Life & Health Insurance Exam
If an insurance company offers Medicare supplement policies, it must offer which of the following plans?
a) A-D b) A c) A & B d) B-N An insurance company must make available to each applicant a policy form offering the basic core benefits (Plan A) if it will offer any Medicare Supplement policies. An insurance company does not have to issue all or any of the plans B through N.
What happens when a policy is surrendered for its cash value?
B.) coverage ends and the policy cannot be reinstated D.) The policy can be reinstated by paying back all loans and premiums Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated. (B)
If authorized to write life and property and casualty insurance, how many hours of continuing education instruction are producers required to complete every 2 years?
a) 10 b) 12 c) 14 d) 24 Producers in Louisiana are required to complete 24 hours of continuing education every 2 years, regardless of the number of lines for which the producer is licensed. (D)
According to the PPACA rules, what percentage of health care costs will be covered under a bronze plan?
a) 10% b) 30% c) 40% d) 60% Under the bronze plan, the health plan is expected to cover 60% of the cost for an average population, and the participants would cover the remaining 40%. (Answer D)
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
a) Adjustable life b) Term life c) Limited pay d) Universal life Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.
Which of the following would be considered a nonmedical insurance application?
a) An application submitted with the Agent's Report b) Any application for life insurance c) An application on which the medical information is completed by the applicant and the agent only d) An application that does not ask any questions about the applicant's medical history An application on which all of the questions, including medical history questions, do not need to be completed by medical professionals, and may be completed by the applicant and the agent.
An agent selling variable annuities must be registered with
a) FINRA. b) Department of Insurance. c) The Guaranty Association. d) SEC. Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.(Answer A)
Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer's right to change premium amounts?
a) Insurer's rights b) Coverage limitations c) Continuation provision d) Premium provision The renewal provision, also known as a continuation provision, must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.
Which of the following best describes annually renewable term insurance?
a) Neither the premium nor the death benefit is affected by the insured's age. b) It provides an annually increasing death benefit. c) It is level term insurance. d) It requires proof of insurability at each renewal. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.(Answer C)
In a long-term care policy, pre-existing condition limitations
a) Never have specific exclusions. b) Are not permitted. c) Must appear as a separate paragraph and be clearly labeled. d) Apply to 12 months from the effective date of coverage. If there are any limitations in the policy with respect to pre-existing conditions these limitations must appear in a separate paragraph in the policy labeled "Pre-existing Condition Limitations." A long-term care policy cannot deny a claim for losses incurred more than 6 months from the effective date of coverage because of a pre-existing condition.
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
a) Paid-up options b) Extended term c) Cash surrender d) Reduced paid-up Once the cash surrender value is paid, the contract is over.
An insured was involved in an accident and could not perform her current job for 3 years. If the insured could reasonably perform another job utilizing similar skills after 1 month, for how long would she be receiving benefits under an "own occupation" disability plan?
a) She would not receive any benefits. b) 3 years c) 2 years d) 1 month Under an Own Occupation plan, if the insured cannot perform his/her current job for a period of up to two years, disability benefits will be issued, even if the insured would be capable of performing a similar job during that two-year period. After that, if the insured is capable of performing another job utilizing similar skills, benefits will not be paid.
Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?
a) Statewide predetermined annual interest rate b) Insurer's guaranteed minimum rate of interest c) Investment performance of the company d) Investment performance of the insured With fixed annuities, the company is required to pay at least a guaranteed minimum rate of interest to the owners. If the company investments perform well, the company will pay a higher interest rate, but since the interest rate can never fall below the guaranteed minimum, that's what ultimately determines what the company will pay. (Answer B)
The maximum fine for violating the Insurance Code is
a) $1,000. b) $5,000. c) $15,000. d) $25,000. Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000 (Answer D)
Which of the following would be a typical maximum benefit offered by major medical plans?
