Questions and Answers

Coinsurance means the insured will have to pay..

A *portion* of the covered expenses. Usually the insured pays *20%* and the insurance company pays 80% within a given range

What is the penalty for excessive contributions to a traditional IRA?

6%

Under contributory group plans, ______% of the eligible members must be covered

75%

Equity Indexed Annuities invest on an ________ basis in order to yield _______ returns.

Aggressive; higher

What are the four elements of an insurance contract?

Agreement (offer and acceptance) Consideration Competent parties And Legal purpose

What is a buy-sell agreement?

Agreements that helps establish what happens to a company if one owner dies or becomes disabled

The death protection component of a universal life policy is expressed as what type of coverage?

Annual renewable term

Traditional IRA contributions are tax deductible based on which of the following? A IRA limit B Owner's income C How long the plan has been in force D Owner's age

B - Owner's income Traditional IRA contributions are tax deductible, but may be limited *if the owner's income exceeds a certain level.*

Life insurance is used to _______ the buy-sell agreement

Fund

Mode: the more frequently the premium is paid, the..

Higher the premium

What are the two classifications of annuities according to the time when annuity payments begin?

Immediate and deferred

An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Pay a reduced death benefit

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Policyowner

What is the primary purpose of a 401(k) plan?

Provide retirement income

What are the three types of Social Security benefits?

Retirement, disability and survivors

What are three types of risk eating classification in life insurance?

Standard Substandard Preferred

If an agent makes a correction on the application for health insurance, who must initial the correct answer?

The applicant

A policy's saving element or living benefits is also known as

The cash value

Peril is

The cause of a loss. Ex: death (is a cause of loss)

When planning for survivor protection in life insurance, what needs to be considered?

The insured's current assets, liabilities and survivor's needs

The insuring clause (or insuring agreement) is a basic agreement between

The insurer and the insured

Policy summary must be included and provided when..

The policy is delivered

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund

Term riders explained. What does it allow? Does it affect the death benefit ?

Allow for an additional amount of *temporary assistance insurance* to be provided on the insured, *without* the need to issue *another policy* It does *affect the DB*

If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

Joint life annuity

The premium that does not change throughout the life of a policy is called a

Level premium

Underwriting determines

Whether or not a particular applicant is insurable and if so, what premium to charge

Term insurance: when does the policy expire ?

With term insurance, the policy expires at the end of the policy period.

An SEP is a benefit plan that is designed to be provided by a __________ for the benefit of the employees.

small employer

Acute care is what type of care

24-hour skilled care for short-term illnesses or injuries; generally given in hospitals and ambulatory surgical centers

The ______ is one of the main sources of underwriting info for insurance company

Application

What are policy dividends?

Return of unused premiums

Most policies will pay the accident death benefits as long as the death is caused by the accident and occurs within a. 30 days b. 60 days c. 90 days d. 120 days

c. 90 days

If an underwriter requires extensive information about the applicant's medical history, what report will best serve this purpose?

Attending Physician's Statement

What does liquidity mean in a life insurance policy?

Availability of cash value

Under Option B in a universal life policy, what happens to the death benefit?

The death benefit increases each year by the amount of the cash value increases

Cost of Living Rider increases what ? And why?

The death benefit increases to keep pace with inflation

What is the name of the insured who enters into a viatical settlement?

Viator

Gross Income

a person's income before taxes or other deductions

Term policies do not develop what?

cash values

In a joint life policy, when is the death benefit paid?

Upon the first death

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

collateral assignment

Adverse selection in the insurance industry involves an applicant

gaining insurance at a cost that is below their true level of risk.

A buyer's guide provides _________ information on various types of policies. A policy summary provides ___________ information on the policy being issued.

generic ; specific

Under a variable annuity, unlike fixed annuities, the issuing insurance company does not

guarantee a minimum interest rate or the benefit payment amounts.

Florida have a ______ day free-look period.

14 day

What is the typical deductible for basic surgical expense insurance? a. $0 b. $100 c. $200 d. $500

A. $0

Who is entitled to the cash values in a life insurance policy?

Policyowner

Grace Period Provision

7 days for weekly premium policies 10 days for monthly premium policies 31 days for all other modes will be granted for the payment of each premium falling due after the first premium. *The policy will continue in force during the grace period.*

An applicant for a life agents license may obtain a temporary license for a maximum period of: a. 3 months b. 6 months c. 12 months d. 24 months

B. 6 months (ONLY ONE temporary license may be issued per applicant)

What is an important feature of a dental expense insurance plan that is NOT typically found in a medical expense insurance plan? a) Allow monthly premium b) Low cost deductibles c) diagnostic and preventive care d) A broad coverage area

C. diagnostic and preventive care

What policy component must decrease in decreasing term insurance?

Face amount

Term insurance provides what is known as *Pure death protection* which means

If the insured dies during term, the policy pays the death benefit to the beneficiary

What report is used to assess risk associated with a health insurance applicant's lifestyle and character?

Investigative consumer report

Policy endowment is the policy's

Maturity date

What is the name for an overfunded life insurance policy?

Modified Endowment Contract (MEC)

NAIC stands for? And purpose?

National Association of Insurance Commissioners An organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues

Why doesn't STOLI have insurable interest?

No insurable interest because insurable interest is in place to ensure that a person purchasing a life insurance policy is *actually interested in the longevity rather than the death of the insured*

SIMPLE plans are available to groups of how many employees?

No more than 100

An agent may ONLY use the illustrations...

Of the insurer that have been approved *the agent MAY NOT change them in any way*

Pure risk vs Speculative risk. What risk is covered and what risk is not? Explain

Pure risk is covered because it's a *Loss only* Speculative risk is *not* covered because it's a *loss or gain. i.e. gambling*

Name the 5 *other-insureds* policy riders

- Other-insured riders - Spouse term riders - Children's term rider - Family term rider - Non-family insured

What are the provisions as they apply to health insurance policies issued in the state of Florida? (10)

1. Entire contract/changes 2. Time limit on certain defenses 3. Grace period 4. Reinstatement 5. Notice of claim 6. Claim forms 7. Proofs of loss 8. Denial of claims 9. Legal actions 10. Change of beneficiary

What are the three rating classifications that denote the risk level of insureds ? Why is it used?

1. Standard 2. Substandard 3. Preferred To help insurers decide if an no insured should pay a higher premium

Under *non*-contributory group plans, ______% of the eligible members must be covered

100%

What percentage of a companies employees must take part in a non-contributory group life plan?

100%

Which of the following is the best reason to purchase life insurance rather than annuities? A To liquidate a sum of money over a period of ears B To create regular income payments C To liquidate a sum of money over a lifetime D To create an estate

D. To create an estate

In what form of payment must the contributions to a traditional IRA be made?

In cash (or cash equivalents)

What entities make up the Medical Information Bureau?

Insurers

What type of life insurance offers an applicant a cash value element?

Permanent insurance (usually, whole life)

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Policy premium in a reinstated policy will be set according to the insured's *original* age.

What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?

Single premium whole life

In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

The longer the period selected, the smaller each installment will be

With Guaranteed Insurability Rider, the policyowner can do what to the Death benefit?

increase Death Benefit at specified ages or events, i.e. marriage or birth of a child

Insurance is a contract by which one seeks to protect another from

loss

Health insurance contracts are unilateral. What does this mean?

only one party makes a legally enforceable promise

A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when

the company shows a profit

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

unilateral

Hazard. What can it cause? 4 types of Hazards and the definitions.

*events/conditions* that cause the los. Can cause a possible peril(or accident) which creates a *loss* Physical- blind/deaf Moral- a lie Morale- indifference to loss (don't care) think *speed* Legal- affect an insurers ability to collect premiums

Which of the following does the Insuring Clause NOT specify? a. A list of available doctors b. Covered perils c. The insurance company d. The name of the insured

A. A list of available doctors The Insuring Clause lists the insured, the insurance company, what kind of losses are covered, and for how much the losses would be compensated.

Within how many days of the termination of the insured's group coverage must the insured notify the insurer of the decision to convert to individual coverage? a. 7 days b. 14 davs c. 31 days d. 60 days

C. 31 days The insured must notify the insurer of this election within 31 days of the termination of group coverage.

All life insurance policies fall into what 2 categories

Temporary And Permanent protection

What type of beneficiary is next in line after the primary beneficiary?

contingent beneficiary

Pretax contribution

contribution made before federal and/or state taxes are deducted from earnings

Adverse Selection is

insuring of risks that are more prone to losses than the average risk

Vesting

the right of a participant in a retirement plan to retain part or all of the benefits

Business overhead insurance will provide the funds needed to pay... (2)

the salary of employees (other than the owners) and their other ongoing business expenses, such as rent

An insured submits a proof of loss form within 10 days of a loss. The insurer, however, does not acknowledge the form for 3 months. Which of the following violations has the insurer committed? a. Unfair claims settlement b. Rebating c. Inappropriate delay d. Dragging

A. Unfair claims settlement (Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insureds is an example of unfair claims settlement)

Which of the following is another term for an authorized insurer? a. Licensed b. Legal c. Admitted d. Certified

C. Admitted (Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.)

Failure of a licensee to maintain an appointment with an insurance company within 48 months after the date the license became effective will result in a. A penalty of up to 6 months in jail. b. Expiration of the license. c. A monetary fine by the insurance company. d. A monetary fine by the Department of Insurance.

B. Expiration of the license. (Licensees who are not appointed within 48 months of licensing will be required to qualify as a first-time applicant.)

How are state Insurance Guaranty Associations funded? a. By NAIC b. By the Government c. By their members - authorized insurers d. By the Department of Insurance

C. By their members - authorized insurers (All authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers)

Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? a. Undercutting b. Twisting c. Slandering d. Defamation

D. Defamation (Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person enged in the business of insurance.)

Which of the following is NOT a responsibility of the Office of Insurance Regulation? a. Enforcing insurance Code b. Issuing certificates of authority c. Instituting legal proceedings d. Enacting new insurance laws

D. Enacting new insurance laws. (New laws are enacted by the state legislature)

What does "level" refer to in level term insurance?

Face amount

What is the term for how frequently a policyowner is required to pay the policy premium?

Mode

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract

Who can provide skilled nursing care? a. Doctor b. Spouse c. Family member d. Community volunteer

a. Doctor It can only be provided by skilled medical personnel under the direction of a doctor

Which of the following is a risk classification used by underwriters for life insurance ? a. Poor b. Normal c. Excellent d. Standard

d. Standard

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Proofs of loss provision

Written proof of loss must be furnished to the insurer *within 90 days* after the date of such loss.

Tax deductible

a reduction of taxable income, resulting in lower tax liability

Reinstatement Provision permits what? If the policy has been *surrendered* can it be reinstated?

permits the owner to reinstate a lapsed policy A policy that has been surrendered *cannot* be reinstated

Tax deferred

taxes on investments or gains (such as interest or dividends) are paid at a future date instead of in the period in which they are incurred tax

2 types of Risks and their describe loss

- Pure: loss only (insurable) - Speculative: loss or financial gain (not insurable)

Annuity is like a savings account and the liquidation of....

An estate

Explain Spouse term riders. Provides coverage for who? Permanent coverage or limited?

Coverage provided to spouse to be added for *limited period of time*

Why are dividends in life insurance policies not taxable?

Dividends are not considered income for tax purposes; they are a return of unused premium.

HIPAA is an acronym for:

Health Insurance Portability and Accountability Act of 1996

Reinstatement Provision

If any *renewal premium* is not paid within the time granted the insured for payment, a subsequent acceptance of premium by the insurer or its producer, *without requiring an application for reinstatement*, will reinstate the policy. *Coverage is automatically reinstated if not refused within 45 days from the date the conditional receipt was issued.*

If a retirement plan or equity is qualified, this means

It is approved by the IRS

Medical Information Bureau (MIB) is owned by

Member insurance companies and is a nonprofit trade organization *insurers cannot refuse coverage solely on the basis of adverse info on an MIB report*

How soon can income payments begin in an immediate annuity?

No later than 1 year from the time of annuity purchase

What is the name for a life insurance policy rider that provides coverage on the insureds family members?

Other-insured rider

In group insurance, the primary purpose of the Coordination of Benefits provision is to

Prevent overinsurance

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Primary beneficiary

Vesting

Process by which a retirement benefit becomes nonforfeitable. It's a process wherein employees are *granted full rights to the benefits* of a stock option, retirement, or profit-sharing scheme after working in a company for a particular number of years

Basic medical expense coverage provides coverage for? Deductible?

Provides coverage for nonsurgical services Usually limited to visits to patients confined in the hospital *NO deductible* but usually limited to number of visits per day, limit per visit, or limit per hospital stay

What nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

Renewable allows the policy owner the right to..? Premiums will be based on?

Renew the coverage at the expiration date without evidence of insurability Premium will be based on insureds age

What are three types of Social Security benefits?

Retirement, disability and survivors

What type of beneficiary can be changed at any point by the policyowner?

Revocable

What elements of an adjustable life policy can be changed by the policy owners?

The amount and payment period of the premium, the face amount, and the period for protection

What is the entire contract in health insurance underwriting?

The application and the policy issued

In Accidental Death Rider, if the insured dies from an accident, What happens to the Death benefit ?

The death benefit is a multiple of the Face Amount

Whole life insurance policies mature when the insured reaches age 100. If the owner of a whole life policy (the insured) dies at age 80 and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

The full death benefit

Who must sign a health insurance application?

The policyowner, the insured (if different), and the agent

Is there a cash value or other living benefits in Term insurance?

There are NO cash value or other living benefits

Qualified plans(aka retirement plans) must have a ___________ requirements

Vesting Employer contributions made to a qualified plan are subject to vesting *the right of an employee in a retirement plan to retain part or all of the benefits*

Insurable interest and consent. A contract without a legal purpose is considered..

Void and cannot be enforced by any party

In insurance, when is the offer usually made in a contract?

When the insurance application is submitted

Variable Life Insurance

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

What is required to qualify an individual to contribute to a traditional IRA?

earned income

Larceny means

the fraudulent and wrongful taking and carrying away of the property of another with *intent to convert such property* to the taker's use without the consent of the owner.

What are the dividends options in life insurance policies? (7)

- Cash - Reduced premium - Accumulation of interest - Paid-up additions - Paid-up option - One year term - Acceleration of endowment

What are the 3 Policy Options?

- nonforfeiture - dividend - settlement

examples of adverse selection

A terminally ill person purchasing life insurance Someone with a nicotine dependency getting insurance at the same rate of someone without nicotine dependency

The term "fixed" in a fixed annuity refers to all of the following EXCEPT a. Death benefit b. Guaranteed rate of interest c. Equal annuity payments d. Amount and length of payments

A. Death Benefit A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefits

Who can provide skilled nursing care? a. Doctor b. Spouse c. Family Member d. Community volunteer

A. Doctor Skilled nursing care is daily nursing and rehabilitative care that can only be provided by medical personnel, under the direction of a physician. Skilled care is almost always provided in an institutional setting.

Which of the following is NOT a type of whole life insurance? A Level term B Single premium C Straight life D Limited payment

A. Level term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Level term is a type of term insurance.

In a Disability Income policy, all of the following are considered presumptive disabilities EXCEPT a. Loss of one eye. b. Loss of hearing. c. Loss of two limbs. d. Loss of speech.

A. Loss of one eye The definition of a presumptive disability varies by company, but generally includes a total loss of sight, speech, hearing or the use of any two limbs.

A person insured under a group life insurance policy can make an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, to any of the following EXCEPT a) The policyholder, b) A lender. c) A family member. d) The beneficiary.

A. Policyholder Any person insured under a group life insurance policy can make to any person, other than the policyholder, an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, including the right to exercise the conversion privilege and the right to name a beneficiary.

Explain Children's term rider. Allows what type of children to be added? Permanent coverage or limited ? Can coverage be converted? Does premium change when more children are added?

Allows children of the insured, *natural, adopted, or stepchildren* , to be added to the coverage for a *limited period of time* or specified amount of time Provides the minor with the *option of converting to a permanent policy* without proof of insurability Premium does *not* change in the inclusion of additional children; it is *based on average number of children* One premium = ALL Children

Who receives income payments from an annuity?

Annuitant

Which of the following is true regarding the agent's appointments? a) A person does not need to be licensed to hold an insurance appointment. b) A person may hold several appointments at one time c) A person can only have one appointment. d) A person only needs 1 appointment for all the insurers he/she represents if it's in the same line of authority.

B. A person may hold several appointments at one time At any one time, the same individual agent may hold any or all categories of appointments for which he or she is qualified and licensed. However, an agent must have a separate appointment for each insurer.

A group major medical policyholder that provides benefits on a self-funding basis may limit it's total liability for claims by purchasing a. Supplementary coverage b. A stop-loss contract c. Coinsurance d. A deductible

B. A stop-loss contract The term for this type of *agreement that caps obligations* is stop-loss

All of the following statements concerning dividends are true EXCEPT A Favorable investment results generate higher dividends. B Dividend amounts are guaranteed in the policy. C Lower insurance company costs generate higher dividends. D They stem from favorable underwriting experience.

B. Dividend amounts are guaranteed in the policy. Dividends cannot be guaranteed.

Which of the following statements is TRUE about a policy assignment? a. It authorizes an agent to modify the policy b. It transfers rights of ownership from the owner to another person c. It is the same as a beneficiary designation d. It permits the beneficiary to designate the person to receive the benefits

B. It transfers rights of ownership from the owner to another person

One technique that helps to control health care costs is a requirement for a. Preexisting conditions b. Second surgical opinions c. Waiver of premiums d. Optional benefit riders

B. Second surgical opinions It's often recommended before expensive surgical procedures are preformed because they may help to avoid unnecessary treatments and costs

Which of the following may NOT be included in an insurance company's advertisement? a) An identification of a limited policy as a limited policy b) That its policies are covered by a state Guaranty Association c) The policies limitations or exclusions d) The name of a specific agent

B. That its policies are covered by a state Guaranty Association It is illegal for insurers to state that their policies are guaranteed by the existence of a Guaranty Association.

Which of the following is NOT an example of a business use of Life insurance? a. Key person b. Worker's Compensation c. Buy-sell funding d. Executive Bonuses

B. Worker's Compensation

An agent delivers a life insurance policy to the proposed insured. The insured makes a decision not to accept the policy. The insured may return the policy for a full refund of premium within how many days? a. 7 b. 10 c. 14 d. 21

C. 14 The free-look provision in Florida allows the insured to return a life policy or annuity after 14 days if dissatisfied for any reason.

In order for an employee to be considered eligible for small group insurance, he/she must work at least how many hours per week? a. 15 b. 20 c. 25 d. 40

C. 25 "Eligible employee" means an employee who works full time, having a normal workweek of 25 or more hours, and who has met any applicable waiting-period requirements or other requirements.

When may an insurance company use suicide as a defense against paying a death claim? A At any time suicide can be proven B At no time C When death occurs within a specified period of time after the policy was issued D Only when there was a witness to the event

C. When death occurs within a specified period of time after the policy was issued An insurance company can deny a claim if the death of the insured was by suicide and occurred within a time specified in the policy.

The gatekeeper of an HMO helps

Control specialist costs

An absolute assignment is a a. Transfer of some ownership rights in a policy. b. Change of beneficiary. c. Change of insurer. d. Transfer of all ownership rights in a policy.

D Transfer of all ownership rights in a policy. Absolute Assignment involves transferring all rights of ownership to another person or entity. This is a *permanent and total transfer* of all the policy rights. The new policyowner does not need to have an insurable interest in the insured.

The free-look provision allows for which of the following? A Immediate coverage when the application is submitted B guarantee that the policy will not lapse if the premium is overdue C A guarantee that the policy will be issued D A right to return the policy for a full premium refund

D) A right to return the policy for a full premium refund The free-look period is a mandatory provision found in health insurance policies that allows the applicant to examine the policy and if dissatisfied for any reason, return the policy for a full refund.

Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain a) A statement from the insured's employer showing that the insured was unable to work. b) An estimate of the total amount of medical and hospital expense for the loss. c) A complete physician's statement. d) A statement that is sufficiently clear to identify the insured and the nature of the claim.

D. A statement that is sufficiently clear to identify the insured and the nature of the claim The Insurance Code requires that each policy must include, "Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible".

Before starting operations as an HMO, the organization must meet which of the following requirements? a. Obtain a certificate of authority from the Insurance Department b. Obtain a valid Health Care Provider Certificate from the Department of Health and Rehabilitative Services c. Make a deposit of $10,000 to the Rehabilitation Administration Expense Fund d. All of the above

D. All of the above The requirements to start an HMO in Florida include all of the above, as well as other requirements as stated in the statutes.

What license or licenses are required to sell variable annuities? a. Only a life insurance license b. Only a securities license c. No license is required d. Both a life insurance license and a securities license

D. Both a life insurance license and a securities license Agents are required to have both a life insurance license and a securities license to sell variable annuities.

Which term describes the benefits of a life insurance policy that the policyowner does not automatically relinquish even if the policy lapses? a. Permanent values b. Cash values c. Guaranteed values d. Nonforfeiture values

D. Nonforfeiture values Nonforfeiture values are the benefits of a life insurance policy that the policyowner does not forfeit (lose) even if the policy lapses.

Which of the following explains the Policy owners right to change beneficiaries, choose options, and receive proceeds of a policy? a. The Entire Contract Provision b. The Consideration Clause c. Assignment Rights d. Owners Rights

D. Owners Rights

In which of the following situations would Social Security Disability benefits NOT cease? a) The individual reaches age 65 b) The individual dies c) The individual has undergone therapy and is no longer disabled d) The individual's son gets a part-time job to help support the family

D. The individual's son gets a part-time job to help support the family Benefits *cease when the individual reaches age 65, dies, or is no longer disabled*. If a person has been receiving Social Security disability benefits at the time that he or she turns age 65, the disability benefits cease, and are *replaced by Social Security retirement benefits*. *At death, family benefits will continue as survivor benefits*. Benefits will continue for an adjustment period of three months if an individual no longer satisfies the definition of disability.

