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228 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What type of policy provides limited, specialized health insurance coverage?
Disability income insurance. Hospital income. HMO. Comprehensive health care. |
Limited policies are specialized health insurance policies that provide specific coverage. Limited policies include accidental death & dismemberment (AD&D), travel accident, dread disease, hospital income, credit health, prescription, vision, dental and blanket coverage.
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comprehensive health care is not the answer
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Which statement is false regarding medical expense policies?
All of the above are false Perils covered by medical expense policies include accidental injury and sickness Medical expense policies pay for loss of income Medical expense policies cover the insured and his dependents |
Disability income policies pay loss of income benefits.
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Medical expense policies cover the insured and his dependents is not the answer
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What are the two ways that SIMPLE plans may be organized?
403(b) or 408(k). HR-10 or ESOP. 403(b) or annuity. IRA or 401(k). |
SIMPLE plans may be organized as an IRA or 401(k) established by the employer.
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What type of health plan is offered by Blue Cross/Blue Shield?
HMO. PPO. POS plans. All of the Above |
Blue Cross and Blue Shield offer managed care plans. Subscribers can purchase HMO, PPO and POS plans. Blue Cross and Blue Shield are nonprofit organizations in most states.
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All of the following are the primary types of medical expense policies EXCEPT:
Major medical. Disability income. Base plans. Comprehensive. |
The four main types of medical expense policies are: base plans, major medical, comprehensive and specialized policies.
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With the __________ definition of accident, the injury must be unintentional and unexpected; most injuries are covered except those that were self-inflicted.
neither accidental means or accidental bodily injury accidental bodily injury either accidental means or accidental bodily injury accidental means |
The injury was unintentional and unexpected. Policies that use the accidental bodily injury cover nearly all injuries except for those that were self-inflicted.
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Group insurance generally contains a provision for extension of benefits to covered employees or dependents who become totally disabled. The extension of benefits usually lasts for a period of at least ______ months or until the individual is no longer totally disabled.
1. 12. 6. 5. |
Group insurance generally contains a provision for extension of benefits to covered employees or dependents who become totally disabled. The extension of benefits usually lasts for a period of at least 12 months or until the individual is no longer totally disabled.
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Employees are usually required to fulfill a ______-day probationary period before they are eligible for coverage.
15 30 to 90 180 10 |
Employees are usually required to fulfill a 30 to 90-day probationary period before they are eligible for coverage.
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What is the minimum number of Social Security quarters of credit required to obtain fully insured status for disability?
10. 40. 20. 6. |
The minimum six quarters is required to obtain fully insured status for disability benefits.
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An individual who is not eligible for premium-free Medicare Part A coverage may apply for coverage during which of the following enrollment periods?
Initial enrollment period. General enrollment period. Special enrollment period. All of the Above |
Individuals who are not eligible for premium-free Part A coverage may apply for coverage during the following enrollment periods: initial, general or special.
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What is the 2012 Part D deductible?
$162 $320 $4,550 $450 |
A deductible of $320 in 2012 must be paid before Part D begins to pay.A deductible of $320 in 2012 must be paid before Part D begins to pay.
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Medicare Part C may be offered as a(n):
Private Fee-for-service. PPO. HMO. All of the Above |
Part C plans may be offered as a Private Fee-For-Service, PPO, HMO, MSA, SNP, POS, or PSO plan
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All of the following are ways long-term care coverage may be offered EXCEPT:
Group plan. AD&D rider. Individual plan. Life insurance rider. |
Long-term care policies can be issued in several forms. These include: individual policies, group policies, and as a rider on a life insurance policies.
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How much withholding tax is assessed when funds from one qualified plan are not deposited into another qualified plan within 60 days?
20%. 10%. 1%. 30%. |
A rollover occurs when the owner of the plan or account withdraws funds and deposits them into another qualified plan or account. If the funds are paid to the individual rather than another plan or account, a 20% withholding tax is assessed. The deposit of funds for rollovers must occur within 60 days of disbursement or they will be subject to additional tax and penalties.
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All of the following are Medicare supplement additional benefits EXCEPT:
Preventive care. Skilled nursing facility care Part A coinsurance for days 21 through 100. Part B excess charges. Part B 20% coinsurance. |
The Part B 20% coinsurance is a core benefit.
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How long does an insured have after filing a claim with an insurance company in which he may file a legal suit against the insurer?
One year from the date the loss occurred One year from the date proof of loss is furnished Two years from the date the loss occurred Three years from the date proof of loss is furnished. |
The insured has up to 3 years after filing a claim with an insurance company in which he may file a legal suit against the insurer.
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Joanna’s cash value in her life policy was reduced to zero. Which of the following statements is TRUE about the effect on her cash value life insurance policy.
The APL borrowed from the face value of the policy. Her policy lapsed when the premium did not get paid. Consideration clause There was no effect |
If the cash value goes to zero, the automatic loan payment provision cannot cover the premium and the policy would lapse.
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Jacob wants to pay up his policy earlier. He doesn’t want to pay premiums in his 60’s when he plans to retire and travel the world. What dividend option should he use to achieve his goal?
One-year term. Reduction of premium payments. Paid-up insurance. Paid-up additions. |
The paid-up insurance option allows the policyowner to use dividends to pay up the policy earlier.
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Life insurance policies that build cash value have certain guarantees, required by law, if the policyholders discontinue payment of premiums. The provision to access the cash value of the policy is called the:
Settlement option Conversion option Nonforfeiture provision Reinstatement provision |
The nonforfeiture provision protects a policyowner from losing all of their investment, in the event a policy is cancelled, surrendered or premiums are not paid.
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Which of the following is a step that can be taken to minimize problems related to beneficiaries upon the death of the insured?
Designate an arbitrator Use the full, legal name when designating a beneficiary Specify that the husband or wife is the beneficiary Specify that the children are beneficiaries |
In order to avoid problems, (i.e. ex-wife/current wife, biological children/step-children etc.) it is recommended that beneficiaries be designated using their full, legal names.
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Which of the following is not a requirement for qualified long-term care plans?
Policies must accrue cash value. Coverage cannot reimburse insureds for medical expenses or services covered by Medicare. The individual must be unable to perform at least 2 ADLs. Inflation protection must be provided. |
Policies cannot accrue cash value.
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All of the following are requirements for qualified long-term care plans EXCEPT:
The individual must be severely cognitively impaired. Nonforfeiture options and inflation protection must be provided. The individual must require long-term care for at least 30 days. The individual must be unable to perform at least two ADLs. |
The individual must require long-term care for at least 90 days.
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The cash value in a variable life policy is characterized by all of the following EXCEPT:
Cash value is not guaranteed. Variable life policies accrue cash value. Cash value is tied to the insurer’s separate account. Cash value cannot be borrowed or withdrawn. |
Cash value is figured daily and varies based on the investment in the separate account. Cash value is not guaranteed. Cash value may be borrowed or withdrawn at any time.
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Donna is getting ready to look at a variable life insurance as an option for her insurance. Which of the following statements it TRUE about variable life insurance?
Cash values are not guaranteed The benefits of variable life insurance vary according to the premiums paid. The insurance company assumes the investment risk of a variable policy To sell a variable life insurance policy the proposal must be accompanied by a prospectus |
A variable life policy cannot be proposed in a sales scenario unless a prospectus precedes or accompanies the proposal, because it is considered a security.
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Which policy combines whole life and convertible term?
Family income policy Family maintenance policy Protection plan Juvenile policy |
The protection plan (family policy) insures the entire family. The primary breadwinner is insured with whole life, and the spouse and each child is insured with convertible term.
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Which of the following life income settlement options is best described as payment of periodic income for the beneficiary’s entire life, and a second beneficiary receiving payments until the principal reaches zero?
Straight life. Joint and survivor. Refund life. Life income certain. |
The refund life option pays the beneficiary periodic income for his entire life. If the beneficiary dies before the policy proceeds have been paid out entirely, then a second beneficiary receives the payments until the principal reaches zero. The refund life option provides a guarantee that the minimum benefit will be paid out.
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All of the following statements about key person life insurance are true EXCEPT:
Premiums are tax-deductible as a business expense. A business is the owner, premium payor, and beneficiary of the policy. The key employee must agree to the coverage. The coverage is intended to cover the cost of hiring and training a replacement employee. |
Premiums for key person life insurance are not tax-deductible.
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Group health insurance policy rates are usually based on:
Experience rating. Community rating. Individual rating. None of the Above |
Group health insurance policy rates are usually based on experience rating in which premiums are based on the claims experience of the entire group.
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Which of the following best describes how the cash value in a universal life policy grows?
At a fixed rate At a variable rate At a guaranteed minimum rate, but may earn a higher current rate At a guaranteed minimum rate |
The interest rate of universal life policies is a guaranteed minimum, but may earn a higher "current" rate.
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Which renewability provision guarantees that premiums will not be increased and the policy will be renewed?
Optionally renewable. Noncancellable. Guaranteed renewable. Conditionally renewable. |
A noncancellable health insurance policy guarantees that premium rates will not increase, and the policy will be renewed (until a specified age – usually 65).
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Which among the following assures renewability, but gives the insurer the right to change premium costs?
Optional Renewable Guaranteed Renewable Conditionally Renewable Noncancelable |
not optional renewable
While the policy may be renewed for life, the insurer reserves the right to change premium costs within reason. Google: Guaranteed Renewable: An insurance policy feature that obligates the insurer to continue coverage as long as premiums are paid on the policy. While re-insurability is guaranteed, premiums can rise based on the filing of a claim, injury, or other factor that could increase the risk of future claims. |
not optional renewable
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ABC employer pays the entire cost of the group health insurance premiums. Which of the following is true regarding the taxation of premiums and benefits?
Premiums are not tax-deductible to the employer and benefits are tax-free to the employees. Premiums are tax-deductible to the employer and benefits are not taxable to the employees. Premiums are tax-deductible to the employer and benefits are taxable to the employees. Premiums are paid with after-tax dollars and benefits are taxable as ordinary income. |
When the employer pays the premiums for a group health insurance policy, the employer can tax-deduct the amount of premiums paid. Employees do not pay taxes on medical expense benefits received.
