Simulated Exam

In PA, the free-look provision for all individual life or endowment insurance policies is A) 10 days B) 21 days C) 45 days D) 30 days

A) 10 days *All individual life insurance policies in PA must include a provision that allows the policyowner to return the policy within 10 days of delivery for a full refund of the premium if the policy is unsatisfactory.

Life insurance policies must include a provision entitling policyholders to a grace period for payment of premium, during which time the death benefit coverage continues in force. How long must this grace period last? A) 31 days or 1 month B) 7 days or 1 week C) 90 days D) 365 days or 1 year

A) 31 days or 1 month *A life insurance policy must provide for a 31-day or 1-month grace period for payment of any premium except the first. The death benefit coverage must continue in force for the duration of the grace period.

The insured has a $2,500 individual deductible and a $7,500 family deductible. The insured has an injury in February resulting in $6,000 of medical expenses. Later in the same year, her spouse incurs $4,000 of medical expenses. How much of these expenses will not be paid by the insurer? A) $7,500 B) $5,000 C) $2,500 D) $4,000

B) $5,000 *The insured and spouse will each have to pay a $2,500 deductible.

How many hours of continuing education must an insurance producer complete during each 2-year license period? A) 12 hours B) 24 hours C) 10 hours D) 20 hours

B) 24 hours *To receive a license renewal, a producer successfully must complete 24 hours of approved continuing education during each 2-year period. Up to a maximum of 24 excess continuing education credit hours may be carried forward from one licensing period to the next.

All of the following are elements of a contract EXCEPT A) legal purpose B) acknowledgement C) agreement D) competent parties

B) acknowledgement *The elements of a contract are: agreement, consideration, competent parties and legal purpose.

Assume a dentist is insured with a business overhead expense policy that pays maximum monthly benefits of $3,000. The dentist became disabled and had covered expenses for the month totaling $1,500. Benefits payable would be A) $1,500 B) $4,500 C) $3,000 D) $3,150

A) $1,500 *Business overhead expense (BOE) insurance reimburses businesses for actual overhead expenses in the event the business owner becomes disabled or dies. In this case, the actual expenses totaled $,1500.

Edna stopped paying premiums on her permanent life insurance policy 7 years ago though, she never surrendered it. She is still insurable and has no outstanding loan against the policy. The company probably will decline to reinstate the policy because the time limit for reinstatement has expired. The limit usually is A) 3 years B) 60 to 90 days C) 6 to 18 months D) 1 year

A) 3 years *The policyowner has only a limited period of time - 3 years from the date of the last premium due - in which to reinstate a lapsed policy. It is important to remember that policyowners can only reinstate life policies that have lapsed for nonpayment only. If a policyowner intentionally surrenders the policy, reinstatement is not allowed.

Alvin is employed by a construction company to erect a skyscraper downtown. He is injured when the company's crane operator, while lifting an I-beam, accidentally strikes Alvin while he is guiding the crane operator. Which of the following statements is CORRECT? A) Alvin is entitled to workers' comp benefits because he was injured in a work-related activity B) Alvin cannot claim workers' comp because he may have been partially responsible for the crane operator's actions C) Alvin is entitled to workers' comp if he prevails on a lawsuit filed against his employer for negligence D) Alvin cannot claim workers' comp because the injury was accidental

A) Alvin is entitled to workers' comp benefits because he was injured in a work-related activity *State law provides that an injured employee is entitled to benefits as a matter of right, without having to sue the employer for benefits. In return for this immediate access to benefits, the employee waives the right to sue the employer on other grounds, including negligence.

Which act protects the interests of participants in employee benefit plans? A) Employee Retirement Income Security Act (ERISA) B) State Insurance Dept. Regulation Act C) Sponsoring Employer Benefit Act D) Insurance Company Act of 1941

A) Employee Retirement Income Security Act (ERISA) *The Employee Retirement Income Security Act (ERISA) is designed to protect the interests of participants in employee benefit plans, as well as the interests of the participants' beneficiaries.

A policy or rider designed to provide coverage for at least 12 consecutive months for diagnostic, preventive or personal care services provided in a setting other than the acute care unit of a hospital is called A) LTC insurance B) pre-existing condition insurance C) Med Supp insurance D) comprehensive insurance package benefits

A) LTC insurance *LTC insurance is any individual or group insurance policy or rider that provides coverage for at least 12 consecutive months on an expense-incurred, indemnity, or other basis for medical, rehabilitative or personal care in a setting other than the acute care unit of a hospital.

According to the National Association of Insurance Commissioner's (NAIC) standardized model Med Supp policy, insurers must offer coverage for all of the following core benefits EXCEPT A) Medicare Part A deductible B) coinsurance amount of Medicare Part B - eligible expenses, regardless of hospital confinement, subject to Medicare Part B deductible C) coverage under Medicare Parts A and B for the first 3 pints of blood or equivalent (unless replaced according to federal regulations) D) Medicare Part A - eligible hospital expenses not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period

A) Medicare Part A deductible *All Med Supp policies must provide certain core benefits, including coverage for Medicare Part A - eligible hospital expenses not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period, the coinsurance amount of Medicare Part B - eligible expenses, and coverage under Medicare Parts A and B for the first 3 pints of blood or equivalent. Although Plan A does not provide coverage for the Medicare Part A deductible, other Med Supp policies (Plans B through J) cover this deductible.

Assume 4 individuals, all age 30, purchase the following life insurance policies. If all policies are still in force 10 years later, who will have the largest cash value in his policy? A) Rajesh, who has a $100,000 20-pay life policy B) Dennis, who has a $100,000 life paid-up at 65 policy C) Jack, who has a $100,000 life paid-up at 55 policy D) Luis, who has a $100,000 straight whole life policy

A) Rajesh, who has a $100,000 20-pay life policy *The larger the face amount of the policy, the larger the cash values. The shorter the premium payment period, the quicker the cash values grow. The longer the policy has been in force, the greater the buildup in cash values.

What kind of policy provides coverage only for death, dismemberment, disability or hospital and medical care caused by accidents? A) accident-only policy B) specialized death policy C) Med Supp policy D) major medical type II policy

A) accident-only policy *Accident-only coverage provides for death, dismemberment, disability or hospital and medical care when the insured suffers injuries caused by an accident.

All of the following are essential health benefits (EHBs) EXCEPT A) dental care B) ambulance C) hospitalization D) emergency services

A) dental care *EHBs cover the essential needs, such as ambulance, emergency, hospital and maternity and newborn care.

When it is used, the time-limit on certain defenses provision in a health insurance policy provides that the policy cannot be contested and claims cannot be denied after 2 (or 3) years EXCEPT A) for fraudulent statements in the application B) for incomplete policy records C) for mental incompetence of the insured D) for nonpayment of premiums

A) for fraudulent statements in the application *According to the time-limit on the certain defenses provision, also known as the incontestability clause, a policy cannot be contested until after 2 (or 3) years from the date of policy issue for misstatements. A fraudulent misstatement on a health insurance application is grounds for contest at ANY time.

What is another name for services provided to insureds at their residences? A) home health care B) long-term care C) adult day care D) acute care

A) home health care *Home health care refers to services provided by a licensed home health agency to an insured in her place of residence. These services must be prescribed by the person's attending physician as part of a written plan of care. Disability insurers must make benefits for home health care available under group insurance policies.

Which of the following statements about dental benefits offered by a PPO is NOT correct? A) if an insured decides to obtain treatment from a dentist who does not participate in the panel, he usually can receive the same care for the same costs B) PPOs offer dental care through a panel of dentists who have agreed to treat a group of insureds C) rates offered through a PPO are negotiated and save money for the insurer D) in contracting to render services, a PPO's dentists agree to charge less than their usual fees when treating group members

A) if an insured decides to obtain treatment from a dentist who does not participate in the panel, he usually can receive the same care for the same costs *If an insured obtains treatment from a dentist who does not participate in the PPO panel, the insurer will usually require the insured to pay a greater portion of the cost. In general, the insured will pay more for treatment from a dentist who is not part of the panel.

The net premium is defined as A) mortality minus interest B) mortality minus expenses C) mortality plus interest D) mortality plus expenses

A) mortality minus interest *Mortality minus interest equals the net premium.

An accident-only policy would pay for A) necessary medical care for dismemberment due to a motorcycle accident B) expenses related to cancer C) hospitalization due to a heart attack D) expenses related to HIV

A) necessary medical care for dismemberment due to a motorcycle accident *Accident-only policies specifically exclude disease and sickness while paying for disability, death or dismemberment due to accidental injuries.

All of the following are unfair trade practices EXCEPT A) paying commissions to licensed agents B) making derogatory statements regarding an insurer's financial condition C) rebating premiums D) offering advantages in dividends that were not specified in the policy

A) paying commissions to licensed agents *Rebating by refunding premiums or by offering special dividends and defamation are unfair trade practices.

