NM Mutual Exam
Premature IRA distributions are assessed a penalty tax of
10%.
What year was the McCarran-Ferguson Act enacted?
1945
In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?
2 years.
In Texas, an individual life insurance policy is REQUIRED to have a grace period of
31 days of grace period.
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days.
Which provision is NOT a requirement in a group life policy?
accidental.
What is the initial source of underwriting for an insurance policy?
application containing statements from the insured.
Under a graded premium policy, the premiums
are lower during the policy's early years.
The phrase "transacting business" includes
collecting premiums.
Which of the following statements about health coverage for newborns is NOT true?
coverage is limited to only congenital defects.
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
disability income.
An insurance company organized under New York laws and licensed to do business in Texas is considered a(n)
foreign company.
With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's
gross income at the time of purchase.
Which requirement must be met for an association to be eligible for a group life plan?
group was formed for a purpose other than acquiring insurance.
A nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lasped.
T sends proof of loss to her insurer for an acceptable medical expense claim under her individual Health insurance policy. Upon receipt, the insurer must pay the benefits
immediately.
What is the initial requirement for an insured to become eligible for benefits under the Waiver of Premium provision?
insured must be under a physician's care.
Which of these needs is satisfied by Adjustable Life insurance?
insured's need for flexible premiums.
If a contract of adhesion contains questionable language, to whom would the interpretation be in favor of?
insured.
How are policyowner dividends treated in regards to income tax?
interest on accumulations is taxed.
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased.
What is the purpose of a Policy Summary?
it highlights the critical parts of the policy issued.
The individual Health Insurance policy that offers the broadest protection is a(n) _______ ______ policy.
major medical.
During a sales presentation for a participating life insurance policy, an agent MUST
make a prospect understand that dividends are NOT guaranteed.
Which of the following statements about a Guaranteed Renewable Health Insurance policy is CORRECT?
premiums normally increase at time of renewal.
With Optionally Renewable Health policies, the insurer may
review the policy annually and determine or not to renew it.
What type of life policy covers two people and pays upon the death of the last insured?
survivorship.
J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application five years ago was found to be understated by ten years. Which of the following actions will the insurance company take?
the insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age.
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?
the maximum amount considered eligible for reimbursement by an insurance company under a health plan.
Stranger-Originated Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n)
third party with no insurable interest.
P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$0.
The Insurance Commissioner must give how many days notice prior to holding a hearing regarding an agent's unfair or deceptive practice?
30 days.
All of these are characteristics of a Health Reimbursement Arrangement (HRA) EXCEPT
HRA is entirely funded by the employee.
Which of the following are NOT managed care organizations?
Medical Information Bureau (MIB)
A certificate of ______ permits an insurance company to transact business in Texas.
authority.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
automatic policy loan.
B's policy provides coverage on an in-hospital basis only and contains a limited daily room and board benefit. Which of these policies does B have?
basic hospital.
Which of the following is a requirement for obtaining a Texas insurance agent's license?
be honest, trustworthy, and reliable.
Variable Whole Life Insurance can be described as
both an insurance and securities product.
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates?
change of occupation revision.
Under an individual Health Insurance policy, the Time Limit of Certain Defenses provision states that nonfraudulent misstatements first become incontestable two years
from the date that the policy was issued.
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
full benefits are payable under the Master contract.
Which health policy clause specifies the amount of benefits to be paid?
insuring clause.
Which of the following health insurance policy provisions specifies the health care services a policy will provide?
insuring clause.
An insured covered by Accidental Death and Dismemberment (AD&D) insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary?
proceeds will go to the contingent beneficiary.
The investment gains from a Universal Life Policy usually go toward
the cash value.
A policy of adhesion can only be modified by whom?
the insurance company.
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5 months.
To be eligible for Social Security disability benefits, an employee must be unable to perform
any occupation.
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
applicant's physician.
Who is NOT required to sign a life insurance application?
beneficiary.
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
contributory.
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider.
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
derives from the fair credit reporting act.
M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for?
determined by the terms of the policy.
