TODO

Which of the following outlines the authority given to the producer on behalf of the insurer?

a. Rebating arrangement

b. Commingling agreement

c. Controlled business clause

d. Producer contract

Which of the following accurately describes a participating insurance policy?


a. Policyowners may be entitled to receive dividends

b. Policyowners pay assessments for company losses

c. Stock companies allow their policyowners to share in any company earnings

d. Policyowners are not entitled to vote for members of the board of directors

A stock insurance company is owned by its

a. officers
b. board of directors
c. policyowners
d. shareholders

Dividends from a mutual insurance company are paid to whom?

a. Policyholders
b. Beneficiaries 
c. Preferred stockholders
d. Stockholders

Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?

a. Arbitrage reinsurance

b. Facultative reinsurance

c. Excess reinsurance

d. Treaty reinsurance

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. The administrator is called a(n)

a. reciprocal commissioner

b. attorney general

c. attorney-in-fact

d. reciprocal director

Which of the following financial products creates an instant estate, no matter when the date of death?

a. mutual funds

b. life insurance

c. certificate of deposit

d. deferred annuity

An agent's authority to bind an insurer to an insurance contract may be granted in the

a. agent's contract and the insurance company's appointment

b. agent's license and insurance company's certificate of authority

c. buyer's guide and policy summary

d. state guaranty association

Who regulates an insurer's claim settlement practices?

a. National Association of Claim Adjusters

b. State attorney general

c. National Association of Insurance Commissioners (NAIC)

d. State insurance departments

Which of the following type of insurers limits the exposures it writes to those of its owners?

a. restricted insurer

b. limited insurer

c. confined insurer

d. captive insurer

Which of the following is a syndicate established by a group of insurers to share underwriting duties?

a. Reinsurer

b. Lloyd's organization

c. NAIC

d. Multi-line insurers

Dividends from a stock insurance company are normally sent to

a. beneficiaries

b. shareholders

c. policyowners

d. insureds

Which group is the Do Not Call Registry designed to protect against?

a. Telemarkers

b. Charities

c. Political Organizations

d. Relatives

According to the law of large numbers, how would losses be affected if the number of similar insured units increases?

a. The higher the exposure, the higher the cost of each loss

b. No effect on predicting losses

c. Predictability of losses will be improved

d. Ability to predict losses decreases

A business becoming incorporated is an example of risk

a. reduction

b. severence

c. retention

d. transfer

How can an insurance company minimize exposure to loss?

a. risk concealing

b. reinsuring risks

c. reissuance

d. risk assumption

An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this?

a. coinsurance contract

b. mutuality contract

c. reinsurance contract

d. reciprocity contract

Which term describes the elimination of a hazard?

a. risk avoidance

b. risk retention

c. risk transference

d. risk pooling

Which of these statements regarding insurance is false?

a. One way insurers deal with catastrophic loss is through reinsurance

b. As the number of units increases, the number of losses decreases

c. Speculative risk cannot be insured

d. Pure risk can be insured

For insurance purposes, similar objects which are exposed to the same group of perils are referred to as

a. homogenous perils

b. similar exposure units

c. homogeneous exposure units

d. common hazards

Risk is the process of analyzing exposures that create risk and designing programs to handle them.

a. acceptance

b. management

c. administration

d. transfer

Which of the following can be defined as a cause of a loss?

a. adversity

b. risk

c. hazard

d. peril

Which of these statements is NOT a characteristic of the law of large numbers?

a. Individual losses can be predicted based on past experience

b. Group losses can be predicted based on past experience

c. Losses can be predicted in large groups with a higher degree of accuracy

d. Rates can be calculated to compensate for losses

Which of the following can be defined as "the potential for loss"?

a. hazard

b. risk

c. transference

d. peril

The law of large numbers enables an insurer to

a. predict losses

b. avoid adverse selection

c. classify rates

d. assure company profits

What type of risk involves the potential for loss with possibility for gain?

a. speculative risk

b. pure risk

c. adverse risk

d. morale risk

A hold-harmless clause is an example of risk

a. avoidance

b. retention

c. transfer

d. sharing

Which of the following describes the act of insuring a risk against possible loss?

a. Risk avoidance

b. Risk transfer

c. Hazard reduction

d. Loss management

ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk

a. transference

b. retention

c. reduction

d. avoidance

An insurable risk requires

a. that the chance for both a loss or gain exists

b. the loss must be catastrophic

c. that the chance of loss be calculable

d. that the loss must be incalculable

What type of risk involves the potential for loss AND the possibility for gain?

a. homogeneous

b. adverse

c. pure

d. speculative

Which of the following is NOT an example of risk retention?

a. Becoming aware of a risk and taking no action

b. Self-insuring a given risk

c. Deciding a business deal is risky but going through with it anyways

d. Not doing a business deal after deciding it would be too risky

Purchasing insurance is an example of risk

a. transference

b. avoidance

c. retention

d. sharing

Which one of these is NOT considered to be an element of an insurable risk?

a. Speculative risk

b. Pure risk

c. Loss cannot be catastrophic

d. Loss must be due to chance

Statements made by an insured on an accident and health insurance application are considered to be

a. representations

b. warranties

c. conditional

d. aleatory

Giving up a known right on a voluntary basis is called a(n)

a. disclaimer

b. estoppel

c. waiver

d. surrender

Which situation would not require the insured's consent when a life insurance policy is issued?

a. A policy is purchased by a husband for his wife

b. A policy is purchased by a parent for a minor child

c. A policy is purchased by a business partner for another partner

d. A policy is purchased by an employer for an employee

What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?

a. All actions by the producer

b. Not responsible for any acts by the producer

c. Responsible for acts that involve misrepresentation only

d. Responsible for acts by the producer that are authority only

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called

a. implied authority

b. express authority

c. apparent authority

d. acknowledged authority

In what way are insurance policies said to be aleatory?

a. Only one party makes any kind of enforceable promise

b. Involves the potential for the unequal exchange of value

c. Contract is prepared by only one party

d. Vagueness in a contract's wording is resolved in favor of the policyowner

An insurance contract may be voided if a misrepresentation found on the application is determined to be

a. conditional

b. aleatory

c. material

d. intentional

Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?

a. Remitting premiums to an insurer

b. Conducting a sales meeting with other agents

c. Making a recommendation to a potential insured to replace existing coverage

d. Setting a sales appointment with a potential client

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

a. required to be in currency

b. must be equal

c. can be unequal

d. must be certified by the state where transaction takes place

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of

a. consideration

b. legal purpose

c. representation

d. acceptance

The insurer's obligation to pay a claim depends on whether the insured or beneficiary has compiled with all policy conditions. This makes the policy a(n)

a. agency agreement

b. aleatory agreement

c. contract of good faith

d. conditional contract

What happens when an initial offer is answered with a counteroffer?

a. an arbitrator decides on a compromise

b. the counteroffer is legally enforceable

c. initial offer is void

d. initial offer os automatically accepted

Under the Law of Agency, the principal is considered to be

a. the producer

b. the insurer

c. the plain administrator

d. the insured

Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This is attached agreement is called a(n)

a. extension

b. endorsement

c. sanction

d. restriction

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called

a. adhesion

b. reasonable sensibility

c. reasonable expectations

d. insurable interest

Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of

a. expresses authority

b. implied authority

c. apparent authority

d. fiduciary duty

An arrangement where an individual is authorized to act on behalf of another person or company is established through

a. estoppel

b. the law of agency

c. the law of adhesion

d. an aleatory contract

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called

a. adhesion

b. reasonable sensibility

c. reasonable expectations

d. insurable interest

Which of these do NOT indicate the presence of insurable interest in a life insurance contract?

a. lifelong friendship

b. marriage

c. blood-related

d. co-owning a business

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

a. subrogation

b. reasonable expectations

c. insurable interest

d. adhesion

Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)

a. substandard representation

b. unacceptable risk

c. material misrepresentation

d. adverse selection

An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?

a. meeting of the minds

b. offer

c. acceptance

d. equity

The following are all elements of a valid contract EXCEPT

a. consideration

b. offer and acceptance

c. competent parties

d. written evidence

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?

a. aleatory contract

b. estoppel contract

c. contract of utmost faith

d. unilateral contract

During the application process, a statement made by an applicant that becomes part of the contract is considered to be a(n)

a. warranty

b. representation

c. waiver

d. exclusion

Which element of a contract constitutes a definite and unqualified proposal by one part to another?

a. adhesion

b. consideration

c. acceptance

d. offer

A contract is considered void in all of the following situations EXCEPT

a. When one party is a minor

b. When consideration is unequal

c. When consideration is incomplete

d. When agreement cannot be reached between parties

An insurance company can be liable for a producer's unauthorized acts

a. only when a felony is involved

b. when the agency contract is unclear concerning the authority given

c. at anytime

d. only if the agency contract is unilateral

XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?

a. implied authority

b. apparent authority

c. express authority

d. assumed authority

An insurance company's failure to enforce a contract's provision is called a(n)

a. waiver

b. warranty

c. assignment

d. concealment

Insurable interest involves what assumption?

a. Insurable interest must exist during the entire life of the insured

b. One person gains from the death of another person

c. One person benefits from another person's continued life

d. Insurable interest must only exist at the time of the insured's death

Voluntarily terminating an insurance policy is also known as

a. discontinuation

b. elimination

c. estoppel

d. cancellation

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)

a. warranty contract

b. aleatory contract

c. contract of adhesion

d. unilateral contract

Which of the following relationships demonstrates insurable interest in the absence of economic interest?

a. lifelong friends

b. employees

c. marriage partners

d. business associates

An appointed producer's implied authority is derived from

a. the NAIC

b. express authority

c. the insurer's Certificate of Authority

d. evident authority

The powers directly given to a producer in an agency contract are called

a. express

b. apparent

c. implied

d. assumed

All of these statements correctly describe an aleatory contract EXCEPT

A. A legal wager is considered an aleatory contract

b. Potential unequal exchange of value for both parties

c. Only one party makes any kind of legally enforceable offer

d. Element of choice is involved

A producer working for an insurance company my be personally liable for

a. acts performed which are expressed in the agency contract

b. acts performed which are prohibited in the agency contract

c. all actions taken on behalf of the insurer

d. nothing

Which of the following would NOT have a restricted ability to enter into a contract?

a. Mentally ill person

b. Minor

c. Person under the influence of alcohol

d. Small employer

What qualifies as acceptance of an insurance contract offer?

a. a decline policy

b. an issued policy

c. the application and initial premium

d. the initial premium only

When must insurable interest exist for a life insurance contract to be valid?

a. Inception of the contract

b. Throughout the entire length of the contract

c. When the insured dies

d. During the contestable period

An agent whose actions exceed the authority granted by contract is

a. acting under apparent authority

b. acting under implied authority

c. not backed by the insurer

d. backed by the insurer

Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?

A. Remain the same

B. Decrease but never increase

C. Increase but never decrease

D. Fluctuate with changes in the cash account

Which is an accurate description of the premium in a grade premium life insurance policy?

a. Level premium for a stated number of years the increases annually for the remainder of the contract

b. Level premium for a stated number of years then decreases annually for the remainder of the contract

c. Annual decreases in premium for a stated number of years then remains level

d. Annual increases in premium for a stated number of years then remain level

A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of

a. 5%

b. 10%

c. 17.5%

d. 20%

Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?

a. Convert the cash value to a paid-up term policy

b. Gives policyowner ability to borrow against funds within two years

c. Increases the policy's face amount

d. Provide supplemental income in 35 years

What would be considered an advantage of purchasing term life insurance?

a. cash value can be borrowed against

b. the coverage is permanent

c. nonforfeiture values are available

d. the initial premium is lower compared to an equivalent amount of whole life coverage

A policy owner has just borrowed from a life insurance policy's cash value. Which of these statements is true?

a. in the event of death, the loan amount is deducted from the policy proceeds

b. the policy lapses if not repaid within 5 years

c. a policyowner must pre-qualify for the loan to determine creditworthiness

d. interest on the loan amount is prohibited

Which of these policies is considered a whole life policy?

a. credit life

b. single premium life

c. renewable life

d. convertible life

Which statement concerning an adjustable life insurance policy is FALSE?

a. cash surrender is possible

b. evidence of insurability is required when there is a change in premium

c. combines term and permanent insurance into a single plan

d. an extra premium paid is allowable

Laura added a children's rider to her life insurance policy. What type of coverage was added?

a. level term

b. increasing term

c. decreasing term

d. juvenile term

How does a continuous premium whole life policy differ from a limited payment whole life policy?

a. the time period in which premiums will be paid

b. the availability of cash value loans

c. the availability of nonforfeiture options

d. the settlement options

An advantage of owning a flexible premium life insurance policy would be

a. premiums are fixed for the first 5 years

b. the insurer can make policy charges without difficulty

c. the policy owner can make policy changes without difficulty

d. evidence of insurability is required with any change in premium

When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for

a. ten year term insurance for a person aged 55

b. ten year term insurance for a person aged 45

c. yearly renewable term insurance for a person aged 55

d. yearly renewable term insurance for a person aged 45

All of these are considered features of whole life insurance EXCEPT

a. cash value accumulation

b. permanent coverage

c. initial premium is lower than for an equivalent amount of term insurance

d. policy loans are allowed

Which of the following statement about universal life insurance is NOT true?

a. Death benefit can be increased

b. Premiums are flexible

c. Universal life insurance normally has a minimum guaranteed cash value for duration of the policy

d. The cash value interest rate must equal or exceed a guaranteed minimum value

Which of the following combinations best describe a universal life insurance policy?

a. A mutual fund and an endowment policy

b. A term insurance policy and a whole life policy

c. A modified endowment policy and an annual term insurance policy

d. A flexible premium deposit fund and a monthly renewable term insurance policy

What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?

a. $0

b. $50,000

c. Under $50,000 initially, but decreases annually over time

d. Under $50,000 initially, but increases over time

How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?

a. Survivorship life policy is lower

b. Survivorship life policy is higher

c. Depends on the investment performance of the underlying accounts

d. Both have the same actuarial costs

How long does protection normally extend to under a limited pay whole life policy?

a. It depends on the performance of the underlying investment account

b. When premiums are no longer required as stated in the contract

c. Until age 65

d. Until age 100

Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?

a. The gain is treated as taxable income and a penalty tax is imposed on the gain

b. The gain is treated as taxable income but no additional penalties are applied

c. The gain is not taxable but a penalty is assessed

d. Surrendering an MEC is considered a tax and penalty-free transaction

A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policy owner on receipt of the cash value?



a. $16,000 was received as ordinary income and $4,000 as tax-free

b. $20,000 was received as a capital gain

c. $20,000 was received as ordinary income

d. $16,000 was received tax-free and $4,000 as ordinary income

Which statement regarding universal life insurance is correct?

a. Cash value accumulations have a guaranteed minimum interest rate

b. Policyowner can change the face amount but not the premium

c. Policyowner can change the premium but not the face amount

d. Partial withdrawals cannot be made from the policy's cash value

Which statement regarding whole life insurance is accurate?

a. Cash value loans are not permitted

b. Insurance coverage can continue for life

c. Policy normally matures at retirement

d. No cash value accumulations

What typically changes at the re-entry option date found in some term life policies?

a. beneficiary

b. amount of coverage

c. premium

d. contestable period

How long does one premium payment cover in a single premium whole life policy?

a. Until the policy's first renewal date

b. One month

c. One year

d. Full life of the policy

A material change in a modified endowment contract (MEC) results in

a. the contract becoming void

b. a new contestable period

c. the seven pay test, adjusted for cash value, applies again

d. a tax penalty

An insurance policy that can also be classified as a securities product is called

a. variable life

b. modified life

c. universal life

d. a Modified Endowment Contract

When does the insured stop making payments under a thirty-payment whole life policy?