John, age 55, owns a whole life policy with a face amount of $100,000 for which the annual premium is $1,000. John explains to his agent that he lost his job and cannot afford his $1,000 annual premium but still desires to have life insurance to age 100. What nonforfeiture option could John's agent recommend to him? A) reduced paid-up policy B) modified endowment contract C) reduced premium D) there are no options, since John can't afford to pay the premium anymore

A) reduced paid-up policy *With the reduced paid-up nonforfeiture option, the cash value of John's policy will be used to purchase a single premium whole life policy based on his attained age for a reduced face amount. The advantage for John is that he will continue to have insurance protection and will not be required to pay any additional premiums.

Rachel added a Social Security rider to her individual disability income plan. This rider provides an additional monthly benefit for what purpose? A) to ensure that a projected level of benefit is received B) to ensure that her Social Security benefits are not reduced once her disability benefits begin C) to pay benefits while her Social Security disability application is pending D) to ensure that her total benefits remain level, even if her disability is determined not to be a total disability

A) to ensure that a projected level of benefit is received *The additional monthly benefit is paid when the insured is eligible for Social Security, but those benefits have not yet begun, have been denied or have begun in an amount less than the benefit amount of the rider. After the Social Security benefit amount is determined, the difference between the actual benefit and the expected benefit in the rider is payable as an additional disability income benefit.

All of the following are types of limited benefit policies EXCEPT A) umbrella B) vision C) credit disability D) accident-only

A) umbrella *Umbrella policies provide liability coverage. Limited benefit policies include accident, dread disease, critical illness, hospital indemnity, credit disability, blanket coverage, prescription drugs, vision, hearing and short-term medical expense.

With regard to insurance, risk can be defined as A) uncertainty regarding loss B) certainty regarding loss C) uncertainty regarding financial gain D) certainty regarding financial gain

A) uncertainty regarding loss *Risk refers to the uncertainty of financial loss. Insurance replaces the uncertainty of risk with certain guarantees of financial stability.

Which of the following statements about life insurance policy settlement options is NOT correct? A) under the fixed-period option, the payment of excess interest will lengthen the payment period B) payments under the interest-only option may be made at a higher rate than the guaranteed minimum C) by using the interest-only option, 2 or more settlement options can be combined for added flexibility D) Debra and Renee are each receiving monthly income from their deceased spouses' identical life insurance policies under the fixed-period option. Debra's payments are to be made for 15 years and Renee's for 20 years. Debra receives the larger monthly payments

A) under the fixed-period option, the payment of excess interest will lengthen the payment period *Under the fixed-period option, the payment of excess will be used to make each payment larger, not to extent the payment period.

With a participating life insurance policy, a policyowner may do all of the following with dividends received EXCEPT A) use the dividends to pay overdue premiums from previous years B) purchase additional life insurance protection C) allow the dividends to accumulate at interest D) take the dividends in cash

A) use the dividends to pay overdue premiums from previous years *Policy dividends may be taken in cash, used to reduce the following year's premium or used to purchase a 1-year term policy or additional life insurance protection. Dividends can also be allowed to accumulate at interest.

Which of the following types of life insurance requires that the agent be licensed by FINRA before selling the policy? A) variable life B) universal life C) term life D) adjustable life

A) variable life *To sell variable life insurance, an individual must hold a life insurance producer's license and a FINRA registered representative's license.

For a beneficiary to receive accidental death benefits, death of the insured generally must occur within how many days following the accident? A) 45 days B) 90 days C) 60 days D) 30 days

B) 90 days *For a beneficiary to receive accidental death benefits, the death of the insured generally must occur within 90 days following an accident.

Qualified LTC policies must meet the specific requirements of A) IRMI B) HIPAA C) Medicare D) Medicaid

B) HIPAA *To receive preferential tax treatment, LTC policies must meet the rules and requirements set forth by HIPAA of 1996.

Which of the following would be a source of instant liquidity upon the death of an estate owner? A) bank certificates of deposits B) a life insurance policy on the estate owner's life, payable to the estate C) a home D) debts payable to the estate

B) a life insurance policy on the estate owner's life, payable to the estate *The term instant liquidity refers to property that is readily convertible into cash without loss of cash itself. In this example, the only asset that would provide instant liquidity would be the life insurance policy.

A stop-loss feature in a major medical policy specifies the maximum A) benefit amount the policy provides each year B) amount the insured must pay toward covered expenses C) amount the insured must pay in premiums D) benefit amount the policy provides in a lifetime

B) amount the insured must pay toward covered expenses *To provide a safeguard for insureds, many major medical policies contain a stop-loss feature that limits the insured's out-of-pocket expenses. This means the insured is no longer required to pay coinsurance once expenses have reached a specific limit.

A Surrender Comparison Index Disclosure must be given to all A) purchasers of variable life insurance policies B) applicants for a life insurance policy C) life insurance policy applicants over the age of 50 D) life insurance applicants for whom the coverage will replace existing insurance

B) applicants for a life insurance policy *All applicants for a life insurance policy must be given a Surrender Comparison Index Disclosure. The purpose of the disclosure is to provide a purchaser of a life insurance policy with a means of making a cost comparison of the same types of life insurance policies having the same premium payment period and pattern.

To enroll in the PA Children's Health Insurance Plan (CHIP), a child must meet all of the following criteria EXCEPT A) be a resident of PA B) be under the age of 10 C) be a US citizen or alien with lawful immigration status D) meet family size and income guidelines

B) be under the age of 10 *To enroll in CHIP, a child (except for newborns) must be a resident of PA, be under age 19 and be a US be a US citizen or alien with lawful immigration status. Applicants must NOT be eligible for Medicaid or have any other insurance. CHIP insurance will be free or at a low cost based on family size and income guidelines.

All of the following are required uniform provisions in an individual health insurance policy EXCEPT A) entire contract B) change of occupation C) reinstatement D) grace period

B) change of occupation *The grace period, entire contract and reinstatement provisions are mandatory uniform provisions. The change of occupation provision sets forth the changes that may be made to premium rates or benefits payable if the insured changes occupations; it is an optional provision.

Leland elects to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will A) decrease gradually B) continue to increase C) remain the same as in the old policy D) decrease by 50% immediately

B) continue to increase *When Leland surrenders his whole life policy for a reduced paid-up policy, the face value is reduced, but the cash value continues to increase.

What is the default nonforfeiture option? A) reduced paid-up B) extended term C) surrender value D) interest only

B) extended term *If a permanent life policy lapses for nonpayment and the policyowner has not chosen a nonforfeiture option, the insurance company will, by default, choose extended term insurance. The company will purchase a 1-year term policy on the insured's behalf at his attained age with the same size death benefit as the policy that lapsed for nonpayment.

The amount of an annuity payment depends on all of the following factors EXCEPT A) assumed rate of interest B) insurer's reserves C) annuitant's age and gender D) length of the payment guarantee

B) insurer's reserves *The amount of an annuity payment depends on several factors: starting principal, assumed rate of interest, length of the income guarantee period and the annuitant's age and gender. By knowing the original sum of money (the principal), the length of the payment period, and an assumed rate of interest, as well as the age and gender of the annuitant, one can calculate the payment amount. Actuaries use tables of annuity factors to accomplish this.

Any standard health insurance policy provision that is in conflict with a state statute A) is kept in the policy verbatim, but with a rider added B) is automatically amended to conform to the state statute C) is deleted entirely from the policy D) supersedes the statute and remains in force

B) is automatically amended to conform to the state statute *In accordance with state regulation of the insurance industry, any health insurance policy provision that conflicts with state law is automatically amended to conform to the statute.

Which of the following statements regarding Medicare Part B is NOT true? A) it provides for annual mammograms for those over 40, pap tests, pelvic exams and clinical breast exams B) it pays for skilled care provided in the home like speech, physical and occupational therapy C) it covers a routine physical exam within 6 months of enrollment D) it provides glaucoma testing once every 12 months

B) it pays for skilled care provided in the home like speech, physical and occupational therapy *Medicare Part A pays for skilled nursing after a hospital stay lasting at least 3 days. The other routine preventive items are covered by Part B.

Norma and Luis are considering the purchase of an annuity for retirement. Which payout option would be the least suitable for them? A) joint life and survivor annuity option B) joint life annuity option C) life with period-certain option D) life-with-refund option

B) joint life annuity option *The joint life annuity option would be the least suitable because income payments stop at the death of the FIRST annuitant, which leaves the survivor without the income.

Med Supp policies are designed primarily for A) dependents of employees insured through their employer group plan B) people eligible for Medicare C) people who are uninsurable due to pre-existing conditions D) people designated by the federal government as qualifying for public assistance

B) people eligible for Medicare *Med Supp policies are health insurance policies delivered in PA that are designed primarily to supplement coverage for the hospital, medical or surgical expenses of persons eligible for Medicare by reason of age.

