practice 2
Endowment contracts issued today no longer qualify as life insurance (for tax purposes), but those issued before what date were grandfathered and still retain favorable life insurance taxation? 1996 1986 1976 2006
1996
Which occupation would NOT qualify for a disability income policy that pays benefits on the basis of the "own occupation" definition of disability? construction worker architect mechanical engineer physician
construction worker
Ambiguities in an insurance contract are most often interpreted in favor of the policyowner because insurance contracts are: unilateral aleatory conditional contracts of adhesion
contracts of adhesion
Jim plans to withdraw $3,000 from his Section 529 education savings plan this year to pay for some of his college expenses. He can withdraw the money tax free to pay for all of the following, EXCEPT: room and board books clothes Tuition
clothes
An insured has a basic hospital plan with a supplementary major medical plan. She incurs $10,000 in covered expenses. The basic plan pays the first $3,000. The supplementary plan has a $500 deductible. What kind of deductible does the supplementary plan have? corridor deductible annual deductible flat deductible per cause deductible
corridor deductible
The elimination period in a disability income insurance policy functions like which of the following in a medical expense policy? benefit schedule stop-loss provision deductible indemnity
deductible
Which statement is correct about state administration of Medicaid? Every state provides the same Medicaid benefits. All states base Medicaid eligibility on financial need. States cannot provide Medicaid assistance to anyone under age 65. Every state must have the same requirements for Medicaid eligibility.
All states base Medicaid eligibility on financial need.
Which statement is correct about the taxation of benefits paid to a person insured by a group health plan? Benefits from qualified group LTC insurance are taxed. Benefits from group AD&D insurance are taxed to the extent an employer paid the premium. Benefits from a group managed care plan are taxed. Reimbursements for covered expenses under group medical expense insurance are taxed.
Benefits from group AD&D insurance are taxed to the extent an employer paid the premium.
Which product supplements Medicare by offering benefits delivered through a network of health care providers? tax-qualified long-term care Medicaid long-term care insurance Medicare SELECT plan
Medicare SELECT plan
Which statement regarding defined contribution qualified plans is correct? Participants are always fully vested in their contributions, but employer contributions may not fully vest for several years. They are required to distribute benefits in the form of lifetime annuitized payments. The retirement benefit is tax free if distributed at the participant's full retirement age. Participants may choose to keep account values undistributed, to be passed on tax free to heirs.
Participants are always fully vested in their contributions, but employer contributions may not fully vest for several years.
A long-term care rider on a life insurance policy will pay benefits if the insured is diagnosed as chronically ill due to which of the following? a catastrophic accident only either a medical or cognitive (mental health) reason terminal cancer only any medical problem requiring hospitalization
either a medical or cognitive (mental health) reason
Which of the following does NOT provide independent ratings of insurance companies' financial strength and claims-paying abilities? Standard & Poor's Moody's each state's Department of Insurance A.M. Best
each state's Department of Insurance
Life insurance can provide both death benefits and living benefits. All the following are death benefit-related reasons for owning life insurance EXCEPT: to supplement one's retirement income to preserve an estate to create an estate to protect survivors against the income lost when an insured dies
to supplement one's retirement income
After the deductible is paid, the insured can expect Medicare Part A to cover all eligible hospital expenses without a copayment for up to: 30 days 60 days 10 days 45 days
60 days
Which of the following statements regarding variable annuity annuitization is correct? Annuitization under a variable annuity contract provides income payments that remain fixed. Annuitization under a variable annuity contract provides income payments that can fluctuate up or down. Annuitization under a variable annuity contract provides income payments that are guaranteed to increase at a specified rate. Annuitization under a variable annuity contract provides income payments that can increase but not decrease.