a. At the time of death or 30 years after the policy's inception, whichever comes first

b. It depends on the performance of the underlying investment account

c. When the cash value surpasses the face amount

d. At age 100

Which of the following would NOT be a reason for purchasing life insurance on a child's life?

a. Provide benefits for the child if the parents die

b. Pay for the child's funeral expenses

c. Provide a start on the child's personal insurance

d. Help provide funds for the child's education

Which of these must be disclosed in a universal life policy?

a. Maximum coverage that can be purchased

b. The policy's surrender charges

c. The commissions earned from the sale of the policy

d. The producer's license expiration date

What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?

a. Joint and survivorship

b. Survivorship life

c. Universal life

d. Joint life

Which statement regarding a single premium life insurance policy is NOT correct?

a. No further premiums are necessary

b. Policy loans are permitted

c. Cash value is immediately created

d. Additional premiums may be required under certain conditions

The insurance coverage in a variable life insurance policy may vary based on the value of

a. the AM Best rating the company has received

b. its underlying investments

c. the consumer price index

d. the total premiums paid

What type of premiums are associated with individual mortgage protection life insurance policies?

a. level premiums

b. flexible premiums

c. modified premiums

d. decreasing premiums

Taxable income may be result from all of these modified endowment contract (MEC) transactions EXCEPT for

a. A cash value loan is taken out

b. Automatic premium loan provision is utilized

c. The policy is surrendered for less than what was paid into it

d. Dividend is issued

Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?

a. the person insured

b. the period of coverage

c. the payment period

d. the plan of coverage

What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?

a. greater than the policy's face amount

b. less than the policy's face amount

c. depends on the performance of the separate underlying investment account

d. equal to the policy's face amount

Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?

a. 30-year endowment

b. 30-year increasing term

c. 30-year decreasing term

d. 30-year whole life

The death proceeds of a credit life insurance policy are typically paid to the

a. borrower

b. lender

c. annuitant

d. borrower's dependents

How are level term policies able to provide level premiums?

a. policy dividends

b. yearly policy fees

c. yearly reductions in face amount

d. premium are average over the term of the policy

Which of these statements accurately portrays an adjustable life insurance policy?

a. policy can alternate between form of term and whole life insurance

b. cash value loans are not permitted

c. evidence of insurability required for conversion

d. settlement options are limited

Which of these life insurance policies does NOT contain a cash value provision?

a. modified whole life

b. universal life

c. decreasing term life

d. adjustable life

At what point are death proceeds paid in a joint life insurance policy?

a. When the first insured dies

b. When the second insured dies

c. Only after insurable interest has been confirmed to still exist

d. If both insureds die from the same accident

Which of the following is generally a form of group credit life insurance?

a. decreasing term insurance

b. increasing term insurance

c. level term insurance

d. whole life insurance

Which of these is NOT a reason to buy a term life policy?

a. to pay a mortgage balance if an insured dies

b. to offer temporary protection

c. to offer low-cost insurance coverage

d. to accumulate savings

Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?

a. variable universal life

b. modified endowment contract

c. adjustable life

d. graded premium whole life

These are all accurate statements regarding universal life insurance EXCEPT

a. Mortality charge is deducted from the policy's cash value each month

b. Policy loans are not permitted

c. Flexible premiums as long as the cost of insurance protection is covered

d. Policy states what percentage of the premium is contributed to the cash value and which pays for the cost of insurance

Who normally pays the premiums for group credit life insurance?

a. Creditor and borrower share the cost equally

b. Borrower

c. Creditor

d. Beneficiary

Which statement concerning adjustable life insurance is accurate?

a. cash value loans are not permitted

b. the face amount and premiums can be changed simultaneously by the policyowner

c. settlement options are limited

d. only the face amount can be changed by the policyowner

Straight whole life insurance can be accurately described in all of these statements EXCEPT

a. Policy protection normally expires at age 65

b. Nonforfeiture values are available to the policyowner

c. Provides level protection with level premiums

d. Cash value loans are permitted

Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)?

a. policy loans

b. claim on a death benefit

c. extended term settlement option

d. policyowner reaching the age of 70 1/2

Assets that back the non-guaranteed values of variable life insurance products are held in which account?

a. trust account set up by the insured

b. separate account set up by the insurer

c. general account of the insurer

d. money market account

Which statement concerning a decreasing term life policy is accurate?

a. Cash value decreases over the policy period

b. Premium decreases over the policy period

c. Face amount decreases over the policy period

d. Face amount stays the same over the policy period

A survivorship life insurance policy usually covers how many lives?

a. 1

b. 2

c. 3

d. 4

Which statement regarding an adjustable life insurance policy is NOT true?

a. Combines term and permanent insurance into a single plan

b. Allows flexibility as insurance needs change

c. Plan of coverage may be changed by the policyowner

d. Policy loans are not permitted

Which of these is NOT considered a type of limited payment whole life insurance?

a. Life paid-up at 65

b. 20 payment life

c. 15 payment life

d. Endowment at age 70

An individual who purchases a modified life insurance policy expects

a. a higher rate of return

b. coverage for two people

c. an improvement in future income

d. a flexible face amount

Which of these may NOT be deducted from premium payments or the cash value of a variable insurance policy?

a. mortality costs

b. administrative charges

c. investment management fees

d. federal premium taxes

Which of these is NOT an advantage of term life insurance?

a. The greatest amount of coverage can be provided for the initial premium paid

b. It can be provided as a rider to another policy

c. A cash benefit will be produced if the insured is alive at the end of the policy period

d. Temporary insurance needs to be met

When would evidence of insurability be required for a person already covered with a variable universal life policy?

a. When the premium is increased

b. When the policy has renewed

c. When the death benefit is increased

d. When policy is being converted to permanent coverage

What kind of life policy typically offers mortgage protection?

a. Whole life

b. Decreasing term

c. Increasing term

d. Level term

What is a juvenile life insurance policy?

a. coverage normally sold as a term rider

b. a life policy that covers the parents of a minor

c. a life policy that covers the life of a minor

d. a life policy that covers the lives of both parents and their children

All of these statements concerning group credit life insurance are false EXCEPT

a. cash value loans are allowable

b. dividends can reduce the premium payments

c. the face amount and premiums are flexible

d. the face amount is based on the outstanding loan balance

Which of the following is a TRUE statement regarding universal life insurance?

a. Death benefits are normally taxable

b. Policy loans are not permitted

c. Premiums or face amount cannot be changed

d. Policy indicates how much of each premium is used toward company expenses

Which statement regarding the cash value of a whole life insurance policy is correct?

a. Can be borrowed against, starting in the policy's fifth year

b. Cash value accumulation is based on the performance of a separate investment account

c. Available to the policyowner when policy has been surrendered

d. Starts growing with the initial premium

A life policy that has premiums that are lower than normal during the early years is called

a. decreasing term

b. modified life

c. variable life

d. limited-pay life

John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?

a. 0%

b. 25%

c. 50%

d. 100%

When a lapsed policy's premium has been paid current, it has the potential of being

a. restored

b. renewed

c. reinstated

d. reinstituted

A life insurance guaranteed insurability rider gives the insured the right, without proving insurability, to

a. purchase life insurance policies on his children as they are born

b. purchase life insurance on a spouse after becoming married

c. purchases additional life insurance at anytime

d. periodically purchase additional insurance

Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends

a. equal the net single premium for the same face amount at the insured's attained age

b. can purchase extended term of coverage for a period of two years or more

c. equal the nonforfeiture value of the policy

d. can purchase a paid-addition

Which of these statements is NOT true regarding a cash value loan against a life insurance policy?

a. interest normally accuses on unpaid balances

b. loan cannot exceed the policy's cash value

c. policy contract terms dictate the interest rate

d. interest payments made by policyowner are deductible

Which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has passed?

a. entire contract provision

b. grace period provision

c. incontestable clause

d. insuring cluase

After the extended term life nonforfeiture option is chosen, the available insurance will be

a. increasing term for a stated period of time

b. level term for a stated period of time

c. decreasing term for a stated period of time

d. renewable for a stated period of time

The absolute assignment of a life insurance policy results in

a. all incidents of ownership transferred to the assignee

b. the assignee receives partial incidents of ownership

c. the transfer of ownership is revocable at the discretion of the original policyowner

d. evidence of insurability must be proven before ownership is transferred

How may an insurance company classify an accidental death benefit on a life policy?

a. as an optional policy rider

b. as a provision of the policy

c. as a nonforfeiture option

d. as a mandatory policy rider

A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?

a. Nothing

b. More than the face amount

c. Less than the face amount

d. Full face amount

How is the insured protected if a payor benefit rider is attached to the life insurance policy?

a. premiums are waived if the payor becomes financially insolvent

b. policy loan will automatically cover the premiums if payor becomes disabled or dies

c. premium payments are waived in the event the premium payor dies or becomes disabled

d. policy loan will automatically cover the premiums if payor becomes financially insolvent

What is considered the collateral on a life insurance policy loan?

a. no collateral is needed

b. the policy's cash value

c. the policy's face value

d. the equity in a policyowner's home

Which of these is NOT a common life insurance nonforfeiture option?

a. reduced paid-up insurance

b. extended term option

c. cash surrender option

d. life income annuity

Which of the following is NOT a dividend option for a life insurance policy?

a. elect to take the dividends in cash

b. allow the dividends to accumulate with interest

c. use the dividends to pay all or part of the next premium due

d. receiving the entire policy cash value

Which of the following is NOT a condition that must be met for an accidental death benefit to be paid?

a. injury must have been suffered prior to a stated age

b. accidental bodily injury must have been the cause of death

c. cause of death must be from a job-related injury

d. death must occur within a stated number of days after the accident

What is the name of the rider that provides an additional purchase option in a life insurance policy?

a. payor rider

b. cost of living rider

c. waiver of premium rider

d. guaranteed insurability rider

Which statement regarding the life insurance premium for a children's rider is true?

a. decreasing premium as each child becomes an adult

b. premium remains the same no matter how many children

c. increasing premium as additional children are born

d. no premium is normally charged for a children's rider

Which benefit supplement added to a life insurance policy insures an entire family?

a. kin term rider

b. household term rider

c. family term rider

d. group term rider

An insured has a $25,000 whole life insurance policy with $6,000 cash value available. Under the extended term nonforfeiture option, what is the amount of insurance available to the insured?

a. $6,000

b. $19,000

c. $25,000

d. $31,000

Which life insurance policy provision allows a policyowner to cancel the policy and receive a full refund within a limited time period after policy delivery?

a. Grace period

b. Incontestable period

c. Elimination period

d. Free-look period

A life insurance policy provision that has the ability to reduce the death benefit is called the

a. accelerated (living) benefit

b. insuring clause

c. payor benefit

d. spendthrift clause

Life insurance premiums are computed on what three factors?

a. Mortality, interest, dividends

b. Morbidity, interest, expenses

c. Mortality, interest, expenses

d. Morbidity, interest, dividends

A policyowner with a terminal illness who sells his life insurance policy to a third party is called a

a. viable

b. viatical

c. viator

d. viatee

When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this?

a. Collateral beneficiary

b. Revocable beneficiary

c. Irrevocable beneficiary

d. Per stripes beneficiary

Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes?

a. as a Section 1035 exchange

b. as a transfer

c. as a rollover

d. as a Section 1040 exchange

A life insurance company just paid a $100,000 death benefit to a beneficiary. When the insured died, the cash value was $15,000 and the total premiums-paid equaled $10,000. How much of the proceeds will be added to the beneficiary's gross income for federal income tax purposes?

a. nothing

b. $5,000

c. $100,000

d. $105,000

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

a. net gain index

b. net payment cost index

c. cost surrender index

d. guaranteed renewable index

Which of these factors does NOT affect life insurance premium rates?

a. expense factor

b. interest factor

c. mortality factor

d. producer certification

Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing, or assigning" any portion of the proceeds prior to actual receipt from the company?

a. insuring clause

b. spendthrift clause

c. nonforfeiture provision

d. collateral provision

Which statement best describes a single premium whole life policy?

a. premiums that can only be paid from a single source

b. a single premium that is due annually

c. paid-up policy that offers lifetime protection

d. paid-up policy that offers limited protection

How much is normally paid to a policyowner in a life (viatical) settlement?

a. total premiums paid plus interest

b. full face amount

c. more than the face amount

d. less than the death benefit

Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?

a. the periodic payment amount is determined by the beneficiary's age

b. the shorter the period of time, the larger each installment

c. the longer the period of time, the smaller each installment

d. the installment payments are composed of both principal and interest

Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate

a. for federal income tax reasons

b. for federal and state income tax purposes

c. only if the insured's estate is listed as beneficiary

d. only if the policy is owned by the beneficiary

Which settlement option makes minimum guaranteed dollar payments over a stated number of years?

a. interest-only

b. fixed-period

c. fixed-amount

d. life income

A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?

a. transfers to the insured's estate

b. transfers to the beneficiary's estate

c. donated to charity

d. kept by the insurance company

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?

a. fixed amount installment option

b. fixed period installment option

c. life income option

d. interest only option

Which would be described as a beneficiary

a. children of the insured

b. estate of the insured

c. tertiary beneficiary

d. a specific named beneficiary

What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?

a. Minors are not capable of having insurable interest

b. Minors are normally not capable of handling money in a reasonable manner

c. Minors are usually not capable of paying for the insurance premium

d. Minors cannot legally enter into a contract

Which of these occurrences could improve an insurer's ability to reduce premiums?

a. expense factor increase

b. mortality rates increase

c. rate of earnings on investments increase

d. requiring monthly premium payments instead of annual

When premiums are determined, one factor would be the expenses of the

a. beneficiary

b. insurer

c. policyowner

d. producer

During the early years of a whole life insurance policy, the cash value will normally be

a. equal to the total premiums paid

b. more than the total premiums paid

c. less than the total premiums paid

d. unavailable as a policy loan

Which statement is INCORRECT about the interest-only settlement option in a life insurance policy?

a. interest rate is guaranteed with a minimum rate

b. interest on proceeds must be paid by the beneficiary

c. interest is payable to a sated beneficiary

d. interest must be paid at least annually

Which tax cost is normally associated with death?

a. federal excise tax

b. sales tax

c. federal estate tax

d. payroll

Switching Life insurance policies without tax consequence is permitted under

a. MEC rules

b. Section 1035 rules

c. the Exclusion Ratio

d. Replacement rules

Which tax is normally associated with an individual's death?

a. Excise tax

b. Consumption tax

c. Federal estate tax

d. Ad valorem tax

A terminally ill policyowner decides to sell his life insurance policy at a discount to help support his family. This sale is called a(n)

a. accelerated death benefit

b. assignment

c. viatical settlement

d. nonforfeiture option

A life policy's spendthrift clause would have no effect if the beneficiary is paid the proceeds as a

a. fixed-period installment

b. life income option

c. fixed-amount installment

d. lump-sum payment

When there is a named beneficiary on a life insurance policy, the death benefits

a. are directed to a trustee if the insured has any outstanding debts

b. are paid directly to the insured's creditors, with any remaining balance forwarded to the beneficiary

c. are paid directly to the beneficiary, minus any debt claims by the insured's creditors

d. are paid directly to the beneficiary without interference from the insured's creditors

Al surrenders his life insurance policy for its cash value. The total of the premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the

a. premium basis

b. net proceeds

c. cash basis

d. cost basis

Which statement regarding a fixed period settlement option is correct?