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What term describes the situation where an employer changes group plan coverage to another insurer, and all employees eligible for coverage by the old plan are automatically covered under the new plan without any probationary period?
No-loss no-gain. Rollover. Persistency. Rating. |
If an employer changes group plan coverage to another insurer, all employees eligible for coverage by the old plan are automatically covered under the new plan without any probationary period. This is referred to as no-loss no-gain.
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For individual health insurance policies, how soon must the insured submit proof of loss to the insurer?
120 days 20 days 15 days 90 days |
For individual health insurance policies, proof of loss must be submitted to the insurer within 90 days of the date of loss.
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All of the following are characteristics of the reinstatement provision for individual health insurance EXCEPT:
Sicknesses are covered once a policy is reinstated. A policy will be reinstated on the 45th day after the conditional receipt unless denied. Accidents are covered once a policy is reinstated. The insurer may require 60 days of back due premium and proof of insurability. |
Sickness has a 10-day waiting period.
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All of the following are true regarding group life insurance contracts EXCEPT:
Have a grace period Members have the right to convert their policy Evidence of insurability is never required for enrollment The application may be attached to the policy. |
Evidence of insurability must be provided if an eligible individual enrolls after the enrollment period.
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What are the taxes imposed on a key person disability income policy?
Premiums and benefits are tax-free. Premiums are not taxed. Premiums are paid with after-tax dollars. Benefits are taxable. |
Premiums for a key person disability income policy are not tax-deductible as a business expense, but benefits are received tax-free.
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When can an individual make a distribution from a traditional IRA?
Upon retirement after age 59 ½. For education expenses. For death or disability. All of the Above |
Distributions from an IRA may occur for the following: death or disability without penalty; retirement after age 59 ½; first time home-buyers up to $10,000 without penalty, but with taxes; education – no dollar maximum – without penalty, but with taxes; catastrophic medical expenses, without penalty, but with taxes.
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Which of the following is a characteristic of HMOs?
Capitation. Deductibles. Coinsurance. All of the Above |
HMOs use all of these cost-control features.
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Which of the following best describes the federal income taxation of life insurance policy proceeds?
Policy proceeds are tax-deferred. Policy proceeds are not taxable. Policy proceeds are taxable as income. Policy proceeds provide a tax credit to policyowners. |
Generally, life insurance policy proceeds are not taxable.
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Qualified plan vesting requirements are imposed on:
Employer and employee contributions Vesting is not imposed on qualified plans Employee contributions Employer contributions |
Only employers must comply with vesting requirements because employee contributions are completely vested immediately.
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What program receives funds from Medicaid to assist individuals in paying Medicare premiums?
Medicaid. Medicare. Medicare Savings Programs. Medicare supplement policies. |
Medicare Savings Programs (MSPs) receive funds from Medicaid to assist individuals in paying Medicare premiums. Some MSPs pay a portion of Medicare Part A and B deductibles and coinsurance.
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Which of the following is not a dividend option?
Reduction of premium payments Paid-up additions Paid-up Insurance Reduced paid-up insurance |
Reduced paid-up insurance is a nonforfeiture option.
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Jacob wants to pay up his policy earlier. He doesn’t want to pay premiums in his 60’s when he plans to retire and travel the world. What dividend option should he use to achieve his goal?
Reduction of premium payments. Paid-up additions. Paid-up insurance. One-year term. |
The paid-up insurance option allows the policyowner to use dividends to pay up the policy earlier.
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Social Security quarters of coverage earned are based on ________ quarters worked, and ________be earned consecutively.
cumulative; cannot cumulative; do not need to consecutive; must consecutive; can |
Quarters of coverage earned are based on cumulative quarters worked, and do not have to be earned consecutively.
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Life insurance policy illustrations must contain all of the following EXCEPT:
Insured?s age and sex Only the guaranteed policy elements Agent's name Generic name of policy |
Life insurance policy illustrations depict the nonguaranteed policy elements.
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Medicare Supplement policies are primarily designed to
provide a reinsurance network that spreads the Medicare risk among private insurance companies provide additional retirement income to supplement Social Security retirement benefits offset the cost of Medicare provide additional benefits beyond those provided by Medicare |
Medical Supplement insurance policies are designed to provide benefits not covered by Medicare.
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Rebecca has a contributory employer group health plan for her employees. How many employees must participate in the group health plan?
75% of the employees 100% of the eligible employees 75% of the eligible employees 100% of the employees |
In a contributory employer group plan, 75% of all eligible employees must participate in the plan.
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Optionally renewable is best described as:
The insurer has the right to non-renew a contract for any reason specified in the policy. Guarantees continuation of coverage for the insured until the insured reaches a specified age. Cannot be canceled by the insurer The insurer has the right to non-renew a contract for any reason. |
Optionally renewable policies provide the insurer the right not to renew the contract for any reason.
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How long must agents and insurers keep a record of complaints since the date of last examination?
2 years 3 years A complaint record is not required 5 years |
Agents and insurers must keep a record of all complaints for 3 years since the date of last examination.
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A nonqualified annuity:
has tax-deferred growth on the cost base. is a type of qualified plan. has tax-deductible premiums. is not subject to tax. |
Interest earned in a nonqualified annuity is tax-deferred until distributions are made.
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An elimination period for long-term care policies that is counted based on the number of days the insured receives care is called:
service day basis. calendar day basis. Medicare basis. long-term care basis. |
Elimination periods are counted on a service day basis (days receiving care) or calendar day basis (days are counted once an individual is eligible for LTC benefits).
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Which of the following is true regarding the treatment of preexisting conditions in Medigap and LTC polices?
Preexisting conditions which were present 12 months prior to the policy's effective date may be excluded for a maximum of six months after the effective date of coverage. Preexisting conditions which were present six months prior to the policy's effective date may be excluded for a maximum of 12 months after the effective date of coverage. Preexisting conditions which were present six months prior to the policy's effective date may be excluded for a maximum of six months after the effective date of coverage. Preexisting conditions which were present six months prior to the policy's effective date may be excluded for a maximum of three months after the effective date of coverage. |
Preexisting conditions which were present 6 months prior to the policy's effective date may be excluded for a maximum of 6 months after the effective date of coverage.
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All of the following is true regarding purchase of personal life insurance for charity EXCEPT:
The charity is named as the beneficiary. The person purchasing life insurance for charity must have insurable interest in the lives of the charity’s members. The person buying the policy pays the premiums, which are usually tax-deductible. Coverage is taken out on the life of the person buying the policy. |
Life insurance may be purchased for charitable reasons. To make life insurance a charitable gift, a person purchases life insurance on himself and names the charity as beneficiary. In most cases, the insured’s premium payments are tax deductible.
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ABC insurer is in the process of underwriting Kara's disability income policy. Which of the following factors is most important to the insurer in underwriting her coverage?
Kara's age Kara's health history Kara's occupation Kara's place of residence |
Disability income policies replace income while an insured cannot work; therefore, Kara's occupation is the most important factor in underwriting the coverage.
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All of the following are cash benefits of disability income policies EXCEPT:
Medical reimbursement benefit. Impairment rider. Rehabilitation benefit. Accidental death and dismemberment. |
The impairment rider excludes coverage for a specified condition.
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What type of employer-administered health plan provides funding for claims payments for its employees and dependents?
Self-funded. Cafeteria plans. MEWAs. 501(c)(9) trusts. |
The employer provides funding for claims payments for its employees and their dependents. The self-funded plan can be supplemented by a stop-loss contract so the employer’s liability is limited and an insurer will pay the claims in excess of the employer’s expected claims.
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Which of the following individual’s missing signature deems a life insurance application incomplete?
The underwriter. The primary beneficiary. The executive officer of the insurance company. The prospective adult insured. |
The proposed insured, if an adult, must sign the life insurance application. If the proposed insured is a minor child, his/her signature is not required on the application.
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Which of the following terms means risk is spread by sharing the possibility of loss over a large number of people?
Insurance Law of large numbers Risk pooling None of the Above |
Risk Pooling spreads risk by sharing the possibility of loss over a large number of people. It transfers risk from an individual to a group.
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Jake is an insurance agent. He owns the renewals on his clients' policies. What type of agent is Jake?
Exclusive agent Captive agent Independent agent Managing general agent |
Independent agents may work for many insurers and have control and ownership over their clients? accounts.
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All of the following statements regarding investments in the separate account are true EXCEPT:
The investment risk is borne upon the contract owner. The insurer’s separate and general accounts are tied together. Variable annuity premiums are invested in the insurer’s separate account. The contract owner chooses what portion of premium dollars are invested in the separate account, and what portion of premium dollars are invested in the insurer’s general account. |
The insurer’s separate account is not tied to the general account.
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All of the following are uses of annuities EXCEPT:
Provide death benefit Provide education funds Tax-advantaged savings vehicle Provide lifetime income |
Life insurance is intended to provide a death benefit, not annuities.
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Annuity payout options take effect:
after the accumulation period and before annuitization. during the accumulation period. upon annuitization. after the annuity phase. |
The selected payout option takes effect upon annuitization.
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What happens if an insurance producer presents an incomplete application for underwriting?
The Underwriter will accept a signed and witnessed FAX copy of the information needed from the producer. The Underwriter will contact the agent to request the missing information The Underwriter will void the application. The Underwriter will return the application to the producer at once for completion. |
The Underwriting department must return the application for completion. Nothing else will do because this is a critical part of the insuring process.
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When can an individual enroll into, drop, or change Medicare Part C plans?
During the initial enrollment period. November 15th through December 31st annually. During the general enrollment period. All of the Above |
An individual can enroll into, drop, or change Part C plans during the initial or general enrollment periods, or from November 15th through December 31st each year.
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Distributions from a Roth IRA must begin by:
age 70 ½ age 59 ½. no specified age. age 65. |
Roth IRAs do not have to begin payout by the time the participant reaches the age of 70 ½. Contributions to a Roth IRA can continue beyond the age of 70 ½.