The time during which funds are being paid into an annuity is called A) the paid-up period B) the accumulation period C) the annuity period D) the savings period

B) the accumulation period *The accumulation period is the time during which funds are being paid into the annuity, in the form of premiums by the contract holder and interest earnings credited by the insurer. The payout or annuity (annuitization) period is the point at which the annuity ceases to be an accumulation vehicle and begins to generate income payments on a regular basis.

A broad statement that generally appears on the first page of a health insurance policy and specifies conditions under which benefits will be paid is known as A) the assurance clause B) the insuring clause C) the guaranty provision D) the warranty provision

B) the insuring clause *The insuring clause identifies the insurer and insured, specifies benefits and includes the insurer's promise to pay benefits for specific kinds of losses.

Which of the following statements pertaining to key-person life insurance is CORRECT? A) at the death of the key person, proceeds are paid to that person's beneficiary B) the policy is a company-owned asset C) the owner of a company cannot be considered a key person D) the insured key person controls the policy

B) the policy is a company-owned asset *A key person is any person in an organization whose contributions are essential to its success. With key-person insurance, the business is the owner, premium payor and beneficiary of the policy. The purpose of the insurance is to protect the business against the economic loss it would suffer i the key person were to die.

According to the principal of human life value, the purpose of life insurance is A) to determine an individual's eligibility for insurance B) to replace an individual's economic value C) to determine the amount of insurance an individual needs D) to replace an individual's insurance based on life events

B) to replace an individual's economic value *The purpose of life insurance is to replace an individual's economic value, according to the principal of human life value. It is calculated by multiplying the individual's annual income by the number of years until retirement. The answer is the amount of money that will be earned by retirement.

Denise, age 52, has a straight whole life policy and decides to stop paying premiums and take a paid-up policy for a reduced amount. Her paid-up policy will be A) term insurance B) whole life C) an annuity D) any type of policy she selects

B) whole life *When a policyowner decides to stop paying premiums and take a paid-up policy for a reduced amount, the paid-up policy will be the same kind as the original policy. (In this case, whole life).

Emily is 3 months pregnant and receiving prenatal health care from her employer group health plan. When her employer switches plans with a new insurer, Emily's claim with the original insurer A) will be transferred to the new insurer plan under the no loss/no gain rule B) will be continued for the balance of her pregnancy under the no loss/no gain rule C) will be terminated, and she will not be insurable under the new plan because her condition is pre-existing D) will be terminated, and she will have to seek coverage from the new plan

B) will be continued for the balance of her pregnancy under the no loss/no gain rule *In many states, a no loss/no gain statute requires that when either the employer or the insurer terminates a group plan, any employees receiving ongoing care under a claim must continue to be covered by the terminated plan for up to 1 year so they suffer no loss of coverage and care.

Identify the number of days the insured or insurer must do the following in this order: Notice of Claim, Claims Forms, Proof of Loss, Waiting Period for Sickness Claims upon Reinstatement A) 15, 20, 10, 90 B) 10, 90, 15, 20 C) 20, 15, 90, 10 D) 10, 20, 15, 90

C) 20, 15, 90, 10 *Notice of Claim must be filed within 20 days. Claims Forms must be provided to the insured within 15 days. The insured has 90 days to file Proof of Loss and Sickness Claims are covered 10 days after reinstatement of a policy.

In the case of a Med Supp insurance policy, the policyholder can return the policy for a full refund of the premium within how many days after the policy is purchased? A) 15 days B) 10 days C) 30 days D) 21 days

C) 30 days *All Med Supp policies must include a 30-day free-look period during which the policyholder can return the policy for a full refund of the premium if he or she is unsatisfied with it.

Which of the following applicants for a producer's license would be required to take the licensing exam? A) Jan, who is applying for a limited lines license B) Todd, who is licensed in CA as a property and casualty producer and is applying for the same license in PA C) Diane, who is applying for a property and casualty license and is a licensed real estate broker D) Bob, who is applying for a property and casualty license and holds the CPCUA designation

C) Diane, who is applying for a property and casualty license and is a licensed real estate broker *Applicants who hold certain professional designations or are applying for limited lines licenses are not required to take a licensing exam. Nonresidents applying for a license in the same line of authority are also exempt.

Becky wants to make sure that she has insurance to protect herself if she eventually needs long-term custodial or nursing home care. Which type of policy will cover these types of care? A) Medicare B) Medicaid C) LTC insurance D) Med Supp insurance

C) LTC insurance *Although Medicare and Med Supp insurance help protect the elderly against the costs of medical care, neither program covers long-term custodial or nursing home care. Medicaid covers some of the costs associated with LTC, but it is available only to individuals without significant assets. LTC insurance is designed to cover the costs of long-term custodial or nursing home care.

Which of the following situations regarding covered employees is NOT considered a qualifying event? A) Doreen becomes legally separated from her spouse B) Santino's son who no longer meets their dependent status C) Laurie becomes eligible for Medicaid D) Dmitri's hours are reduced

C) Laurie becomes eligible for Medicaid *Qualifying events under COBRA include Medicare eligibility, reduction in work hours, termination of a child's dependent status and legal separation of a covered employee from the covered employee's spouse.

A peril is A) an exposure B) a moral hazard C) a cause of loss D) a type of risk

C) a cause of loss *A peril is a cause of loss, such as illness, injury or premature death. Insurance is purchased to transfer the financial loss of a covered peril from an individual or business to an insurance company.

In which of the following situations would premium payments be tax-deductible? A) Randy is the owner and premium payor of a life insurance policy covering his spouse B) a company is the owner and premium payor of a $250,000 key-executive policy covering the life of its president C) a company provides $25,000 life insurance coverage to each of its 15 employees and pays the full premium D) Janet is the owner and premium payor of a mortgage policy that covers the outstanding mortgage on her home

C) a company provides $25,000 life insurance coverage to each of its 15 employees and pays the full premium *Premiums paid by a company for group term life insurance are deductible as a business expense, assuming the group plan and its provisions meet the necessary requirements. Premiums paid for personal life insurance are NOT tax-deductible, including key-person insurance.

The beneficiary on Lina's life insurance policy is listed as "children of the insured." Which of the following terms best describes this type of beneficiary designation? A) juvenile beneficiaries B) generational beneficiaries C) class beneficiaries D) basic beneficiaries

C) class beneficiaries *A policyowner may designate a class of beneficiaries without specifying the beneficiaries by name. This is a practical way to accommodate changes in the group of beneficiaries. For instance, the policyowner may want to ensure that all of her children will benefit. A class designation will accommodate this by including her current offspring, as well as any children yet to be born.

Monthly or weekly benefits payable under a disability income policy can be tied to changes in the Consumer Price Index through what type of rider? A) guaranteed insurability B) Social Security C) cost-of-living adjustment D) waiver of premium

C) cost-of-living adjustment *The COLA rider provides for indexing the monthly or weekly benefit payable under a disability income policy to changes in the CPI. The benefit amount is usually adjusted on each disability anniversary date to reflect changes in the CPI, subject to a minimum change that triggers an increase in the benefit.

Nancy is an agent for Assured Life and Health Insurance Company and convinces Sook, a young newlywed, to buy a policy. Sook and her spouse have recently moved to the city and found new jobs. Nancy wants to help them get settled. She may help them in all of the following ways EXCEPT A) explaining the coverage B) delivering the policy C) depositing the initial premium in her own account D) collecting the initial premium

C) depositing the initial premium in her own account *Depositing client funds in an agent's personal account, which is called commingling, violates fiduciary responsibility.

Elaine signs an application for a $50,000 life policy, pays the first premium, and receives a conditional receipt. If Elaine were killed in an auto accident 2 days later A) the company could reject the application on the basis that the death was accidental B) the premium would be returned to Elaine's family because the policy had not been issued C) her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for D) the insurer could reject the death claim because the underwriting process was never completed

C) her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for *If the applicant qualifies for coverage, she is immediately insured at the time of application upon paying an initial premium and receiving a conditional receipt.

All of the following are levels of LTC EXCEPT A) custodial care B) skilled nursing care C) hospital care D) intermediate nursing care

C) hospital care *The 3 levels of LTC are: skilled nursing care, custodial care and intermediate care. Skilled nursing care is continuous, round-the-clock care provided by licensed medical professionals under the direct supervision of a physician. Custodial care provides assistance in meeting daily living requirements --> ADLs and it is given under a doctor's order. Intermediate nursing care is provided by RNs, licensed practical nurses and nurses' aides under the supervision of a physician.

