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?
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) Credit Life insurance is
insurance issued to a creditor to cover outstanding loan balances
insurance issued on a debtor to cover outstanding loan balances
not regulated in this state
Credit Life insurance can be best described as insurance issued on a debtor to cover outstanding loan balances.
3) 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
contested in front of an arbitrator
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
4) In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of two years.
5) A certificate of ________ permits an insurance company to transact business in Texas.
certificate of authority permits an insurance company to transact business in Texas.
6) A foreign insurance company conducting insurance business in Texas
was formed under the laws of another country
was formed under the laws of another state
is not subject to Texas insurance laws
is only authorized to write business outside the United States
A foreign insurance company is one that is incorporated under the laws of another state.
7) In Texas, which of these statements regarding the Suicide clause is TRUE?
An insurer must always pay a death benefit when the cause of death was suicide
An insurer may not use suicide as a defense against payment after the second year
An insurer may not use suicide as a defense against payment after the first year
An insurance company may only deny a suicide death claim if an exclusionary rider is attached to the policy
Suicide may not be a defense against payment after the second year.
8) A new general property and casualty licensee must complete at LEAST __ hours of continuing education within 24 months of initial licensure.
A new general property and casualty licensee must complete a MINIMUM of 24 hours of continuing education within 24 months after initial licensure.
9) Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?
Pay an amount the premiums would have purchased at the insured's actual age
Pay an amount reduced by a specified percentage of the face amount
Pay 50% of the initial death benefit
The company will most likely pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age.
10) Which of the following is NOT a required provision in group life policies?
Group life policies MUST include all of the following provisions EXCEPT Right to Loan Proceeds.
11) A temporary agent's license issued by the Commissioner of Insurance is valid for up to ___ days.
The Commissioner may issue a temporary insurance agent license for 90 days to an applicant for license who is being considered for appointment as an agent.
12) Which of the following is NOT included in a life insurance illustration?
Company's mortality table
Underwriting classification upon which the illustration is based
A life insurance illustration is NOT required to include the company's mortality table.
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
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) All of these statements about the Commissioner of Insurance are true EXCEPT
The Commissioner must be elected
The Commissioner regulates the business of insurance in this state
The Commissioner ensures that Texas insurance laws are executed
The Commissioner protects and ensures the fair treatment of consumers
The governor appoints the Commissioner to a two-year term.
15) An example of an unfair claims settlement practice is
requiring a time limit for submitting a claim
making it mandatory that proof of loss be provided for each claim
paying a claim in a timely matter
turning down a claim without providing the basis of denial
Denying an insured's claim without indicating the basis of denial under the policy is considered an unfair claim settlement practice.
16) An insurance agent has a fiduciary responsibility to all of the following EXCEPT
Because the agent handles money of the insured and insurer, he/she has a fiduciary responsibility.
17) An insurance company organized under New York laws and licensed to do business in Texas is considered a(n)
In this situation, the company is considered a foreign company in Texas.
18) An insurer is NOT required to provide information on fraudulent claims if requested by
the Texas Department of Insurance
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.
19) As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?
A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.
20) an insurance agent, tells his clients that their rights may be impaired if they fail to complete a release form within a given period of time. B may be found guilty of
In this situation, the agent is guilty of coercion.
21) To terminate an agent's appointment, an insurance company must
send termination notice to Governor
request a hearing before the Commissioner of Insurance
send termination notice to the Texas Department of Insurance
An insurance company that terminates an agent’s appointment must send notice of the termination to the Texas Department of Insurance.
22) What is required for an agent whose license has been revoked?
Wait at least ten years before applying for a new license
Submit a letter of apology to the Insurance Commissioner along with a $500 fine
Wait at least five years before applying for a new license
Obtain a personal $500,000 E&O policy
An individual whose license has been denied or revoked cannot apply again for an agent’s license for at least 5 years.
23) When will a hearing be held after a notice of hearing, alleging participation in an unfair or deceptive act, is served to a licensee or insurer by the Commissioner?
The correct answer is "No sooner than 6 days". Once notice is served, a hearing will be held no sooner than 6 days after the notice is provided.
24) Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
Activate insurance companies' financial reserves
Regulate the business of insurance in this state
Issue a cease-and-desist order
The Commissioner of Insurance has the power and duty to take all of these actions EXCEPT activate insurance companies' financial reserves.
25) Which of the following is a requirement for obtaining a Texas insurance agent's license?
Be a high school graduate
Be honest, trustworthy, and reliable
An applicant for an agent's license must be honest, trustworthy, and reliable.
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?
The Commissioner of Insurance
The agent and the insured
If an agent places insurance with an insurer that is not authorized by a certificate of authority, the agent may be held personally liable for any claims amounts that the unauthorized insurer does not pay.
27) Who owns a stock insurance company?
A stock insurance company is owned by it's stockholders.
28) A Medicare Supplement policy may be cancelled for which of the following reasons?
The premium has not been paid by the insured
An insurer's claims were higher than expected for the fiscal year
The insurer's AM Best rating has dropped
The insured's credit rating has dropped significantly
Failing to pay the premium would cause a Medicare Supplement policy to be cancelled.
