150 Simulation Questions
150 Simulation Questions
1. An employee is covered under a company group life plan with a $50,000 death benefit. What is the MAXIMUM amount a spouse may be insured for under this program?
A. $10,000
B. $40,000
C. $25,000
D. $50,000
C.
The correct answer is "$25,000". Group life insurance on an employee’s spouse may not exceed ½ of the amount of insurance on the life of the insured employee under the group policy.
2. An insured may assign up to ____ of policy ownership under an individual life insurance policy.
A. 75%
B. 100%
C. 50%
D. 25%
B.
The correct answer is "100%". Under an individual life insurance policy, an insured may assign a maximum of 100% of policy ownership.
3. How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?
A.6 months
B. 4 months
C. 9 months
D. 1 month
A.
The correct answer is "6 months". A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy.
4. If an insured's age was misstated on a life insurance contract, the Misstatement of Age provision requires that any death benefit payable would be
A. forfeited
B. contested in front of an arbitrator
C. an amount that the premiums paid would have purchased at the current age
D. reduced by 50%
C.
The correct answer is "an amount that the premiums paid would have purchased at the current age". The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is an amount that the premiums paid would have purchased at the current age or ages.
5. In Texas, an individual life insurance policy is REQUIRED to have a grace period of
A. 20 days
B. 30 days
C. 15 days
D. 31 days
D.
An individual life insurance policy issued in Texas MUST have a grace period for premium payment of 31 days.
6. ____ of continuing education MUST be completed in the classroom or classroom equivalent.
A. 50%
B. 20%
C. 80%
D. 100%
A.
The correct answer is "50%". 50% of continuing education requirement must be spent in a classroom setting.
7. A domestic insurance company in Texas is considered a company that?
A. is incorporated and formed in Texas
B. own real estate in Texas
C. write insurance on risks located only in Texas
D. honors the charter of the National Association of Insurance Commissioners (NAIC)
A.
The correct answer is "is incorporated and formed in Texas". In Texas, a domestic insurance company is defined as a company that is incorporated and formed in Texas.
8. A foreign insurance company conducting insurance business in Texas
A. is not subject to Texas insurance laws
B. is only authorized to write business outside the United States
C. was formed under the laws of another country
D. was formed under the laws of another state
D.
was foreign insurance company is one that is incorporated under the laws of another state.
9. In Texas, which of these statements regarding the Suicide clause is TRUE?
A. An insurer may not use suicide as a defense against payment after the first year
B. An insurer may not use suicide as a defense against payment after the second year
C. An insurance company may only deny a suicide death claim if an exclusionary rider is attached to the policy
D. An insurer must always pay a death benefit when the cause of death was suicide
B.
The correct answer is "An insurer may not use suicide as a defense against payment after the second year".
10. A new general property and casualty licensee must complete at LEAST __ hours of continuing education within 24 months of initial licensure.
A. 24
B. 20
C. 12
D. 16
A.
The correct answer is "24". A new general property and casualty licensee must complete a MINIMUM of 24 hours of continuing education within 24 months after initial licensure.
11. Which of the following groups may NOT be insured by a group life insurance policy?
A. Administrators
B. Individuals who are related by blood
C. Employees
D. Supervisors
B.
The correct answer is "Individuals who are related by blood". A group life insurance policy may NOT insure groups consisting exclusively of persons who are related by marriage, blood or legal adoption.
12. A promotional advertising item is not considered a rebate unless it has a value equal to or less than what amount?
A. $50
B. $25
C. $10
D. $100
B.
The correct answer is "$25". An item that is a promotional advertising item, educational item, or traditional courtesy commonly extended to consumers and that is valued at $25 or less
13. ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering
A.twisting
B. unfair methods of competition
C. rebating
D. false advertising
B.
The correct answer is "unfair methods of competition". Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the Texas Insurance Code covering unfair methods of competition.
14. Which of these provisions is NOT required in life insurance policies?
A. Extended Term
B. Free look
C. Entire contract
D. Grace period
A.
The correct answer is "Extended Term". All of these provisions must be included in life insurance policies EXCEPT "Extended Term".
15. An example of an unfair claims settlement practice is
A. paying a claim in a timely matter
B. making it mandatory that proof of loss be provided for each claim
C. requiring a time limit for submitting a claim
D. turning down a claim without providing the basis of denial
D. turning down a claim without providing the basis of denial
Unfair claims settlement practices often involve failing to handle claims transparently or fairly, and denying a claim without offering the reason for the denial is a clear violation. This undermines the claimant's ability to address or dispute the decision effectively.
Would you like to explore more examples of unfair practices or related insurance concepts?
16. Denying an insured's claim without indicating the basis of denial under the policy is considered an unfair claim settlement practice.
A. An example of false advertising would be
B. An insurer advertising in an insurance trade journal
C. An insurer exaggerating its dividends in a magazine advertisement
D. A producer spending more than $25 on marketing gifts for a client
C.
Is "An insurer exaggerating its dividends in a magazine advertisement". An insurance company may be judged guilty of false advertising if it exaggerates its dividends in a magazine advertisement.
17. An example of rebating would be
A. returning a portion of a premium as inducement to purchase insurance
B. an offer of rated insurance coverage
C. advertising cheaper insurance rates than competitors
D. a mutual insurance company paying dividends to its policyowners
A.
The correct answer is "returning a portion of a premium as inducement to purchase insurance". Returning a portion of a premium as inducement to purchase insurance is an example of rebating.
18. An insurance company organized under New York laws and licensed to do business in Texas is considered a(n)
A. reciprocal company
B. foreign company
C. alien company
D. export company
B.
