NM Life Insurance Final Exam Mock Test

Under HIPPA, medical plan late enrollees may be excluded for pre-existing conditions for a maximum of

18 months

What is the minimum number of employee's needed for a small employer medical expense plan in New Mexico?

2

EXCEPT for fraud, the time after issuance of a policy during which an insurance company may contest a health insurance claim due to the statements on an application is

2 years

Medicare Supplement policies in New Mexico may contain

neither waiting periods nor pre-exsiting conditions exclusions

An agent whose actions exceed the authority granted by contract is

not backed by the insurer

A medical expense policy typically does NOT

pay surgeon fee's on a first dollar basis

A life insurance policy's contingent beneficiary is the

person who recieves the death benefits if the primary beneficiary dies before the insured

Which statement regarding an adjustable life insurance policy is NOT true?

policy loans are not permitted

Patrick purchased a long-term care policy. He has a health condition for which medical treatment was recommended by a physician within 6 months prior to the policy's effective date. This condition is called a(n)

pre-existing condition

What typically changes at the re-entry option date found in some term life policies?

premium

A Keogh plan is a(an)

qualified retirment plan for the self employed

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?

unemployment tax expenses

How long does protection normally extend to under a limited pay whole life policy?

until age 100

Individual health insurance policies must cover mentally and physically handicapped dependent children

until they become self-supportive

An insurance company can be liable for a producer's unauthorized acts

when the agency contract is unclear concerning the authority given

An individual working part-time has a gross income of $5, 000 for the year. If this individual has an IRA, what is the maxium deductible IRA contribution allowable?

$5,000

A licensee who is required to take continuing education must include how many ethics coursework hours?

1

An individual health insurance policy with premiums paid monthly has a minimum grace period of

10 days

Premature IRA distributions are subject to a penalty tax of

10%

Long-term care policies issued in New Mexico must provide benefits for at least

12 months

An insurance company writing business in a state other than the one in which it is domiciled is called

A foreign

What is a juvenile life insurance policy?

A life policy that covers the life of a minor

Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited?

Accelerated (living) Benefit

Which of the following is NOT a valid contract exchange?

An annuity exchanged for a life insurance policy

All of the following are unfair claims settlement practices EXCEPT

An attempt to settle a claim by arbitration

Which is an accurate discription of the premium in a graded premium life insurance policy?

Annual increases in premium for a stated number of years then remains level

A single-life annuity only has ONE

Annuitant

Accident and health insuance claim handling is made more convenient to the insured by utliizing

Assignment of Benefits

Tim had an on-the-job accident and collects benefits from his individual disability income policy. Which factor could possibly reduce these benefits?

Benefits he recieves from worker's compensation

In health insurance, 60 days must pass after written proof of loss has been recieved by an insurer before the insured may

Bring legal action against the insurer

Which of these is NOT considered to be a cost connected with an individual's death?

Business expenses

Which of the following type of insurers limits the exposures it writes to those of it's owners?

Captive insurer

Which statement regarding the waiver of premium rider is accurate?

Cash payment is not directly provided to the policyowner

A comprehensive group policy also covers expenses related to vison care. Which of the following is not typically covered under a vison plan?

Cataract surgey

Upon receipt of written notice of claim, an insurer is required to provide the claimant with

Claim forms

What must be given to a life insurance applicant when the agent receives an application and the initial premium?

Conditional receipt

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?

Contract of utmost good faith

Which term refers to insurance written on the interests of the licensee, the licensee's employer, or the licensee's immediate family?

Controlled Business

Individual and group health insurance typically exclude coverage for which of the following?

Cosmetic Surgery

What type of doctor-ordered care assists an individual with performing basic daily activities such as bathing, dressing, and eating?

Custodial Care

In what way is a life insurance policy affected by an accelerated benefit payment?

Decreases the death benefit

Which of the following is generally a form of group credit life insurance?

Decreasing Term Insurance

Which annuity allows contributions to an IRA?

Deferred

Which statement about group life insurance is INCORRECT?

Each participant requires evidence of insurability

An employer has a group life insurance plan in place for his employees. How would an employee in poor health be treated in this situation?

Eligible for the same type of coverage as the other employees

Which of the following would permit an insurer to delay a covered disability policy claim?

Elimination period

Which provision makes the application part of the annuity contract?

Entire Contract Clause

Which life insurance policy allows the policyowner to have coverage equal to the net death benefit of the lapsed policy?

Extended term nonforfeiture option

Which settlement option makes minimum guaranteed dollar payments over a stated number of years?

Fixed-Period

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

If Tom's employment is terminated, 20% of his funds could be forfeited.

A single premium deferred annuity sometimes containes a bail out feauture. Which statement regarding this feauture is correct?

