policy to a corporation in which the current owner is an officer or shareholder sale of the policy to the insured person a sale of the policy to a business partner of the current owner

sale of the policy's to the current owner's brother *if a policy is sold to someone other than the insured, a business partner, or the current owner's corporation, the gain on the policy WILL BE TAXABLE to the new owner (who is likely the new beneficiary)

Which of the following sections of the Tax Code deals with the exchange of life insurance policies and annuities?

section 1035

For what groups of people were medical savings accounts (MSAs), the forerunners of health savings accounts (HSAs), specifically created? large employers sole practitioners only all employers self-employed people and small employers

self-employed people and small employers

Although the employer sets the eligibility standards for participation in its group health insurance plan, the insurer alone: sets the waiting period sets the group membership sets the minimum participation standards selects the benefits

sets the minimum participation standards

Joanna has a $500,000 permanent life insurance policy that she no longer wants to keep in force. In order to enter into a viatical settlement, what must Joanna prove? She has a financial need to sell her policy. She is her family's breadwinner. She will use the funds to pay for medical expenses. She is terminally or chronically ill.

she is terminally or chronically ill

Jessica, age 48, owns a traditional IRA that she funded with tax-deducted contributions and which is now worth $300,000. Which of the following correctly describes the tax consequences of converting her IRA to a Roth IRA? She would have to pay income taxes only on the portion of the $300,000 representing interest growth. She would have to pay income taxes on the entire $300,000. She would have to pay income taxes only on the portion of the $300,000 representing the tax-deducted contributions. She would have to pay income taxes and a 10 percent early withdrawal penalty on the entire $300,000.

she would have to pay income taxes on the entire $300,000

Which type of medical expense coverage might be limited to a particular form of care? specified pre-paid comprehensive fee-for-service

specified medical expense coverage

Which governments regulate group health insurance?

state and federal

What process will an insured follow when using funds from a flexible spending account (FSA) to pay for a medical expense? Submit a claim to the employer's group health insurance administrator with proof of payment for reimbursement. Submit a claim form to the FSA administrator for reimbursement. Submit a claim and proof of payment to the FSA administrator for reimbursement. Submit a claim to the insurance company with proof of payment for reimbursement.

submit a claim and proof of payment to the FSA administrator for reimbursement

Justine leaves her position with her employer on March 1. She wants to convert her employer's group life insurance coverage to an individual policy. Which action must she take in order to convert her group coverage? provide proof of group coverage and evidence of insurability pay the premium and provide proof that she is not covered by another group policy provide evidence of insurability submit an application and pay the premium within the time frame specified in the policy

submit an application and pay the premium within the time frame specified in the policy

Jim applies for a health insurance policy. Although the insurer issues the policy, it excludes coverage for losses associated with cardiac illness. The insurer has classified Jim's risk as: preferred substandard declined standard

substandard

Which of the following most correctly describes the option(s) available with a universal life insurance policy the owner no longer wishes to maintain? surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions surrender the policy for its cash value, convert it to extended term insurance, or convert it to paid-up whole life insurance surrender the policy for its cash value or convert it to extended term insurance surrender the policy for its cash value or convert it to paid-up whole life insurance

surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions

A currently insured worker is eligible for which of the following Social Security benefits? survivor death benefits and disability benefits retirement benefits only survivor death benefits, disability benefits, and retirement benefits survivor death benefits only

survivor death benefits only

In which one of the following ways are Section 529 prepaid tuition plans and education savings plans similar? types of education-related expenses covered types of educational institutions where the plan's funds can be used tax treatment of distributions account funding requirements

tax treatment of distributions

HIPAA treats premiums paid for tax-qualified long-term care insurance plans as medical expenses that qualify for what type of tax status? tax-deferred status tax-exempt status tax-free status tax-favored status

tax-favored status *their premiums are medical expenses that can be deducted from taxable income for federal income tax purposes