29) A plan through the Marketplace may be purchased by
any legal resident (except those imprisoned)
any legal resident (including those imprisoned)
everyone over 18 years old
only those who might be eligible for Medicare
Any legal resident, except those incarcerated, can purchase a plan through the Marketplace.
30) An applicant MUST receive an Outline of Coverage when an application is taken for a(n)
Medicare Supplement policy
An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Medicare Supplement policy.
31) Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of
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 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?
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?
Starting a cigarette habit
Exceeding a specified number of claims
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for failure to pay for coverage.
35) Which of the following statements about health coverage for newborns is NOT true?
Coverage includes treatment of congenital defects
Coverage begins at moment of birth
Coverage is limited to only congenital defects
Coverage continues after the first 31 days upon payment of first premium
All of these statements about health coverage for newborns are correct EXCEPT "coverage is limited to congenital defects".
36) Which statement regarding a Key Employee Life policy is NOT true?
The application must be signed by the key employee
The company purchases, owns, pays the premiums and is the beneficiary
The beneficiary is named by the key employee
Its purpose is to prevent the financial loss that may ensue if a key employee dies
The company names the beneficiary, not the employee.
37) In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:
In a Key Employee life insurance policy, the third-party owner can be all of these EXCEPT the insured.
38) Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?
Each partner owns a $1,000,000 policy on their partner's life
Each partner owns a $500,000 policy on their own life
Each partner owns a $1,000,000 policy on their own life
Each partner owns a $500,000 policy on their partner's life
The correct answer is "Each partner owns a $500,000 policy on their partner's life". The amount of the policy is equivalent to each partner’s share of the business. When one partner dies, the other partner receives the death benefit from the life insurance on the deceased partner, which is then used to buy the deceased partner’s ownership of the business.
39) Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
The loss of company revenues while a replacement is being sought
A void in leadership if the key person were to die
The reduction in sales as a direct result from death of the key employee
All of these are reasons for a business organization to purchase key person life insurance EXCEPT "A pension deficiency if the key employee dies".
40) What does a 401(k) plan generally provide its participants?
Salary-deferral contributions
A defined retirement benefit
Salary-deferral distributions
A 401(k) plan normally provides participants with a salary-deferral option for contributions to the plan.
41) Which of the following will a Long Term Care plan typically provide benefits for?
A Long Term Care policy will typically pay for home health care.
42) A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family's out-of-pocket medical expenses for 2013?
In this situation, the insured's maximum out-of-pocket expenses for 2013 would be $1,000.
43) What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security, also known as Old Age, Survivors, and Disability Insurance (OASDI), was signed into law in 1935 by President Roosevelt as part of the Social Security Act.
44) All are true statements regarding the underwriting process, EXCEPT:
AIDS and HIV virus exams can be conducted in a discriminatory fashion
Signed consent from the applicant must be provided in order to test for AIDS and HIV virus
The original application is the primary source of information used in the underwriting process
The cost of any examination is paid for by the insurer
AIDS and HIV testing must be conducted in a uniform fashion and cannot be discriminatory.
45) A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
Profit-sharing plans set aside a portion of a company's net income for distributions to qualified employees.
46) All of the following statements about traditional individual retirement accounts are false EXCEPT
Contributions are not tax deductible
Withdrawals are normally tax-free to the recipient
10% penalty is applied to withdrawals before age 59 1/2
10% penalty is applied to withdrawals after age 59 1/2
Because an IRA is a qualified plan, it has the same rules for early withdrawal.
47) A major medical policy typically:
contains a 60-day Elimination period for losses due to accident
provides benefits for reasonable and necessary medical expenses, subject to policy limits
provides benefits for surgical expenses only, subject to policy limits
contains more limitations than a Basic Hospital, Medical, or Surgical policy
A major medical policy provides benefits for reasonable and necessary medical expenses, subject to policy limits.
48) In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
must be matched dollar-for-dollar by the employer
are restricted to minimum levels set by the IRS
Annual limits to an employee's qualified retirement plan are based on maximum limits set by the IRS.
49) Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
Fair Credit Reporting 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.
All of the following statements about Major Medical benefits are true, EXCEPT:
Benefits are generally expressed as a percentage of eligible expenses
Benefits have no maximum limit
The deductible can be expressed as a fixed dollar amount
The benefit period begins only after a specified amount of expenses have accrued
Major Medical benefits normally have a maximum limit.
Basic Medical Expense insurance:
has lower benefit limits than Major Medical insurance
pays for lost wages while hospitalized
covers an illness but not an accident
normally has a deductible and coinsurance
The correct answer is "has lower benefit limits than Major Medical insurance". Basic Medical Expense insurance typically has lower benefit limits than Major Medical insurance.
Which of these do NOT constitute policy delivery?
Policy mailed to applicant
Policy delivered to the applicant by the agent
Policy issued with a rating
All of these constitute delivery of the policy EXCEPT issuing a rated policy.
Which of these is NOT a source of funding for Social Security benefits?