Equity-indexed life insurance policy values are determined by a specified participation rate and A) dividends from stocks in a particular stock market index B) flexible premium payments C) indirect links to a stock market index D) aggressive investment in the stock market

C) indirect links to a stock market index *Equity-indexed life insurance links policy values based on a specified participation rate to potential increases in a particular market index, such as the Standard & Poor's 500 Index. The life insurance policy is not participating in the actual stock market index or in the actual stocks that are in that index. Consequently, it does not benefit from the dividends of those stocks. Equity-indexed or equity-linked universal life insurance allows a conservative indirect link to a stock market index and allows a certain participation percentage of increased based on the increase in the stock market index. While it is true that premium payments are flexible, this question is about how equity-indexed life insurance policy values are determined. This question is not about how policy values might be affected, which is where flexible premiums come into play.

Which of the following is subject to PA's replacement regulations? A) group life insurance B) annuities C) individual life insurance D) individual credit life insurance

C) individual life insurance *Several kinds of life insurance products are exempt from replacement regulations, including annuities, credit life insurance, many kinds of group life insurance and variable life insurance.

An insurance producer must be appointed by the A) state of PA B) policyowner C) insurer D) broker

C) insurer *An insurance producer must be appointed in writing by the insurance company in order to represent the company, sell its insurance, solicit applications, and (if authorized by the insurer) countersign policies on the insurer's behalf. An appointed producer represents the company and has the power to bind it to insurance contracts.

George and Virginia have an annuity that will provide benefits for George's life and then continue to provide the same amount of benefits to Virginia as his survivor. What type of annuity did George set up? A) joint life annuity B) temporary annuity certain C) joint life and survivorship annuity D) life annuity with period certain

C) joint life and survivorship annuity *The joint and survivor annuity is often purchased by married couples who want to guarantee that the surviving spouse will receive regular income for life. Other annuity products have the possibility of the surviving spouse outliving the income payments.

Which of the following people is paid a fee from his/her client to examine life insurance policies and provide advice? A) agent B) assessment association C) life insurance counselor D) managing general agent

C) life insurance counselor *A life insurance counselor examines life insurance policies and annuities and gives advice on the contract's terms, coverage, conditions or benefits. The counselor charges a fee for this service.

Which of the following statements regarding basic forms of whole life insurance is NOT correct? A) the owner of a 30-pay life policy will owe no more premiums after the 30th year the policy is in force B) generally, straight life premiums are payable, at least annually, for the duration of the insured's life C) limited payment life provides protection only for the years during which premiums are paid D) a single premium life policy is purchased with a large one-time only premium

C) limited payment life provides protection only for the years during which premiums are paid *Although the premium payments are limited to a certain period, the insurance protection extends until the insured's death or to age 100.

Life insurance protects people from dying too soon, while annuities protect people from A) excessive taxes B) hospitals C) living too long D) poor health

C) living too long *Annuity products were created to protect people from outliving their income. Once a product is annuitized, it will pay an income to the annuitant as long as she lives.

An applicant for a resident producer license A) may only reside in PA B) may only have their principal place of business of PA C) may either reside in PA or have their principal place of business in this state D) must live in PA

C) may either reside in PA or have their principal place of business in this state *An applicant with a principal place of residence or business in PA may apply for a resident insurance producer license.

In major medical and comprehensive medical expense policies, a coinsurance provision A) helps to satisfy the deductible amount B) has no effect on claims C) provides for percentage participation by the insured D) does not apply until benefit amounts exceed $2,000

C) provides for percentage participation by the insured *In major medical and comprehensive medical expense policies, a coinsurance provision provides for percentage participation by the insured. For example, a 72/25 coinsurance provision means the insurance company will cover 75% of the allowable medical expenses, and the insured pays the remaining 25%. Coinsurance provisions apply after any required deductible has been paid.

Underwriting is a process of A) selecting, reporting and rejecting risks B) selecting and marketing policies C) selecting, classifying and rating risks D) determining and establishing premiums

C) selecting, classifying and rating risks *Underwriting is a process by which an insurance company selects, classifies and rates risks. Careful underwriting avoids financial loss for the insurance company.

The purpose of a health savings account is to A) save for retirement B) shield assets for the purpose of qualifying for Medicaid C) serve as a tax-favored way to accumulate funds to cover medical expenses D) provide funds to pay for the health care of dependents

C) serve as a tax-favored way to accumulate funds to cover medical expenses *The purpose of an HSA is to provide a medical savings plan that has tax advantages for taxpayers enrolled in a high-deductible health plan (HDHP). Contributions are tax-deductible, earnings grow tax-deferred and distributions are tax-free when used to pay for qualified medical expenses.

When an insurer terminates a producer's appointment, the insurer must notify A) the state legislature B) the attorney general C) the Commissioner and the producer D) the insured party and insurance associations

C) the Commissioner and the producer *Once appointed, an insurance producer remains appointed by an insurer until the insurer terminates the appointment in writing to the insurance producer or until the insurance producer's license is suspended, revoked or otherwise terminated. An insurer that terminates an appointment must notify the Dept. in writing within 30 days following the effective date of the termination.

When Mary applied for a life insurance policy, she did not disclose that she had just been treated for cancer 3 months ago. In addition, Mary intentionally misstated her age so that her premiums would be lower. If the insurer issues the policy but discovers the misrepresentations 1 year later A) Mary can void the contract B) the insurer cannot challenge the validity of the contract C) the insurer can challenge the validity of the contract D) Mary and the insurer cannot void the contract

C) the insurer can challenge the validity of the contract *If Mary intentionally failed to disclose that she had been treated for cancer, the insurer can void the contract. However, the insurer has a limited time (typically, 2 years from the date of issue) to challenge the validity of the contract. After that period, the insurer cannot contest the policy or deny benefits on the basis of material misrepresentations, concealment or fraud. If Mary misstated her age, the misstatement of age provision allows the insurer to reduce benefits or refund premiums, and if may do this beyond the 2-year contestability window.

In insurance, A) contracts made by the principal are considered to be contracts of the agent B) contracts made by the agent are considered to be contracts of the producer C) the insurer is the principal and the producer is the agent D) the producer is the principal and the insurer is the agent

C) the insurer is the principal and the producer is the agent *In insurance, the insurer is the principal and the producer is the agent. An agency relationship is created by the consent of both the agent and the principal.

Which of the following statements concerning a coordination of benefits provision is CORRECT? A) coordination of benefits provisions are found most often in family policies where the insured is still paying for a dependent's health care B) the provision allows all policies that cover an individual to divide equally all health care costs C) the purpose of the coordination of benefits provision is to avoid duplication of benefit payments and over-insurance D) this provision can be found in both group and individual policies

C) the purpose of the coordination of benefits provision is to avoid duplication of benefit payments and over-insurance *The coordination of benefits provision is most appropriate for married couples, when both are covered by their employer group plan. This provision is found only in group plans. It limits the total amount of claims paid from all insurers covering the patient. It prevents over-insurance and duplication of benefit payments. The provision establishes which plan is primary - or the plan that is responsible for paying the full benefit amount. Once the primary plan has paid its full promised benefit, the insured may submit the claim to the secondary provider for any additional benefits payable.

PA's laws about LTC insurance were created for all of the following reasons EXCEPT A) to establish standards for LTC insurance B) to promote public interest and availability of LTC policies C) to provide affordable coverage to all in PA who want LTC insurance D) to protect applicants against deceptive sales practices

C) to provide affordable coverage to all in PA who want LTC insurance *PA's LTC laws and regulations were not intended to ensure affordable coverage for those who want LTC insurance. The purpose of LTC according to PA insurance law is to protect purchasers of coverage from deceptive sales practices and to establish standards for this type of insurance.

Betty purchased a universal life policy when she was 61. Upon her 66th birthday, she received a sizable inheritance, paid an exceptionally large annual premium and, in doing so, violated the 7-pay test. The following year, hoping to correct the situation, she made no premium payment so that the average premiums paid were less than the 7-pay test average. Today, the policy's cash value stands at $45,000, and her basis in the contract is $28,000. If she were to withdraw $30,000 from the policy's cash value, which of the following best describes the tax treatment this transaction would receive? A) $28,000 of the distribution is tax-free, but $2,000 is subject to income taxation B) the entire distribution is tax-free C) the entire $30,000 distribution is subject to income taxation D) $13,000 of the distribution is tax-free, but $17,000 is subject to income taxation

D) $13,000 of the distribution is tax-free, but $17,000 is subject to income taxation *This policy became a modified endowment contract (MEC) the moment it violated (and did not immediately correct) the 7-pay test. Once a policy becomes a MEC, it cannot lose that status. As such, pre-death distributions are treated first as a distribution of (income-taxable) gain, which in this case is $17,000.

A complaint record must be kept for at least A) 3 years B) 1 year C) 2 years D) 4 years

D) 4 years *Everyone engaged in the insurance business must maintain a complete record of all the complaints received during the preceding 4 years. The record must list the total number of complaints, their classification by line of insurance, the nature of each complaint and the time it took to process each complaint.