Jack bought a life insurance policy that will provide a lump-sum death benefit plus a ten-year stream of income should he die before a specified date. Five years after purchasing the policy, before the specified date, Jack died and the policy began paying a monthly benefit to his family for ten years. What type of policy did Jack buy? ten-year family maintenance policy ten-year family income policy survivorship life insurance policy ten-year family protection policy

ten-year family maintenance policy

Social Security benefits are a function of a worker's average indexed monthly earnings and primary insurance amount (PIA). What is a worker's PIA? the total amount of money that a worker earned from employment during his or her lifetime the amount of retirement and disability benefits payable to the worker and his or her spouse the amount of the retirement benefit the worker will receive at normal retirement age the amount payable to a surviving spouse at the worker's death

the amount of retirement benefit the worker will get at normal retirement age

The death benefit of a fixed deferred annuity equals: the sum of periodic income payments projected to the annuitant's life expectancy the contract's accumulated value when death occurs the face amount stipulated in the deferred annuity contract. the sum of premiums paid into the annuity

the contract's accumulated value when death occurs

When used in group insurance, the probationary period is the time during which: the employer has to investigate the employee to determine eligibility for employee benefits the employee must be employed before becoming eligible for a salary increase the employee must be employed before becoming eligible for group insurance benefits the employee must be employed before filing a claim for benefits

the employee must be employed before being eligible for group insurance benefits

Which statement is correct about the operation of an employer's self-insured group health insurance plan? The employer pays covered claims. An insurance company pays covered claims. A state insurance fund pays covered claims. Employees contribute to a fund from which covered claims are paid.

the employer pays covered claims

Which of the following statements about the tax treatment of funds received through a qualified viatical settlement is correct? The insured pays state income tax but no federal income tax. The insured pays capital gains tax but no federal or state income tax. The insured pays no federal income tax but may have to pay state income tax. The insured pays no taxes in any form.

the insured pays no federal income tax but may have to pay state income tax

When setting the premium for an individual health insurance policy, an insurer does NOT consider: the insurer's interest earnings on investments the insurer's administrative expenses the applicant's risk of loss the insurer's claims reserves

the insurer's claims reserves *premiums reflect the cost of the benefit to be provided, the insurer's expense in issuing and administering the policy, and the interest earned on invested assets. An insurer's claim reserve is a fund that the insurer allocates to pay future claims

Under which one of the following circumstances are funds related to life insurance policy dividends taxable? the interest earned on dividends left with the insurer to accumulate interest when used to buy additional insurance when paid in cash to a policyowner when used to reduce premiums

the interest earned on dividends left with the insurer to accumulate interest

Under which of the following circumstances might life insurance policy dividends represent a taxable event? when the insured uses them to buy additional insurance the interest earned on dividends left with the insurer to accumulate interest when paid in cash to the policyowner when used to reduce future premiums

the interest earned on dividends left with the insurer to accumulate interest (interest made on dividends)

A basic physician expense policy typically specifies: the maximum benefit amount per visit, and the maximum number of visits per injury or illness the insured's deductible amount for each office visit which providers the insured must use the insured's copayment amount for each office visit

the maximum benefit amount per visit and the maximum number of visits per injury or illness

Under the Patient Protection and Affordable Care Act, the terms platinum level, gold level, silver level, and bronze level refer to a classification of health insurance plans that differ by: the percentage of essential health benefit (EHB) costs in the general population funded by the plan. the underwriting classification assigned to the insured. the deductible and coinsurance requirements of the plan. the number of essential health benefits (EHBs) covered under the plan.

the percentage of essential health benefit (EHB) costs in the general population

Which statement is correct if a group offers noncontributory group life insurance? The employer must pay most of the premiums. The employees must pay part of the premiums. The plan must cover at least 75 percent of eligible group members. The plan must cover 100 percent of eligible group members.

the plan must cover 100% of eligible group members

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? the policy's cash value her ability to borrow an interest-free loan from the cash value policy dividends payment of premiums on Sylvia's behalf in the event of emergencies

the policy's cash value

Unlike traditional fixed interest UL policies, many variable universal life policies offer a third death benefit option, which provides a guaranteed minimum death benefit equal to: he policy's net amount at risk plus its cash value the policy's net amount at risk plus its cash value minus the sum of premiums paid the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid the policy's net amount at risk plus its cash value plus the sum of premiums paid

the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid

Once annuitized income payments begin, which of the following statements is correct? The annuitant can change the settlement option at any time during the first two years only. The annuitant can change the settlement option before the first payment is distributed. The annuitant can change the settlement option at any time. The settlement option cannot be changed.

the settlement option cannot be changed

Which of the following statements best explains the basic level premium concept of ordinary whole life insurance? The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age. Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance. The death benefit is decreased to offset the rising cost of insurance with age. The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level.

the steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age

Under either a benefit schedule or usual, customary, and reasonable charge method, benefit payments are based on: a statutory amount the actual amount charged a statutory amount or the amount charged, whichever is higher the stipulated amount or the amount charged, whichever is lower

the stipulated amount or the amount charged, whichever is lower

Under the life insurance transfer-for-value rule, to what extent are death benefits from a policy sold to another party considered taxable income to the new owner? The taxable portion equals the death benefit minus the sum of the initial purchase price and all subsequent premiums paid by the new owner. The taxable portion equals the death benefit minus the initial purchase price paid by the new owner. The taxable portion equals the death benefit minus the policy's cash value at the time of the transfer. The full death benefit is taxable.

the taxable portion equals the death benefit minus the sum of the initial purchase price and all subsequent premiums paid by the new owner

After a viatical settlement agreement is signed, which party owns the life insurance policy? the viatical settlement provider the insured the viatical settlement broker the viator

the viatical settlement provider

What is the main difference between medical savings accounts (MSAs) and health savings accounts (HSAs)? the amount of the maximum annual contribution and the deduction HSAs are designed for use in employer plans. HSAs are designed for employees of small employers. their maximum deductible and the maximum annual out-of-pocket costs

their maximum deductible and the maximum annual out-of-pocket costs

In addition to offering basic, major, and comprehensive medical plans and HMO plans, what else do Blue Cross and Blue Shield plans do? They administer basic surgical expense insurance in many states. They administer Medicare programs in many states. They administer Medicaid programs. They are common providers for long-term care insurance plans.

they administer Medicare programs in many states

When received in a lump sum, how are life insurance death benefits commonly taxed to the beneficiary? They are generally tax free to the beneficiary, but only to the extent of the policy's gain. They are generally taxable as income to the beneficiary, but only to the extent of the policy's gain. They are generally income tax free to the beneficiary. They are generally fully taxable as income to the beneficiary.

they are generally income tax free to the beneficiary

Kelly owns a deferred annuity. What options does she have for using the funds accumulating in her contract before the annuitization date? Those values must be left intact in the contract for future annuitization. Those values must be fully withdrawn before annuitization. These values can only be partially withdrawn in an emergency before annuitization. They can be withdrawn, partially or in full, before the contract annuitizes.

they can be withdrawn, partially or in full, before the contract annuitizes

Endowment contracts are NOT considered life insurance (for tax purposes) because: They never mature. They endow before age 120. They do not pay a death benefit if the insured dies before the contract matures. They do not build cash values.

they endow before age 120

Which statement correctly describes the tax treatment of unreimbursed medical expenses? They are added to taxable income. They are subtracted from premium expenses to determine the medical expense deduction. They may be deducted from taxable income if they exceed a certain percentage of AGI. They are subtracted from gross income.

they may be deducted from taxable income if the exceed a certain percentage of AGI

Which statement correctly describes the tax treatment of unreimbursed medical expenses? They are added to taxable income. They may be deducted from taxable income if they exceed a certain percentage of AGI. They are subtracted from premium expenses to determine the medical expense deduction. They are subtracted from gross income.

they may be deducted from taxable income if they exceed a certain percentage of AGI

Which statement about disability buy-out insurance policies is correct? Benefits are typically paid in monthly payments for a specified number of years. Benefits are payable if the insured business owner is either partially or totally disabled. They may be used with either a cross-purchase buy-sell agreement or an entity purchase buy-sell agreement. They have a shorter elimination period than individual DI policies.

they may be used with either a cross-purchase buy-sell agreement or an entity purchase buy-sell agreement

Since January 2014, how must individual medical expense insurance policies treat pre-existing conditions? They must be covered without restriction. They may be partially excluded for 10 to 15 weeks. They may be excluded for 12 to 24 months. Benefits may be reduced for 24 to 36 months.

they must be covered without restriction

Which of the following statements about an individual long-term care insurance policies issued in Pennsylvania is TRUE? They must be guaranteed renewable or noncancelable. They must be conditionally renewable. They do not need the insured's acceptance to increase benefits at a higher premium. They can exclude benefits by type of illness.