Annuitization under a variable annuity contract provides income payments that can fluctuate up or down
All of the following statements regarding insurance fraud laws in California are true, EXCEPT: Claims analysis bureaus serve to identify utilization patterns of individual insureds to identify fraudulent activities. Certain select insurers are chosen by the Department of Insurance to establish and maintain fraud investigation divisions, which then share information with other insurers. Insureds who knowingly sign fraudulent claims forms may be guilty of perjury. Insurers and their agents are granted access to public information when investigating suspected fraudulent claims.
Certain select insurers are chosen by the Department of Insurance to establish and maintain fraud investigation divisions, which then share information with other insurers.
All of the following are automatically deemed to represent an insurable interest EXCEPT: Frank (the applicant) and his elderly neighbor ABC Corp. (the applicant) and its key executive Karen (the disabled applicant, age 28), and her father who cares for her. Sue (the applicant) and her husband
Frank (the applicant) and his elderly neighbor
Which is NOT a typical source of health underwriting information? any other health insurance applications the applicant has completed Attending Physician Statement (APS) producer (agent) report credit repor
any other health insurance applications the applicant has completed
Life insurance underwriters are most likely to request a consumer (inspection) report on which of the following? business life insurance applicants who have already been issued high amounts of life insurance applicants whom the agent does not know well applicants who are seeking very high amounts of life insurance all applicants
applicants who are seeking very high amounts of life insurance
Which type of group health insurance plan bases premiums and benefits on the claims experience of similar groups in the region? group-rated plan regional-rated plan community-rated plan experience-rated plan
community-rated plan
The main purpose for errors and omissions insurance (E&O) is to: pay for an insurance company executive to meet with a policyowner to correct an error made by the producer during the sales process allow the producer to be less diligent in complying with insurance sales disclosure requirements provide legal protection to the producer who is charged with willfully engaging in an unfair trade practice cover damages that arise due to services a producer non-willfully failed to render
cover damages that arise due to services a producer non-willfully failed to render
Phil selected the uncommon paid-up insurance option for his participating whole life insurance policy. Which of the following best describes the purpose for this type of dividend option? pay up the whole life insurance policy several years early purchase additional units of paid-up whole life insurance reduce the policy face amount so that the dividend is sufficient to pay up the policy in the year that the dividend is issued purchase additional units of term life insurance coverage
pay up the whole life insurance policy several years early
A disability income insurance policy with a noncancellable renewability provision typically cannot be cancelled until the insured: is no longer disabled reaches age 65 files three or more claims within an 18-month period begins receiving income again
reaches age 65
The owner of a tax-qualified long-term care insurance policy may deduct premium payments by the amount that unreimbursed medical expenses exceed what percentage of adjusted gross income? 5 percent 6 percent 7.5 percent 10 percent
10 %
How many optional provisions did the NAIC develop for use in a health insurance policy? 5 11 12 6
11
Which of the following methods does not constitute actual delivery of an insurance policy to a policyowner? Delivery to the policyowner by courier Personal delivery to the policyowner by the agent Mailing it to the policyowner Delivery to the insurer's agent
Delivery to the insurer's agent
All the following statements regarding the disclosure that must be made with accelerated benefits riders are correct EXCEPT: The disclosure must explain the effect paying accelerated benefits will have on the policy's cash value, death benefit, premium, and policy loans. Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested. Some states require that the disclosure must note that receiving accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits. The disclosure must provide a brief description of accelerated benefits and definitions of conditions triggering payment of benefits.
Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested.
Which of the following statements about representations and warranties is most correct? Statements made by the applicant on the application are deemed warranties. A statement made on the application which is true to the applicant's best knowledge is deemed a misrepresentation if it is later discovered to be inaccurate. Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period. Promises made by the insurer in the insurance contract are deemed representations.
Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period.
When a deferred annuity is annuitized, which one of the following most correctly describes the tax treatment of the contract's "gain" (i.e., accrued interest) portion of each payment? It is taxed as capital gains. It is taxable at the annuitant's marginal income tax rate. It is taxable at the lowest marginal tax rate. It is tax exempt.
