Final Exam 1 Flashcards
What is the purpose behind full disclosure requirements?
To help a client make an informed decision
Adverse Selection is based on what premise?
The propensity for insuring less favorable insurance risks.
In a reciprocal insurer structure, each policyholder insures the risks of:
the other policyholders.
Service providers contract for and sell medical and hospital:
care services.
Which statement best describes the function of insurance?
The function of insurance is to safeguard against financial loss by having the losses of few paid by the contributions of many who are exposed to the same risk
Which of the following best describes the function of insurance?
2) It spreads financial risk over a large group to minimize the loss to any one individual
An insurance company has their home office in Orlando, Florida, and is doing business in Tampa, Florida. In Tampa, the company would be considered a(n) ____________ insurer.
domestic
Mass marketing involves exposure to large groups of people through such methods as advertisement, commercials, mass mailouts, etc. ____________ is/are not involved in this process of selling.
Licensed agents
Assessment Mutual Insurers, Reinsurers, and Home Service Insurers are all examples of what type of insurer?
Private insurers
Mutual insurers are incorporated insurers without
permanent capital stock
___________ create their own reserves to provide coverage for future losses.
Self-insurers
Self-insuring is an example of what type of risk?
Risk Retention
Replacing existing life insurance with a new life insurance policy based upon incomplete or incorrect representation is referred to as:
twisting
Which of the following risks is insurable?
Pure risks
A life insurance contract is considered a valued contract because:
it pays a predetermined amount with no way to assess loss
Which of the following does NOT describe one of the ways in which insurable interest can be established?
Sympathy for a neighbor
Insurable interest must exist at
the time of application
What is the operating objective of a stock insurance company?
To make a profit for its owners, the stockholders
A man commits suicide 30 months after purchasing a life insurance policy and his wife is the named beneficiary. What amount will his wife receive?
The face amount of the policy
Insurance is a contract of:
utmost good faith
The feature of an insurance contract that states only one party (the insurer) has any future obligation is reflected as what kind of contract?
Unilateral
Insurance would be unenforceable and considered a wager if the __________ does not have an insurable interest in the insured party.
policyowner
To transact insurance business, the agent must have ___________ authority.
express, apparent, or implied
The ______________ refers to the fact that a written contract cannot be changed by oral evidence.
parol evidence rule
____________ authority specifies the agent’s authority as written in the employment contract.
Express
Ron has paid on his 20-year pay whole life policy for 20 years. Which of the following scenarios apply?
Ron no longer must make premium payments.
If an insurance policy contains an incontestable clause, it means that the insurer CANNOT contest any claim under any circumstances.
False
The operating objective of a mutual life insurance company is to:
provide insurance to its owners (the policyholders) at the lowest possible net cost
Bill gives Jim a couple of tickets to a Florida Gators game to thank him for purchasing a policy. This is an example of:
rebating
Which of the following is NOT part of a product presentation?
Asking for referrals
Family Income policies are a combination of which two types of policies?
Whole life and decreasing term
Which of the following is NOT one of the primary factors used in determining life insurance premium costs?
Morbidity
Of the following, who would most likely pay a lower premium amount?
A preferred risk client
In Florida, a child must be at least ____ years of age to sign a life insurance application.
15
Which of the following premium payment modes will result in the highest total out-of-pocket costs?
Monthly
Complete this sentence: “Typically, the shorter the premium-paying period, the _________________.”
higher the premium
What alternative does the insurer have if it is discovered that the insured misstated his age on the application?
Pay the benefit amount that the paid premiums would have purchased at the correct age.
The MIB’s main purpose is to:
be a reliable source of medical information
A life insurance policy under which the amount a policyowner pays in during the first years exceeds the sum of net level premiums that would have been payable to provide paid-up future benefits in seven years is called:
a Modified Endowment (MEC) contract
What is the typical period of time specific to the suicide clause in life insurance policies?
2 years
When might a Statement of Continued Good Health be required regarding a life insurance policy?
