chap. 9 Flashcards
Q: What type of licensee represents the insured?
A: Broker
Q: Who may share in the commission from the sale of a life insurance policy?
A: Only producers properly licensed for the type of insurance transaction
Q: What are producers required to do in order to renew their license?
A: Complete continuing education hours and pay a renewal fee
Q: What is the purpose of a cease and desist order?
A: To prevent a producer or insurer from further violating laws for transacting insurance
Q: If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?
A: Defamation
Q: Who is responsible for the costs associated with the examination of insurers?
A: The insurer who is being examined
Q: Who is considered a nonresident agent?
A: An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state
Q: In general, who can be excluded from producer licensing and examination requirements?
A: Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities include administrative, executive or clerical).
Q: When can the Commissioner or Director examine insurers?
A: Whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)
Q: If an insurer holds a Certificate of Authority, it is known as what type of insurer?
A: Authorized or admitted
Q: What are the most common penalties for violations of insurance statutes?
A: A cease and desist order, a fine, and license suspension or revocation
Q: On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
A: Misrepresentation
Q: What type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
A: Twisting
Q: For what reason can a temporary license be issued?
A: For continuation of business in case the licensed producer dies or becomes disabled
Q: An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating
Q: Who is an insurance agent?
A: A person authorized to sell, solicit and negotiate insurance contracts
Q: Who can usually be granted a temporary license?
A: Producer’s spouse or designee in case the licensed producer dies or becomes disabled
Q: Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?
Discrimination
Q: Who must be notified of a producer’s change of address?
A: The Department of Insurance (Commissioner/Director/Superintendent)
Q: What type of licensee represents the insurance company?
A: The agent
Q: What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?
A: Misrepresentation
Q: To whom may a certificate of authority be issued?
A: To an insurer authorized to transact business in this state
Q: If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?
A: Authorized or admitted
Q: If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?
A: Cease and desist order
Premium payments for personally-owned disability income policies are
Not tax deductible.
To be eligible for a Health Savings Account, an individual must be covered by a
High-deductible health plan.
Which of the following individuals is eligible for a Health Savings Account?
Allison is insured by a High Deductible Health Plan (HDHP)
An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. If the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable?
$3,000
Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income?
10%
Which of the following is INCORRECT concerning taxation of disability income benefits?
If paid by the individual, the premiums are tax deductible.
Which of the following statements is correct concerning taxation of long-term care insurance?
Excessive benefits may be taxable.
Which of the following is not true of Disability Buy-Sell coverage?
Benefits are considered taxable income to the business.
The benefits received by the business in a Disability Buy-Sell policy are
Income tax free.
Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer?
Disability Income
Which type of insurance provides funds for a business organization to purchase the business interest of a disabled partner?
Disability Buy-Sell
What are the 2 types of Flexible Spending Accounts?
Health Care Accounts and Dependent Care Accounts
Under what condition are group disability income benefits received by an employee NOT taxable as income?
When the benefits received are equal or less than the employee’s percentage of the contribution.
Which of the following describes taxation of individual disability income insurance premiums and benefits?
Premiums are not tax deductible, and benefits are not taxable.
When may an insured deduct unreimbursed medical expenses paid under a long-term care policy?
When the expenses exceed a certain percentage of the insured’s adjusted gross income
S is a sole business proprietor who owns a medical expense plan. What percentage of the cost of the plan may he deduct?
100%
A noncontributory group disability income plan has a 30-day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive
$12,000, all of which is taxable.
An individual is insured under his employer’s group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?
Benefits that are attributable to employer contributions are fully taxable to the employee as income.
The annual contribution limit of a Dependent Care Flexible Spending Account is set by
The IRS
All of the following are true regarding Key Employee Disability Income insurance EXCEPT
Benefits are taxable to the employer.
Under which condition would an employee’s group medical benefits be exempt from income taxes?
An employee’s group medical benefits are generally exempt from taxation as income.
Which of the following is correct regarding the taxation of group medical expense premiums and benefits?
Premiums are tax deductible and benefits are not taxed.
The sole proprietor of a business makes a total salary of $50,000 a year. This year, his medical expenses have reached a total of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses?
$50,000
Group disability income insurance premiums paid by the employer are
Deductible by the employer as an ordinary business expense.
Health Savings Accounts (HSAs) are designed to
Help individuals save for qualified health expenses.
All of the following would be qualified as a dependent under a Dependent Care Flexible Spending Account, EXCEPT
Jeremy had to have both legs amputated, but has learned how to take care of himself and to get around in a wheelchair
Which of the following is true regarding benefits paid to disabled employees?
They may be subject to taxation if the premium was paid by the employer.
What is a penalty tax for non-qualified distributions from a health savings account?
20%
What percentage of individually-owned disability income benefits is taxable?
0%
Under a Key Person disability income policy, premium payments
Are made by the business and are not tax-deductible.
Which of the following determines whether disability insurance benefits are taxed?
Whether the premiums were tax deductible
Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are
Tax deductible.
An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation?
They are tax deductible.
Assuming that all of the following people are covered by a High Deductible Health Plan and are not claimed as dependents on anyone’s tax returns, which would NOT be eligible for a Health Savings Account?
Amanda is 67 and is covered by a basic medical expense policy
In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received?
No tax
Other than for a qualified life event, when can a change be made in benefits for a Flexible Spending Account (FSA)?
During the open enrollment period
Concerning group Medical and Dental insurance, which of the following statements is INCORRECT?
Employee benefits are tax deductible the year in which they were received.
At what age may an individual make withdrawals from an HSA for nonhealth purposes without being penalized?
65
An insured is the recipient of an Accidental Death and Dismemberment (AD&D) policy purchased by his employer. The policy pays triple indemnity in case of accidental death. If the insured died as a result of an accident stipulated in the policy, how will the benefits paid be taxed?
Benefits received are considered income tax free.
