Final Practice Test - TX Life & Health Xcel 2024 Flashcards
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
a Medical Information Report
the initial premium
forward it immediately to the insurer
attending Physician Statement
the initial premium
Coverage begins on the day in which the producer collects the initial premium and has the applicant sign the life insurance contract.
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
Claim will be denied and coverage will remain in force
Claim will be denied and coverage will be cancelled
Claim will be denied, the coverage cancelled, and all premiums paid will be refunded
Claim will be paid and coverage will remain in force
After a policy has been in force for 2 (sometimes 3) years, it enters the incontestable period, in which the insurer may not deny a claim based on information not disclosed at the time of application.
A Medicare Supplement policy may be cancelled for which of the following reasons?
An insurer’s claims were higher than expected for the fiscal year
The premium has not been paid by the insured
The insurer’s AM Best rating has dropped
The insured’s credit rating has dropped significantly
The premium has not been paid by the insured
Failing to pay the premium would cause a Medicare Supplement policy to be cancelled.
Which of the following actions may NOT be taken by an insurance company to insure a substandard applicant for disability income coverage?
Increase the premium
Do not cover the substandard condition
Limit the type of coverage
Lengthen the contestability period
Lengthen the contestability period
An insurer may legally take all of these actions to provide disability income coverage to a substandard applicant EXCEPT “Lengthen the contestability period”.
J was reviewing her Health Insurance policy and noticed the phrase “This policy will only pay for a semi-private room”. This phrase is considered to be a(n)
hidden deductible
internal limit
restricted provision
stop loss
Internal limit
Certain types of expenses may have limits placed on the dollar amount of certain services or on the type of service provided.
An insurance company receives E’s application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet?
Entire Contract clause
MIB clause
Insuring clause
Consideration clause
Consideration clause
A health insurance contract is valid only if the insured provides consideration in the form of the full minimum premium and the statements made in the application
A domestic insurance company in Texas is considered a company that?
own real estate in Texas
write insurance on risks located only in Texas
is incorporated and formed in Texas
honors the charter of the National Association of Insurance Commissioners (NAIC)
incorporated and formed in Texas
In Texas, a domestic insurance company is defined as a company that is incorporated and formed in Texas.
In Texas, an individual life insurance policy is REQUIRED to have a grace period of
15 days
20 days
30 days
31 days
31 days
An individual life insurance policy issued in Texas MUST have a grace period for premium payment of 31 days.
Which of the following statements about health coverage for newborns is NOT true?
Coverage includes treatment of congenital defects
Coverage continues after the first 31 days upon payment of first premium
Coverage is limited to only congenital defects
Coverage begins at moment of birth
coverage is limited to congenital defects
All of these statements about health coverage for newborns are correct EXCEPT “coverage is limited to congenital defects”.
Which of the following statements describes what an Accident and Health policyowner may NOT do?
File a covered claim
Assign ownership
Cancel the coverage
Adjust the premium payments
Adjust the premium payments
The owner of an Accident and Health policy may not change the premium amount.
Which of the following policy features allows an insured to defer current health charges to the following year’s deductible instead of the current year’s deductible?
Deferral provision
Carryover provision
Stop Loss provision
Corridor provision
Carryover provision
The Carryover provision permits expenses incurred during the last three months of the calendar year to be carried over into the new year if needed to satisfy the deductible for the next year.
Medicare Part B does NOT cover:
occupational therapy
inpatient hospital services
physician and surgeon services
medical equipment rental
inpatient hospital services
Medicare Part B is a voluntary program designed to provide supplementary medical insurance to cover physician services, medical services, and supplies not covered under Part A.
An applicant’s medical information received from the Medical Information Bureau (MIB) may be furnished to the:
agent
applicant’s spouse
National Association of Insurance Commissioners (NAIC)
applicant’s physician
applicant’s physician
Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured’s physician.
The USA Patriot Act was enacted in:
2001
2002
2003
2004
2001
The USA Patriot Act was enacted in 2001 to detect and deter terrorism.
A policy that becomes a Modified Endowment Contract (MEC):
will no longer allow for policy loans
must be placed in an irrevocable trust
can never be reinstated after a lapse
will lose many of its tax advantages
will lose many of its tax advantages
When a policy becomes a Modified Endowment Contract (MEC), many of the tax advantages are lost.