It is taxable at the annuitant's marginal income tax rate.
All the following statements about "other insured" term riders on a life insurance policy are correct EXCEPT: Applicants often purchase this rider to cover their spouse or partner. Coverage ends when the policyowner reaches a specified age such as 65 or 70. Only spouses or partners can be covered under this rider. The term life coverage provided by the rider is temporary.
Only spouses or partners can be covered under this rider.
Grace owns a fixed annuity and wants to exchange it for a variable annuity. What must she use to be sure no taxes are imposed? an annuity exchange a free exchange Section 1035 exchange a qualified conversion
Section 1035 exchange
What is the only restriction on naming an annuitant? The annuitant can be a natural or non-natural person. The annuitant must be related to the owner. The annuitant must be a natural person. The annuitant must not be related to the owner.
The annuitant must be a natural person
Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company can only retain its coverage on June because she is not a principal of the company. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.
The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.
All the following organizations are eligible to set up a 403(b) tax-sheltered annuity plan for their employees EXCEPT: a hardware store a not-for-profit cancer society a state university a religious center
a hardware store
All the following types of insurance involve a personal contract EXCEPT: a disability income insurance policy a medical expense insurance policy a life insurance policy an automobile policy
a life insurance policy
Which insurance company function calculates company mortality and morbidity rates as well as the dividends on participating life insurance policies? underwriting division sales division actuarial division claims division
actuarial division
Once the insured has triggered the benefits of a long-term care insurance policy, when will they begin? after the nonforfeiture period after the elimination period after the exclusionary period immediately
after the elimination period
The entire contract provision states that changes can be made to policy provisions by: the policyowner, an insurance company executive, or the producer the producer only the policyowner only an executive officer of the company only
an executive officer of the company only
In a medical expense policy, which method uses pre-determined prices for medical or health services to determine the benefit? usual and customary charges hospital expense plan benefit schedule basic medical expense plan
benefit schedule
Which one of the following is the most appropriate use of life insurance? buying life insurance to save for a big vacation in several years buying life insurance to obtain workers' compensation protection buying life insurance to insure all the parties to a business buy-sell agreement buying life insurance on an unrelated person as an investment
buying life insurance to insure all the parties to a business buy-sell agreement
Which of the following can be funded with a single premium payment, a series of fixed premium payments, or flexible premium payments? immediate annuities single-premium immediate annuities retirement annuities deferred annuities
deferred annuities
The addition of Part C to Original Medicare (Parts A and B) provided Medicare-eligible individuals with: Medicare supplement insurance prescription drug coverage managed care and private fee-for-service plans long-term care coverage
managed care and private fee-for-service plans
Disability income policies usually exclude coverage for: injuries caused by domestic abuse injuries arising from hereditary conditions accidental injuries self-inflicted injuries
self-inflicted injuries
What is the name of the period during which premium funds are paid into an annuity contract? the annuity payout the benefit period the accumulation period the annuity period
the accumulation period
Kara suffers from a chronic illness. What is her new employer's group health insurance plan likely to do when she requests group coverage? It will increase the group's premium. It will reject her application. It will charge her a higher premium. It will add her to the insured group.
It will add her to the insured group.
If an insured wants to change the terms of a health insurance policy, who alone is authorized to make the change? producer insurance commissioner, director, or superintendent insured insurance company executive
insurance company executive
If a Social Security benefit recipient has income from other sources, including wages and investment earnings, what percentage of Social Security benefits exceeding a combined income threshold may be income taxable? Social Security benefits are never taxable, regardless of the amount of combined income earned. Anywhere from 50 percent to 85 percent of Social Security benefits will be subject to income taxation. Up to a maximum of 50 percent of Social Security benefits will be subject to income taxation. All of his or her Social Security benefits will be subject to tax.
Anywhere from 50 percent to 85 percent of Social Security benefits will be subject to income taxation.