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For an individual disability income policy:
premiums are paid with pre-tax dollars and benefits are received tax-free. premiums are paid with after-tax dollars and benefits are taxable. premiums are paid with pre-tax dollars and benefits are taxable. premiums are paid with after-tax dollars and benefits are tax-free. |
Premiums paid for individually-owned disability income policies are not tax-deductible; however, disability income benefits are tax-free.
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Jan's sushi restaurant has a business overhead expense policy. What is the tax treatment of premiums and benefits?
Premiums and benefits are taxed. Premiums and benefits are tax-free. Benefits are tax-free. Premiums are tax-deductible. |
Premiums for business overhead coverage are tax-deductible as a business expense. Benefits are taxable.
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Generally, how are health insurance policies taxed?
If premiums are tax-deductible, benefits are taxed as income. If premiums are tax-deductible, benefits are also tax-deductible. Premiums and benefits are not taxed. None of the Above |
As a general rule, if the premiums are tax-deductible, the benefits are taxed as income.
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Which of the following statements is false regarding variable universal life insurance?
Premiums are level. The policyowner has access to cash values in the form of policy loans and cash withdrawals. Policyowners choose sub-account investments. Cash value is based on the investment experience in the insurer’s separate account. |
Premiums are flexible.
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Fraternals typically sell what type of insurance?
Life, accident and health insurance. Liability insurance. Property insurance. Accident and health insurance only. |
Fraternal benefit societies are mostly involved in life and health insurance.
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What begins on the day an individual enters the hospital or a skilled nursing facility, and ends when care has ceased for 60 consecutive days?
Primary payor. Part A enrollment. Lifetime reserve days. Benefit period. |
A benefit period begins on the day an individual enters the hospital or a SNF (skilled nursing facility), and ends when care has ceased for 60 consecutive days.
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Withdrawals or partial surrenders can be made of the cash value of a universal life policy. Which of the following is specified in the policy?
Timing on repaying the withdrawal The amount of tax on the withdrawal if it is over basis How to convert the withdrawal to a loan. How much can be withdrawn |
The policy will specify how much can be withdrawn, at what frequency the withdrawals can be made, and the service charges applicable to the withdrawal. There is no presumption that the withdrawal will be repaid.
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How long is the conversion period for group long-term care policies?
90 days. 60 days. 180 days. 31 days. |
Individuals must apply for the individual coverage and pay the premium within 31 days of the group coverage termination date.
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Most medical expense plans have:
deductibles only. coinsurance and deductibles. coinsurance only. copayments only. |
Most medical expense plans have coinsurance and deductibles, which require the insured share in the cost of medical care.
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All of the following are ways medical expense policies pay benefits EXCEPT:
Indemnity. Valued. Reimbursement. Service basis. |
Medical expense policies may pay benefits in the following ways: reimbursement (expense-occurred), where the policyholder is reimbursed for the cost of medical care; service basis, where providers are paid directly by the insurer; or on an indemnity basis, where the policy pays a fixed amount regardless of the cost of medical care. Disability income policies pay benefits on a valued basis.
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All of the following statements are true regarding the taxation of personal life insurance used for charity EXCEPT:
In order for tax deductions to be valid, the charity must retain full ownership rights of the policy. A charity may be made a beneficiary of a personal life insurance policy, in which case ownership need not be relinquished. When a charity is made a beneficiary of a personal life insurance policy, the policyowner retains the right to change the beneficiary. When a charity is made a beneficiary of a personal life insurance policy, premiums are tax-deductible. |
A policy may be given to the charity, and the value of the policy is tax-deductible. If the individual chooses to make the premium payments for the charity, those are also tax-deductible. The charity must retain ownership and rights of the policy for the tax deductions to be valid. The individual may also make the charity a beneficiary of a policy without relinquishing ownership. Payments of premiums are not tax-deductible, and the proceeds will be deducted from the estate as a charitable contribution. In this case, the policyowner retains the right to change the beneficiary if necessary.
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This provision identifies the named insured, type, and amount of coverage provided by the policy:
Consideration clause Policy face Execution clause Insuring clause |
The insuring clause is found on the policy face (title page). It contains the insurer's basic promise to pay benefits. The insuring clause names the individuals covered by the policy, the policy effective date, and period of coverage.
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Which of the following best describes creditable coverage?
Prior health coverage. Credit health insurance. Insurance issued by a credit union. None of the Above |
Creditable coverage is prior health insurance coverage, which is used to establish eligibility under HIPAA.
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Which dividend options allows the policyowner to pay up the policy sooner?
Reduction of premium payments. Paid-up insurance. One-year term. Paid-up additions. |
The paid-up insurance option allows the policyowner to use dividends to pay up the policy earlier.
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Whole life policies that accumulate cash value have a nonforfeiture option. All of the following are nonforfeiture options EXCEPT:
One year term option Reduced paid-up insurance option Extended term option Cash surrender value option |
The one-year term option pertains to usage of dividends to purchase one-year term insurance.
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Return of premium rider is sometimes thought of as a safety net for your safety net. If the insured outlives the term policy, the insurance company returns all or some of your premium payments. All of the following are considered drawbacks of this type of rider EXCEPT:
If the insured dies, the beneficiaries receive a lump sum death benefit. Any lapse in the policy results in termination of the policy. The premiums can be 20% - 50% higher. The insured must hold on to the policy for the full term to receive the refund. |
The lump sum benefit is considered an advantage. The insured must hold on to the policy for the full term to take advantage of the return of premium benefit and if the policy lapses, it can be terminated. Premiums can also be quite a bit higher.
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All of the following are Medicare supplement policy core benefits EXCEPT:
The 20% Part B coinsurance. Blood deductible. Part A copayments for approved hospital charges during the 61st through 90th day of hospitalization. Part A deductible. |
The core benefits include: Part A copayments for approved hospital charges during the 61st through 90th day of hospitalization; Part A copayments for approved hospital charges for the 60 lifetime reserve days; approved hospitalization costs for 365 extra days after all Medicare benefits have been exhausted; coverage for the blood deductible (first three pints); and the 20% Part B coinsurance.
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Angie allows her comprehensive major medical plan to lapse. If her policy is reinstated on January 10th and she contracts mononucleosis on January 19th, what benefits will she receive?
None Only hospitalization coverage Full Partial |
Upon reinstatement, accident is covered immediately, but sickness is not covered until a 10-day waiting period has been fulfilled.
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Individuals who are under the age of 65 and have a disability will be automatically enrolled in _____ if they are receiving Social Security or RRB disability benefits.
Medicare Part B. Medicare Part C. Medicare Part D. TRICARE. |
Individuals who are under the age of 65 and have a disability will be automatically enrolled in Part B if they are receiving Social Security or RRB disability benefits. Part B coverage begins on the 25th month of disability.
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All of the following correctly describe risk pooling except:
Loss sharing spreads risk by sharing the possibility of loss over a small number of people Risk pooling transfers risk from an individual to a group Risk pooling allows a large number of people to be insured for a small amount of money Each member of the group shares in the losses of the group, and is promised a future benefit |
Risk pooling spreads risk by sharing the possibility of loss over a large number of people.
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Wesley purchases an increasing term life insurance policy. Which of the following elements must increase in Wesley’s policy?
The premium. The death benefit. The dividend options. The interest rate. |
In an increasing term life insurance policy, the death benefit increases as time passes.
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An HMO that allows members to use medical providers not authorized by the HMO is operating a(n):
PPO. producers’ cooperative. POS. consumers’ cooperative. |
Some HMOs operate on a point-of-service basis allowing members to use medical providers not authorized by the HMO. The member may pay higher deductibles and coinsurance, but allows greater flexibility in choosing medical providers.
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Which of the following policies combines convertible term and whole life, and has lower premiums in the early years which increase to a higher level after a certain number of years?
Graded premium Index-linked Economatic Modified whole |
Modified whole life policies use convertible term and whole life to provide permanent protection that has lower premiums during the early policy years. After a certain number of years, the premiums are raised to a higher level.
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The __________________ calculates an interest rate that must be earned in a side fund of a buy term and invest the difference policy in order for the value of the side fund to be equivalent to the surrender value of the policy that has the higher premium at a specific time.
interest-adjusted net cost method comparative interest rate method net payment cost index surrender cost index |
The comparative interest rate method calculates an interest rate that must be earned in a side fund of a buy term and invest the difference policy in order for the value of the side fund to be equivalent to the surrender value of the policy that has the higher premium at a specific time.
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All of the following are defined contribution plans EXCEPT:
Profit-sharing Group deferred annuity 401(k) Money-purchase pension plan |
A group deferred annuity is a defined benefit plan.
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Which of the following is false regarding the reduced paid-up insurance nonforfeiture option for life insurance policies?
The policy is paid-up with the cash values used as a single premium to purchase the reduced face amount coverage. The insured’s attained age is used to determine the amount of reduced paid-up coverage. Premium payments are made, but are lower than the original policy. Reduced paid-up insurance is the same type of whole life coverage as the original policy, except all policy riders are eliminated. |
The policy is paid-up with the cash values used as a single premium to purchase the reduced face amount coverage. No more premium payments are made. The insured’s attained age is used to determine the amount of reduced paid-up coverage. Reduced paid-up insurance is the same type of whole life coverage as the original policy, except all policy riders are eliminated.
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All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies EXCEPT:
The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value. The cash values act as a single premium to purchase reduced paid-up insurance. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. |
A. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value.
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What is the penalty for persons convicted of currency evasion in an amount of $100,000?
10 years imprisonment. Misdemeanor. 5 years imprisonment. None of the Above |
When money launders are caught, the cash is confiscated and penalties are assessed. It is a criminal offense to evade currency reporting by concealing more than $10,000 on a person through luggage, merchandise or other means into and out of the U.S. The penalty is up to 5 years imprisonment and forfeiture of money/property being smuggled.
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Marie, age 65, has group health coverage through work and her employer has 10 employees. If Marie enrolls in Medicare, what is the primary payor?