Who qualifies for tax-sheltered annuities, or 403(b) plans

Employees of nonprofit organizations under Section 501(c)(3) and employees of public school systems

What are the characteristics of the group that underwriters will consider before issuing a group life policy? (3)

Group's purpose, size, financial strength and turnover

How long will the extended term Nonforfeiture option last for ?

It depends on what the cash value can buy

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what type of policy?

Limited-pay Whole life

Can a business or a corporation be an annuitant?

No, an annuitant must always be a natural person

In qualified plans, are employer contributions taxed as income to the employees?

No, employer contributions are not taxed as income to the employees

Can a policyowner borrow against a policy's cash value or assign the policy to another without the beneficiary agreement if it's a irrevocable beneficiary?

No. Must have the irrevocable beneficiary to agree

In an absolute assignment, does the new policyowner need to have an insurable interest in the insured?

No. The new policyowner *does not* need to have an insurable interest in the insured.

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Only the portion *in excess* of the premium paid

"Vesting" in a retirement plan means __________. This means that each employee will vest, or ______, a certain percentage of their account in the plan each year. An employee who is 100% vested in his or her account balance owns 100% of it and the employer cannot forfeit, or take it back, for any reason.

Ownership; own

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Provide the applicant a Disclosure Authorization Notice

An immediate annuity is purchased with a

Single Premium

Conditional receipt means the applicant may be covered as early as

The date of the application

Whole life insurance death benefit explained (2)

The death benefit is guaranteed It also stays leveled

What is insurance underwriting?

The process of risk selection and classification

What is the best reason to purchase life insurance rather than annuities ?

To create an estate

Examples of qualified retirement plans are

Traditional IRA Roth IRA SIMPLE SEP 401k (Anybody with earned income can contribute to these plans)

Embezzlement is a type of fraud that involves

a type of financial fraud where someone takes money or assets that were *entrusted to them* and uses them for a different purpose than for what they were intended.

LIFO

last in, first out principle applied to asset management in life insurance products, under which it is assumed that the funds paid into the policy last will be paid out first.

Respite care is able to provide

temporary relief to the patient's primary caregiver

Lapse is when policy is

terminated due to nonpayment of premium

The Florida Office of Insurance Regulation (OIR) is responsible for all activities concerning

*insurers* and other risk bearing entities, including *licensing, rates, policy forms*, market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, *premium financing*, and administrative

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? a) A debtor has an insurable interest in the life of a lender. b) Business partners have an insurable interest in each other. c) A married person has an insurable interest in their spouse d) An individual has an insurable interest in their own life.

A. A debtor has an insurable interest in the life of a lender. A lender has an insurable interest in the life of a debtor but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.

Which of the following terms describes the specified dollar amount beyond which the insured no longer participates in the sharing of expenses? a) Stop-loss limit b) Probationary limit c) First-dollar coverage d) Corridor deductible

A. Stop-loss limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one-time offense? a. $180 b. $250 c. $500 d. $1,500

B. $250 (If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent's license will be suspended or revoked)

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called? a. Accumulation Period b. Blackout Period c. Nonpayment Interval d. Latent Interval

B. Blackout Period The interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 is called a "Blackout Period". *No benefits are paid during this time.*

What term is used for replacing insurance policies for the sole purpose of making commissions? a. Coercion b. Churning c. Misrepresentation d. Replacement

B. Churning ("Churning" is defined as replacing insurance policies for the sole purpose of making commissions.)

For how long is an insurance company allowed to defer policy loan requests? a. 30 days b. 60 days c. 6 months d. 1 Year

C. 6 months This *excludes* loans requests used to pay policy premiums

Who is a third-party owner? a. An insurer who issues a policy for two people b. An employee in a group policy c. An irrevocable beneficiary d. A policyowner who is not the insured

D A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Entire Contract

How long will a life annuity with a 15-year period certain pay?

For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years

An agent who is in violation of the agency contract may be held..

Personally liable to the insurer

Insurers selling variable products invest their customer's monies in a ________ account not a ________ account

Separate; general

What does the term double indemnity mean?

The insurer will pay a benefit of twice the face amount

How is the premium determined in a joint life insurance policy?

The premium is based on the average age of the insureds

Whole life policies provide protection until the insured reaches what age?

Age 100

Who would be considered a third-party owner?

An individual or an entity who is not the insured

Declined risks are

Applicants who are rejected. Underwriting access as not insurable are declined Ex: - there is no insurable interest - applicant medically unacceptable - potential loss is so great - insurance is prohibited by public policy or is illegal

All of the following are true of key person insurance EXCEPT a. The key employee is the insured. b.The plan is funded by permanent insurance only. c. There is no limitation on the number of key employee plans in force at any one time. d. The employer is the owner, payor and beneficiary of the policy.

B. The plan is funded by permanent insurance only. Key Person coverage may be funded by any type of life insurance.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a. Those who have worked in the company for at least 3 years b. Those who have dependents c. Those who have no history of claims d. Those who have been insured under the plan for at least 5 years

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

What percentage of a company's employees must take part in a noncontributory group life plan? a. 0% b. 25% c. 75% d. 100%

D. 100% If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

A corporation can be considered a "Small group employer" if it has at least one and a maximum of how many employees? a. 20 b. 30 c. 40 d. 50

D. 50 "Small Group Employer" means any person, firm, corporation, partnership, or association that is actively engaged in business that has no more than 50 eligible employees.

Purchasing a life policy on the insureds life with the intent of selling the policy to an investor and profiting financially when insured dies is known as

STOLI

A variable annuity is considered to be a security and is regulated by the __________. An agent selling variable annuities must be registered with

Securities Exchange Commission (SEC) ; FINRA

What is the purpose of establishing the target premium for a universal life policy?

To prevent the policy from lapsing

Nongrandfathered plans

health plans are health insurance policies or HMO contracts that do not provide the creditable coverage benefits. must comply with all rules and laws of the ACA

What type of life insurance policy offers pure death protection?

term

Time of payment of claims provision

the insurer must pay all claims immediately after receiving proof of loss. Indemnities payable under this policy for any loss will be paid immediately upon receipt of due written proof of such loss.

And insured decides to surrender his $100,000 whole life policy. The premiums paid until the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

$3,000

Which of the following is NOT covered under a long-term care policy? A Acute care in a hospital B Adult day care C Hospice care D Home health care

A. Acute care in a hospital A long-term care policy may provide coverage for home health care, adult day care, hospice care or respite care. Acute care is not covered under a long-term care policy

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? a. The policy will expire at the end of the 20-year period. b. At the end of 20 years, the policy's cash value will equal $100,000. c. The policy premiums will remain level for 20 years. d. If the insured dies before the policy expired, the beneficiary will receive $100,000.

B. At the end of 20 years, the policy's cash value will equal $100,000. Term policies do not develop cash values. All the other statements are true.

The provision that states that both the printed contract and a copy of the application form the contract between the policyowner and the insurer is called the a. Entire contract. b. Certificate of insurance. c. Aleatory contract. d. Master policy.

A. Entire contract The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.

All of the following benefits are available under Social Security EXCEPT A Death benefits. B Welfare benefits. C Old-age and retirement benefits. D Disability benefits.

B. Welfare benefits Social Security is an entitlement program, not a welfare program.

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill

A guaranteed renewable health insurance policy allows the A Policy to be renewed at time of expiration, but the policy can be canceled for cause during the policy term. B Insurer to renew the policy to a specified age. C Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class. D Policyholder to renew the policy to a stated age and guarantees the premium for the same period.

C Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class. Coverage is guaranteed, but rates can be adjusted for the entire class.

Which of the following is the best reason to purchase life insurance rather than annuities? A To create regular income payments B To liquidate a sum of money over a lifetime C To create an estate D To liquidate a sum of money over a period of years

C To create an estate With insurance, the death benefit creates an immediate estate should the insured die.

What's the difference between a Viatical settlement and a life settlement?

Individuals *not* facing a health crisis may also choose to sell their life insurance policies to get cash, this is called a life settlement

If a retirement plan is 'qualified', what does that mean?

It is approved by the IRS, The plan has favorable tax treatment

Prior to purchasing a Medigap policy, a person must be enrolled in which of the following?

Parts A and B of Medicare

When can an insurance company use suicide as a defense against paying a death claim?

When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid

Social Security was created to provide all of the following benefits EXCEPT A Unemployment income. B Survivor's benefits. C Disability income. D Retirement income.

A. Unemployment income Social Security is designed to provide protection against financial loss due to *old age, disability, or death*. It also provides income during retirement.

Warranties is an

Absolute true statement upon which the validity of the insurance policy depends. Breach of this can be considered grounds for voiding the policy or a return of premium Ex: If a person was treated for cancer prior to policy and was indicated

The waiver of premium rider waives the premium for the policy is the insured...

Becomes totally disabled

Can businesses take a tax deduction (tax break) for the expense of premiums on a Key Person insurance? If not, when do they get their tax break?

Businesses *cannot* take a tax break for the expense of the premium. *However, after death*, the benefits paid to the business are usually *tax free*

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT A Fully insured status. B Waiting period of 5 months. C Being age 65. D Inability to perform any gainful work.

C Being age 65. The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

When does Medicare cover nursing home care? a. Only for those age 80 and older b. Medicare covers all nursing home care for eligible policyholders c. Only if it is part of treatment for a covered illness or injury d. Only if the deductible has been met

C. Only if it is part of treatment for a covered illness or injury Medicare will not cover long-term care or nursing home care unless it is part of the treatment for a covered illness or injury.

Key Person can be issued as term or permanent or both? What plans are usually selected for a key Person ?

Can be issued as term or permanent life Whole life and universal life are most common

Fair Credit Reporting Act (FCRA) established procedures that..

Consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. Also the law protects consumers against the circulation of inaccurate or obsolete info

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds a. $10.000. b. $15.000. c. $25,000. d. $50.000

D. $50,000 (The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.)

If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate? a) 2% b) 4% c) 6% d) 8%

D. 8% The time that may elapse between a premium's due date and its eventual payment is called the grace period. If a claim is made on a policy during one of these grace periods, an insurer may deduct the amount of the premium due and up to 8% of interest per year from the settlement.

If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate? a. 2% b. 4% c. 6% d. 8%

D. 8% The time that may elapse between a premium's due date and its eventual payment is called the grace period. If a claim is made on a policy during one of these grace periods, an insurer may deduct the amount of the premium due and up to 8% of interest per year from the settlement.

In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is A More limited in general. B More limited in duration. C Broader in duration. D Broader in general.

D. Broader in general A policy that uses the accidental bodily injury definition will provide broader(wider) coverage than a policy that uses the accidental means definition.

Which of the following is NOT typically excluded from life policies? a. Self-inflicted death b. Death that occurs while a person is commuting a felony c. Death due to war or military service d. Death due to plane crash for a fare-paying passenger

D. Death due to plane crash for a fare-paying passenger

Accelerates or living benefits provide __________ payment of the death benefit prior to the insureds death

Partial

What is Consideration?

Something of value that each party gives to the other (binding force in any contract)

What are the personal uses of life insurance? (4)

Survivor protection Estate creation and conservation Cash accumulation Liquidity

What are the personal uses of life insurance ? (3)

Survivor protection estate creation and conservation cash accumulation and liquidity

What happens to a policy's cash value under an extended term Nonforfeiture option?

The cash value is converted to the same face amount as in the whole life policy

What are the 3 *basic* forms of Whole life ?

1. Whole life or *Straight Life* , *Ordinary life* , *Continuous premium Whole life* 2. Limited-pay Life or *Limited Payment* 3. Single Premium Whole life

Medical Information Bureau (MIB) is

An information database that stores the health histories of individuals who have applied for insurance in the past. *Most insurance companies subscribe to this database for underwriting purposes*

In an annuity, the accumulated money is converted into a stream of income during which phase?

Annuitization period

And individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have?

Annuity

What is the term used for a written request for an insurer to issue an insurance contract based on the provided information?

Application

What information are the members of the Medical Information Bureau required to report?

*Adverse medical information* about the applicants or insured

Another common type of *buy-sell agreement* is the "stock redemption" agreement. This is an agreement between...

*shareholders in a company* that states when a shareholder leaves the business, whether it be due to retirement, disability, death, or other reason, the *departing members shares will be bought by the company*

Health Savings Accounts (HSA)

- Accumulates tax-free funds to be used for medical expenses in high deductible and out-of-pocket expense health plans - individuals under 65 -An individual who is covered by a high deductible health plan can make a tax-deductible contribution to an HSA, and use it to pay for out-of-pocket medical expenses.

Whole life insurance facts

- most common type of permanent insurance - provides lifetime protection and *includes a savings element* (aka cash value) - policy endow at the age 100 - Usually are higher than term

Two types of Medical Examination reports are

- paramedical report: completed by a paramedic or a registered nurse - Attending Physician statement (APS) from a medical practitioner *who treated the applicant for a prior medical exam*

Indexed *Whole* Life. Death benefit? Tied to? Do you need evidence of insurability?

A whole life insurance policy whose death benefit *increases according to the rate of inflation*. Such policies are usually tied to the Consumer Price Index (CPI). Enviden e of insurability is not required

Benefit periods for individual short-term disability policies will usually continue from a. 6 months to 2 years. b. 2 years to age 65. c. 1 week to 4 weeks. d. 3 months to 3 years.

A. 6 months to 2 years Short-term disability is defined as a disability lasting not more than 2 years.

Regarding the taxation of Business Overhead policies, a. Premiums are deductible, and benefits are taxed. b. Premiums are not deductible, and benefits are taxed. c. Premiums are not deductible, but benefits are deductible. d. Premiums are not deductible, but expenses paid are deductible.

A. Premiums are deductible, and benefits are taxed The premiums paid for BOE insurance are tax deductible to the business as a business expense. However, the benefits received are taxable to the business as received.

Which of the following is INCORRECT concerning a noncontributory group plan? A The employees receive individual policies. B They help to reduce adverse selection against the insurer. C They require 100% employee participation. D The employer pays 100% of the premiums.

A. The employees receive individual policies The employer receives a master policy, and employees receive a certificate of insurance.

Insurers MUST provide a buyers guide to all prospective policy applicants prior to

Accepting their initial premium *However, if the policy contains an unconditional refund provision of at least 10 days (free-look period) a buyers guide can be delivered with the policy*

Which document helps ensure that full and fair disclosure is provided to the recipient of a policy? a) Statute of Limitations b) Outline of Coverage c) Benefit Limitations d) Policy Summary

B. *Outline of Coverage* The Outline of Coverage is created to ensure full and fair disclosure to the recipient of a new policy. This document can be released at the time of application or upon delivery of the policy.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? a. Morbidity b. Life expectancy c. Mortality rate d. Risk exposure

B. Life expectancy Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

Which of the following authorities grants and revokes licenses? a. National Association of Insurance commissioners (NAIC) b. Guaranty Association c. Department of Financial Services d. Federal Insurance Bureau

C. Department of Financial Services (The Department is responsible for issuing, reissuing, and terminating licenses.)

Under a group plan, Certificates of Insurance must include all of the following EXCEPT a. A description of the Insurance protection. b. The name of the insured. c. The name of the writing agent d. The group policy number.

C. The name of the writing agent Certificate of insurance for a group plan requires the policy number, description of insurance protection and the name of the insured. The name of the writing agent is not a requirement

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash surrender

Provisions defines the

Characteristics of an insurance contract and are fairly universal from one policy to the next

Investigative consumer report (inspection)

Covers financial and moral info such as finances, character, work, hobbies, and habits. The underwriter *may* order an inspection report on the application from an independent investigating firm or credit agency. Subject to rules and regulations outlined in the Fair Credit Reporting Act

The death protection component of Universal Life Insurance is always a. Whole Life b. Adjustable Life c. Decreasing Term d. Annually Renewable Term

D. Annually Renewable Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

In addition, Florida law requires the following provisions to apply to group health insurance policies: (2)

1. Make available to the policyholder coverage for *mental and nervous disorders*. If such coverage is elected by the policyholder, *the benefits must be the same as for other medical and surgical benefits under the policy* 2. *All group health policies must be guaranteed renewable*. The insurer, however, may cancel coverage for nonpayment of premium, fraud or intentional misrepresentation of material fact, if the policyowner fails to comply with group eligibility requirements.

Contributory Plan is what type of plan? Does Florida law require anything and if so what?

Group life insurance plan in which the *employee* *'contributes'* a portion of the premium and the *employer pays the rest.* *Florida law requires 100% participation by eligible employees in the group plan*

What qualifies plan is suitable for the self-employed?

HR-10 or Keogh

The parties of an Annuity are? (3) and Explain each.

1. Owner: owner may be a corporation, trust, or other legal entity or the *annuitant themselves* 2. Annuitant: *must be a natural person* the person who receives benefits or payments from the annuity. Whose life expectancy is taken into consideration. *Owner and annuitant most often same person* 3. Beneficiary: the person who receives annuity assets (*either the amount paid into the annuity or the cash value, whichever is greater*) if the annuitant dies during the accumulation period

Accidental death rider explained. What does it pay? Must occur how many days after accident? Does it affect the Death benefit? What's not included(6)? When does it expire? Benefits apply only to the policy's ____ face amount

It pays some multiple of the face amount of death is the result of an accident as defined in policy. *Normally two times (double indemnity) the face amount* Must usually occur *within 90 days* of such accident This rider *affects the death benefit* Not included is *health problems, disability, self-inflected injuries, war, or hazardous hobbies or avocations* Expires often at insureds *age 65* Benefits *base* face amount is doubled or tripled

If the premium was NOT received at the time of application and the policy is issued, when does coverage begin?

It starts on the Date of Delivery. AFTER: *the premium is collected and a Statement of Good Health is collected*

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

Modified endowment contract

In the Insuring Clause it lists: (4)

1. The insured 2. The insurance company 3. What kind of losses are covered 4. For how much the losses would be compensated

Life settlement is

Selling an existing life insurance policy

STOLI stands for and what is it for

Strange-originated life insurance Buying a NEW policy on a stranger. They are financed and purchased solely with the intent of selling them for life settlements

Preferred Risk has

Superior physical condition, lifestyle, and habits *qualify for the Lowest premiums*

A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?

20-year level term

What are securities ?

The financial instruments that may trade for value (for example stocks, bonds, options)

What are the most common exclusions in life insurance policies?

War and military service, hazardous occupation, and aviation

Which of the following is true regarding taxation of dividends in participating policies? a. Dividends are not taxable. b. Dividends are taxable only after a certain amount is accumulated annually. c. Dividends are taxable in some life, insurance policies, and non-taxable in others. d. Dividends are considered income for tax purposes.

A .Dividends are not taxable

What type of premium is charged on a straight life policy?

A level premium for the life of the insured

Liquidation of an estate is converting ...

A persons net worth into a cash flow

Regarding health insurance, all of the following are tax-deductible EXCEPT a. Employer paid group Long-Term Care b. Employer paid group Accidental Death and Dismemberment c. Employee paid group disability income d. Employer paid group health insurance

c. Employee paid group disability income

If an annuitant dies during the accumulation period, what will the beneficiary receive?

either the cash value or the premiums paid, whichever is greater

Grandfathered plans

is any group health plan to which section 42 § 18011 of the U.S. Code applies. This section pertains to a *plan participant's right to maintain existing coverage when the insured changes plans*, and to have creditable coverage count toward HIPAA eligibility relating to pre-existing conditions exclusions.

Traditional IRA Contributions

may be tax deductible based on *owners income*

Like a fixed annuity, Equity Indexed Annuities have guaranteed

minimum interest rates

In health insurance contracts the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?

unilateral

What policy riders affect the death benefit amount ? (8)

- Accidental death rider - Accidental death and dismemberment rider (AD&D) - Guaranteed Insurability rider - Return of Premium - Term Riders - Accelerated death benefits - Living needs rider - Long-Term Care (LTC) coverage

What are 4 reasons for the role of The Florida Office of Insurance Regulation in insurance?

-maintain insurer solvency -protect consumers -make insurance available to people who, because they are poor risks, might otherwise be unable to get it -regulate premium rates.

What are the two phases of an annuity?

Accumulation and annuitization (or pay-in and pay-out)

In flexible premium payment annuities, the term flexible refers to what?

Amount of premium

If a parent would like to enroll a child over the age of 5 into the Florida Healthy Kids program, their family income must be under a certain percentage of the federal poverty level. What percentage? a. 100% b. 200% c. 25% d. 50%

B. 200% To qualify for the Florida Healthy Kids program, a child's family income must be below 200% of the federal poverty level. *If a child's family income exceeds 200%, they are only eligible until the age of 5*

All of the following are true about variable products EXCEPT a. Policyowners bear the investment risk. b. The premiums are invested in the insurer's general account. c. The minimum death benefit is guaranteed. d. The cash value is not guaranteed.

B. The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

What is the maximum allowed value of promotional gifts that an agent may give to a prospective insured? a) $20 b) $50 c) $100 d) Gifts are never allowed.

C. $100 A licensed insurer or its agents may not give to insureds or prospective insureds for the purpose of advertising any articles of merchandise that have a value of more than $100 per insured in any calendar year.

What is the waiting period on a Waiver of Premium rider in life insurance policies? a. 30 days b. 3 months c. 5 months d. 6 months

D 6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.

What level of authority is given to the Office of Insurance Regulation with respect to examination of insurer's activities to determine compliance Unfair Trade Practice laws? a. Voluntary b. Limited c. Civil d. Absolute

D. Absolute ( Florida statutes provide the Office of Insurance Regulation with an absolute right to examine the affairs of every person (insurers and licensees) involved in the business of insurance to see if they are engaged in any unfair trade practices.)

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? A Life income B Fixed period C Fixed amount D Lump sum

D. Lump sum Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.

Which of the following is NOT true regarding Equity Indexed Annuities? a. The insurance company keeps a percentage of the returns. b. They have guaranteed minimum interest rates. c. They are less risky than variable annuities. d. They earn lower interest rates than fixed annuities.

D. They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

What is the general taxation rules for death benefits payable to the beneficiary of a life insurance policy?