If an interest rate falls below a specified level, the surrender charge is waived.

The type of health insurance in which underwritting procedures are the most restrictive is

Individual

Ken is age 65 and has 2 years until he receives Social Security retirement income benefits. At his current age, which is true about Medicare Part A Hospital Insurance coverage?

It is available through application to Social Security

Which of the following is associated with an immediate annuity?

Lack of accumulation period

All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT

Leave a conditional receipt with the client

Which of the following finacial products creates an instant estate, no matter when the date of death?

Life insurance

Tim is covered by an accident and health insurance policy that may not be changed in any way by the insurer up to a stated age, as long as the premiums are paid. What type of policy is this?

Noncancelable

Which of the following health care plans charges a premium that cannot be increased?

Noncancelable

The authority to change the beneficiary in an individual annuity lies with the

Owner

Which of the following outlines the authority given to the producer on behalf of the insurer?

Producer contract

Twisting means

Pursuading an insured, to the insured's detriment, to switch policies.

Which of these statements is NOT a characteristic of the law of large numbers?

Rates can be calculated to compensate for losses

All of the following may be an unfair claims practice EXCEPT

Refusing to pay persons bringing false or fraudulent claims

Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?

Reimbursement

A (an) ___________ insurer assumes risk from another insurance company.

Reinsurance

A transaction in which a new life insurance policy is purchased and an exsiting life insurance policy is surrendered is called

Replacement

What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarunteed period?

Subject to market value adjustment

How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?

Taxed as an ordinary income in the year recieved

When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for

Ten year term insurance for a person aged 55.

A copy of all Medicare Supplements advertisments must be submitted for approval to

The Superintendent of insurance

Which statement regarding the joint and survivor life insurance settlement option is not true?

The amount of each installment is larger than the single life income option

In order to contribute to a Health Savings Account (HSA),

The applicant must be enrolled in a High Deductible Health Plan (HDHP)

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the agent delivered the policy, collected the intial premium, and obtained a good health statement from the insured

Medicare Part A does NOT provide coverage for

The first three pints of blood

Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?

The gain is treated as taxable income and a penalty tax is imposed on the gain

Who may terminate coverage under a cancelable health insurance policy?

The insurer or the insured

What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?

Trust administration fees would reduce policy proceeds

When does interest income for a flexiable premium deferred annuity get reported for federal income taxes?

Upon recieving distributions from the contract

Which type of life insurance policy allows the policyowner the choice of investments along with flexible premium payments?

Variable Universal Life

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

Julie is in need of assistance with one or two activities of daily living. She may be eligible for a(n)

assisted living facility

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. The administrator is called a(n)

attorney-in-fact

In the event of premium default, which life insurance provision will use cash value to keep the policy in force?

automatic premuim loan

Which statement regarding the cash value of a whole life insurance policy is correct?

available to the policyowner when policy has been surrendered

In a disability buy-sell agreement, the policies funding the agreement are owned by the

business entity

In New Mexico, continuing a Health plan coverage beyond the inital coverage period may require the policyholder to do all of the following EXCEPT

certify the newborn's insurablity

Prepaid dental plans differ from most other types of dental plans in what way?

closed panel of dentists can only be used

When a sum of money undergoes capital liquidation, that sum will

decrease in size

Which of these life insurance policies does NOT contain a cash value provision?

decreasing term life

Making a statement that is false or maliciously critical of the financial condition of an insurer is known as

defamation

An individual, age 45 would like to help pay for his daughter's college expenses in 10 years. Which annuity would be appropriate for this indivudal?

deferred annuity

Elimination periods typically apply to

disability policies

Which statement concerning an adjustable life insurance policy is FALSE?

evidence of insurablity is required when there is a change in premuim

The unwritten authority given to the producer to carry out necessary incidental acts of the agency agreement is called

implied authority

When an insurance appointment with an agent is terminated, the party that must notify the agent of the termination is the

insurer

When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this?

irrevocable beneficiary

When the superintendent believes an agent is causing substantial and material harm, the superintendent has the authority to

issue a cease and desist order against the agent

James ownes a business and purchased a policy that covers the business expense of finding a permenant or temporary employee to replace a disabled one. This type of disability coverage is called

key employee coverage

Inpatient psychiatric care is covered under Part A Medicare for 190 days per

lifetime

Which of the following is NOT a reason the government provides insurance?

reduce fraudulent claims

When a lapsed policy's premium has been paid current, it has the potential of being

reinstated

Which term describes the elimination of a hazard?

risk avoidance

A group-owned insurance company that is formed to assume and spread the liability risks of it's members is known as a

risk retention group

An example of endodontic treatment is a

root canal

Third-party administration has become fairly common in accident and health insurance due to the growth of

self-funding of benefits

Which group is the Do Not Call Registry designed to protect against?

telemarketers

Illistrations used in the sale of life insurance contain a statement that must be signed by

the agent

Nonqualified medical expense distributions from a Health Savings Account (HSA) have a tax penalty of

20%

Replacement rules are designed primarily to protect the interest of the

Policyowner

What is the maxium number of employees (earning at least 5,000) that an employer can have in order to start a SIMPLE retirement plan?