The correct answer is "foreign company". In this situation, the company is considered a foreign company in Texas.
19.An insurer is NOT required to provide information on fraudulent claims if requested by
A.the Commissioner
B. the Texas Department of Insurance
C. an insured
D. the Attorney General
C.
The correct answer is "an insured". On the written request of an authorized government entity (such as the Commissioner, Attorney General, or a local law enforcement agency), an insurer will provide to that entity any relevant information or material relating to a fraudulent matter under investigation.
20. What is an organization that solicits insurance only to its members?
A. Singular company
B. Domestic society
C. Limited liability company
D. Fraternal benefit society
D.
An organization that solicits insurance only among its members is known as a fraternal benefit society.
21. What is required for an agent whose license has been revoked?
A. Wait at least ten years before applying for a new license
B. Wait at least five years before applying for a new license
C. Submit a letter of apology to the Insurance Commissioner along with a $500 fine
D. Obtain a personal $500,000 E&O policy
B.
The correct answer is "Wait at least five years before applying for a new license". An individual whose license has been denied or revoked cannot apply again for an agent’s license for at least 5 years.
22. What is the monetary penalty for willfully violating a cease-and-desist order?
A. A fine of up to $250
B. A fine of up to $500
C. A fine of up to $50
D. A fine of up to $100
B.
The correct answer is "A fine of up to $500". A fine of up to $500 may be assessed to a person or entity that willfully violates a cease-and-desist order. An unintentional violation results in a fine of up to $50.
23 . Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
A. Issue a cease-and-desist order
B. Regulate the business of insurance in this state
C. Issue insurance licenses
D. Activate insurance companies' financial reserves
D.
The Commissioner of Insurance has the power and duty to take all of these actions EXCEPT activate insurance companies' financial reserves.
24. Which of these is NOT an example of doing insurance business?
A. Delivering an insurance policy
B. Selling shares of stock
C. Collecting insurance premium
D. Receiving an insurance application
B.
The correct answer is "Selling shares of stock". All of these are examples of doing insurance business EXCEPT selling shares of stock.
25. Which Unfair Trade Practice involves an agent telling a prospective client that a policy's dividends are guaranteed?
A. Twisting
B. Sliding
C. Misrepresentation
D. Rebating
C.
The correct answer is "Misrepresentation". An agent who tells a client that dividends are guaranteed may be guilty of misrepresentation.
26. Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
A. The insured
B. The Commissioner of Insurance
C. The agent and the insured
D. The agent
D.
The correct answer is **D. The agent**.
When an agent sells a policy through an unauthorized insurer in Texas, the agent becomes liable for any losses incurred by the insured. This ensures accountability and compliance with the state's insurance regulations, which aim to protect consumers from unapproved or potentially unreliable insurers.
27. A Medicare Supplement policy may be cancelled for which of the following reasons?
A.The premium has not been paid by the insured
B. An insurer's claims were higher than expected for the fiscal year
C. The insured's credit rating has dropped significantly
D. The insurer's AM Best rating has dropped
A.
The correct answer is "The premium has not been paid by the insured". Failing to pay the premium would cause a Medicare Supplement policy to be cancelled
28. A plan through the Marketplace may be purchased by
A. everyone over 18 years old
B. any legal resident (including those imprisoned)
C. any legal resident (except those imprisoned)
D. only those who might be eligible for Medicare
C.
The correct answer is "any legal resident (except those imprisoned)". Any legal resident, except those incarcerated, can purchase a plan through the Marketplace.
29. An applicant MUST receive an Outline of Coverage when an application is taken for a(n)
A. Medicare Supplement policy
B. Endowment
C. Annuity
D. Universal life policy
A.
The correct answer is "Medicare Supplement policy". An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Medicare Supplement policy.
30. An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the
A. National HMO Association
B. Attorney General
C. NAIC
D. Commissioner
A.
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the Commissioner of Insurance.
31. Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of
A. 60 days
B. 31 days
C. 10 days
D. 45 days
B.
The correct answer is "31 days". Fully insured group health plans and HMO's must have at least one 31-day open enrollment period each year.
32. What is the MINIMUM benefit period that must be offered by a Long-Term Care policy?
A. 36 months
B. 12 months
C. 18 months
D. 48 months
B.
The correct answer is "12 months". A Long-Term Care policy must offer a MINIMUM benefit period of 12 months.
33. Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?
A. Outpatient treatment
B. Inpatient treatment
C. Transportation to and from a treatment facility
D. Group therapy
C.
The correct answer is "Transportation to and from a treatment facility". Benefits for drug and alcohol treatment under a group health policy must include all of these services EXCEPT transportation to and from a treatment facility.
34. Which of the following is a valid reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?
A. Drinking alcohol
B. Nonpayment of coverage
C.Exceeding a specified number of claims
D. Starting a cigarette habit
B.
The correct answer is "Nonpayment of coverage". An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for failure to pay for coverage.
35. In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:
A. Insured
B. Applicant
C. Payor
D. Owner
A.
The correct answer is "Insured". In a Key Employee life insurance policy, the third-party owner can be all of these EXCEPT the insured.
36. Which statement regarding third-party ownership of a life insurance policy is true?
A. It is illegal in most states
B. Policy cannot be assigned once issued
C. It is used extensively in estate-planning as well as business circumstances
D. Beneficiary is required to be irrevocable
C.
The correct answer is "It is used extensively in estate-planning as well as business circumstances". Third-party ownership of a life insurance policy is widely used in business settings and estate-planning situations.