Death benefits are generally *not* subject to income taxes

The agent must prove beyond the stated questions in the application if he or she..(3)

Has any reason to believe the applicant is misrepresenting or concealing info, or doesn't understand the specific questions asked

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Incontestability

Mortality tables are used by insurance companies to predict what?

Life expectancy and the death rates for specific groups of individuals

In Term insurance, if the policy is canceled or expires prior to the insureds death, what happens?

Nothing is payable at the end of the term

What is the official name for the Social security program?

Old-Age, Survivors, and Disability Insurance (OASDI)

What provision allows the owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Reinstatement

What elements of an adjustable life policy can be changed by the Policyowners?

The amount and payment period of the premium, the face amount, and the period for protection

Insurable interest is when

The policyowner must face the possibility of losing money or something of value in the event of a loss

What are Policy riders?

They are *written modifications* attached to a policy that provides benefits not found in the original policy *sometimes requires additional premium*

How is the information obtained for an investigative consumer report

Through interviews with the applicant's associates, friends and neighbors

Group life insurance policies are written as what type of insurance?

annually renewable term

Equity Indexed Annuities are less risky than _________ and earn higher interest rates than ____________.

variable annuities; fixed annuities

Certain conditions, such as dismemberment or total and permanent blindness, will automatically qualify the insured for full disability benefits. Which disability policy provision does this describe? A Presumptive disability B Dismemberment disability C Partial disability D Residual disability

A. Presumptive disability Presumptive disability is a provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.

Todd has been informed that he has a hernia which requires repair. When Todd researches the cost, he learns that his insurance plan will cover 200 points worth of surgical expenses. Each point represents $10, which means that $2000 of his surgery will be covered by his insurance plan. What system is Todd's insurance company using? A Relative value B Basic Surgical C Point-based medical D Conversion factor

A. Relative value In a relative-value approach, a surgical procedure is assigned an amount of points relative to the maximum coverage allowed for a given surgery.

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? a. The benefits will be coordinated. b. Neither plan would pay. c. Each plan will pay in equal shares. d. The insured will have to select a plan from which to collect benefits.

A. The benefits will be coordinated Benefits will be coordinated when individuals are covered under two or more health plans.

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

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

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? a. 4 credits b. 6 credits c. 10 credits d. 40 credits

B. 6 credits To be considered currently (or partially) insured, an individual must have earned 6 credits during the last 13-quarter period.

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called a. Common errors. b. Material misrepresentations. c. Fraudulent statements. d. Warranties.

B. Material misrepresentations A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

All of the following would be considered an insurance transaction EXCFPT a. Negotiating coverage. b. Obtaining an insurance license. c. Soliciting a policy. d. Advising a policyholder regarding a claim.

B. Obtaining an insurance license An insurance transaction means the carrying on of business in insurance, which could include *the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims* Obtaining an insurance license is a prerequisite transacting insurance.

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever *a profit* is realized. What is this called? A HR10 plan B Profit sharing plan C 401(k) plan D Tax-sheltered account plan

B. Profit sharing plan A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.

Traditional Whole Lifes aka *Permanent Life Insurance* are policies that

Builds cash value and remain effect for the entire life of the insured (or until age 100) as long as premiums are paid

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Cash value growth is tax deferred

The agent report allows the agent to

Communicate with the underwriter and provide info about the applicant known by the agent that may assist in the underwriting process

Basic Hospital Expense Coverage. Deductible?

Covers hospital room and board, and miscellaneous expenses, such as lab and x-ray charges and medicines while insured is confined to a hospital. No deductible

In order to maintain coverage under COBRA, how soon from termination of employment must an employee exercise extension of benefits? a. 7 days b. 10 davs c. 30 days d. 60 days

D. 60 days Under COBRA, terminated employees must exercise extension of benefits within 60 days of separation from employment.

What is it called when the cash value of a whole life policy has reached the contractual face amount

Endow

Insurable interest must

Exist at the time of the application. The policy owner must have insurable interest in the life of the insured.

What does the term "level" refer to in level term insurance?

Face amount/ death benefit

*High Deductible Health Plans (HDHPs)* is often used in coordination with Medical Savings Accounts (MSAs), Health Savings Accounts (HSAs), or Health Reimbursement Accounts (HRAs) and HDHPs features

Features *higher annual deductibles* and out-of-pocket limits the traditional health plans. Which means *lower premiums*

If an insured is not required to pay a deductible, what kind of coverage does he/she have

First dollar This coverage doesn't require the insured to pay a deductible

Indexed life insurance. What 2 policies under it? Cash value? Is there an interest rate?

Indexed *Whole* Life and *Equity* Indexed *Whole* Life Cash value is not fixed. Its dependent upon the performance of the equity indexed such as S&P 500 *Guaranteed* minimum interest rate amount

Physical hazard is when... and example

Individual characteristics that increase the chances of the cause of loss *something physical* Ex: smoker since 16 years old

Investigative consumer report is similar to consumer reports but also provide... (primary difference)

Info in consumers character, reputation, and habits Primary difference: the info is obtained through an investigation and interviews with associates, friends, and neighbors of the consumer

If the agent feels there could be some misrepresentation he/she MUST

Inform the insurance company

Fraud is

Intentional misrepresentation or deceit with the intent to induces person to part with something of value

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

Interest only

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?

Life income with period certain

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?

Limited pay whole life

What type of life insurance policy is Life paid-up at age 65?

Limited pay whole life

With a single premium deferred annuity, when will the annuity payments become available?

No sooner than 1 year after the annuity purchase

Are policy loans subject to income taxation?

No they are not subjected

Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?

No, lump-sum benefits are *received tax free*

Are medicare supplement policies sold by any state or federal government agencies?

No, they may not be sold by them

What are the death benefit options in universal life policies?

Option A - level death benefit, and Option B - increasing death benefit

Traditional IRA contributions are tax deductible based on

Owners income

What dividends option is automatically deleted by the company if not chosen by policyowner?

Paid-up addition

What dividend option can increase the death benefit of the existing life policy?

Paid-up additions

Living Needs Rider explained. Whats it's purpose? Does insurance companies usually charge for this rider ?

Provides for the payment of the policy death benefit if the insured is diagnosed with a *terminal illness that will result in death within 2 years.* Purpose is to provide the insured with the necessary *funds* to take care of necessary *medical and nursing funds* that incur as a result of terminal illness Many insurers *don't* charge for this since it is simply an advance payment of the death benefit

What makes two policies of the same type different in significant ways? (3)

Provisions, riders, options

What is the best way to make a change on an application for insurance?

Start over with a fresh application

What is a requirement to determine if an insurance product is appropriate for a customer?

Suitability

Contract of Adhesion

Take-it or leave-it basis. Prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insured has little to say about the provisions **Any ambiguities in the contract will be settled in FAVOR of the insurer

Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?

The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death

Business Overhead Expense includes important day-to-day costs like employee wages, loans, rent or a mortgage, and taxes. Notably, BOE doesn't cover

The owners lost wages when they become disabled. They'll need their own disability insurance policy for that

The waiver of premium rider if the insured is never able to return to work, what will happen to the premiums?

The premiums will continue to be waived by the insurance company

What happens to the proceeds of a life insurance policy if their is no named beneficiary?

The proceeds are paid to the insureds estate

What type of plan is a retirement plan that meets IRS guidelines for receiving favorable tax treatment

The qualified plan

Does the transfer of ownership in an assignment change the insured also? Does it change the amount?

Transfer of the life insurance policy *does not* change the insured or amount of coverage

Absolute assignment involves transferring what? Is it permanent or temporary? Some of the policy(partial) or all(total)? Does the new owner have to have insurable interest?

Transferring *all* rights of ownership to another person or entity. *permanent and total transfer* The new owner does *not* need to have an insurable interest in the insured

Collateral assignment involves transferring what? What is it usually used for? Is it permanent or temporary? Some of the policy(partial) or all (total)?

Transferring of *partial* rights to another person Usually to secure a loan or other transaction *partial and temporary* it goes back to owner

The expenses covered by a BOE policy are normally those that are deductible for federal income-tax purposes. Typically, expenses such as (5)

a mortgage or rent, employee wages/salaries, loans, taxes, and utilities would be covered.

All of the following are correct about the required provisions of a health insurance policy EXCEPT a. Proof-of-loss forms must be sent to the insured within 15 days of notice of claim b. A grace period of 31 days is found in an annual pay policy c. The entire contract clause means the signed application, the policy, endorsements, and attachments constitute the entire contract d. a reinstated policy provides immediate coverage for an illness

d. a reinstated policy provides immediate coverage for an illness

Surrender

early termination of a policy by the policyowner

The guaranteed purchase option is also referred to as the

future increase option

The Office of Financial Regulation (OFR) is responsible for supervising

state-chartered *banks*, credit unions, savings associations, and international bank agencies, and licenses and regulates non-depository finance companies and *the securities industry*.

Conversion provisions are required by law. It allows terminated employees to convert... (3)

their group health coverage to individual insurance *without evidence of insurability*, *within a specified amount of time*, and *for eligible reasons*.

Term Life Insurance Facts (2)

- *Greatest amount* of coverage for the *lowest premium* - Their is usually a *maximum age* above which coverage will not be offered or at which coverage cannot be renewed

Substandard Risk is

*High Risk Exposure* Not accepted at standard rates because physical condition, personal or family history of disease, occupation, and dangerous habits *Highest Premiums*

To meet the requirements of the entire contract policy provision, an insurance policy must contain what?

A copy of the original insurance application

Who may contribute to an HR-10 plan?

A self-employed individual

Lechter lost both of his parents at age 12, when they perished in an airplane crash. If Lechter is at least _____ years old and he became disabled before the age of _____ , Lechter is eligible for Social Security benefits. a. 18; 22 b. 16; 18 c. 18; 25 d. 21; 25

A. 18;22 A child who is a dependent, unmarried child of a worker that is deceased, disabled or retired can obtain Social Security benefits once that child turns 18 years old and becomes disabled before the age of 22.

If an employee terminates her employment, which of the following provisions would allow her to continue health coverage under an individual policy, if requested within 31 days? A Conversion B Replacement C Grace period D Renewability

A. Conversión Conversion provisions are required by law. It allows terminated employees to convert their group health coverage to individual insurance without evidence of insurability, within a specified amount of time, and for eligible reasons.

Whose life expectancy is taken into consideration in an annuity contract?

Annuitant

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called A Common errors. B Material misrepresentations. C Fraudulent statements. D Warranties.

B. Material misrepresentation A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply? a. Coverage will apply, but will be reduced by 50%. b. No coverage will apply, since the injury could have been foreseen. c. No coverage will apply, since disability income policies cover sickness only. d. Coverage will apply since the break was accidental.

B. No coverage will apply, since the injury could have been foreseen. An accidental means clause states that if the insured meant to do whatever caused their injury, no coverage applies since the resulting injury should have been foreseen.

In the event of a loss, business overhead insurance will pay for A Medical bills of the business owner. B Rent. C Loss of profits. D Salary of the business owner.

B. Rent Business overhead insurance is designed to pay the ongoing business expenses of a small business owner while they are disabled and unable to work. *It does not pay the salary of the business owner or their loss of profits*. However, it will provide the funds needed to pay the salary of employees other than the owners and their other ongoing business expenses, such as rent.

Which of the following policies would be classified as a traditional level premium contract? a) Variable Universal Life b) Straight Life c) Adjustable Life d) Universal Life

B. Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

All of the following are basic types of health insurance plans EXCEPT a. Basic medical expense. b. Workers compensation. c. Major medical d. Health maintenance organizations.

B. Workers compensation Workers Compensation coverage is actually considered a liability coverage because it pays those medical expenses of employees that an employer is legally liable to provide.

Which of the following is INCORRECT concerning a noncontributory group plan? A The employer pays 100% of the premiums. B The employees receive individual policies. C They help to reduce adverse selection against the insurer. D They require 100% employee participation.

B. the employees receive individual policies The employer receives a master policy, and employees receive a certificate of insurance.

In life insurance, insurable interest must exist

Between the policyowner and the insured *at the time of the application* However once a life insurance policy has been issued, the insurer must pay the policy benefit whether or not an insurable interest, exists

Which of the following is an IRS qualified retirement program for the self-employed? a. Buy-sell agreement b. 401(k) plan c. Keogh plan d. Split dollar

C. Keogh plan The Keogh or HR-10 plan allow self-employed individuals to establish tax favored retirement plans for themselves and their eligible employees.

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount? A 65 B 701/2 C 90 D 100

D. 100 Whole life insurance policies mature when the insured reaches the age of 100. The cash value at that time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value.

S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct? a) 25% b) 50% c) 75% d) 100%

D. 100% Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are *considered self-employed individuals, not employees.*

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a A Key person plan. B Split-dollar plan. C Stock redemption plan. D Cross-purchase plan.

D. Cross-purchase plan In a Cross-Purchase Plan each partner involved purchases insurance on the life of each of the other partners. With a cross-purchase plan, each partner is the owner, premium-payor, and beneficiary of the life insurance on the lives of the other partners. The amount of the life insurance is equal to each partner's share of the purchase price of the deceased partner's interest in the business.

Which provision in a child's life insurance policy requires that premium payments will be suspended if the person responsible for paying the insurance premiums passes away or becomes disabled? a. Waiver-of-premium rider b. Conversion c. Non-contributory rider d. Payer benefit

D. Payor benefit

All of the following are requirements for life insurance illustrations EXCEPT a. They may only be used as approved. b. They must identify nonguaranteed values. c. They must differentiate between guaranteed and projected amounts. d. They must be part of the contract.

D. They must be part of the contract An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

When an insurer issues an individual health insurance policy that is guaranteed renewable, the insurer agrees a. To charge a lower premium every year the policy is renewed. b. Not to change the premium rate for any reason. c. To renew the policy indefinitely. d. To renew the policy until the insured has reached age 65.

D. To renew the policy until the insured has reached age 65. The guaranteed renewable provision is similar to the noncancellable provision, with the exception that the insurer can increase the policy premium on the policy anniversary date. As with the noncancellable policy, coverage is generally not renewable beyond the insured's age 65.

When an HMO knowingly makes any misleading representations, incomplete or fraudulent comparisons for the purpose of inducing any person to lapse, forfeit, terminate, surrender or convert any insurance policy or contract with another insurance company or HMO, they are in violation of the unfair trade practice of a. Unfair claims settlement practices. b. False statements. c. Defamation. d. Twisting.

D. Twisting Twisting is *knowingly making misleading representations or incomplete or fraudulent comparisons for the purpose of inducing a person to terminate existing coverage* and purchasing new or different coverage that may not be in the person's best interest.

What type of policy is typically issued without proof of insurability from the insured?

Group Policy

Noncontributory is what type of plan? Does Florida law require anything and if so what?

Group life insurance plan in which *the employer pays the entire premium* and the employee supplies no portion of the premium costs. *Florida law requires 100% participation by eligible employees in the group plan*

Is the beneficiary required to have insurable interest in the insured?

No. Beneficiaries do not have insurable interest in the insured.

Moral hazard is when... and example

Not honest; tendencies toward increased risk Ex: lie on application

Accidental death and dismemberment rider (AD&D) explained. How is dismemberment pay determined? What gets the full principal amount and what gets the capital amount? Does this rider affect the Death benefit amount?

Pays the *principal (face amount) for accidental* death and pays a *percentage* of the amount, or capital sum, *for accidental dismemberment* Death portion *same as Accidental death* Dismemberment is determined by the severity. *Full principal amount* will usually be paid for loss of *two hands, two arms, two legs, or loss of vision in both eyes* *Capital amount* is usually limited to half face value payable in the event of loss of *one hand, arm, leg, or loss of vision in one eye* *it does affect the DB*

Types of Hazards: (3)

Physical, Moral, Morale

Family term rider explained.

Spouse term rider along with the children's term rider *in a single rider*

What is the main purpose of the 7-pay test?

To determine if a life insurance policy is a Modified Endowment Contract(MEC)

What is the main reason for purchasing an annuity?

To provide income that the annuitant cannot outlive

What type of annuity requires an agent to have a securities license?

Variable annuity

What life policy rider allow the company to forgo collecting the premium if the insured becomes disabled?

Waiver of premium

Which of the following types of insurance policies would perform the function of cash accumulation? a. Credit life b. Increasing term life c. Whole life d. Term life

c. Whole life

Who is responsible for paying the cost of a medical examination required in the process of underwriting?

insurer

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

whole life

What type of life insurance policy provides permanent protection?

whole life

What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?

10% penalty

Flexible Spending Accounts (FSA) is a form of

A form of cafeteria plan benefit funded by salary reduction and employer contributions Employees allowed to deposit a certain amount of their paycheck into an account before paying income taxes *Important: FSAs may be used to pay medical and dental expenses for employees and their dependents*

What type of licenses are required to sell variable annuities?

A life insurance license and a securities license

What is policy replacement?

A new policy is issued while an existing policy is terminated or *reissued with a reduction in cash value*

What is indemnity?

A principle of reimbursement on which insurance is based; *in the event of a loss, an insurer reimburses* the insureds or beneficiaries for the loss

Material misrepresentation is

A statement that if discovered would alter the underwriting decision of the insurance company. If this is intentional, they are considered fraud

If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

Annuitant's estate

Which of the following insurance products will be subject to the regulation on life insurance solicitation? a. An annuity b. A term life policy c. A credit life policy d. A group life policy

B. A term life policy The regulation on life insurance solicitation does not apply to the sale of annuities, credit life and group life insurance, variable life insurance policies, and ife insurance policies issued in connection with pension and welfare plans that are subject to ERISA.

All of the following are required provisions in all individual health insurance policies delivered in this state EXCEPT a) Reinstatement. b) Misstatement of age C) Entire contract. d) Grace period

B. Misstatement of age Misstatement of age is an optional health insurance policy provision, meaning that it may be included in a policy at the option of the insurer.

Which of the following dates must be contained in a policy summary? a. The date that the producer was licensed b. The date the summary was prepared c. The date the application was signed d. The date that the policy was issued

B. The date the summary was prepared A policy summary must contain the date that the summary was prepared.

All of the following are Nonforfeiture options EXCEPT a. Extended term b. Reduced paid-up c. Interest only d. Cash surrender

C. Interest only Interest only is a settlement option

Which of the following is TRUE of a qualified plan? A It may discriminate in favor of highly paid employees. B It may allow unlimited contributions. C It has a tax benefit for both employer and employee. D It does not need to have a vesting schedule.

C. It has a tax benefit for both employer and employee A qualified plan is *approved by the IRS*, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.

Which of the following is true of a PPO? A Claim forms are completed by members on each claim. B No copayment fees are involved. C Its goal is to channel patients to providers that discount services. D The most common type of PPO is the staff model.

C. Its goal is to channel patients to providers that discount services.

What type of care is Respite care? A Institutional care B 24-hour care C Relief for a major care giver D Daily medical care, given by medical personnel

C. Relief for a major care giver Respite Care is designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the care giver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

Cash/ lump sum

Most HMOs operate through what type of system? a. Individual fee-for-service system b. Individual subscribers c. A group formed principally for the purpose of obtaining HMO coverage d. A group enrollment system either at their place of employment or as a member of an association

D. A group enrollment system either at their place of employment or as a member of an association Most HMOs operate almost exclusively through a group enrollment system, in which each member pays a fixed monthly premium, whether or not they have used the services of the HMO that month.

If the premium was received at the time of application and the policy is issued, when does coverage begin?

It starts the Date of application *however, if a medical exam is required, the date of the coverage will coincide with the date of the exam*

In annuities, the owner is the _______ and the annuitant is ____________. Can the owner and the annuitant be the same person?

Purchaser; person who receives benefits or payments from the annuity; yes they can be but they don't *have to* be

IOLI is another name for...? What does it stand for?

STOLI Investor -owned life insurance

if the consumer challenges any of the information in the consumer or investigative report..

The reporting agency is required to reinvestigate and amend the report, if warranted

Why are policy loans not available on term insurance?

There is no cash value to borrow against

Grace Period Provision: if the insured dies during this period, with the death benefit be paid?

Yes. The death benefit is payable, however, any unpaid premium will be deducted from the death benefit

In which of the following instances would the premium be tax deductible? A Premiums paid by an employer on the life of a key person B Premiums paid by an employer on a $30,000 group term life insurance plan for employees C Premiums paid by an individual on his/her own life insurance D Premiums paid by a mother on her son's policy

B. Premiums paid by an employer on a $30,000 group term life insurance plan for employees As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a *business expense.*

The paid-up addition option uses the dividend a. To accumulate additional savings for retirement. b. To purchase a smaller amount of the same type of insurance as the original policy. c. To purchase a one-year term insurance in the amount of the cash value. d. To reduce the next year's premium.

B. to purchase a smaller amount of the same type of insurance as the original policy The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

A producer who fails to separate premium monies from his own personal funds is guilty of a. Theft. b. Commingling c. Larceny. d. Embezzlement.

B. Commingling It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? a. The policy beneficiary takes over the loan payments b. The policy is rendered null and void c. The balance of the loan will be taken out of the death benefit d. The policy beneficiary receives the full death benefit

C The balance of the loan will be taken out of the death benefit. If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit.

Conditional Contract requires that

Certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills it's obligations Ex: insured must pay the premium and provide proof of loss in order for the insurer to cover a claim

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Only the potion in excess of the premium paid

What is the purpose of a conditional receipt? A It serves as proof that the applicant has been determined insurable. B It is given only to applicants who fully prepay the premium. C It is intended to provide coverage on a date prior to the policy issue. D It guarantees that a policy will be issued in the amount applied for.

C. It is intended to provide coverage on a date prior to the policy issue. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

Which term describes the benefits of a life insurance policy that the policyowner does not automatically relinquish even if the policy lapses? a) Cash values b) Guaranteed values c) Nonforfeiture values d) Permanent values

C. Nonforfeiture values Nonforfeiture values are the benefits of a life insurance policy that the policyowner does not forfeit (lose) even if the policy lapses

Shortly after a replacement transaction on a Medicare supplement policy the insured decided to cancel the policy but is unsure whether the free-look provision applies. The insured could find that information in the a) Buyer's Guide. b) Certificate of Coverage. c) Notice Regarding Replacement. d) Policy application.