Which of the following is the best example of the insurance with another insurer provision? A) the insured has a major medical policy and a disability income policy with a different insurer, the 2 policies would coordinate benefits B) the insured has a major medical policy and a hospital income policy with Company A. The insured was in the hospital for 5 days. Both policies would pay applicable benefits in full C) the insured's medical expense policy lapsed. However, the insured had a covered claim during the grace period. The insurer must pay this claim D) The insured has a hospital income policy with Company A with a $100 daily benefit, and a hospital income policy with Company B with a $200 daily benefit. Company A would pay 1/3 of the loss, subject to its policy limit

D) The insured has a hospital income policy with company A with a $100 daily benefit, and a hospital income policy with company B with a $200 daily benefit. Company A would pay 1/3 of the loss, subject to its policy limit *The insurance with other insurer provisions states that the insurers will pay benefits pro rata. In this example, Company A will pay 1/3 of the loss up to its policy limit and Company B will pay 2/3 of the loss up to its policy limit.

Which of the following statements regarding the cost-of-living (COLA) rider is NOT correct? A) it is not necessary for the insured to demonstrate evidence of insurability to receive the increased coverage provided through a cost-of-living adjustment B) if the face amount is increased through the cost-of-living adjustment, there is typically an increase in the premium C) the typical cost-of-living rider is provided through a form of term insurance coverage D) a drawback of the rider is that a drop in the Consumer Price Index (CPI) can result in a decrease in the coverage previously added

D) a drawback of the rider is that a drop in the Consumer Price Index (CPI) can result in a decrease in the coverage previously added *Declines in the CPI are not matched by the decline in the amount of coverage; instead, future increases are held off until the CPI exceeds its prior high point.

A temporary license may be issued to all of the following individuals EXCEPT A) the surviving spouse of a deceased producer in order to sell the business B) a person holding power of attorney for a producer in the armed forces C) a deceased producer's personal representative until new personnel is trained to run the business D) a person selling insurance for the estate of a deceased producer

D) a person selling insurance for the estate of a deceased producer *Temporary licenses may be issued to a producer's spouse, designee or personal representative if the producer dies, becomes disabled or enters active military service.

If the first premium was not paid at the time of application, what must the producer also collect? A) referrals B) medical records C) results from the paramedic's visit D) a signed statement of good health

D) a signed statement of good health *When the producer delivers the policy, the first premium must be collected if it was not given when the application was being completed. The producer must also get a signed statement of good health, which attests that the applicant's health is the same as when he applied for the policy.

Any attempt by the existing insurer or its producer to dissuade a policyholder from replacing an existing insurance policy is known as A) representation B) dissuasion C) coercion D) conservation

D) conservation *Conservation is an attempt by the existing insurer or its producer to dissuade a policyholder from replacing an existing insurance policy. Conservation consists not only of keeping insurance in force, but also of the prevention of lapses and the reinstatement of any insurance policy that has already lapsed.

Madge took out a $100,000, 10-year convertible term policy at age 30. At age 36 she decides to convert the policy to permanent insurance of the same amount on an original-age basis. Which of the following statements is NOT correct? A) the new policy will build cash values at a faster rate than if she converts at her attained age B) a higher premium will be charged for the new policy C) she must make up the difference in premiums for the period between ages 30 and 36 D) conversion will be contingent upon her evidence of insurability

D) conversion will be contingent upon her evidence of insurability *Under term life insurance, the option to convert offers the insured the right to change the term policy to permanent insurance without evidence of insurability.

An eligible applicant for Social Security disability benefits must meet all of the following qualifications EXCEPT A) be unable to perform the duties of any occupation B) be unable to engage in gainful work for at least 5 months before the benefit payout, with the disability expected to last at least 12 months or result in death or blindness C) enjoy a full insured status under the Social Security program D) have had surgery within 30 days before applying for benefits

D) have had surgery within 30 days before applying for benefits *An eligible applicant for Social Security disability benefits must enjoy a full insured status and be unable to engage in gainful work for at least 5 months before the start of the benefits, with a disability that is expected to last at least 12 months, or result in the loss of sight or death.

When a policy covers chemotherapy, cancer hormone treatments and other approved cancer treatments, benefits are available when treatment is received at all of the following EXCEPT A) through hospital inpatient treatment B) through outpatient treatment at a hospital C) in a doctor's office D) in a facility that is not licensed by the state to dispense with medical treatment

D) in a facility that is not licensed by the state to dispense with medical treatment *When an individual or group health insurance policy covers cancer chemotherapy and FDA-approved cancer hormone treatments and services, the covered individual must be entitled to benefits in any medically appropriate treatment setting.

Which of the following comparison methods is to be used in a life insurance Surrender Comparison Index Disclosure? A) amortization method B) cost-plus-benefit method C) final costs comparison method D) interest-adjusted method

D) interest-adjusted method *The purpose of cost disclosures is to provide the purchaser of life insurance a means of making a cost comparison of the same type of life insurance policies that have the same premium payment period and pattern. One common method used to compare cost involves the Surrender Comparison Index, which must use the interest-adjusted method. Disclosure must include an explanation of the purpose and use of the Surrender Comparison Index.

An applicant for health insurance completes the application and satisfies all of the conditions of the conditional receipt. If the policy is eventually issued as applied for, coverage takes effect A) as soon as the underwriting process has been completed B) as soon as the policy has been issued C) as soon as the policy has been delivered to the applicant D) just as if the policy had already been issued

D) just as if the policy had already been issued *If the initial premium was paid with the application, the applicant satisfies all of the conditional receipt, and the policy is eventually issued as applied for, coverage takes effect just as if the policy had already been issued.

Which of the following statements regarding limited-pay life insurance is NOT correct? A) limited-pay policies endow when the insured is 100 years old B) cash value grows more quickly in limited-pay life policies than it does in continuous premium whole life policies C) limited-pay policy death benefits remain level for the duration of the policy D) limited-pay policies mature more quickly than do continuous premium whole life policies

D) limited-pay policies mature more quickly than do continuous premium whole life policies *Limited-pay policies emphasize savings more than straight life policies do. These policies also make it possible for an insured to stop premium payments at the expiration of a specified period without any reduction in the amount of the insurance as long as the insured survives. The most common types of limited-pay policies are 10-pay life, 20-pay life and life paid-up at age 65.

All of the following are penalties for violating the Fair Credit Report Act EXCEPT A) either fines or imprisonment B) reasonable attorney's fees C) punitive damages awarded by a court D) loss of license indefinitely

D) loss of license indefinitely *Violators of the Fair Credit Reporting Act may be subject to fines, imprisonment, or both. They may also be required to pay any actual damages suffered by a consumer, punitive damages awarded by a court, and reasonable attorney's fees.

All of the following medical expenses are generally excluded from coverage under individual medical expense policies EXCEPT A) custodial care in a convalescent facility B) nursing care at home C) treatment for drug and alcohol abuse D) nursing care in a hospital

D) nursing care in a hospital *Individual medical expense policies cover nursing care in a hospital but usually exclude treatment for drug or alcohol abuse, custodial care in a convalescent home and nursing care at home.

Which of the following statements regarding emergency medical services under the ACA is FALSE? A) out-of-network providers must comply with normal cost-sharing requirements B) emergency services are considered to be essential health benefits C) insureds may use in-network or out-of-network providers D) pre-authorization must be obtained by the insured or family member

D) pre-authorization must be obtained by the insured or family member *Emergency medical services are EHBs. As such, pre-authorization is NOT required whether the provider is in-network or out-of-network. Out-of-network providers must adhere to normal cost-sharing requirements and may not impose administrative requirements or coverage limits that are more restrictive than services provided by in-network providers.

When is "total disability" defined as the insured's inability to perform substantial and material duties of his regular occupation? A) in individual disability income policies only B) during the first 90 days after the loss begins C) during the life of the policy D) previously during the first 24 months after the loss begins

D) previously during the first 24 months after the loss begins *Insureds are considered to be totally disabled if they cannot perform the duties of their own profession for a specific period. Previously, this was 2 years. After this 2-year period, an individual would be considered totally disabled only if her were unable to engage in ANY occupation for which the insured was suited by training, education and training. Many insurers now offer total disability coverage in an individual's own occupation for up to 5 years, 10 years, to age 65 or life, depending on the insured's occupation classification.

Upon the insured's death, which of the following policies will pay the face amount of the policy plus a sum equal to all or a portion of the premiums paid? A) adjusting benefit policy B) cost-of-living policy C) guaranteed dividend policy D) return-of-premium policy

D) return-of-premium policy *Return-of-premium policies promise to pay the policy face amount plus a sum equal to all or a portion of the premiums paid.

Which of the following factors is NOT used to calculate each payment with the fixed-period option? A) the length of the chosen period B) the amount of the death benefit C) a guaranteed interest rate D) the chosen payment amount

D) the chosen payment amount *The chosen payment amount is a factor for the fixed-amount settlement option, not the fixed-period option.