37. Which Long Term Care insurance statement is true?
A. Benefits are usually payable for alcohol rehabilitation
B. Can only be offered to individuals under the age of 70
C. Pre-existing conditions must be covered after the coverage has been in force for six months
D. Inflation protection is usually not offered
C.
The correct answer is "Pre-existing conditions must be covered after the coverage has been in force for six months". Pre-existing conditions are those for which medical advice or treatment was recommended by or received from a health provider within 6 months preceding the effective date of an individual long-term care policy.
38. Which of the following will a Long Term Care plan typically provide benefits for?
A. home health care
B. disability income
C. death
D. unemployment
A.
The correct answer is "home health care". A Long Term Care policy will typically pay for home health care.
39. Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
A. Ordinary income tax and a 10% tax penalty for early withdrawal
B.10% tax penalty for early withdrawal
C. Ordinary income tax
D. Capital gains tax
C.
The correct answer is "Ordinary income tax and a 10% tax penalty for early withdrawal". Income tax and a penalty tax are generally assessed when a participant receives retirement savings from an IRA before reaching age 59 1/2.
40. A Major Medical policy typically contains a provision that requires the insurer to pay only part of a loss, while the balance is paid by the insured. This provision is called
A. Coinsurance
B. Indemnity
C. Assignment of Benefits
D. Co-deductible
A.
The correct answer is "Coinsurance". The provision in a Major Medical policy that requires the insurance company pay only part of a loss and the insured to pay the balance is known as coinsurance.
41. B's policy provides coverage on an in-hospital basis only and contains a limited daily room and board benefit. Which of these policies does B have?
A. Basic Surgical
B. Basic Hospital
C. Comprehensive Major Medical
D. Critical illness
B.
The correct answer is "Basic Hospital". A Basic Hospital policy typically contains a limited daily room and board benefit and provides coverage on an in-hospital basis only.
42. All of the following statements about traditional individual retirement accounts are false EXCEPT
A. Contributions are not tax deductible
B. 10% penalty is applied to withdrawals before age 59 1/2
C. Withdrawals are normally tax-free to the recipient
D. 10% penalty is applied to withdrawals after age 59 1/2
B.
The correct answer is "10% penalty is applied to withdrawals before age 59 1/2". Because an IRA is a qualified plan, it has the same rules for early withdrawal.
43. Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
A. Dodd-Frank Act
B. USA Patriot Act
C. Fair Credit Reporting Act
D. Federal Reserve Act
B.
The correct answer is "USA Patriot Act". The USA PATRIOT Act includes provisions intended to prevent the financial services industry, including the insurance sector, from being used for money laundering and terrorist financing by criminals and terrorists.
44. Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for Social Security disability benefits?
A. 5
B. 4
C. 6
D. 3
A.
The correct answer is "5". You are eligible to file for Social Security benefits after being totally disabled for 5 months.
45. Additional coverage can be added to a Whole Life policy by adding a(n):
A.decreasing term rider
B.payor rider
C.accelerated benefit rider
D.automatic premium loan rider
A.
The correct answer is "Decreasing term rider". A decreasing term rider can add additional coverage to a whole life policy.
46. A life insurance application must be signed by all of these, EXCEPT:
A. the insured (if an adult)
B. beneficiary
C. the policyowner
D. the agent
B.
The correct answer is "beneficiary". Beneficiaries are not required to sign an insurance application.
47. K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
A. Return of premiums paid
B. Cash value plus interest
C. $20,000 death benefit
D. Face amount plus interest
C.
The correct answer is "$20,000 death benefit". If the insured dies before the endowment's maturity, the policy's face value — also known as the "death benefit" — is paid in a lump sum to any beneficiaries.
48. Which of these Nonforfeiture Options continue a build-up of cash value?
A. Reduced Paid-Up
B. Cash Surrender
C. Extended Term
D. Waiver of Premium
A.
The correct answer is "Reduced Paid-Up". A Reduced Paid-Up option would provide continuing cash value build-up.
49. T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
A. Warranty receipt
B. Binding receipt
C. Conditional receipt
D. Backdated receipt
C.
The correct answer is "Conditional receipt". A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.
50. The premiums paid by an employer for his employee's group life insurance are usually considered to be:
A. taxable income to the employee
B. tax-deductible to the employer
C. tax-deductible to the employee
D. partially deductible to the employee
B.
The correct answer is "tax-deductible to the employer". The amount an employer pays for his employee's life insurance is typically deductible to the business.
51. Which of the following policy features allows an insured to defer current health charges to the following year’s deductible instead of the current year’s deductible?
A. Deferral provision
B. Carryover provision
C. Corridor provision
D. Stop Loss provision
B.
The correct answer is "Carryover provision". The Carryover provision permits expenses incurred during the last three months of the calendar year to be carried over into the new year if needed to satisfy the deductible for the next year.
52. All of these are considered sources of underwriting information about an applicant, EXCEPT:
A. Credit Report
B. Inspection Report
C. Medical Information Bureau
D. Rating Services
D.
All of these are valid sources to obtain underwriting information about an applicant EXCEPT for a rating service (A.M. Best, Standard & Poor's).
53. Whose life is covered on a life insurance policy that contains a payor benefit clause?
A. Beneficiary
B. Parent
C. Child
D. Spouse
C.
The correct answer is "child". A payor benefit clause is generally added to a life policy that insures the life of a juvenile. It provides continuance of insurance coverage in the event of the death or total disability of the individual responsible for the payment of premiums.