C. Notice Regarding Replacement The Notice Regarding Replacement must inform the applicant of the 30-day free-look provision of the replacing policy.

Straight life (or whole life ordinary) explained. What is the premium like? Cash value decreases or increases or leveled?

- The policyowner pays the premium from the time the policy is issued until the insureds death or age 100 - Cash value increase -*has the lowest annual premium out of all the whole life's*

When an insurer combines two periods of disability into one, the insured must have suffered a A Recurrent disability. B Partial disability. C Residual disability. D Presumptive disability.

A. Recurrent disability. Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

What is a rebate ?

An illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. It is ONLY ALLOWED if specially stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium

Agency contract is a contract that is held between

An insurer and an agent/producer, containing the expressed authority given to the agent/producer and duties and responsibilities to the principle

If a licensee changes his or her residence address, within how many days must the department be notified? a. 15 b. 30 c. 45 d. The department only needs to be notified if an individual's business address changes.

B. 30 (Every licensee in Florida must notify the department in writing within 30 days after a change of name, residence address, principal business street address, or mailing address.)

Which of the following will be included in a policy summary? a. Comparisons with similar policies b. Primary and secondary beneficiary designations c. Premium amounts and surrender values d. Copies of illustrations and application

C. Premium amounts and surrender values A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and *premium, cash value, surrender value* and death benefit figures for specific policy years.

HMOs that contract with outside physicians to provide health care service to their subscribers compensate those providers on a a. Fee-for-service basis b. Usual, reasonable or customary basis c. Capitation basis d. Medicare allowable basis

C. Capitation basis HMOs generally pay the provider a fixed amount per subscriber in exchange for the medical services agreed upon, called a capitation basis.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? a. Second-to-Die b. Family Income Policy c. Joint Life Policy d. Survivorship Life Policy

C. Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Basic Surgical Expense Coverage Provides coverage for..? Coverage includes(3)? Is there a deductible?

Covers *costs of surgeons' services*, whether the surgery is performed in or out of the hospital Surgeons Fees, anesthesiologist, and the operating room *when it is not covered as a miscellaneous medical item* NO deductible but coverage is limited

With the interest only settlement option, what happens to the policy's death benefit?

Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary

What is a risk?

Uncertainty, chance, or possibility of a loss

What type of insurance would perform the function of cash accumulation?

whole life insurance

Rollover is the

withdrawal of the money *from one qualified plan* and placing it *into another plan*

What is the purpose of establishing the target premium for a universal life policy? A To cover all policy expenses B To keep the policy in force C To accumulate cash value faster D To pay up the policy faster

B To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is A Within 45 days. B Weekly. C Biweekly. D Monthly.

D. Monthly If a claim involves disability income benefits, the policy must pay those benefits *not less frequently than monthly*. In all other cases, the company may specify the time period of 45 or 60 days for payment of claims.

Which of the following is NOT an example of a business use of Life Insurance? A Buy-sell Funding B Executive Bonuses C Key Person D Workers Compensation

D. Workers Compensation Workers Compensation is a benefit payable when a worker is injured by a work-related injury, regardless of fault or negligence. *It is not considered a business use of insurance.*

An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation? a. They are considered after-tax contributions. b. They are not deductible. c. They are taxed as income. d. They are tax deductible.

D. They are tax deductible An individual covered by a high deductible health plan can make a tax-deductible contribution to an HSA and use it to pay for out-of-pocket medical expenses.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?

It will be paid to the insureds estate

What term is used to describe method of payments of the death benefit to the beneficiary upon the insureds death?

Settlement options

Activities of daily living. What is it?

The basic activities a person usually accomplishes during a normal day, such as eating, dressing, and bathing, transferring, toileting, continence

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

The death benefit will be adjusted to the amount that the insured could obtain for her correct age.

When would a misrepresentation be considered material?

When it may alter the underwriting decision

Notice of Claim provision

Written notice of claim must be given to the insurer within *20 days after the occurrence* of any loss covered by the policy or as soon thereafter as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary to any authorized producer of the insurer will be deemed notice to the insurer.

Who bears the investment risk in a fixed annuity?

insurance company

A stop-loss provision is a specific clause in a health insurance policy with a deductible and co-insurance arrangement that states

that the insured need *no longer pay any percentage* of the medical expenses once their out-of-pocket expenses have reached the specific amount or limit indicated in the policy

Annually Renewable Term is..? Death benefit explained, is it renewable, what happens to the premium?

the *purest form* of term insurance. Offers the most insurance at the lowest cost The *death benefit remains level* and the policy may be guaranteed to be *renewable each year without proof of insurability* the premium increases annually according to the attained age, as the probability of death increases.

Medical Examinations are only requested when..(2)

- policies have higher amounts of coverage - if the application raised additional questions concerning the prospective insureds health

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested? a. At the time of application b. When the applicant's credit is checked c. When the policy is delivered d. At the initial interview

A. At the time of application A notice to the applicant must be issued to all applicants for health insurance coverage.

Premium receipt is when

Agent collects premiums, the agent MUST issue a premium receipt **Thus type of receipt will determine when coverage will be effective

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a) HR 10 plan b) Profit sharing plan c) 401(k) plan d) Tax-sheltered account plan

B. Profit sharing plan A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.

An agent transacts business for Insurer A and Insurer B, both selling life insurance, and for Insurer C, selling health insurance. How many appointments must the agent hold? a. Two - one for life and one for health b. Three - one for each insurer c. No appointments are required. d. Only one - for any of the insurers

B. Three - one for each insurer (An agent must have a separate appointment for each insurer.)

Cross Purchase Plan

Business continuation funding plan whereby each partner agrees to buy Life policies on each other, but not themselves. Each partner purchases insurance on the lives of the other partner(s), amounting to equal to each partners share of the purchase price. Business is obligated to buy out the ownership interest of any deceased or disabled partner

Which of the following best describes an insurance company that has been formed under the laws of this state? a) Alien b) Foreign c) Domestic d) Sovereign

C. Domestic A company is domestic when doing business within the state in which it is incorporated.

Which of the following entities must approve all Medicare supplement advertisements? a. Federal Association of Insurers b. Consumer Protection Agency c. Insurance Commissioner or Director d. NAIC

C. Insurance Commissioner or Director An insurance company must provide a copy of any Medicare Supplement advertisement intended to be used in this state to the Insurance Director for review or approval.

Which of the following is true of a PPO? a. Claim forms are completed by members on each claim. b. No copayment fees are involved. c. Its goal is to channel patients to providers that discount services. d. The most common type of PPO is the staff model.

C. Its goal is to channel patients to providers that discount services Insureds are treated by providers who have agreed to discount their charges.

An insurer hires a representative to advertise its company at a local convention. The representative lies about the details of some of the policies, in an attempt to secure more business for the company. Who is responsible for the representative's claims? a. The underwriters b. The agent c. the insurer d. The representative

C. The insurer An insurer is completely responsible for advertisements regarding its company, regardless of who creates, presents, or distributes the material.

Who qualifies for tax-sheltered annuities, or 403(b) plans?

Employees of *nonprofit* organizations under Section 501(c)(3) and employees of public school systems

When will a contingent beneficiary receive death benefit from a life insurance policy?

When the primary beneficiary dies before the insured

Business overhead insurance reimburses who? For what ?

a *business owner* for business expenses incurred during a *disability.*

What type of insurance would be used for a Return of Premium rider? A Level Term B Decreasing Term C Annually Renewable Term D Increasing Term

D Increasing Term The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary.

Commingling

Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).

What type of annuity can be purchased with a single premium?

Immediate annuity

Cash value in Whole life insurance is created by

The accumulation of the premium. It is scheduled to equal the face amount of the policy when the insured reaches age 100 and *it is paid out to the policyowner* Cash value has a *guaranteed interest rate*

Whose responsibility is it to inform an applicant for health insurance about the insurers information gathering practices?

The agent

Does the free-look period start when the policyowner receives the policy or when the insurer issues the policy?

When the policyowner receives the policy

Facts about the Agent's (producer's report) [3]

1. It provides the agent personal observations concerning the proposed insured 2. It does not become a part of the entire contract, although it is part of the application process 3. The insurer may inquire whether the agent knows of any adverse info about the applicant, or ask about the applicants: character, financial standing, and environment

A valid insurable interest may exist between the policy owner and the insured when the policy is insuring any of the following: (4)

1. Policy owner's own life 2. The life of a family member - a spouse or close blood relative 3. The life of a business partner, key employee 4. Someone who has a financial obligation to the policy owner -such as debtor to a creditor ***beneficiary does not have to show an insurable interest

Annuity. What is it? What does it protect? Who markets it? Does it pay face amount upon the death of the annuitant? Which has a longer life expectancy: annuities or Life insurance? What is the basic function?

A *contract that provides income* for a specified period of years or for life. Protects a person against outliving his or her money Marketed by life insurance companies (not a life insurance by policy) Do *not* pay face amount upon the death of the annuitant. They do the opposite. In most cases, the payment stop upon the death of the annuitant Annuities reflect a *longer life expectancy* than life insurance Basic function: liquidating a principal sum regardless of how it was accumulated

A collateral assignment is the transfer of what? And does it give ownership?

A collateral assignment is the transfer of *some or all of the death benefits* of the policy to a creditor as security for a loan, but *does not give the creditor the rights of ownership*

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? A No benefits B Full benefits C Partial benefits D Full benefits until the blindness lifts

A. No benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least *two limbs*, *total and permanent blindness, or loss of speech or hearing*. Benefits are paid, even if the insured is able to work. Because the insured's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits.

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? a. Viatical settlement b. Estate liquidation c. Nonpayment of premium d. Change of beneficiary

A. Viatical settlement A viatical statement allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically receive a percentage of the policy's face value from the person who purchases the policy.

Time limit on certain defenses Provision

After *2 years* from the date of issue of a policy, no misstatements made by the applicant in the policy application (except in the cases of fraud) can be used to void the policy or to deny a claim for loss incurred or disability beginning after the expiration of a 2-year period.

Guaranteed Insurability Rider explained. What does this allow the insurer to do? When can changes be made? Is proof of insurability needed? When does it expire? Does it affect the Death Benefit?

Allows the insured to purchase additional coverage at specified future dates Usually change can be made *every 3 years* or it can happen when events like *marriage or birth of a child* happens *Without* evidence of insurability Premium= Attained age Expires at insureds *age 40* usually It *does affect* the DB

When the insured selects the extended term Nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a. The same as the original policy minus the cash value b. Equal to the original policy for as long as the cash value will purchase c. In lesser amounts for the remaining policy term of age 100 d. Equal to the cash value surrendered from the policy

B. Equal to the original policy for as long as the cash value will purchase With this option, the cash value is used as a single premium to purchase the *same face amount* (example: $300,000) as the original policy for as long a period of time as the cash will buy at the insureds current age

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a. Automatic lapse b. Recession of the policy c. Adjustment in the amount of death benefit d. No change whatsoever

C Adjustment in the amount of death benefit. If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.

If an employee terminates her employment, which of the following provisions would allow her to continue health coverage under an individual policy, if requested within 31 days? A Renewability B Conversion C Replacement D Grace period

C. Conversion Conversion provisions are required by law. It allows terminated employees to convert their group health coverage to individual insurance without evidence of insurability, within a specified amount of time, and for eligible reasons.

Which statement accurately describes group disability income insurance? A There are no participation requirements for employees. B Short-term plans provide benefits for up to 1 year. C The extent of benefits is determined by the insured's income. D In long-term plans, monthly benefits are limited to 75% of the insured's income.

C. The extent of benefits is determined by the insured's income. Group plans usually specify the benefits based on a percentage of the worker's income. Group long-term plans provide monthly benefits usually limited to 60% of the *individual's income*.

Which of the following is true regarding Medicare supplement policies? a. They must contain a minimum of Plans A and B. b. They must be available to those aged 60 and over. c. They must be guaranteed renewable d. They must have a 15-day free-look period.

C. They must be guaranteed renewable Each Medicare supplement policy must be at least guaranteed renewable

Which of the following is true about the premium on the children's rider in a life insurance policy? a. It decreases when the oldest child reaches the age of 21. b. It increases when a newborn baby is added to the policy. c. It decreases when an adopted child is added to the policy. d. It remains the same no matter how many children are added to the policy.

D It remains the same no matter how many children are added to the policy. The premium does not change on the inclusion of additional children; it is based on an average number of children.

Which of the following is NOT true regarding policy loans? a. Policy loans can be repaid at death. b. An insurer can charge interest on outstanding policy loans. c. A policy loan may be repaid after the policy is surrendered. d. Money borrowed from the cash value is taxable.

D Money borrowed from the cash value is taxable. Money borrowed from the cash value is not taxable. *Policy loans can be repaid at any time, including surrender and death.* An insurer can charge interest on outstanding policy loans.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? A $50.000 B $18.000 C $15,000 D $3,000

D. $3,000 The difference between the premiums paid and the cash value would be taxable. In this example, the difference between the premiums paid ($15,000) and the cash value ($18,000) is $3,000.

Licensed life insurance agents are expected to be familiar with which of the following laws? a. Florida Life Insurance Solicitation laws b. Florida Life Insurance Replacement laws c. Code of Ethics of Florida Association of Insurance and Financial Advisers d. All of the insurance laws and regulations

D. All of the insurance laws and regulations While the other laws may have particular significance, an agent should be generally aware of all insurance laws.

Licensed life insurance agents are expected to be familiar with which of the following laws? a. Florida Life Insurance Solicitation laws b. Florida Life Insurance Replacement laws c. Code of Ethics of Florida Association of Insurance and Financial Advisers d. All of the insurance laws and regulations

D. All of the insurance laws and regulations (While the other laws may have particular significance, an agent should be generally aware of all insurance laws.)

In the case of producer solicitation, at what point must a long-term care Shopper's Guide must be presented to the applicant? a. At the time of application b. Between the completion of the application and the delivery of the policy c. At the time of policy delivery d. Prior to the time of application

D. Prior to the time of application A long-term care insurance shopper's guide must be provided in the format developed by the National Association of Insurance Commissioners (NAIC) The shopper's guide must be presented to the applicant prior to completing the application if solicited by a producer.

An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?

Decreasing term

*Equity* Indexed Life. Who is at risk? Premium and Face amount?

Either the policyowner or the insurer assumes inflation risk If Policyowner assumes risk: - policy premium increases with the increases in face amount If insurer assumes risks: -premium remains level

Variable *Whole* Life Insurance. Premium? Death benefit? Cash value? Who bears the risk? Can assets stay in insurance company's account?

Fixed premiums that are leveled *Guaranteed minimum* death benefit Cash value *not guaranteed* and fluctuates with performance of the portfolio Policyowners bears the investment risk in variable contracts. Insurance company is NOT sustaining the investment risks Assets must be held in a separate account. *NOT in insurance company's account*

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first.

Payor Benefit Rider are usually found in? What does it do?

Found in juvenile polices waives the premiums if the person paying them (often the parent) becomes disabled *for at least 6 months* or dies *The insurer will waive the premiums until the minor reaches a certain age* usually 21

What are some examples of qualified retirement plans?

IRA, 401k, HR10 (Keogh), SEP, SIMPLE

Policy Provision - Suicide provision explained

If a suicide is committed after the period of time stipulated in the suicide clause/provision, the *entire death benefit* will be paid

If the consumer or investigative report is found to be inaccurate and is corrected, the agency...

Is required to correct info and send corrected info to all parties they reported inaccurate info to within the last 2 years

Variable *Universal* Life insurance. Premium? Death benefit? Policy loans? What do you need to sell this plan?

Like universal life, the premium is flexible. Can be increased, decreased, or skipped as long as there is enough in policy to pay premium May or May not have a death benefit (unlike universal) Cash withdrawals or policy loans available Agents selling this policy MUST be *registered with FINRA, licensed by state to sell insurance, and have security licenses*

The cash value available to the policyowner is an example of

Liquidity in a life insurance contract Liquidity in life insurance refers to availability of cash to the insured

What settlement options are available in life insurance policies?(5)

Lump-sum/cash Fixed period Fixed amount Life income Interest only

Death benefits payable to a beneficiary under a life insurance policy are generally ( is there income taxation or not)

Not subject to income taxation by the Federal Government

2 Application parts and explain some key things

Part I: General information. Which includes names, age, address. Also identifies the types of policy applied for and usually contains info concerning the beneficiary Part II: Medical information. Which includes medical background, medical status of living relatives and causes of death of deceased relatives. **if amount is small, agent and proposed insured will complete all medical info. ***if amount is large, medical examination is required

Variable Annuities. Are the payments the same each time? What types of investments are made (2)? Does the payments go into the insurers general account? Is interest guaranteed? Is special licensing required and if so what licenses are needed? Who regulates this annuity ?

Payments *fluctuate* according to the *value of* an account invested primarily in common *stocks* Provides *conservative to aggressive investments* that are not guaranteed The payments that the annuitant pays into the annuity are invested in the insurers *separate account (not their general account)* *Interest rate is not guaranteed* License required. Must hold a *security license, insurance license and registered with FINRA* *Regulated by* the Securities Exchange Commission *(SEC)* so security license is needed

Policy Options: Dividends and Dividend Options. How do dividends come about ? Are the taxable to Policyowners? Can the insurance company guarantee them?

Policyowners actually pays a "grossed-up" premium or *high premium is charged* as a safety margin in the event the insurers losses are higher than anticipated If extra amount is not needed, a dividend will be returned to the owner. *Dividends are a return of excess premiums* *Not taxable income to the policyowner* Insurance companies cannot guarantee dividends

Beneficiary's designations provision: what is the difference between revocable and irrevocable beneficiary?

Revocable- the policyowner, without the consent or knowledge of the beneficiary, may change the beneficiary at any time Irrevocable- designation may *not* be changed without *written consent* of the beneficiary because the beneficiary have vested interest in the policy

What is the principal?

The *face value of the policy*; the original amount invested before earning

Policy Options: Settlement explained. What is it? What are the two reasons it will be paid out? When does owner make their choice and can it be changed? When can the beneficiary make a choice?

The 5 methods used to pay the death benefits to a beneficiary or to pay the endowment benefit if the insured lives to the endowment date (age 100) Owner may select at the time of policy application but it can be changed at any time during the life of the insured Once option is selected by owner, it *cannot be changed by the beneficiary* If owner does not select a settlement option, the beneficiary will be allowed to choose one at the time of the the insureds death

The waiver of premium rider explain the 6-month waiting period. When does this waiver of premium usually expire?

The 6-month waiting period from the time of the disability until the first premium is waived. If the insured is *still disabled after* the waiting period, the insurer will *refund the premiums paid* from the start of the disability and waive the following months ahead that they are still disabled Usually expires when insurer reaches age 65

A policy owner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?

The amount of the loan will be subtracted from the death benefit.

Conditional receipt is the most common type of receipt and it is used when

The applicant submits a prepaid application. This receipt says that coverage will be effective either on the date of the application or the date of the medical exam (which ever occurs last.) Applicant must be found to be insurable as a standard risk. Ex: agent collects the initial premium from an applicant and they are given a conditional receipt, but dies the next day. The underwriting process will proceed as if the applicant was still alive. If insurer approves the coverage, the applicants beneficiary will receive the death benefit of the policy If insurer declines , only the premium will be returned it to the beneficiary

Investigative consumer reports cannot be made unless

The consumer is advised in writing about the report within 3 days of the date of the report was requested (this is unlike the consumer report) The consumer must be advised that they have a right to request additional info and the insurer or reporting agency has 5 days to provide the info to the consumer (including name and address) *can result to civil action if don't comply to the Fair Credit Reporting Act*

Consequences of incomplete application. If policy is issued with questions left unanswered ...

The contract will be interpreted as if the insured waived it's right to have an answer to the question

With the reduction of premium dividend option, how is the dividend used?

The dividend is applied to the next year's premium (it reduces the next year's premium)

How long does an insurer have to adjust policy is applicant makes a misstatement of Age & Gender? What happens to the premium?

The insurer can adjust the policy at any time due to a misstatement of age or gender. Misstatement of age on the application will result in *adjustment of premium and benefit.* The policy must be based in the insurers rates *at the date the policy was issued *

Entire Contract/ Changes Provision

The policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. *No change* in this policy will be valid until approved by an executive officer of the insurer and unless such approval be endorsed or attached. Producers have *no authority* to change the policy or to waive any of its provisions.

Whole life living benefits explained

The policyowner *can borrow against the cash value* while the policy is in effect *or can receive the cash value*when the policy is surrendered The cash value, also called *nonforfeiture value* does not usually accumulate until the *3rd policy* and grows *tax deferred*

Whole life insurance premium explained. Is it increasing decreasing or leveled?

The premium is based on the *issue age* which means it remains leveled/the same throughout the life

Convertible provision provides the policyowner with..? Premiums will be based on?

The right to convert the policy to a permanent insurance policy without evidence of insurability Premium will be based on insureds age at the time of conversion

What insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third-party ownership

Return of Premium Term is..? Is the return taxable? What does the beneficiary receive?

This *increasing term* policy provides for a *full refund of premiums* if the insured is still living at the end of the term. These policies charge a higher premium than level term insurance. Not taxable; since the amount returned equals the amount paid in Pays an additional death benefit to the beneficiary 'equal' to the amount of the premiums paid

What is the purpose of the automatic premium loan provision?

To prevent the unintentional lapse of a policy because of nonpayment of the premium

IOLI is where a 3rd party investor who has no insurable interest in the insured initiates a

Transaction designed to transfer the policy ownership rights to someone with NO insurable interest in the insured and who hopes to make a profit upon the death of the insured or annuitant

When should an agent obtain a statement of good health?

When the premium was paid *upon policy* and not at the time of application

When would life insurance policy proceeds be included in the insured's taxable estate?