An immediate annuity consists of a:
variable premium
flexible premium
single premium
deferred premium
Single premium
An immediate annuity has a single premium.
Which of these provisions is NOT required in life insurance policies?
Free look
Grace period
Extended Term
Entire contract
Extended term
All of these provisions must be included in life insurance policies EXCEPT “Extended Term”.
Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration
Negotiating
The elements of an insurance contract do not include negotiating.
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Contributions to employee retirement plans
Utilities and office rent
Owner’s salary
Meals and entertainment
Utilities and office rent
A Business Overhead Expense policy is designed to cover certain overhead expenses (rent, taxes, utility bills, employee’s salaries etc) that continue when the business owner is disabled.
XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is:
25%
50%
75%
100%
100%
Most noncontributory group health plans require 100% participation by eligible employees.
Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
Activate insurance companies’ financial reserves
Issue a cease-and-desist order
Issue insurance licenses
Regulate the business of insurance in this state.
activate insurance companies’ financial reserves.
The Commissioner of Insurance has the power and duty to take all of these actions EXCEPT activate insurance companies’ financial reserves.
A policyowner would like to change the beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy and make the change permanent. Which type of designation would fulfill this need?
Revocable
Contingent
Irrevocable
Primary
Irrevocable
An irrevocable designation may not be changed without the written consent of the beneficiary.
T sends proof of loss to her insurer for an acceptable medical expense claim under her individual Health Insurance policy. Upon receipt, the insurer must pay the benefits
immediately
within 6 months
at the insurer’s discretion
within 3 months
Under the Time of Payment of Claims provision, the insurer must pay the benefits immediately after receiving proof of loss.
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
Administrative-services-only plan
Commercial insurer
Preferred provider organization
Health maintenance organization
Commercial insurer
Commercial health insurance companies use the reimbursement approach, which allows policy owners to seek medical treatment then submit the charges to the insurer for reimbursement.
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
driving history
probability of making timely premium payments
if applicant is a tobacco user
overall health of the applicant
probability of making timely premium payments
The purpose of these reports is to provide a picture of an applicant’s general character and reputation, mode of living, finances, and any exposure to abnormal hazards.
Which of these is considered a statement that is assured to be true in every respect?
Estoppel
Warranty
Guarantee
Representation
Warranty
A warranty is a statement that is considered guaranteed to be true.
A(n)
Life policy combines investment choices with a form of Term coverage
Straight Whole
Variable Universal
Variable Term
Adjustable Universal
Variable Universal
Variable Universal Life combines investment choices with a form of Term coverage.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Agent’s report
MIB report
Inspection report
Attending physician’s report
Inspection report
An inspection report may include information obtained by a telephone call to the proposed insured.
Credit Life insurance is
illegal in this state
insurance issued on a debtor to cover outstanding loan balances
not regulated in this state
insurance issued to a creditor to cover outstanding loan balances
insurance issued on a debtor to cover outstanding loan balances
Credit Life insurance can be best described as insurance issued on a debtor to cover outstanding loan balances.
B, an insurance agent, tells his clients that their rights may be impaired if they fail to complete a release form within a given period of time. B may be found guilty of
boycotting
rebating
coercion
discrimination
Coercion
In this situation, the agent is guilty of coercion.
An applicant MUST receive an Outline of Coverage when an application is taken for a(n)
Endowment
Annuity
Medicare Supplement policy
Universal life policy
Medicare Supplement policy
An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Medicare Supplement policy.
A plan through the Marketplace may be purchased by
everyone over 18 years old
any legal resident (except those imprisoned)
any legal resident (including those imprisoned)
only those who might be eligible for Medicare
Any legal resident, except those incarcerated, can purchase a plan through the Marketplace.
Health insurance benefits NOT covered due to an act of war are:
excluded by the insurer in the contract provisions
assigned to a reinsurer
given a longer probationary period
charged a higher premium
excluded by the insurer in the contract provisions
An exclusion is a provision that entirely eliminates coverage for a specified risk, such as an act of war or aviation.