they must be guaranteed renewable or noncancelable

Sally owns a $750,000 life insurance policy that names her son as beneficiary. Which statement correctly describes how the policy death benefit will be treated in Sally's estate when she dies? They will be included in Sally's estate but whether or not they are subject to estate taxation depends on the value of her estate. They will not be included in Sally's estate and therefore not subject to estate taxation. They will be included in Sally's estate but not subject to taxation because life insurance death benefits are tax free. They will be included in Sally's estate and subject to estate taxation regardless of the value of her estate.

they will be included in Sally's estate but whether or not they are subject to estate taxation depends on the value of her estate

Which of the following correctly describes the two basic categories of life insurance settlement options? period certain and refund straight life and survivorship fixed period and fixed amount those without a life contingency and those with a life contingency

those without a life contingency and those without a life contingency

How may an HMO member get covered medical care from a provider who is outside the provider network, without a reduction in coverage? get the HMO's prior approval through a point-of-service (POS) plan get written authorization from his primary care physician have the services treated as an emergency medical condition

through the point-of-service (POS) plan *HMO members cannot get covered health care services outside the HMO's provider network without buying a point-pf-service (POS) option, which allows the HMO member to get treatment from an out-of-network provider

Why does an insurer require that a certain percentage of eligible members participate in a group health insurance plan? to protect the insurer from adverse selection to ensure that the employer is adequately protected from risks to its employees to protect the employer from adverse selection to guarantee the insurer a reasonable profit

to protect the insurer from adverse selection

Which of the following correctly identifies qualified educational expenses that can be covered under a Section 259 prepaid tuition plan? tuition, mandatory fees, and room and board only tuition, mandatory fees, room and board, and books tuition and mandatory fees only tuition only

tuition and mandatory fees only

What determines whether a health insurance policy will be issued with an impairment rider? underwriting credit report investigative consumer report MIB data

underwriting

Which of the following is the leading reason for producers to lose their licenses? unfair sales practices unfair trade practices unethical behavior misrepresentation

unethical behavior

Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses? up to 50 percent, depending on the insurer up to 75 percent, depending on the insurer up to 25 percent, depending on the insurer up to 100 percent, depending on the insurer

up to 75%, depending on the insurer

HMOs control costs through which of the following? minimal deductible for health care provided within the network 20 percent deductible for health care provided within the network use of network health care providers and minimal copayments no deductibles for health care provided outside the network

use of network health care providers and minimal copayments *HMOs impose no deductibles for health care provided in their networks. They require a small copayment for each visit

The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance to fund future cash needs using life insurance as a speculative investment on another person's life overusing life insurance designating an ineligible person as the policy beneficiary

using life insurance as a speculative interest on another person's life

When underwriting individual disability income insurance, the most important factor in determining the maximum monthly benefit is the insured's: occupational class wages and earnings health age and sex

wages and earnings

A rider that waives all monthly deductions from a UL policy's cash value but credits nothing to the cash value if the insured becomes totally disabled is called a: waiver of cost of insurance rider waiver of monthly deductions rider waiver of premium rider waiver of stipulated premium rider

waiver of monthly deductions rider

In which case is the amount payable for a covered service based on the amount that is typical for the area in which the service is performed? when coverage is paid on a usual, customary, and reasonable (UCR) charge basis when coverage is paid on a medical expense basis when coverage is paid on an any provider basis when coverage is paid according to a benefits schedule

when coverage is paid on a usual, customary, and reasonable charge basis

If a person buys a new life insurance policy to replace an existing one, the producer must give the applicant the Notice Regarding Replacement form no later than when? when the person is first solicited when the policy is delivered when the initial premium is paid when the application is taken

when the application is taken

If Sam makes a full or partial withdrawal from his deferred annuity before the contract annuitizes, which of the following statements applies? Withdrawals are tax free up to Sam's investment in the contract (i.e., his basis), after which all subsequent withdrawals are fully taxable as a distribution of gain. Withdrawals are fully tax free. The taxable portion of the withdrawal is determined after calculating the exclusion ratio. Withdrawals are fully taxable until they equal the contract's gain (i.e., interest earnings), after which all subsequent withdrawals are tax free.

withdrawals are fully taxable until they equal the contract's gain (interest earnings), after which all subsequent withdrawals are tax free *if Same withdrawals funds as a full or partial surrender before the contract annuitizes, the withdrawal is subject to LIFO rules (interest is last in, so first out), which means the withdrawn amount is taxable until all gain has been distributed