When there is an incident of ownership at the time of death

Incontestability Provision. What is it? What about material misstatement or concealment, does it apply to them too? What doesn't it apply to?

a provision stating that the insurer cannot deny a claim due to statements in the application after the policy has been in force for *2 years* Even if there has been a material misstatement of facts or concealment of a material fact *This does not apply* in the event of nonpayment of premiums. Nor statements relating *to age, sex, or identity*

Accelerated Death Benefits Rider explained. What does the insured have to have to qualify for this rider? (2) How much is given? Does it affect the DB? Is it legal to pay out entire DB?

allows *insureds who are terminally ill* or *inability to preform activities of daily living ADLs* to collect part or all of their life insurance benefits before they die Maximum given is usually a *percentage of the Face amount* (usually 50%) or could be a dollar amount like $100,000 It does *affect the Death Benefit* It is *legal* for the insurer to pay 100% of the death benefit before the insured dies

The premium on a term life insurance policy is level throughout the term of the policy. This does not apply to ______________________, in which the premium increases annually according to the *attained age*

annual renewable term insurance

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a. Accelerated endowment b. Paid-up additions c. One-year term option d. Paid-up option

c) One-year term option. The dividend is utilized to purchase one year term insurance.

A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as A Benefit schedule. B Gatekeepers. C Usual, customary and reasonable. D Relative-value schedule.

c. Usual, Customary and Reasonable The usual, customary and reasonable approach for determining insurance benefits is based upon the fees normally charged for specific procedures in the geographic location where the services are provided.

Buy-Sell Funding

determines what will be done with a business in the event that an owner dies or becomes disabled. This is also referred to as a business continuation agreement. An individual owner or a partners death, the business must be sold in order to settle the deceaseds estate Used to contractually establish the intent of someone else to purchase the business upon the insured death and sets a value (purchase price) on a business

Denial of claims provision

each claimant who has had a claim denied has the *right to appeal* to the insurer's licensed physician who is responsible for the medical necessity reviews under the plan. *The insurer's physician must respond within a reasonable time, no later than 15 business days.*

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

fully insured

Corridor Deductible what is it ? Is it larger or smaller than the standard deductible?

the deductible between a basic and major medical policy The insured pays a regular deductible. But once the full basic coverage limits stipulated in the policy have been used up, *the insured then has to pay a second deductible (the corridor deductible)* before they can get further coverage for major medical expenses. This corridor deductible is usually *much larger* than your standard deductible.

Options offer insurers and insureds ways to

*Invest or distribute a sum of money* available in a life policy

Riders are added to a policy to

*Modify provisions* that already exists

Policy Provisions: Exclusions- what the policy will not cover. The three *most* common exclusions are?

1. *Aviation* : no coverage for *noncommercial* pilots or do cover but additional premium 2. *Hazardous occupations or Hobbies* (underwriting also has the option of charging a higher premium for insuring these risks) 3. *War or military service*

3 basic types of term coverage (temporary) based on *how the face amount/death benefit changes*

1. Level Term 2. Increasing Term 3. Decreasing Term

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

A. Aleatory In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.

Employer contributions made to a qualified plan A Are subject to vesting requirements. B May discriminate in favor of highly paid employees. C Are after-tax contributions. D Are taxed annually as salary.

A. Are subject to vesting requirements Qualified plans must have a vesting requirement.

Which of the following does NOT describe hospice care? a. It provides care to people with life expectancies of 1 to 2 years. b. It provides continuous care. c. It provides care in a home-like setting. d. It provides care to terminally-ill people

A. It provides care to people with life expectancies of 1 to 2 years. Hospice provides short-term, continuous care in a home-like setting to terminally-ill people with life expectancies of *6 months or less*

An employee quits her job and converts his group policy; the premium for the individual policy will be based on his

Attained age

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a A Settlement option. B Nontaxable exchange. C Nonforfeiture option. D Rollover.

A. Settlement option A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

Which of the following would be considered a non-qualified retirement plan? a. Split collar plan. b. 401K. C. Keogh plan D. Roth IRA

A. Split collar plan

Children's riders attached to whole life policies are usually issued as what type of insurance? a. Term b. Variable life c. Adiustable life d. Whole life

A. Term Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then A The benefit is received tax free. B The benefit is subiect to the exclusionary rule. C IRS has no jurisdiction. D The benefit is received as taxable income.

A. The benefit is received tax free Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

What is the term that relates to the amount of money that an insured is entitled to withdraw from an annuity? a. Vesting b. Build up c. Defined benefit d. SPDA

A. Vesting Vesting is associated with an insured's withdrawal of the balance of an annuity before the contractual term of the annuity ends.

Group life insurance policies are written to provide coverage to members of a group. Which of the following statements concerning group life is correct ? a. 100% participation of members is required in a non-contributory plan. b. Each member covered receives a policy. c. Covers cannot be converted when an individual leaves the group. d. Premiums are determined by age, occupation, and individual underwriting.

A.100% participation of members is required in a non-contributory plan

An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? a. 7 days b. 10 days c. 31 days d. 60 days

B. 10 days The grace period is 7 days if the premium is paid weekly, 10 days if paid monthly, and 31 days for all other modes.

A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default? a. 15 b. 30 c. 60 d. 90

B. 30. A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within 60 days after the due date of the premium in default

After an insurer stops offering health insurance for small employers in this state, how long must the insurer wait before selling small employer insurance in the market again? a. An insurer may begin selling insurance at any time. b. 4 years c. 5 years d. 8 years

B. 5 years If an insurer discontinues selling all small employer health insurance in this state, the insurer must wait at least 5 years before selling the discontinued insurance again.

The inflation protection feature in long-term care policies issued in this state must provide protection for inflation at what percent annually? a. 2% b. 5% c. 6% d. 8%

B. 5% In the state of Florida, insurers must offer each policyholder an inflation protection feature that provides, at minimum, an increase of 5% for the annual benefit level.

What coverage, written in conjunction with hospital expense policies, covers surgeons' fees, anesthesiologist, and the operating room? a. Stop Loss b. Basic Surgical Expense c. Basic Medical Expense d. Major Medical Expense

B. Basic Surgical Expense Basic surgical expense coverage includes surgeons' fees, anesthesiologist, and the operating room when it is not covered as a miscellaneous medical item

All of the following information about a customer must be used in determining annuity suitability EXCEPT a. Annual income. b. Beneficiary's age. c. Tax status. d. Financial experience.

B. Beneficiary's age To ensure suitability of annuity products, producers must obtain relevant information about the consumer's age, income, financial status, tax status, financial experience and objectives. Beneficiary's age is not a suitability factor.

In life insurance policies, cash value increases a. Are only taxed when the owner reaches age 65. b. Grow tax deferred. c. Are income taxable immediately. d. Are taxed annually.

B. Grow tax deferred. Generally life insurance cash values are only income taxed if the policy is surrendered (totally or partially) and the cash value exceeds premiums paid

A typical Accidental Death & Dismemberment policy covers all of the following losses EXCEPT a. Life. b. Income. c. Eyesight. d. Limb.

B. Income Accidental Death & Dismemberment policies cover loss of body parts or life only.

All advertisements are the responsibility of the a) Department of Insurance b) Insurer c) Soliciting agent. d) Advertising agency.

B. Insurer The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them.

Which of the following is NOT an Unfair Trade Practice under Florida law with regard to HMO plans? a. Twisting b. Operating an HMO on a closed-panel basis c. Unfair claim settlement practices d. Failure to maintain claim handling procedures

B. Operating an HMO on a closed-panel basis Florida law allows HMOs to operate as either open-panel or closed-panel.

What is the major difference between a stock company and a mutual company? a. Types of policies issued b. Ownership c. Amount of benefits d. Number of producers

B. Ownership *Mutual companies* are owned by *policyholders*, while *stock companies* are owned by *stockholders*.

When an applicant applies for Medicare supplement insurance, whose responsibility is it to confirm whether the applicant has an accident or sickness insurance policy in force? a. The soliciting agent's b. The insurer's c. The applicant's d. A primary care physician's

B. The insurer's It is ultimately the insurer's responsibility to determine if an applicant already has an accident or sickness policy in force.

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? A $8,000, tax on growth only B $10,000, tax on growth only C $10,000, no tax consequence D $8,000, no tax consequence

C $10,000, no tax consequence During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.

Which of the following is a feature of a disability buyout plan? a. Taxable benefits b. A short elimination period c. A lump-sum benefit payment option d. Tax deductible premiums

C A lump-sum benefit payment option Buyout plans usually allow for a lump-sum payment of the benefit.

After a person's employment is terminated, it is possible to obtain individual health insurance after losing the group health coverage provided by the employer. Which of the following is NOT true? a) The employee can convert from group to individual insurance within 31 days of termination. b) The premium of the individual health insurance policy can be higher than the original policy. c) By law, the new, individual policy must provide the same benefits as the group insurance policy. d) Continuation of group coverage need not include dental, vision, or prescription drug benefits.

C. By law, the new, individual policy must provide the same benefits as the group insurance policy Terminated employees have *31 days* to convert to an individual health insurance policy, *without having to provide proof of insurability*. The insurer can adjust the new. individual health policy's premium as it sees fit, as long as coverage is provided. *The new policy could offer lesser benefits than the original group health policy.*

Which of the following terms is used to name the nontaxed return of unused premiums? a. Interest b. Surrender c. Dividend d. Premium return

C. Dividend

Annually renewable term policies provide a level death benefit for a premium that a. Remains level. b. Fluctuates. c. Increases annually. d. Decreases annually.

C. Increases annually Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

Which of the following is true about the requirements regarding HIV exams? a. Prior informed oral consent is required from the applicant. b. HIV exams may not be used as a basis for underwriting. c. The applicant must give prior informed written consent. d. Results may be disclosed to the agent and the underwriter.

C. The applicant must give prior informed written consent A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction. b) The benefit is received as taxable income. c) The benefit is received tax free. d) The benefit is subject to the exclusionary rule.

C. The benefit is received tax free. Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

In variable universal life insurance, to what policy component does the term "variable" refer?

Cash value and death benefit

The continuation of coverage provision allows terminated employees to continue coverage under a group health insurance plan for up to a. 3 months. b. 6 months. c. 12 months. d. 18 months.

D. 18 months Upon termination of employment, eligible employees may elect the continuation of coverage for an additional 18 months or until they are eligible for other group coverage. A terminated employee must provide notice to the insurer within 63 days of termination.

At what age are individuals become INELIGIBLE for Florida Healthy Kids coverage? a. 21 b. 15 c. 16 d. 19

D. 19 Only children under the age of 19 are eligible for Florida Healthy Kids coverage.

What is the statute of limitation on lawsuits for health insurance policies? a) 1 year b) 2 years c) 4 years d) 5 years

D. 5 years No legal action may be brought on a health insurance policy within 60 days after written proof of loss has been given. After 60 days, in the state of Florida, legal action may be brought against the insurer for up to 5 years after filing proof of loss.

The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have? a. Restrictive b. Accidental Death c. Comprehensive d. Accident-only

D. Accident-only Accident-only policies cover medical benefits related to an accident. Medical conditions related to sickness are not covered.

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest and consent

Which of the following is NOT an example of a valid insurable interest? A Business partners in each other's lives B Employer in key employee's life C Child in parents' lives D Debtor in the life of the creditor

D. Debtor in the life of the creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring their own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to the policyowner. A debtor does not have an insurable interest in the creditor.

This arrangement specifies who will purchase a disabled partner's interest in the event he or she becomes disabled. a. Business overhead expense b. Key-person insurance c. Employee benefit plan d. Disability buyout

D. Disability buyout The disability buyout agreement specifies who will purchase a disabled partner's interest and legally obligates that person or party to purchase such interest upon disability.

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? a. Fixed period b. Life income period certain c. Extended term d. Fixed amount

D. Fixed amount

Which of the following is NOT true regarding a non qualified retirement plan? a. Contributions are not currently tax deductible b. It can discriminate in benefits and selecting participants c. Earning grow tax deferred d. It needs IRS approval

D. It needs IRS approval

What type of life insurance is best suited to cover a mortgage?

Decreasing term

For a retirement plan to be qualified, it must be designed for whose benefit?

Employees

Agents are the company's front line, and is referred to as a

Field underwriter

How premiums are invested in annuities? (2)

Fixed and variable

What type of report provides information about the applicant's hobbies, habits and financial status?

Investigative consumer report

Example of riders: Alan's life insurance policy contains both *guaranteed insurability rider* and *waiver of premium rider* . He becomes permanently disabled 3 years after and 7 months later has a child that was born. What will happen?

Not only are Alan's life insurance premiums waived but Alan may purchase additional amount of insurance for his child *with the premiums on those increases also waived*

Unilateral contract is when

Only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises however an insurer is legally bound to pay losses covered by a policy in force Ex: insured losses job and calls to cancel life insurance policy. The insurance company cannot file legal action for cancellation. However the insurer cannot refuse the Death benefit with the insured has been paying premium. **if premium is current then the named beneficiary has legal rights to the DB**

Explain Other-insured riders. Who does it provide coverage for? What life insurance policy is this rider usually found in? Also known as?

Provides coverage for *one or more family members* other than the insured *usually found in level term insurance* Also known as a family rider

What are the two premium payment methods for annuities?

Single premium (Lump sum) Periodic premium (accumulation/installments)

The annually, renewable term policies, what is the annual premium based upon?

The insured's attained age

If an insured skips a premium payment on a universal life policy, what happens?

The missing premium may be deducted from the policy's cash value. The policy will NOT lapse

What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

The number of payments that purchase the annuity

What is the difference between a single, premium and a flexible premium payment options in a deferred annuity?

The number of payments that purchase the annuity

What happens to the premium in an annually renewable term policy?

The premium increases with each renewal

Which of the following is NOT covered under a long-term care policy? a. Acute care in a hospital b. Adult day care c. Hospice care d. Home health care

a. Acute care in a hospital

In the event of a divorce, which of the following would allow a divorcee to continue receiving group health coverage under an insureds spouse's plan for an additional 36 months? a. COBRA b. MSA c. HIPPA d. Social Security

a. COBRA

What is another name for interest-sensitive whole life insurance ? a. Current assumption life b. Variable life c. Term life d. Adjustable life

a. Current assumption life

Which of the following best describes annually renewable term insurance? a. it is level term insurance b. it requires proof of insurability at each renewal c. Neither the premium nor the death benefit is affected by the insureds age d. It provides an annually increasing death benefit

a. it is level term insurance

Aleatory Contract

an exchange of unequal amounts or values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss

Which of the following is NOT true of life settlements? a. They could be sold for an amount greater than the current cash value b. They involve insurance policies with large face amounts c. The seller must be terminally ill d. They could be used for a key person coverage

c) The seller must be terminally ill

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT a. Note on the application the reason for the change b. Destroy the application and complete a new one c. Erase the incorrect answer and record the correct answer d. Draw a line through the first answer, record the correct answer, and have the applicant initial the change

c. Erase the incorrect answer and record the correct answer (Agent should not use white-out, erase, or obliterate any answers)

Which of the following riders would NOT increase the premium for a policyowner? a. Waiver of premium rider b. Multiple indemnity rider c. Impairment rider d. Payor benefit rider

c. Impairment rider

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? A The insured would not need to prove insurability for a conversion policy. B The insured may convert coverage to an individual policy within 31 days. C The premium for individual coverage will be based upon the insured's attained age. D The insured may choose to convert to term or permanent individual coverage.

d) The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, *the insurer will determine the type of coverage*, usually permanent insurance.

A health insurance policy that pays a lump sum if the insured suffers a heart attack or stroke is known as a. Major medical b. AD&D c. Medical expense d. Critical illness

d. Critical illness

Common Disaster Provision is when..? Most insurers timeframe is what and means what? Who does this provision protect? What law addresses this?

if insured and primary beneficiary die at approximately the same time from a *common accident* with no clear evidence of who died first, the policy proceeds are to be distributed as if *the primary beneficiary died first* Most insurers have a specific time frame, usually 14-30 days, in which the primary beneficiary death must occur in order for this provision to apply. *As long as the beneficiary dies within this specified period of time following the death of the insured, it will still be interpreted that the beneficiary died first* This provision *protects the contingent beneficiary* The *Uniform Simultaneous Death Law*

A __________________ is an agreement between an employer and an employee in which they hold joint ownership of a permanent cash-value life insurance policy, including its benefits and premium

split-dollar life insurance plan

Representations are

statements made by the applicant for insurance application that are believed to be true but are not guaranteed to be true **insureds statements on application are this **

Under what circumstances can an agent's appointment be transferred to another person? a. Under no circumstances b. When another person works for the same appointing insurer c. With the Commissioner's written approval d. If the agent's license has been temporarily suspended

A. Under no circumstances (Any issued appointment is valid only for the person named and is not transferable to another person.)

When an insurer terminates an agent's appointment, the insurer must do all of the following EXCEPT a. Provide a 30-day advance notice to the Commissioner b. Provide a 60-day advance notice to the agent. c. File a written notice with the department of insurance within 30 days of termination d. Make sure that the agent's contract rights are not violated.

A. Provide a 30-day advance notice to the Commissioner (An appointing entity may terminate an agent's appointment at any time, subject to an appointees contract rights and with a 60-days advance notice Once terminated the appointing entity must file a written notice with the department of insurance within 30 days)

All of the following are true regarding rebates EXCEPT a. Rebates are only allowed if specifically states in the policy b. Rebates can be anything of monetary value given as inducement to purchase insurance c. Dividends are not considered to be rebates d. Rebates are allowed if it is in the best interest of the client in

D. Rebates are allowed if it is in the best interest of the client in

What does the application of contract of adhesion mean?

Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured

According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed?

The primary beneficiary died before the insured According to the "common Disaster" clause, if it cannot be determined who died first, the insured or the primary beneficiary, it will be assumed the primary beneficiary died first, so the proceeds go to the contingent beneficiary. Proceeds will go to the insured's estate only if there is no contingent beneficiary.

Underwriting a group health insurance plan that is paid for by the employer requires all of the following EXCEPT a. Individual members of the group may select the level of benefits for their own coverage b. The plan is based on other than individual selection c. All eligible employees must be covered d. Coverage for plan participants is uniform

a. Individual members of the group may select the level of benefits for their own coverage

A long-term care policy may provide coverage for (4)

1. Home health care 2. Adult day care 3. Hospice care 4. Respite care

Where are premiums from fixed annuities invested?

A general account A fixed annuity is characterized by a general account into which the purchase payments (premiums) are invested

What is the minimum age that a person can obtain a life insurance license? a. 18 b. 21 c. 23 d. 25

A. 18 (A person must be at least 18 years old in order to obtain a life insurance agent's license.)

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty a. Twisting. b. Defamation. c. Misrepresentation. d. Rebating.

A. Twisting (Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.)

The Office of Insurance Regulation is responsible for all of the following insurer activities EXCEPT a. Premium financing b. Issue of securities. c. Viatical settements d. Policy forms.

B. Issue of securities (The Office of Financial Regulation is responsible for all activities of the Financial Services Commission relating to the regulation of banks, credit unions, finance companie: and the securities industry. All the other listed activities are the responsibility of the Office of Insurance Regulation)

An insurance agent B likes to add additional coverages applicants policies and charge them for such coverages without their knowledge. The agent is guilty of: a. Defamation b. Sliding c. Misrepresentation d. Rebating

B. Sliding. Charging an applicant for a specified additional coverage or product, in addition to the cost of the coverage applied for, without the applicants knowledge or consent

Insurers offering small employer health insurance are prohibited from (5)

Providing varying coverage to employees 1. In different geographical locations 2. Health status 3. Claims experience 4. Industry 5. Occupation

Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policyowner? a. Payment of claim b. Change of beneficiary c. Entire contract Clause d. Proof of Loss

a. Payment of claim (this provision states that the claims must be paid to the policyowner, unless the death proceeds needs to be paid to a beneficiary)

Premium payments for personally-owned disability income policies are a. Eligible for tax credits b. Tax deductible c. Tax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions d. not tax deductible

d. not tax deductible

What is a Joint Life policy? Is it Term or permanent or both? Death benefit is paid when? How does the premium work? When is the policy ended? Can business partners use this plan?

A *single* policy that is designed to insure *two or more* lives. It is both Term and permanent Death benefit is paid upon the *first* death only The premium is based on a *joint average age* making it cheaper than buying 2 individual policy's Insurance is no longer present *after the first of the insured dies* Business partners can use too in the funding of a *buy-sell agreement*

HIPAA act is ..... & patients have the right to

A federal Law that protects health information. View their own medical records, as well as the right to know who had accessed it over the previous 6 years

All of the following are general requirements of a qualified plan EXCEPT A The plan must provide an offset for social security benefits. B The plan must be communicated to all employees. C The plan must be for the exclusive benefits of the employees and their beneficiaries. D The plan must be permanent, written and legally binding.

A. The plan must provide an offset for social security benefits. Plans must meet the general requirements established by IRS.

Who can make a fully deductible contribution to a traditional IRA? A A person whose contributions are funded by a return on investment B An individual not covered by an employer-sponsored plan who has earned income C Anybody; all IRA contributions are fully deductible regardless of income level D Someone making contributions to an educational IRA

B. An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

A fixed annuity is fixed in the sense that it provides (3)

- a guaranteed *minimum rate of interest* - income payments that *do not* vary from one to the next (EQUAL) - guarantees the specified *dollar amount* for each payment and the *length* of the payout period

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

$10000, no tax consequence During an IRA direct transfer (or *direct rollover*), the full amount gets reinvested from one plan to the other.

In insurance, an offer is usually made when A An applicant submits an application to the insurer. B The insurer approves the application and receives the initial premium. C The agent hands the policy to the policyholder. D An agent explains a policy to a potential applicant.

A. An applicant submits an application to the insurer. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

Under an extended term nonforfeiture option, the policy cash value is converted to a. A higher face amount than the whole life policy b. The same face amount as in the whole life policy c. The face amount equal to the cash value d. A lower face amount than the whole life policy

B The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to *convert to term insurance for the same face amount* as the former permanent policy.

An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This indicates that his policy is written with a 30-day A Probationary period. B Waiver of benefits period. C Elimination period. D Blackout period.