a. The insurance company dictates each installment payment amount

b. A fixed period settlement option can pay no longer than 20 years

c. The installment payment amount is determined by the total number of installments

d. The insurance company dictates the total number of installment payments

A policyowner fell behind on the premium payments of a whole life policy and is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan?

a. full face amount

b. face amount minus the past-due premium

c. face amount minus the loan balance

d. face amount minus the loan balance and past-due premium

What kind of arrangement gives the policyowner the right to change the beneficiary?

a. Contestable designation

b. Incontestable designation

c. Irrevocable designation

d. Revocable designation

Which life insurance settlement option pays lifetime benefits to two or more people?

a. life income with period certain

b. joint

c. joint and survivor

d. life income

Death benefits from a life insurance policy are normally considered to be

a. exempt from federal income tax

b. subject to the cost recovery rule

c. subject to attachments from the insured's creditors

d. subject to the value added

Who is the beneficiary in a life insurance policy?

a. the person designated to have control over the nonforfeiture options

b. the stated person or entity who is designated to receive the death proceeds

c. the person responsible for payment of the policy premiums

d. the stated person whose life is insured in the insurance contract

How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision

a. 1 month

b. 2 months

c. 4 months

d. 6 months

What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?

a. trusts cannot be formed for life insurance purposes

b. trust administration fees would reduce policy proceeds

c. trusts cannot be used if a minor is the beneficiary

d. trustee must be a bank or brokerage

Which statement regarding the joint and survivor life insurance settlement option is NOT true?

a. age of the beneficiaries plays a factor when determining the payment amounts

b. income continues until the last beneficiary dies

c. two or more beneficiaries can be paid

d. the amount of each installment is larger than the single life income option

The highest mortality rate belongs to which group?

a. age 60 females

b. age 70 males

c. age 60 males

d. age 70 females

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. request will be accepted only if in writing by the insured

b. change will be made only if premiums are paid current

c. change will be made immediately

d. request of the change will be refused

What effect does interest income have upon insurance premiums?

a. increases premium

b. decreases premium

c. levels the premium

d. adjusts premium on a quarterly basis

The beneficiary of a life insurance policy is normally selected by whom?

a. policyowner

b. contingent beneficiary

c. estate

d. insurance company

Where will a life insurance policy's proceeds be directed to if all the beneficiaries die before the insured?

a. insured's creditors

b. beneficiary's estate

c. insured's estate

d. court-ordered beneficiary

Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?

a. a portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy

b. payment can be adjusted monthly by the beneficiary

c. a portion of the payments paid to the beneficiary comes from interest generated from policy loans

d. payments are normally guaranteed for 10 years or more

A life insurance policy's contingent beneficiary is the

a. primary person who receives the death benefits if the insured dies

b. person who receives the death benefits if the primary beneficiary dies before the insured

c. person who receives the death benefits if there is no named beneficiary

d. person whose approval is needed before a beneficiary designation is changed

What would be a valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual?

a. avoiding probate

b. management of proceeds would be provided

c. trustee can pay off any existing policy loans

d. more settlement options available with a trustee

The reason for backdating a policy is

a. to avoid being considered a substandard risk due to a recent cancer diagnosis

b. to obtain a premium rate based on an earlier age

c. to decrease the face amount

d. to decrease the Contestable period

In what situation could an insurance policy's coverage be modified?

a. applicant is a preferred risk

b. applicant is a substandard risk

c. applicant is a standard risk

d. applicant is uninsurable

Field underwriting by a producer

a. is used to reduce costs to the insurer

b. involves conducting a physical examination of the applicant

c. may result in the disclosure of hazardous activities of the applicant

d. is illegal in most states

What must be given to a life insurance applicant when the agent receives an application and the initial premium?

a. agent's report

b. conditional receipt

c. commission disclosure

d. good health statement

When does the producer give a premium receipt for a life insurance application?

a. when the application has been approved

b. when the initial premium has been paid with the application

c. during the medical exam

d. when the completed application has been collected

Insurable interest in one's life is legally considered as

a. illegal in most states

b. limited

c. generally unlimited

d. contingent on future earnings

When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement?

a. consumer report

b. eye examination

c. urine sample

d. blood sample

An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT

a. good credit history

b. living in a rural area

c. good health history

d. being a nonsmoker

When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do?

a. insurer is not obligated to take any action

b. insurer is obligated to verify that the producer is in compliance

c. give notice, explain, and allow opting out

d. provide the proper NAIC paperwork

An insured may be required to sign which document at policy delivery to ensure there has not been any adverse medical conditions since the time of the application?

a. binding receipt

b. good health statement

c. agent's report

d. MIB disclosure

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

a. the date the sales appointment was made

b. the date the application was submitted to the insurance company

c. the date of application

d. the date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

After an applicant reads and signs an insurance application, he/she should be conscious of the fact that

a. a false statement could lead to loss of coverage

b. premiums refunds are not allowed

c. the policy is guaranteed to be issued

d. the premium quoted by the agent is final

When must a producer provide disclosure about information practices to an applicant?

a. during the medical examination

b. upon policy delivery

c. prior to or at the time of signing the application

d. immediately after signing the application

A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?

a. premium will be refunded with interest and no death benefit paid

b. premium received by insurer is considered to be unearned

c. proceeds are prorated to 1/12th to the full amount

d. beneficiary receives $50,000 income tax-free

A signed good health statement may be requested by a life producer at the time of

a. policy issue

b. application

c. policy delivery

d. physical examination

The initial premium for a life insurance policy is typically paid in what way?

a. the applicant mails it to the insurer after the policy has been approved

b. it is typically obtained by the producer and forwarded to the insurer

c. it is typically forwarded to the insurer by the applicant

d. the producer pays it from any commissions received

Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?

a. credit report

b. national origin

c. age of applicant

d. sex of applicant

An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?

a. applicant can determine which items in the report to leave out

b. insurer can obtain a copy of this report without the applicant's knowledge

c. fee for the report is typically paid by the applicant

d. applicant has a right to receive a copy of the report

Which of these is NOT an underwriting responsibility of a life insurance agent?

a. asking relevant questions concerning an applicant's avocations

b. requesting an attending physician's report (APR)

c. ordering an inspection report

d. determining the final rate classification

Which report contains information regarding an individual's general reputation and credit standing?

a. credit report

b. consumer report

c. MIB report

d. agent's report

The Medical Information Bureau consists of members from which group?

a. doctors

b. hospitals

c. insurance companies

d. underwriters

Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?

a. date of issuance of the conditional receipt

b. date the policy was approved

c. date of policy delivery

d. date the insurer received the application

When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?

a. producer

b. insurer

c. underwriter

d. fiduciary

Which of these is NOT considered the responsibility of a producer during the underwriting process?

a. collecting additional medical information if needed

b. promptly sending the completed application to the insurance company

c. forwarding any material personal observations to the insurer

d. selecting the final approval date

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

a. when the policy is issued

b. the date of policy delivery

c. when the conditions of the receipt are met

d. the date the sales appointment was set

After an insurance application has been originated, the producer normally

a. can change the policy provisions

b. determines whether a claim will be paid

c. is the major personal contact to the insured

d. conducts a physical examination

Where is the difference between a standard risk and a substandard risk reflected?

a. backdating

b. coverage is not offered

c. premium charges

d. back-end charges

All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT

a. acquire a statement of good health signature

b. gather the initial premium

c. review policy with applicant

d. leave a conditional receipt with client

The principal source of information concerning an applicant's identity, age, and marital status is found in the

a. MIB

b. credit report

c. policy summary

d. completed application

The policy provision that permits an employee to change from group life coverage to an individual life policy is called the

a. assignment provision

b. conversion provision

c. certificate provision

d. modification provision

Group life insurance is typically issued as

a. whole life insurance

b. decreasing term insurance

c. increasing term insurance

d. level term insurance

Which statement regarding the certificate of insurance is accurate?

a. it is an insurance contract between the employer and insurer

b. it indicates evidence of an employee's insurance of coverage

c. each certificate of insurance is underwritten on an individual basis

d. it is issued by the employer to the employee

The conversion option for group term insurance may be exercised by an employee

a. at any time while still employed

b. within 2 years of the hire date

c. within 31 days of terminated employment

d. after providing proof of insurability

Any employee insured under a group life insurance plan is normally

a. given a master certificate

b. covered on a noncontributory basis

c. required to show proof of insurability

d. covered with term life insurance

What are premiums for group credit life insurance based on?

a. the age of the borrower at the time debt is incurred

b. the age of the borrower when debt is paid off

c. the average age of the borrower over the life of the debt

d. flat rate unrelated to the borrower's age

If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally

a. tax deductible to the business

b. non-deductible to the business

c. partially deductible to the business

d. considered taxable income to each employee

What is an insurance contract that identifies individuals by relationship to a specific organization?

a. employer insurance

b. group insurance

c. COBRA plan

d. industrial insurance

Which statement about group life insurance is INCORRECT?

a. Cost can be shared between employer and employee

b. Each participant requires evidence of insurability

c. A minimum number of employees participating may be required

d. Employer is issued a master policy

What minimum percentage of all eligible employees must participate in a group life insurance plan if the premiums are completely paid for by the employer?

a. 0%

b. 50%

c. 75%

d. 100%

Why do insurers require a minimum number of employees participate in a group insurance plan?

a. efficiency is maximized

b. minimize adverse selection

c. profits are maximized

d. claims are minimized

Which type of policy can group term life insurance normally be converted to?

a. an individual renewable policy

b. an individual level term policy

c. an individual permanent life insurance policy

d. a group permanent life insurance policy

An employer has a group life coverage for his employees. How would an employee in poor health be treated in this situation?

a. approved on a graded basis

b. not eligible for insurance in this plan

c. eligible for the same type of coverage as the other employees

d. must pay a rating based on risk

An annuity which starts paying monthly benefits within a month after issuance is called a(n)

a. period certain annuity

b. deferred annuity

c. fixed annuity

d. immediate annuity

A large corporation pension plan purchased an accumulation annuity contract where all of the participating employees received certificates of participation. What is this contract called?

a. 403(b) plan

b. group deferred annuity

c. group immediate annuity

d. joint and survivor group plan

Which of these annuity contract features is meant to discourage withdrawals and exchanges?

a. annuitization

b. annual fees

c. withdrawal penalty

d. surrender charges

What is another term used for a "pure" life annuity?

a. annuity certain

b. immediate annuity

c. life income

d. joint annuity

During the liquidation phase of an annuity contract, to whom are the income benefits normally payable to?

a. trustee

b. beneficiary

c. policyowner

d. annuitant

The annuitant in a single premium deferred annuity (SPDA)

a. receives immediate benefit payments

b. makes only one premium payment

c. can make tax-free withdrawals until the principal is recovered

d. is also the beneficiary

When a deferred annuity is surrendered, who must sign the authorization to do so?

a. owner

b. annuitant and beneficiary

c. annuitant

d. all parties involved

A life annuity with period certain is characterized as

a. guaranteeing benefit payments for a stated period of time after reaching age 65

b. guaranteeing a minimum interest rate

c. guaranteeing lifetime benefit payments for two or more people

d. guaranteeing benefit payments for a stated minimum number of years

The main purpose of an annuity is to

a. provide a tax shelter

b. create an estate

c. create a stream of income

d. provide a death benefit

Which of the following is NOT a valid contract exchange?

a. an annuity exchanged for a life insurance policy

b. an annuity exchanged for another annuity

c. a life insurance policy exchanged for another life insurance policy

d. a life insurance policy exchanged for another annuity

Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for additional benefit payments will be derived primarily from funds that were

a. obtained from the state's Guaranty Association

b. accumulated from the invested principal

c. given up by the annuitant's refund beneficiary

d. not distributed to life annuitants who died before life expectancy

During an annuity's liquidation phase, the annuitant normally

a. receives nothing

b. receives benefit payments at regular intervals

c. can borrow against the cash value

d. can increase the premium payout period

Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this?

a. fixed life annuity with period certain

b. variable life annuity with installment refund

c. fixed life annuity with cash refund

d. variable life annuity with period certain

Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will

a. discontinue after a stated number of years

b. remain a constant dollar amount for the duration of the annuity period

c. pay a lump sum if the annuitant dies

d. vary according to the underlying investment performance

When does interest income for a flexible premium deferred annuity get reported for federal income taxes?

a. Never

b. After the principal has been exhausted

c. Upon receiving distributions from the contract

d. During the accumulation phase

When an annuity contract has been fully surrendered, how will the surrender charges affect the final contract settlement?

a. final contract settlement will be reduced

b. final contract settlement will be increased

c. final contract settlement will not be affected

d. final contract settlement will be held in escrow until surrender charges are paid

Which of the following is NOT an intended use of an annuity?

a. obtain income benefits for a stated period of time for more than one person

b. accumulate assets on a tax-deferred basis

c. create immediate lifetime income benefits

d. create new funds upon the death of a wage-earner

A retired couple would like to maximize the income derived from their combined life savings and have it payable until they both die. Which annuity would be their best choice?

a. fixed annuity

b. survivorship annuity

c. joint life annuity

d. joint and survivor annuity

The authority to change the beneficiary in an individual annuity lies with the

a. annuitant

b. owner

c. beneficiary

d. administrator

Which statement concerning a deferred annuity contract is correct?

a. the contract cannot be assignable by the owner

b. requires a single premium payment

c. the owner can be the beneficiary, annuitant, or neither

d. benefits start immediately after contract formation

The surrender charge on many deferred annuity contracts are waived when the

a. annuitant becomes unemployed

b. annuitant dies or becomes disabled

c. contract's interest rate falls below a stated percentage

d. contract is canceled within the first year

A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic deposits total $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today?

a. $200,000

b. $80,000

c. $120,000

d. $0

What does a fixed life annuity offer protection against?

a. inflation

b. premature death

c. inadequate retirement planning

d. savings depletion due to longevity

An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as?

a. back-end assessment

b. cancellation fee

c. surrender charge

d. tax penalty

Which of these pays an income to two or more annuitants until the death of the last annuitant?

a. joint life annuity

b. deferred survivor annuity

c. joint and survivor annuity

d. survivorship annuity

When a large sum of money is used to structure monthly payments, which product is typically used?

a. a 401(k) plan

b. a 401(b) plan

c. a deferred annuity

d. an immediate annuity

What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period?

a. subject to market value adjustment

b. subject to no adjustments

c. subject to a surrender charge only

d. cash value is forfeited

John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract?

a. John

b. Mary

c. Tom

d. Mary's estate

Which event triggers a deferred annuity to start making benefit payments to the annuitant?

a. when the owner dies

b. when the contract's cash value exceeds the cost basis

c. when the contract is annuitized

d. cash surrender of the annuity

A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called

a. fixed period

b. period certain

c. installment refund

d. straight life

How do benefit payments fluctuate over time in a variable life annuity?

a. benefit payments stay fixed

b. reflects changes in the market value of assets in a separate account

c. annuitant controls any benefit payment changes

d. any benefit payment fluctuations have to be approved in writing by the owner

A single-life annuity only has ONE

a. annuitant

b. benefit payment

c. premium payment

d. beneficiary

When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest earned minus

a. bailout option charge

b. surrender charges

c. taxes owed

d. expenses and withdrawals

The exclusion ratio determines

a. how long an annuitant receives benefit payments

b. if an annuity is eligible for a 1035 exchange

c. the interest rate of an annuity

d. the amount of an annuity payment subject to income tax

Which benefit can be found in an equity indexed annuity, but not in a fixed annuity?

a. protection against living too long

b. equity loans

c. a fixed rate of return

d. protection against long-term inflation

Under which circumstance is the interest rate guaranteed within a market value adjusted annuity?