Who would NOT have insurable interest for a life insurance policy? A) the spouse of the insured B) the daughter of the insured C) the employer of a key-employee insured D) the closest friend of the insured

D) the closest friend of the insured *Insurable interest is defined as interest created by love and affection for those persons closely related by blood or law. For those who are not related, an insurable interest is a lawful economic interest in having the life of the insured continue.

Which of the following statements pertaining to a whole life policy is NOT correct? A) the policy offers insurance protection to age 100 B) it is designed to mature or endow at the insured's age 100 C) it provides both insurance protection and living values D) the face amount may be paid as a lump sum at the policyowner's selected retirement age

D) the face amount may be paid as a lump sum at the policyowner's selected retirement age *The face amount of a whole life policy may be paid as a lump sum at the policyowner's death, not at retirement age.

Which of the following is NOT a characteristic of group health insurance plans? A) the cost of insuring an individual is less than what would be charged for comparable benefits under an individual plan B) employers may require employees to contribute to the premium payments C) their benefits are more extensive than those under individual plans D) the parties to a group health contract are the employer and the employees

D) the parties to a group health contract are the employer and the employees *The contract for coverage is between the insurance company and the employer, and a master policy is issued to the employer.

How can the cash value accumulation in a straight whole life insurance policy be accessed while the insured is living and while keeping the coverage in force? A) through a cash value surrender B) through a dividend payment C) through a partial cash value withdrawal D) through a policy loan

D) through a policy loan *The cash values of a straight whole life policy can be accessed through a policy loan or through a complete withdrawal of the entire cash value. A policy loan allows the policy to continue in force (though any amount not paid back with interest at the time of death will be subtracted from the death benefit). A complete withdrawal constitutes a surrender of the policy and coverage ends.

Which of the following statements pertaining to the grace period and reinstatement provisions in health insurance policies is NOT correct? A) states may require grace periods of 7, 10 or 31 days, depending on the mode of premium payment or term of insurance. B) Craig's health policy has a grace period of 31 days. He had a premium come due June 15 while on vacation. He returned home July 7 and mailed his premium the next day. His policy remained in force C) Warren's medical expense policy was reinstated on September 30. He became ill and entered the hospital on October 5. His hospital expense will not be paid by the insurer. D) under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement

D) under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement *Under a health policy's reinstatement terms, insured losses from sickness will not be covered unless they occur at least 10 days after reinstatement. This is to prevent adverse selection against the insurer. Accidental injuries, however, are covered immediately.

Contracts that provide payments based on the investment return of a segregated asset account are called A) whole life insurance B) participating annuities C) segregated life insurance D) variable life insurance and annuities

D) variable life insurance and annuities *Variable life insurance and annuities provide payments based on the invest return of an asset account that is segregated from the insurer's general investment account. These accounts are known as separate accounts.

In PA, insurers must maintain all of their insurance advertisements on file for A) 4 years B) 2 years C) 5 years D) 3 years

A) 4 years *Each insurer must maintain a file containing every individual contract advertisement and typical blanket, franchise and group advertisements used by the company, and must indicate the form number of the contract advertised along with the manner of distribution. The file must be kept for 4 years or until the next regular examination of the company, whichever is longer, and is subject to inspection by the Insurance Dept.

The Commissioner of Insurance is appointed by the governor for a term of A) 4 years B) 6 years C) 8 years D) 2 years

A) 4 years *The Commissioner of Insurance, who is the head of the PA Insurance Dept., is appointed by the governor to a 4-year term.

The Commissioner may examine an insurer at her discretion, but must examine insurers at least every A) 5 years B) 3 years C) 10 years D) 4 years

A) 5 years *Insurers must be examined at least every 5 years.

Susan's producer license lapsed because she forgot to pay her licensing renewal fee 10 days after it was due. Which of the following statements is CORRECT? A) Susan's license may be reinstated if she makes a request for reinstatement and submits the renewal application, the registration fee and continuing education certification B) Susan's failure to pay the renewal fee cannot be waived and her license will not be reinstated C) Susan's license will be reinstated only if she pays a $500 penalty and shows proof of completing the continuing education requirements D) Susan's license can never be reinstated

A) Susan's license may be reinstated if she makes a request for reinstatement and submits the renewal application, the registration fee and continuing education certification *A licensee who allows a license to lapse by filing to renew in a timely manner, pay the fee required or complete the continuing education required may, within 1 year of the license renewal date, ask the Dept. to reinstate the license. Persons requesting reinstatement of a lapsed license must submit a completed renewal form, the required fee and verification that the person has completed all required continuing education for the previously licensed and lapsed periods.

Amanda took out a $250,000 home mortgage when she purchased her house 5 years ago. What type of life insurance policy would be the best choice to insure the remaining balance on her home mortgage? A) decreasing term B) variable life C) whole life D) level term

A) decreasing term *Amanda should consider purchasing a decreasing term insurance policy to cover the balance of her home mortgage, which decreases from year to year.

Javier purchased a LTC insurance policy with an optional benefit that provides a yearly increase in benefits. His policy offers A) inflation protection B) a return of benefits option C) an insurability option D) nonforfeiture benefits

A) inflation protection *Inflation protection is an optional benefit that provides for automatic annual increases in benefits based on COLA. The increase is stated as a percentage and is compounded annually.

Which of the following statements about Medicare Part D is CORRECT? A) it is available to anyone enrolled in Medicare Parts A & B B) some plans offer basic drug coverage C) benefits are available only through Medicare Advantage plans D) it helps cover the costs of hospitalization

A) it is available to anyone enrolled in Medicare Parts A & B *Medicare Part D helps cover the cost of prescription drugs. It is available to anyone enrolled in Medicare Part A and Part B. Benefits are available through private prescription drug plans or Medicare Advantage plans. All plans must offer basic drug coverage.

Which of the following statements regarding a conditional receipt is CORRECT? A) it is given only if the initial premium has been submitted with the signed application B) it is given pending acceptance by the applicant of additional riders C) it is given at the time of policy delivery D) it is given when the application is completed

A) it is given only if the initial premium has been submitted with the signed application *The conditional receipt means that if the coverage is accepted as applied for and an initial premium is submitted with the application, the policy will be in force from the date the application is signed. The receipt is not provided simply by completing the application. At the time of policy delivery, the policy would have already been approved and coverage would no longer be conditional. It is also not given pending acceptance of additional riders and changes in the policy.

Which of the following is NOT encompassed by agency law? A) knowledge of the principal is knowledge of the agent B) a contract completed by the agent on behalf of the principal is a contract of the principal C) payments made to an agent intended for the principal are payments made to the principal D) the acts of an agent are the acts of the principal

A) knowledge of the principal is knowledge of the agent *A fundamental rule of agency law states that information known to the agent is also known by the principal, as long as the agency relationship exists. Information known to the principal, however, is not presumed to be known to the agent.

All of the following may result in license suspension or revocation EXCEPT A) making a factual but subjective comparison of the two policies B) intentionally violating a cease and desist order C) violating an insurance regulation D) making a false statement in a license application

A) making a factual but subjective comparison of the two policies *It is not illegal to compare insurance policies as long as those comparisons do not misrepresent the policy's coverages and terms.

All of the following are methods of handling risk EXCEPT A) resistance B) sharing C) retention D) reduction

A) resistance *The different methods for handling risk include: sharing, transfer, avoidance, reduction and retention (STARR). Resistance is not a method for handling risk.

All Med Supp policies must cover 100% of the Part A hospital coinsurance amount for each day used from A) the 61st through the 90th day in any Medicare benefit period B) the 1st through the 60th day in any Medicare benefit period C) the 45th through the 90th day in any Medicare benefit period D) the 30th through the 90th day in any Medicare benefit period

A) the 61st through the 90th day in any Medicare benefit period *All Med Supp policies must cover the core basic benefits that Plan A covers. This includes covering 100% of the Part A hospital coinsurance amount for each day used from the 61st through the 90th day in a Medicare benefit period and 100% of the Part A hospital coinsurance amount for each Medicare lifetime inpatient reserve days used from the 91st through the 150th day in any Medicare benefit period.

The calendar year deductible provision of a major medical policy stipulates that A) the deductible is applied only once during the calendar year B) the insurer pays a higher percentage of the medical expenses than the insured C) all claims submitted during the calendar year are subject to the amount of the deductible D) the deductible is applied against each claim during the first calendar year the policy is in effect

A) the deductible is applied only once during the calendar year *A major medical policy's calendar year deductible stipulates that when the deductible amount is met during the calendar year, all claims submitted will be treated for the balance of the year without meeting any new deductibles. Dividing the costs of medical expenses between the insured and insurer is known as percentage participation, or coinsurance.