The investment gains from a Universal Life Policy usually go toward:
the death benefit
the dividends
the cash value
paying off a policy loan
the cash value
In a Universal Life Policy, income is usually directed toward the cash value.
In the event of an illness, a(n) earnings. policy would reimburse an insured for loss of
Earnings Indemnity
Family Income
Medicare Supplement
Disability Income
Disability Income
A Disability Income policy would reimburse an insured for loss of earnings due to sickness.
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:
all statements be warranties
insurable interest in the proposed insured
the agent complete a third-party application
all those involved be family-related
insurable interest in the proposed insured
An applicant who is also the designated primary beneficiary must have an insurable interest in the proposed insured.
All of these statements concerning Settlement Options are true, EXCEPT:
Increased proceeds can be provided through accumulation of interest
Rapid depletion of proceeds can be avoided
Proceeds can be administered by the insurance company
Only the beneficiary may select
Only the beneficiary may select
This is inaccurate. Settlement options may be selected by the policyowner.
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M’s policy goes into effect, EXCEPT:
policy is delivered
free-look period has expired
insurance company issues policy
initial premium is collected
free-look period has expired
In this situation, the policy will go into effect after all these actions occur EXCEPT the expiration of the free-look period.
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Insured’s tax bracket
Amount of the benefits available from other sources
Nature of the disability
Insured’s education level
Amount of the benefits available from other sources
The amount of the benefits available from other sources affects the amount of monthly disability benefits payable under Social Security.
A CEO’s personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant?
Disability Income
Major Medical
Key Employee
Business Overhead Expense
Disability Income
In this situation, a Disability Income policy would pay monthly benefits.
A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family’s out-of- pocket medical expenses for 2013?
$500
$1,000
$1,500
$2,000
$1,000
In this situation, the insured’s maximum out-of-pocket expenses for 2013 would be $1,000.
A non-contributory plan requires participation of all eligible employees.
25%
50%
75%
100%
100%
The percentage of eligible employees participating in a non-contributory plan is required to be at 100%.
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured’s estate
This clause provides the payment of proceeds to the beneficiary’s estate
The estate taxes in the insured’s estate may be reduced
The estate taxes in the beneficiary’s estate may be reduced
This clause provides the payment of proceeds to the insured’s estate
The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the
To terminate an agent’s appointment, an insurance company must
send termination notice to the Texas Department of Insurance
send termination notice to Governor
pay a termination fee
request a hearing before the Commissioner of Insurance
send termination notice to the Texas Department of Insurance
An insurance company that terminates an agent’s appointment must send notice of the termination to the Texas Department of Insurance.
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will:
pay the death benefit in full
adjust the death benefit to an increased amount
adjust the death benefit to a reduced amount
deny the claim
adjust the death benefit to a reduced amount
In this situation, the Misstatement of Age provision in the policy specifies that the insurance proceeds will be adjusted to a reduced amount.
Which of the following Life insurance policies combine term insurance with an investment element?
Increasing Term Life
Decreasing Term Life
Universal Life
Graded Life
Universal Life
A Universal Life policy combines term insurance and an investment element.
How often must an insurance agent license normally be renewed?
Every six months
Each year
Every two years
Every three years
Every two years
Insurance agent licenses normally must be renewed every 2 years.
Which of the following situations does a Critical Illness plan cover?
Asthma
Leukemia
Alcohol rehabilitation
Severe car accident
Leukemia
Leukemia is a type of cancer and would be covered under a Critical Illness plan.
What is the MINIMUM benefit period that must be offered by a Long-Term Care policy?
12 months
18 months
36 months
48 months
12 months
A Long-Term Care policy must offer a MINIMUM benefit period of 12 months.
What is required for an agent whose license has been revoked?
Wait at least five years before applying for a new license
Wait at least ten years before applying for a new license
Submit a letter of apology to the Insurance Commissioner along with a $500 fine
Obtain a personal $500,000 E&O policy
Wait at least five years before applying for a new license
An individual whose license has been denied or revoked cannot apply again for an agent’s license for at least 5 years.
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Group Disability
Business Continuation
Disability Buy-Sell
Key Person Disability
Disability Buy-Sell
A disability buy-sell plan allows the remaining partners to buy out the interest of the disabled business partner.