Which of the following is NOT included in the policy face?
exclusions.
Which of these types of coverage is best described as a short term medical policy?
interim coverage.
A life insurance arrangement which circumvents insurable interest statues is called
investor-originated life insurance (IOLI).
A policyowner's rights are limited under which beneficiary designation?
irrevocable beneficiary designation.
Which of these is NOT an element of Life Insurance premiums?
morbidity rate.
An insurance agent has a fiduciary responsibility to all of the following EXCEPT
other agents.
Who owns a stock insurance company?
stockholders.
A Medicare Supplement policy may be cancelled for which of the following reasons?
the premium has not been paid by the insured.
A temporary agent's license issued by the Commissioner of Insurance is valid for up to _____ days.
90 days.
When can a policyowner change a revocable beneficiary?
Anytime.
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life.
A Health Reimbursement Arrangement MUST be established
by the employer.
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
collateral assignment.
Which of the following reimburses its insureds for covered medical expenses?
commercial insurers.
Medicare Part A and Part B do NOT pay for
dental work.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
if the primary dies before the insured.
The type of annuity that can be purchased with one monetary deposit is called a(n)
immediate annuity.
When advertising, an insurance company MUST use its
legal corporate name.
The insuring clause
states the scope and limits of the coverage.
A disability elimination period is best described as a
time deductible.
The cash value of a _______ Life policy may fluctuate to reflect changing assumptions regarding morality cost, interest, and expense factors.
universal.
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
utilities and office rent.
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning
November 1.
A(n) _______ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.
a revocable beneficiary.
A policyowner may generate taxable income from which of the following Dividend Options?
accumulation at interest.
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
conversion.
What provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
conversion.
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
disability buy-sell.
Dividends paid from a life insurance policy are
issued by the insurer.
What kind of premium does a Whole Life policy have?
level premium.
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
life annuity with period certain.
Which of these is considered a mandatory provision?
payment of claims.
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
proceeds will go to the contingent beneficiary.
Which of these provisions require proof of insurability after a policy has lasped?
reinstatement.
An example of rebating would be
returning a portion of a premium as inducement to purchase insurance.
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
this clause provides the payment of proceeds to the insured's estate.
Which Accident and Health policy provision addresses preexisting conditions?
time limit on certain defenses.
What is required for an agent whose license has been revoked?
wait at least 5 years before applying for a new license.
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0.
M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2200 claim for an eligible medical expense, how much will M receive in payment for this claim?
$1600.
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$2,500.
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit.
Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?
$2100.
An insurer must provide an insured with claim forms within __ days after receiving notice of a loss.
15 days.
What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?
2.
An insured must notify an insurer of a medical claim within how many days after an accident?
20 days.
Insurers may requests a hearing within _______ if their policuy is rejected.
20 days.
According to the Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid?
31 days after the premium due date.
An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?
31 days for the Grace Period provision.
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F.
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 the funds would be forfeited.
J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
J will receive $25,000.
On January 8, an applicant filled out and application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26.
Which of these is NOT a reason for a business to buy key person life insurance?
a pension deficiency if the key employee dies.
P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?
a recurrent disability.
Which premium schedule results in the lowest cost to the policyowner?
annual.
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
annuity.
Which type of contract liquidates an estate through recurrent payments?
annuity.
The difference between group insurance and blanket health policies is
blanket health policies do not issue certificates.
A Whole Life insurance policyowner does NOT have the right to
change the grace period.
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be
converted to an individual permanent policy at an individual rate.
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
file written proof of loss.
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?
flexible installment deferred.
An applicant MUST receive an Outline of Coverage when an application is taken for a(n)
medicare supplement policy.
The Notice of Claims provision requires a policyowner to
notify an insurer of a claim within a specified time.
An accident policy will most likely pay a benefit for a(n)
off-the-job accident.
Which is true concerning a Variable Universal Life policy?
policyowner controls where the investment will go and selects the amount of the premium payment.
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
risk classification.
Which statement is TRUE regarding a group accident & health policy issued to an employer?
the employer receives the policy and each employee is issued a certificate.