Self employed individuals
All of these are sources of Social Security benefit funding EXCEPT the Federal Government.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
The correct answer is "Modified Endowment Contract (MEC)". When a life insurance policy exceeds certain IRS table values, the result would create a Modified Endowment Contract (MEC).
In order to sell a(n) ________ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA).
The correct answer is "Variable". In order to sell a Variable Life policy, the producer must register with the Financial Industry Regulatory Authority (FINRA).
A life insurance application must be signed by all of these, EXCEPT:
the insured (if an adult)
The correct answer is "beneficiary". Beneficiaries are not required to sign an insurance application.
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the first insured
upon death of the last insured
when one of the insureds becomes disabled and no longer able to make premium payments
when policy reaches maturation
The correct answer is "upon death of the last insured". A Joint Life and Survivor policy pays benefits after the death of the last insured.
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?
Face amount plus interest
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.
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase?
The ability to borrow against the cash value
The duration of premium payments
The word “straight” denotes the duration of premium payments, usually for the rest of the owner's life.
Which of these provisions require proof of insurability after a policy has lapsed?
The correct answer is "Reinstatement". Most insurers require evidence of insurability be provided upon reinstatement of a lapsed policy.
Credit life insurance is typically issued with which of the following types of coverage?
The correct answer is "Decreasing Term". The type of insurance used for Credit life is typically decreasing term, with the term matched to the length of the loan period.
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax
Policy's cash value may be used to pay premiums
Premium payments may be made at unscheduled times
Face amount may be adjusted
the correct answer is "Premiums may be applied as a credit against income tax". All of these actions are possible with a Universal Life policy EXCEPT "Premiums may be applied as a credit against income tax".
Which of the following BEST describes a Hospital Indemnity policy?
Coverage that pays for hospital room and board
Coverage that replaces lost income due to hospitalization
Coverage that pays a stated amount per day of a covered hospitalization
Coverage that reimburses an insured for surgeon expenses
The typical Hospital Indemnity policy pays a stated amount per day of a covered hospitalization.
Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT:
premiums that remain fixed for the life of the policy
partial withdrawal features beyond a surrender charge period
nonforfeiture benefit options
cash value that will ultimately replace the death benefit
The correct answer is "partial withdrawal features beyond a surrender charge period". All of these are contractually guaranteed to be provided in a whole life insurance policy EXCEPT "partial withdrawal features beyond a surrender charge period".
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Coverage can be added at specific events such as marriage or having a child
Evidence of insurability is required when the option is exercised
Coverage can be added at specific ages
Evidence of insurability is not required when the option is exercised
The correct answer is "Evidence of insurability is required when the option is exercised". All of these statements are true, EXCEPT "Evidence of insurability is required when the option is exercised".
P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the
Life Insurance Buyer's Guide
Fair Credit Reporting Act
Part lll of the application
Medical Information Bureau
The correct answer is "Fair Credit Reporting Act". The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant.
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
Refund of all premiums paid
Refund of all premiums paid, plus interest
The correct answer is "Full face amount minus any past due premiums". If an insured dies during the Grace Period of a life insurance policy before paying the required premium, the beneficiary will receive the face amount of the policy less any past due premiums.
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
Provides child with insurance now, in case the child becomes uninsurable later
Provides funds for final expenses if the child were to die
Provides living benefits for the child's college education
If both parents were to die, it would provide death benefits to the child
The correct answer is "If both parents were to die, it would provide death benefits to the child". An insurance policy on a child would not pay any benefits if one or both of the parents died. All of the other answers are valid reasons for buying life insurance on a child.
Why is an applicant's signature required on a life insurance application?
To attest that all statements on the application are guaranteed to be true
To give Power of Attorney to the producer if needed
To attest that the statements on the application are accurate to the best of the applicant's knowledge
To attest that the statements on the application are warranties
An applicant's signature represents that the statements on the application are true to the best of the applicant's knowledge.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
The correct answer is "Variable Universal Life". Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Any policy whose title includes the term "Universal" indicates that the policy has a flexible or adjustable premium. The variable nature of the product indicates that the cash savings value is invested in the stock market (e.g., mutual funds) which permits for a contract owner to decide where the equity (i.e., cash value) is to be invested.
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?
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.
Any changes made on an insurance application requires the initials of whom?
The correct answer is "Applicant". When an applicant makes a mistake in the information given to an agent in completing the application, the applicant can have the agent correct the information, but the applicant must initial the correction
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer after giving the applicant a binding receipt
Forward the application to the insurer after giving the applicant a conditional receipt
Keep the application until premium is paid
Forward the application to the insurer without the initial premium
The correct answer is "Forward the application to the insurer without the initial premium". In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
The estate taxes in the insured's estate may be reduced
This clause provides the payment of proceeds to the beneficiary's estate
This clause provides the payment of proceeds to the insured's estate
The estate taxes in the beneficiary's estate may be reduced
The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured's estate.
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.