Which of the following statements about IRA rollovers is correct? Tax laws impose limits on amounts that can be rolled over from qualified plans to IRAs. When a distribution from a qualified plan is rolled over to an IRA, the entire amount is subject to immediate taxation. Funds can be rolled over tax free from one IRA to another. A penalty tax must be paid on the amount rolled over.
Funds can be rolled over tax free from one IRA to another.
Which of the following statements is correct regarding an insurer that cancels a policy based on medical information it requests and receives after the policy was issued? It has engaged in post-claims underwriting. It must give the insured a 10-day notice of the cancelation, during which time any valid claim the insured submits must be honored. It must offer the insured another policy at the same rate. It has followed acceptable underwriting standards.
It has engaged in post-claims underwriting.
Which of the following statements is true about any advertisement for an educational seminar directed at seniors in which insurance products will be promoted? It must disclose the event as an insurance presentation. It must highlight the educational aspects of the presentation. It must limit attendance to persons who are at least 65 years old. It can associate the seminar with a governmental agency.
It must disclose the event as an insurance presentation.
Which of the following correctly describes the disability income benefit rider available with life insurance policies? It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount. A disability income benefit rider pays a monthly income equal to the policy premium if the insured becomes disabled. A disability income benefit rider distributes the policy's cash value in the form of monthly payments if the insured becomes disabled. A disability income benefit rider distributes the policy's death benefit in the form of monthly payments if the insured becomes disabled.
It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount
Which of the following statements regarding the life insurance return of premium rider is correct? If the insured dies during the policy term, the policy face amount is paid to the beneficiary as well as the sum or premiums paid. The rider is available only with whole life insurance policies. Interest is included in the returned premium amount. It pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term..
It pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term..
Which of the following statements is correct regarding an insurer that does not meet the state's paid-in capital requirement? Its assets are less than its liabilities. It has premium receipts that are less than its assets. It has not invested its premium deposits in the manner required by law. It has not been admitted to transact insurance in California.
Its assets are less than its liabilities.
How does the Age Discrimination in Employment Act affect participants in a group health insurance plan? Medicare beneficiaries cannot leave the employer plan. Medicare is the primary payor for workers who become eligible for Medicare benefits. Older workers are assured coverage under a group health plan. Older workers may be denied coverage under a group health plan.
Older workers are assured coverage under a group health plan.
Which statement is correct about group health insurance? Premiums that employers pay for group coverage are not taxable wages. Employees are taxed on the premiums their employers pay for group coverage. Employers cannot deduct premiums they pay for group coverage. Group health insurance is considered an extraordinary business expense.
Premiums that employers pay for group coverage are not taxable wages.
To be eligible to participate in an employer's Simplified Employee Pension (SEP) plan, an employee must meet all the following requirements EXCEPT: The employee may not be a key employee or executive. The employee must be 21 or older. The employee must have received a minimum specified amount in annual compensation. The employee must have worked for the employer during at least three of the previous five years.
The employee may not be a key employee or executive.
Replacement occurs if a life insurance policy is purchased and, in conjunction, any of the following happen EXCEPT: The existing policy is converted to reduced paid-up insurance. The existing policy is surrendered. The existing policy is amended with a reduction in benefits. The existing policy's beneficiary designation is changed.
The existing policy's beneficiary designation is changed.
A policyowner owns variable universal life insurance policy that offers a wide array of variable subaccounts. W/ respect to this policy, all of the following statements are correct EXCEPT: Cash value funds can be transferred from 1 subaccount to another w/o income tax consequences Subaccount funds are not guaranteed by the insurer. The variable subaccounts allow policyowners to participate in the investment performance of the assets underlying their contracts. The insurance company bears the investment risk for funds allocated to variable subaccounts.
The insurance company bears the investment risk for funds allocated to variable subaccounts.