When there is no premium accompanying the application
As inflation increases, the life insurance cost of living rider (COLA) provides that the value of the policy:
increases
In Florida, which of the following groups are eligible for group life insurance?
Typically, any type of legitimate group is eligible to purchase a group life insurance policy
The disadvantage of naming an estate as beneficiary is that proceeds will be included in the insured’s
estate
Protection against the unintentional lapse of a life insurance policy is afforded through what means?
Automatic Loan provision
Which of the following does NOT belong in the category of available life insurance settlement options?
Joint and first survivor method
When a life insurance policy is reinstated after lapse, the incontestable clause is usually regenerated.
TRUE
The ____________ determines the life insurance policy’s beneficiary.
Policy owner
The insurer has informed applicant Joan that adverse information has been discovered through her credit report investigation. Joan requests a summary of the information. The insurer has ______ days in which to provide Joan with the information.
Five
A life insurance policy’s cash value belongs to the insured.
FALSE
If a life insurance applicant is given a conditional receipt, what is the effective date of coverage?
The time the insurer accepts the application and issues the policy
When a policyowner surrenders his whole life policy for its cash value, he can receive an amount equal to the premiums paid into the policy tax-free.
TRUE
Which type of life insurance is the principally purchased life policy in the United States?
Ordinary life insurance
Variable insurance products are considered securities contracts as well as life contracts and contain no contract value guarantees.
TRUE
Which type of life insurance is sold by home service insurers?
Industrial life insurance
Which of the following whole life policies provide level premiums limited to a certain time period (less than life)?
Limited Pay Whole Life
Once insurable interest has been established, and the process of evaluating all of the information and applying it against the insurer’s standards and guidelines has been accomplished, ______________ can be established.
premium rates
Agents are sometimes referred to as “field underwriters.”
TRUE
____________ term insurance provides a level amount of protection for a specified period, after which the policy expires.
Level
Why is it important that the agent carefully ask the applicant each question on the application and see that the answers are correctly stated?
The insured or a beneficiary may not have a valid claim
“Combination contract” is a term used to describe life insurance programs which combine different forms of life insurance into a single package to produce a desired pattern of benefits.
TRUE
Gail names her church as the beneficiary of her $100,000 life insurance policy. When Gail dies, who is responsible for the income taxes payable on the lump sum proceeds received by the church.
No income tax is payable on the death proceeds.
Group Permanent life insurance is another name for:
Group Whole life insurance.
A group life insurance plan in which the employee and the employer contribute a portion of the premiums is known as a ____________ plan
contributory
A group life insurance plan in which the employer pays the entire premium is known as a ________________ plan.
noncontributory
The _________________ is a qualified plan that allows unincorporated business owners to participate in the retirement plan as an employee.
Keogh Plan
There are several ways life insurance is used in business. Which of the following does NOT apply?
As a dependency period
Buy-sell agreements can only be drafted by:
an attorney
Which of the following does NOT fit in with basic forms of health insurance plans?
Key person insurance
Which of the following would most likely NOT be covered under miscellaneous expenses on Hospital insurance?
Physician services
Disability insurance provides an income stream for an individual who is unable to continue working due to accident or illness. However, if a person is under ______ disabled, he/she does not qualify for benefits.
20%
In order to qualify for Medicaid benefits, the applicant must be able to prove they do not have the ability or means to pay for:
Their own medical care
Disability accidents are considered external and violent.
TRUE
__________________ are the two most important factors in the health insurance underwriting process.
Medical history and occupation
The key factor behind ERISA’s development was to encourage employers to establish employee health plans allowing them to self-insure
TRUE
Comprehensive Major Medical plans provide coverage for all major medical expenses under a single policy
TRUE
AD&D policies make benefits payable in the form of principal sum and capital sum.
TRUE
The disability income insurance cost of living rider (COLA) is relatively:
Expensive
A Salary Continuation Plan is set up between the employer and employees and is funded by:
the employer.