The correct answer is "Universal". Universal life insurance, popular in the 1980s, worked as advertised for years, when interest rates were in the high single digits and above. Interest rates have since taken a dramatic fall, which negatively affected the performance of Universal Life policies issued in the 1980's. This ultimately resulted in the policyowner paying a much higher premium due to the increased cost of the underlying Term life policy and having no cash value to offset the premiums.
How long does an individual have to "rollover" funds from an IRA or qualified plan?
The correct answer is "60 days". In IRA's and qualified plans, the time limit for rollover funds is 60 days, or the funds could be subjected to income taxes and a penalty tax.
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Automatic Premium Loan provision
The correct answer is "Reinstatement provision". In cases where a policyowner wishes to reinstate a lapsed policy, the reinstatement provision allows the policyowner to do so with some limitations.
Which premium schedule results in the lowest cost to the policyowner?
The correct answer is "Annual". If the policyowner chooses to pay the premium more than once per year (example monthly, quarterly, semi-annually) there normally will be an additional charge because the company will have additional charges in billing and collecting the premium payments.
A catastrophic illness would be best covered by which of the following health insurance plans?
The correct answer is "Major Medical." Major Medical health insurance coverage is best suited for meeting catastrophic illness expenses.
Which of these options can an individual use their medical flexible spending account to pay for?
Prescription drugs are an allowable expense when paid for by a medical flexible spending account.
A life insurance application may be rejected on the basis of all of these factors EXCEPT
The correct answer is "Gender". An insurance company may NOT reject a prospective insured's life application on the basis of gender.
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Incorrect. The correct answer is "Life Income". The Life Income settlement option pays a specified amount to the annuitant with no residual value payable to a beneficiary.
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
When the policy proceeds are paid
After the Contestable period
At the time of application
The correct answer is "At the time of application". With life insurance, insurable interest must exist only at the policy inception.
A variable insurance policy:
does not guarantee an assignment provision
does not allow the policyowner to assume the investment risk
guarantees a minimum rate of return
does not guarantee a return on its investment accounts
The correct answer is "does not guarantee a return on investment accounts". In contrast, variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.
A term life insurance policy matures:
upon the insured's death during the term of the policy
upon death of the insured
when the cash value equals the death benefit
upon endowment of the contract
The correct answer is "upon the insured's death during the term of the policy". Term life policies can only mature (pay out the face amount) if death occurs during the term of the policy.
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Graded Premium Whole life
The correct answer is "Term life". Term insurance would provide the greatest amount of protection for a limited period of time.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
If the insured died of accidental causes
If the primary beneficiary is a minor at the time of the insured's death
If the insured died of natural causes
The correct answer is "If the primary beneficiary dies before the insured". A contingent beneficiary will receive the policy proceeds if the primary beneficiary dies before the insured's death.
Which is true concerning a Variable Universal Life policy?
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid
Policyowner has no say where the investment will go but can choose the premium mode
Policyowner controls where the investment will go and selects the amount of the premium payment
The correct answer is "Policyowner controls where the investment will go and selects the amount of the premium payment". With Variable Universal Life, the policyowner controls the investment of cash values and chooses the timing and amount of premium payments.
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
Within the incontestability period
The correct answer is "When the application is made". Insurable interest must exist when the application is made for it to be valid.
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:
The correct answer is "$10,000". The anti-money laundering provisions of the USA Patriot Act require insurers to report any cash payments received that are greater than $10,000.
A Health Reimbursement Arrangement MUST be established:
with other employer-sponsored benefit plans
only during specific open enrollment periods
The correct answer is "by the employer". HRAs are employer-established benefit plans that must be funded by the employer.
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?
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.
A Term Life rider offers the insured
The correct answer is "additional life coverage". A Term Life rider offers the insured additional life coverage.
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
Premiums paid plus interest
Nothing. Claim will be denied
$100,000 because the cause of death was accidental
The correct answer is "$50,000 minus any outstanding policy loans". In this situation, the beneficiary will receive $50,000 less any outstanding loans and interest. At the time of the insured's death, the policy is beyond the contestable period.
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
The correct answer is "$6,000". In this situation, the maximum allowable IRA contribution is $6,000.
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
The correct answer is "cost of insurance". The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the cost of insurance.
Which of these life products is NOT considered interest-sensitive?
Interest Sensitive Whole Life
The correct answer is "Modified Whole Life". All of these have an interest-sensitive investment aspect, EXCEPT Modified Whole Life.
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.
Which of these is NOT considered to be an element of an insurance contract?
The correct answer is "negotiating". The elements of an insurance contract do not include negotiating.
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:
The correct answer is "Insuring clause". The insuring clause in a Life insurance contract establishes the basic promise of the insurance company.
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?
Minimizes the need for deductibles
Discourages adverse selection
Minimizes the waiting period
Discourages overutilization of the insurance coverage
The correct answer is "Discourages overutilization of the insurance coverage". A purpose of the Coinsurance clause in a Major Medical Policy is to discourage overutilization of the insurance coverage.
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Interest-Sensitive Whole Life
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.
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Accelerated death benefit rider
The correct answer is "Return of premium rider". In this situation, a return of premium rider was included on the policy.
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called Limited Pay Life.
