Practice Exam 7

If an insurer pays an insured $25,000 in lost wages, $45,000 for physicians visits and hospital cost, and $15,000 for physical therapy treatments, and later discovers that the claim was fraudulent, the insured may be fined as much as:

$170,000

In a seven year vesting schedule, What percentage of employer contributions must be vested after seven years of service?

100%

After the deductible, what portion does a patient pay for covered expenses under Medicare Part B?

20%

The blackout period starts when the youngest child reaches the age of:

??? answer not there guess: 21 or 25

An agent must submit all of the following to the insurer, except:

A copy of all the printed communications used for the presentation

Viatical settlements are accomplished through the use of:

Absolute assignment

A person responsible for collecting premium payments in addition to paying claims is which of the following?

An administrator

A representation in an insurance contract qualifies as which of the following?

An implied warranty

All of the occurrences listed below are examples of an insurable event as defines by the CA Insurance Code, except:

An insured suffers a financial loss in the state lottery

The process whereby a mutual insurer becomes a stock company is called:

Demutualization

Which non-forfeiture option uses cash surrender values to purchase paid-up term insurance for the full face amount of the policy?

Extended term insurance

Life insurance settlement option include all of the following, except:

Extended term option

All of the following would fall under the category of an "adverse underwriting decision," except:

Failure of the agent to submit the application to an insurance company

An agent acting as an insurance agent, broker, solicitor, life-only agent, or bail agent acts in which capacity when handling premiums or return premiums for an insured?

Fiduciary

An agent who acts as an insurance agent, broker, solicitor, life-only agent, or bail agent, acts in which capacity when handling premiums or return premiums for an insured?

Fiduciary

Retirement benefits under social security are available only for workers who are:

Fully insured

Which of the following is not an option for the use of the policy dividends?

Fund the addition of monthly income payments

Which settlement option allows only the death benefit earnings to be paid to the beneficiary?

Interest option

Which statement best describes a life insurance policy dividend?

It is the distribution of excess of funds accumulated by the insurer on participating policies

Who are owners/members of the Medical Information Bureau?

Life insurance companies

Which of the following functions is best defines as an insurance company's identifying and selling to potential customers?

Marketing

Members of the Medical Information Bureau are required to report:

Medical impairments found during the underwriting process

Which type of insurance policy provides a death benefit that matches the projected outstanding debt on an individual's home?

Mortgage protection

What is the difference between a conditional premium receipt and a binding premium receipt?

Only a binding receipt always provides insurance that is effective from the date the receipt is given

What is required when an applicant reveals conditions that require more information?

Physical examination

According to Employee Retirement Income Security Act of 1974 (ERISA) fiduciary standards, benefit plans are operated for:

Plan participants and beneficiaries

Which risk classification carries the lowest premium?

Preferred

A life-only agent's records must include all of the following, except:

Printed material in general use which has been distributed by the insurer

The price of insurance for each exposure unit is called the:

Rate

Which life insurance classification carries the highest premium?

Substandard

Which retirement plan was designed for employees of public school systems?

TSA

For more serious offenses and convictions, an application for a license can be denied without a hearing. Which of the following circumstances would allow for an application to be denied for an insurance license, without a hearing?

The applicant for the license has had a previous license denied for cause within the previous 5 years

A life insurance application is important for all of the following reasons, except:

The beneficiary must sign the application before the insurer will issue the policy

A policy owner has the right to change all of the following, except:

The dividend schedule

All of the following apply to the life insurance cost-of-living rider, except:

The face value of the policy raises or lowers as the cost of living index increases or decreases

After a life insurance policy has been in effect for two years, What prevents it from being rescinded by the insurer?

The incontestability clause

What rule is used to determine the importance of a representation?

The materiality of concealment

What is the difference between a defined contribution plan and a defined benefit plan?

The penalties for early distribution

What is the written instrument called in which the insurance contract is set forth?

The policy

According to state law, what size print must be used for the licensee's license number on all price quotes, business cards, and printed material?

The same size print as the licensee's phone number, fax number or address

Whose benefits are affected by the blackout period?

The surviving spouse

What is it called when an insurer uses higher rates based solely on religion, race, or ethnic group?

Unfair discrimination

Frank and Ernest are 25 year identical twins. They are both in excellent health. Both buy life policies that have $500 annual premiums. Frank buys a 5 year renewable term policy. Ernest buys a whole life policy. Which statement is not true?

*see explanation at the end of the workbook

Which retirement plan utilizes non-deductible contributions?

Roth IRAs

The social security blackout period ends when the surviving spouse reaches the age of:

60

The conversion privilege allows a person to change coverage from:

A group policy to an individual policy

Any situation that presents the possibility of a loss in known as:

A loss exposure

The complete transfer by the existing owner of all rights in an insurance policy to another person is:

Absolute assignment

An agent's appointment with an insurer will be discontinued if all of the following circumstances exist, except:

Another insurer submits an employment application

When must insurance records for insurance agents and insurance brokers be made available to the Insurance Commissioner?

At all times

A worker dies while he is credited with six quarters of the last 13 quarter period. What status does the worker have under social security?

Currently insured

In which plans do employers make specific contributions to an employee's retirement account?

Defined contribution plans

When referring to an insurance contract, when must a representation be made?

Either at the time of or before policy issuance

A group insurance plan is contributory when the:

Employee pays part of the premium

All of the following statements about qualified pension plans are true except:

Employer contributions are taxable to employees in the year they are contributed

In order to obtain group life insurance without providing evidence of insurability, what do eligible individuals generally have to do?

Enroll within a specified eligibility period

In a relation to the frequency of premium payments paid by the insured, which of the following statements is true concerning the total of premium paid by the end of the year:

Is greater if paid semi-annually rather than annually

If a person was in violation of Section 770 of the CA Insurance Code, what action would the insurance Commissioner most likely take if the violation dealt with loans on the security of real or personal property?

Issue a cease and desist order for a violation of more than one transaction

If no other method of payment is selected, which of the following is the automatic mode of settlement for life insurance policy proceeds?

Lumps-sum settlement in cash

Which of the following is the best definition of premium?

Money the insured pays to the insurer to obtain benefits in the policy

Yearly probabilities of death are shown in:

Mortality tables

Social Security provides protection against the financial consequences of all of the following, except:

Poor investments

Every admitted insurer in the state of California is required to maintain a unit or division to investigate which of the following?

Possible fraudulent claims made by insureds

In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer is called:

Primary insured

A return of premium rider is a rider that:

Provides for the periodic return of a percentage of the premiums that have been paid if the insured becomes and remains disabled

Which non-forfeiture option uses an existing policy's cash value to purchase a paid-up policy with a lower face value than the original policy?

Reduced paid-up insurance option

To authorize the release of an attending physician's report, the applicant must:

Sign a consent form

The request for an attending physician's report must be accompanied by a copy of the:

Signed authorization

In order to determine the amount of a premium an insured will pay, the insurer multiplies the rate by:

The number of exposure units

A policy holder stops making payments on a 20-pay life policy and converts the cash surrender value to extended term insurance. All of the following statements are true, except:

The term policy will have the same loan value as the original policy

The social security normal retirement age depends upon:

The worker's year of birth

The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, except:

To protect the interest of life insurers and their agents

What do we call the process whereby insurers decide which customers to insure, and what coverage to offer?

Underwriting