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
the full face amount.
What is the elimination period of an individual disability policy?
time period a disabled person must wait before benefits are paid.
Why is an applicant's signature required on a life insurance application?
to attest that the statements on the application are accurate to the best of the applicant's knowledge.
Why would the Insurance Commissioner examine the records of an insurance company?
to determine the solvency of the company.
Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?
transportation to and from a treatment facility.
A Return of Premium life insurance policy is
whole life and Increasing term.
An employee is covered under a company group life plan with a $50,000 death benefit. What is the MAXIMUM amount a spouse may be insured under this program?
$25,000.
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from an accident on a commercial flight, what will the policy pay B's beneficiary?
$300,000.
J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay
$3600.
_____ of personal life insurance premiums is usually deductible for federal income tax purposes.
0%.
Generally, how long is a benefit period for a Major Medical Expense Plan?
1 year.
G has purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years.
All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals before age 59 1/2.
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
10-year endowment.
What is the maximum number of employees (earning at least $5000) that an employer can have in order to start a SIMPLE retirement plan?
100 number of employees.
An insured may assign up to ____ of policy ownership under an individual life insurance policy.
100%.
XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is
100%.
What is the MINIMUM benefit period that must be offered by a Long-Term Care policy?
12 months.
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life.
A new agent must complete at LEAST __ hours of continuing education within 24 months of initial licensure.
24.
Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of
31 days.
Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of
31 days. q
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%.
_____ of continuing education MUST be completed in the classroom or classroom equivalent.
50%.
An insurer may normally delay the payment of a cash value loan or surrender value for up to
6 months.
How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?
6 months.
Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage.
6 months.
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index.
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as
a representation.
Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
activate insurance companies' financial reserves.
A "reimbursement policy" pays what amount of covered Long-Term Care expenses?
actual covered expenses up to the daily maximum.
Which of the following types of care is typically not covered in a Long-Term Care policy?
acupuncture.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional whole life coverage at specified times.
Under a Long Term Care policy, which benefit would be typically excluded or limited?
alcohol rehabilitation.
Under which of the following circumstances will the benefits under COBRA continuation coverage end?
all group health plans are terminated by the employer.
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
all proceeds are income tax free in the year they are received.
The Consideration clause in a life insurance contract contains what pertinent information?
amount of premium payments and when they are due.
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
amount of the benefits available from other sources.
If an insured's age was misstated on a life insurance contract, the Misstatement of Age provision requires that any death benefit payable would be
an amount that the premiums paid would have purchased at the current age.
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
an immediate annuity.
Which of the following statements BEST describes what the Legal Actions provision of an Accidental and Health policy requires?
an insured must wait at least 60 days after Proof of Loss has been submitted before a lawsuit can be filled.
An insurer is NOT required to provide information on fraudulent claims if requested by
an insured.
An example of false advertising would be
an insurer exaggerating its dividends in a magazine advertisement.
In Texas, which of these statements regarding the Suicide clause is TRUE?
an insurer may not use suicide as a defense against payment after second year.
With whom may an agent legally share commissions?
another agent with the same line of insurance.
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)
anti-money laundering violation.
A plan through the Marketplace may be purchased by
any legal resident (except those imprisoned).
Before a life insurance policy is issued, which of these components of the contract is required?
applicant's signature on application.
An incomplete life insurance application submitted to an insurer will result in which of these actions?
application will be returned to the writing agent.
In a qualified retirement plan, the yearly contributions to an employee's account
are restricted to maximum levels set by the IRS.
When does a Probationary Period provision become effective in a health insurance contract?
at the policy's inception.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
beneficiary will be paid the death benefit.
T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the
beneficiary.
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT
bilateral.
Accidental Death coverage is provided to commercial airline passengers in which of the following types of policies?
blanket accident policy.
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is
business overhead expense.
Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is
business overhead expense.
Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks?
business overhead expense.
S is covered by a whole life policy. Which insurance product can cover his children?
child term rider.