C. Elimination period The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.

How many consecutive months of coverage (other than in an acute care unit of a hospital) must LTC insurance provide in this state? A 24 B 36 C 6 D 12

D. 12 *Long-term care policies*, which can be marketed in the form of individual policies, group policies, or as riders to life insurance policies, provide coverage for individuals who are no longer able to live an independent lifestyle and require living assistance at home or in a nursing home facility. They *must provide coverage for at least 12 consecutive months in a setting other than an acute care unit of a hospital.*

No insurance policy form can be issued, delivered, or used in this state unless it has been a. Reviewed by the Office of Insurance Regulation and approved by the Governor. b. Approved by the Office of Financial Regulation. c. Developed by the Chief Financial Officer. d. Filed with and approved by the Office of Insurance Regulation.

D. Filed with and approved by the Office of Insurance Regulation. Prior to the use of any policy or contract form, application form, rider, or endorsement, insurers must submit the forms and all changes to the Office and have the forms approved.

Which statement is NOT true regarding a policy summary? a. It is generally given to applicants before acceptance of the initial premium. b. It must include the generic name of the basic policy and each rider. c. It must include the date the policy summary is prepared. d. It must be combined with a sales illustration.

D. It must be combined with a sales illustration The policy summary must be a *separate document* It *cannot* be combined with a sales illustration.

An insured has endured multiple surgeries and hospitalizations for an illness during the last few months. Her insurer no longer bills her for medical expenses. Which of the following allows for that? a. Grace period b. Waiver of premium c. Maximum loss d. Stop-loss limit

D. Stop-loss limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

Consumer reports include..

written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources

Return of Premium Rider explained. What is it ? When does it expire? Does it affect Death Benefit?

*If death happens before given age*, the original face amount payable to beneficiary. The amount equal to *all premiums previously paid* is *also* payable to the beneficiary along with face amount Expires at *age 60* usually It does *affect DB* Example: Janet purchased $200,000 life insurance policy with Return of Premium rider. She died 10 years later. Janet's beneficiary receives $200,000 (face amount) and $10,000 (premiums she paid before dying) for a total of $210,000 to the beneficiary

Policy Options: Dividend Options (4-6) and explain each *(Paid-up additions, Paid-up option, One-year option)*

*Paid-up additions* : used to purchase a single premium policy in addition to the face amount of the permanent policy. *increases the death benefit of the original policy and this is the AUTOMATIC option if the owner doesn't choose one* - *Paid-up option* : insured first accumulates the dividends at interest, uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early (paid sooner than 100) -*One-year option* : insurance company uses the dividends to purchase additional insurance in the form of one- year term insurance that increases the overall policy death benefit *if insured dies during one-year term, beneficiary receives 2 death benefits*

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true? a. The cost of coverage paid by the employer is tax deductible by the employees. b. The cost of coverage is a deductible expense by the employer. c. The value of insurance will be deducted from the employees compensation. d. The cost of coverage paid by the employer is taxed to the employees.

B. The cost of coverage is a deductible expense by the employer. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

All of the following are basic types of health insurance plans EXCEPT a. Basic medical expense. b. Workers compensation. c. Major medical. d. Health maintenance organizations.

B. Worker's compensation Workers Compensation coverage is actually considered a liability coverage because it pays those medical expenses of employees that an employer is legally liable to provide.

What is the purpose of key person insurance? a. To insure retirement benefits are available to all key employees b. To maintain an account that insures the owner of a company remains solvent c. To lessen the risk of financial loss because of the death of a key employee d. To provide health insurance to the families of key employees

C. To lessen the risk of financial loss because of the death of a key employee A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contacts. A business can lessen the risk of such loss by the use of key person insurance.

In a disability policy, the probationary period refers to the time a. Between the first day of disability and the day the disability must continue before the insured receives any benefits. b. Between the 10th day of an illness-related disability and the first payment. c. Between the first day of disability and the actual receipt of payment for the disability incurred. d. During which illness-related disabilities are excluded from coverage.

D. During which illness-related disabilities are excluded from coverage The probationary period limits coverage on new policies for certain illness-related conditions.

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount B Amount paid into the plan C Cash value of the plan D Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

D. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.

How must a replacing producer respond to an applicant wishing to replace existing life insurance? a. The producer must collect the existing policies and turn them over to the replacing insurer. b. The producer must request the permission of the existing insurer. c. The producer has no specific duties. d. The producer must provide the applicant with a Notice Regarding Replacement.

D. The producer must provide the applicant with a Notice Regarding Replacement (In a replacement transaction, a producer must present to the applicant a Notice Regarding Replacement, signed by both the applicant and the producer.)

What does the "level" in Level Term Insurance stand for? Can Level Term be converted?

It refers to the Face amount or the death benefit which does not change Ex: $100,000 10-year level term policy will provide $100,000 death benefit if the insured dies and premium will also remain level during the 10-yr period It can be converted to Whole Life if survive after 'End of Term'

Decreasing Term Insurance is...? Is it convertible?

term insurance in which the annual *premium remains constant/leveled* but the face amount/death benefit of the policy declines each year. Death benefit is at $0 at the end so it's *convertible but NOT renewable* Commonly purchased to insure the payment of a mortgage or other debts of insured dies

Which provision states that the insurance company must pay Medical Expense claims immediately? A Time of Payment of Claims B Payment of Claims C Legal Actions D Relation of Earnings to Insurance

A. Time of Payment of Claims The Time Payment of Claims provision requires that claims will be paid immediately upon receipt of proofs of loss except for periodic payments, which are to be paid as specified in the policy.

Which of the following would be required to be licensed as an insurance producer? a) An insurance company director who performs executive, administrative and managerial duties b) A salaried employee who advertises and solicits insurance c) A person whose activities are limited to producing insurance advertisements d) A salaried full-time employee who furnishes information for group insurance

B. A salaried employee who advertises and solicits insurance A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.

Who might receive dividends from a mutual insurer? a) Stockholders b) Agents c) Policyholders d) Subscribers

C. Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. *Dividends received by policyholders of a mutual insurer are not taxable.*

If an insured continually uses the automatic premium loan option to pay the policy premium, A The cash value will continue to increase. B The insurer will increase the premium amount. C The policy will terminate when the cash value is reduced to nothing. D The face amount of the policy will be reduced by the automatic premium loan amount.

C. The policy will terminate when the cash value is reduced to nothing. This option, usually elected at the time of application, provides that in case of a possible policy lapse, the premium will be automatically paid form the contract's guaranteed cash value. However, once the cash value is exhausted, the policy will terminate.

An insured under a group health plan has a dependent child who has an intellectual disability. When the child was enrolled in the insured's policy, the insurer offered coverage at a much higher rate than for other dependents. Which of the following is true? a. The insurer may exclude the disability coverage with a rider and therefore lower premium costs. b. The insurer is protecting itself from adverse selection. c. This is considered an illegal discrimination d. This is an acceptable practice.

C. This is considered an illegal discrimination Discrimination against handicapped dependents is prohibited. Health insurers cannot refuse to provide coverage, or charge unfairly discriminatory rates for health insurance coverage for a person solely because of an intellectual or physical disability.

Underwriting is a major consideration when an insured wishes to replace her current policy for all of the following reasons EXCEPT A Due to age or health, the policy may change dramatically. B Pre-existing conditions that were previously covered may not be covered under the replacing policy. C Benefits may change. D Premiums always stay the same.

D Premiums always stay the same. Underwriting is important when replacement is involved. It is an underwriter's duty to evaluate risk and decide whether or not a person is eligible for coverage. When replacement is involved, the insured may be under the assumption that a replacing policy is in his/her best interests, but after being evaluated by an underwriter, where premium and risk are exchanged, an insured may not be paying the same premium or receiving the same benefits.

In order to maintain an insurance license, an agent licensed for less than 6 years will need to satisfy Florida's continuing education requirement of a. 10 hours every vear b. 20 hours every yeal. c. 20 hours every 2-year period d. 24 hours every 2-year period

D. 24 hours every 2-year period (Agents licensed for less than 6 years must complete 24 credit hours of continuing education every 2 years. Agents licensed 1 hours. As part of their CE hours, all agents must complete a 4-hour Law and Ethics updates course)

When a group policy terminates, every individual insured under the policy will be entitled to have an individual policy if the insured has been insured by the group policy for at least how many years prior to policy termination? a. 7 years b. 1 year c. 3 years d. 5 years

D. 5 years (When a group policy terminates, every individual insured under the policy at the date of such termination who has been so insured for at least 5 years prior to such termination date will be entitled to have issued to him by the insurer an individual policy of life insurance.)

claim forms provision

the insurer is required to send the insured a claim form within 15 days after notice is received Upon receipt of a notice of claim, the insurer must furnish to the claimant such forms as are usually furnished by it for filing proofs of loss. If the forms are not provided within 15 days after the giving notice, the claimant will be deemed to have complied with the requirements of this policy as to proof of loss upon submitting, within the time fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character, and the extent of the loss for which claim is made.

Legal actions provision

the law allows the policyholder to bring an action against the insurer, provided the suit is filed at least *60 days after proof of loss* has been given, and the *loss is not paid for within 120 days*. The statute of limitation on lawsuit is 5years after proof of loss is furnished to the insurance company. - The insured cannot take legal action against the company in a claim dispute until after 60 days from the time the insured submits proof of loss. *A claimant must take legal action against the company within 5 years*

Who does the secondary notice provision protect? a. Elderly insureds b. The policyowners c. Secondary addressees d. The insurer

A. Elderly insureds. (The secondary notice provision protects elderly insureds, and prevents the policy from lapsing for nonpayment of premium after the grace period without the insurer notifying the policyowner and a designated secondary addressee of the impending lapse in coverage.)

The insuring clause of a disability policy usually states all of the following EXCEPT A The method of premium payment. B The identities of the insurance company and the insured. C That insurance against loss is provided. D The types of losses covered.

A.The method of premium payment The insuring clause, usually on the first page of the policy, is the general statement that defines the insurance agreement and identifies the insured and the insurance company and states what kind of loss (peril) is covered.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT a) A securities license. b) A life insurance license c) SEC registration d) FINRA registration.

C SEC registration. Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

If a life insurer holds the proceeds of any policy it issues, which of the following is true? a. The proceeds will be more likely to be subject to a creditor's claims against a beneficiary. b. Death benefits will be increased as an incentive. c. Premiums will be decreased as an incentive. d. The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.

D. The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner. *A life insurer may hold the proceeds of any policy it issues, provided the insured agrees. These proceeds may be exempt from any creditor's claims againstla beneficiary other than the policy owner.*

Which of the following products requires a securities license? A Fixed annuity B Equity Indexed annuity C Deferred annuity D Variable annuity

D. Variable Annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.

What required provision protects against unintentional policy lapse?

Grace period

Whole life's *Limited payment* explained. How is it designed? What are the two most common types of plans for Limited ? What happens to Cash value?

It's designed so that premiums for coverage will be *completely paid-up well before age 100*. *20-pay life* is most common. Coverage is completely paid for in 20 years or until death *LP-65* is it paid up at age 65 Cash value builds faster and higher annual premium

Difference between Nonforfeiture options and settlement options

Nonforfeiture options is provision included in certain life insurance policies stipulating that the policyholder will not forfeit the value of the policy if the policy lapses after a defined period due to missed premium payments *cash surrender value extended term insurance (doesn't last til 100) reduced paid-up insurance( last until age 100)* Settlement options is how proceeds are paid to the designated beneficiaries or when the insured lives past 100. *lump sum Interest only Fixed period Fixed amount Life income option*

What is the Annuity Period (aka Annuitization Period, Liquidation Period, Pay-Out Period) How long may it last for? What happens if the investor dies? During the annuity period/annuitization is the funds are..?

The time during which the sum that has been accumulated during the *accumulation period is converted into a stream of income payments to the annuitant.* May last for the lifetime or for a specified period If investor dies then the *insurer* (owner) keeps whatever is remaining During this period, funds are paid OUT to the annuitant

An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be renting soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy? a. Single Premium Immediate Annuity b. Flexible Premium Deferred Annuity c. Flexible Premium Immediate Annuity d. Single Premium Deferred Annuity

a. Single Premium Immediate Annuity

When does Medicare cover nursing home care? a. Only for those age 80 and older b. Medicare covers all nursing home care for eligible policyholders c. Only if it is part of treatment for a covered illness or injury d. Only if the deductible has been met

C. Only if it is part of treatment for a covered illness or injury Medicare will not cover long-term care or nursing home care unless it is part of the treatment for a covered illness or injury.

In order for a debtor group to qualify for group life insurance, what should be the minimum number of participants joining the plan every year? a. 10 b. 25 c. 50 d. 100

D. 100 Life insurance policies can be issued to debtor groups if the group of eligible debtors is receiving new entrants at the rate of at least 100 persons a year.

Single Premium Whole Life explained. How is it designed? Cash value does what?

Designed to provide a *level death benefit* to the insureds age 100 for a *one-time lump sum payment* The policy is completely paid-up after *one premium* Generates immediate cash (through interest)

Which of the following information will be stated in the consideration clause of a life insurance policy? a. The parties to the contract b. the time period allowed for the payment of premium c. The conditions for insurability d. The amount of premium payment

d. The amount of premium payment The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments

Which of the following reports will provide the underwriter with the information about an insurance applicants credit? a. Any federal report b. Consumer report c. Inspection report d. Agents report

b. Consumer report (it includes written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources)

Any annuitization in 12 months or less from the effective date is an

Immediate annuity

Which of the following statements is INCORRECT?a. Medicare and Medicare supplements does not cover skilled nursing care b. Medicaid does not pay for nursing home care in any case c. Medicare and Medigap policies do not provide coverage for long-term custodial or nursing home care d. Medicare and Medigap policies provide coverage for long-term custodial or nursing home care

d. Medicare and Medigap policies provide coverage for long-term custodial or nursing home care

How often must domestic insurance companies be examined by the Chief Financial Officer in Florida? a. Annually b. At least every 5 years c. Every 2 years d. Not more frequently than every 3 years

B. At least every 5 years (Examinations must be conducted at least once every 5 years or as frequently as deemed aporopriate by the Office)

Who examines the books and records of insurance companies in Florida? a. The Governor b. The Chief Financial Officer c. The NAIC d. The Commissioner of Insurance

B. The Chief Financial Officer (The CFO and the Office of Insurance Regulation have the right to examine the affairs of every person or entity authorized to transact insurance in this state. Examinations must be conducted at least once every 5 years)

All agents licensed in this state must complete how many hours of continuing education specific to law and ethics? a. 2 b. 3 c. 4 d. 5

C. 4 (As part of their CE hours, all agents must complete a 4-hour Law and Ethics updates course every 2 years)

Which of the following must an insurer obtain in order to transact insurance within a given state? a. Business entity license b. Insurer's license c. Certificate of authority d. Producers certiticate

C. Certificate of authority. All insurers (domestic. foreign, or alien must obtain a certiticate of authority before transacting insurance within a given state.

Must have 4 essential elements for a contract to be legally binding. List the 4 and describe the meaning

- Agreement/ Offer & Acceptance: Applicant usually makes the offer when submitting the application. Acceptance takes place when a insurer's underwriter approves the application and issues - Consideration: the binding force. The insureds consideration is payment of premium and the representations made in the application. The insurers consideration is to promos to pay in the event of a loss - Competent parties: both parties of legal age, both mentally competent to understand the contract, both not under the influence - Legal purpose: purpose of contract must be legalllegal. Insurance legal.

Who does the secondary notice provision protect? a. Elderly insureds b. The policy owners c. Secondary addressees d. The insurer

A. Elderly insureds (The secondary notice provision protects elderly insureds, and prevents the policy from lapsing for nonpayment of premium after the grace period without the insurer notifying the policyowner and a designated secondary addressee of the impending lapse in coverage.)

Change of Beneficiary Provision

*policyowner has the right to change beneficiaries only if he or she has been designated revocable* Unless the insured makes an irrevocable designation of beneficiary, the right to change of beneficiary is reserved to the insured and the consent of the beneficiary or beneficiaries will not be required to surrender, make any change of beneficiary or beneficiaries, or to any other changes in this policy.

Policy Options: Dividend Options (1-3) and explain each *(Cash, Reduction of premium, Accumulation at interest)*

- *Cash*: the insurer simply sends the policyowner a check - *Reduction of premium*: insurer uses the dividend to reduce the next year's premium - *Accumulation at interest* : insurance company keeps it in an account where it accumulates interest. The owner is allowed to withdraw at any time. *Interest is taxable*

Policy Options: Settlement. 5 settlement options and explained

1. *Cash payment*: the contract is designed to pay the proceeds in cash calles a lump sum. *automatic option, if an option is not chosen* Usually not taxable 2. *Life income*: Provides an income the beneficiary cannot outlive; no guarantee that entire principle will be paid out (if dies too soon) 3. *Interest Only*: insurer retains the principal and only pays out interest. Beneficiary will *only* receive payments of the *interest* earned on the death benefit 4. *Fixed income* : Payments for a specified time period until all proceeds are paid out 5. *Fixed Amount* : payments in specified amounts until all the proceeds are paid out

Ray has an individual major medical policy that requires a coinsurance payment. Ray very rarely visits his physician and would prefer to pay the lowest premium possible. Which coinsurance arrangement would be best for Ray? a. 50/50 b. 75/25 c. 80/20 d. 90/10

A. 50/50 After the deductible has been paid, the insurance company will pay a specified amount for a physician's visit, while the insured pays the remaining percentage. This is called "coinsurance". Plans will often be listed in a fraction format, with the first number representing the amount that will be paid by the insurer. The less the insurer must pay with coinsurance payments, the lower the premiums will be. Therefore, Ray should choose the 50/50 plan.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a. For 20 years or until death, whichever occurs first. b. Until the policyowner reaches age 65. c. For at least 20 years. d. Until the policyowner's age 100, when the policy matures.

A. For 20 years or until death, whichever occurs first Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all Wif the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for *accidents* become effective? a. Immediately b. After 14 days c. After 21 days d After 31 days

A. Immediately Coverage for accidents is immediate when reinstatement occurs, *but coverage for sickness may have a waiting period of about 10 days.*

Which of the following statements is INCORRECT? a) Replacing insurance policies for the purpose of making commissions is legal. b) Misrepresenting the true nature or facts of a policy or its benefit in order to induce a policyholder to surrender one policy and replace it with another is illegal. c) It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly. d) Discrimination in rates, premiums, policy benefits, etc. for persons within the same class or with the same life expectancy is illegal.

A. Replacing insurance policies for the purpose of making commissions is legal. *Churning* is defined as replacing insurance policies for the sole purpose of making commissions, and it is illegal.

All of the following must be presented on a small group health insurance identification card EXCEPT a. The insured's address. b. The name of the certificate holder. c. The member identification number. d. Contact numbers for physicians.

A. The insureds address Upon issuing small group health insurance, an insurer must provide all insureds with an identification card which includes the insured's name, name of certificateholder, the type of health plan, identification number, group number, national plan identifier, and insurer contact information for insureds and physicians.

The gatekeeper of an HMO helps A Determine which doctors can participate in an HMO plan. B Control specialist costs. C Determine who will be allowed to enroll in an HMO program. D Prevent double coverage.

B) Control specialist costs Initially the member chooses a primary care physician, or gatekeeper. If the member needs the attention of a specialist, the primary care physician must refer the member. This helps keep the member away from the higher priced specialists unless it is truly necessary.

Which of the following will NOT be considered unfair discrimination by insurers? a) Assigning different risk classifications to applicants based on gender identity b) Discriminating in benefits and coverages based on the insured's habits and lifestyle c) Charging applicants with similar health histories different premiums based on their ethnicity d) Cancelling individual coverage based on the insured's marital status

B. Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.

How do employer contributions to a Health Savings Account affect the insured's taxes? A The employer contributions are deducted from the individual insured's tax calculations. B The employer contributions are not included in the individual insured's taxable income. C The employer contributions are taxed at the same rate as the Social Security tax rate. D The employer contributions are taxed to the individual insured as earned income.

B. The employer contributions are not included in the individual insured's taxable income. HSA contributions made by an employer are not included in the determination of an individual's taxable income

Which of the following is TRUE regarding the premium in term policies? a. Decreasing term policy will have a decreasing premium. b. The premium is level for the term of the policy. c. Only level term policy has a level premium. d. The premium in term policies is not based on the insured's age.

B. The premium is level for the term of the policy The premium on a term life insurance policy is level throughout the term of the policy. *Only the amount of the death benefit may change* This does not apply to annual renewable term insurance, in which the premium increases annually according to the attained age.

Which of the following must be present in all Medicare supplement plans? a. Outpatient drugs b. Plan C coinsurance c. Plan A d. Foreign travel provisions

C. Plan A In order to standardize the coverage provided under Medicare supplement policies, the NAIC has developed standard Medicare Supplement benefit plans which are identified with the letters A through N. The benefits in Plan A are considered to be core benefits and must be included in the other types

What is a Survivorship Life policy? Other names for policy? Death benefit is paid when? How does the premium work? Is the premium higher in this policy or joint life policy? Can business partners use this plan?

It insurers *two or more* lives Also known as *second-to-die* or *last survivor* policy Death benefit is paid on the *last death* rather than the first Premium that is based on a joint age (cheaper than 2 individual policies) Expectant of death in a sense is extended (because last death) which means *lower premium* Business partners don't use this plan

Variable Life Insurance is Term or Whole life? Who is it regulated by? Premium? Face Amount? Cash Value? Policy Loans?

It's Permanent/Whole life insurance *dually regulated by state and federal government* *Investment risks & security contracts* Premium is *fixed* if whole life and *flexible* if universal life Face amount can increase or decrease to a stated minimum Cash value *not guaranteed* placed in insurers separate account Policy loans can borrow cash value

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? a. Reciprocal association b. Fraternal benefit society c. Mutual company d. Stock company'

B. Fraternal benefit society (Fraternal insurers operate on the basis of a lodge or charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.)

