Accumulative 1-19

Question 1

Which of the following statements regarding deferred annuities is not correct?

A. They typically have a surrender charge that is assessed with contract surrender during the first 2 to 12 years or more. Typically up to 10% of the contract value can be withdrawn free of surrender charge in any 1 year.

B. They generally permit contract owners to withdraw a specified percentage annnually tax-free and without a surrender charge.

C. The owner is not required to annuitize the contract.

D. They may be funded with a single premium payment or with periodic premium payments.

Answer 1

B

Question 2

Which of the following statements best describes the nature of a cash value loan?

A. It is a financial transaction in which the cash value is unaffected but the face amount is reduced by the amount of the loan plus interest.

B. It is a financial transaction in which future growth of the cash value is suspended until the loan amount plus interest is recovered.

C. It is a financial transaction in which the cash value is reduced by the amount of the loan.

D. It is a financial transaction in which the insurer loans the money and attaches a comparable portion of the cash value as collateral.

Answer 2

D

Question 3

Which of the following statements regarding annuities is not correct?

A. Annuities that pay benefits in specified dollar amounts are fixed annuities; annuities that pay benefits in relation to units are variable annuities.

B. An installment refund annuity guarantees a specific amount of benefits, payable to the annuitant only; if death occurs before total payout, an amount equal to all premiums is refunded to the annuitants estate or beneficiary.

C. An annuity can be classified as immediate or deferred, depending on when benefit payments begin.

D. Pure life annuities provide income as long as the annuitant lives; benefits terminate at death.

Answer 3

B

Question 4

Which of the following is not a cost containment method used to reduce hospital care costs?

A. Preauthorization

B. Indemnification of medical expenses

C. Mandatory second opinions

D. Outpatient benefits

Answer 4

B

Question 5

An example of a state-administered disability program is

A. Medicare

B. Workers compensation

C. Social Security

D. Medigap

Answer 5

B

Question 6

Which of the following statements regarding current assumption whole life insurance is not correct?

A. During a period of relatively high interest rates the premiums could be reduced.

B. Premium adjustments are usually made on an annual basis.

C. It is also known as interest-sensitive whole life.

D. During a period of relatively high interest rates the premiums could be increased.

Answer 6

D

Question 7

Which of the following statements concerning qualified retirement plans is not correct?

A. Employer-sponsored IRAs are considered qualified retirement plans.

B. Employer contributions to a qualified plan are tax deductible as a business expense.

C. Employer contributions to a qualified plan on behalf of its employees are taxable income to the employees when they are made.

D. The earnings of a qualified plan are not taxed until they are distributed.

Answer 7

C

Question 8

Which of the following statements about a Roth IRA is correct?

A. The Roth IRA was introduced in 1980.

B. Only individuals younger than age 72 can contribute.

C. Distributions must begin at age 72.

D. Contributions are not tax deductible.

Answer 8

D

Question 9

All of the following are examples of medical cost management except

A. Denying claims

B. Precertification review

C. Mandatory second opinion

D. Ambulatory surgery

Answer 9

A

Question 10

An individual life insurance policy must include all of the following except

A. A 1-month grace period

B. An entire contract provision

C. An incontestability provision

D. A table showing the annual loan values of the policy for at least 30 years

Answer 10

D

Question 11

Which of the following is not an essential health benefit found in qualified plans?

A. Rehabilitative services

B. Dental services

C. Emergency services

D. Pediatric services

Answer 11

B

Question 12

Since the obligations of the insurance company hinge on certain acts of the policyowner, beneficiary, or both, the insurance contract is termed

A. Conditional

B. Aleatory

C. Unilateral

D. Bilateral

Answer 12

A

Question 13

Which of the following statements pertaining to a whole life policy is not correct?

A. It is designed to mature or endow at the insured’s age 100

B. It provides both insurance protection and living values.

C. The face amount may be paid as a lump sum at the policyowner’s selected retirement age.

D. The policy offers insurance protection to age 100

Answer 13

C

Question 14

Excepted benefits are not included as minimum essential coverage. Which of the following is not an excepted benefit?

A. Worker’s compensation insurance

B. Medicare

C. Disability income insurance

D. Accident-only insurance

Answer 14

B

Question 15

Under Social Security; a worker’s primary insurance amount (PIA) is

A. The total benefits received during the first year of retirement.

B. Larger than the combined insurance benefit payable to the worker and the worker’s spouse at age 62.

C. An amount equal to the worker’s full retirement benefit at the full retirement age or disability benefit.

D. The amount the worker’s surviving spouse will receive upon the worker’s death.

Answer 15

C

Question 16

Which of the following is a promise in exchange for an action?

A. a condition contract

B. a contract of adhesion

C. an aleatory contract

D. a unilateral contract

Answer 16

D

Question 17

Which of the following statements about variable universal life insurance is not correct?

A. It guarantees a minimum cash value in the investment account.

B. It allows the insured to make withdrawals or to borrow from the policy during the insured’s lifetime.

C. It pays a death benefit to a named beneficiary and offers the insured tax-deferred cash value investment options.

D. It offers flexibility in premium payments and face amounts dependent on investment performance.

Answer 17

A

Question 18

Under a group health insurance plan, a terminated employee may have which of the following options?