a) $10 million b) $50,000 c) $500,000 d) $1 million Major medical plans have high maximum benefits such as $1,000,000 or $2,000,000. Maximum benefits are usually lifetime maximums.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
a) $100 per violation b) Revocation of license c) $2,500 d) $1,000 An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500. (Answer C)
Under an extended term nonforfeiture option, the policy cash value is converted to
a) The same face amount as in the whole life policy. b) The face amount equal to the cash value. c) A lower face amount than the whole life policy. d) A higher face amount than the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. (Answer A)
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
a) The surrender charge is a flat fee determined by the annuity owner when the annuity is purchased. b) The surrender charge will increase as the accumulation period increases. c) The surrender charge is a percentage of the cash value and decreases over time. d) The surrender charge is always 7% of the cash value. If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends. (Answer C)
Which of the following is NOT a way to determine the interest rate in a Universal Life Policy?
a) Tie current interest rates to Treasury Bills b) Maintain a profit margin between the interest credited on in-force policies and the interest earned on their own investment portfolio c) Estimate market conditions for the life of the policy d) Declare the annual rate by the company's board of directors Some insurers tie their current interest rates to Treasury Bills, while others maintain a specified spread (profit margin) between the interest that they credit on their in-force policies and the interest that they are earning on their own investment portfolio. Some insurers have their current interest rate declared by the company's board of directors each year, if not more frequently. (C)
What is the waiting period on a Waiver of Premium rider in life insurance policies?
a) 30 days b) 3 months c) 5 months d) 6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived. (Answer D)
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
a) Legal purpose b) Contract of adhesion c) Acceptance d) Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application. (Answer D)
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as
a) Unlawful distribution of dividends. b) Coercion c) Rebating d) Twisting Rebating -- giving a client an inducement to the sale that is not stated in the policy -- is unlawful in most states. (C)
According to OBRA, what is the minimum number of employees required to constitute a large group?
a) 100 b) 15 c) 20 d) 50 There must be at least 100 employees in order to qualify for OBRA large-group status. The act states that plans must provide primary coverage for disabled individuals under age 65 who are not retired. (A)
In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective?
a) 100% b) 75% c) 50% d) 25% One hundred percent of eligible employees must participate in a non-contributory health insurance plan for the plan to become effective. (Answer A)
When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent?
a) 18 months b) 3 months c) 6 months d) 12 months Group insurance plans, which are terminated generally, provide for an extension of benefits to any totally disabled employee or dependent. This extension of benefits is generally provided up to a period of 12 months or until the individual is no longer totally or continuously disabled.(Answer D)
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholders?
a) 3% regardless of what the investment draws since that's the guaranteed rate b) 2.5% c) 3% d) 3% this payment. The overpayment this time will be subtracted from the next time the rate exceeds 3%. Insurance companies promise guaranteed minimums on the fixed annuities (3% in this scenario). This means that if the investments draw less than 3%, the company will have to pay 3% anyway. If the investments earn over 3%, the company will pay that excess. (Answer C)
In instances where a coordination of benefits provision is necessary, and two relevant plans cannot agree on the order of benefits, they have to pay the claim in equal shares. How long do they have to determine the order of benefits?
a) 90 b) 7 c) 30 d) 60 In this situation, the insurers have 30 days to determine the order of benefits.
How do employer contributions to a Health Savings Account affect the insured's taxes?
a) The employer contributions are deducted from the individual insured's tax calculations. b) The employer contributions are not included in the individual insured's taxable income. c) The employer contributions are taxed at the same rate as the Social Security tax rate. d) The employer contributions are taxed to the individual insured as earned income. HSA contributions made by an employer are not included in the determination of an individual's taxable income. (Answer B)
Which of the following is NOT a feature of a noncancellable policy?
a) The insurer may terminate the contract only at renewal for certain conditions. b) The premiums cannot be increased beyond the amount stated in the policy. c) The guarantee to renew coverage usually applies until the insured reaches certain age. d) The insured has the right to renew the policy for the life of the contract. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.