Neither. Medicare. Both Medicare and Marie’s employer. Marie’s employer. |
Medicare is primary if an individual retains group employer coverage and enrolls in Medicare, and there are fewer than 20 employees insured under the group plan. However, if there are 20 or more employees insured under the employer group coverage, then Medicare is secondary.
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Which of the following is not covered by Medicare supplement policies?
Part A coinsurance Part B coinsurance Blood deductible Skilled care |
Medigap policies are not designed to cover the costs of custodial, intermediate or skilled nursing care. Long-term care policies cover these needs.
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A person purchases a renewable and convertible term policy. The premiums on his policy are level; however, when he decides to convert his policy to ordinary whole life insurance, the premiums are higher. Which of the following best describes why the premiums increase upon conversion?
Whole life policies have higher premiums. The insured's health has deteriorated. The premiums for the converted policy are based on the insured's attained age. The insurer must pay for the administrative expenses of effectuating a new policy. |
When a term policy is converted to whole life insurance, the premiums will be higher because they are based on the insured's age at the time of conversion.
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All of the following statements regarding renewable term life insurance policies are false EXCEPT:
Renewable term life insurance policies may be renewed by the insured as long as evidence of insurability is provided. Renewable term life insurance policies can only be renewed by the insurance company, and the insured must provide evidence of insurability. Renewable term life insurance policies are always convertible. Renewable term life insurance policies are renewable at the insured’s option. |
The perk with renewable term life insurance policies is that the insured has the option of renewing the policy without needing to provide evidence of insurability.
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Which of the following terms is defined as the cause of loss and event insured against in an insurance policy?
Peril. Risk. Loss. Exposure. |
A peril is the cause of the loss and the event insured against. In life and health insurance, the perils are premature death, dependency during old age, accident, and sickness.
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How much will a covered worker receive from Social Security retirement benefits if he was born in 1960 and retires at age 62?
Full PIA. 80% of his PIA. 50% of his PIA. 0% of his PIA. |
According to Social Security, the normal retirement age for a person born in 1960 or later is 67. Therefore, a person who retires before his normal retirement age will be receive a smaller portion of his PIA for retirement benefits. If a covered worker retires at the normal retirement age, he will receive 100% of the PIA. However, if a covered worker retires early at the age of 62, the maximum Social Security benefit is 80% of the PIA.
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All of the following are types of deductibles in major medical policies EXCEPT:
Per cause deductible. Integrated deductible. Flat dollar deductible. Maximum annual deductible. |
The integrated deductible is used in comprehensive plans. Major medical plans use the following deductibles: flat dollar deductible, per cause deductible, and maximum annual deductible, also referred to as an all cause, calendar year or cumulative deductible.
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What type of deductible does a comprehensive major medical policy have?
Per cause deductible Flat dollar deductible All cause deductible Corridor deductible |
The insured pays a corridor deductible before coinsurance begins.
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Which of the following is characteristic of comprehensive medical expense policies?
First-dollar coverage. Smaller deductibles. Catastrophic coverage. All of the Above |
Comprehensive medical expense plans provide first-dollar coverage, have small deductibles than major medical plans, and provide catastrophic coverage.
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Medicare Part C may be offered as a(n):
Private Fee-for-service. PPO. HMO. All of the Above |
Part C plans may be offered as a Private Fee-For-Service, PPO, HMO, MSA, SNP, POS, or PSO plan.
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Which of the following best describes the capital sum in an AD&D policy?
The death benefit paid for accidental death. The benefit paid for total disability. The portion of the policy proceeds paid to contingent beneficiaries, as stated in the policy. The lump-sum payment for accidental dismemberment. |
The capital sum of an AD&D policy is paid for accidental dismemberment of one or more limbs.
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All of the following statements are true regarding the agency distribution system EXCEPT:
Under the managerial system instead of a general agent running the agency, a salaried branch manager is employed by the insurer. An agent is appointed by one insurer on an exclusive basis with subagents working beneath him. Independent agents are appointed to work for several insurers exclusively. Exclusive agents are also called career agents and work for only one insurer; some exclusive agents may be promoted to managing general agents. |
Independent insurance agents are appointed to work for several insurers non-exclusively. They may also work for themselves or under other insurance agents. Independent insurance agents have control and ownership over their clients’ accounts. This means they may place clients’ business with a different insurer when policies are up for renewal. Independent insurance agents earn commissions on the sales they make and overrides on sales made by agents they manage.
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Basic dental plans provide coverage through a:
Prepaid basis Usual, customary and reasonable basis. Schedule Combination basis |
A schedule lists the procedures and each benefit amount for a basic dental plan.
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Gail has no children and has decided to make a gift of her life insurance to her alma mater. This type of assignment is voluntary and also usually absolute and complete. Specifics of this type of assignment include:
All the rights of the policy are assigned All of the above The assignee has the right to use the cash value of the policy The policyowner cannot recover surrendered rights |
With this type of assignment, all rights are assigned, the assignee can use the cash value and the assignment is usually permanent
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What part of the insurance contract contains the insurer's consideration?
Execution clause Consideration clause Payment of claims Insuring clause |
The insuring clause contains the insurer’s promise to pay benefits in the event of a covered loss. The consideration clause states a policyowner must pay premium in exchange for the insurer’s promise to pay benefits.
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The ________ provision refunds 60-80% of the insured’s premiums and interest in cases where premium payments far exceed claims paid.
cash surrender value impairment rider cost of living adjustment rider return of premium |
The cash value surrender rider refunds 60-80% of the insured’s premiums and interest in cases where premium payments far exceed claims paid. This benefit is only paid when the disability income policy is terminated.
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All of the following are false regarding the taxation of nonqualified annuities EXCEPT:
Premiums are paid with pre-tax dollars and interest is tax-deferred Premiums are made with pre-tax dollars; however, interest is taxed in the year earned Premiums are taxable and interest is taxable in the year it is earned Premiums are made with taxed dollars; however, interest is tax-deferred |
During the annuity pay-in period, premiums are not tax-deductible, but interest is tax-deferred until withdrawn.
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What are the taxes imposed on a key person disability income policy?
Premiums and benefits are tax-free. Premiums are not taxed. Benefits are taxable. Premiums are paid with after-tax dollars. |
Premiums for a key person disability income policy are not tax-deductible as a business expense, but benefits are received tax-free.
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Generally, how are health insurance policies taxed?
If premiums are tax-deductible, benefits are taxed as income. If premiums are tax-deductible, benefits are also tax-deductible. Premiums and benefits are not taxed. None of the Above |
As a general rule, if the premiums are tax-deductible, the benefits are taxed as income.
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All of the following are characteristics of whole life policies EXCEPT:
Level face amount Guaranteed cash value Opportunity to change components of the policy Level premiums |
Whole life policies do not offer the opportunity to change components.
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When a health insurance policy is reinstated:
It only covers accidents and sicknesses that occur more than a month after reinstatement. Its coverage begins immediately. A health insurance policy cannot be reinstated. It must be rewritten. It only covers sicknesses that begin more than 10 days following policy reinstatement. |
The reinstatement provision states that reinstated policy will cover only accidents that occur after reinstatement and sickness losses that begin 10 days after reinstatement.
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The outline of coverage for long-term care policies is also referred to as:
Plan summary. Policy summary. Shopper’s guide. All of the Above |
Applicants must be provided with a shopper’s guide (outline of coverage) upon initial solicitation, prior to completing the policy application. This document explains policy features such as premiums, policy renewability, conversion and exclusions.
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What are the two primary types of qualified plans?
Annuities and life insurance. Profit-sharing and pension plans. Money-purchase pension plan and target benefit pension plan. Defined benefit plans and defined contribution plans. |
The two primary types of qualified plans are defined benefit and defined contribution plans.
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All of the following statements regarding annuities are true EXCEPT:
The annuity certain does not guarantee life income. Upon annuitization, cash value taken in one lump-sum is not taxable. Life annuities provide income that an annuitant cannot outlive. The more guarantees and annuity has, the lower the annuity payment. |
If the cash value of an annuity is taken in one lump-sum, the interest earned on the principal is taxable.
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What business continuation agreement would you recommend to a corporation with 20 shareholders so that when a shareholder dies, all other shareholders agree to purchase a portion of the deceased shareholder’s stock at an agreed price?
Stock purchase plan. Section 303 stock redemption. Stock redemption plan. Cross-purchase plan. |
Stock redemption plan.
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Per HIPAA, what is the minimum number of months of creditable coverage a person must have to avoid preexisting condition exclusions under a new group health plan?
At least 36. At least 18. At least 12. At least 24. |
At least 12.
If an individual has 12 months of prior creditable coverage, then the new coverage cannot impose preexisting condition exclusions. |
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An insured is hospitalized with meningitis. In the course of his illness, he loses consciousness for a period, and is not fully restored to health for almost a year. He files a claim six months after the 90-day period of loss has elapsed. The insurance company will probably:
Accept the claim but penalize the claimant with a surcharge on next three premium payments Refuse payment, based on mandatory time limit included in the policy Accept the claim, but reduce the percentage of coverage based on the time elapsed past the filing deadline Accept the claim and pay it as if it were filed on time. |
Accept the claim and pay it as if it were filed on time.
When the insured lacks mental capacity for attending to business or is too ill to perform his legal responsibilities, insurers must take that into consideration and treat the claim in the same way they would treat an on-time claim. |
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Under Medicare Part A, how many lifetime days are allotted for psychiatric hospital care?
190. 180. 60. 90. |
psychiatric hospital care?
190. 190. |
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What is the purpose of the elimination period in disability income policies?
To prevent overinsurance. To prevent payment of short-term disabilities. To prevent adverse selection. To prevent payment of long-term disabilities. |
To prevent payment of short-term disabilities.
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Joel cancels his health insurance policy. How will the insurer return his unearned premium?
Pro rata Short-rate Full refund Will not refund premiums |
Short-rate
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What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?
Reduced paid-up insurance. None. Cash surrender value. Extended term. |
Extended term.
The extended term option permits the policyowner to use the policy’s cash values to buy paid-up term insurance. |
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Which of the following is not a nonforfeiture option?