What is the initial requirement for an insured to become eligible for benefits under the Waiver of Premium provision?
Insured must be hospitalized
Insured must demonstrate financial need
Insured must be unemployed
Insured must be under a physician's care
The correct answer is "Insured must be under a physician's care". Under Waiver of Premium, which is a rider that will pay your premium while you're disabled, you must have a doctor certify that you meet the definition of disability as contained in the rider.
The __________ is authorized to assign a Life Insurance policy as collateral for a loan.
A life insurance policy may ONLY be assigned as collateral by the policyowner.
What is the purpose of the U.S.A. Patriot Act?
detect and deter misrepresentations
detect and deter alien insurance companies
detect and deter terrorism
The correct answer is "detect and deter terrorism". The purpose of the U.S.A. Patriot Act is to detect and deter terrorism.
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?
No claim will be paid because cause of death was from natural causes
Refund of premiums paid plus interest
The correct answer is "$50,000". In this situation, the beneficiary is entitled to receive $50,000.
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
without evidence of insurability
at the option of the insurer
along with a decrease in premium
only with evidence of insurability
The correct answer is "without evidence of insurability". Renewable term refers to a provision in many term life insurance policies that allow for its renewal without the need for new underwriting. With renewable term, coverage can be extended even if the insured's health has declined, but the new premiums will reflect their older age.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
The correct answer is "Automatic Policy Loan". The Automatic Policy Loan provision will keep a Whole Life policy in force if a required premium payment is not made and there is sufficient cash value.
The free-look provision begins
upon receipt of the policy by the policyowner
upon the completion of the application
upon the date of the sales presentation
upon receipt of the policy by the producer
The correct answer is "upon receipt of the policy by the policyowner". When delivering the policy, the agent needs to explain that the free-look provision begins upon receipt of the policy by the policyowner.
According to the Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid?
The correct answer is, "31 days". According to the Mandatory Uniform Policy Provisions, the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid is 31 days.
The purpose of the _______ Period clause is to avoid an unintentional lapse of a life insurance policy.
The correct answer is "Grace". The purpose of the Grace Period Clause is to avoid an unintentional lapse in a life insurance policy.
What action can a policyowner take if an application for a bank loan requires collateral?
Utilize accelerated benefits provision
Borrow against policy cash value and use as a down payment
Assign policy ownership to the bank
A policyowner may assign ownership of the policy to a bank as collateral.
Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage.
The correct answer is "6". If a pre-existing condition waiting period applies, the policy must not exclude coverage for any pre-existing conditions that occurred more than 6 months prior to the effective date of coverage. These conditions cannot be excluded beyond 6 months after the policy is issued.
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?
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
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
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
Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account
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.
In Major Medical Expense policies, what is the objective of a Stop Loss provision?
Limits an insurer's premium increases
Limits an insured's coverage for pre-existing conditions
Limits an insured's out-of-pocket medical expenses
Limits an insurer's liability
The purpose of a Stop Loss provision in Major Medical Expense policies is to limit the amount of an insured's out-of-pocket medical expenses.
What type of life policy covers two people and pays upon the death of the last insured?
A survivorship life policy insures two individuals and is designed to pay a benefit upon the second death.
Which parts of a health insurance policy are guaranteed to be true?
Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Policy may be amended by insurer at any time
Policy may be renewed at the discretion of the insured
Premiums may increase at any time
Premiums may increase at time of renewal
The correct answer is "Premiums may increase at time of renewal". A Conditionally Renewable Health Insurance policy can increase premiums at time of renewal.
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the:
medical examination is given
producer completes the application
the first premium is paid
The correct answer is "insurer dates the policy". An insurance company can usually contest the information contained in an accident and health application for two years from the date the insurance company dates the policy.
Which of the following statements describes what an Accident and Health policyowner may NOT do?
Adjust the premium payments
The correct answer is "Adjust the premium payments". The owner of an Accident and Health policy may not change the premium amount.
Consumer reports requested by an underwriter during the application process of a health insurance policy can be used to determine
overall health of the applicant
if applicant is a tobacco user
probability of making timely premium payments
The correct answer is "probability of making timely premium payments". The purpose of these reports is to provide a picture of an applicant's general character and reputation, mode of living, finances, and any exposure to abnormal hazards.
Which rider provides coverage for a child under a parent's life insurance policy?
The correct answer is "Child term rider". 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.
J’s Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay:
The correct answer is "$3,600". In this situation, $2,000 + 20% of the remaining bill = $3,600.
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?
Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating
20-Pay Life and Straight Life accumulate cash value at the same rate
20-Pay Life accumulates cash value faster than Straight Life
Straight life accumulates faster than Limited-pay Life
In this situation, the statement "20-Pay Life accumulates cash value faster than Straight Life" would be correct.
What action will an insurer take if an interest payment on a policy loan is not made on time?
disallow any further loans
subtract from any dividends owed
cancel the policy if not paid within the grace period
automatically add the amount of interest due to the loan balance
The correct answer is "automatically add the amount of interest due to the loan balance". Unpaid interest from a policy loan is added to the loan balance if not paid by the due date.