a. when the contract has been held for the period specified in the policy

b. for the entire length of the contract

c. never

d. when the cash value has reached a stated minimum amount

When does the owner's contractual rights begin under an individual annuity contract?

a. time of purchase

b. when the benefit period begins

c. when the accumulation period ends

d. after free-look period expires

What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up?

a. increases

b. decreases

c. not affected by inflation

d. tied to stock index

The owner's cost basis for a non-qualified deferred annuity is typically the same as the

a. annuity's cash value

b. total premiums paid

c. benefits payable to the annuitant

d. interest earned within the annuity

Which of the following is associated with an immediate annuity?

a. tax-free benefit payments

b. installment premium payments

c. lack of an accumulation period

d. lump-sum benefit

The interest paid during an annuity's payout period is considered

a. nontaxable

b. taxable as ordinary income

c. taxable as capital gains

d. tax-deductible

Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value?

a. variable life policy

b. modified life policy

c. flexible premium fixed annuity

d. immediate fixed annuity

Taking a sum of money and decreasing it in size is called

a. capital gains

b. capital appreciation

c. capital liquidation

d. capital sum

Which annuity allows contributions to an IRA?

a. Single Premium Immediate Annuity (SPIA)

b. Annuity certain

c. Deferred

d. Life with period certain

A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?

a. if the interest rate falls below a specified level, the surrender charge is waived

b. if the interest rate rises above a certain level, the surrender charge is waived

c. it allows the Life and Health Guaranty Association to bailout the insolvent insurer

d. a reinsurer will make the remainder of the annuity payments if the original insurance company becomes insolvent

Which of the following would most likely purchase an immediate annuity?

a. individual wishing to contribute to a tax-sheltered annuity

b. individual wanting to accumulate an investment over time

c. retiree having a lump sum to invest

d. business needing an immediate tax write-off

What determines how much an annuitant is paid for a variable annuity?

a. varies according to how many outstanding annuity units

b. payments fluctuate as annuitant gets older

c. the market value variations of the securities backing it

d. varies according to the insurer's investments in its general account

The administrator for a corporate pension plan bought an accumulation annuity contract for its 2,000 employees. All 2,000 participating employees received certificates of participation. What kind of contract is this?

a. 403(b) plan

b. group deferred annuity

c. group immediate annuity

d. deferred compensation plan

Which of the following would NOT be appropriate for an immediate annuity?

a. a lottery winner who opted for a lump-sum payment

b. a parent saving for a child's college

c. a beneficiary collecting the face amount of a life insurance policy

d. someone who just won a large settlement

An annuity's accumulation period may

a. continue after the purchase payments stop

b. continue after the benefit payments start

c. continue after the annuitant dies

d. continue after the annuity has been surrendered

The interest credited to the cash values of personally-owned non-qualified annuities is considered

a. a tax credit

b. tax-deferred

c. tax-deductible

d. tax-exempt

The contractual rights which allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called

a. nonforfeiture options

b. settlement options

c. conversion options

d. surrender options

What is the tax treatment of benefit payments for a non-qualified annuity?

a. benefit payments are always taxable

b. benefit payments are subject to taxes only prior to age 70 1/2

c. benefit payments must begin at age 59 1/2 to avoid a penalty

d. benefit payments received after 70 1/2 are always tax-exempt

Sylvia purchased an annuity for $100,000 from the proceeds of an inheritance. No further payments are permitted and the income stream begins in 15 years. This contract is a(n)

a. equity indexed annuity

b. single premium immediate annuity

c. single premium deferred annuity

d. fixed period immediate annuity

Which statement is INCORRECT concerning a tax-sheltered annuity (TSA)?

a. participants make payments from salary reductions

b. normally used by charitable, educational, and religious organizations

c. also known as 403(b) plans

d. annual investment gains are included in participant's gross income

A business may purchase an annuity for all of the following reasons EXCEPT

a. structuring a liability settlement payment

b. informally funding a non-qualified deferred compensation plan

c. accumulating assets on a tax-deferred basis

d. providing a pension to employees

How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?

a. taxed as a capital gain during the accumulation period

b. taxed as ordinary income during the accumulation period

c. taxed as ordinary income in the year received

d. received tax-free to all recipients

Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity?

a. ages 70 and 72

b. ages 60 and 80

c. ages 71 and 73

d. ages 69 and 71

When a sum of money undergoes capital liquidation, that sum will

a. increase in value

b. remain the same indefinitely

c. decrease in size

d. create tax deductions

Who typically makes the purchase payments in an individual annuity?

a. owner

b. trustee

c. insurer

d. beneficiary

The owner of a single premium deferred annuity is entitled to do all of these EXCEPT

a. make additional payments into the annuity

b. choose the length of the payout period

c. choose who will be the recipient of the annuity payments

d. cash surrender the contract

An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?

a. fixed amount

b. straight life

c. period certain

d. installment refund

An individual, age 45, would like to help pay for his daughter's college expenses in 10 years. Which annuity would be appropriate for this individual?

a. joint and survivor annuity

b. deferred annuity

c. 403(b) plan

d. immediate annuity

When compared to a fixed annuity, a variable annuity has what distinguishing feature?

a. flexible premiums according to a stock index

b. investment risk is assumed by the purchaser

c. investment risk is assumed by the insurer

d. payout option can be changed after the accumulation phase

What is the effect of the market value adjustment in a market value adjustment annuity?

a. transfer the tax liability to the owner

b. allows owner to periodically adjust the investment risk

c. transfers some of the investment risk to the policyowner

d. no effect

Interest is credited to a fixed annuity no lower than the

a. variable contract rate

b. contract guaranteed rate

c. current rate of inflation

d. prime rate

One becomes eligible for Social Security disability benefits after having been disabled for

a. 3 months

b. 5 months

c. 6 months

d. 12 months

What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?

a. Primary Insurance Amount (PIA)

b. Total taxes paid into FICA

c. Number of dependents

d. State of residence

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

a. Medicare

b. Social Security

c. Medicaid

d. FICA

Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?

a. 3

b. 4

c. 5

d. 6

How many quarters must be an employee have worked in a covered occupation to be considered fully insured for Social Security disability income?

a. 25

b. 30

c. 35

d. 40

To be eligible for Social Security disability benefits, an employee must be unable to perform

a. any occupation

b. his/her current occupation

c. any occupation that reflects the employee's educational level

d. any occupation that the employee is qualified and willing to do

All of these are considered to be a benefit under Social Security EXCEPT for

a. survivorship

b. unemployment

c. disability

d. retirement

A description of a qualified plan's insurance contract may be found in which ERISA reporting form?

a. annual return/report (Form 5500)

b. shareholder's report

c. IRS Form 1040

d. summary report (Form 6500)

A life insurance producer's underwriting duties may include

a. approving or declining a life insurance application

b. seeking additional information requested by the insurance company

c. ordering an MIB report

d. determining the rate classification of the applicant

An employee welfare plan exempt from ERISA regulations would be

a. church plans

b. indemnity plans

c. split dollar plans

d. accident only plans

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

a. distribution is subject to capital gains tax

b. distribution is subject to ordinary income tax

c. distribution is subject to a tax penalty

d. distribution is subject to federal income tax withholding

Traditional Individual Retirement Account (IRA) distributions must start by

a. age 59 1/2

b. age 65

c. April 1st of the year following the year the participant age 59 1/2

d. April 1st of the year following the year the participant age 70 1/2

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

a. rollover plan

b. 403(b) plan

c. profit-sharing plan

d. salary reduction plan

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

a. 30%

b. 40%

c. 50%

d. 60%

According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within days of the member's eligibility date.

a. 30

b. 60

c. 90

d. 120

ERISA requires that a Summary Plan Description must be provided to a new plan member within how many days following the new member's eligibility date?

a. 30

b. 45

c. 90

d. 120

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

a. the 403(b) custodian

b. the financial institution

c. the employer

d. the participating employee

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

a. mandatory income tax withholding on the amount transferred

b. paying transfer fees

c. paying trustee fees

d. ever playing income taxes on the distributions

In a qualified retirement plan, the yearly contributions to an employee's account

a. are not tax-deductible

b. are restricted to minimum limits set by the IRS

c. are restricted to maximum limits set by the IRS

d. must be matched dollar-for-dollar by the employer

The IRS has a "minimum coverage" rule regarding qualified retirement plans. This rule states that each qualified plan is required to

a. benefit a broad cross-section of employees

b. benefit a minimum number of employees

c. provide a minimum amount of income per year

d. provide benefits to a company's executive team

Premature IRA distributions are subject to a penalty tax of

a. 0%

b. 10%

c. 15%

d. 20%

Which of the following is TRUE about a qualified retirement plan that is "top heavy"?

a. more than 30% of plan assets are in key employee accounts

b. more than 40% of annual additions are for key employee accounts

c. more than 50% of plan assets are in key employee accounts

d. more than 60% of plan assets are in key employee accounts

A qualified profit-sharing plan is designed to

a. allow key employees to participate in the profits of the company

b. distribute a portion of company earnings to its employees

c. keep key employees from leaving the company

d. allow employees to elect company officers

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?

a. only income taxes on $30,000

b. only income taxes on $24,000

c. income taxes plus a 10% penalty tax on $30,000

d. income taxes plus a 10% penalty tax on $24,000

According to the IRS, a company may NOT do which of the following in regards to funds in a qualified retirement plan?

a. transfer the funds to a new custodian

b. invest the funds in mutual funds

c. transfer vested funds to terminated employees

d. repossess the funds for business purposes

Contributions made by an employee to a qualified retirement plan are required to be

a. subject to income taxes

b. fully refundable

c. nonforfeitable

d. subject to a vesting schedule

XYZ Corp has implemented a qualified retirement plan. This plan may NOT discriminate

a. against employees under the age of 21

b. in favor of highly compensated employees

c. in favor of employees with higher seniority

d. against stockholders

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

a. 20% of the funds are subject to taxes

b. 80% of the funds are invested in a separate account

c. If Tom's employment is terminated, 20% of the funds could be forfeited

d. If Tom's employment is terminated, 80% of the funds could be forfeited

Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions?

a. qualified plan waiver

b. trustee-to-trustee transfer

c. conduit IRA

d. 1035 exchange

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for

a. the marital deduction

b. death benefits

c. Section 1035 exchange

d. capital gains taxation

In an individual retirement account (IRA), rollover contributions are

a. subject to capital gains tax

b. subject to ordinary income tax

c. partially limited by dollar amount

d. unlimited by dollar amount

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

a. 10% is withheld for income taxes

b. 20% is withheld for income taxes

c. 30% is withheld for income taxes

d. nothing is withheld

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?

a. 10% tax penalty for early withdrawal

b. capital gains tax

c. income tax and penalty tax

d. ordinary income tax

An individual working part-time has a gross income of $5,000 for this year. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

a. no deduction allowed

b. $5,000

c. $2,000

d. $1,000

First-time homebuyers are able to withdraw up to how much from their qualified IRAS without incurring the 10% early withdrawal penalty?

a. $2,500

b. $5,000

c. $7,500

d. $10,000

When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld?

a. 10%

b. 20%

c. 30%

d. None

Which of the following statements is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

a. surrender charge is applied

b. the account can be rolled into the surviving spouse's IRA

c. distributions will be received tax-free if surviving is over age 59 1/2

d. future distributions are payable to the owner's estate

A Keogh plan is a(n)

a. unqualified retirement plan for large corporations

b. qualified retirement plan for the self employed

c. tax-exempt annuity for government workers

d. split dollar plan for key employees

How are qualified Roth IRA distributions normally treated for tax purposes?

a. 10% penalty tax is applied

b. taxed as ordinary income

c. capital gains is applied

d. received income tax-free

What is another name for a Keogh plan?

a. Roth IRA

b. HR 10 plan

c. Rollover plan

d. 1040 plan

An employer that offers a qualified retirement plan (as opposed to a non-qualified plan) to its employees is eligible to

a. avoid ERISA regulations

b. make tax-deductible contributions to the plan

c. make tax-deductible contributions to key employees only

d. make partial tax-deductible contributions to the plan

What does a 401(k) plan generally provide its participants?

a. tax-free distributions

b. salary-deferral distributions

c. salary-deferral option

d. a defined retirement benefit

Which of these statements about traditional individual retirement accounts is accurate?

a. 10% penalty is applied to withdrawals after age 59 1/2

b. withdrawals are normally tax-free to the receipient

c. 10% penalty is applied to withdrawals prior to age 59 1/2

d. contributions are not tax deductible

Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule?

a. reasonable expectations

b. alienation of benefits

c. minimum coverage

d. indemnity of benefits

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?

a. 25

b. 50

c. 100

d. 250

Which of these is a true statement regarding survivor benefits under a qualified retirement plan?

a. survivor benefits can only be waived with the written consent of a married employee's spouse

b. survivor benefits CANNOT be waived with the written consent of a married employee's spouse

c. survivor benefits are rarely included in small company plans

d. survivor benefits do not apply to divorced employees

The time limit an individual has to "rollover" funds from an IRA or qualified plan is

a. 60 days

b. 90 days

c. 120 days

d. no limit

An officer for a corporation takes out numerous unsecured loans from the company's qualified retirement plan. Which of these rules is the plan in violation of?

a. Key employee rule

b. Top heavy rule

c. Vesting rule

d. Exclusive benefit rule

Which of the following situations would allow funds to be deposited into a rollover IRA

a. an individual receives a $100,000 inheritance

b. a family receives $1,000,000 in a wrongful death lawsuit

c. an employee quits her job and receives $50,000 from her qualified plan

d. a policyowner surrenders his life insurance policy's $25,000 cash value

The premiums paid by an employer for his employee's group life insurance are usually considered to be

a. tax-deductible to the employer

b. partially deductible to the employee

c. tax-deductible to the employee

d. taxable income to the employee

Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners?

a. split dollar plan

b. entity agreement

c. cross-purchase agreement

d. key person plan

Which of these is NOT considered to be a cost connected with an individual's death?

a. funeral expense

b. tax liability

c. business expenses

d. probate costs

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

a. identifies the needs of an individual and the individual's dependents

b. takes into account the present value of future income earned by the breadwinner

c. places a dollar value on the life of the individual

d. establishes the investment risk level acceptable to the individual

XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?

a. split-dollar

b. cross purchase

c. key employee

d. deferred compensation

Which of these is NOT relevant when determining the amount of personal life insurance needed?

a. existing life insurance coverage

b. local unemployment rates

c. household income

d. household debt

Which of these factors does NOT influence an individual's need for life insurance?

a. lifestyle of the applicant

b. number of dependents

c. future educational costs of the dependents

d. self-maintenance expenses

With life insurance, the needs approach is used primarily in determining

a. which insurance company to purchase the coverage from

b. how much life insurance a client should apply for

c. the type of life insurance that should be purchased

d. a budget for the surviving dependents to follow in the event of the client's death

Employers often purchase life insurance on a key employee in order to

a. provide an income to the deceased key employee's family

b. pay for funeral costs

c. provide the employer with a tax credit

d. pay for finding and training a replacement if the employee dies prematurely

Which of the following is NOT a reason for a business to buy key person life insurance?



a. The reduction in sales as a direct result from death of the employee

b. A void in leadership if the key person were to die

c. The loss of company revenues while a replacement is being sought

d. An increased pension liability if the key employee dies

When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT

a. final expenses

b. charitable donation

c. education

d. employee benefits

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?

a. estate taxes

b. unemployment tax expenses

c. funeral expense

d. living expenses

What is considered a valid reason for small corporations to insure the lives of its major stockholders?