What will result if an insured decides to stop paying premiums for his or her insurance policy? The insurance company can require the insured to continue paying the premiums. The insurance company is released from its promise to pay benefits and the contract expires. The insurance company must return all premiums that have been paid if no claims have been made under the policy. The insured has breached the terms of the contract.
The insurance company must return all premiums that have been paid if no claims have been made under the policy.
All the following statements regarding apparent authority are correct EXCEPT: A third party reasonably believes that the producer has it based on the reasonable statements and actions by the insurer and agent. The insurer is not liable for an agent's acts when he or she is acting under apparent authority. The insurer does not intend it. The agent's contract does not create it.
The insurer is not liable for an agent's acts when he or she is acting under apparent authority.
Which statement is correct about coverage for pre-existing conditions under a major medical insurance policy? The insurer must cover pre-existing conditions. The insurer can exclude pre-existing conditions if it reduces the premium. The insurer can cover pre-existing conditions if the insured pays an additional premium. The insurer can exclude a pre-existing condition for up to six months.
The insurer must cover pre-existing conditions
What does the life insurance company do upon an insured's death if there is a collateral assignment attached to the insured's policy? The policyowner decides at the time of the assignment how to divide up the death benefit. The collateral assignee and beneficiary split the death benefit equally. The insurer pays the collateral assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary. The insurer pays the collateral assignee the entire death benefit.
The insurer pays the collateral assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary.
Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? The trust passes the insurance benefit to Jerry's next of kin. The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed. The trustee invests the insurance benefit in securities. A trust cannot be a beneficiary; Jerry must name an individual or business.
The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed.
In a life settlement, which of the following receives the death benefit when the insured dies? The state The life settlement provider The insured's estate The insured's estate and the life settlement provider, in equal parts
The life settlement provider
Which of the following statements about a life settlement transaction is correct? The provider pays an amount equal to the policy's cash value. The provider pays an amount less than the policy's cash value. The provider pays an amount equal to the policy's death benefit. The provider pays an amount less than the policy's death benefit.
The provider pays an amount less than the policy's death benefit.
Fred is terminally ill. He sells his $100,000 life insurance policy to a viatical settlement provider for $60,000. Six months later, Fred dies. Which of the following statements is correct? Fred's estate will receive $100,000 as a death benefit. Fred's estate will receive $60,000 as a death benefit under the policy, and the viatical settlement provider will receive $40,000. The death benefit will be split equally between the viatical settlement provider and Fred's estate. The viatical settlement provider will receive the entire $100,000.
The viatical settlement provider will receive the entire $100,000
All of the following are characteristics of a mutual insurance company EXCEPT: They are owned by stockholders. They may issue policy dividends. They are governed by a board of directors. They have minimum financial capital requirements that must be met before they can conduct business.
They are owned by stockholders.
Any after-tax contributions Tom makes toward the cost of his group life insurance coverage are treated in which of the following ways? They are added to his taxable income. They are added to the imputed income of the employer's contributions on a dollar-for-dollar basis. They are subtracted from the imputed income of the employer's contributions on a dollar-for-dollar basis. They are subtracted from his taxable income.
They are subtracted from the imputed income of the employer's contributions on a dollar-for-dollar basis.
All the following statements about universal life insurance partial surrenders are correct EXCEPT: They incur interest charges. Policyowners can withdraw funds as long as the policy has a cash surrender value. Partial surrenders reduce the death benefit dollar-for-dollar. Insurers do not require policyowners to repay partial surrenders.
They incur interest charges.
Which statement about disability buy-out insurance policies is correct? Benefits are payable if the insured business owner is either partially or totally disabled. They may be used with either a cross-purchase buy-sell agreement or an entity purchase buy-sell agreement. Benefits are typically paid in monthly payments for a specified number of years. They have a shorter elimination period than individual DI policies.
They may be used with either a cross-purchase buy-sell agreement or an entity purchase buy-sell agreement.