When is the face amount of a Whole Life policy paid?
When the policy is surrendered
When the insured dies or at the policy's maturity date, whichever happens first
Only when the insured dies
At the policy's maturity date only
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.
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability.
When does a Probationary Period provision become effective in a health insurance contract?
When a claim is submitted
At the policy's inception
When a covered loss occurs
30 days after the policy's inception
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.
With Optionally Renewable Health policies, the insurer may:
review the policy whenever they please and determine whether or not to renew it
renew the policy only with the insured's consent
review the policy annually and determine whether or not to renew it
renew the policy only if no claims have been filed the previous year
With an Optionally Renewable policy, the insurance company may review the policy annually and choose whether or not to renew it.
What kind of premium does a Whole Life policy have?
A Whole Life insurance policy has a level premium.
What is the Suicide provision designed to do?
decline an applicant who is contemplating suicide
safeguard the insurer from an applicant who is contemplating suicide
allows the insurer the option to pay a death benefit in the event of suicide
protect the insurer from ever paying a claim that results from suicide
The correct answer is "safeguard the insurer from an applicant who is contemplating suicide". The purpose of a Suicide provision is to protect the insurer against the purchase of a policy in contemplation of suicide.
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning:
The correct answer is "November 1". The insured must wait 60 days after written proof of loss before legal action can be brought against the company.
When is the face amount of a Whole Life policy paid?
Only when the insured dies
When the policy is surrendered
At the policy's maturity date only
When the insured dies or at the policy's maturity date, whichever happens first
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.
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?
Request of the change will be refused
Change will be made immediately
Request will be accepted only if in writing by the insured
Change will be made only if premiums are paid current
The correct answer is "Request of the change will be refused". An irrevocable designation may not be changed without the written consent of the beneficiary.
Which of the following types of Term Life policies most likely contains a Renewability feature?
The correct answer is "10 Year Convertible Term". A 10 Year Convertible Term life policy contains a Renewability provision.
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole life provides the insured with a cash value as well as a level face amount.
Which of the following is an example of a nonforfeiture option?
Guaranteed insurability option
"Reduced Paid-Up option" is an example of a nonforfeiture option.
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
Freedom of Information Act
Medical Information Bureau Act
The correct answer is "Fair Credit Reporting Act". The Fair Credit Reporting Act of 1970, or FCRA, established procedures for the collection and disclosure of information obtained on consumers through investigation and credit reports.
Which mode of payment is NOT used by health insurance policies?
The correct answer is "Single premium". Single premium is not used when paying for health insurance policies.
Which mode of payment is NOT used by health insurance policies?
The correct answer is "Single premium". Single premium is not used when paying for health insurance policies.
A policyowner is allowed to pay premiums more than once a year under which provision?
The correct answer is "Mode of Premium". The Mode of Premium provision permits an insured to pay premiums more than once every year.
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The assignment of ownership
The nonforfeiture options
The correct answer is "The cost". In this situation, the cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.
P is insured under a basic cancer plan. Which of the following conditions would be covered under this plan?
Operation for a malignant tumor
The correct answer is "Operation for a malignant tumor". A basic cancer plan would pay the claim if the insured needed surgery for a malignant tumor.
Which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements?
The correct answer is "HMO". A Health Maintenance Organization (HMO) is a prepaid group health plan, where members pay in advance for the services of participating physicians and hospitals that have agreements.
A life insurance policy would be considered a wagering contract WITHOUT:
The correct answer is "insurable interest". Without insurable interest, a life insurance policy would be considered a wagering contract.
What must the policyowner provide to the insurer for validation that a loss has occurred?
The correct answer is "Proof of Loss". A Proof of Loss statement must be provided to an insurance company to show that a loss actually occurred.
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
The correct answer is "Daughter". With a common disaster provision, a policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.
Which of the following is an important underwriting principle of group life insurance?
Employer must pay for the entire premium
Everyone must be covered in the group
The group must be formed for the purpose of getting affordable insurance
Physical examinations are required
The correct answer is "Everyone must be covered in the group". An important underwriting principle of group life is that all or a large percentage of persons in the group must be covered by the insurance.
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
The dissolved partnership
In this situation, the proceeds from E's life insurance policy will go to F. Insurable interest only needs to exist at the time of application.
The reason for a business having a Business Overhead Expense Disability Plan is to cover:
the owner's loss of income
all business-related expenses and salaries
the cost of providing group disability insurance to the employees
The correct answer is "fixed business expenses". The reason for a business having a Business Overhead Expense Disability Plan is to cover fixed business costs in the event the owner becomes disabled.
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:
The correct answer is "P only". In this situation, benefits will be paid to P because P survived the accident and is the primary beneficiary.
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
The correct answer is "Entire Contract". The Entire Contract provision states that the health insurance policy, together with a copy of the signed application and attached riders and amendments, constitutes the entire contract.
Quarterly premium payments increase the annual cost of insurance because
mortality costs are greater
interest to the insurer is decreased while the administrative costs are increased
insurer risk exposure is greater
interest to the insurer is increased while administrative costs are decreased
The correct answer is "interest to the insurer is decreased while the administrative costs are increased". The higher the frequency of payments, the higher the premiums.