54. A Nonforfeiture clause gives the policyowner
A. unemployment benefits
B. cost of living allowances
C. guaranteed values even if the policy has lapsed
D. lifetime income
C.
The correct answer is "guaranteed values even if the policy has lapsed". A nonforfeiture clause stipulates that a policyowner can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment.
55. Term insurance has which of the following characteristics?
A. Has nonforfeiture options
B. Endows at the end of the policy period
C. Builds cash value
D. Expires at the end of the policy period
D.
With term insurance, the policy expires at the end of the policy period.
56. What is the purpose of a Policy Summary?
A. It highlights the critical parts of the policy issued
B. It guarantees a policy will be issued
C. It allows the consumer to compare the costs of different policies
D. It details the commissions earned by the agent
A.
The correct answer is "It highlights the critical parts of the policy issued". A Policy Summary highlights the critical parts of the policy issued and describes the coverages, riders, and exclusions.
58. Which of these is NOT an element of Life insurance premiums?
A. Morbidity rate
B. Insurer's expenses
C. Mortality rate
D. Interest credit
A.
The correct answer is "Morbidity rate". Morbidity rate is NOT an element of life insurance premiums.
59. K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
A. Joint life
B. Endowment
C. Straight life
D. 10-Year Renewable Term
C.
The correct answer is "Straight life". Straight life insurance policies provide an insured the greatest amount of permanent protection per dollar of annual premium.
60. Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
A. Endowment
B. 20-Pay Life
C. Decreasing Term
D. Modified Whole Life
C.
The correct answer is "Decreasing Term". The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.
61. A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT
A. Change beneficiary
B. Change the policy's interest rate
C. Cancel policy
D. Borrow against cash value
B.
The correct answer is "Change the policy's interest rate". The company may do all of these things with a Key Person Insurance policy EXCEPT "Change the policy's interest rate".
62. A catastrophic illness would be best covered by which of the following health insurance plans?
A. Indemnity
B. Surgical Expense
C. Limited
D. Major Medical
D.
Major Medical health insurance coverage is best suited for meeting catastrophic illness expenses.
63 . An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
A. 20% is withheld for income taxes
B. Nothing is withheld
C. 30% is withheld for income taxes
D. 10% is withheld for income taxes
A.
The correct answer is "20% is withheld for income taxes". A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. Once the rollover takes place to a new custodian, the remainder of the distribution is made.
64 . What does a Face Amount Plus Cash Value Policy pay upon the insured's death?
A. The greater amount of the policy's death benefit or the cash value
B. Face amount plus total premium paid throughout the life of the policy
C. Face amount plus the policy's cash value
D. Face amount plus the policy's dividends
C.
The correct answer is "Face amount plus the policy's cash value". A Face Amount Plus Cash Value Policy is a contract that promises to pay at the insured's death the face amount of the policy plus a sum equal to the policy's cash value.
65. What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc.)?
A. Disability insurance
B. MEWA
C. Dread disease insurance
D. Blanket insurance
C.
The correct answer is "Dread disease insurance". Dread disease insurance provides benefits for ONLY specific types of illnesses such as cancer or stroke.
66. The incontestable clause allows an insurer to:
A. contest a claim at anytime if the cause of death was accidental
B. contest a claim during the Contestable Period
C. disallow a change of ownership throughout the Contestable period
D. disallow a change of beneficiary during the Contestable period
B.
The correct answer is "contest a claim during the Contestable Period". The incontestable clause or provision specifies that after a certain period of time (usually two years from the issue date), the insurer no longer has the right to contest the validity of the life insurance policy so long as the contract continues in force.
67. What type of life insurance gives the greatest amount of coverage for a limited period of time?
A. Endowment policy
B. Graded Premium Whole life
C. Whole life
D. Term life
D.
Term insurance would provide the greatest amount of protection for a limited period of time.
68. Which of these factors do NOT play a role in the underwriting of a health insurance policy?
A. Marital status
B. Credit status
C. Occupation
D. Avocations
A.
The correct answer is "Marital status". Marital status does not affect the underwriting of a life insurance policy.
69. P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
A. P cannot assign ownership of the policy while premiums are being waived
B. P cannot borrow against the policy's cash value while disabled
C. P will still receive declared dividends
D. P will have to pay income taxes on the amount of premiums waived
C.
The correct answer is "P will still receive declared dividends". Even though premiums are waived because of the disability, the insured will continue to receive dividends just as if the insured were still making the payments themselves.
70. A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
A. Life settlement contract
B. 1031 Exchange
C. Cash surrender
D. Buy-sell arrangement
A.
The correct answer is "Life settlement contract". A Life settlement contract allows a policyowner to sell a life insurance policy for more than its cash value.
71. Which of the following types of care is typically not covered in a Long-Term Care policy?
A. Custodial care
B. Skilled care
C. Acupuncture
D. Home Health care
C.
The correct answer is "Acupuncture". Acupuncture is a service typically not covered in a Long-Term Care policy.
72. What is the underlying concept regarding level premiums?
A. The early years are charged less than what is needed
B. The early years are charged more than what is needed
C. Level premiums build cash value quicker in the early years
D. Level premiums can only be paid annually
B.
The correct answer is "The early years are charged more than what is needed". The concept of level premiums charges more than needed in early years.
73. D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
A. Loan provision
B. Extended term
C. Reduced Paid-up
D. Cash Surrender
B.
The correct answer is "Extended term". Choosing the nonforfeiture extended term option allows the policyowner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy. Extended-term insurance is often the default nonforfeiture option in the event of nonpayment of premiums.