a. to provide an income for the surviving dependents

b. reduce the company's tax liability

c. to pay for final expenses

d. fund a buy-sell agreement

According to the needs approach, an emergency reserve fund's primary purpose is to

a. pay off debt

b. cover the cost of unexpected expenses

c. pay for the cost of life insurance

d. provide a supplemental income source

Under HIPAA requirements, eligibility for the pre-existing conditions exclusion waiver under new coverage is lost if

a. there is a break in coverage of more than 33 days

b. there is a break in coverage of more than 43 days

c. there is a break in coverage of more than 53 days

d. there is a break in coverage of more than 63 days

A group health insurance policy is a contract between an

a. employee and insurance company

b. employee and employer

c. employer and insurance company

d. employer and producer

According to HIPAA regulations, which of the following may reduce a medical plan's pre-existing conditions exclusion?

a. an improvement in health over the previous three months

b. any period of prior coverage

c. any period of treatment in the twelve months prior to enrollment

d. passing a physical examination

Kate received a group accident and health termination notice. How many days does she have to apply for a converted policy?

a. 30

b. 31

c. 60

d. 90

Darrell has a group long-term disability income policy paid by his employer. Which of these statements is true?

a. Any benefits received will be tax-free

b. The premiums paid by the employer are not tax-deductible

c. The specified benefit amount is a percentage of his wages

d. Long-term policy benefits are not contributed with Social Security benefits

Which of the following does NOT help determine group health insurance premiums?

a. average age of group

b. claims experience of the group

c. income level of group members

d. the group's size

When disability buy-sell insurance benefits exceed a partner's cost basis, which of the following is correct?

a. the excess is taxed as a capital gain to the partner

b. the excess is taxed as ordinary income to the partner

c. the excess is partially taxable to the partner

d. the full amount is non-taxable to the partner

For employees covered in multiple states under a group health plan, jurisdiction rules cannot alter

a. contract provisions

b. COBRA laws

c. eligibility standards

d. contribution percentages

What action can insurer take to discourage malingering and false disability claims?

a. the insurer can selectively refuse a disability claim for specific diseases

b. the probation period can be increased for specific injuries

c. limit the amount of benefits an insured can receive from two disability policies with the same insurer

d. a premium rating can be given to an insured with more than one policy with the same insurer

An employer pays the accident and health insurance premiums for its employees. The premiums paid by the employer are

a. deductible to the business

b. taxable to the employee

c. tax-deferred to the business

d. reimbursed as a tax credit

Individuals covered with employer-paid group health plans will normally receive tax-free benefits under all of these plans EXCEPT

a. disability income

b. HMO

c. vision

d. major medical

ABC Corporation purchases and is beneficiary of an individual disability income insurance policy on a key employee. Which of the following statements is true?

a. premiums paid by the company are tax-deductible

b. benefits are taxable to the key employee

c. benefits are received tax-free by the company

d. premiums paid by the company are tax-deductible to the key employee

Pete is covered by a group health insurance plan which covers employees in multiple states. This plan is governed by the laws of which state?

a. where the certificate of coverage was mailed to

b. where most of the employees reside

c. where the master contract was issued

d. where the insurer's home office is located

For employees covered in multiple states under a group health plan, jurisdiction rules cannot alter

a. contract provisions

b. COBRA laws

c. eligibility standards

d. contribution percentages

Trade association groups that are eligible for group medical benefits normally are

a. in the same industry

b. in different industries

c. formed for the sole reason of obtaining insurance

d. large businesses

How do birthing centers reduce medical costs?

a. Using gatekeepers

b. Using network providers

c. Using certified nurse midwives

d. Using ambulatory care

Under HIPAA, medical plan late enrollees may be excluded for pre-existing conditions for a maximum of

a. 6 months

b. 12 months

c. 18 months

d. 24 months

Which type of group plan is excluded from HIPAA rules?

a. PPOs

b. Disability income

c. HMOs

d. Major medical

Bert's spouse passed away recently. Bert was covered under his spouse's group family health insurance plan but now is covered under COBRA. How much of the active-employee cost may be passed on to Bert for continued coverage?

a. No maximum

b. Maximum of 50%

c. Maximum of 100%

d. Maximum of 102%

Which of the following BEST describes a double indemnity provision in travel accident insurance?

a. Benefits are doubled under certain circumstances stated in the policy

b. If the claim is disputed in court and the insurer loses, the face amount will be doubled

c. Benefits cover two people when traveling

d. Accidents and illnesses are covered while the insured is traveling

What type of employee welfare plans are not subject to ERISA regulations?

a. church plans

b. major medical plans

c. corporate

d. qualified plans

According to the Pregnancy Discrimination Act of 1978, employers must treat pregnancy in the same manner as

a. any other medical disability

b. a suspension

c. an unpaid holiday

d. a pre-existing condition

A disabled business owner who has payroll and business expenses paid for has what kind of insurance policy?

a. key person

b. franchise disability

c. business overhead expense

d. disability income

ABC Partnership is a business with a limited number of partners. Which disability buy-sell agreement is best suited for this business?



a. optional buy-back agreement

b. entity purchase agreement

c. cross purchase agreement

d. organizational group agreement

A comprehensive group policy also covers expenses related to vision care. Which of the following is not typically covered under a vision plan?

a. cataract surgery

b. routine eye exam

c. corrective vision glasses

d. corrective contact lenses

Laura is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?

a. authorize for payroll deductions

b. agree to a physical examination

c. sign an enrollment card

d. register with her state of residency

Which of the following is NOT a function of accident and health insurance?

a. pays a death benefit as a result of natural causes

b. covers the loss of income from a disability

c. covers the cost of medical care as a result of an accident

d. pays for hospice in the event of a terminal illness

Notice of information practices must be given to a policyholder at least

a. every year

b. every two years

c. every three years

d. every four years

In regards to health insurance, employees age 65 or older are typically required to

a. be offered the same group health benefits offered to the younger employees

b. provide evidence of insurability for medical insurance offered by the employer

c. choose Medicaid as their primary provider

d. choose Medicare as their primary provider

James owns a business and purchased a policy that covers the business expense of finding a permanent or temporary employee to replace a disabled one. This type of disability coverage is called

a. key business coverage

b. key maintenance coverage

c. key employee coverage

d. key employer coverage

A certificate of coverage for a group health policy is best described as

a. a contract between the employer and employee

b. a contract between the employer and the insurer

c. proof of coverage for the employee

d. proof of coverage for the employer

Which of the following statements is BEST describes employer contributions for employer provided health insurance?

a. employer is given tax credits for contributions paid

b. employee can deduct contributions by the employer

c. employer contributions are deductible

d. employer contributions are taxable to the employee

If group Health benefit levels are too high, what could be the end result?

a. underutilization of the plan

b. overutilization of the plan

c. normal utilization of the plan

d. adverse selection

What is the name of the period of time during which a new employee is ineligible for group Health insurance coverage?

a. free-look period

b. elimination period

c. probationary period

d. noncontributory period

Which of the following statements is NOT true concerning the relationship between group health insurance plans and Medicare? (assuming the business has more than 20 employees)

a. group health coverage is NOT available for workers over the age of 65

b. group health coverage is available for workers over the age of 65

c. An active employee's group health plan is primary and Medicare is secondary, unless the employee chooses otherwise

d. group health coverage is available to an employee's spouse that also happens to be Medicare-eligible

In a disability buy-sell agreement, the policies funding the agreement are owned by the

a. business entity

b. officers

c. shareholders

d. employees

The health insurance premiums paid for each partner in a partnership is considered to be

a. non-deductible

b. 50% tax deductible

c. 75% tax deductible

d. 100% tax deductible

Accident and health insurance claim handling is made more convenient to the insured by utilizing

a. inspection reports

b. attending physician statements

c. Medical Information Bureau (MIB) statements

d. assignment of benefits

Nonqualified medical expense distributions from a Health Savings Account (HSA) have a tax penalty of

a. 7.5%

b. 10%

c. 20%

d. 30%

The main role of accident and health and disability insurance is to

a. protect against on-the-job injuries and illnesses

b. protect against medical care costs and the loss of earning power

c. protect against the premature death of the insured

d. protect against accidents

Mike recently lost sight in both eyes. He has a policy that pays a lump sum benefit for this injury. What type of insurance does Mike have?

a. catastrophic

b. accidental death and dismemberment

c. major medical

d. hospital expense

Which of the following statements BEST describes disability buy-sell insurance policies?

a. benefits are taxable to the business entity

b. premiums are typically tax-deductible

c. policy proceeds are typically received income tax-free

d. benefits are paid to the disabled insured

Which of these is NOT a factor that influences group health insurance underwriting?

a. physical exams of group members

b. number of individuals in the group

c. group's claims experience

d. type of occupation group is involved in

How do birthing centers reduce medical costs?

a. Using gatekeepers

b. Using network providers

c. Using certified nurse midwives

d. Using ambulatory care

Group accident and health insurance may be offered by an insurer when the sponsoring group

a. was formed to purchase insurance

b. provides individual evidence of insurability of its group members

c. provides an employer-employee relationship

d. consists of unrelated members

Mary is an employee who is covered with a disability income policy through her employer. She pays for the portion of the premium attributable to the cost of residual disability benefits, while her employer pays for the remainder. What are the tax implications of this policy?

a. residual benefits will be received income tax-free

b. residual benefits will be taxable to Mary

c. premiums paid by the employer are NOT tax-deductible

d. premiums paid by Mary are tax-deductible

Under which circumstance can an insurance company offer group Health insurance?

a. the sponsoring group is composed of totally unrelated members

b. the sponsoring group was formed for illegal purposes

c. the sponsoring group provides an employer-employee relationship

d. the sponsoring group was formed to purchase group insurance at reduced rates

Which of the following statements BEST describes the HIPAA portability rules for an individual who changes from one group medical plan to another?

a. reduces or eliminates any pre-existing conditions excluded under the new plan

b. requires that an employer pays for health coverage

c. reduces or eliminates the deductible under the new plan

d. allows the employee to convert to individual coverage

An accident and health insurance policy defines an injury as "bodily injury by accidental means". For an injury to be covered on this policy, what is required?

a. the accident must be external and violent

b. the cause of the accident must be intentional

c. only the injury resulting from an accident must be unintentional

d. both the cause and resultant injury must be accidental

Which of the following incidents would NOT be covered by an Accidental Death and Dismemberment policy?

a. deafness in one ear as a result of an accident

b. loss of vision as a result of a hunting incident

c. suicide

d. killed from an accident while being a passenger in a taxicab

Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?

a. limited

b. special risk

c. reimbursement

d. blanked

Jill has a group health plan with an employer that covers employees in more than one state. Which of the following is NOT affected by the state regulatory jurisdiction established for this plan?

a. eligibility requirements

b. required provisions

c. minimum enrollment percentage

d. continuation of coverage under COBRA

Typically, states will permit the grouping of two or more small employers in the same industry for obtaining group health insurance at a favorable rate. This grouping of employers is known as a multiple employer

a. welfare association

b. trust

c. consortium

d. alliance

When group benefits under COBRA have expired, a fully insured group policy can be converted to a(n)

a. individual health policy

b. blanket policy

c. group policy with another insurer

d. disability policy

Which parties are directly involved in a group accident and health insurance contract?

a. insurer and employees

b. insurer, employees, and employer

c. employer and insurer

d. employer and employees

Tina is insured under a business overhead expense insurance policy. Which of the following would be covered if she were to become disabled?

a. a decrease in the company's valuation

b. business property rental expense

c. Tina's salary

d. dividends owed to shareholders

Under a key person disability income policy, benefits will be received as

a. taxable income to the key employee

b. tax-free to the key employee

c. tax-free income to the business

d. taxable income to the business

Kim is covered under two medical expense plans. Plan A pays up to $5,000. Plan B pays up to $4,000. If she incurs $7,000 in expenses, the coordination of benefits provision dictates that

a. plan A pays up to $7,000

b. plan A pays up to $3,500 and plan B pays up to $3,500

c. plan A pays 80% and plan B pays 20%

d. plan A pays up $5,000 and plan B pays to $2,000

What is the federal income tax liability of a death benefit paid from a health insurance policy to a named beneficiary?

a. benefits are not taxable

b. benefits are partially taxable

c. benefits are tax-deferred

d. benefits are fully taxable

Steve has a group disability income policy where the premiums are paid by his employer. He elected to pay for additional residual disability coverage. Which of the following statements is true?

a. Steve's disability benefits are received tax free

b. the premiums for Steve's disability policy are tax-deductible for Steve

c. Steve can deduct the premium for the amount he paid for the additional residual disability coverage

d. Steve will pay taxes on the disability benefit received from his employer, but will receive any residual disability benefits tax-free

Typically, working individuals age 65 or over must be

A. offered the same Health benefits as the younger employees

B. covered by Medicare exclusively

C. paying a higher premium than younger employees

D. covered by a Medicare Supplement policy

Laura has an employer-based preventative health care plan that focuses on an enrollee's problems, such as drug abuse or stress. These plans are called

a. wellness programs

b. preventative managed care

c. employee utilization plans

d. employer-based initiatives

How many employees must an employer have for the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to apply?

a. at least 10

b. at least 15

c. 20 or more

d. 100 or more

Which of the following guidelines does NOT apply under the pregnancy provision of the Civil Rights Act?

a. A pregnant woman is entitled to sick-leave under the same guidelines as any other type of disability

b. pregnancy must be covered under medical benefits the same as any other illness

c. post-termination extensions of medical benefits must apply equally to pregnancy

d. abortion complications are covered if the woman's life is in danger

How are benefit payments from individually-owned medical expense policies treated for tax purposes?

a. exempt from income taxes

b. taxed as ordinary income

c. taxed as a dividend

d. tax credit given for amount of benefit payment

What is the maximum Social Security Disability benefit amount an insured can receive?

a. 50% of the insured's Primary Insurance Amount (PIA)

b. 75% of the insured's Primary Insurance Amount (PIA)

c. 100% of the insured's Primary Insurance Amount (PIA)

d. 100% of the insured's Primary Insurance Amount (PIA) minus any monies received from a retirement plan

The difference between a doctor's actual charges and the amount approved by Medicare is referred to as a(n)

a. usual, reasonable, and customary amount

b. excess charge

c. deductible

d. surplus fee

An organization that requires healthcare services to be provided by a network of physicians and hospitals is known as a(n)

a. PPO

b. HMO

c. POS

d. HDHP

Terry suffers an injury at his workplace which is covered by workers compensation. Terry also has a medical expense insurance policy. Under medical expense insurance policies, losses that are covered by workers compensation are typically

a. excluded from coverage

b. partially covered

c. covered, but requiring a higher deductible and copay

d. subject to age restrictions

Which of the following is NOT true of participants in multiple-employer trusts?

a. participants are normally small employers

b. participants must purchase all coverages the trust offers

c. participants are typically all in the same industry group

d. joinder agreement is issued to participants

Impatient psychiatric care is covered under Part A medicare Insurance for 190 days per

a. billing period

b. hospital visit

c. year

d. lifetime

A physician who accepts assignment on all Medicare claims is called a(n)

a. participating provider

b. authorized provider

c. registered provider

d. admitted provider

Health Maintenance Organization (HMO) wellness programs may include each of the following EXCEPT

a. Stress reduction

b. Routine physicals

c. Smoke cessation programs

d. Diagnostic testing services

Which of the following does NOT fall under "hospital care" in a typical health maintenance organization (HMO) plan?

a. Private duty nursing

b. Inpatient X-rays

c. Inpatient mental health care

d. Inpatient lab services

Karen is a health maintenance organization (HMO) subscriber. Who provides all of her preventative and routine care?

a. Primary care physician

b. Provider specialist

c. Preventative coordinator

d. HMO director

Rick is a disabled worker receiving Social Security benefits. What benefits are his wife and dependent children eligible for?

a. No benefits

b. Spouse is eligible for an income benefit but the children are not

c. An income benefit which is a percentage of his primary insurance amount

d. An income benefit which equals his entire primary insurance amount

Individuals who participate in an HMO plan are called

a. certificate holders

b. subscribers

c. policyowners

d. beneficiaries

What is a major difference between private commercial insurers and HMO's?

a. An HMO pays claims on a fee-for-service basis

b. A private commercial insurer typically has fewer health provider choices

c. An HMO combines medical care delivery and funding in one organization

d. A private commercial insurer only offers individual coverage

A characteristic of preferred provider organizations (PPO) is

a. PPOs operate like an HMO on a prepaid basis

b. if service is obtained outside the PPO, benefits are reduced and costs increase

c. PPOs are generally public in nature rather than private

d. Health care providers themselves are barred from forming a PPO due to conflict of interest

Which of the following is NOT a reason the government provides insurance?

a. stimulate economic development

b. reduce fraudulent claims

c. ensure social needs are being met

d. increase availability of health coverage

Alan is an enrollee of a health maintenance organization (HMO) which uses a gatekeeper system. If there ever comes a time when he needs emergency health services, what should he do?