J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?
Workers' Compensation coverage
The correct answer is "Nonoccupational coverage". The coverage provided by a Disability Income policy that does not provide benefits for losses occurring as the result of the insured's employment is called nonoccupational coverage.
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
The correct answer is "$0". The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.
In regards to representations or warranties, which of these statements is TRUE?
Warranties are statements considered to be true to the best of the applicant's belief
Representations are statements guaranteed to be true in every respect
If material to the risk, false representations will void a policy
If material to the risk, false representations will NOT void a policy
Correct. In insurance, false representations will void a policy if they are material to the risk.
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
The correct answer is "Disability Income". Disability Income would reimburse an insured for loss of earnings if the insured became sick.
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?
Cancel the policy and deny the claim
Pay half the claim and keep remaining balance until premium is paid
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.
X is insured with a Disability Income policy that provides coverage until age 65. This policy allows the insurer to change the premium rate for the overall risk class assigned. Which of these renewability features does this policy contain?
The correct answer is "Guaranteed Renewable". Guaranteed Renewable individual disability income policies provides the right to continue a policy (normally through age 65) if the client pays the premium on time. Where the insurance company cannot change the benefits or features of the policy, they may change the premium of the policy.
In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments:
After an insured has become totally disabled as defined in the policy
Following an accidental injury, but not during sickness
Whenever an insured is unable to work
During the time an insured is confined in a hospital
The correct answer is "After an insured has become totally disabled as defined in the policy". The waiver of premium provision keeps the coverage in force without premium payments if the insured has become totally disabled as defined in the policy.
All of the following statements regarding group health insurance is true, EXCEPT:
A master contract is issued for the group
Group health insurance premiums are typically lower than individual health insurance premiums
An individual policy is given to each member
Premiums are usually determined by the claims experience of the group
In group health insurance, each member receives a certificate of insurance, not an individual policy.
The ________ clause identifies which losses resulting from an accident or sickness are insured by the policy.
The correct answer is "Insuring" The clause that identifies which losses resulting from an accident or sickness are insured by the policy is the Insuring clause.
Which of the following BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
The correct answer is "Less restrictive". A policy that uses the "accidental bodily injury" definition of an accident is less restrictive than the one that uses the "accidental means" definition.
Dividends payable to a policyowner are
declared by the insurance company
The correct answer is "declared by the insurance company". Dividends payable to a policyowner are declared by the insurance company.
The insured and insurance company will share the cost of covered losses under which health policy feature?
Payment of Claims provision
The correct answer is "Payment of Claims provision". In a health policy, the Payment of Claims provision states that the insured and insurance company will share the cost of covered losses.
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from an accident on a commercial flight, what will the policy pay B's beneficiary?
The correct answer is "$300,000. In this situation, the policy will pay $300,000.
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?
Claim will be paid and coverage will remain in force
Claim will be denied and coverage will be cancelled
Claim will be denied, the coverage cancelled, and all premiums paid will be refunded
Claim will be denied and coverage will remain in force
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.
A(n) ___________ of benefits of a Health Policy transfers payments to someone other than the policyowner.
The correct answer is "assignment". An assignment of benefits of a Health Policy transfers payments to someone other than the policyowner.
Health insurance benefits NOT covered due to an act of war are:
given a longer probationary period
excluded by the insurer in the contract provisions
The correct answer is "excluded by the insurer in the contract provisions". An exclusion is a provision that entirely eliminates coverage for a specified risk, such as an act of war or aviation.
How does group insurance differ from individual insurance?
Pre-existing conditions not covered
Evidence of insurability is required
The correct answer is "Premiums are lower". Group insurance differs from individual insurance in that it provides coverage at a lower cost.
D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?
Guaranteed Benefit clause
Concurrent Benefit clause
The correct answer is "Residual Benefit clause". A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.
Under a Guaranteed Renewable health insurance policy, the insurer
is permitted to require proof of insurability upon policy renewal
may refuse to continue coverage upon policy renewal
may cancel the policy for nonpayment only
will typically decrease the premium upon policy renewal
Under a Guaranteed Renewable health insurance policy, the insurer may cancel the policy for nonpayment of premium only.
If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best describes this policy is called:
The correct answer is "noncancellable". A noncancellable policy is one which the insurance company cannot cancel and which premiums cannot be increased.
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.
Which type of contract liquidates an estate through recurrent payments?
A contract that provides for the liquidation of all or part of an estate through periodic payments is known as an annuity.
Which of the following are Equity Indexed annuities typically invested in?
The correct answer is "S&P 500". An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index — typically the S&P 500.
Which of the following statements about noncontributory employee group life insurance is FALSE?
All eligible employees must be covered
A minimum number of employees is required to participate
No evidence of insurability required
Must have conversion rights
The correct answer is "A minimum number of employees is required to participate". Noncontributory employee group life insurance plans must cover ALL eligible employees at all times.
Which requirement must be met for an association to be eligible for a group life plan?