74. Which of these life products is NOT considered interest-sensitive?
A. Variable Universal Life
B. Modified Whole Life
C. Interest Sensitive Whole Life
D. Variable Life
B.
The correct answer is "Modified Whole Life". All of these have an interest-sensitive investment aspect, EXCEPT Modified Whole Life.
75. Which of these terms accurately defines an underwriter's assessment of information on a health insurance application?
A. Warranty review
B. Insurable interest
C. Inspection report
D. Risk classification
D.
Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.
76. N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
A. Collateral assignment
B. Concealment
C. Exclusion
D. Misrepresentation
C.
The correct answer is "Exclusion". Exclusions are specified hazards listed in a policy for which benefits will not be paid.
77. Premature IRA distributions are assessed a penalty tax of:
A. 0%
B. 15%
C. 10%
D. 20%
C.
The correct answer is "10%". Premature distributions from an IRA are subject to a 10% penalty tax.
78. T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is
A. guaranteed, no matter what is found during the underwriting process
B. effective upon delivery of the policy
C. conditional, depending on the insurer's underwriting guidelines
D. effective upon completion of the Free-Look period
C.
The correct answer is "conditional, depending on the insurer's underwriting guidelines". In this situation, the life insurance coverage is conditional, depending on the insurer's underwriting guidelines.
79. An insurance company may NOT reject a prospective insured's insurance application on the basis of which of the following factors?
A. Weight
B. Gender
C. Medical history
D. Hobbies
B.
The correct answer is "Gender". An insurance company may NOT reject a prospective insured's application on the basis of gender.
80. An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred?
A. $2,000
B. $7,000
C. $10,000
D. $5,000
B.
The correct answer is "$7,000". In this situation, $5,000 + 20% of the remaining bill = $7,000
81. Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
A. Interest-Sensitive Whole Life
B. Variable Life
C. Credit Life
D. Universal Life
B.
The correct answer is "Variable Life". Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.
82. N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
A. Claim will be decided by an arbitrator
B. Claim will be partially paid
C. Claim will be denied
D. Claim will be paid in full
C.
The correct answer is "Claim will be denied". In this situation, the insurance company will deny the claim, as the policy would have lapsed due to nonpayment by September 15.
83. What is the purpose of the U.S.A. Patriot Act?
A. detect and deter misrepresentations
B. detect and deter alien insurance companies
C. detect and deter fraud
D. detect and deter terrorism
D.
The purpose of the U.S.A. Patriot Act is to detect and deter terrorism.
84. What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
A. Whole Life
B. Credit Life
C. Term Life
D. Universal Life
A.
The correct answer is "Whole Life". Whole life insurance is designed to mature at age 100.
85. A producer does not have the authority to change a policy or waive any of its provisions. The health provision that best describes this statement is called the
A. Incontestable
B. Entire Contract
C. Time Limit on Certain Defenses
D. Grace Period
B.
The correct answer is "Entire Contract". The Entire Contract provision states that the producer does NOT have the authority to change the policy or waive any of its provisions.
86. S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
A. $50,000
B. $100,000
C. Refund of premiums paid plus interest
D. No claim will be paid because cause of death was from natural causes
A.
The correct answer is "$50,000". In this situation, the beneficiary is entitled to receive $50,000.
87. Deductibles are used in health policies to lower:
A. the incidents of fraud
B. the coinsurance amount
C. adverse selection
D. overuse of medical services
D.
One of the primary reasons for using deductibles in health policies is to reduce the overuse of medical services.
88. An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to:
A. issue the policy only when the initial premium check has cleared
B. determine if the applicant is an acceptable risk by completing standard underwriting procedures
C. issue the policy on a standard basis
D. determine if the applicant is insurable by investigating family health history
B.
The correct answer is "determine if the applicant is an acceptable risk by completing standard underwriting procedures". With a conditional receipt, the insurance company will complete standard underwriting procedures before making a decision about whether to insure the applicant.
89. The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n):
A. Entire Contract provision
B. Insuring agreement
C. Assignment agreement
D. Consideration clause
B.
The correct answer is "Insuring Agreement". The insuring clause or provision sets forth the company's basic promise to pay benefits upon the insured's death.
90. What is being delivered during a policy delivery?
A. A binding receipt to the proposed insured
B. Insurance contract to the proposed insured
C. Policy summary sheet and disclosure material to the proposed insured
D. Application and initial premium to the insurer
B.
The correct answer is "Insurance contract to the proposed insured". Policy delivery refers to the delivery of the insurance contract to the applicant.
91. The advantage of reinstating an original life policy is
A. the premiums are based on a younger age
B. a new incontestable period will begin
C. the interest charged on policy loans will be lowered
D. the premiums are based on the current age of the insured
A.
The correct answer is "the premiums are based on a younger age". The advantage of reinstating an original life policy is the premiums are based on a younger age.
92. Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
A. Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
B. Deposit the check in to his personal account, use the funds to purchase a cashiers check, and send the new cashiers check back to the insurance company
C. Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account
D. Cross off his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company
A.
The correct answer is, "Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company." If an agent receives a check made out to them instead of the insurance company, they should return the check to the customer and collect a new check properly made out to the insurance company.
93. Which of the following statements describes what an Accident and Health policyowner may NOT do?
A. File a covered claim
B. Cancel the coverage
C. Adjust the premium payments
D. Assign ownership
C.
The correct answer is "Adjust the premium payments". The owner of an Accident and Health policy may not change the premium amount.
94. P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
A. Whole Life Paid-Up at Age 70
B. Endowment at Age 70
C. Modified Life
D. Straight Life
B.