Who does the secondary addressee provision protect? a. The insured whose policy is being replaced b. The insurance company c. The insured over the age of 64 d. Contingent (secondary) beneficiaries

C. The insured over the age of 64 ( The secondary notice/addressee provision protects elderly insured. Coverage for persons age 64 and older that has been in force for at least 1 year cannot lapse for nonpayment of premium after expiration of the grace period without the insurer notifying the policyowner and a specified secondary addressee (if designated in writing by the policyowner) of the impending lapse in coverage.)

Medicare will cover nursing home care if it is part of

Part of treatment for a covered injury or illness

With Adjustable Life, the owner can change all of the following EXCEPT a. The insured b. The death benefit c. The premium d. The length of time the coverage will last

a. The insured

Which of the following riders would NOT cause the death benefit to increase? a. Accidental Death Rider b. Payor benefit rider c. Guaranteed insurability rider D. Cost of living rider

b) Payor Benefit Rider.

Which of the following is NOT considered eligible for group life insurance? a. A public employer group with 5 members b. A credit union that needs coverage only for it's top 20 employees c. A debtor group d. A labor union

b. A credit union that needs coverage only for it's top 20 employees (Must be for ALL eligible members of a credit union)

Which of the following does the Insuring Clause NOT specify? a. The name of the insured b. A list of available doctors c. Covered parts d. The insurance company

b. A list of available doctors

What is a foreign insurer? a. An insurer with licensed agents who are citizens in more than one country b. An insurer with a home office in another state c. An insurer with a home office in another country d. An insurer with licensed agents doing business in other countries

B. An insurer with a home office in another state (A domestic insurer's home office is in this state, a foreign insurer's is in another state, and an alien insurer's is in another country.)

In insurance transactions, fiduciary responsibility means a. Being liable with respect to payment of claims. b. Commingling premiums with agents personal funds. c. Handling insurer funds in a trust capacity. d. Maintaining a good credit record

C. Handling insurer funds in a trust capacity (An agent's fiduciary responsibility includes handling insurer funds in a trust capacity)

Which of the following is true regarding branch agency licensing? a. All its agents must be licensed. b. The branch must secure an agency license c. There are no special licensing requirements d. Agent in charge must be licensed

D. Agent in charge must be licensed. (Each branch location established by an agent, agency, firm, corporation, or association must be in the active full-time charge of a licensed general lines, or life and/or health agent who is appointed to represent one or more insurers)

No insurance policy form can be issued, delivered, or used in this state unless it has been a. Reviewed by the Office of Insurance Regulation and approved by the Governor. b. Approved by the Office of Financial Regulation. c. Developed by the Chief Financial Officer. d. Filed with and approved by the Office of Insurance Regulation.

D. Filed with and approved by the Office of Insurance Regulation (Prior to the use of any policy or contract form, application form, rider, or endorsement, insurers must submit the forms and all changes to the Office and have the forms approved)

A producer who fails to separate premium monies from his own personal funds is guilty of a. Commingling b. Larceny. c. Embezzlement d. Theft

A. Commingling (It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds)

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a. A required disclosure b. A legal representation of the Association c. An unfair trade practice d. A misrepresentation

C. An unfair trade practice (It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is ILLEGAL TO ADVERTISE, the statement is STILL TRUE and would not be considered a misrepresentation"

Annually Renewable Term is a form of what insurance that offers what?

Level term insurance that offers the MOST insurance at the Lowest cost

In a group health policy, a probationary policy is intended for people who a. want lower premiums b. Join the group after the effective date c. Have a pre-existing condition at the time they join the group d. Have additional coverage through a spouse

b. Join the group after the effective date

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

The contingent beneficiary If none, the benefits are paid to the insureds estate

What is the annuity income amount based on? (4) What happens is life expectancy is longer?

- The amount of premium paid or cash value accumulated - The frequency of the payment - The interest rate - The annuitant's age and gender Life expectancy is longer will have smaller income installments. *women statistically have a longer life expectancy* *Shorter life expectancy = higher benefits* *Longer life expectancy = lower benefits*

When income payments begin in annuities? 2 options.

1. Immediate - payment begins *within 1 year* (purchases with a single, lump sum payment) 2. Deferred - payment begins after 1 year

A surrender charge on a *deferred* annuity is what the first year, second year, third year, and the years after ? What would the owner get for a surrendered annuity?

7% , 6%, 5% Then 4%, 3%, 2%, 1%, 0%(0% on year eight) At surrender, the owner gets the premium, plus interest (the value of the annuity), minus the surrender charge

Which of the following Medicare supplement plans would be available to a reasonably healthy 91-year-old female? a. A-N b. K & L only c. A only d. A-C only

A. A-N All Medicare supplement plans (A-N) must be made available to qualifying applicants, regardless of age.

Indexed Annuity. What are returns based on? Does it have a guaranteed interest rate? Does the insurance company take a percentage? Comparison of indexed and variable. Comparison of indexed and fixed. Is there a way to guarantee the death benefit?

An annuity contract with *guarantees* to principal upon which *returns are based on either stock index or indices from investment* period to period subject to a return ceiling. Has *guaranteed minimum interest rate* Insurance companies reserve the initial returns for themselves but pay the excess to the annuitant. For example, the company may keep 4% so if interest earned is 12%, the client will receive 8% *Less risky* than a *variable annuity* Expected to receive *higher interest rate* than a *fixed annuity* To reduce Market risk, many contracts allow *Lock-in account value* to provide a guaranteed death benefit to the beneficiary

In this state, long-term care benefits may be triggered by inability to perform how many activities of daily living? a. 1 or 2 b. 3 c. 4 d. All 6

B. 3 LTC policies may not restrict eligibility for the payment of benefits to inability to perform more than 3 of of daily living.

An applicant for an insurance agent's license must a) Submit a minimum of two insurance company appointments to the Insurance Department. b) Complete a prelicensing education course, c) Have at least 24 college credits in insurance-related courses. d) Be a resident of the state of Florida for a minimum of 6 months.

B. Complete a prelicensing education course Applicants for an agent's license must complete a 40-hour prelicensing education course.

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called a) Acceptance. b) Consideration. c) Conditions. d) Utmost good faith.

B. Consideration "Consideration" is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.

Which of the following is NOT a feature of a noncancellable policy? a. The insured has the right to renew the policy for the life of the contract. b. The insurer may terminate the contract only at renewal for certain conditions. c. The premiums cannot be increased beyond the amount stated in the policy. d. The guarantee to renew coverage usually applies until the insured reaches certain age.

B. The insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

Which of the following is among the regulations set forth by the Florida Replacement Rule? a. Defining appropriate and inappropriate business behavior b. Returning property to its original state, before the time of loss c. Providing a written comparison and summary statement d. Explaining the procedures used when proposing insurance

C. Providing a written comparison and summary statement The Florida Replacement Rule established that, when replacing life insurance contracts with new contracts, the agent is required to give the applicant a written comparison and summary statement at the request of the policyholder.

Which of the following is an example of a producer's fiduciary duty? a. A duty to base all transaction upon the principle of Utmost Faith b. The obligation to tell the truth to the best of one's knowing c. The trust that a client places in the producer in regard to handling premiums d. An obligation to state every known fact about the policy the producer is selling

C. The trust that a client places in the producer in regard to handling premiums

All of the following are examples of third-party ownership of a life insurance policy EXCEPT A An insured couple purchases a life insurance policy insuring the life of their grandson. B A company purchases a life insurance policy on their manager, who is an important part of the operation. C When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. D An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

D. an insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan.

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a. The insurer will pay a reduced death benefit of the beneficiary. b. The insurer will pay the death benefit minus one months premium. c. The insurer will pay nothing because the employee has terminated this group insurance and hasn't started the individual one d. The insurer will pay the full death benefit from the group policy to the beneficiary.

D.The insurer will pay the full death benefit from the group policy to the beneficiary

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Estate conservation

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability is not required

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Extended term

An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity?

Flexible premium deferred annuity

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest earned on the withdrawn cash value

Universal Life is..? Is it Term or Whole life? Premium? Face Amount? Cash Value? Policy Loans?

It's a Permanent/ Whole life policy with a renewable term protection component (death protection) Premium is flexible. Can either choose between Minimum amount to keep it going or Target amount to cover the insurance protection and help premium from lapsing. *May skip premium if cash value can cover monthly deductions* Face amount flexible and set by policyowner with proof of insurability Cash value *guaranteed* at a minimum level Policy loans: can borrow cash value allows *partial* withdrawals/ surrenders

What is it called when the benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Nonforfeiture values

What universal life option has a gradually increasing cash value and a level death benefit?

Option A (level death benefit)

What is adverse selection?

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

Who has the right to the cash value of a life insurance policy?

Policyowner

Term Life *aka Pure Life* is _________ protection because it only provides coverage for a specific period of time

Temporary

If an insurer decides to obtain medical information from different sources in order to determine the insurability of an applicant, who must be notified of the investigation?

The applicant

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an automobile accident the next day,

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

Who owns a group life insurance contract?

The employer (also known as the sponsor of the group)

The amount of benefit stated in the life insurance policy is called

The face amount

Morale hazard is when... and example

The state of mind that causes indifference towards loss Ex: "if I'm insured, why should I worry or be careful?" Or drinking and driving

Each contract has a surgical schedule which is..? What if not listed?

The surgical schedule lists the types of operations covered and their assigned dollar amounts If not listed, contract may pay for a comparable operation

What is the purpose of settlement options in life insurance policies?

To determine how the death benefit will be paid to the beneficiary

An annuity contract is issued to a senior consumer over age 65. What is the maximum surrender charge for a withdrawal of money allowed on this annuity? a. 5% b. 8% c. 10% d. 12%

c. 10% An annuity contract issued to a senior consumer age 65 or older may not contain a surrender or deferred sales charge for a withdrawal of money from an annuity exceeding 10% of the amount withdrawn.

FIFO

first in, first out principle under which it is assumed that the funds paid into the policy first will be paid out first.

Illustration is a depiction that includes

nonguaranteed elements of a policy of individual or group life insurance over a period of years

Long-term care (LTC) coverage explained. What is it often purchased as? What is it marketed as to a life insurance policy? What is it's purpose?

often purchased as a seperate policy Marketed as a rider to a life insurance policy Payment of part of death benefit (called accelerated benefits) *in order to take care of the insureds health care expenses* in a nursing or convalescent home

What is the Accumulation period (aka pay-in period)? Who has ownership of the bag? What can the owner do with the money? During the accumulation period, the funds are..? What happens if the owner dies while the annuity is still in the accumulation period?

period of time over which the owner makes payments (premiums) into an annuity; payments earn interest on *tax-deferred basis* The *investor* has ownership of bag. Investor can make withdrawals and investment decisions During this period funds are paid *into* the annuity If the annuity owner dies while the annuity is still in this stage, the beneficiary will receive the greater of the money paid into it or the cash value

Taxable

subject to taxation, payable to state and federal government

Viatical Settlement is the sale of what and what state does the insured have to be in? Describe the transaction and who becomes the sole beneficiary ?

the *sale of a life insurance policy* by a *terminally ill insured* to another party, typically to investors or investor groups, who hope to profit by the insured's early death The *buyer* of a viatical settlement *pays the seller a lump sum cash payout* and *pays all future premiums* left on the life insurance policy. The *buyer becomes the sole beneficiary* and cashes in the full amount of the policy when the original owner dies.

Florida law provides that individual and group health insurance policies and HMO contracts must be renewed at the option of the individual or the policyholder except for the following reasons: (4)

• Failure to pay or untimely payment of premiums; • Fraud or intentional misrepresentation of a material fact; • Failure to meet minimum participation or minimum contribution requirements of a group policy; • The insurer ceases offering coverage in a market. If a policy form is no longer issued, the insurer may terminate coverage under current forms if it provides 90 days' notice and offers policyholders any other coverages. If the individual or group market are discontinued, the insurer must give 180 days' notice

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

Purchase a single premium policy for a reduced FACE amount

Which of the following would be required to be licensed as an insurance producer? a. An insurance company director who pertorms executive, administrative and managerial duties b. A salaried employee who advertises and solicits insurance c. A person whose activities are limited to producing insurance advertisements d. A salaried full-time emplovee who furnishes information for group insurance

B. A salaried employee who advertises and solicits insurance (A person does not require an insurance producer license it he or she only advertises without intent to solicit insurance. However, once their is solicitation, a license is required)

Misrepresentation are

Untrue statements on an application. Could void the contract

Risk Classifications are determined by.... (4)

- past medical history - present physical condition - occupation - morals and habits *the higher the risk, the higher the premium*

If policy of insurance is declined or modified because of consumer or investigative report, the consumer...

-Must be advised and provided with the name and address of reporting agency -Has the right to know what was in the report -Has a right to know the identity of anyone who has received a copy during the past year

Fixed Annuities. What is it and what does it provide? Do the payments vary from one payment to another? What does the insurance company guarantee? What is the disadvantage? Is interest guaranteed?

A type of annuity that provides a *guaranteed fixed benefit amount*, payable for the life of the annuitant Income (annuity) payments that do *not* vary from one payment to another. The annuitant knows the exact amount of each payment called *level benefit payment amount* Insurance company guarantees the dollar amount and length of payments Disadvantage to it is that the purchasing power that they afford *may be eroded over time due to inflation* *Interest rate guaranteed by insurer*

Which of the following must an insurer obtain in order to transact insurance within a given state? a. Certificate of authority b. Producer's certificate c. Business entity license d. Insurer's license

A. Certificate of authority All insurers (domestic, foreign, or alien must obtain a certificate of authority before transacting insurance within a given state.

In long-term care (LTC) policies, as the benefit period lengthens, the premium a. Increases. b. Remains unchanged. c. LTC premiums are not based on benefit periods. d. Decreases.

A. Increases LTC policies define the benefit period for how long coverage applies, after the elimination period. The longer the benefit period, the higher the premium will be.

A Return of Premium term life policy is written as what type of term coverage? a. Increasing b. Decreasing c. Renewable d. Level

A. Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

When replacing life insurance, the duties of the replacing insurance company include all of the following EXCEPT a. Maintaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years. b. Requiring from the agent with the application a copy of the Notice Regarding Replacement. c. Sending to the existing insurer a copy of the Notice Regarding Replacement immediately. d. Providing to each purchaser a Buyer's Guide and a Policy Summary.

A. Maintaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years. Replacing insurers must maintain copies of the Notice Regarding Replacement and all sales proposals used for at least 3 years or until the conclusion of the next regular audit by the insurance department, whichever is later.

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

A. The date of medical exam (Whichever is *last*)

Which of the following statements is most correct concerning the changing of an irrevocable beneficiary? a. They can be changed only with the written consent of that begeficiary. b. They may be changed at any time. c. They can never be changed. d. They may be changed only on the anniversary date of the policy.

A. They can be changed only with the written consent of that begeficiary Once an irrevocable beneficiary is shown for the policy, it requires his or her written consent to change.

What is the purpose of a fixed-period settlement option? A To provide a guaranteed income for a certain amount of time B To settle the insurance company's liability C To provide a guaranteed income for life D To provide a guaranteed amount of money each month

A. To provide a guaranteed income for a certain amount of time When the fixed-period installments option is selected, the insurer agrees to pay the proceeds in equal installments over a specified period of time.

Grant is terminally ill, but has a life insurance policy with a cash surrender value and he wants to sell his policy to a private individual. Yodel is interested in purchasing the policy, but is only willing to pay less than the face value of the policy. What is the name of the process of selling the policy for less than the amount of the death benefit? a. Viatical settlement b. Conversion transfer c. Cash out sale d. Settlement of cash value

A. Viatical settlement A viatical settlement is the process whereby a *policyholder sells a policy for less than the amount of the death benefit* to a private individual. And the insured still receives more than the cash surrender value

When does a free-look period begin on a life insurance policy? a. When the policy is delivered to the insured b. When the insured pays the first premium c. When the insurer signs the policy d. When the policy is issued

A. When the policy is delivered to the insured (The free-look provision allows an insured a period of a specified number of days from the delivery date of the policy to look over a new policy and return it for a full premium refund if dissatisfied for any reason)

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party ?

Absolute assignment

Explain Nonfamily insureds. What does it allow? Is it often used for business?

Allows for the *change of insureds* subject to insurability. *often used in business* example is if the key person is terminated, the rider permits the policyowner, or employer, to change the key person to another key person

Which of the following statements is TRUE concerning the Accidental Death Rider? a. It is only available in group insurance. b. It will pay double or triple the face amount. c. It is also known as a triple indemnity rider. d. This rider is only available to insureds over the age of 65.

B It will pay double or triple the face amount. The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident

Which of the following is a feature of a variable annuity? A Securities license is not required. B Benefit payment amounts are not guaranteed. C Payments into the annuity are kept in the company's general account. D Interest rate is guaranteed.

B. Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.

All of the following statements concerning Accidental Death and Dismemberment coverage are correct EXCEPT A Accidental death and dismemberment insurance is considered to be limited coverage. B Death benefits are paid only if death occurs within 24 hours of an accident. C Accidental death benefits are paid only if death results from accidental bodily injury as defined in the policy. D Dismemberment benefits are paid for certain disabilities that are presumed to be total and permanent.

B. Death benefits are paid only if death occurs within 24 hours of an accident. Under an Accidental Death and Dismemberment insurance policy, the death benefit will be paid if the *accidental death occurs within 90 days of the accident*, not 24 hours.

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will a. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. b. Issue the policy anyway and pay the face value to the beneficiary. c. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. d. Return the premium to Y's estate, since it has no obligation to pay the death

B. Issue the policy anyway and pay the face value to the beneficiary. The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.

What is the main purpose of the Seven-pay Test? A It guarantees the minimum interest. B It determines if the insurance policy is a MEC. C It requires level premium payments for 7 years. D It ensures that the policy benefits are paid out in 7 years.

B. It determines if the insurance policy is a MEC. The Seven-pay Test determines whether an insurance policy is "over-funded" or if it's a Modified Endowment Contract. In other words, the cumulative premiums paid during the first seven years of a policy must not exceed the total amount of net level premiums

Which of the following is NOT specifically prohibited by state law as an unfair trade practice? a. Failing to disclose that the solicitations of an insurance contract are the result of a marketing method b. Reducing the premiums paid by employers for group insurance based on loss experience c. Using misleading representations to induce uncalled-for action by the insured d. Using incomplete comparisons of policies to induce uncalled-for action by the insured

B. Reducing the premiums paid by employers for group insurance based on loss experience Insurers are permitted to lower the premiums of employers group insurance because of loss experience. This is called experience rating. All the other practices would be considered unfair trade practices.

If an employer decides to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised? a. The number of employees covered by the policy will determine which replacement regulations will be required. b. Replacement regulations will not apply in this situation. c. Special corporate replacement regulations will apply. d. The type of life insurance policy obtained will determine which replacement regulations will be required.

B. Replacement regulations will not apply in this situation. ( If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply. )

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? A Employer contributions are not included in the employee's gross income. B SEPs are suitable for large companies. C SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income. D SEPs have a higher tax deductible contribution limit than an IRA.

B. SEPs are suitable for large companies An SEP is a benefit plan that is designed to be provided by a small employer for the benefit of the employees.

A customer with an existing life insurance contract is considering exchanging it for a newer contract. What Florida insurance regulation should the customer's insurance agent consult? a) The Florida Insurance Guaranty Association b) The Florida Replacement Rule c) The Code of Ethics of the Florida Association of Insurance and Financial Advisers d) The Florida Life Insurance Solicitation Law

B. The Florida Replacement Rule The Florida Replacement Rule established the procedures followed when a prospective life insurance buyer replaces an existing insurance contract with new insurance.

What is the maximum allowed value of promotional gifts that an agent may give to a prospective insured? a. $20 b. $50 c. $100 d. Gifts are never allowed.

C. $100 (A licensed insurer or its agents may not give to insureds or prospective insureds for the purpose of advertising any articles of merchandise that have a value of more than $100 per insured in any calendar year.)

How will a life insurance beneficiary designation naming a spouse be changed by divorce? a. Insurer's own policy rules will determine the result. b. The beneficiary designation will be voided. c. There will be no change. d. The beneficiary will be changed to revocable.

B. The beneficiary designation will be voided (If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary designation will be void at the time the palicvowner's marriage is legally dissolved (divorce) or declared invalid by court order if the designation was made prior to the divorce.)

How will a life insurance beneficiary designation naming a spouse be changed by divorce? a. Insurer's own policy rules will determine the result. b. The beneficiary designation will be voided. c. There will be no change. d. The beneficiary will be changed to revocable.

B. The beneficiary designation will be voided (If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary designation will be void at the time the policyowner's marriage is legally dissolved (divorce) or declared invalid by court order if the designation was made prior to the divorce)

If a person accumulates more continuing education hours than is necessary to fulfill the requirements for a 2-year period, which of the following will occur? a) Nothing will happen; the hours will not be reimbursed or deducted from the next period's hours. b) The extra hours may be continued into the next period. c) The extra hours will not count toward the next period's requirements. d) The extra hours will be reimbursed monetarily.

B. The extra hours may be continued into the next period. Excess classroom hours accumulated during any 2-year period may be carried forward to the next 2-year period.

Which statement is NOT true regarding underwriting group health insurance? A Everyone in the group is covered, regardless of their medical history. B The group is assessed individually for insurability. C The premiums are reassessed annually. D The cost of the policy is partially determined by the ratio of males to females in the group.

B. The group is assessed individually for insurability. Group health insurance policies must cover everyone in the group, regardless of age, health history, and occupation. Because of this blanket coverage, the group as a whole is assessed for insurability. The size, average age, gender ratio, persistency, and industry of the group are considered, along with other factors, when determining premiums. Groups can be reassessed annually in order to adjust premium amounts.

Who bears all of the investment risk in a fixed annuity? A The annuitant B The insurance company C The owner D The beneficiary

B. The insurance company Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

Which of the following is NOT a feature of a noncancellable policy? A The insured has the right to renew the policy for the life of the contract. B The insurer may terminate the contract only at renewal for certain conditions. C The premiums cannot be increased beyond the amount stated in the policy. D The guarantee to renew coverage usually applies until the insured reaches certain age.