What is the advantage of reinstating a policy instead of applying for a new one?
a) The cash values have gained interest while the policy was lapsed b) The original age is used for premium determination c) Proof of insurability is not required d) The face amount can be increased The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status. (B)
The minimum fine for violating the Insurance Code is
a) $500. b) $1,000. c) $1,500. d) $2,000. Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000.
A nonresident producer moves to another state. The producer must notify the Department of Insurance of the address change within how many days?
a) 5 b) 10 c) 20 d) 30 A nonresident producer who moves from one state to another state or a resident producer who moves from this state to another state must file a change of address and provide certification from the new resident state within 30 days of the change of legal residence. No fee or license application is required. (Answer D)
A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?
a) A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments. b) The surrender value will be based on current interest rates. c) The surrender value will not be more than 80% of the cash value in the annuity at the time of surrender. d) The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.
What required provision protects against unintentional lapse of the policy?
a) Payment of premiums b) Reinstatement c) Grace period d) Assignment The grace period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of the grace period provision is to protect the policyholder against an unintentional lapse of the policy.
Which of the following riders would NOT cause the Death Benefit to increase?
a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
a) Adhesion b) Personal c) Unilateral d) Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policy owner. (Answer D)
The death protection component of Universal Life Insurance is always
a) Adjustable Life b) Increasing Term c) Annually Renewable Term d) Whole Life A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance. (Answer C)
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
a) Pay back all premiums owed plus interest. b) Receive payments for a fixed amount. c) Purchase a single premium policy for a reduced face amount. d) Purchase a term rider to attach to the policy. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.
Concerning Medicare Part B, which statement is INCORRECT?
a) It provides partial coverage for medical expenses not fully covered by Part A. b) It is fully funded by Social Security taxes (FICA). c) It is known as medical insurance. d) It offers limited prescription drug coverage. Part B is funded by monthly premiums and from the general revenues of the federal government.
An insurer conducts business in Louisiana without a certificate of authority. Hundreds of policies are sold, and claims start rolling in. Which of the following is true?
a) Because the insurer is not authorized, it is not required to pay the claims. b) The insurer will have to pay the claims anyway. c) The insurer will void all the policies. d) Because the insurer is not authorized, the Guaranty Association will pay the claims. If an insurance company decides to transact insurance illegally, it still will be responsible for paying any claims that are filed under its fraudulent policies (Answer B)
Mortality - Interest + Expense =
a) Benefits budget b) Operating expenses c) Net premium d) Gross premium If "mortality" represents the cost of insured mortality, "interest" represents the interest earned by an insurer, and "expense" (or "loading") represents company operating costs, then the interest is subtracted from the cost of mortality, yielding the net premium, and the loading is added to the net premium to yield the gross premium
What was created to keep telemarketers from calling consumers who do not wish contacted?
a) Call Control Registry b) National Do Not Call Registry c) Confidential No Call Act d) Freedom of Information Act The National Do Not Call Registry was created to allow consumers the choice to not be contacted by telemarketers. Answer (B)
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered
a) Controlled business. b) Adverse selection. c) Discrimination. d) Twisting. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination. (Answer C)
Prior to issuance of a Long-Term Care policy to an applicant age 80 or older, the insurer must obtain all of the following EXCEPT
a) Date of previous doctor visit. b) Report of a physical examination or assessment of functional capacity. c) Attending physician's report. d) Copies of medical records. An insurer must obtain a report of a physical exam, the attending physician's report, and copies of medical records.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must
a) Defend the report if the agency feels it is accurate. b) Change the report. c) Send an actual certified copy of the entire report to the consumer. d) Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report (Answer D)
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT
a) Draw a line through the first answer, record the correct answer, and have the applicant initial the change. b) Note on the application the reason for the change. c) Destroy the application and complete a new one. d) Erase the incorrect answer and record the correct answer. An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.