Which insurance sales distribution arrangements is NOT affiliated with just a single insurance company but instead represents multiple companies? a sales office that is managed by a general manager who is an insurance company employee a sales arrangement in which sales are made directly to consumers through mass media channels without the use of producers an independent sales office that is managed by a Personal Producing General Agent (PPGA) a sales agency that is managed by a general agent who is under contract with an insurance company to employ sales agents to represent that company
an independent sales office that is managed by a Personal Producing General Agent (PPGA)
Robert is purchasing a life insurance policy in which he is the insured. If he wants to keep the policy proceeds out of his estate for tax purposes, all of the following arrangements would help him meet that goal EXCEPT: purchase the policy as the owner, but then transfer policy ownership to a third party at least three years before his death designate an irrevocable life insurance trust to be the owner and Robert's estate to be the policy beneficiary designate an adult son to be the owner and allow him to designate a beneficiary other than Robert's estate designate an irrevocable life insurance trust to be the owner and beneficiary of the policy
designate an irrevocable life insurance trust to be the owner and Robert's estate to be the policy beneficiary
Which type of business disability insurance helps the owners purchase the share of a totally disabled partner? disability buy-out insurance ordinary and necessary business insurance key person disability insurance business overhead expense insurance
disability buy-out insurance
Which provision in a health insurance policy imposes a waiting period on every claim before benefits begin? probationary period waiver of premium provision consideration clause elimination period
elimination period
The contract between the producer and insurer, setting forth certain acts and duties the producer is specifically authorized to perform, describes the producer's: express authority agency authority apparent authority implied authority
express authority
Which method of determining the benefit amount is most common in individual disability income policies? flat amount totality of income percentage of earnings occupational amount
flat amount
The future increase option rider is also known as the: annually renewable term life rider cost-of-living adjustment (COLA) rider return of premium rider guaranteed insurability rider
guaranteed insurability rider
An insurer would use which of the following to limit or exclude coverage for an applicant's health condition? nonrenewable term policy multiple indemnity rider impairment rider guaranteed insurability rider
impairment rider
Mark and Mary are annuitants in a single contract that is currently paying them $1000 per month but would drop to $500 per month upon either person's death. Which annuity settlement option have they selected? joint and 100 percent survivor option joint life option joint and one-half survivor option joint and two-thirds survivor option
joint and one-half survivor option
Which of the following annuity settlement options best suits two spouses who want to make sure payments will continue for as long as either is alive, no matter which of them dies first? straight life income option joint life income option joint and survivor option life income with refund guarantee option
joint and survivor option
Specific to California, what does the term "twenty-four hour coverage" refer to? long-term care insurance a policy that is guaranteed to be issued within 24 hours of application coverage that applies to personal property, such as a home or automobile joint issue of a workers' compensation policy with nonoccupational health insurance coverage
joint issue of a workers' compensation policy with nonoccupational health insurance coverage
Which provides health insurance coverage? health maintenance organization (HMO) preferred provider organization (PPO) medical expense plan (MEP) benefit schedule
medical expense plan (MEP)
A PPO provides health care services at fees that are determined on what basis? fees plus costs federal guidelines usual, customary, and reasonable (UCR) charges for the area negotiated, reduced fees
negotiated, reduced fees
To be eligible for standard group health insurance, a group must qualify on the basis of its: number of members sponsor's wealth members' health members' average age
number of members
Billy, age 10, is insured under a juvenile life insurance policy purchased by his father, who pays the premiums. Which of the following would ensure that the insurance stays in force if the father dies or becomes disabled? disability income benefit rider payor benefit rider waiver of premium rider waiver of monthly deductions rider
payor benefit rider
Any insurer that offers Medicare supplement policies for sale in this state must offer which of the following plans? Plan C Plan B Plan D Plan A
plan A
