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Insurance > Final Exam 1 > Flashcards

Final Exam 1 Flashcards

0
Q

What is the purpose behind full disclosure requirements?

A

To help a client make an informed decision

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1
Q

Adverse Selection is based on what premise?

A

The propensity for insuring less favorable insurance risks.

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2
Q

In a reciprocal insurer structure, each policyholder insures the risks of:

A

the other policyholders.

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3
Q

Service providers contract for and sell medical and hospital:

A

care services.

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4
Q

Which statement best describes the function of insurance?

A

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

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5
Q

Which of the following best describes the function of insurance?

A

2) It spreads financial risk over a large group to minimize the loss to any one individual

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6
Q

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.

A

domestic

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7
Q

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.

A

Licensed agents

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8
Q

Assessment Mutual Insurers, Reinsurers, and Home Service Insurers are all examples of what type of insurer?

A

Private insurers

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9
Q

Mutual insurers are incorporated insurers without

A

permanent capital stock

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10
Q

___________ create their own reserves to provide coverage for future losses.

A

Self-insurers

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11
Q

Self-insuring is an example of what type of risk?

A

Risk Retention

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12
Q

Replacing existing life insurance with a new life insurance policy based upon incomplete or incorrect representation is referred to as:

A

twisting

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13
Q

Which of the following risks is insurable?

A

Pure risks

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14
Q

A life insurance contract is considered a valued contract because:

A

it pays a predetermined amount with no way to assess loss

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15
Q

Which of the following does NOT describe one of the ways in which insurable interest can be established?

A

Sympathy for a neighbor

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16
Q

Insurable interest must exist at

A

the time of application

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17
Q

What is the operating objective of a stock insurance company?

A

To make a profit for its owners, the stockholders

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18
Q

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?

A

The face amount of the policy

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19
Q

Insurance is a contract of:

A

utmost good faith

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20
Q

The feature of an insurance contract that states only one party (the insurer) has any future obligation is reflected as what kind of contract?

A

Unilateral

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21
Q

Insurance would be unenforceable and considered a wager if the __________ does not have an insurable interest in the insured party.

A

policyowner

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22
Q

To transact insurance business, the agent must have ___________ authority.

A

express, apparent, or implied

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23
Q

The ______________ refers to the fact that a written contract cannot be changed by oral evidence.

A

parol evidence rule

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24
Q

____________ authority specifies the agent’s authority as written in the employment contract.

A

Express

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25
Q

Ron has paid on his 20-year pay whole life policy for 20 years. Which of the following scenarios apply?

A

Ron no longer must make premium payments.

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26
Q

If an insurance policy contains an incontestable clause, it means that the insurer CANNOT contest any claim under any circumstances.

A

False

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27
Q

The operating objective of a mutual life insurance company is to:

A

provide insurance to its owners (the policyholders) at the lowest possible net cost

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28
Q

Bill gives Jim a couple of tickets to a Florida Gators game to thank him for purchasing a policy. This is an example of:

A

rebating

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29
Q

Which of the following is NOT part of a product presentation?

A

Asking for referrals

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30
Q

Family Income policies are a combination of which two types of policies?

A

Whole life and decreasing term

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31
Q

Which of the following is NOT one of the primary factors used in determining life insurance premium costs?

A

Morbidity

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32
Q

Of the following, who would most likely pay a lower premium amount?

A

A preferred risk client

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33
Q

In Florida, a child must be at least ____ years of age to sign a life insurance application.

A

15

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34
Q

Which of the following premium payment modes will result in the highest total out-of-pocket costs?

A

Monthly

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35
Q

Complete this sentence: “Typically, the shorter the premium-paying period, the _________________.”

A

higher the premium

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36
Q

What alternative does the insurer have if it is discovered that the insured misstated his age on the application?

A

Pay the benefit amount that the paid premiums would have purchased at the correct age.

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37
Q

The MIB’s main purpose is to:

A

be a reliable source of medical information

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38
Q

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

a Modified Endowment (MEC) contract

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39
Q

What is the typical period of time specific to the suicide clause in life insurance policies?

A

2 years

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40
Q

When might a Statement of Continued Good Health be required regarding a life insurance policy?

A

When there is no premium accompanying the application

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41
Q

As inflation increases, the life insurance cost of living rider (COLA) provides that the value of the policy:

A

increases

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42
Q

In Florida, which of the following groups are eligible for group life insurance?

A

Typically, any type of legitimate group is eligible to purchase a group life insurance policy

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43
Q

The disadvantage of naming an estate as beneficiary is that proceeds will be included in the insured’s

A

estate

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44
Q

Protection against the unintentional lapse of a life insurance policy is afforded through what means?

A

Automatic Loan provision

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45
Q

Which of the following does NOT belong in the category of available life insurance settlement options?

A

Joint and first survivor method

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46
Q

When a life insurance policy is reinstated after lapse, the incontestable clause is usually regenerated.