A. Receive permission from the primary physician to begin treatment

B. Call the HMO to verify coverage

C. Proceed to the nearest emergency room

D. Contact the HMO for a listing of approved providers

Why might it be beneficial for an employee to purchase private disability income insurance for workplace injuries when he/she is already covered by worker's compensation?

a. loss of income that results from a workplace injury is not covered by worker's compensation

b. worker's compensation claims require a lengthy elimination period before benefits are paid

c. worker's compensation benefits are taxable and additional coverage needs to be purchased to offset the tax

d. the benefits arising from a worker's compensation claim could be inadequate to replace the loss of income

Medicare Part A typically covers

a. inpatient drugs

b. custodial care

c. disability income

d. respite care

Employees generally receive workers compensation benefits for

a. only medical expenses due to occupational accidents

b. employment termination

c. lost wages and medical expenses due to occupational accidents

d. only lost wages due to accidents that occur on the job

Inpatient psychiatric care is covered under Part A Medicare Insurance for 190 days per

a. billing period

b. hospital visit

c. year

d. lifetime

Medicare will cover a maximum of how many days per benefit period in a skilled nursing facility?

a. 10 days

b. 30 days

c. 60 days

d. 100 days

Federally qualified HMO's must offer

a. dental coverage

b. urgent care

c. family planning services

d. custodial care

Emily is disabled. In order to become eligible for Social Security disability income benefits, she must be

a. expected to live no longer than 12 months

b. partially insured, according to Medicaid

c. fully insured, according to Social Security

d. married with children

A MET third-party administrator may NOT perform which of the following functions?

a. claims processing

b. marketing the plan

c. underwriting the plan

d. insuring the plan

Which of the following does TRI-CARE provide accident and health coverage to?

a. military families

b. Social Security recipients

c. permanent disabled individuals

d. children

What is the eligibility requirement for Medicare Part B?

a. must be uninsurable

b. must be eligible for Medicare Part A

c. must be retired

d. must be totally disabled

Tim had an on-the-job accident and collects benefits from his individual disability income policy. Which factor could possibly reduce these benefits?

a. state and federal income taxes

b. benefits he receives from workers compensation

c. total household income

d. assistance he receives from friends and family

Third-party administration has become fairly common in accident and health insurance due to the growth of

a. the Affordable Care Act

b. self-funding of benefits

c. health savings accounts

d. Medicaid

Which of the following is NOT true of a preferred provider plan?

a. If service is obtained outside the preferred provider plan, benefits are reduced and costs increase

b. Members of the preferred provider plan select from among the preferred providers for needed services

c. Hospitals can only initiate preferred provider plans

d. Preferred provider plans can include dental care

What can be expected when a preferred provider organization (PPO) patient decides to use a non-PPO?

a. higher out-of-pocket expenses

b. lower out-of-pocket expenses

c. 100% coverage

d. no coverage

Where does the primary funding for Medicare Part A come from?

a. private funding

b. insurance company funding

c. state funding

d. federal payroll and self-employment taxes

Which of the following health plans pay benefits on a pre-paid service basis?

a. Medicare

b. Medicaid

c. Group medical expense plans

d. HMO

An accident and health plan that typically covers ONLY the services of approved providers is called a(n)

a. HMO plan

b. POS plan

c. PPO plan

d. major medical plan

Tonya has been diagnosed with kidney failure and has group accident and health insurance through her large employer. Which of these accident and health plans will be primary during the months following her diagnosis?

a. Medicare

b. Medicaid

c. Medicare Supplement

d. Her employer's group accident and health plan

Which statement is true about a permanent disability under workers compensation coverage?

a. employee is expected to return to work within 6 months

b. coverage includes nonoccupational injuries

c. employee is expected to make a full recovery

d. coverage excludes nonoccupational injuries

The grouping of two or more small employers in order to obtain group health insurance at a favorable rate is called a multiple employer

a. grouping

b. trust

c. alliance

d. corporation

Medicare Part A covers which type of care?

a. skilled nursing facility care

b. custodial care

c. respite care

d. intermediate nursing facility care

In a staff model HMO, enrollees normally have which of the following pharmacy options available to them?

a. mail-order pharmacy

b. in-house pharmacy

c. captive pharmacy

d. network pharmacies

Ken is age 65 and has 2 years until he receives Social Security retirement income benefits. At his current age, which is true about Medicare Part A Hospital Insurance coverage?

a. It is available through application to Homeland Security

b. It is available through application to Social Security

c. He is automatically enrolled through this employer

d. He is not eligible until he starts receiving social security retirement income

Medicaid will pay for nursing home expenses under what condition?

a. must have permanent kidney failure

b. must be age 65 or older

c. must be receiving Social Security disability benefits

d. must have financial need

The coinsurance for skilled nursing facility services covered by Medicare after the 100% Medicare coverage ends is

a. 15% of the approved amount

b. 30% of the approved amount

c. a percentage of the approved amount

d. a flat dollar amount per day

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

a. Preferred Provider Organization (PPO)

b. Health Maintenance Organization (HMO)

c. Designated Provider Organization (DPO)

d. Professional Service Organization (PSO)

All parts of the Medicare program (except for public information and enrollment) are administered by which federal agency?

a. the ACA

b. the Social Security Administration

c. the Department of Homeland Security

d. the Centers for Medicare and Medicaid Services

Social Security disability income requirements state that in order to become fully insured on a permanent basis, you must have worked in a covered occupation for

a. 10 quarters

b. 20 quarters

c. 30 quarters

d. 40 quarters

Part A Medicare includes coverage for all of the following services EXCEPT

a. first 60 days of hospitalization

b. 120 days of Skilled Nursing Facility care

c. hospice care

d. inpatient mental health care limited to 190 days in a lifetime

After joining a health maintenance organization (HMO), a subscriber will typically select a(n)

a. capitation level

b. primary level physician

c. closed panel

d. deductible level

If an individual would like to enroll in Medicare or seek public information about Medicare, which federal agency handles this?

a. Department of Health and Aging

b. Social Security Administration

c. Centers for Medicare and Medicaid Services

d. Department of Homeland Security

An individual may receive Medicare Part A Hospital benefits, regardless of age, as long as the person has received which of the following benefits for at least 24 months?

a. unemployment

b. workers compensation

c. Medicaid compensation

d. Social Security Disability

Individuals seeking Social Security disability income benefits must have a disability that will eventually lead to death, or be expected to last at least

a. 3 months

b. 6 months

c. 9 months

d. 12 months

An HMO prescription drug plan is generally characterized by

a. generic drugs only

b. annual deductibles

c. drugs dispensed through participating pharmacies

d. drugs dispensed through online pharmacies

Skilled nursing facility expenses are sometimes coved by , but ONLY if the insured was hospitalized prior to entering the facility.

a. HMOs

b. Medicare

c. Medicaid

d. Medicare Supplements

After the initial enrollment period for Medicare Part B has expired, when may an individual purchasing again?

a. January through March of each year

b. October through December of each year

c. Six months after the individual's birthday month of each year

d. Three months after the individual's birthday month of each year

At what age do most people become eligible for Medicare?

a. 59 1/2

b. 62

c. 65

d. 72

Medicare Part A does NOT provide coverage for

a. inpatient room and board

b. inpatient prescription medication

c. first 3 pints of blood

d. skilled nursing facility care

Specialty care is provided by which of the following health maintenance organization (HMO) providers?

a. neurologist

b. HMO administrator

c. HMO director

d. gatekeeper

The benefit period of Medicare Part A begins on the first day the insured

a. notices symptoms

b. enters a hospital

c. becomes eligible for Medicare

d. is diagnosed of an illness

Medicare can be described as

a. a supplemental income source for individuals over the age of 65 or permanently disabled

b. a state health program for individuals over the age of 65 or permanently disabled

c. a federal health program for individuals with financial need

d. a federal health insurance program for individuals over the age of 65 or permanently disabled

Which of these procedures is NOT designed for ambulatory care centers?

a. inpatient surgery

b. vaccinations

c. outpatient surgery

d. physical examinations

Which of these would NOT likely qualify as a presumptive disability?

a. loss of sight in one eye

b. loss of both hands

c. loss of hearing

d. loss of speech

A policyowner suffers an injury that renders him incapable of performing one or more important job duties. Any decrease in income resulting from this injury would make him eligible for benefits under which provision?

a. partial disability

b. non-disabling injury

c. presumptive disability

d. flat amount disability

What is taken into consideration when defining "total disability" in a disability income insurance policy?

a. number of days spent in the hospital

b. the amount of additional coverage the insured has

c. the insured's education, training, and experience

d. the elimination period

An insured is covered under a group long-term disability policy. Under this type of policy, the definition of disability based on any occupation typically applies

a. only to part-time employees

b. only to white collar employees

c. during the probation period

d. after two years of disability

Which of the following statements accurately describes the financial impact of total disability?

a. may be worse than the financial impact of death

b. with the right insurance coverage, the potential exists to make more money than while working

c. the financial impact is usually minimal

d. no negative impact because of programs like Social Security and Workers Compensation

When issuing disability income coverage on a substandard risk, an insurance company may

a. raise the deductible

b. shorten the benefit period

c. raise the benefit limits

d. reduce the premium

Which of the following would permit an insurer to delay a covered disability policy claim?

a. probationary period

b. service waiting period

c. elimination period

d. grace period

Pat is covered by a disability income insurance policy that covers disabilities arising from a work-related illness or injury. The amount of his disability income payments for an on-the-job injury may be reduced by

a. medical expenses covered under Pat's employer-sponsored group health insurance

b. benefits paid under workers compensation

c. income earned by Pat's spouse

d. a deductible stated in the policy's provision

Jonas is covered with disability insurance through his employer. The employer pays 75% of the premium, while Jonas pays the other 25%. What is Jonas' tax liability for any benefits paid from the disability plan?

a. taxes must be paid on all benefits received

b. no taxes are payable on any benefits received

c. taxes must be paid on 25% of the benefits received

d. taxes must be paid on 75% of the benefits received

For purposes of disability income insurance, earned income would include all of the following EXCEPT

a. salary

b. commissions

c. bonus

d. dividends

What does the rehabilitation benefit cover in a disability income policy?

a. covers the cost of all out-of-pocket expenses while a disabled worker is unable to work

b. covers the approved cost of the rehabilitation necessary to help a disabled insured return to work

c. covers the cost of inpatient rehabilitation for alcohol and drug dependency

d. pays a lump-sum indemnity to cover all out-of-pocket expenses

Mark is covered by a policy that uses the regular occupation (own-occ) definition of total disability. Using this definition, he will be considered disabled if unable to

a. perform the substantial and material duties of his regular occupation

b. work in any career field

c. perform the duties of an occupation that matches his skill level and experience

d. earn less than half his normal income

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

If a disability income policy contain a cost-of-living adjustment rider, benefits must typically be increased

a. at the insurer's discretion

b. at least once per year from the policy issue

c. at least once per year from when benefits begin

d. based on the performance of the S&P

In a disability income contract, an insured is considered to be totally disabled under the presumptive disability provision if he/she

a. loses hearing in one ear

b. loses the use of one hand

c. loses the sight in one eye

d. loses the ability to speak

Which factor determines the maximum disability income benefit that can be purchased by an applicant?

a. the applicant's income

b. the applicant's age

c. the applicant's health

d. the applicant's credit score

Dan owns a disability income insurance policy which provides ONLY nonoccupational coverage. Which of the following circumstances would likely NOT be covered under his plan?

a. he is injured in an automobile accident while driving to work

b. he suffers third-degree burns while on vacation

c. he falls from the roof of his personal residence while replacing shingles

d. he falls and breaks his hip at work

Each of the following will trigger a benefit under the presumptive disability provision, EXCEPT

a. loss of hearing

b. loss of any one limb

c. loss of sight

d. loss of speech

Non-occupational disability coverage is designed for

a. 24 hour protection

b. those who are exempt from Workers' Compensation coverage

c. sole proprietors and self-employed individuals

d. employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation

Jerome is covered by a disability income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?

a. limited coverage

b. Worker's Compensation coverage

c. Occupational coverage

d. Nonoccupational coverage

Beth is a surgeon who has an own-occupation disability income policy. She was injured six months ago and has been unable to return to her practice. Her monthly benefit from the policy is $15,000. During this time, Beth has been working part-time at a local boutique and receives $2,000 monthly. What is her ongoing monthly benefit while she is unable to perform her surgical duties?

a. $13,000

b. $17,000

c. $15,000

d. nothing

An insured covered under a Disability Income policy is disabled and collecting benefits for a period of two months. He returns to work and is again disabled from the same cause, whereupon benefits continue to be paid. This is an example of which of the following?

a. presumptive disability

b. concurrent disability

c. residual disability

d. recurrent disability

A disability income insurance policy was recently issued with a rating. What does this mean?

a. policyowner will be charged an additional premium

b. policy will have specific illness excluded from coverage

c. policyowner will be charged a reduced premium

d. policy will have a longer waiting period

Which of the following BEST describes a "partial disability"?

a. becoming deaf in one ear

b. unable to perform all job duties due to a short-term disability

c. unable to perform one or more job duties

d. when a disability recurs from a previous illness or accident

Jim is covered under a disability income policy. He is hurt while engaged in an occupation that is more hazardous than the occupation he specified in the policy. What action will the insurer likely take?

a. decrease the premium

b. reduce the benefit level

c. increase the benefit level

d. increase the premium

Short-term group disability income benefits are

a. always paid income-tax free to the employee

b. a percentage of weekly earnings up to a stated maximum

c. only payable if the disability was work-related

d. taxable to the employee when the plan is fully contributory

Disability income policies provide protection for which of the following?

a. economic death

b. physical death

c. hospital expense

d. custodial care

The inability to perform SOME of the duties of one's own occupation is known as a

a. recurrent disability

b. total and permanent disability

c. residual disability

d. presumptive disability

Larry wants to purchase an individual disability income policy to provide continuous income while disabled. He is also covered by a two-month wage continuation benefit from his employer. What should the policy elimination period be for his individual policy?

a. 30 days

b. 60 days

c. 90 days

d. 120 days

How are the premiums for an individually-owned disability income policy treated for tax purposes?