The correct answer is "Endowment at Age 70". An endowment policy is characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date (before age 100).
95. Long Term Care policies will usually pay for eligible benefits using which of the following methods?
A. Respite
B. Expense incurred
C. Fee for service
D. Delayed
B.
The correct answer is "Expense incurred". Most long-term care policies pay on a reimbursement (or expense-incurred) basis, up to the policy limits.
96. Which rider provides coverage for a child under a parent's life insurance policy?
A. Base insured rider
B. Payor benefit rider
C. Spouse term rider
D. Child term rider
D.
One of the best methods of adding coverage for a child on a parent's life insurance policy is to add a child term rider.
97. When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
A. Extended term option
B. 1035 Exchange
C. Incontestable period
D. Conversion provision
D.
The option to convert gives the insured the right to convert or exchange the term policy for a whole life (or permanent) plan without evidence of insurability.
98. M completes an application for health insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
A. policy is delivered
B. initial premium is collected
C. insurance company issues policy
D. free-look period has expired
D.
In this situation, the policy will go into effect after all these actions occur EXCEPT the expiration of the free-look period.
99. Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy?
A. Premiums are waived after the insured has been unemployed for a specified time period
B. Premiums are waived after the insured has been totally disabled for a specified time period
C. Past due premiums on a lapsed policy are waived and coverage is restored
D. The insured is paid a monthly benefit to keep insurance premiums current in the event of total disability
B.
The correct answer is "Premiums are waived after the insured has been totally disabled for a specified time period". The Waiver of Premium provision waives the payment of premiums after the insured has been totally disabled for a specified period of time.
100. K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered:
A. guaranteed renewable
B. conditionally renewable
C. noncancellable
D. optionally renewable
A.
The correct answer is "guaranteed renewable". Guaranteed renewable is best described as a policy that must be renewed and premium rate increases can only be applied if for an entire class of insureds.
101. Which of the following BEST describes how pre-admission certification is used?
A. Used to assist in underwriting
B. Used to prevent nonessential medical costs
C. Used to minimize hospital lawsuits
D. Used to help process claims
B.
The correct answer is "Used to prevent nonessential medical costs". Pre-admission certification is used to prevent unnecessary medical costs.
102. A Medical Information Report (MIB) report may disclose which of the following:
A. Prior bankruptcy judgement
B. Prior preferred rating
C. Prior use of marijuana
D. Prior lapsing of policy
C.
The correct answer is "Prior use of marijuana". Medical Information Bureau (MIB) reports may identify medical and nonmedical information, including hazardous hobbies, habits (e.g., tobacco/drug/alcohol use), application dates, coverage in force, and pending applications. MIB reports do not identify an applicant's primary physician, credit score, risk classification (substandard, standard, preferred, denied), policy premiums, the amount of insurance applied for, prior policy lapse, or bankruptcy.
103. A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
A. 20-Pay Life and Straight Life accumulate cash value at the same rate
B. Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating
C. Straight life accumulates faster than Limited-pay Life
D. 20-Pay Life accumulates cash value faster than Straight Life
D.
In this situation, the statement "20-Pay Life accumulates cash value faster than Straight Life" would be correct.
104. What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
A. Endowment policy
B. Decreasing Term
C. Limited-Pay Whole life
D. Convertible Term
D.
Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability.
105. When does a Probationary Period provision become effective in a health insurance contract?
A. 30 days after the policy's inception
B. When a covered loss occurs
C. At the policy's inception
D. When a claim is submitted
C.
The correct answer is "At the policy's inception". The probationary period begins when a policy goes into effect. During this period, no benefits will be paid under the policy.
106. M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim?
A. $1,760
B. $2,000
C. $400
D. $1,600
D.
In this situation, $2,200 - $200 deductible x 80% = $1,600.
107. Who is NOT required to sign a health insurance application?
A. Producer
B. Beneficiary
C. Adult insured
D. Policyowner
B.
The correct answer is "Beneficiary". All of the following individuals must sign a health insurance application EXCEPT the beneficiary.
108. When is the face amount of a Whole Life policy paid?
A. At the policy's maturity date only
B. When the insured dies or at the policy's maturity date, whichever happens first
C. When the policy is surrendered
D. Only when the insured dies
B.
The correct answer is "When the insured dies or at the policy's maturity date, whichever happens first". The face amount of a Whole Life policy will be paid when the insured dies or on maturity of the policy, whichever occurs first.
109. T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
A. Change will be made immediately
B. Change will be made only if premiums are paid current
C. Request will be accepted only if in writing by the insured
D. Request of the change will be refused
D.
An irrevocable designation may not be changed without the written consent of the beneficiary.
110. A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
A. Payor provision
B. Waiver of Premium provision
C. Accelerated Benefits provision
D. Assignment provision
A.
The correct answer is "Payor provision". A payor provision provides that in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract.
111. A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
A. Whole life
B. Credit life
C. Ordinary life
D. Level term
A.
The correct answer is "Whole life". Whole life provides the insured with a cash value as well as a level face amount.
112. Which of the following is an example of a nonforfeiture option?
A. Inflation option
B. Reduced Paid-Up option
C. Guaranteed insurability option
D. Conversion option
B.
The correct answer is "Reduced Paid-Up option". "Reduced Paid-Up option" is an example of a nonforfeiture option.
113. A Business Overhead Expense policy:
A. covers employee wages only
B. covers any loss of income by the business owner
C. covers business expenses such as rent and utilities
D. reimburses the company for any reduction in sales due to the owner's disability
C.