Reduced paid-up insurance Cash surrender value Extended term One-year term option |
One-year term option
One-year term is a dividend option. |
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All of the following statements are false regarding the paid-up additions dividend option in a whole life insurance policy issued by a participating insurer EXCEPT:
Paid-up additions are only available on term life insurance policies issued by mutual insurers. Paid-up additions are based on the insured’s attained age. The insurer may require the underwriting department approve the insured’s request for paid-up additions. Paid-up additions simply add term life insurance coverage to the existing policy. |
The insured’s attained age is used to calculate the amount of coverage that can be purchased when the paid-up additions dividend option under a participating whole life insurance policy is used.
Paid-up additions are based on the insured’s attained age. |
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An HMO member will _________ in his choice of medical providers, as compared to a person who is enrolled in a PPO.
not have options have the same options be more restricted have more options |
be more restricted
Compared to health insurance plans, the choice of medical providers in HMOs is much more limited. The HMO selects a group of providers who agree to provide health care at an agreed price and uphold the HMO’s standards. |
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Which of the following is not a personal use of life insurance?
To fund a business’ buy-sell agreement. Life insurance purchased for charitable reasons. Life insurance death benefit used to maintain an estate. To provide the insured with immediate availability of funds. |
To fund a business’ buy-sell agreement.
There are many reasons a person seeks to purchase life insurance. Some of these include: survivor protection, estate creation, cash accumulation, liquidity, estate conservation, for viatical settlements and charity. Life insurance purchased for a business financial relationship is a business use of life insurance. |
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Of the following, which assures the insured may renew a policy to a specified date or age, barring stated circumstances?
Noncancelable Conditionally Renewable Optional Renewable Guaranteed Renewable |
Conditionally Renewable
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An insured’s disability insurance plan has a Recurrent Disability Provision for six months. If the insured is disabled, this plan:
Will waive the elimination period for a disability claim made within six months of a previous claim. Will waive the elimination period for a disability claim made more than six months after a previous claim. Will waive the elimination period for any disability claim occurring in the first six months of the policy period. Will not pay for more than one disability in a period of six months. |
The recurrent disability insurance provision is designed to make sure that a person does not have to go through more than one elimination period within a certain period of time.
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Genevieve is eligible for Medicare but is employed and insured through her employer’s group health plan. Which statement is true?
Genevieve cannot enroll in Medicare Genevieve can enroll in Medicare once her employer-sponsored coverage ends Genevieve’s employer-sponsored coverage is secondary Genevieve’s employer-sponsored coverage is primary |
Genevieve’s coverage through work is primary.
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All of the following statements are correct regarding variable universal life contract charges and fees EXCEPT:
Interest earned is credited to the death benefit. Insurers must provide policyowners with an annual statement of charges and interest earned. Sales and loading charges are deducted from the policy’s cash value. The full cost of death protection is deducted from the policy’s cash value. |
Interest earned is credited to the death benefit is false
b/c Interest earned is credited to the cash value. |
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When can an individual can enroll into, drop, or change Medicare Part C plans?
During the initial enrollment period. November 15th through December 31st annually. During the general enrollment period. All of the Above |
An individual can enroll into, drop, or change Part C plans during the initial or general enrollment periods, or from November 15th through December 31st each year.
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Sam submits an application with initial premium for a life insurance policy on July 6th. The agent issues Sam a conditional receipt at this time. Sam takes the required medical exam on July 10th. The insurer approves the policy on August 1st, and the agent delivers the policy to Sam on August 10th. Which day did Sam's coverage begin?
July 10th August 1st August 10th July 6th |
July 10th
Coverage begins at the later of the conditional receipt or medical exam. |
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Premiums for all of the following health insurance policies are tax-deductible as a business expense EXCEPT:
Employer-sponsored group disability income plan. Group dental expense. Individual disability income. Group medical expense. |
Individual disability income.
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Which of the following health plans provide tax-free withdrawals?
Health savings accounts. Health reimbursement accounts. Flexible spending accounts. All of the Above |
All of the Above
All of these special savings plans provide tax-free withdrawals. |
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Which of the following is true regarding the taxation of traditional IRAs?
Contributions are made with pre-tax dollars and interest earned is tax-deferred Contributions are made with after-tax dollars, but interest is taxable in the year it is earned Contributions are made with after-tax dollars and interest earned is tax-deferred Contributions are made with pre-tax dollars, but interest is taxable in the year it is earned |
Contributions to a traditional IRA are tax-deductible and interest is tax-deferred until withdrawal.
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The two types of flexible spending accounts are:
HRAs and HSAs. MSAs and HSAs. Qualified medical expense account and dependent care expense account. None of the Above |
Qualified medical expense account and dependent care expense accoun
There are two types of FSAs available: qualified medical expense account, and dependent care expense account. |
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All of the following are not reasons an investigative consumer report is performed EXCEPT:
To obtain the applicant’s credit score. To obtain information about the applicant’s character and lifestyle. To obtain information about the applicant’s medical history. To obtain information about the applicant’s employment performance. |
To obtain information about the applicant’s character and lifestyle.
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Which of the following is typically not covered by a dental plan?
Replacement of dentures Oral exam and six-month cleaning Fillings Wisdom teeth extraction |
Replacement of dentures
Replacement of dentures is typically not covered by dental plans. |
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All of the following Medigap plans cover Medicare preventive care Part B coinsurance EXCEPT:
K. G. L. M. |
M
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Which life insurance settlement option guarantees that the minimum benefit will be paid out?
Life income certain. Joint and survivor. Refund life. Straight life. |
Refund life.
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Disability benefits are:
A stated amount. Valued. Based on a percentage of the insured’s lost income. All of the Above |
Based on a percentage of the insured’s lost income.
Loss of income from disability occurs when an accidental injury or sickness prevents an insured from being able to work. Disability income insurance policies replace income lost while the insured is unable to work. |
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What type of HMO is non-profit?
Producers’ cooperatives. Consumers’ cooperatives. HMOs are always nonprofit. All HMOs are for-profit. |
Consumers’ cooperatives.
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Which of the following best describes a guaranteed renewable accident & health insurance policy?
The insurer may not cancel the policy nor raise the premiums. The insurer may increase the premium for an entire class of insureds. The insurer may increase the premium for one insured. The insurer may cancel the policy at any time. |
The insurer may increase the premium for an entire class of insureds
With a guaranteed renewable accident & health insurance policy, the insurer may only raise premiums on a class-basis, not individually. |
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Based on the 1980 C.S.O tables, at what age may a life insurance policy endow at the earliest?
59 ½ 62 95 70 ½ |
The earliest age at which a life insurance policy may endow is age 95. The new 2001 C.S.O tables increase that age to 120.
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All of the following are true regarding business life insurance EXCEPT:
If a business purchases group insurance for the benefit of its employees, employer-paid premiums are not tax-deductible. Proceeds are tax-free. If a business uses a life insurance policy for business purposes, premiums are made with after-tax dollars. Premiums are not tax-deductible as a business expense. |
A. If a business purchases group insurance for the benefit of its employees, employer-paid premiums are not tax-deductible.
Life insurance policy premium payments are not tax-deductible as a business expense if the company is using the policy for business purposes; however, the proceeds are tax-free. The exception to this is when a business purchases group insurance for the benefit of its employees. |
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All of the following are characteristics of disability buy-sell policies EXCEPT:
The elimination period is 1-2 years. Disability buy-sell policies are used to transfer ownership when a business owner becomes disabled. Benefits may be paid monthly or in a lump-sum. The business owner has ownership of the policy, but the business pays the premiums and receives the benefits. |
A disability Buy-Sell policy is used to establish how ownership in a business is transferred upon an owner’s disability. The business owns the policy, pays premiums and receives the benefits. The benefit is used by the business to purchase the disabled owner’s share in the business. The elimination period in Buy-Sell policies are one to two years. The benefits may be paid in monthly periodic payments or in a lump-sum.
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A life insurance policy is considered replaced if:
an existing life insurance policy is lapsed, forfeited, surrendered or terminated. converted to reduced paid-up insurance. reissued with a reduction in cash value. All of the Above |
Policy replacement is defined as an insurance transaction in which a new life insurance policy or annuity contract is to be purchased, and the producer or insurer is aware or should be aware that an existing life insurance policy or annuity contract is to be: lapsed, forfeited, surrendered or terminated; converted to reduced paid-up insurance, continued as extended term life insurance, or reduced in value due to utilization of nonforfeiture benefits or policy cash values; modified causing a reduction in benefits; or reissued with a reduction in cash value.
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Joseph has a deferred variable annuity. His premiums are invested in:
Variable units Accumulation units Separate account units Annuity units |
Premiums paid during the pay-in period of an annuity purchase accumulation units. For variable annuities, premiums are invested in the insurer's separate account.
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All of the following describe the Social Insurance Supplement (SIS) in a disability income policy EXCEPT:
The SIS is double what Social Security disability would pay. The SIS pays benefits during the 5-month Social Security disability income waiting period. The SIS rider is intended to supplement Worker’s Compensation and other social insurance programs. The SIS pays benefits if the insured has been denied Social Security disability income benefits. |
The SIS pays a benefit equivalent to what Social Security disability would pay, but if Social Security actually begins to pay the insured, the SIS benefit is reduced by the amount of the Social Security benefit. The SIS pays benefits for the following scenarios: during the 5-month Social Security disability income waiting period; if the insured has been denied Social Security disability income benefits; or if the amount of the Social Security disability income benefit is less than what the SIS rider would pay.
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All of the following are false regarding the taxation of nonqualified annuities EXCEPT:
Premiums are taxable and interest is taxable in the year it is earned Premiums are made with taxed dollars; however, interest is tax-deferred Premiums are made with pre-tax dollars; however, interest is taxed in the year earned Premiums are paid with pre-tax dollars and interest is tax-deferred |
During the annuity pay-in period, premiums are not tax-deductible, but interest is tax-deferred until withdrawn.