A

TRUE

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47
Q

The ____________ determines the life insurance policy’s beneficiary.

A

Policy owner

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48
Q

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.

A

Five

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49
Q

A life insurance policy’s cash value belongs to the insured.

A

FALSE

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50
Q

If a life insurance applicant is given a conditional receipt, what is the effective date of coverage?

A

The time the insurer accepts the application and issues the policy

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51
Q

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.

A

TRUE

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52
Q

Which type of life insurance is the principally purchased life policy in the United States?

A

Ordinary life insurance

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53
Q

Variable insurance products are considered securities contracts as well as life contracts and contain no contract value guarantees.

A

TRUE

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54
Q

Which type of life insurance is sold by home service insurers?

A

Industrial life insurance

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55
Q

Which of the following whole life policies provide level premiums limited to a certain time period (less than life)?

A

Limited Pay Whole Life

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56
Q

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.

A

premium rates

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57
Q

Agents are sometimes referred to as “field underwriters.”

A

TRUE

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58
Q

____________ term insurance provides a level amount of protection for a specified period, after which the policy expires.

A

Level

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59
Q

Why is it important that the agent carefully ask the applicant each question on the application and see that the answers are correctly stated?

A

The insured or a beneficiary may not have a valid claim

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60
Q

“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.

A

TRUE

61
Q

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.

A

No income tax is payable on the death proceeds.

62
Q

Group Permanent life insurance is another name for:

A

Group Whole life insurance.

63
Q

A group life insurance plan in which the employee and the employer contribute a portion of the premiums is known as a ____________ plan

A

contributory

64
Q

A group life insurance plan in which the employer pays the entire premium is known as a ________________ plan.

A

noncontributory

65
Q

The _________________ is a qualified plan that allows unincorporated business owners to participate in the retirement plan as an employee.

A

Keogh Plan

66
Q

There are several ways life insurance is used in business. Which of the following does NOT apply?

A

As a dependency period

67
Q

Buy-sell agreements can only be drafted by:

A

an attorney

68
Q

Which of the following does NOT fit in with basic forms of health insurance plans?

A

Key person insurance

69
Q

Which of the following would most likely NOT be covered under miscellaneous expenses on Hospital insurance?

A

Physician services

70
Q

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.

A

20%

71
Q

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:

A

Their own medical care

72
Q

Disability accidents are considered external and violent.

A

TRUE

73
Q

__________________ are the two most important factors in the health insurance underwriting process.

A

Medical history and occupation

74
Q

The key factor behind ERISA’s development was to encourage employers to establish employee health plans allowing them to self-insure

A

TRUE

75
Q

Comprehensive Major Medical plans provide coverage for all major medical expenses under a single policy

A

TRUE

76
Q

AD&D policies make benefits payable in the form of principal sum and capital sum.

A

TRUE

77
Q

The disability income insurance cost of living rider (COLA) is relatively:

A

Expensive

78
Q

A Salary Continuation Plan is set up between the employer and employees and is funded by:

A

the employer.

79
Q

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?

A

The Incontestability clause

80
Q

At what age may the owner of an IRA begin to receive payments from his/her retirement fund without penalty?

A

59 1/2

81
Q

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:

A

Premiums paid

82
Q

An annuitant selects Life with Period Certain as his annuity option. What will he receive?

A

Payout for life or a fixed number of years, whichever is longer.

83
Q

If health savings account (HSA) funds are used for any other purpose than medically authorized, they become taxable and subject to a ______ penalty fee.

A

10%

84
Q

HMO contracts may not exclude coverage for HIV infection or limit HIV or AIDS coverage.

A

TRUE

85
Q

Medicare Part ___ provides medical coverage.

A

B

86
Q

The Medicare “benefit period” begins the _________ day of hospitalization.

A

First

87
Q

The Deficit Reduction Act gives governors more flexibility to design _____________ benefits that efficiently and affordably meet their states’ needs.

A

Medicaid

88
Q

Medigap applies to both the hospital and medical insurance plans administered by the _________ government for the elderly and permanently disabled.

A

Federal

89
Q

The three basic levels of long-term care are:

A

institutional care, home-based care, and community care.

90
Q

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.

A

45

91
Q

Most individual health policies are written on a ______________ basis and require an application and usually evidence of insurability.

A

nonparticipating Nonpar

92
Q

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.

A

15

93
Q

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.

A

Ten

94
Q

What does FICA stand for?

A

Federal Insurance Contributions Act

95
Q

The two categories of retirement contribution plans are _________________ Plans and Defined Contribution Plans.

A

Defined Benefit

96
Q

The variable annuity has no minimum guarantee of growth.

A

True

97
Q

Commercial insurers operate on the _____________ method.

A

Reimbursement

98
Q

The _____________ is the dollar amount an insured is required to pay before health insurance benefits kick in.

A

Deductible

99
Q

PPOs use the reimbursement method for covered medical expenses.

A

TRUE

100
Q

Mortality Tables indicate the average number of individuals from a given group who will become disabled.