The correct answer is "covers business expenses such as rent and utilities". Business Overhead Expense insurance covers eligible expenses for utilities, rent, and staff.
114. Which of these is NOT considered to be a right given to a policyowner?
A. Surrendering the policy's cash value
B. Change the beneficiary, if revocable
C. Modify a provision in the insurance contract
D. Assignment of ownership
C.
The correct answer is "Modify a provision in the insurance contract". Changing contract provisions is not a policyowner right.
115. An insurance company would MOST likely pay benefits under an Accidental Death and Dismemberment policy for which of the following losses?
A. Loss of life due to a heart attack
B. Loss of the spleen due to an accidental injury
C. Partial paralysis due to a stroke
D. Loss of eyesight due to an accidental injury
D.
In this situation, an Accidental Death and Dismemberment policy will most likely pay benefits for loss of eyesight due to an accidental injury.
116. Additional coverage can be added to a Whole Life policy by adding a(n):
A. automatic premium loan rider
B. payor rider
C. accelerated benefit rider
D. decreasing term rider
D.
A decreasing term rider can add additional coverage to a whole life policy.
117. A life insurance policy would be considered a wagering contract WITHOUT:
A. premium payment
B. insurable interest
C. constructive delivery
D. agent solicitation
B.
The correct answer is "insurable interest". Without insurable interest, a life insurance policy would be considered a wagering contract.
118. K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
A. Consideration
B. Grace Period
C. Reinstatement
D. Free-look
C.
The correct answer is "Reinstatement". In this situation, coverage may be restored under the reinstatement provision.
119. What type of renewability guarantees premium rates and renewability?
A. Optionally renewable
B. Noncancellable
C. Conditionally renewable
D. Warrantied renewable
B.
The correct answer is "Noncancellable". Noncancellable policies provides guaranteed renewability and premium rates.
120. Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
A. Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company
B. Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company
C. Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company
D. Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
D.
If a customer wants to apply for an insurance policy, the agent should complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.
121. T applied for a Disability Income policy and has a history of back injuries. The insurer issued the policy with a statement that excludes coverage for back injuries. This statement is called a(n)
A. impairment rider
B. back exclusion
C. rating
D. encumbrance
A.
The correct answer is "impairment rider". A statement on a policy that excludes coverage for specific injuries or conditions is called an impairment rider.
122. Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
A. Modified Whole Life
B. 20-Pay Life
C. Endowment
D. Decreasing Term
D.
The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.
123. T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?
A. Increase her policy's coverage amount
B. Allow her to take a tax deduction on unearned premiums
C. Decrease her policy's coverage amount
D. Nothing
A.
The correct answer is "Increase her policy's coverage amount". Under the Change of Occupation provision in an Accident & Health policy, if the insured notifies the insurance company of a less hazardous occupation, the insurance company may increase the policy's coverage.
124. Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
A. Consideration
B. Unilateral
C. Aleatory
D. Adhesion
C.
The correct answer is "Aleatory". Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss.
125. An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a:
A. $25,000 modified whole life policy
B. $25,000 individual term life policy
C. $125,000 individual whole life policy
D. $25,000 individual whole life policy
D.
In this situation, a terminated employee may convert to a $25,000 individual whole life policy.
126. K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
A. Major Medical
B. Travel
C. Disability Income
D. Indemnity
C.
The correct answer is "Disability Income". Disability Income would reimburse an insured for loss of earnings if the insured became sick.
127. An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?
A. 10
B. 7
C. 20
D. 31
D.
The grace period is a minimum of 31 days for policies that are paid for on an annual basis.
128. C is the policyowner of a Comprehensive individual Major Medical policy. C pays an annual premium which is due September 1. If C forgets to pay the premium and is hospitalized September 10, how will the insurer handle this claim?
A. Pay the claim in full minus the premium due
B. Deny the claim
C. Pay half the claim and keep remaining balance until premium is paid
D. Cancel the policy and deny the claim
A.
The correct answer is "Pay the claim in full minus the premium due". Because the grace period is 31 days for individual Accident and Health policies paid annually, this claim will be paid minus the premium due.
129. What year was the McCarran-Ferguson Act enacted?
A. 1945
B. 1946
C. 1947
D. 1944
A.
The correct answer is "1945". The McCarran-Ferguson Act was enacted in 1945 and made it clear that continued regulation of insurance by the states was in the public's best interest.
130. A Business Disability Buyout plan policy is designed:
A. with a very short Elimination period
B. to pay benefits to the insured's spouse
C. as an incurred expense plan
D. to pay benefits to the Corporation or other shareholders
D.
A Business Disability Buyout plan policy is designed to pay benefits to the Corporation or other shareholders.
131. Which provision is NOT a requirement in a group life policy?
A. Conversion
B. Incontestable period
C. Accidental
D. Grace period
C.
The correct answer is "Accidental". An AD&D provision is not required in a group life policy.
132. N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is:
A. $1,250
B. $2,000
C. $1,500
D. $1,750
A.
The correct answer is "$1,250". After the 30-day Elimination period has been satisfied, the total benefit paid on this claim is $1,250 ($500+$500+$250).
133. A policyowner would like to change the beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy and make the change permanent. Which type of designation would fulfill this need?
A. Primary
B. Revocable
C. Contingent
D. Irrevocable
D.
An irrevocable designation may not be changed without the written consent of the beneficiary.
134. What is the consideration given by an insurer in the Consideration clause of a life policy?
A. Promise to accept an insured's assignment of benefits
B. Promise to not raise premiums
C. Promise to pay a death benefit to a named beneficiary
D. Promise to never cancel coverage
C.