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Major medical plans have all of the following EXCEPT:
first-dollar coverage. coinsurance. maximum dollar benefit. deductibles. |
Major medical plans have a deductible, coinsurance, eligible expenses and a maximum dollar benefit. Essentially, after the insured pays the deductible, the policy will cover the remainder of medical expenses up to a stated maximum. Base plans and comprehensive plans provide first-dollar coverage.
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If a life insurance policy lapses, it can be reinstated if which of the following conditions are met?
All of the above Back premiums have been paid Proof of insurability is provided Not more than three (3) years have elapsed |
All of the conditions are required to reinstate a policy.
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Which of the following policies has premiums that are fixed and level?
Universal life Adjustable life Variable universal life Variable life |
Variable life policies have fixed, level premiums. Variable life policies guarantee a minimum death benefit, which is why premiums are fixed and level.
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All of the following are drawbacks of buying a viatical settlement EXCEPT:
Viatical settlement payouts may be subject to creditors’ claims if the insured has debt. The portion of the death benefit the viator receives in a viatical settlement ranges from 50 to 80 percent of the death benefit. Viators may be unable to receive benefits through Medicaid or Supplemental Social Security Income The insured’s life insurance protection ends. |
In a viatical settlement, the insured’s death protection does not end – instead, the insured (viator) sells his policy to a viatical settlement provider who becomes the owner and beneficiary of the life insurance policy, so when the viator dies, the viatical settlement provider receives the full policy proceeds. In return for assigning full ownership to the viatical settlement provider, the viator receives a fraction of the death benefit as a cash advance, typically in the amount of 50-80% of the death benefit. As you can see, the insured’s death protection does not end; it simply is a transfer of policy ownership.
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There are many options available to policyholders of participating policies. All of the following are dividend options EXCEPT:
Cash dividend option Life income option Paid-up option One Year Term option. |
The life income option is a form of life annuity and serves the same function. It is not a dividend option.
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Which dividend option allows the policyowner to use the dividend as a single premium to purchase additional face amounts of permanent coverage?
Paid-up insurance. Accumulation at interest. One-year term. Paid-up additions. |
The paid-up additions option allows the policyowner to use the dividend as a single premium to purchase an additional amount of whole life coverage.
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After looking at his options, Randy decided on a single premium whole life policy. What is the main advantage of this type of policy?
The total premium is lower. Only one payment is due Policyholder is covered immediately There is no medical exam |
The main advantage of a single premium policy is that the premium is less than it would be if it stretched over several or many years.
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An insurance agent told a member of his church who had recently experienced several personal and financial losses that he could see that she got a more favorable rate on her insurance policies than her health and general circumstances would warrant. The woman had been his kindergarten teacher and was a pillar in the community’s life. He wanted to help her. Which of the following is FALSE?
The agent is compassionate. The agent was breaking the law. The agent was engaging in unfair discrimination. The agent was engaging in twisting. |
Obviously, the agent is compassionate. He is also engaged in unfair discrimination because he is offering special rates to one member of a general class of assureds. In making this offer he is also breaking the law, which expressly forbids unfair discrimination. No insurance producer may unfairly discriminate between individuals of the same class and equal expectation of life in the rates charged for the policy or between individuals of the same class and of the same hazard in the amount of premium rates, in any manner whatsoever. What he is NOT doing was twisting, which involves a misrepresentation of facts (twisting of reality) in order to secure a sale.
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Making a misleading statement to induce a person to lapse, surrender, or convert an insurance policy is known as:
coercion. replacement. twisting. conservation. |
It is illegal to knowingly make misleading statements or comparisons regarding the terms, conditions, benefits, or advantages of any policy to induce any person to lapse, forfeit, surrender, exchange, convert, or otherwise dispose of an insurance policy. This unfair trade practice is called twisting.
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An agent for Waller Insurance sought to sell policies to a prospective client who already had similar policies with another insurer. He presented the case in such a manner that it appeared the policy he was selling offered far broader basic coverage than it actually offered. He suggested the possibility of simply letting the older policy lapse and purchasing a policy from him. His practice in this case is called
misrepresentation twisting unfair claims and practices rebating |
Twisting is making any written or oral statements that deliberately and literally represent the terms, conditions, or benefits of a policy for the purpose of inducing a policyholder to lapse on his current insurance and to purchase a new policy.
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Which of the following statements is true about the guaranteed insurability rider (GIR)?
If the option is not exercised within 90 days of the specific time, the option is forgone. All of the Above The insured can buy additional life insurance at specific times in the future. The guaranteed insurability rider usually drops off at age 40. |
All of the statements are true. The options offer the opportunity to buy additional life insurance at specific times, and if not exercised within 90 days of the specified time, the insured looses the option. The rider usually drops off at age 40.
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Of the following, which is not a term rider?
Return of premium rider Variable income rider Other-insured rider Spouse rider |
Term riders include: spouse, other insured, children, family, return of premium and return of cash value. There is not a variable income rider.
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An employer that has a self-funded health plan, but contracts out claims processing, has hired a(n):
MET. MEWA. TPA. ASO. |
An employer can contract out the claims processing to a third party administrator (TPA).
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What policy can be described as annual renewable term with a cash value account?
Adjustable life. Universal life. Decreasing term. Modified whole life. |
The cash value in a universal life policy must continually cover the cost of death protection (cannot reach zero); otherwise, the policy will expire after its grace period lapses. In this way, universal life policies are simply annual renewable term with a cash value account.
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What happens when payment of group disability income policy premiums are shared between the employer and employees?
Benefits are not taxed. Benefits are 100% taxable. Benefits are only taxed up to an amount based on the portion of premiums paid by the employer. Benefits are only taxed up to an amount based on the portion of premiums paid by the employee. |
Where the premium is paid in part by both employer and employee, the employee’s premium payments are not tax-deductible, but the employer’s premium payments are tax-deductible as a business expense. The benefits are taxable income to the employee only up to an amount based on the portion or percentage of premiums paid by the employer.
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When a person enrolls in an HMO, preexisting conditions:
can be excluded indefinitely. can be excluded, but only for 12 months. cannot be excluded. can be excluded, but only for 6 months. |
All HMOs must have a period of open enrollment at least once per year which allows new individuals to enroll in the HMO. Preexisting conditions cannot be excluded.
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Which of the following statements about Medicare is CORRECT?
Medicare recipients are billed for their Medicare Part A premiums semi-annually. Under Medicare Part B, payments for physicians’ services are unlimited. Medicare Part A Hospital Insurance (HI) has no deductible. Medicare Part B Supplement Medicare Insurance (SMI) is voluntary. |
There are two separate parts to Medicare coverage. Part A is hospital insurance, and Part B is medical insurance. Anyone who has turned 65 and has applied for Social Security benefits is eligible for Part A Medicare. Part B is entirely voluntary and may be elected or rejected, as the recipient chooses.
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Monika had a convertible term policy that expired last month. What are her options to convert to another type of policy?
She can convert to a form of permanent protection Because her term policy expired, she lost the opportunity to convert. She can convert, but her premiums will go up. None of the Above |
In order to convert her policy, the conversion must be made prior to the expiration of the term.
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Which of the following fixed annuities has a minimum rate of return and a current rate of return that is connected to the S&P 500?
Market value adjusted annuity Equity indexed annuity Fixed annuity FPDA |
An equity indexed annuity will earn a guaranteed minimum interest rate up to a current interest rate that is tied to an equity index, such as the S&P 500.
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A rider is an attachment to your life insurance policy. All of the following statements are true about the return of premium rider (ROP) EXCEPT:
The ROP can be a provision of a whole life policy The rider provides for a refund of premiums paid. Because of the payback feature, premiums can be more than 25% higher You must hold on to your policy for the full term of the policy |
The return of premium (ROP) rider is a type of term insurance, not whole life. It can be a rider to a whole life policy, but not a provision of whole life.
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Which of the following is not a use of disability income insurance?
Purchase groceries Pay credit card bill Pay mortgage bill Pay medical expenses |
ANS is not purchase groceries...
Disability income insurance is not intended to pay medical expense bills. Instead, it is designed to provide a replacement income while the insured is disabled and cannot work. |
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Which document contains detailed information about a life insurance policy regarding policy elements such as policy riders and premiums?
Buyer's guide Illustrations Policy summary Outline of coverage |
The policy summary contains information regarding policy elements such as the policy's generic name, the name and address of the insurer and agent, and policy benefits. The outline of coverage is the document, with similar purpose, used for health insurance.
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J. is totally disabled and has applied for Social Security disability benefits. How long must J. wait to be eligible to receive full Medicare benefits?
24 months. 29 months. 6 months. 12 months. |
A disabled covered worker, regardless of age, is eligible to receive full Medicare benefits after the waiting period and two years of receiving Social Security disability benefits - after 29 months.
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In attempting to sell a policy to a prospective client, a young agent told the client an HMO was a form of insurance and implied that the policy he was offering included shares of stock. How would his actions be characterized?
defamation unfair trade twisting misrepresentation |
The agent was engaged in misrepresentation. He was presenting the policy as something it was not, suggesting that a risk-avoidance medical plan was an insurance. Statements are considered to be misrepresentations if, when taken in the context of the whole presentation, may tend to deceive a person.
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In a conversation with an older family friend, an insurance producer inquired with what company she had a Medicare Supplement policy. When she told him, the producer was silent. Concerned by his silence, the woman asked if the company was a reliable company. The producer asked, “Have you received any financial statements regarding their solvency?” This producer
was engaging in defamation. was engaging in misrepresentation. was acting appropriately by refusing to comment personally on the competing insurance company. was engaging in churning. |
ANS is not that he was acting appropriately by refusing to comment personally on the competing insurance company.
The agent did not have to state literally that the company was possibly weak. He implied that within the context of the conversation. |
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Making a misleading statement to induce a person to lapse, surrender, or convert an insurance policy is known as:
conservation. twisting. replacement. coercion. |
It is illegal to knowingly make misleading statements or comparisons regarding the terms, conditions, benefits, or advantages of any policy to induce any person to lapse, forfeit, surrender, exchange, convert, or otherwise dispose of an insurance policy. This unfair trade practice is called twisting.