Whose life is covered on a life insurance policy that contains a payor benefit clause?
child.
The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n)
closed panel.
As a condition for a loan, the bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?
coercion.
B the insurance agent tells his clients that their rights may be impaired if they fail to complete a release form within a given period of time. B may be found guilty of
coercion.
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
collect initial premium along with a signed health statement.
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
commercial insurer.
An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the
commissioner of insurance.
Which of the following is NOT included in a life insurance illustration?
company's mortality table.
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
conditional.
Major Medical policies typically
contain a deductible and coinsurance.
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will
continue coverage but exclude the heart condition.
Which of the following consists of an offer, acceptance, and consideration?
contract.
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
conversion privilege.
Which statement regarding the Misstatement of Age provision is considered to be true?
coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
daughter.
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
decreasing term.
The combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy.
decreasing.
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
deferred.
Common exclusions to continuation of group coverage include
dental care and other prescription drugs.
An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to
determine if the applicant is an acceptable risk by completing standard underwriting procedures.
Which of the following statements does NOT accurately describe the tax treatment of premiums and benefits of individual Accidental and Health insurance?
disability income policy premiums are tax-deductible.
In the event of an illness, a(n) _______ _______ policy would reimburse an insured for loss of earnings.
disability income.
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?
discourages overutilization of the insurance coverage.
Which of the following does Social Security NOT provide benefits for?
dismemberment.
T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company
does NOT have to make any further payments.
What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?
dread disease insurance.
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
each partner must own a policy on the other partners.
M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate?
earned, but unpaid benefits.
In a Disability Income policy, which of these clauses acts as a deductible?
elimination period.
Under a trustee group life policy, who would be eligible for a certificate of coverage?
employee.
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the
entire contract provision.
"A producer does not have the authority to change a policy or waive any of its provisions." The health provision that best describes this statement is called the
entire contract.
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
entire contract.
Which of the following policy provisions prohibits an insurance company from incorporating external docuements into an insurance policy?
entire contract.
How often must an insurance agent license normally be renewed?
every two years.
Health insurance benefits NOT covered due to an act of war are
excluded by the insurer in the contract provisions.
A(n) _______ contained in a life insurance policy states that the policy will NOT cover certain risks.
exclusion.
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
exclusion.
A Universal Life Policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the
expense charges.
Long Term Care policies will usually pay for eligible benefits using which of the following methods?
expense incurred.
Term insurance has which of the following characteristics?
expires at the end of the policy period.
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
extended term.
Which of the following Nonforfeiture options offers the highest death benefit?
extended term.
Which of these provisions is NOT required in life insurance policies?
extended term.
An underwriter determines that an applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n)
extra premium.
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends.
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
face amount plus the policy's cash value.
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
fair credit reporting act.
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
fair credit reporting act.
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
family maintenance policy.
Taking receipt of premiums and holding them for the insurance company is an example of
fiduciary responsibility.
What action should a producer take if the initial premium is NOT submitted with the application.
forward the application to the insurer without the initial premium?
What is an organization that solicits insurance only to its members?
fraternal benefit society.
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
free-look period has expired.
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
full face amount minus any past due premiums.
With Accidental Death and Dismemberment policies, what is the purpose of the Grace Period?
gives the policyowner additional time to pay overdue premiums.
Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due?
grace period.
K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered
guaranteed renewable.
Under a Basic Medical Expense policy, what does the hospitalization expense portion cover?
hospital room and board.
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?
if the employee paid for qualified medical expenses, the reimbursements may be tax-free.
When must insurable interest exist for a life insurance contract to be valid?
inception of the contract.
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in
income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan.
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
income taxes plus a 10% penalty tax on $30,000.
When determining the monthly benefit amount for a Disibility Income policy, the factor that limits the amount a prospective insured may purchased is
income.
T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?
increase her policy's coverage amount.
Which of the following groups may NOT be insured by a group life insurance policy?
individuals who are related by blood.
The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the
initial deductible.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
inspection report.
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured.
Who makes the legally enforceable promises in a unilateral contract?
insurance company.