Premium payments for personally-owned disability income policies are
a) Eligible for tax credits. b) Tax deductible. c) Tax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions. d) Not tax deductible. Premiums for personally-owned individual disability income policies are not deductible. (Answer D)
All of the following are true regarding a decreasing term policy EXCEPT
a) It has a lower premium than level term. b) The contract pays only in the event of death during the term and there is no cash value. c) The face amount steadily declines throughout the duration of the contract. d) The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.
Which of the following is true regarding the taxation of the premium in group accidental death and dismemberment policies?
a) It is received tax-free by the employees. b) It is deductible as an ordinary business expense. c) It is deductible by the employees. d) It is taxed to the employee as ordinary income. Premiums for group accidental death and dismemberment policies are deductible to the employer as an ordinary business expense. (B)
All of the following are features and requirements of the Living Needs Rider EXCEPT
a) It is usually available at no additional charge. b) The remainder of the policy proceeds is payable to the beneficiary at the insured's death. c) It provides funds for medical and nursing home expenses to a terminally ill insured. d) Diagnosis must indicate that death is expected within 3 years. The Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.
The Waiver of Cost of Insurance rider is found in what type of insurance?
a) Juvenile Life b) Universal Life c) Whole Life d) Joint and Survivor The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value. (Answer B)
A producer's license has been revoked a second time for violating the Insurance Code. When can the producer apply for a new license?
a) Never: once a license is revoked the second time, producers cannot get licensed again. b) Within 5 years of the revocation c) Within 1 year of the revocation d) After the revocation period If a producer commits another violation after the license has been reissued following a revocation, the producer's licensed will be revoked for up to 5 years. If the license is revoked a second time, the producer cannot apply for a new license during the revocation period.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
a) Premiums are taxable to the employee. b) Premiums are not tax deductible as a business expense. c) Premiums are tax deductible by the key employee. d) Premiums are tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
Which of the following are the main factors taken into account when calculating residual disability benefits?
a) Present earnings and earnings prior to disability b) Earnings prior to disability and the length of disability c) Employee's full-time status and length of disability d) Present earnings and standard cost of living Residual disability will help pay for loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to disability. (Answer A)
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
a) Reinstatement rule b) Conversion rule c) Disclosure rule d) Replacement rule Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.
What types of services may NOT be provided under the long-term care's assisted living care?
a) Reminders regarding medication b) Visits by a registered nurse c) Linens and personal laundry service d) Assistance with dressing and bathing The following services may be provided: linens and personal laundry service, assistance with dressing and bathing, reminders regarding medication, assistance with eating. Assisted living offers nonmedical assistance. (B)
The rider that may be added to a Disability Income policy that allows for an increase in the benefit amount under certain conditions is called
a) Residual benefits. b) Cost of Living (COLA). c) Waiver of Premium. d) Double Indemnity. The purchasing power of fixed disability benefits may be eroded due to inflation and increases in the cost of living. This rider is used to protect against these trends by increasing the monthly benefits automatically once the insured has been receiving benefits for 12 months, if the cost of living increases.(Answer B)
Which of the following entities established the Do-Not-Call Registry?
a) The Federal Trade Commission b) The Better Business Bureau c) The NAIC d) The Consumer Protection Agency The FTC established the do-not-call list in order to protect consumers against unwanted solicitations
Which of the following does NOT have to be disclosed in a long-term care (LTC) policy?
a) The aggregate amount of premiums due b) The meaning of the terms "reasonable" and "customary" c) Any limitations or conditions of eligibility for LTC benefits d) Any riders or endorsements All LTC policies must disclose and explain the renewability provisions. With regard to life insurance policies that provide an accelerated benefit for long-term care, the policy must include a statement to the effect that receipt of the accelerated benefits may be taxable, and that the insured should seek assistance from a personal tax advisor.