The correct answer is "Promise to pay a death benefit to a named beneficiary". Consideration is given by the insurer by promising to pay a death benefit to a named beneficiary.
135. A(n) ________ annuity pays benefits based on units rather than stated dollar amounts.
A. Variable
B. Immediate
C. Deferred
D. Unit
A.
The correct answer is "Variable". A Variable annuity pays benefits based on units rather than specific dollar amounts.
136. A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
A. Claim will be denied, the coverage cancelled, and all premiums paid will be refunded
B. Claim will be paid and coverage will remain in force
C. Claim will be denied and coverage will be cancelled
D. Claim will be denied and coverage will remain in force
B.
The correct answer is "Claim will be paid and coverage will remain in force". After a policy has been in force for 2 (sometimes 3) years, it enters the incontestable period, in which the insurer may not deny a claim based on information not disclosed at the time of application.
137. Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?
A. Guaranteed insurability rider
B. Additional coverage rider
C. Paid-up option rider
D. Extended insurability rider
A.
The correct answer is "Guaranteed insurability rider". A guaranteed insurability rider guarantees the insured the option of purchasing additional amounts of disability income coverage at predetermined times without requiring the insured to provide evidence of insurability.
138. A disability elimination period is best described as a:
A. eligibility period
B. probation period
C. dollar deductible
D. time deductible
D.
The best way to describe a disability elimination period is a "time deductible".
139. Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is:
A. Key Employee Life
B. Disability Income
C. Contributory
D. Business Overhead Expense
D.
A Business Overhead Expense policy's purpose is to cover certain overhead expenses that continue when the businessowner is disabled.
140. J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
A. $50,000
B. $25,000
C. $100,000
D. $0
B.
The correct answer is "$25,000". The maximum sum payable would be the capital sum, or $25,000.
141. In a Disability Income policy, which of these clauses acts as a deductible?
A. Probationary Period
B. Elimination Period
C. Waiver Period
D. Deductible Period
B.
The correct answer is "Elimination Period". The Elimination Period serves as the deductible in a Disability Income policy.
142. A 45 year-old woman won $100,000 in a scratch-off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Which of these annuities did this woman purchase?
A. Variable annuity
B. Immediate annuity
C. Deferred Fixed annuity
D. Immediate Variable annuity
C.
The correct answer is "Deferred Fixed annuity". Because the annuity will pay a fixed amount beginning at a future date, it is considered a Deferred Fixed annuity.
143. An immediate annuity consists of a:
A. flexible premium
B. single premium
C. variable premium
D. deferred premium
B.
The correct answer is "single premium". An immediate annuity has a single premium.
144. A noncontributory group term life plan is characterized by:
A. the entire cost of the plan is paid for by the employer
B. both employer and employee must provide evidence of insurability
C. the cost of the plan is shared by both employer and employee
D. the entire cost of the plan is paid for by the employee
A.
The correct answer is "the entire cost of the plan is paid for by the employer". When an employer provides noncontributory group term life insurance, the employer pays the entire cost of the plan.
145. A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow?
A. Waiver of Premium rider
B. Extended Term rider
C. Guaranteed Insurability Option rider
D. Cost of Living Adjustment rider
C.
The correct answer is "Guaranteed Insurability Option rider". If a physician wants to ensure he can increase the benefit for his disability policy as his practice and income grow, he would want to include a Guaranteed Insurability Option rider.
146. Which of the following is NOT a characteristic of Preferred Provider Organizations (PPOs)?
A. PPOs provide equal benefits and costs for services obtained in-network and out of network.
B. PPO's are only available through social insurance programs.
C. PPOs are available for both individual and group plans.
D. PPO's operate on a fee-for-service basis.
A.
The correct answer is "PPOs provide equal benefits and costs for services obtained in-network and out of network." Members are not mandated to use the PPO. However, if they go outside the PPO for health care services, benefits are reduced and costs increase. QUID: 3D7B9F9A-6409-49CC-A0CE-C2ECB5FCD52A
147. Which of the following best describes a Preferred Provider Oganization (PPO)?
A. A primary care physician is required
B. Not allowed to see out-of-network physicians
C. Physicians are paid on a capitation basis
D. Discounted fees for the patient
D.
A Preferred Provider Organization (PPO) offers a network of healthcare providers who agree to provide services at reduced rates, ensuring discounted fees for patients. PPO plans typically allow patients more flexibility, such as seeing specialists or out-of-network providers without requiring referrals, though at higher costs for out-of-network services.
148. Preferred Provider Organizations (PPOs) _____.
A. reduce benefits and increase costs when service is obtained outside the PPO.
B. operate like an HMO on a prepaid basis
C. only offer group plans.
D. are generally public in nature rather than private.
A.
Preferred Provider Organizations (PPOs) typically allow members to access healthcare services from providers outside the network; however, doing so often results in higher costs and reduced benefits compared to services obtained within the network. This structure encourages members to utilize in-network providers while still offering flexibility.
149. G quits their job and wants to convert their group health coverage to an individual policy during the COBRA period. Which of the following statements is TRUE?
A. She DOES need to provide evidence of insurability
B. She does NOT need to provide evidence of insurability
C. She will be paying exactly the same premium for the individual plan as she did the group plan
D. She will have up to 6 months to convert to an individual policy
B.
The correct answer is "She does NOT need to provide evidence of insurability". Under COBRA, conversion of group accident and health coverage to an individual policy does not require evidence of insurability as long as it happens during the COBRA conversion period.