Group must have at least 10 members
Group was formed for a purpose other than acquiring insurance
Group was formed for the purpose of acquiring insurance
Group must establish a President
The correct answer is "Group was formed for a purpose other than acquiring insurance". Group life insurance can be formed just as long as they are formed for a reason other than to purchase insurance.
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated:
1945 - The McCarran-Ferguson Act
1999 - Financial Services Modernization Act
1959 - Intervention by (SEC) The Securities and Exchange Commission
1970 - Fair Credit Reporting Act
The correct answer is "1970 - Fair Credit Reporting Act". Fair Credit Reporting Act requires the fair and accurate reporting of information about consumers. Insurers must inform applicants about any investigations being made. If the report is used to deny coverage or charge higher rates, the insurer must provide the applicant the name of the credit reporting agency conducting the investigation.
Which of these describe a participating insurance policy?
Policyowners are entitled to receive dividends
Policyowners pay assessments for company losses
Policyowners are not entitled to vote for members of the board of directors
Stock companies allow their policyowners to share in any company earnings
The correct answer is "Policyowners are entitled to receive dividends". A participating life policy is one in which the policyowner receives dividends deriving from the company's divisible surplus.
Group life insurance policies are generally written as:
The correct answer is "annually renewable term". Group life insurance policies are generally written as annually renewable term.
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
No benefits are payable under the Master contract
Benefits less required premium are payable under the converted policy
Full benefits are payable under the Master contract
Full benefits are payable under the converted policy
An individual is covered under the group policy during the conversion period.
Which type of provider is known for stressing preventative medical care?
Health Maintenance Organizations (HMO's)
Preferred Provider Organizations (PPO's)
Multiple Employer Welfare Arrangements (MEWA)
The correct answer is "Health Maintenance Organizations (HMO's)". The health provider that stresses preventive medical care is known as a Health Maintenance Organization. QUID: D37DF03D-744F-4B13-B762-C4F4DFB5FACF
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate
The employer is issued a certificate of coverage and each employee receives a policy
Both the employer and employee are policyowners
The correct answer is "The employer receives the policy and each employee is issued a certificate". With a group accident and health plan, a master policy is issued to the employer and each employee receives a certificate of insurance. QUID: E7E593DB-E37D-46D5-821C-79D89F72E37C
Which type of plan normally includes hospice benefits?
Short-term disability plans
Hospice benefits are typically included in managed care plans.
Which of the following is NOT a characteristic of Preferred Provider Organizations (PPOs)?
PPOs are available for both individual and group plans.
PPO's are only available through social insurance programs.
PPOs provide equal benefits and costs for services obtained in-network and out of network.
PPO's operate on a fee-for-service basis.
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.
Which of the following BEST describes how pre-admission certification is used?
Used to minimize hospital lawsuits
Used to help process claims
Used to prevent nonessential medical costs
Used to assist in underwriting
Pre-admission certification is used to prevent unnecessary medical costs.
Which of the following involves analyzing a case before admission to determine what type of treatment is necessary?
The correct answer is "Prospective Review." Prospective Review involves analyzing a case before admission to determine what type of treatment is necessary.
Which of the following are NOT managed care organizations?
Point-of-Service plan (POS)
Medical Information Bureau (MIB)
Preferred Provider Organization (PPO)
Health Maintenance Organization (HMO)
The correct answer is "Medical Information Bureau (MIB)". All of the following entities are managed care organizations EXCEPT for the MIB (Medical Information Bureau).
The agreement in which hospitals and physician groups in a specific area contract with an insurance company to provide medical care at predetermined costs is:
Preferred Provider Organization (PPO)
Professional Service Organization (PSO)
Health Maintenance Organization (HMO)
Designated Provider Organization (DPO)
The correct answer is "Preferred Provider Organization (PPO)". PPO's is a collection of health care providers who offer their services to certain groups at prearranged prices.
S is employed by a large corporation that provides group health coverage for its employees and their dependents. If S dies, the company must allow his surviving spouse and dependents to continue their group health coverage for a maximum of how many months under COBRA regulations?
Under COBRA, if an employee dies, the dependents may continue their group health coverage for up to 36 months.
MEWA (Multiple Employer Welfare Arrangement) permits?
Large affiliated employers to insure their members
Large non-affiliated employers to insure their members
Small non-affiliated employers to insure their members
Small affiliated employers to insure their members
Multiple Employer Welfare Arrangement permits small non-affiliated employers to insure their members.
How does group health insurance differ from individual health insurance?
Individual evidence of insurability is required
Individual evidence of insurability is not required
Pre-existing conditions not covered
Group insurance differs from individual insurance in that it provides coverage at a lower cost.
How does group insurance differ from individual insurance?
Evidence of insurability is required
Pre-existing conditions not covered
The correct answer is "Premiums are lower". Group insurance differs from individual insurance in that it provides coverage at a lower cost.
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?
She will be paying exactly the same premium for the individual plan as she did the group plan
She does NOT need to provide evidence of insurability
She DOES need to provide evidence of insurability
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.