Under the transfer-for-value rule, which of the following ownership transfers of a life insurance policy is a taxable transfer? a sale of the policy to a corporation in which the current owner is an officer or shareholder sale of the policy to the current owner's brother sale of the policy to the insured person a sale of the policy to a business partner of the current owner
sale of the policy to the current owner's brother
Which type of inflation protection in a long-term care policy is recommended for insureds who are at least 60 years old? routine inflation protection compound inflation protection simple inflation protection original inflation protection
simple inflation protection
Regarding life insurance policy dividend options, which of the following types of life insurance is purchased under the paid-up additions option? single premium life insurance one-year term life insurance level premium whole life insurance level premium term life insurance
single premium life insurance
Under standard exclusions, most insurers would deny coverage of which of the following? someone serving as an aircraft crew member someone killed as a bystander during a bank robbery someone flying as a passenger in a commercial airplane someone flying as a passenger in a private airplane
someone serving as an aircraft crew member
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created which two categories of long-term care policies? long-term care and short-term care policies tax-qualified and non-tax-qualified LTC policies simple inflation protection and compound inflation protection LTC policies individual and group LTC policies
tax-qualified and non-tax-qualified LTC policies
Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined? Sue's son's life Sue's life the joint life expectancy of Sue's son and daughter Sue's daughter's life
the joint life expectancy of Sue's son and daughter
A medical expense policy covers the cost of health care services delivered according to: the insured's age and health the insurer's marketing of these services and care the plan or policy the insured's preferences
the plan or policy
Tim had paid only four premiums totaling $1000 on his health insurance policy when he was diagnosed with cancer. The insurance company paid more than $100,000 to cover the medical bills for his treatment during the next year. This situation demonstrates which of the following characteristics of insurance contracts? They are unilateral. They are aleatory. They are contracts of adhesion. They are personal.
they are aleatory
For which of the following people would an annuity probably NOT be suitable? Deanna, age 24, who was recently awarded a large monetary settlement in a lawsuit and who wants to make sure the money lasts her entire life. Alan, age 42, who wants to save money outside of his 401k plan for extra retirement income, Barbara, age 64, who recently inherited a large sum of money and wants to use some of it to provide retirement income she can't outlive. Charlie, age 79, who is looking for a place to save the proceeds from the recent sale of his vacation home.
Charlie, age 79, who is looking for a place to save the proceeds from the recent sale of his vacation home.
To be eligible to set up a SIMPLE plan, a business has to meet which one of the following basic requirements? It must have reported a profit on its tax returns the previous two years. It must employ no more than 100 people. It must be organized as an S corporation. It must already have a qualified plan in place that it will be replacing with the SIMPLE plan.
It must already have a qualified plan in place that it will be replacing with the SIMPLE plan.
Melissa asks to continue her lapsed universal life insurance policy under the extended term option. How will the insurance company respond? It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash or let the policy continue without premiums until the cash value can no longer cover monthly deductions. It will tell Melissa that she cannot elect the extended term option but may elect either the reduced paid-up or cash value payment options. It will ask Melissa to complete the nonforfeiture option selection form. It will tell Melissa that lapsed universal life policies automatically go on the extended term option.
It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash or let the policy continue without premiums until the cash value can no longer cover monthly deductions.
Which statement does NOT describe Medicare supplement policies? Medicare adjusts its deductibles and copayments to match insurers' benefits. Medicare supplement policies are guaranteed renewable. Insurers selling Medicare supplement policies must sell Plan A. Plan A provides the core benefits of Medicare supplement insurance.
Medicare adjusts its deductibles and copayments to match insurers' benefits.
All of the following statements about annuities are correct, EXCEPT: Annuities are sold by life insurance agents and are issued by life insurance companies. The primary purpose of an annuity is to guarantee the accumulation of money over time. An annuity converts a sum of money into a series of income payments. Annuities are not life insurance.
The primary purpose of an annuity is to guarantee the accumulation of money over time.