Credit Life Insurance is
insurance issued on a debtor to cover outstanding loan balances.
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition?
insurer will likely treat as a pre-existing condition and may not be covered for one year.
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)
insuring agreement.
Which of the following claims are typically excluded from Medical expense policies?
intentionally self-inflicted injuries.
What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made?
irrevocable beneficiary.
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured
is blinded in an accident.
A license may be denied, suspended, or revoked if the licensee
is found guilty of misrepresentation in obtaining the license.
Which statement regarding 3rd-party ownership of a life insurance policy is true?
it is used extensively in estate-planning as well as business circumstances.
What type of life policy covers 2 lives and pays the face amount after the first one dies?
joint life policy.
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
joint life.
A sole proprietor may use this plan ONLY if the employees of this business are included.
keogh pension plan.
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should firm purchase on its project manager?
key person insurance.
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
legal purpose (insurable interest).
Which of the following may NOT charge fees for insurance advice?
legal reserve agents.
T has Disability Income policy that pays a monthly benefit of $5000. If T becomes partially disabled, what can he likely expect?
less than $5000 per month benefit regardless of the cause.
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
level.
Which of the following is NOT a limited benefit plan?
life insurance policy.
Life Insurance that covers an insured's whole life with level premiums paid over a limited time is called
limited pay life.
Which of these is NOT relevant when determining the amount of personal life insurance needed?
local unemployment rate.
Basic Hospital and Surgical policy benefits are
lower than the actual expenses incurred.
Which Unfair Trade Practice involves an agent telling a prospective client that a policy's dividends are guaranteed?
misrepresentation.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
modified endowment contract (MEC).
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?
modified premium life.
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
monthly.
Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)?
more physicians to choose from.
Which of the following is TRUE about a qualified retirement that is "top heavy?"
more than 60% of plan assets are in key employee accounts.
Which of the following statements is CORRECT about accelerated death benefits?
must have a terminal illness to qualify.
Which of the following characteristics is associated with a large group disability income policy?
no medical underwriting.
A Disability Income policy that only the policyowner can terminate and which the rates will never go up is considered to be
noncancellable.
If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best desribes this policy is called
noncancellable.
What type of renewability guarantees premium rates and renewability?
noncancellable.
Which of the following is a vaild reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?
nonpayment of coverage.
Which of the following BEST describes a short-term medical expense policy?
nonrenewable.
Which of these statements concerning an individual Disability Income policy is TRUE?
normally includes an elimination period.
Which statement is true regarding a minor beneficiary?
normally, a guardian is required to be appointed in the Beneficiary clause of the contract.
All of these statements concerning Settlement Options are true, EXCEPT
only the beneficiary may select.
Deductibles are used in health policies to lower
overuse of medical services.
Which statement is TRUE in regards to a policy loan?
past-due interest on a policy loan is added to the total debt.
Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?
pay an amount the premiums would have purchased at the insured's actual age.
The provision that defines to whom the insurer will pay benefits to is called
payment of claims.
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
payor clause.
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
payor provision.
Which of the following best describes a contingent beneficiary?
person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
policy loan provision.
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
policy was returned within the free-look period, premium will be fully refunded.
The _______ has the right to change a life insurance policy's beneficiary.
policyowner.
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
policyowner.
Which Long Term Care insurance statement is true?
pre-existing conditions must be covered after the coverage has been in force for six months.
Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?
preferred provider organization (PPO).
A policyowner is able to choose the frequency of premium payments through what policy feature?
premium mode.
Which statement is CORRECT regarding the premium payment schedule for whole life policies?
premiums are payable throughout the insured's lifetime/coverage lasts until the death of the insured.
Which of these statements best describes the Waiver of Premium provision in an Accident and Health policy?
premiums are waived after the insured has been totally disabled for a specified time period.
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
premiums may increase at time of renewal.
Which of these options can an individual use their medical flexible spending account to pay for?
presecription drugs.
Which of these is NOT a type of agent authority?
principal.
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine
probability of making timely premium payments.