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An agent for Waller Insurance sought to sell policies to a prospective client who already had similar policies with another insurer. He presented the case in such a manner that it appeared the policy he was selling offered far broader basic coverage than it actually offered. He suggested the possibility of simply letting the older policy lapse and purchasing a policy from him. His practice in this case is called
misrepresentation rebating twisting unfair claims and practices |
Twisting is making any written or oral statements that deliberately and literally represent the terms, conditions, or benefits of a policy for the purpose of inducing a policyholder to lapse on his current insurance and to purchase a new policy.
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The consideration clause in a health insurance policy:
States the promises exchanged between the insured and the insurer. States the insurer's promise to pay benefits. States how benefits will be paid. Contains the scope of coverage. |
The consideration clause describes the promises exchanged between the insured and the insurer.
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The facility of payment clause:
States benefits are payable to an individual who is related to the deceased insured by blood or marriage. Is a required uniform provision. States benefits are paid to the insured?s estate. States claims must be paid immediately upon receipt of proof of loss. |
The facility of payment clause states benefits are payable to an individual who is related to the deceased insured by blood or marriage. This clause is optional
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The entire contract provision in a Health & Accident policy includes two basic parts. These are:
Policy and exclusions Policy and any attached papers Application and endorsements Policy and application |
The entire contract provision in an insurance contract states that the complete agreement between the insured and the insurer is contained in the contract. This includes the policy and any attached papers, including declarations, exclusions, conditions, and endorsements.
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All of the following are exemptions under the Privacy Act of 1974 upon which an individual’s written consent is not required in order to release personally identifiable information EXCEPT:
For circumstances affecting the health or safety of an individual. For a consumer poll. For routine uses within an agency. To a general accounting office. |
ANS not To a general accounting office.
The 12 exemptions under the Privacy Act of 1974 are: on a “need to know” basis within an agency; disclosures required by the Freedom of Information Act; for routine uses within an agency; for the Bureau of the Census to perform a census or survey; if used strictly for statistical research or reporting record; to the National Archives and Records Administration as a record which has sufficient historical or other value; a request made by law enforcement; for circumstances affecting the health or safety of an individual; to Congress; to a general accounting office; court-ordered; and to a consumer reporting agency (debt collection). |
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Jerry is in a car accident and incurs life-threatening injuries. If Jerry dies while in the hospital, payout of accidental death benefits stipulate that his death must take place within how many days of the date of the accident?
30 days 120 days 90 days 180 days |
The accidental death benefit (ADB), or multiple indemnity rider, stipulates that death must occur within 90 days of the accident.
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Which of the following laws defined a security product?
Securities Act of 1933. Securities Act of 1934. Investment Company Act of 1940. None of the Above |
The Securities Act of 1933 ruled that applicants for a variable product must receive a prospectus. It also laid out a clear definition of a security product.
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If Jaime has an adjustable life policy he can:
Convert term to lessen the amount of the whole life Convert whole life to lessen or increase the term Convert term to equal whole life All of the above. |
The conversions can all be accomplished with an adjustable life policy. Converting term to equal the whole life would probably result in a premium increase.
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All of the following statements are true regarding the interest rate guarantees of fixed annuities EXCEPT:
If the insurer’s current interest rate drops below the quoted fixed interest rate, the insurer will pay the lower current interest rate. Premiums grow at a fixed interest rate during the accumulation phase. Fixed annuities earn the insurer’s current interest rate, which cannot drop below the quoted fixed interest rate. Benefits are paid at a fixed interest rate. |
Fixed annuities will earn the insurer’s current interest rate. However, contract owners are quoted a guaranteed minimum interest rate (around 4%) that the annuity will earn at a minimum. If the current interest rate drops below the guaranteed minimum interest rate stated in the contract, the insurer is obliged to pay the guaranteed minimum interest.
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All the following are required to qualify for Medicare’s nursing facility benefit EXCEPT
The patient must meet stated income limits. The patient must enter a Medicare-certified skilled nursing facility. The patient’s physician must certify that skilled care is required. The patient must spend at least three days in a hospital within past 30 days. |
There is no income limit on this covered service. All the rest are true.
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Jerry has a group disability income policy. His employer pays all premiums. Which of the following is true regarding the taxation of benefits?
They are tax-deductible to Jerry's employer. They are tax-deferred. They are taxable. They are not taxable. |
Employer-paid premiums for a group disability income policy are tax-deductible to the employer as a business expense; therefore, benefits are taxable to the employees.
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Which life insurance rider pays the face amount plus the total premiums paid into the policy?
Waiver of premium. Return of premium. Return of cash value. Payor rider. |
The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. The death benefit is comprised of the face amount plus the total premiums paid into the policy.
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A long-term care rider is a type of:
accelerated benefit. disability rider. rider covering an additional insured. waiver of premium rider. |
The long-term care rider is a type of accelerated benefit, which is used to pay long-term care costs. The long-term care rider may be separate from the life policy, in which case the accelerated benefit does not reduce the death benefit, or may be incorporated into the life insurance policy, thereby reducing the death benefit or policy cash value.
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The transfer of some or all of a policyowner’s legal rights to another party is called an assignment. Which of the following is NOT a type of assignment utilized to transfer rights?
Collateral, partial, conditional assignment Total, complete, unconditional assignment Absolute, voluntary, complete assignment Beneficiaries’ assignment |
There is no assignment designated as total, complete, unconditional.
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What part of the insurance contract contains the insurer's consideration?
Payment of claims Consideration clause Insuring clause Execution clause |
The insuring clause contains the insurer’s promise to pay benefits in the event of a covered loss. The consideration clause states a policyowner must pay premium in exchange for the insurer’s promise to pay benefits.
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All of the following benefits are provided by Social Security EXCEPT:
Retirement Survivors Supplemental medical insurance Disability |
Social Security provides disability, survivors and retirement benefits.
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Which of the following is a material change in a life insurance policy?
Adding a contingent beneficiary A collateral assignment Increasing the policy face amount Using the cash payment dividend option |
If a life insurance policy's face amount is changed, then a new seven-pay test must be performed to make sure that the policy is not a MEC.
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Which of the following is true regarding the taxation of universal life insurance policies?
Cash value grows tax-deferred, but may be subject to taxation upon withdrawal. All cash value is taxed upon withdrawal Premiums are tax-deductible. Only withdrawals of premium dollars from the cash value are taxable. |
Partial surrenders from a universal life policy are not taxable up to the amount of premium that makes up the cash value. Once all premiums have been withdrawn, then all withdrawals consisting of the interest portion of the cash value are subject to taxation.
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All of the following are false regarding the taxation of nonqualified annuities EXCEPT:
Premiums are paid with pre-tax dollars and interest is tax-deferred Premiums are taxable and interest is taxable in the year it is earned Premiums are made with taxed dollars; however, interest is tax-deferred Premiums are made with pre-tax dollars; however, interest is taxed in the year earned |
During the annuity pay-in period, premiums are not tax-deductible, but interest is tax-deferred until withdrawn.
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A nonqualified plan:
has tax-deductible contributions. does not have tax-deferred interest. must be approved by the IRS. permits discrimination in favor of certain employees. |
Nonqualified plans are characterized by the following: do not need to be approved by the IRS, can discriminate in favor of certain employees, contributions are not tax-deductible, and interest earned on contributions is tax-deferred until withdrawn upon retirement.
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All of the following are true regarding group insurance underwriting considerations EXCEPT:
Group insurance applications are typically much more brief than individual insurance applications. When applying for group insurance, each individual enrollee does not need to prove evidence of insurability, unless enrolling after the group enrollment period. Persistency is a desirable trait in group insurance plans, and means there is a constant flow of members leaving and joining the group. Groups are selected and rated based on the group’s average age, proportion of men to women, and occupation. |
Persistency is defined as the group’s ability to pay premiums and renew coverage.
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All of the following are characteristics of managed care dental plans EXCEPT:
Can be closed or open panel. Uses cost control features similar to an HMO. Provides prepaid dental services. Group dental plans are convertible. |
Unlike group health plans, group dental plans are not convertible.
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All of the following are true regarding franchise health insurance EXCEPT:
Each individual covered receives an individual policy. Franchise coverage is not technically group insurance. Each individual applying for coverage must complete an individual application. Each individual pays a separate premium. |
Unlike group insurance, each individual insured under a franchise plan is issued an individual policy. In this way, franchise coverage is not technically “group coverage.” Applicants must complete an individual application. Coverage offered includes: medical, surgical, hospital and disability income. The group as a whole pays only one premium.
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Which of the following is another term for reciprocal exchange?
Interinsurance exchange. Reinsurer. Risk retention group. Risk purchasing group. |
Reciprocal exchanges, also referred to as interinsurance exchanges or simply reciprocals, are unincorporated groups of individuals. Each individual member, called a subscriber, provides insurance for other members through indemnity contracts. Each subscriber acts as both the insurer and the insured.
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All of the following are true regarding Medicare Part C premiums and deductibles EXCEPT:
Premium for Part D may be charged separately if prescription coverage is included in the plan. Some Part C plans charge an annual deductible. Premiums vary from plan to plan. Premiums are separate for Parts A and B. |
Part C plans charge a combined premium for Parts A and B. Coverage for Part D may be charged separately if included in the plan. Some Part C plans charge an annual deductible. Each Part C plan is different, and premiums vary as a result.
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Ricardo and Kim are killed simultaneously in a car crash on the freeway. Ricardo was the insured and Kim was the primary beneficiary. How will the policy proceeds most likely be distributed?
The proceeds go to their children. The proceeds go to Ricardo’s estate The proceeds go to the contingent beneficiary The insurance company keeps the proceeds |
If the insured and the primary beneficiary die at the same time, the proceeds would be paid to the contingent beneficiary. If there were no contingent beneficiary, then the proceeds would go to Ricardo’s estate.