a. amount spent on premiums over 7.5% of gross income is tax deductible

b. partially tax deductible

c. fully tax deductible

d. not tax-deductible at all

Which of the following best describes the presumptive disability provision?

a. reduces the incontestability period

b. increases the monthly benefits stated in the policy

c. waives the typical total disability requirements

d. assume all injuries result in total disability

What is the elimination period of an individual disability policy?

a. time period an insured must wait before coverage begins

b. time period a disabled person must wait before benefits are paid

c. time period after the policy issue date in which the provisions are still contestable

d. the point in time when benefits are no longer payable

Elimination periods typically apply to

a. hospital policies

b. short-term policies

c. disability policies

d. blanket policies

An insured, age 67, is covered under a disability income policy. What will the insurer require in order for the insured to continue coverage?

a. the insured must submit to a physical examination on annual basis

b. the insured must be actively at work for a specified number of hours per week

c. the insured must remain in the same direction

d. the insured must continue working for the sam employer

Christine is receiving benefits provided from her disability income insurance. As compared to her previous earnings, the disability benefits should be

a. the same

b. less than 50%

c. somewhat less

d. somewhat more

Major Medical policies are typically characterized by which of the following?

a. corridor deductible

b. flat deductible

c. probationary period

d. first dollar coverage

A Health Reimbursement Arrangement MUST be established

a. with employee funding

b. with other employer-sponsored benefits plans

c. by the employer

d. only during specific open enrollment periods

Which of the following does medical expense insurance NOT typically cover?

a. x-rays

b. treatment in a government facility

c. hospitalization

d. diagnostic testing

Which of the following is considered a Limited accident and health plan?

a. HMO

b. PPO

c. cancer plan

d. major medical plan

What is covered under a limited accident and health insurance policy?

a. losses that occur only in limited occupations

b. limited pre-existing conditions

c. losses that occur only in limited age groups

d. limited perils and amounts

Which of these policies is considered to be comprehensive health policy?

a. major medical policy

b. surgical policy

c. limited benefit policy

d. health savings account

A preferred provider plan and an indemnity plan are similar in what way?

a. only select providers may be used

b. both pay on a fee-for-service basis

c. any provider may be used

d. both operate on a prepaid basis

What are reasonable and customary charges for health insurance primarily based on?

a. average charges as determined by the NAIC

b. average charges as determined by actuarial tables

c. average charges within a geographic region

d. average charges within the United States

A policyowner suffers a covered accident and health insurance loss on June 30, and submits the proof of loss to the insurer July 10. If the policyowner cancelled the coverage on July 2, how will the insurance company handle the claim?

a. insurer does not have to pay the claim

b. only a percentage of the claim will be paid

c. claim must be paid after proof of loss is received

d. claim will be denied

Larry has a Major Medical Expense policy for his family with a $1,000 per family/per year deductible and an 80/20 coinsurance provision. If Larry's family files four claims of $400, $800, $100, and $700 in one year, how much will the insurance company pay?

a. $500

b. $800

c. $1,000

d. $1,200

The major medical deductible carryover period normally applies to expenses incurred during the last months of the plan year.

a. five

b. four

c. three

d. two

Chris has a single major medical contract which covers all medical expenses. His plan is considered to be

a. comprehensive

b. supplemental

c. limited

d. basic

Which of these statements regarding Major Medical Expense insurance is NOT true?

a. Benefits are paid typically after the coinsurance provision has been satisfied

b. Policies normally have a high maximum benefit

c. Policies typically include a deductible

d. Benefits are paid on a capitation basis

What is the MAXIMUM number of employees an employer may have for qualified medical savings accounts?

a. 20 employees

b. 30 employees

c. 40 employees

d. 50 employees

A major medical expense policy typically does NOT

a. contain a deductible

b. have a high limit of coverage

c. contain a coinsurance provision

d. pay surgeon fees on a first-dollar basis

Dan has a major medical expense policy with a $200 deductible and an 80/20 coinsurance provision. He incurs covered medical expenses of $100 in November and $400 in January. Under the carryover provision, what will the insurer pay?

a. $200

b. $210

c. $220

d. $240

Major medical plans typically exclude coverage for which of the following benefits?

a. maternity care

b. custodial care

c. hospital room and board

d. surgeon's fees

Fee-for-service is a method of administering health insurance benefit payments in which

a. the insurer is reimbursed directly

b. the cost of each service is bundled into one payment

c. the cost of each service is scheduled

d. the insurer pays for services through a voucher system

How long is individual medical expense insurance normally written for?

a. 1 year

b. 2 years

c. 3 years

d. 4 years

An individual is insured under a major medical plan with a $1,000,000 lifetime benefit. The plan has a $500 deductible and an 80% coinsurance. If the insured suffers a $50,500 medical expense during the calendar year, what is the remaining lifetime benefit?

a. $950,000

b. $960,000

c. $989,500

d. $1,000,000

Which of the following statements is true regarding accident and health insurance claims that reimbursed on an indemnity basis?

a. no proof of loss is needed

b. claims can be sent directly to the insured

c. claims are required to be sent to the health provider

d. no claim form is needed

Karen is considering replacing her individual accident and health insurance policy with another individual policy. She has had issues in the past with her gall bladder that would be considered a pre-existing condition. How will a pre-existing conditions exclusion affect Karen's new insurance contract?

a. will not affect the new contract at all

b. may increase her benefits

c. may reduce her benefits

d. will permanently exclude her from insurance coverage

Which type of deductible must be satisfied again for each illness or accident in a major medical plan?

a. specific-cause

b. per-cause

c. all-cause

d. comprehensive-cause

A pre-existing condition exclusion in an accident and health insurance policy pertains to

a. prior insurance coverage

b. prior financial matters

c. prior health matters

d. prior occupations

Which of the following is NOT included as a hospice benefit under a major medical plan?

a. home-based services

b. counseling

c. rehabilitation

d. pain management

Which statement is NOT true regarding health insurance policies that provide limited benefits?

a. only persons under the age of 65 are eligible

b. coverage may be limited to a specific dread disease, such as cancer

c. benefits may be paid on a reimbursement or indemnity basis

d. benefits may be paid on a reimbursement or indemnity basis

The amount of a covered loss to be paid by the insured before a major medical expense policy begins to pay is called the

a. out-of-pocket expense

b. coinsurance percentage

c. deductible amount

d. usual, customary, and reasonable charges

The "Use it or Lose it" rule applies to

a. Medical Savings Accounts

b. Health Savings Accounts

c. Health Reimbursement Accounts

d. Flexible Savings Accounts

A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for

a. hospital charges

b. physician fees

c. experimental and investigative services

d. nursing services

Mary has a Health Savings Account (HSA). Distributions that have been made for anything other than qualified medical expenses are considered taxable and subject to a penalty of

a. 10%

b. 20%

c. 30%

d. 50%

What do Limited accident and health policies normally cover?

a. a specific illness or event

b. a specific age group

c. a specific income group

d. a specific geographical location

In order to contribute to a Health Savings Account (HSA),

a. the applicant must have no sickness & accident coverage

b. the applicant must be enrolled in a High Deductible Health Plan (HDHP)

c. the applicant must be at least 55 years of age

d. the applicant must be at least 65 years of age

A major medical expense plan typically includes coverage for hospital room and board. Which of the following is normally covered under the category "room and board"?

a. surgeon's fee

b. diagnostic services

c. prescription medication

d. general nursing care

A medical fee schedule shows the amount an insurer will pay for a given procedure. This amount is considered to be the

a. negotiated amount payable

b. average amount payable

c. lowest amount payable

d. highest amount payable

Long-term care policies normally cover expenses associated with

a. drug and alcohol dependency treatment
b. halfway homes
c. nursing homes
d. intensive care units

Linda is covered with the long-term care insurance and has early-stage Alzheimer's. She is still able to reside in her home while receiving primary care, as opposed to moving into a nursing home. All of the following long-term benefits encourage home health care EXCEPT

a. custodial care
b. home health care
c. adult day care
d. respite care

Which of the following is NOT an allowable exclusion for long-term insurance policies?

a. Self-inflicted injuries
b. Acute care
c. Custodial care outside the U.S.
d. Care for incurable conditions

Under a long-term care inflation rider, the benefit levels

a. periodically increase without proof of insurability
b. periodically increase without proof of insurability
c. periodically decrease with proof of insurability
d. periodically decrease with proof of insurability

Emergency health care coverage for Medicare enrollees traveling abroad is

a. excluded from a Medicare Supplement
b. a core benefit under a Medicare Supplement
c. a Medicare Supplement additional benefit
d. a Medicare Part D benefit

Which of these statements reflects an accurate portrayal of Medicare SELECT?

a. Insured uses preferred providers in exchange for paying lower premiums
b. Evidence of insurability must always be given before enrollment
c. Medicare SELECT is normally subject to deductibles and coinsurance
d. Open enrollment periods do not apply to medicare SELECT plans

When dealing with long-term care coverage, which of the following are classified as ADLs?

a. reading, writing, learning
b. occupation, income, insurability
c. age, height, weight
d. eating, bathing, dressing, and mobility

Which of the following does a Medicare Advantage enrollee typically pay for?

a. retainer fee
b. annual deductibles
c. small co-pay per visit or per service
d. capitation

A health plan offered by private insurance companies is

a. Social Security
b. Medicaid
c. Medicare
d. a Medicare Supplement

What is a "functional assessment" for long-term care benefits?

a. an assessment of the insurer's financial solvency
b. a review of the insurer's ability to pay long-term care 
c. a review of the insured's ability to perform the activities of daily living
d. an assessment of the quality of care given in a long-term care facility

Julie is in need of assistance with one or two activities of daily living. She may be eligible for a(n)

a. respite care facility
b. hospice facility
c. assisted living facility
d. intermediate care facility

Employer-paid qualified long-term care insurance premiums are typically

a. deducted from the employee's net income
b. included on the employee's gross income
c. included as a dividend to the employee
d. excluded from the employee's gross income

Medicare Supplement insurance requires an individual to be at least how old for open enrollment?

a. 59 1/2 years old
b. 65 years old
c. 70 1/2 years old
d. No minimum age

Which individual would be best suited for Medicare Supplement insurance?

a. Medicare enrollee
b. Medicaid enrollee
c. Social Security recipient
d. HMO subscriber

Medicare Part A coinsurance payments are covered by

a. Part B Medicare
b. Part D Medicare
c. Medicare Supplement Plan A
d. Never covered

The guarantee of insurability option provides a long-term care policyowner the ability to

a. buy additional coverage at a later date
b. add the insured's spouse at a later date
c. pay the same premium for life
d. cancel the policy at anytime

Which of the following does NOT meet the requirements of "skilled nursing care"?

a. must be ordered by a doctor
b. must require daily care
c. must be provided exclusively in a hospital
d. must be provided by skilled medical practitioners

Which of the following describes coverage for the Medicare Part B coinsurance?

a. only a Long-term care policy will cover Medicare Part B coinsurance
b. a Medicare Supplement optional benefit
c. a Medicare Supplement core benefit
d. Medicare Part B does not require a coinsurance so no additional coverage is needed

Custodial care is normally covered under 

a. major medical insurance
b. Medicare Part B
c. Long-term disability insurance
d. Long-term care insurance

What type of doctor-ordered care assists an individual with performing basic daily activities such as bathing, dressing, and eating?

a. custodial care
b. respite care
c. family care
d. domestic care

Which of these is a type of private insurance that covers the cost-sharing amounts under Medicare?

a. major medical insurance
b. Medicaid
c. disability income
d. Medicare Supplement

Home health care benefits typically do NOT include coverage for

a. nursing care
b. wheelchairs
c. physical therapy
d. prescription medication

In a long-term care insurance, what s an "ADL"?

a. advocates of daily living
b. approved dollar limits
c. activities of daily living
d. accepted doctor lists

Respite Care Coverage is typically found in a(n)

a. HMO
b. PPO
c. Long Term Care policy
d. Major Medical Expense policy

Which of the following is NOT covered by a comprehensive long-term care policy?

a. custodial care
b. acute care
c. physical therapy
d. skilled nursing care

Terry receives long-term physical therapy at her residence. What type of insurance would cover this service?

a. home health care
b. long-term disability income
c. nursing home
d. respite care

In long-term care insurance, what is the length of time for which claims will be paid?

a. benefit period
b. free-look period
c. grace period
d. elimination period

Which of the following is a true statement regarding a Medicare Supplement policy purchased during the open enrollment period?

a. there will be a reduction in benefits
b. the elimination period will be longer than normal
c. the cost of premiums will be higher than normal
d. the policy will be issued regardless of health

Some standard Medicare Supplement policies include which benefit?

a. Hospice care
b. Respite care
c. Vision care
d. Custodial care

Patrick purchased a long-term care policy. He has a health condition for which medical treatment was recommend by a physician within 6 months prior to the policy's effective date. This condition is called a(n)

a. antecedent condition
b. pre-existing condition
c. hazardous condition
d. grandfathered condition

Andy is in need of health care performed by skilled medical practitioners, but only on an intermittent basis. What level of care will his doctor likely prescribe?

a. respite care
b. intermediate care
c. custodial care
d. skilled nursing care

Medicare supplement insurance that provides a preventative medical care benefit will often cover

a. respite care
b. hospitalization
c. custodial care
d. yearly physical examinations

Qualified long-term care premiums are treated for tax purposes as

a. Qualified Retirement plans
b. always non-deductible
c. 100% tax-deductible
d. tax-deductible to the extent they exceed 7 1/2% AGI

Medicare Part A does NOT provide coverage for

a. inpatient room and board
b. prescriptions administered while an inpatient
c. the first 3 pints of blood
d. skilled nursing facility care

A Medicare Supplement policy is required to do which of the following?

a. Provide a 10 day free-look period
b. Provide a 20 day free-look period
c. Provide a 30 day free-look period
d. Provide a 60 day free-look period

Medicare Part B excess charges are covered by

a. long-term care policies
b. respite care
c. Medicare Part A
d. Medicare Supplement insurance

A family counseling benefit is typically offered under which of these coverages?

a. skilled nursing care
b. respite care
c. home health care
d. hospice care

Which would NOT be a location where skilled nursing care is provided?

a. hospital
b. custodial care facility
c. nursing home
d. personal residence

Long Term Care policies will usually pay for eligible benefits using which of the following methods?

a. delayed
b. fee for service
c. expense incurred
d. respite

An accident and health insurer has just received written proof of loss from one of its insureds. The insured must now wait 60 days before

a. submitting another claim
b. bringing legal action against the insurer
c. the insurer will pay the claim
d. purchasing more insurance from this insurer

The insured's consideration given for a health insurance policy is 

a. the first premium payment and the application
b. the initial premium payment only
c. the application
d. the initial premium and an investigative report

An accident and health insurance policy's premium requirements are set forth in which of the following provisions?

a. insurance clause
b. entire contract clause
c. consideration clause
d. premium mode

Which of the following statements accurately describes the "time limit on certain defenses"?

a. after a stated period of time, claims cannot be denied due to material misrepresentation of the application
b. all claims can be disputed after two years
c. an insured cannot file a lawsuit within 90 days of the claim being filed
d. the right to return an accident and health policy must be within 10 days of policy delivery

Who may terminate coverage under a cancelable health insurance policy?

a. the insured only
b. the insurer only
c. the insurer or the insured
d. an officer of the insurer

An insured files for an accident and health insurance policy claim eight days after the premium due date. The benefit payable is $500 and the overdue premium is $200. Assuming that the policy pays on a first-dollar basis and contains the unpaid premium provision, how much will the insurer pay?