B. The insurer may terminate the contract only at renewal for certain conditions. The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.

A person insured under a group life insurance policy can make an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, to any of the following EXCEPT a. The beneficiary. b. The policyholder. c. A lender. d. A family member.

B. The policyholder Any person insured under a group life insurance policy can make to any person, other than the policyholder, an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, including the right to exercise the conversion privilege and the right to name a beneficiary.

Long-term care policies require that in addition to the applicant at least one person must be designated in the policy. What is the role of that designated person? a. To cosign the policy application b. To receive notice of policy lapse or termination c. To receive policy benefits if the insured is deceased d. To pay the premiums on the policy

B. To receive notice of policy lapse or termination An individual long-term care policy cannot be issued until the insurer has received from the applicant either a written designation of at least 1 person, in addition to the applicant, who is to receive notice of lapse or termination of the policy for nonpayment of premium.

Policy options: Nonforfeiture Options. What is it ? What is the three options and explain them? Can a surrendered policy be reinstated? What is the automatic Nonforfeiture option an insurer will choose if the policyowner does not?

Because *permanent life insurance* policies have *cash values*, this is something that is built into the policy that *cannot be forfeited by the policyowner* if the *policy lapses* Policyowner must choose one of the 3 options available. (1) *Cash surrender value* : Policyowner surrenders the policy for current value at the time when coverage is no longer need or affordable. Once surrendered for it's cash value *cannot be reinstated* (2) *Reduced Paid-Up*: The policy cash value is used by the insurer as a *single premium to purchase* a completely paid-up *permanent policy* that has reduced face amount (3) *Extended Term*: the *automatic Nonforfeiture option*. The insurer uses the policy cash value to convert/ to *term insurance*for the same face amount as the former permanent policy. *Highest amount of insurance protection*

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? a) "Any occupation" - less restrictive than other definitions b) "'Any occupation" - more restrictive than other definitions c) "Own occupation" - less restrictive than other definitions d) "Own occupation" - more restrictive than other definitions

C. "Own occupation" - less restrictive than other definitions covered In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly

Regulations for annuity recommendations would apply when a consumer is at least what age? a. 50 years old b. 62 years old c. 65 years old d. 70 years old

C. 65 years old A senior consumer is a person age 65 or older.

The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is a. Subject to government standards. b. Illegal. c. A nonqualified annuity plan. d. An executive annuity plan.

C. A nonqualified annuity plan Nonqualified plans are a perfectly legal way for selected employees to receive certain types of benefits. Before-tax corporate dollars can be used for these plans, and they are not subject to government standards. Because of this, however, nonqualified plans contributions are not tax-deductible, unlike with qualified plans.

Which of the following is true regarding branch agency licensing? a) The branch must secure an agency license. b) There are no special licensing requirements. c) Agent in charge must be licensed, d) All its agents must be licensed.

C. Agent in charge must be licensed. Each branch location established by an agent, agency, firm, corporation, or association must be in the active full-time charge of a licensed general lines, or life and/or health agent who is appointed to represent one or more insurers.

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a. Aleatory contracts. b. Binding contracts. c. Contracts of adhesion. d. Unilateral contracts.

C. Contracts of adhesion. Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.

An agent selling variable annuities must be registered with A The Guaranty Association. B SEC. C FINRA. D Department of Insurance.

C. FINRA Because *variable annuities are considered to be securities*, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? a) Conditional receipt b) Disclosure rule c) Fair Credit Reporting Act d) Consumer Privacy Act

C. Fair Credit Reporting Act The Fair Credit Reporting Act governs what information can be collected and how the information can be used.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a. Children's rider b. Additional insured rider c. Family term rider d. Spouse rider

C. Family term rider A single rider that provides coverage on every family member is called a "family rider".

Which of the following was designed to ensure continued access to affordable health insurance coverage for employees of small employers, their dependents, and other qualified beneficiaries not currently protected by COBRA? a. Florida Continuation of Coverage Plan b. Florida Health Insurance Act c. Florida Health Insurance Coverage Continuation Act d. Florida Insurance Continuation Plan

C. Florida Health Insurance Coverage Continuation Act The purpose and intent of the Florida Health Insurance Coverage Continuation Act is to ensure continued access to affordable health insurance coverage for employees of small employees, their dependents and other qualified beneficiaries not currently protected by the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985

How long must insurers maintain records of the information collected from senior consumers and other information used in making recommendations that were the basis for insurance transactions? a. For 6 years after the initial contact with the consumer b. For 3 vears c. For 5 years after the insurance transaction is completed by the insurer d. For 10 years after the initial recommendation

C. For 5 years after the insurance transaction is completed by the insurer Insurers must maintain records of the information collected from senior consumers and other information used in making recommendations that were the basis for insurance transactions for 5 years after the insurance transaction is completed by the insurer.

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? a) Alien b) Nonadmitted c) Foreign d) Domestic

C. Foreign A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance.

The Office of Insurance Regulation is responsible for all of the following insurer activities EXCEPT a) Policy forms. b) Premium financing. c) Issue of securities. d) Viatical settlements.

C. Issue of securities The Office of Financial Regulation is responsible for all activities of the Financial Services Commission relating to the regulation of banks, credit unions, finance companies, and the securities industry. All the other listed activities are the responsibility of the Office of Insurance Regulation.

The Office of Insurance Regulation is responsible for all of the following insurer activities EXCEPT a. Policy forms. b. Premium financing. c. Issue of securities. d. viatical settlements.

C. Issue of securities The *Office of Financial Regulation* is responsible for *all activities of the Financial Services Commission relating to the regulation of banks, credit unions, finance companies, and the securities industry.* All the other listed activities are the responsibility of the Office of Insurance Regulation.

The Florida Employee Health Care Access Act serves which of the following purposes? a. It requires employers to purchase insurance that covers all pre-existing conditions of covered employees without limitation. b. It mandates minimal health insurance provisions to employees of companies with 10 or fewer employees. c. It regulates group health insurance provisions provided by insurers or HMOs to small employers. d. It encourages limited group health insurance provisions provided by HMOs.

C. It regulates group health insurance provisions provided by insurers or HMOs to small employers. The Florida Employee Health Care Access Act regulates group health insurance provisions provided by insurers or HMOs to small employers.

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A Fixed amount. B Joint life. C Joint and survivor. D Fixed period.

C. Joint and survivor A joint and survivor option pays while either beneficiary is still living.

In a long-term care policy, pre-existing condition limitations a. Never have specific exclusions. b. Are not permitted. c. Must appear as a separate paragraph and be clearly labeled. d. Apply to 12 months from the effective date of coverage.

C. Must appear as a separate paragraph and be clearly labeled. If there are any limitations in the policy with respect to pre-existing conditions these limitations must appear in a separate paragraph in the policy labeled "Pre-existing Condition Limitations." A long-term care policy cannot deny a claim for losses incurred more than 6 months from the effective date of coverage because of a pre-existing condition.

Shortly after a replacement transaction on a Medicare supplement policy, the insured decided to cancel the policy, but is unsure whether the free-look provision applies. The insured could find that information in the a. Buyer's Guide. b. Certificate of Coverage. c. Notice Regarding Replacement. d. Policy application.

C. Notice Regarding Replacement. The Notice Regarding Replacement must inform the applicant of the 30-day free-look provision of the replacing policy.

During replacement of life insurance, a replacing insurer must do which of the following? a. Designate a new producer for a replaced policy b. Send a copy of the Notice Regarding Replacement to the Department of Insurance c. Obtain a list of all life insurance policies that will be replaced d. Guarantee a replacement for each existing policy

C. Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacemënt notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.

When does Medicare cover nursing home care? a) Only for those age 80 and older b) Medicare covers all nursing home care for eligible policyholders c) Only if it is part of treatment for a covered illness or injury d) Only if the deductible has been met

C. Only if it is part of treatment for a covered illness or injury Medicare will not cover long-term care or nursing home care unless it is part of the treatment for a covered illness or injury.

Which of the following is NOT among the goals of a Medicare supplement application? a. Determining whether or not the policy will replace another accident and health policy b. Advising applicants regarding the availability of counseling services c. Presuming the applicant is eligible for Medicaid, based on the nature of the policy d. Determining whether or not an applicant has an existing Medicare supplement policy

C. Presuming the applicant is eligible for Medicaid, based on the nature of the policy Medicare supplement policies must ask the applicant if they are eligible for Medicaid.

Which of the following is among the regulations set forth by the Florida Replacement Rule? a. Defining appropriate and inappropriate business behavior b. Returning property to its original state, before the time of loss c. Providing a written comparison and summary statement d. Explaining the procedures used when proposing insurance

C. Providing a written comparison and summary statement The Florida Replacement Rule established that, when replacing life insurance contracts with new contracts, the agent is required to give the applicant a written comparison and summary statement at the request of the policyholder.

Which of the following is an agreement between an insured and an insurer, where the insurer agrees to indemnify the insured for specific losses in exchange for a premium? a. Reciprocity b. The indemnity clause c. The insurance contract d. The insurance guaranty

C. The insurance contract Insurance contracts are defined as the agreements made between an insured and an insurer, where the insurer promises to indemnify the insured for covered losses, in exchange for a premium. Both parties are bound by the conditions of the contract.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is incorrect? a. The premium for individual coverage will be based upon the insurance attained age. b. The insured may choose to convert to term or permanent individual coverage. c. The insured would not need to prove insurability for a conversion policy. d. The insured may convert coverage to an individual policy within 31 days.

C. The insured may choose to convert to term or permanent individual coverage.

Which of the following is NOT a feature of a guaranteed renewable provision? a. Coverage is not renewable beyond the insured's age 65. b. The insured's benefits cannot be reduced. c. The insurer can increase the policy premium on an individual basis. d. The insured has a unilateral right to renew the policy for the life of the contract.

C. The insurer can increase the policy premium on an individual basis Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as A Survivorship insurance. B Juvenile protection provision. C Survivor protection. D Life planning.

C. survivor protection life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. this is known as survivor protection

Adjustable Life is..? Term or Whole Life insurance? Premium type? Face Amount? Cash value? Policy Loan?

Can be Term or Whole Life and can be converted from one to the other Premium can be increased or decreased by policyowner and the premium paying period can be changed Face Amount/death benefit is flexible. Set by policyowner with proof of insurability Cash value *only develops* when the premiums paid are more than the cost of the policy Policy loans can borrow cash value with this policy

What are the three non-forfeiture options in life insurance policies?

Cash surrender, reduced paid-up, and extended term

What happens to the cash value when a whole life insurance policy matures?

Cash value is paid to the policyowner

Interest Sensitive Whole Life. Premium? Face Amount? Cash Value?

Coverage provides *flexible premiums based on a changing interest rate*. Also known as current assumption whole life. Face amount/ death benefit *guaranteed* at age 100 (minimum death benefit too) The added benefit of current interest rates may allow for either *greater cash value accumulation* or a shorter premium-paying period

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A Paid-up addition B Accumulation at interest C Cash option D Reduction of premium

D Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? a. "Own occupation" - more restrictive than other definitions b. "Any occupation" - less restrictive than other definitions c. "Any occupation" - more restrictive than other definitions d. "Own occupation" - less restrictive than other definitions

D. "Own occupation" - less restrictive than other definitions In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered

In the event a policy lapses due to nonpayment of premium, within how many days would the policy be automatically reinstated once the *outstanding premium* is paid? A 10 days B 25 days C 30 davs D 45 days

D. 45 days If a policy premium is not paid by the end of the grace period, and the policy lapses, an insured may pay the outstanding premium and have the policy reinstated. *If the insurer does not refuse reinstatement within 45 days from the date the conditional receipt was issued*, the policy will be automatically reinstated.

What is the statute of limitation on lawsuits for health insurance policies? a) 1 year b) 2 years c) 4 years d) 5 years

D. 5 years No legal action may be brought on a health insurance policy within *60 days after written proof of loss* has been given. After 60 days, in the state of Florida, legal action may be brought against the insurer for *up to 5 years* after filing proof of loss.

A Straight Life policy has what type of premium? a. An increasing annual premium for the life of the insured b. A decreasing annual premium for the life of the insured c. A variable annual premium for the life of the insured d. A level annual premium for the life of the insured

D. A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following? A Cancel the policy B Increase the premium C Exclude coverage for on-the-job injury D Adjust the benefit in accordance with the increased risk

D. Adjust the benefit in accordance with the increased risk A part of the premium rating concerns the hazard of occupation.

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a A Key person policy. B Split-dollar plan. C Stock redemption plan. D Buy-sell agreement.

D. Buy-sell agreement Buy-Sell agreements are used to contractually establish the intent of someone else to purchase the business upon the insured's death, and to set a value (purchase price) on a business. Life insurance is used to fund the buy-sell agreement. Any type of life insurance may be purchased to provide the necessary funds for the agreement. Insurance can be used to either fully or partially fund the buy-sell agreement.

Because an insurer writes the policy language and the insured has little or no control over the content, any ambiguity in the wording is usually resolved in the favor of the insured. Because the design and wording of a policy are in the hands of the insurer, insurance policies are said to be a. Unilateral contracts b. Contracts if indemnity c. Aleatory contracts d. Contracts of adhesion

D. Contracts of adhesion The insured *adheres* to the term (adhesion= adheres)

What kind of policy does NOT typically require proof of insurability? a. Variable universal life b. Term insurance c. Individual insurance d. Group insurance

D. Group insurance Individual life insurance is written on a single life. The rate and coverage is based upon the underwriting of that individual. Group life insurance is written as a master policy, issued to the sponsoring organization, covering the lives of more than one individual member of that group. In group insurance, individual participants typically do not need to provide proof of insurability.

In life insurance policies, cash value increases a. Are income taxable immediately b. Are taxed annually c. Are only taxed when the owner reaches 65 d. Grow tax deferred

D. Grow tax deferred

Under what conditions will proof of insurability NOT be required of an employee wanting to enroll in a group insurance plan? a) The employee will never have to provide proof of insurability in order to enroll in a group plan b) If the employee has been approved for other insurance policies in the past c) If the employee has maintained consistent insurance coverage d) If the employee enrolls within a certain time period

D. If the employee enrolls within a certain time period In group insurance, evidence of insurability is usually not required if participant enrolls during the open enrollment period, and participants (insureds) under the plan do not receive a policy, nor do they own or control the policy. Instead they receive certificates, indicating that they are included in the coverage.

All of the following are true about a key person insurance EXCEPT: a. There is no limitation on the number of key employee plans in force at any one time b. The employee is the owner, payor, and beneficiary of the policy c. The key employee is the insured d. The plan is funded by permanent insurance only

D. The plan is funded by permanent insurance only

Under what conditions will proof of insurability NOT be required of an employee wanting to enroll in a group insurance plan? a. The employee will never have to provide proof of insurability in order to enroll in a group plan b. If the employee has been approved for other insurance policies in the past c. If the employee has maintained consistent insurance coverage d. If the employee enrolls within a certain time period

D. If the employee enrolls within a certain time period (In group insurance, evidence of insurability is usually not required if participant enrolls during the open enrollment period, and participants (insureds) under the plan do not receive a policy, nor do they own or control the policy. Instead, they receive certificates, indicating that they are included in the coverage)

Which of the following statements is NOT correct concerning the COBRA Act of 1985? A It covers terminated emplovees and/or their dependents for up to 36 months after a qualifying event. B It applies only to employers with 20 or more employees that maintain group health insurance plans for employees. C COBRA stands for Consolidated Omnibus Budget Reconciliation Act. D It requires all employers, regardless of the number or age of employees, to provide extended group health coverage

D. It requires all employers, regardless of the number or age of employees, to provide extended group health coverage COBRA Act applies to *only employers with 20 or more emplovees.*

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? A Mortality rate B Risk exposure C Morbidity D Life expectancy

D. Life expectancy Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? a. Full b. 50% c. 25% d. None

D. None General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.

During replacement of life insurance, a replacing insurer must do which of the following? a. Guarantee a replacement for each existing policy b. Designate a new producer for a replaced policy c. Send a copy of the Notice Regarding Replacement to the Department of Insurance d. Obtain a list of all life insurance policies that will be replaced

D. Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? a. Refuse to pay the death benefit because of the misstatement on the application b. Pay a decreased death benefit c. Sue for the right to not pay the death benefit d. Pay the death benefit

D. Pay the death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Which of the following riders would NOT cause the Death Benefit to increase? a. Guaranteed Insurability Rider b. Cost of Living Rider c. Accidental Death Rider d. Payor Benefit Rider

D. Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? A Accidental death and dismemberment rider B Guaranteed insurability rider C Change of insured rider D Term rider

D. Term rider Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.

A customer with an existing life insurance contract is considering exchanging it for a newer contract. What Florida insurance regulation should the customer's insurance agent consult? a. The Code of Ethics of the Florida Association of Insurance and Financial Advisers b. The Florida Life Insurance Solicitation Law c. The Florida Insurance Guaranty Association d. The Florida Replacement Rule

D. The Florida Replacement Rule The Florida Replacement Rule established the procedures followed when a prospective life insurance buyer replaces an existing insurance contract with new insurance.

Which of the following would provide an underwriter with information concerning an applicant's health history? a. A medical examination b. The agent's report c. The inspection report d. The Medical Information Bureau

D. The Medical Information Bureau An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a. The beneficiary must pay interest to the insurer. b. The beneficiary will receive the lump sum, plus interest. c. The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. d. The beneficiary will only receive payments of the interest earned on the death benefit.

D. The beneficiary will only receive payments of the interest earned on the death benefit. With the Interest Only settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiar at regular intervals (monthly, quarterly, semiannually, or annually).

Social Security Supplement (SIS) or Social Security Riders would provide for the payment of income benefits in each of the situations below EXCEPT A When used to replace or supplement benefits payable under other social insurance programs. B When the insured is eligible for Social Security benefits but before the benefits begin. C If the insured has been denied coverage under Social Security. D When the amount payable under Social Security is more than the amount payable under the rider.

D. When the amount payable under Social Security is more than the amount payable under the rider These riders provide benefits when the amount payable under Social Security is *less* than the amount payable under the rider (in this case only the difference will be paid.)

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a. Distributions before age 59 1/2 incur a 10% penalty on policy gains. b. Policy loans are taxable distributions. c. Accumulations are tax deferred. d. Withdrawals are not taxable.

D. Withdrawals are not taxable Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.

What type of annuity credits it's interest based upon an index such as S&P 500?

Equity indexed annuity

Stock Company vs. Mutual Company. What's the difference? And what is Demutualization?

In a mutual company, *policyholders are co-owners* of the firm and *enjoy dividend* income based on corporate profits. In a stock company, *outside shareholders are the co-owners* of the firm and policyholders are *not* entitled to dividends Demutualization is the process whereby a *mutual insurer becomes a stock company.*

Standard Risk are

Representatives of majority of people at their age and with similar lifestyles *Average Risk, higher premium than Preferred*

What type of whole life insurance policy generates immediate cash value?

Single premium whole life

All life insurance policies fall into what two categories:

Temporary (term) and Permanent protection

Whole life policies endow at the insureds age 100 which means...

The *cash value* created by the accumulation of premium is scheduled to *equal the face amount of the policy at age 100*

What is an Assignment? Does the insurer need to give consent for this ?

Transfer of rights of policy ownership without the consent of the insurer *the owner must notify the insurer in writing of the assignment*

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Universal Life

When does an adjustable life policy accumulate cash value?

When the premiums paid exceed the cost of the policy.

What provision in a life insurance policy extends coverage beyond the premium due date?

grace period

A peril is defined as? Examples (3)

the cause of a possible loss, *an accident* Tornado, car crash, flood

An agent's client needs additional insurance which the agent's own insurer cannot provide. The agent has to solicit additional coverage from another authorized insurer. This coverage is known as a. Excess. b. Authorized. c. Controlled business. d. Rejected.

A. Excess. (A licensed life agent may place excess or rejected risks within the agent's licensing authority with another insurer without being required to have an appointment with that insurer. Excess business is that portion of a risk above the limits of that which the agent's own insurer will accept.)

The provision in a health insurance policy that ensurers that the insurer cannot refer to any document that is not contained in the contract is the

Entire contract clause - this clause is required by law

An agent has been convicted of a crime punishable by a 1-year imprisonment. Within how many days must the agent notify the department of insurance? a. 30 days b. 90 days c. 180 days d. 10 days

A. 30 days (Agents must notify the Department of Insurance in writing 30 days after being found guilty of a felony or a crime punishable by imprisonment of 1 year or more)

What are the 7 mandatory provisions in health insurance policies?

1. Entire contract provision 2. Time Limit on Certain Defenses or incontestability 3. Grace period & Reinstatement Grace period 4. Notice of Claim 5. Physical exam & autopsy 6. Legal actions 7. Change of beneficiary

What are the 2 offices of the Financial Services Commission? a. The Office of Financial Regulation and the Office of Insurance Regulation b. The Legislative Office and the State Court Office c. The Department of Insurance and the Department of Finance d. The Office of Insurance Regulation and the NAIC

A. The Office of Financial Regulation and the Office of Insurance Regulation (The following 2 offices are established within the Commission: the Office of Financial Regulation and the Office of Insurance Regulation, which specifically regulates the business of insurance in the state.)

A single Premium annuity involves

Involves depositing one premium payment (I.e. inheritance or one-time lump sum of money)

Usually under Coordination of Benefits provision, one insurance is what while the other is..?

One insurance is primary and the other is secondary. Primary pays first

Social Security disability definition includes all of the following EXCEPT a. Disability expected to last for at least 6 months b. The inability to engage in any gainful work c. Disability resulting from a medically determinable mental impairment d. A physical impairment expected to result in death

a. Disability expected to last for at least 6 months

Which of the following best describes the probationary period in group health policies? a. The stated amount of time when benefits may be reduced under certain conditions b. The number of days that must expire after the onset of an illness before benefits would be earned c. A specified period of time that a person joining a group has to wait before eligible for coverage d. The number of days the insured has to determine if he/she will accept the policy as received

c. A specified period of time that a person joining a group has to wait before eligible for coverage

Payor Benefit Rider only pays

the premium if the payor is disabled or dies.