A. To convert the coverage to an individual plan at the same premium.

B. To continue the identical coverage at the same premium.

C. To continue reduced-benefit coverage under the group plan at an adjusted premium.

D. To convert the coverage to an individual plan at an adjusted premium.

Answer 18

D

Question 19

Which of the following is the most valid reason for a person to purchase a specified (dread) disease health insurance policy?

A. She wants to make sure that she and her family are protected against a major illness.

B. She wants coverage against the risk of illnesses such as aids, tuberculosis and diabetes.

C. She has been diagnosed with heart disease.

D. Her family has a history of cancer, and she is concerned that she might contract the disease.

Answer 19

D

Question 20

One characteristic that the capitation, schedule of allowances, and usual reasonable and customary methods of dental benefit determination have in common is that all 3 methods

A. Determine benefits on some form of scheduled basis.

B. Are available only with indemnity plans.

C. Require that the insured select a dentist from a specific list of approved providers.

D. Generally involve high deductibles and coinsurance requirements.

Answer 20

A

Question 21

The calendar year deductible provision of a major medical policy stipulates that

A. The deductible is applied only once during the calendar year.

B. The insurer pays a higher percentage of the medical expenses than the insured.

C. All claims submitted during the calendar year are subject to the amount of the deductible.

D. The deductible is applied against each claim during the first calendar year the policy is in effect.

Answer 21

A

Question 22

Ralph owns a $50,000 nonparticipating whole life policy. Its cash value has accumulated to $15,000, and he has paid a total of $9,500 in premiums. If he surrenders the policy for its cash value, how will it be taxed?

A. Ralph will receive $5,500 tax-free; the $9,500 balance is taxable as income.

B. Ralph will receive the $15,000 as taxable income.

C. Ralph will receive the $15,000 tax-free.

D. Ralph will receive $9,500 tax-free; the $5,500 balance is taxable as income.

Answer 22

D

Question 23

Benefit periods for short-term disability income policies typically range from

A. 1 to 5 years

B. 1 to 12 months

C. 3 months to 3 years

D. 6 months to 2 years

Answer 23

D

Question 24

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide medical services at a prearranged cost to the insured?

A. MIB

B. HMO

C. PPO

D. DPO

Answer 24

C

Question 25

Maynard earns $70,000 a year. Under his disability income policy, the maximum amount of monthly benefit he will receive is $7,000 a month. Under the relation of earnings to insurance provision, his disability income benefit will be

A. Reduced, and he will be refunded for any premiums he paid for excess coverage.

B. Reduced, and all premiums paid to date will be considered earned premiums.

C. Paid in full.

D. Prorated, and he will receive $7,000 a month for a limited time period.

Answer 25

A

Question 26

Which of the following statements regarding a conditionally renewable policy is not correct?

A. The insured has the conditional right to renew the policy up to a given age.

B. The insurer may refuse to renew the contract as the result of the insured’s deteriorating health.

C. The insured has the conditional right to renew the policy up to a given date.

D. The insurer may refuse to renew the contract as the result of the insured’s retirement.

Answer 26

B

Question 27

Annuity buyers who want their product to be supported by the insurers general accounts would most likely be looking for interest returns that

A. Are guaranteed never to be less than the rate specified in the contract.

B. Can go up but can never go down.

C. Will keep pace with inflation.

D. Can compete with equity investment returns.

Answer 27

A

Question 28

Norma and Luis are considering the purchase of an annuity for retirement. Which payout option would be the least suitable for them?

A. The joint life annuity option

B. The life with period certain option

C. The life with refund option

D. The joint life and survivor annuity option

Answer 28

A

Question 29

Debbie is concerned that her health insurance coverage is inadequate. Which of the following is the best reason for her to purchase an indemnity-type medical expense policy?

A. It will pay the difference between what her other insurance covers and her actual expenses.

B. It will pay a specified per-day benefit.

C. It will pay all or part of her deductible.

D. It will pay a percentage of her coinsurance.

Answer 29

B

Question 30

Which of the following statements about the spendthrift clause is not correct?

A. It gives the beneficiary the right to use the death benefit as collateral for a loan.

B. It states that the life policy proceeds will be paid directly to the beneficiary.

C. It helps protect the death benefit proceeds from the beneficiary’s creditors.

D. Once the beneficiary has received payments from the proceeds, the creditors can take steps to attach those payments.

Answer 30

A

Question 31

Which of the following statements regarding a traditional individual retirement account (IRA) is not correct?

A. Assuming that only tax deductible contributions were made into the IRA, 100% of distributions from it are treated as taxable income.

B. Distributions must begin from an IRA by April 1 of the year following the IRA owners attainment of age 72.

C. IRAs are available to anyone with earned income, but deductible contributions are limited for individuals who are also covered under an employer-sponsored retirement plan.

D. A 10% penalty is assessed on any distribution from an IRA before age 59 1/2

Answer 31

D

Question 32

Which of the following statements regarding limited pay life insurance is not correct?

A. Limited pay policies endow when the insured is 100 years old.

B. Limited pay policies mature more quickly than do continuous premium whole life policies.

C. Cash value grows more quickly in limited pay life policies than it does in continuous premium whole life policies.

D. Limited pay policy death benefits remain level for the duration of the policy.

Answer 32

B