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
proceeds will be payable to K's estate if P dies within a specified time.
What is the consideration given by an insurer in the Consideration clause of a life policy?
promise to pay a death benefit to a named beneficiary.
What must the policyowner provide to the insurer for validation that a loss has occurred?
proof of loss.
All of these are considered sources of underwriting information about an applicant EXCEPT
rating services.
When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits?
recurrent disability.
X owns a Disability Income policy. X recently suffered a disability which was due to the same cause as a previous disability. These disability. These disabilities both occurred a four-month span. Which of the following provisions allows X's second disability to be covered without a new elimination period?
recurrent disability.
What type of policy pays benefits to a policyowner covered under a Hospital Expense policy?
reimbursement.
K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
reinstatement.
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
request of the change will be refused.
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
reserves.
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company.
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
revocable.
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
revocable.
Which of the following is NOT a required provision in group life policies?
right to loan.
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
risk classification.
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group.
Which of these factors does NOT influence an applicant's need for life insurance?
self-maintenance expenses.
Which of these is NOT an example of doing insurance business?
selling shares of stock.
A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take?
send a notice to the MIB that the applicant was declined.
To terminate an agent's appointment, an insurance company MUST
send a termination notice to the Texas Department of Insurance.
To terminate an agent's appointment, an insurance company must
send a termination notice to the Texas Department of Insurance.
Which of the following statements BEST describe dental care indemnity coverage?
services are reimbursed AFTER insurer receives the invoice.
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
set up a meeting with the applicant to answer the remaining questions.
Typically a life insurance benefit is paid by a lump-sum payment. A(n) _______ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.
settlement.
P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA laws, which of the following statements is TRUE?
she DOES need to provide evidence of insurability.
P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?
sign an enrollment card.
Which mode of payment is NOT used by health insurance policies?
single premium.
The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?
social security disability income.
What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision?
submit the claim in any form.
Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party?
subrogation.
Which of the following statements about the classification of applicants is INCORRECT?
substandard applicants are never declined by underwriters.
Which of the following services is NOT included under hospitalization expense coverage?
surgical fees.
What type of life insurance are credit policies issued as?
term life insurance.
What type of life insurance gives the greatest amount of coverage for a limited period of time?
term life.
What kind of life insurance product covers children under their parent's policy?
term rider.
Which of these life insurance riders allows the applicant to have excess coverage?
term rider.
Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
the agent and the company.
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is
the cost.
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 initial premium, and obtained a good health statement from the insured.
G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G's policy, who is responsible for paying the medical bills?
the insured.
T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called
time limit on certain defenses.
An example of an unfair claims settlement practice is
turning down a claim without providing the basis of denial.
A Variable Annuity has which of the following characteristics?
underlying equity investments.
ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering
unfair methods of competition.
How long does an insurance company appointment remain in force?
until terminated.
A Term Life Insurance Policy matures
upon the insured's death during the term of the policy.
Which of the following BEST describes how pre-admission certification is used?
used to prevent nonessential medical costs.
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
variable annuity.
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
variable life allows.
In order to sell a(n) ______ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA).
variable life policy.
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as
variable life.
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
variable life.
A life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) _______ rate loan.
variable rate loan.
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
variable universal life.
A(n) ________ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
variable.
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
varies according to the contract.
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
waiver of premium rider.
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
waiver of premium.
The provision in a health insurance policy that interrupts premiums being paid to the insurer while the insured is disabled is called thekey
waiver of premium.
Disability policies do NOT normally pay for disabilities arising from which of the following?
war.
Which of these is considered a statement that is assured to be true in every respect?
warranty.
A foreign insurance company conducting insurance business in Texas
was formed under the laws of another state.
When does a life insurance contract become effective if the initial premium is not collected during the application process?
when producer delivers policy and collects initial premium.
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.
If an individual is covered under an Accidental Death Policy and dies, an autopsy can be performed in all these situations, EXCEPT
when the state prohibits it by law.
A life insurance policy that provides a policyowner with cash value along with a level face amount is called
whole life.
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages.