a. $0
b. $200
c. $300
d. $500

The Change of Occupation provision in a Disability Income policy states that, in the event the insured changes to a less hazardous occupation, which of the following may apply?

a. benefits will remain the same in the event of a covered claim
b. premiums cannot be adjusted
c. benefits can be increased in the event of a covered claim
d. benefits can be reduced in the event of a covered claim

Tim is covered by an accident and health insurance policy that may not be changed in any way by the insurer up to a stated age, as long as the premiums are paid. What type of policy is this?

a. occupationally renewable
b. noncancelable
c. guaranteed renewable 
d. conditionally renewable

An insured is covered with a health insurance policy. If the insured would like to cancel the policy, he/she must

a. wait until the end of the calendar year
b. notify the insurance company in writing
c. notify the insurance company by telephone
d. provide a reason for cancelling

Which health policy clause specifies the amount of benefits to be paid?

a. insuring
b. consideration
c. free-look
d. payment mode

An insured must notify an insurer of a medical claim within how many days after an accident?

a. 10
b. 20
c. 30
d. 40

Omar is covered by a disability income policy. He is hurt performing an occupation more hazardous than the occupation listed in his policy. The policy's change of occupation provision will have what effect?

a. increase the benefit level
b. reduce the benefit level
c. increase the premiums
d. decrease the premiums

A Guaranteed Renewable provision allows 

a. discrimination of individuals who have an increased loss experience

b. premiums that may not be increased beyond contractual requirements

c. premiums which can only be increased per rate class

d. cancellation of the policy at the insurer's discretion

James is covered with health insurance by two different insurers. The "insurance with other insurers" provision in an individual health insurance policy allows an insurer to pay benefits to the insured on a pro-rata basis when

a. the policy's maximum lifetime benefit level has been paid
b. the policy is beyond the incontestable period
c. the insurer was not notified prior to the claim that the insured has other health coverage
d. the policy is beyond the free-look period

Which statement concerning the Entire Contract provision in an individual accident and health insurance policy is TRUE?

a. the agent can waiver policy provisions and change the policy with the insurer's consent
b. the agent has the authority to waive the policy's provisions under certain conditions
c. the agent has the authority to change the policy under certain conditions
d. the agent doesn't have the authority to change the policy or waive its provisions

Disability income insurance normally excludes coverage for disabilities that arise from

a. automobile accidents
b. injuries sustained while traveling abroad
c. occupational injuries
d. active military duty

Which of the following health insurance provisions requires that the application becomes part of the policy?

a. consideration clause
b. insuring clause
c. entire contract clause
d. application clause

How is an insured's accident and health claim handled by an insurer if it occurs during the policy's grace period?

a. the claim has to be approved by an officer of the insurer
b. no claim will be paid until premium is paid current
c. the claim is paid in full and the unpaid premium will be waived by the insurer
d. the unpaid premium may be subtracted from the reimbursement

Who is protected with the "other insurance with this insurer" provision?

a. insurance company
b. insured
c. policyowner
d. claimant

Which of the following health insurance plans charges a premium that cannot be increased?

a. guaranteed renewable
b. cancelable
c. noncancelable
d. conditionally renewable

A health insurance MUST provide a proof of loss form

a. within 10 days of the actual loss
b. within 10 days of receipt of the notice of loss
c. within 15 days of receipt of the notice of loss
d. within 15 days of the actual loss

Under what circumstance does an accident and health insurer have the right to request an autopsy?

a. when the claim exceeds an amount specified in the policy
b. when 2 days have passed after death
c. when not prohibited by state law
d. when consent is given by the beneficiary

Kelly purchases a health insurance policy issued on a conditionally renewable basis. The insurance company has a right to refuse renewal of the policy for

a. any change in Kelly's health
b. specific reasons stated in the contract
c. any reason the insurer sees fit
d. profitability reasons

The standard provisions of an accident and health insurance policy require that the

a. policy, endorsements, and attached papers constitute the "entire contract"
b. policy summary, conditional receipt, and initial premium constitute the "entire contract"
c. change of occupation provision is mandatory
d. grace period be no shorter than 60 days

Periodic health claim payments MUST be made at least

a. monthly
b. weekly
c. daily
d. annually

Which of the following situations would a medical exam NOT be required for an individual health insurance applicant?

a. applicant was recently hospitalized
b. applicant has not a physical exam in a number of years 
c. applicant's family members have a history of cancer
d. applicant has no prior health insurance

Mary is the sole proprietor of her business and has a family health plan. She would like to deduct the premiums from her taxes. What percentage of her premiums are tax deductible?

a. 0%
b. 50%
c. 75%
d. 100%

Which of these is NOT an underwriting responsibility of an insurance producer?

a. asking relevant questions concerning an applicant's avocations
b. requesting an attending physician's report (APR)
c. ordering an inspection report
d. determining the final rate classification

In what situation could an insurance policy's coverage be modified?

a. applicant is a preferred risk
b. applicant is a substandard risk
c. applicant is a standard risk
d. applicant is uninsurable

How is a community rating used for underwriting purposes?

a. each member of a large group is individually underwritten
b. each individual and group plan in the same geographical area is individually underwritten
c. the same rates are charged for individual and group plans in the same risk category
d. the same rates are charged for individual and group plans in the same geographical area

The type of health insurance in which underwriting procedures are the most restrictive is 

a. accidental
b. individual
c. group
d. employer-raid

When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?

a. producer
b. insurer
c. underwriter
d. fiduciary

What must be given to an accident and health insurance applicant when the producer receives an application and the initial premium?

a. producer's report
b. conditional receipt
c. commission disclosure 
d. good health statement

What is normally the consequence for NOT obtaining certification prior to receiving inpatient medical care?

a. a reduction in benefits
b. a delay in the payment of benefits
c. a cancellation of coverage
d. a taxation of benefits

Field underwriting by a producer

a. is used to reduce costs to the insurer
b. involves conducting a physical examination of the applicant
c. may result in the disclosure of hazardous activities of the applicant
d. is illegal in most states

Which of these noncontributory group plans would a claim likely result in the payment of federal income taxes?

a. accidental death
b. blanket health
c. major medical
d. disability income

When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do?

a. insurer is not obligated to take any action
b. insurer is obligated to verify that the agent is in compliance
c. give notice, explain, and allowing opting out
d. provide the proper NAIC paperwork

After an applicant reads and signs an insurance application, he/she should be conscious of the fact that

a. a false statement could lead to loss of coverage
b. premium refunds are not allowed
c. the policy is guaranteed to be issued
d. the premium quoted by the agent is final

Which of these plans allow a participant to choose either a network or non-network provider at the time when medical care is needed?

a. HMO
b. Medicare Supplement
c. point-of-service
d. limited benefit

A signed good health statement may be collected by a producer at the time of

a. policy issue
b. application
c. policy delivery
d. physical examination

Lamont has a point-of-service plan is seeking to obtain health services outside the network. What will like be the end result?

a. reduction in care given
b. higher out-of-pocket costs
c. increase in premiums
d. denial of specialized services

Who must sign a rider attached to a health insurance policy in order for it to be valid?

a. producer only
b. insured only
c. insured and producer
d. insurance company underwriter

Which statement is true regarding hospital permission certification for emergency situations?

a. notification is not required for emergency situations
b. insured cannot be admitted without preadmission certification
c. notification is required to be given before insured is admitted to the hospital
d. notification is required to be given after insured to the hospital

Health care costs can be better controlled by utilizing preadmission testing. Preadmission testing can reduce the

a. surgeon's fees
b. prescription drug charges
c. length of hospitalization
d. elimination period

Which of these is NOT considered the responsibility of a producer in the underwriting process?

a. collecting additional medical information if needed
b. promptly sending the completed application to the insurance company
c. forwarding any material personal observations to the insurer
d. selecting the final approval date

K is an agent who takes an application for individual accident and health insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

a. the date the sales appointment was made
b. the date the application was submitted to the insurance company
c. the date of application
d. the date of the producer delivered the policy, collected the initial premium, and obtained a good health statement from the insured

Which of the following best describes the tax treatment of medical expense policies for the self-employed?

a. 100% of medical expense plan premiums are tax deductible
b. 50% of medical expense plan premiums are tax deductible
c. 7.5% of medical expense plan premiums are tax deductible
d. 0% of medical expense plan premiums are tax deductible

How does an underwriter take into account an applicant's marital status? 

a. when determining if a policy will be issued'
b. when determining if an applicant is insurable
c. when determining who is eligible for dependent coverage
d. when determining if a rating will be placed on a policy

To which of the following group plans do HIPAA rules NOT apply?

a. PPOs
b. Disability income
c. HMOs
d. Major Medical

A producer gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

a. When the policy is issued
b. The date of policy delivery
c. When the conditions of the receipt are met
d. the date the sales appointment was set

Reductions in coverage are one feature of          in health insurance policies. 

a. optional provisions
b. mandatory provisions
c. cost containment
d. the insuring clause

The initial premium for an accident and health insurance policy is typically paid in what way?

a. the applicant mails it to the insurer after the policy has been approved
b. it is typically obtained by the agent and forwarded to the insurer
c. it is typically forwarded to the insurer by the applicant
d. the agent pays it from any commissions received

A disability income insurance policy was recently issued with a rating. What does this mean?

a. policyowner will be charged an additional premium
b. policy will have specific illnesses excluded from coverage
c. policyowner will be charged a reduced premium
d. policy will have a longer waiting period

When does the producer give a premium receipt for an accident and health insurance application?

a. when the application has been approved
b. when the initial premium has been collected with the application
c. during the medical exam
d. when the completed application has been collected

Reductions in coverage are one feature of                   in Health insurance policies.

a. optional provisions
b. mandatory provisions
c. cost containment
d. the insuring clause

The Medical Information Bureau consists of members from which group?

a. doctors 
b. hospitals
c. insurance companies
d. underwriters

Which of these is NOT a factor during the health insurance underwriting process?

a. current residence 
b. physical condition
c. occupation
d. former residence

The disability income policy most likely to have been issued on a substandard basis is

a. non-cancelable with a 60-day elimination period
b. conditionally renewable
c. non-cancelable with a health condition exclusion rider
d. guaranteed renewable with an inflation rider

Which of these is NOT used as selection criteria in the underwriting process of an accident and health insurance application?

a. credit report
b. national origin
c. age of applicant
d. sex of applicant

All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT

a. acquire a statement of good health signature
b. gather the initial premium
c. review policy with applicant
d. leave a conditional receipt with client

An insured may be required to sign which document at policy delivery to ensure there has not been any adverse medical conditions since the time of the application?

a. binding receipt
b. good health statement
c. agent's report
d. MIB disclosure

Which of the following is NOT a basic underwriting action for accident and health insurance?

a. excluding a particular health condition from coverage
b. removing uniform policy provisions
c. declining applications
d. issuing a policy at standard issue

What does the term "field underwriting" refer to in the health insurance industry?

a. a producer's contact with the applicant
b. the interaction of an underwriter with the applicant
c. the medical reports issued by the MIB
d. an insurer conducting an investigative report

After a health insurance application has been originated, the producer normally

a. can change the policy provisions
b. determines whether a claim will be paid
c. is the major personal contact to the insured
d. conducts a physical examination

Which of the following statements regarding hospital pre-admission authorization is NOT true?

a. no delays for emergency treatment
b. it encourages weekend admission
c. non-emergency situations require notification to the insurance company
d. other types of treatment may be encouraged

Which of the following are used by most insurers when determining the premiums for large groups?

a. large number rating
b. group rating
c. area rating
d. experience rating

Which report contains information regarding an individual's general reputation and credit standing?

a. credit report
b. consumer report
c. MIB report
d. agent's report

An applicant for accident and health insurance has a risk factor that is similar to a majority of the insurer's other applicants. What will be the likely outcome of this applicant?

a. issued with a below-standard premium rate
b. issued with a standard premium rate
c. issued with an above-standard premium rate
d. declined coverage

What does a Mandatory Second Surgical Opinion provision provide to an employer-paid health insurance plan?

a. no pre-existing condition exclusions
b. higher employee retention
c. containment of the employer's premium cost
d. increase in surgical procedures

An attending physician's statement is best described as

a. an MIB report
b. a physician's report from an insurance exam
c. medical information on the application
d. a summary of medical history from the physician listed on the application

When a health insurance policy includes a Mandatory Second Surgical Opinion provision, the insured must

a. cover the cost of the second opinion
b. seek a second opinion for all surgeries
c. seek a second opinion for specified elective surgeries
d. seek a second opinion for emergency surgery

In accident and health insurance, field underwriting is very important because of

a. the protection given to the producer's commission
b. the opportunity to charge a higher premium
c. inflation
d. the risk of a moral hazard

Julie is an employee with a group health plan that contain the Mandatory Second Surgical Opinion provision. What is to be expected with this provision in place?

a. Mandatory second surgical opinions are required when emergency surgery is needed
b. The second surgical opinion must always be accepted by the insured
c. Out-of-pocket expenses are higher when a second surgical opinion is obtained as opposed to having only one
d. Out-of-pocket expenses are lower when a second surgical opinion is obtained as opposed to having only one

Which pf the following best describes a point-of-service (POS) plan?

a. a plan which combines medical health care with long-term care coverage
b. a plan which combines indemnity plan features with those of an HMO
c. a plan which does not allow treatment with non-network providers
d. a plan which operates like a PPO plan without a gatekeeper

Which of these is a typical result of a concurrent review?

a. the deductible amount is increased
b. the length of time spent in the hospital is monitored
c. the insured's premiums usually increase
d. the coinsurance is waived

An applicant submits an accident and health insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?

a. applicant can determine which items in the report to leave out
b. insurer can obtain a copy of the heart without the applicant's knowledge
c. fee for the report is typically paid by the applicant
d. applicant has a right to receive a copy of the report

An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT

a. good credit history
b. living in a rural area
c. good health history
d. being a nonsmoker

A health insurance underwriter will most likely view alcohol abuse as a(n)

a. decreased exposure to risk
b. increased exposure to risk
c. condition which cannot be taken into account
d. condition which results in an automatic rejection for coverage

Where is the difference between a standard risk and a substandard risk reflected?

a. backdating
b. coverage is not offered
c. premium charges
d. back-end charges

What is a Pap test designed to detect?

a. cervical cancer
b. prostate cancer
c. oral cancer
d. breast cancer

In what situation would disability income insurance premiums be a deductible expense?

a. partnership paying for group disability income coverage for the partners
b. corporation paying for group disability income coverage for its employees
c. individual paying for his/her own individual disability policy
d. parent paying for a child's individual disability policy

Tim is in need of surgery. Before being hospitalized, he is referred to an outpatient clinic for diagnostic tests. What is this an example of?

a. pre-admission testing
b. capitation
c. mandatory second opinion
d. concurrent review

A health insurance applicants is notified that a physical examination is required. Which of the following statements is correct?

a. physical examinations are performed at the expense of the applicant
b. physical examinations are performed at the expense of the insurer
c. all applicants for group health insurance require a physical examination
d. all applicants for health insurance do not require a physical examination

Kyle is an insured who disregarded an accident and health insurance policy provision that requires him to seek a second surgical opinion. What will the end result be?

a. He may be reimbursed for the surgical procedure at a reduced benefit level 
b.He may be reimbursed for the surgical procedure at a higher benefit level 
c. He will have to start paying higher premiums starting with the next billing cycle
d. He will be ineligible to receive any benefits for this procedure

Replacement can be BEST described as

a. exchanging a new policy for one already in force
b. converting term insurance to be a permanent policy
c. an illegal transaction performed by a producer
d. an existing policy being renewed by the applicant on the renewal date