Sally owns a $750,000 life insurance policy that names her son as beneficiary. Which statement correctly describes how the policy death benefit will be treated in Sally's estate when she dies? They will not be included in Sally's estate and therefore not subject to estate taxation. They will be included in Sally's estate and subject to estate taxation regardless of the value of her estate. They will be included in Sally's estate but not subject to taxation because life insurance death benefits are tax free. They will be included in Sally's estate but whether or not they are subject to estate taxation depends on the value of her estate.
They will be included in Sally's estate but whether or not they are subject to estate taxation depends on the value of her estate.
The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? return of premium rider guaranteed insurability rider cost-of-living rider accidental death benefit rider
accidental death benefit rider
What triggers payment of Medicare Part A benefits? hospitalization prescription medication medical and surgical services and supplies diagnostic tests and X-rays
hospitalization
What can the insured do if it is not possible to notify the insurer of a covered loss within the required number of days? notify the state's insurance department instead notify the insurer as soon as reasonably possible amend the policy to change the notification period post-date the loss
notify the insurer as soon as reasonably possible
Which payment arrangement do managed care plans like HMOs and PPOs typically use? comprehensive fee-for-service pre-payment specified
pre-payment
What is credit life insurance designed to cover? an association member's life the creditor's life the borrower's life an employee's life
the borrower's life
If a lapsed life insurance policy is reinstated, the reinstated policy's premiums will be: greater than they were under the policy prior to its lapse either greater than or less than they were under the policy prior to its lapse, depending on how long the policy had been lapsed less than they were under the policy prior to its lapse the same as they were under the policy prior to its lapse
the same as they were under the policy prior to its lapse
What is the main difference between medical savings accounts (MSAs) and health savings accounts (HSAs)? the amount of the maximum annual contribution and the deduction HSAs are designed for employees of small employers. their maximum deductible and the maximum annual out-of-pocket costs HSAs are designed for use in employer plans.
their maximum deductible and the maximum annual out-of-pocket costs
Dental plans commonly group covered treatment and benefits into how many classes? two one four three
three
A primary insurer is the insurer that transfers its loss exposure to another insurer in a reinsurance transaction. writes only one line of coverage. accepts ceding business and assumes a part of another insurer's loss exposure. is domiciled in California but is certified to transact insurance in other states.
transfers its loss exposure to another insurer in a reinsurance transaction
Which optional provision addresses premiums that the insured owes at the time of a claim? conformity with state statutes relation of earnings to insurance unpaid premium cancellation
unpaid premium
Under a survivorship life insurance policy, when does the insurer pay the death benefit? when the older insured dies when the younger insured dies upon the death of the insured who dies first upon the death of the insured who dies second
upon the death of the insured who dies second
When does a waiver of premium rider excuse the insured from paying the policy's premium? when the insured is partially disabled when the elimination period is in effect when the insured is either totally or partially disabled when the insured is totally disabled
when the insured is totally disabled
When a person applies for Medicaid, the limits and the types of income and assets counted vary depending on: whether the applicant has a spouse who needs support whether the applicant previously applied for Medicaid assistance whether the applicant has relatives who require support whether the applicant is at least 65 years of age
whether the applicant has a spouse who needs support
How long must the free-look period be for long-term care insurance policies sold in California? 7 days 20 days 30 days 10 days
30 days
The fact that ownership of a health insurance contract cannot be transferred to another party makes it what type of contract? conditional personal unilateral aleatory
personal
The cancellation provision allows an insurer to cancel a policy at any time with 45 days' notice. This 45-day notice requirement also applies when: the insurer assigns a new agent to the insurer the insurer changes location or mailing address the insurer files for bankruptcy the insurer refuses to renew the policy or changes the premium
the insurer refuses to renew the policy or changes the premium
When setting the premium for an individual health insurance policy, an insurer does NOT consider: the insurer's administrative expenses the insurer's claims reserves the insurer's interest earnings on investments the applicant's risk of loss
the insurer's claims reserves