When important and material facts are hidden by an insured on an application, this is known as A) a material misrepresentation B) concealment C) a breach of contract D) a misrepresentation

B) concealment *When an individual knowingly fails to disclose known facts, this is known as concealment. If it is intentional and the information is material, the insurance company may void the contract.

Beth's health insurance policy contains a provision that allows her to renew coverage up to age 65. However, the policy also states that should Beth lose her job, the insurance company will cancel the policy, regardless of Beth's age. In terms of renewability, what type of policy does Beth have? A) optionally renewable B) conditionally renewable C) guaranteed renewable D) cancelable

B) conditionally renewable *A conditionally renewable policy allows an insurer to terminate the coverage, but only in the event of 1 or more conditions stated in the contract. These conditions cannot apply to the insured's health. Most frequently, they are related to the insured reaching a certain age or losing gainful employment.

Which of the following statements pertaining to the insuring clause in a life insurance policy is NOT correct? A) it defines the responsibilities of the insurer B) it specifies the length of the grace period C) it gives the effective date of coverage D) it names the beneficiary

B) it specifies the length of the grace period *The insuring clause explains the promise the insurer has made to the named insured to pay a death benefit to a designated beneficiary. The grace period is a separate policy provision.

All of the following insurance practices are illegal in PA EXCEPT A) soliciting or procuring insurance without a license B) paying a renewal commission to a person who is not licensed, but was licensed at the time of sale C) using insurance premiums for a producer's personal uses D) paying a fee for services as an insurance producer to anyone who is not properly licensed

B) paying a renewal commission to a person who is not licensed, but was licensed at the time of sale *It is legal to pay a renewal commission to a person who is not currently licensed if she was licensed at the time the policy was sold.

An individual with a temporary license may do all of the following EXCEPT A) renew the business of a deceased producer B) procure new insurance C) maintain the business of a disabled producer D) perform any acts necessary to keep a deceased producer's business going until the estate is settled

B) procure new insurance *An individual with a temporary license may not solicit, negotiate or procure new business. He/she is authorized to wind down the business affairs of a deceased or disabled producer.

In the standardized Med Supp policy, Plan A is characterized by A) availability only to Medicare recipients younger than age 75 B) providing the least comprehensive coverage C) duplicating Medicare benefits for maximum security D) offering the widest coverage

B) providing the least comprehensive coverage *In the 12 standardized Med Supp plans, Plan A provides the least coverage and is referred to as the core plan. Plan J has the most comprehensive coverage. Plans K and L provide basic benefits similar to plans A through J, but cost-sharing is at different levels.

All of the following are classified as types of accident and sickness insurance coverage EXCEPT A) disability income insurance B) survivorship insurance C) dental insurance D) medical expense insurance

B) survivorship insurance *Disability income, medical expense and dental insurance represent major categories of accident and sickness insurance. Within these categories is a wide range of coverages. Survivorship life insurance is also known as second-to-die insurance. This specialized policy insures 2 people and pays the death benefit when the last insured dies.

Regular notices sent to policyowners for payment of their life insurance policy premiums reflect A) the net single premium B) the gross premium C) the gross single premium D) the net level premium

B) the gross premium *The gross premium is determined by adding the net single premium to the expense factor. Policyowners pay the gross premium on life insurance policies. The gross premium is determined by adding the net single premium and interest amount together. The net single premium is defined as the single amount needed immediately to fund future benefits. When the net premium is combined with interest, that amount will be sufficient to pay a future death benefit. Policy premiums are generally paid over a number of years rather than with a single payment. The net single premium is converted into annual level premiums, adjusted for the smaller amount of interest the premiums will earn.

If both an older and younger person had annuity funds of the same amount and simultaneously began to receive monthly life payments, which individual would receive the larger payments? A) the amount of the payment is based on the purchase date of the annuity B) the older person C) the younger person D) both would receive the same amount

B) the older person *If both an older and a younger person had annuity funds of the same amount and simultaneously began to receive monthly payments, the older person would receive the larger payments since the insurer would expect to pay the older person for a shorter time according to life expectancy.

A significant feature of adjustable life insurance is that A) the cash value is 3 times greater than in traditional whole life insurance B) the premiums may be increased or decreased from time to time by the policyowner C) the policyowner need not pay premiums after the policy has been in force for a certain number of years D) the policyowner may make retroactive adjustments in the policy's provisions

B) the premiums may be increased or decreased from time to time by the policyowner *An adjustable life policy is simply a whole life policy with adjustable features, such as premiums that may be increased or decreased from time to time by the policyowner. These adjustments cannot be made retroactively.

Which of the following acts helps ensure confidential, fair and accurate reporting of consumer information? A) McCarran-Ferguson Act B) Disclosure Act C) Fair Credit Reporting Act D) Unfair Trade Practices Act

C) Fair Credit Reporting Act *The Fair Credit Reporting Act is a federal law that promotes confidential, fair and accurate reporting of information about consumers. It provides that consumer reports may be furnished by consumer reporting agencies only for certain purposes, which includes underwriting of insurance. It guarantees that every consumer may demand to learn the identity of any investigative agency, the information the agency may have and to whom the reports are given.

Regarding LTC insurance, the existence of symptoms that would cause an ordinarily prudent person to seek diagnosis or treatment, or a condition for which medical advice or treatment was recommended by or received from a provider of health care services within 6 months before the effective date of an insured's coverage is known as A) previous symptoms B) a pre-coverage warranty C) a pre-existing condition D) the 6-month rule

C) a pre-existing condition *The most restrictive definition allowed for a pre-existing condition in LTC insurance is the existence of symptoms that would cause an ordinarily prudent person to seek diagnosis or treatment, a condition for which medical advice or treatment was recommended by or received from a provider of health care services within 6 months preceding the effective date of an insured's coverage.

What kinds of risks does a health insurance policy cover during the 10-day waiting period after it has been reinstated? A) neither accidents nor sickness B) accidents and sickness C) accidents D) sickness

C) accidents *For the first 10 days after reinstatement, the reinstated policy covers only loss resulting from accidental injury. After 10 days, it must cover loss resulting from sickness as well.

All of the following statements regarding a hospital indemnity plan are correct EXCEPT A) the benefits from the policy may be used toward deductibles and coinsurance payments B) the plan pays a flat dollar amount as a daily benefit each day the insured is hospitalized C) another name for the plan is a hospital expense plan D) payment is made directly to the insured, not the insurer

C) another name for the plan is a hospital expense plan *The other name for a hospital indemnity plan is a hospital income plan. The benefit may be used any way the insured sees fit; however, it is not designed to reimburse the insured for the expenses of being in the hospital.

All of the following conditions or medical procedures may be excluded from coverage under an individual accident and health insurance policy EXCEPT A) an injury covered by workers' comp B) cosmetic surgery C) childhood immunizations D) nervous disorders

C) childhood immunizations *All health insurance policies issued in PA must include benefits for childhood immunizations. These policies must provide coverage for medically necessary booster doses of all immunizing producers used in childhood immunizations.

Sean has a young family and needs affordable whole life insurance. He is looking for a policy with lower initial premiums but is not adverse to paying more at a later time. What type of whole life insurance variation would be suitable for him? A) life paid-up at 65 B) 20-pay life C) graded premium D) single pay

C) graded premium *Graded premium policies offer lower premiums during the initial period that gradually increase before leveling off for the duration of the contract. The total amount paid over the period of the policy would equal what is paid for a straight whole life policy. Graded premium policies work well for individuals who can expect to improve their financial condition. In life paid-up at 65 and 20-pay life policies, premium payments are completed before age 100. Single pay insurance is permanent cash value whole life insurance that is purchased with 1 large premium, which would probably not be affordable for Sean.

Which of the following statements pertaining to the optional misstatement of age provision is NOT correct? A) if the insured was actually younger at the time of application than shown in the policy, benefits would be increased B) if the insured was actually older at the time of application than shown in the policy, benefits would be reduced C) if the insured was actually older at the time of application than shown in the policy, the excess premiums paid would be refunded D) if the age of the insured is misstated at the time of application, all amounts payable under the policy would be what the premiums paid would have purchased at the correct age

C) if the insured actually was older at the time of application than shown in the policy, the excess premiums paid would be refunded *According to the optional misstatement of age provision, if the insured was actually older at the time of application than shown in the policy, benefits would be reduced accordingly.

Which of the following is usually included in an individual health insurance contract? A) losses associated with pre-existing conditions B) situations involving deliberate acts of the insured, such as self-inflicted injuries C) injuries due to accidents D) losses that are covered by workers' comp

C) injuries due to accidents *Individual health insurance contracts normally contain certain exclusions and coverage suspensions. These include losses associated with pre-existing conditions (to protect the insurer against adverse selection); losses associated with deliberate acts of the insured, such as suicide and self-inflicted injuries; losses associated with excessive risk, such as hazardous occupations; and losses covered by other types of insurance (to prevent duplication of benefits).

