Life and Health test

Under which condition would an employee's group medical benefits be exempt from income taxes?

An employee's group medical benefits are generally exempt from taxation as income.

The current interest rate on an equity indexed annuity is often based on

An index like Standard & Poor's 500

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income

An agent makes a mistake on the application and then corrects his mistake by physically entering the necessary information. Who must then initial that change?

Applicant

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

Applicant's past income.

In a replacement situation, all of the following must be considered EXCEPT

Assets

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

At the end of 20 years, the policy's cash value will equal $100,000.

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested?

At the time of application

What document describes an insured's medical history, including diagnoses and treatments?

Attending Physician's Statement

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?

Inspection report

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

Which of the following entities can legally bind coverage?

Insurer

Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer

The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the

Insuring clause

Under which of the following organizations are the practicing providers compensated on a fee-for-service basis?

PPO

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-up option

A 403(b) plan, commonly referred to as a TSA, is available to be used by

Teachers and not-for-profit organizations

Nonforfeiture values quarantee which of the following for the policyowner?

That the cash value will not be lost

Which of the following is NOT covered under Plan A in Medigap insurance?

The Medicare Part A deductible

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person.

Which is true regarding obtaining underwriting sources?

The applicant must be informed of the sources contacted and how the information is being gathered.

Which of the following is true about the requirements regarding HIV exams?

The applicant must give prior informed written consent

Which is NOT true about beneficiary designations?

The beneficiary must have insurable interest in the insured.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

Which of the following is true regarding optional benefits with long-term care policies?

They are available for an additional premium

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

According to the rights of renewability rider cancellable policies, all of the following are correct about the cancellation of an individual insurance policy EXCEPT

Unearned premiums are retained by the insurance company

Under the Physical Exam and Autopsy provision, how many times can an insurer have the insured examined, at its own expense, while a claim is pending?

Unlimited

Which of the following products requires a securities license?

Variable annuity

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequence

An insured has primary group health plan and an excess plan, each covering losses up to $10,000. The Insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay?

$5,000

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy?

10 days

A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay?

15 days A probationary period refers to the amount of time that coverage is not available for illness-related disabilities, so it would not apply to a broken leg. The elimination period, however, is the time that must elapse between the onset of the disability and when benefits will start being paid. In this case, the individual is considered disabled for 45 days, and the benefits will start to be paid after 30 days. So, the client will receive benefits for 15 days.

The time of certain provision prohibits insurers from denying a claim due to misrepresentation, as long as the policy has been in force for at least

2 years

What is a penalty tax for nonqualified distributions from a health savings account?

20%

Which of the following is the required number of participants in a contributory group plan?

75%

What is the amount a physician or supplier bills for a particular service or supply?

Actual charge

Which of the following is NOT covered under a long-term care policy?

Acute care in a hospital

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following?

Adjust the benefit in accordance with the increased risk

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

Adjusted to the insured's age at the time of renewal

Which of the following is TRUE about a class designation?

Beneficiaries are not identified by name

Which of the following is NOT true regarding an annuity certain?

Benefits stop at the annuitant's death.

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

Business overhead expense policy

In the event of a divorce, which of the following would allow a divorcee to continue receiving group health coverage under an insured spouse's plan for an additional 36 months?

COBRA

A tax-sheltered annuity is a special tax-favored retirement plan available to

Certain groups of employees only

The provision that provides for the sharing of expenses between the insured and the insurance company is

Coinsurance

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common disaster clause

An applicant for an individual health policy failed to complete the application properly. Before being able to complete the application and pay the premium, she is confined to a hospital. This will not be covered by Insurance because she has not met the conditions specified in the

Consideration Clause

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

Consumer report

The purpose of managed care health insurance plans is to

Control health insurance claims expenses

What is the main difference between coinsurance and copayments?

Copayment is a set dollar amount.

Which of the following is NOT covered by Medicare?

Cosmetic Surgery

All of the following are true about group disability income insurance EXCEPT

Coverage applies both on and off the job

In disability income insurance, the time between the onset of an injury or sickness and when benefits begin is known as the

Elimination period

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

Which policy component decreases in decreasing term insurance?

Face amount

Another term used to describe "no deductible" is

First-dollar basis

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

Fixed amount

All of the following are dividend options EXCEPT

Fixed period installments

Which provision allows the policyholder a period of time while coverage is in force, to examine a health insurance policy and determine whether or not to keep it?

Free-look period

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss

How are HMO territories typically divided ?

Geographic areas

What provision in an insurance policy extends coverage beyond the premium due date

Grace period

Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?

Greatest

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die

In health insurance, if a doctor charges $50 more than what the insurance company considers usual, customary and reasonable, the extra cost

Is not covered

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life

What are the licensing requirements for someone who sells variable universal life insurance?

Life insurance and securities

An insured has a life Insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-Pay Life

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred a nursing or convalescent home?

Long-term care

If a insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an

Modified endowment contract

Which of the following premium modes would result in the highest annual cost for an insurance policy?

Monthly

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

The coverage provided by a disability Income policy that does not pay benefits for losses occurring as the result of the insured's employment is called

Nonoccupational coverage

If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for Medicare?

Nothing

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

Which of the following has the right to convert the existing term coverage to permanent insurance?

Policyowner

Which of the following individuals must have insurable interest in the insured?

Policyowner

Who can request changes in premium payments, face value, loans, and policy plans?

Policyowner

In which of the following instances would the premium be tax deductible?

Premiums paid by an employer on a $30,000 group term life insurance plan for employees

What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered?

Probationary period

Which of the following answers does NOT describe the principal goal of a Preferred Provider Organization?

Provide medical services only from physicians in the network

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

Under the Fair Credit Reporting Act if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must

Respond to the consumer's complaint.

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?

Return the application to the applicant for completion

An insured wants to name her husband as the beneficiary of her health policy. She also wishes to retain all of the rights of ownership. The insured should have her husband named as what type of beneficiary?

Revocable

What is the best way to change an application?

Start over with a fresh application

An applicant signs an application for a $25,000 insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?

The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

The contingent beneficiary

An Individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam

Which of the following statements concerning group health insurance is CORRECT

The employer is the policyholder.

Which of the following best describes the "first-dollar coverage" principle in basic medical insurance?

The insured is not required to pay a deductible

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to

The insured's estate

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy.

The insuring clause of a disability policy usually states all of the following EXCEPT

The method of premium payment

All of the following statements are true regarding installments for a fixed amount EXCEPT

The payments will stop when the annuitant dies.

How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company?

Within 90 days or as soon as reasonably possible, but not to exceed 1 year