According to the NAIC Uniform Policy Provision Law, the “Time Limit on Certain Defenses” clause is akin to which of the following in life insurance policies?
The Incontestability clause
At what age may the owner of an IRA begin to receive payments from his/her retirement fund without penalty?
59 1/2
The actual number of annuity units in a variable annuity contract is determined by the current value of one unit relative to the amount of:
Premiums paid
An annuitant selects Life with Period Certain as his annuity option. What will he receive?
Payout for life or a fixed number of years, whichever is longer.
If health savings account (HSA) funds are used for any other purpose than medically authorized, they become taxable and subject to a ______ penalty fee.
10%
HMO contracts may not exclude coverage for HIV infection or limit HIV or AIDS coverage.
TRUE
Medicare Part ___ provides medical coverage.
B
The Medicare “benefit period” begins the _________ day of hospitalization.
First
The Deficit Reduction Act gives governors more flexibility to design _____________ benefits that efficiently and affordably meet their states’ needs.
Medicaid
Medigap applies to both the hospital and medical insurance plans administered by the _________ government for the elderly and permanently disabled.
Federal
The three basic levels of long-term care are:
institutional care, home-based care, and community care.
The Time Payment of Claims provision allows insurers ______ days after receiving notice and proof of loss in which to pay or deny a health insurance claim.
45
Most individual health policies are written on a ______________ basis and require an application and usually evidence of insurability.
nonparticipating Nonpar
The Claim Forms provision outlines the insurer’s responsibility to provide the claimant with the specific forms the insurer requires within ______ days after receiving the insured’s notice of claim.
15
In order for the Social Security 40-quarter rule to apply, an individual must have been employed and paid FICA taxes for at least _____ years.
Ten
What does FICA stand for?
Federal Insurance Contributions Act
The two categories of retirement contribution plans are _________________ Plans and Defined Contribution Plans.
Defined Benefit
The variable annuity has no minimum guarantee of growth.
True
Commercial insurers operate on the _____________ method.
Reimbursement
The _____________ is the dollar amount an insured is required to pay before health insurance benefits kick in.
Deductible
PPOs use the reimbursement method for covered medical expenses.
TRUE
Mortality Tables indicate the average number of individuals from a given group who will become disabled.
FALSE
The annuity _______________ gives the recipient options of receiving returns for a specified term or for life, or a combination of both.
Payout period
“Corporations” can be publicly-held or closely-held.
TRUE
Deferred compensation plans can be simply and best defined as:
a contractual agreement to pay benefits in the future.
The purpose of Florida’s Health Maintenance Organization Act is to:
increase efficiency and economy in the delivery of healthcare
The sole purpose behind Coordination of Benefits (COB) provision is to eliminate:
duplication of payments
Agents should check with _________________ to determine if the insurer they are representing is a properly authorized insurer.
the Department of Financial Services
Once an organization has filed an application to conduct insurance business, the Office of Insurance Regulation will begin its review for issuing a(n):
Certificate of Authority.
According to agent ethics, it is recommended that agents meet with their clients ________ and complete a review.
Annually
Medical expense policies must provide payment to an optometrist or a podiatrist for those procedures that are specified in the policy.
TRUE
Basic Medical Expense insurance limits coverage to specific types of medical care.
TRUE
Major Medical insurance can work either as a supplement to a basic plan or as a comprehensive stand-alone plan providing ____________________ coverage.
Most extensive
In risk classification, a “higher than average risk” is given a _____________ rate.
substandard
In an Accidental Death and Dismemberment policy, the sum which is paid as a death benefit is called the ______________ sum.
Principal
Most group disability policies use the ___________ method to calculate the amount of the insured’s earnings prior to the accident.
Percentage
Is a variable annuity insurer required to inquire whether an applicant for a variable annuity also has any form of fixed dollar income?