A

FALSE

101
Q

The annuity _______________ gives the recipient options of receiving returns for a specified term or for life, or a combination of both.

A

Payout period

102
Q

“Corporations” can be publicly-held or closely-held.

A

TRUE

103
Q

Deferred compensation plans can be simply and best defined as:

A

a contractual agreement to pay benefits in the future.

104
Q

The purpose of Florida’s Health Maintenance Organization Act is to:

A

increase efficiency and economy in the delivery of healthcare

105
Q

The sole purpose behind Coordination of Benefits (COB) provision is to eliminate:

A

duplication of payments

106
Q

Agents should check with _________________ to determine if the insurer they are representing is a properly authorized insurer.

A

the Department of Financial Services

107
Q

Once an organization has filed an application to conduct insurance business, the Office of Insurance Regulation will begin its review for issuing a(n):

A

Certificate of Authority.

108
Q

According to agent ethics, it is recommended that agents meet with their clients ________ and complete a review.

A

Annually

109
Q

Medical expense policies must provide payment to an optometrist or a podiatrist for those procedures that are specified in the policy.

A

TRUE

110
Q

Basic Medical Expense insurance limits coverage to specific types of medical care.

A

TRUE

111
Q

Major Medical insurance can work either as a supplement to a basic plan or as a comprehensive stand-alone plan providing ____________________ coverage.

A

Most extensive

112
Q

In risk classification, a “higher than average risk” is given a _____________ rate.

A

substandard

113
Q

In an Accidental Death and Dismemberment policy, the sum which is paid as a death benefit is called the ______________ sum.

A

Principal

114
Q

Most group disability policies use the ___________ method to calculate the amount of the insured’s earnings prior to the accident.

A

Percentage

115
Q

Is a variable annuity insurer required to inquire whether an applicant for a variable annuity also has any form of fixed dollar income?

A

YES

116
Q

A _____________ group involves combining several parties into a group for the purpose of obtaining insurance.

A

fictitious

117
Q

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?

A

Indemnity

118
Q

In disability income insurance, the ___________ period is the time immediately following a disability during which benefits are NOT payable.

A

Elimination

119
Q

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.

A

joinder agreement

120
Q

What conversion rights belong to a surviving spouse of a group life insurance certificate holder?

A

The surviving spouse has the same conversion rights the insured employee possessed.

121
Q

Judy becomes eligible for $1,600 a month in her noncontributory group disability income policy. Which of the following is CORRECT?

A

100% of the premium is tax deductible to the employer and the entire $1,600 a month in benefits are taxable to Judy.

122
Q

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?

A

Social security

123
Q

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:

A

Deductible

124
Q

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?

A

Optionally renewable

125
Q

With regard to annuity investments by seniors, “senior consumers” are typically defined as those individuals who are age:

A

65 or older

126
Q

Every licensee must notify the Department of Financial Services within _____ days after changing his or her name, residence, and/or principal business address.

A

60

127
Q

Which of the following would not be considered a regulatory authority over the insurance industry in Florida?

A

The Fire Marshall

128
Q

A violation of a Cease and Desist Order carries a fine of up to:

A

$50,000

129
Q

Who regulates retirement plans in Florida?

A

ERISA

130
Q

The Florida Health Insurance Plan makes coverage available to individuals who:

A

are high risk and have no other option for similar coverage.

131
Q

Mutualization occurs when a stock company turns to a __________ company.

A

Mutual

132
Q

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.

A

leeway or basket

133
Q

Aiding and abetting an unauthorized insurer can result in a _____________ conviction for the first violation.

A

third-degree felony

134
Q

Florida law does not regulate retirement plans.

A

TRUE

135
Q

ERISA overrides any state laws regarding the regulation of retirement plans.

A

TRUE

136
Q

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.

A

24 hours

137
Q

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.

A

$250

138
Q

“Sliding” is akin to:

A

misrepresentation

139
Q

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:

A

Misrepresentation

140
Q

A personal attack on a person’s good name, character, or reputation is known as:

A

defamation

141
Q

Under the Unfair Trade Practices Act, claims must be paid by the insurer within ________ if Proof of Loss was not requested.

A

45 days

142
Q

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

A

Five

143
Q

_______________ is defined as “limiting sales to a specific group in which you have a vested interest.”

A

Controlled business

144
Q

______________ is when a stock company turns to a mutual company.

A

Mutualization

145
Q

______________ is when a mutual company turns to a stock company.

A

Demutualization

146
Q

A ______________ is an entity that sells both par and nonpar policies.

A

Mixed company

147
Q

The Florida Life and Health Guaranty Association’s purpose is to:

A

pay the claims of insolvent or impaired insurers

148
Q

When an agent spreads a false story that damages a competing agent’s reputation, the offense is called:

A

defamation

149
Q

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?

A

No - Breast cancer follow-up care is prohibited from being considered a preexisting condition, unless breast cancer is found.

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