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All of the following statements are false regarding the beneficiary designation of a life insurance policy EXCEPT:
The beneficiary must be a person. The insurer names the beneficiary. The beneficiary does not need to have an insurable interest in the life of the insured. Only one beneficiary can be named in a life insurance policy. |
The beneficiary may be a person or a legal entity. One or more beneficiaries may be named. As part of ownership rights, the policyowner names the beneficiary or beneficiaries.
The beneficiary must be a person. F The insurer names the beneficiary. F The beneficiary does not need to have an insurable interest in the life of the insured. Only one beneficiary can be named in a life insurance policy. F |
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Jacob has a group health insurance policy and pays the same premium as all other insureds under the policy. What rating was used?
Experience rating. Community rating. Individual rating. None of the Above |
With community rating, premiums are based on the actual or projected costs of insureds in a particular geographic location with reference to insureds’ age, gender, occupation and health. When community rating is used to underwrite a group health plan, each member pays the same premium.
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For Medicare Part A, what period of time must coinsurance be paid for a hospital stay?
Days 91 through 150 Days 61 through 90 Days 1 through 60 After 150 day |
Coinsurance must be paid for days 61 through 90 of a benefit period. All approved charges are paid after daily coinsurance is paid.
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When is the general enrollment period for Medicare?
January 1st through March 31st November 15th through December 31st March 15th through November 15th The six-month period spanning three months prior to reaching age 65 to three months after reaching age 65 |
The general enrollment period for Medicare is January 1st through March 31st annually.
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Which of the following laws requires insurers maintain a separate account for variable investments?
None of the Above Investment Company Act of 1940. Securities Act of 1934. Securities Act of 1933. |
The Investment Company Act of 1940 requires insurers maintain a separate account for variable investments.
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Which of the following statements is true regarding the taxation of premiums and interest in annuities?
Principal (premiums) is paid with pre-tax dollars; interest is not taxable income during the payout phase. Principal (premiums) is paid with after-tax dollars; interest is taxable income during the payout phase. Principal (premiums) is paid with pre-tax dollars; interest is taxable income during the payout phase. Principal (premiums) is paid with after-tax dollars; interest is not taxable income during the payout phase. |
The interest portion of the payment is taxable income, but the principal portion is not taxable since it was funded with after-tax dollars.
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A producer sat down with a prospective client to discuss a long-term care policy. He used a computer program to outline and emphasize his remarks. The visual presentation contained the principal benefits of the policy he was trying to sell. Although he mentioned that it also had “the usual” conditions, he did not include those in his visual presentation or specify what they were. The producer was
engaging in coercion engaging in misrepresentation engaging in rebating engaging in twisting. |
Statements are deemed to be misrepresentations if, when taken in the context of the whole presentation, they may tend to mislead or deceive a person. By detailing only the benefits, the producer was not giving a fair representation of the policy.
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Accelerated benefits fall into the same category as death benefits. Which of the following is NOT true about the accelerated death benefit?
The insured is certified by a physician to have an illness or condition that will result in death in 24 months or less The benefits can be paid weekly, or monthly. There is no deduction from the death benefit The benefit paid is tax free |
If accelerated benefits are paid, there is a deduction of that amount paid from the death benefit.
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For individual health insurance policies, the incontestability provision is best described as:
The incontestability provision permits the insurance company to contest misrepresentation in the application during the first two policy years The incontestability provision allows the insured to receive a full refund of the initial policy premium if the policy is returned for any reason The incontestability provision places a limit on the time period a policy can be reinstated The incontestability provision prevents the insurance company from being susceptible to “buying a claim” by imposing preexisting conditions |
The incontestability provision allows the insurer to contest any misstatement, omission or concealment made in the application.
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After the patient pays an annual deductible, what portion of covered expenses does Medicare Part B cover?
80 percent 85 percent 100 percent 90 percent |
After the deductible, Part B will pay 80 percent of covered expenses, assuming all comply with Medicare’s standards for reasonable charges.
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Which of the following statements is false regarding viatical settlements?
The owner of the viator’s life insurance policy is called the viatical settlement provider, who pays the premiums and will receive the full death benefit, not subject to income tax, when the viator dies. Viatical producers and brokers sell viatical settlements. Viatical brokers work for and represent viatical settlement providers, whereas viatical producers work for and represent insureds. Viatical settlement providers, producers and brokers all must be licensed with the state in which they transact business. |
Viatical producers and brokers sell viatical settlements. Viatical producers work for and represent viatical settlement providers, whereas viatical brokers work for and represent insureds.
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Which of the following is not a mandatory NAIC health insurance provision?
Payment of claims. Misstatement of age. Change of beneficiary. Reinstatement. |
The misstatement of age provision is not a mandatory NAIC health insurance provision.
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All of the following statements are true regarding the guaranty association EXCEPT:
There is a dollar amount per insured the guaranty association will pay Agents cannot use the existence of the guaranty association in the sale, solicitation and transaction of life and health insurance Pay in the event of insurer insolvency All life and health insurance policies are covered by the guaranty association |
Certain policies are not covered by the guaranty association, such as HMOs and policies from fraternal benefit societies.
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All of the following are reasons the face amount of a life insurance policy may be subject to tax EXCEPT:
The policy proceeds are paid out in a lump-sum. The policy’s ownership has been transferred to a third party. The designated beneficiary is the deceased’s estate. The deceased transferred ownership of the policy within three years prior to death. |
The face amount of a life insurance policy may be included in the taxable estate of the deceased and subject to federal estate tax in one or more of following situations: 1.) the deceased was the owner of the policy or an incident of ownership occurred at the time of death. An incident of ownership is one or more rights of owning a policy, including the rights to surrender the policy for cash value, change the beneficiaries, borrow or take loans against the policy, or assign or transfer the policy; 2.) the deceased’s estate is the policy’s designated beneficiary; and 3.) the deceased gifted, assigned or transferred ownership of the policy within three years prior to the date of death.
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With respect to credit reports, which of the following best describes the purpose in obtaining an inspection report on an applicant for an insurance policy?
Provides information about the applicant’s financial stability. Provides information about the applicant’s lifestyle. Provides information about the applicant’s character. All of the Above |
An inspection report, also referred to as an investigative consumer report, provides information about an applicant’s lifestyle, character and financial stability.
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Sally Ann’s life insurance policy has lapsed. Her agent explained that there are advantages to reinstating a policy over starting a new policy. All of the following are true statements about the reinstatement advantages EXCEPT:
Statements on the reinstatement application are contestable for 2 years. Interest rates could be more favorable. Reinstatement premium is usually a lower premium. New policy provisions could be stricter |
Statements made on a reinstatement application are not generally contestable for two years. Statements made on a new policy would be contestable for two years.
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It is February 20th and Collen just realized he forgot to pay his monthly life insurance premium on the due date - the 15th of February. How long does he have before the policy will lapse and he will no longer have coverage?
30 days 15-20 days The policy has already lapsed 10 days |
The grace period for most life policies is 30 days.
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Xavier is enrolled in his employer's group LTC plan. When he reaches the age of 65 he will no longer be eligible for group coverage. Which of the following is true?
Xavier must be permitted to convert his group coverage to individual coverage within 31 days of his ineligibility under the group plan. HIPAA requires that Xavier be allowed to remain on the group coverage for 18 months. COBRA requires by law that Xavier may continue coverage under the group plan indefinitely. Xavier may remain on the group coverage indefinitely has long as he pays a higher premium. |
The conversion privilege provides Xavier with the opportunity to convert his group health coverage to individual coverage within 31 days of his ineligibility in the group coverage. Xavier does not need to provide proof of insurability to convert.
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How much coverage must a long-term care insurance policy provide for home-health care services in Massachusetts?
An amount equal to at least one-half a year’s coverage the same policy provides for nursing home benefits. An amount equal to the coverage the same policy offers for nursing home benefits. An amount equal to at least one-third a year’s coverage the same policy provides for nursing home benefits. No regulations exist in Massachusetts regarding this |
Coverage for home health care must be based on coverage the same policy provides for nursing home care. The minimum amount of coverage a policy might provide for home health care is equal to at least one-half a year’s coverage for nursing home benefits.
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All of the following describe the Social Insurance Supplement (SIS) in a disability income policy EXCEPT:
The SIS is double what Social Security disability would pay. The SIS pays benefits if the insured has been denied Social Security disability income benefits. The SIS rider is intended to supplement Worker’s Compensation and other social insurance programs. The SIS pays benefits during the 5-month Social Security disability income waiting period. |
Not option D!
The SIS pays a benefit equivalent to what Social Security disability would pay, but if Social Security actually begins to pay the insured, the SIS benefit is reduced by the amount of the Social Security benefit. The SIS pays benefits for the following scenarios: during the 5-month Social Security disability income waiting period; if the insured has been denied Social Security disability income benefits; or if the amount of the Social Security disability income benefit is less than what the SIS rider would pay. |
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All of the following statements are true regarding the interest rate guarantees of fixed annuities EXCEPT:
Fixed annuities earn the insurer’s current interest rate, which cannot drop below the quoted fixed interest rate. If the insurer’s current interest rate drops below the quoted fixed interest rate, the insurer will pay the lower current interest rate. Premiums grow at a fixed interest rate during the accumulation phase. Benefits are paid at a fixed interest rate. |
Fixed annuities will earn the insurer’s current interest rate. However, contract owners are quoted a guaranteed minimum interest rate (around 4%) that the annuity will earn at a minimum. If the current interest rate drops below the guaranteed minimum interest rate stated in the contract, the insurer is obliged to pay the guaranteed minimum interest.
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Garth has a $150,000 annually renewable term policy. Which of the following is a true statement about an annually renewable term policy?
Usually there is no age cap on this type of policy The premium remains the same He will have to convert to another type of policy at some time. All of the Above |
The annually renewable term policy usually does not have a specific age cap.
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Keith purchased $100,000 of one-year renewable and convertible term insurance. All of the following are true when the policy renews the following year at the same face amount EXCEPT:
A new application will not be required The premium will increase A new policy will be issued The premium reflects the policyholders new age. |
The renewal will not require that a new policy be issued. The premium however, will increase to reflect the fact that the policyowner is one year older.
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