YES
A _____________ group involves combining several parties into a group for the purpose of obtaining insurance.
fictitious
A medical expense policy states that it will pay a flat $200 a day for each day of hospitalization. The policy pays benefits on what basis?
Indemnity
In disability income insurance, the ___________ period is the time immediately following a disability during which benefits are NOT payable.
Elimination
An employer who is a member of an MET is issued a _________________ detailing the relationship between the trust and the employer and the coverages the employer has chosen to offer its employees.
joinder agreement
What conversion rights belong to a surviving spouse of a group life insurance certificate holder?
The surviving spouse has the same conversion rights the insured employee possessed.
Judy becomes eligible for $1,600 a month in her noncontributory group disability income policy. Which of the following is CORRECT?
100% of the premium is tax deductible to the employer and the entire $1,600 a month in benefits are taxable to Judy.
Harriet, age 45, suffered an accident while waterskiing on vacation and became paralyzed from the accident. Which of the following would most likely pay her disability benefits?
Social security
Rachel owns a major medical health policy which requires her to pay the first $300 of covered expenses each year before the policy pays its benefits. The $300 is the policy’s:
Deductible
Which renewability provision allows an insurer to terminate a health insurance policy on any date specified in the policy and to increase the premium for any class of insureds?
Optionally renewable
With regard to annuity investments by seniors, “senior consumers” are typically defined as those individuals who are age:
65 or older
Every licensee must notify the Department of Financial Services within _____ days after changing his or her name, residence, and/or principal business address.
60
Which of the following would not be considered a regulatory authority over the insurance industry in Florida?
The Fire Marshall
A violation of a Cease and Desist Order carries a fine of up to:
$50,000
Who regulates retirement plans in Florida?
ERISA
The Florida Health Insurance Plan makes coverage available to individuals who:
are high risk and have no other option for similar coverage.
Mutualization occurs when a stock company turns to a __________ company.
Mutual
The ________________ provision of the Insurance Code spells out the terms that allow domestic insurers the right to invest a certain percentage of their total assets in loans or certain other investments.
leeway or basket
Aiding and abetting an unauthorized insurer can result in a _____________ conviction for the first violation.
third-degree felony
Florida law does not regulate retirement plans.
TRUE
ERISA overrides any state laws regarding the regulation of retirement plans.
TRUE
To remain in compliance and maintain their licensure, all agents are required to fulfill continuing education requirements of _______ every two years in basic or higher-level courses approved by the Department.
24 hours
Failure to notify the Department within the specified timeframe after a change of name, residence address, principal business street address, or mailing address could result in a fine of ________ for the first offense.
$250
“Sliding” is akin to:
misrepresentation
Knowingly making, issuing, or circulating any estimate, illustration, circular statement, sales presentation, omission, or comparison which incorrectly represents any facet of an insurance policy is called:
Misrepresentation
A personal attack on a person’s good name, character, or reputation is known as:
defamation
Under the Unfair Trade Practices Act, claims must be paid by the insurer within ________ if Proof of Loss was not requested.
45 days
The Statute of Limitations states that if a lawsuit is to be filed, it must be brought within ______ years after Proof of Loss is furnished to the insurance company
Five
_______________ is defined as “limiting sales to a specific group in which you have a vested interest.”
Controlled business
______________ is when a stock company turns to a mutual company.
Mutualization
______________ is when a mutual company turns to a stock company.
Demutualization
A ______________ is an entity that sells both par and nonpar policies.
Mixed company
The Florida Life and Health Guaranty Association’s purpose is to:
pay the claims of insolvent or impaired insurers
When an agent spreads a false story that damages a competing agent’s reputation, the offense is called:
defamation
Lorraine was diagnosed with breast cancer in 2005 but has been cancer free since 2006. However, she still requires follow-up care. Lorraine secured a new job in 2012. Is her breast cancer follow-up care considered a preexisting condition? Why?
No - Breast cancer follow-up care is prohibited from being considered a preexisting condition, unless breast cancer is found.