Which of the following statements about accelerated benefit provisions is NOT correct? A) they are standard in life insurance policies B) the death benefit, less the accelerated payment, is still payable C) the insured must be expected to die within 6 months D) they provide for the early payment of part of a policy's face amount if the insured suffers from a terminal illness or injury

C) the insured must be expected to die within 6 months *An accelerated benefit rider provides for the early payment of a portion of a policy's face amount if the insured is expected to die within 24 months.

Which of the following statements regarding the standard cost-of-living rider used with life insurance policies is NOT correct? A) this rider provides the policyowner with the option to increase the death benefit of her life policy to match an increase in the cost-of-living index B) a cost-of-living rider can involve attaching an increasing term insurance rider to the base policy C) there is no additional premium required to pay for increases in the death benefit resulting from the cost-of-living rider D) there is typically a percentage cap on the amount of yearly increase that is available to the policyowner with this rider

C) there is no additional premium required to pay for increases in the death benefit resulting from the cost-of-living rider *With the cost-of-living rider, any increase in the death benefit as a result of this rider will also result in an increase in premium.

The insurer under a health policy is liable for which of the following losses? A) those sustained while under the influence of alcohol B) those sustained while committing a felony C) those sustained while under the influence of a prescribed medication D) those sustained while under the influence of an illegal narcotic

C) those sustained while under the influence of a prescribed medication *Under a health insurance policy, the insurer is not liable for any loss attributable to the insured while under the influence of intoxicants, drugs or narcotics (unless the drugs were administered on the advice of a physician) or sustained while committing a felony.

Insurers can guard against the prohibited practice of post-claims underwriting in LTC coverage by A) refusing to pay claims for any insured who is older than 85 years B) having the producer fill out the applicant's health information on all application forms C) using unambiguous questions on LTC applications, which will correctly reflect the applicant's health condition D) assigning all challenged coverage problems to Medicaid

C) using unambiguous questions on LTC applications, which will correctly reflect the applicant's health condition *Applications for LTC insurance, except those that are guaranteed issue, must use unambiguous questions that will correctly determine the condition of the applicant's health. Post-claims underwriting is prohibited. An insurer must determine an applicant's acceptability as an insured before the policy is issued.

Which of the following policies endows at age 100? A) endowment and decreasing term B) level term and whole life C) whole life and limited-pay life D) any endowment policy

C) whole life and limited-pay life *A policy endows when it reached the point when the cash value equals the face amount. Endowment policies can endow at different ages. Whole life and limited-pay life policies endow at age 100. Term policies do not endow.

Micah pays $220 annually for a $50,000 life insurance policy. The premium is due June 1, however it is not paid until June 24. If Micah died on June 15, what would be the amount of the death benefit? A) $0 B) $49,220 C) $50,000 D) $49,780

D) $49,780 *Since Micah died during the grace period, the policy will pay the death benefit minus the amount of past due premium.

Sarah owns a life insurance policy with a $50,000 face amount and a 10-year return-of-premium rider. She pays an annual premium of $700. If she were to die 6 years after purchasing the policy, what would be the total amount payable to the beneficiary? A) $50,700 B) $50,000 C) $57,000 D) $54,200

D) $54,200 *The return-of-premium rider increased the death benefit by the sum or premiums paid to date

An insurance company that transacts insurance directly with consumers without the assistance of producers is called A) a public approach carrier B) a reinsurance organization C) a direct advertising carrier D) a direct response company

D) a direct response company *Direct response companies sell to consumers without using producers. These companies may use their own employees to sell insurance directly to prospective buyers or do so through the mail or at airport booths.

Which of the following statements pertaining to an agent's handling of premium money is NOT correct? A) an agent who violates regulations concerning handling premium money may be charged with embezzlement or mishandling funds B) an agent holds premium money for the insured; the money belongs to the insurer C) an agent must not make personal use of premium money received from policyowners D) an agent may spend premium money for his personal use

D) an agent may spend premium money for his personal use *An agent enjoys a fiduciary role with an insured. This establishes a relationship of trust. As a result, the agent must be very careful in handling money received from the insured and the company's premiums or be subject to harsh penalties.

All of the following are characteristics of group life insurance EXCEPT A) the employer is the policyowner B) certificates of insurance provide a summary of benefits C) the employee designates the beneficiary D) each insured in the group receives a policy

D) each insured in the group receives a policy *A distinguishing characteristic of group life insurance is its use of a master contract that sets forth the terms and conditions between the insurance company and the policyowner, who is the employer. Those covered by the contract - the employees - do not receive individual policies and are not parties to the contract. Each insured instead receives a certificate of insurance and has the right to name beneficiaries.

Julie has just received a lump-sum payment from her individual income policy provider. Which of the following is the best explanation for this payment? A) the definition of disability in her policy has been changed from any occupation to own occupation B) the elimination period has ended C) her Social Security benefit has been terminated D) her policy includes a return-of-premium provision

D) her policy includes a return-of-premium provision *Some individual disability income policies include a partial refund of premiums if no claims are made after a certain period of time. The termination of Social Security benefits will not result in a lump-sum benefit payment. Monthly benefits begin when a policy's elimination period ends.

A 65-year old employee of a company with 90 employees suffers a heart attack and, as a result, becomes totally disabled. Which of the following statements describes how his health benefits will be paid? A) because he is over age 65, Medicare is responsible for paying all benefits B) Medicare pays most of the benefits. After that, his employer-sponsored health insurance pays the remainder C) as an active employee, his employer-sponsored health insurance will pay all benefits D) his employer is the primary payer and Medicare pays the remaining eligible expenses

D) his employer is the primary payer and Medicare pays the remaining eligible expenses *The employer has more than 20 employees and the individual is still an employee. Therefore, the employer-sponsored health insurance will be primary and Medicare will cover the remaining eligible expenses.

A person may not act as a PA insurance producer unless that person is A) at least 21 years old B) a resident of PA for at least 3 years C) employed by at least one insurer D) licensed in the line of authority under which a contract is issued

D) licensed in the line of authority under which a contract is issued *A person may not sell, solicit, or negotiate insurance in PA for any line of insurance unless the person is licensed for that qualification. An individual does not need to be employed by an insurance company or have been a PA resident for any specified time period. The minimum age to obtain a license is 18.

Which of the following statements regarding annuities is NOT correct? A) an annuity is based on mortality assumptions and the law of large numbers B) annuity payments are guaranteed C) an annuity contract provides for the purchase of income D) like life insurance, an annuity is used primarily to provide income at death

D) like life insurance, an annuity is used primarily to provide income at death *Unlike life insurance, an annuity is used primarily to provide income during life; consequently, annuity payments are guaranteed to be paid as long as the annuitant lives.

If a life insurance policy specifically names a beneficiary other than the insured's estate, what recourse may the creditors of the deceased insured take to attach the policy proceeds? A) seek a court injunction to delay payment of the death proceeds until the issue of who gets paid is settled in court B) file a petition with the insurer showing proof of the deceased insured's outstanding debts and thus qualify for a portion of the death benefit C) attach a lien against the policy that automatically diverts a portion of the death benefit to the creditor D) nothing, because life insurance proceeds are exempt from the claims of the deceased insured's creditors as long as there is a named beneficiary other than the insured's estate

D) nothing, because life insurance proceeds are exempt from the claims of the deceased insured's creditors as long as there is a named beneficiary other than the insured's estate *One of the notable features of the spendthrift clause is that the life insurance proceeds are exempt from the claims of the deceased insured's creditors as long as there is a named beneficiary other than the insured's estate.

Ben is considering the purchase of a $75,000 whole life policy. Which of the following options would tend to lower his premiums? A) the addition of a cost-of-living rider B) the waiver of premium option C) the addition of a guaranteed insurability rider D) paying premiums annually as opposed to monthly

D) paying premiums annually as opposed to monthly *The less frequently premiums are collected on a life insurance policy, the less it costs the insurer to administer that policy and the more the insurer will have to invest. Consequently, an annual premium payment mode would be less expensive than a monthly premium payment mode. Options that add value to a policy, like guaranteed insurability, waiver of premium and cost-of-living riders would tend to increase the cost of the policy.

Which of the following acts is NOT part of soliciting insurance? A) approaching a prospect through the mail B) completing an insurance application C) approaching a prospect in person D) performing clerical work for an insurance agency

D) performing clerical work for an insurance agency *In general, the solicitation of insurance is the act of approaching people by any means, including the mail or in person, with the intent of inducing them to buy insurance. Soliciting also includes actual sale of an insurance policy, including the completion of an application.

During the accumulation period of a deferred variable annuity, the value of the individual account rises or falls based on A) the variable premiums B) the insurer's expenses C) the number of annuitants D) the investment results

D) the investment results *During the accumulation period of a deferred variable annuity, the value of the individual account rises or falls based on the investment results of the annuity's underlying securities.