100

Medicare will cover a maximum of how many days per benefit period in a skilled nursing facility?

100 days

Which of the following best describes the tax treatment of medical expense policies for the self-employed?

100% of medical expense plan premiums are tax deductable

What is the maxium Social Security Disability benefit amount an insured can recieve?

100% of the insureds Primary Insurance Amount (PIA)

Part A Medicare includes coverage for all of the following services EXCEPT

120 days of Skilled Nursing Care

The New Mexico small employer rules must apply to a medical expense plan when the number of eligible employee's is within a specified range. What is the range?

2-50

A terminated employee has how many days upon termination to convert group life insurance coverage to an individual policy?

31 days

Kate received a group accident and health termination notice. How many days does she have to apply for a converted policy?

31 days

The Superintendent must inspect the financial records of each domestic company every

5 years

At what age do most people become eligible for Medicare?

65

Acccording to ERISA regulations, A Summary Plan Description must be provided to a new plan member within _____ days of the member's eligibility date

90

Emergency health care coverage for Medicare enrollee's traveling abroad is

A Medicare Supplement additional benefit

In New Mexico, who would be eligible for a temporary agent's license?

A designated employee who is replacing a deseased agent

An accident and health plan that typically covers ONLY the services of approved providers is called a (an)

HMO plan

Terry recieves long-term physical therapy at her residence. What type of insurance would cover this service?

Home health care

Which of the following is NOT true of a preferred provider plan?

Hospitals can only initiate preferred provider plans

Which of the following is NOT subject to the promise to pay in an insuring clause?

How the premium is calculated

A characteristic of a preferred provider organization (PPO) is

If service is obtained outside the PPO, benefits are reduced and costs increase

A 55 year old recently recieved a $30,000 distribution from a previous employer's 401K plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a %10 penalty tax on $30,000

Which life insurance clause prohibits an insurance company from questioning the vaildity of the contract after a stated period of time has passed?

Incontestable clause

When group insurance under COBRA have expired, a fully insured group policy can be converted to a (an)

Individual health policy

The Medical Information Bureau consists of members from which group?

Insurance companies

Which statement regarding whole life insurance is accurate?

Insurance coverage can continue for life

Who must sign a rider attached to a health insurance policy in order for it to be valid?

Insured and producer

Which of these statements is NOT true regarding cash value loan against a life insurance policy?

Interst payment made by the policyowner are deductiable

An applicant for accident and health insurance has a risk factor that is similar to a majority of the insurer's other applicants. What will be the likely outcome of this application?

Issued with a standard premuim rate

A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?

Less than the face amount.

Which of these do NOT indicate the presence of insurable interest in a life insurance contract?

Life-Long friendship

The owner of a single premium deferred annuity is entiled to do all of these EXCEPT

Make additional payments into the annuity

John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract?

Mary

Skilled nursing facility expenses are sometimes covered by ________, but ONLY if the insured was hospitalized prior to entering the facility

Medicare

Which individual would be best suited for Medicare Supplement Insurance?

Medicare enrollee

Which of the following is excluded in a medical expense plan?

Military duty

Why do insurers require a minimum number of employees participate in a group insurance plan?

Minimize adverse selection

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

Net payment cost index

Which of the following health insurance plans charges a premium that cannot be increased?

Noncancelable

Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for additional benefit payments will be derived primarily from funds that were

Not distibuted to life annuitants who died before life expectancy

Which of the following is NOT an example as risk retention?

Not doing a business deal after deciding it would be too risky.

All of these statement correctly describe an aleatory contract EXCEPT

Only one party makes any kind of legally enforceable offer

Julie is an employee with a group health plan that contains the Mandatory Second Surgical Opinion provision. What is to be expected with this provision in place?

Out-of-pocket expenses are lower when a Second Surgical Opinion is obtained as opposed to having only one.

If the insured dies during the grace period without having to paid the premium, how much will the insurer pay?

Policy's face amount minus any premiums due

Which of the following accurately describes a participating insurance policy?

Policyowners may be entitled to recieve dividends

Tim is in need of surgery. Before being hospitalized, he is referred to an outpatient clinic for diagnostic tests. What is this an example of?

Pre-admission testing

How are level term policies able to provide level premiums?

Premiums are averaged over the term of the policy

After joining a health maintenance organization (HMO), a subscriber will typically select a

Primary care physician

A pre-exsiting condition exclusion in a accident and health insurance policy pertains to

Prior health matters

A life insurance agent is required to give a disclosure notice about information practices to an applicant or proposed insured

Prior to or at the time of signing the application

What is the name of the period of time during which a new employee is ineligible for group health insurance coverage?

Probationary period

Alan is an enrollee of a health maintenance organization (HMO) which uses a gatekeeper system. If there ever comes a time when he needs emergency health services, what should he do?

Proceed to the nearest emergency room

What kind of arrangement gives the policyowner the right to change the beneficiary?

Revocable designation

Which of the following can be defined as "the potential for loss"?

Risk

Which of the following describes the act of insuring a risk against possible loss?

Risk transfer

When a health insurance policy includes a Mandatory Second Surgical Opinion provision, the insured must

Seek a second opinion for specified elective surgeries

Which of these is NOT considered the responsibility of a producer during the underwriting process?

Selecting the final approval date

Long-term care insurance policies may exclude coverage for all of the following EXCEPT

Senile demetia

Medicare Part A covers which type of care?

Skilled nursing facility care

Which of the following does a Medicare Advantage enrollee typically pay for?

Small co-pay per visit or per service

If an individual would like to enroll in Medicare or seek public information about Medicare, which federal agency handles this?

Social Security Administration

Under the Fair Credit Reporting Act, which statement is true?

The consumer who was investigated must be advised that credit, insurance, or employment was denied because of the unfavorable report

What qualifies as acceptance of an insurance contract offer?

The issued policy

Insurance is NOT characterized as which of the following?

The number of insureds increase the number of losses decrease

Under Medicare Supplement insurance, what form provides information about services, benefits, copayments, deductiables, exclusions, premiums, and the insurer?

The outline of coverage

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

The participating employee

Which of the following statements about the contestability of a life insurance policy is true?

The policy can be contested by the insurer only during the first two years of the contract

A life insurance illistrations showing future premiums being paid out of nonguaranteed values must disclose that

The policyowner may need to resume premium payments depending on actual results

Darrell has a group long-term disability income policy paid by his employer. Which of these statements is true?

The specified benefit amount is a percentage of his wages.

A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured death?

Total premiums paid plus the policy face amount

What is the effect of the market value adjustments in a market value adjustment annuity?

Transfers some of the investment risk to the policyowner

When would evidence of insurability be required for a person already covered with a variable universal life policy?

When the death benefit is increased

If a basic illustration is not provided, an insurer MUST provide a policy summary to a prospective insured at which of the following times?

When the policy is delivered

Pete is covered by a group health insurance plan which covers employees in multiple states. This plan is governed by the laws of which state?

Where the master contract was issued

Which life insurance policy would be eligible to include an automatic premium loan provison?

Whole life

When an insured under a group life insurance plan in New Mexico elects the conversion option, the new policy is issued

Without requiring evidence of insurability

Does the Superintendent have the ability to examine the records of authorized insurers?

Yes, because of the powers granted through state statues

The coinsurance for a skilled nursing facility services covered by Medicare after the 100% Medicare coverage ends is

a flat dollar amount per day

Al surrenders his life insurance policy for its cash value. The total of the premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the

cost basis

Jerry has an indemnity plan which covers dental expenses. Typically, these type of plans

cover preventive care once every six months

Any employee insured under a group life insurance plan is normally

covered with term life insurance

The difference between a doctor's actual charges and the amount approved by Medicare is referred to a(n)

excess charge

Which statement concerning a decreasing term life policy is accurate?

face amount decreases over the policy period

With life insurance, the needs approach is used primarily in determining

how much life insurance a client should apply for

During the early years of whole life insurance policy, the cash value will normally be

less than the total premuims paid

After the extended term life nonforfeiture option is chosen, the available insurance will be

level term for a stated period of time

An insurable interest in each other's lives may exist in absence of an econmic interest when the individuals are

marriage partners

Field underwriting by a producer

may result in the disclosure of hazardous activities of the applicant

How is the uninsured protected if a payor benefit is attached to the life insurance policy?

premium payments are waived in the event the premium payor dies or becomes disabled

Group accident and health insurance may be offered by an insurer when the sponsoring group

provides an employer-employee relationship

The automatic premuim loan provison can be accurately descibed as a

provision that provides a policy loan to pay any premiums by the end of the grace period

A stock insurance company is owned by it's

shareholders

A New Mexico agent's license to sell insurance may be revoked for all the following reasons EXCEPT

sharing commisions with licensed agents

Individuals who participate in in a HMO plan are called

subscribers

If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally

tax deductable to the business

The owner's cost basis for a non-qualified deferred is typically the same as the

total premiums paid

The following are all elements of a valid contract EXCEPT

written evidence