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?
Waiver
Exceptions and Reductions
Incontestable
Entire Contract
Entire Contract
An Entire Contract policy provision prohibits an insurance company from incorporating external documents into an insurance policy.
A promotional advertising item is not considered a rebate unless it has a value equal to or less than what amount?
$50
$25
$100
$10
$25
An item that is a promotional advertising item, educational item, or traditional courtesy commonly extended to consumers and that is valued at $25 or less
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
70 1/2
65
55
59 1/2
Traditional Individual Retirement Account (IRA) withdrawals are normally subject to a tax penalty if they are made before the owner reaches age 59 1/2.
During a sales presentation for a participating life insurance policy, an agent MUST
make a prospect understand that dividends are NOT guaranteed
make a prospect understand that dividends ARE guaranteed
offer to the prospect a minimum return of investment
offer to the prospect a portion of the commissions
make a prospect understand that dividends ARE guaranteed
During a sales presentation for a participating life insurance policy, an agent MUST include a statement that dividends are not guaranteed.
Which of the following is a valid reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?
Nonpayment of coverage
Exceeding a specified number of claims
Starting a cigarette habit
Drinking alcohol
Nonpayment of coverage
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for failure to pay for coverage.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Agent’s report
MIB report
Inspection report
Attending physician’s report
Inspection report
An inspection report may include information obtained by a telephone call to the proposed insured.
An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the
Attorney General
NAIC
Commissioner
National HMO Association
Commissioner of Insurance
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the Commissioner of Insurance.
Which of the following is a requirement for obtaining a Texas insurance agent’s license?
Be honest, trustworthy, and reliable
Be at least 21 years old
Be a college graduate
Be a high school graduate
Be honest, trustworthy, and reliable
An applicant for an agent’s license must be honest, trustworthy, and reliable.
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K’s wife to age 65. All of these situations will pay a death benefit EXCEPT
K’s wife dies at age 60
K’s wife dies at age 66
A child dies at age 15
A child dies at age 18
K’s wife dies at age 66
K’s wife has coverage only until age 65.
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
type of life insurance
S’s attained age
dividend amount used toward purchase
beneficiary’s age
beneficiary’s age
The age of the beneficiary is irrelevant in determining how much paid-up additions can be purchased.
Which of the following claims are typically excluded from Medical expense policies?
Treatment for alcohol addiction
Intentionally self-inflicted injuries
Treatment for mental illness
Injuries sustained from an automobile accident
Intentionally self-inflicted injuries
Medical expense policies usually EXCLUDE coverage for claims resulting from treatment of intentionally self-inflicted injuries.
All of these statements about the Commissioner of Insurance are true EXCEPT
The Commissioner must be elected
The Commissioner regulates the business of insurance in this state
The Commissioner ensures that Texas insurance laws are executed
The Commissioner protects and ensures the fair treatment of consumers
The Commissioner must be elected in a general election
This is inaccurate. The governor appoints the Commissioner to a two-year term.
Term insurance has which of the following characteristics?
Expires at the end of the policy period
Builds cash value
Has nonforfeiture options
Endows at the end of the policy period
Expires at the end of the policy period
With term insurance, the policy expires at the end of the policy period.
Which of these is NOT an example of doing insurance business?
Selling shares of stock
Receiving an insurance application
Collecting insurance premium
Delivering an insurance policy
Selling shares of stock
All of these are examples of doing insurance business EXCEPT selling shares of stock.
An insurance agent has a fiduciary responsibility to all of the following EXCEPT
applicants
insureds
insurers
other agents
other agents
Because the agent handles money of the insured and insurer, he/she has a fiduciary responsibility.
Which of the following provisions specifies how long a policyowner’s health coverage will remain in effect if the policyowner does not pay the premium when it is due?
Grace Period
Consideration
Waiver of Premium
Reinstatement
Grace Period
The grace period is the additional period of time after a premium payment is due that will allow the policy to remain in force in the event of nonpayment.
A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need?
Revocable
Contingent
Irrevocable
Primary
irrevocable
An irrevocable designation may not be changed without the written consent of the beneficiary.
How long does an individual have to “rollover” funds from an IRA or qualified plan?
60 days
90 days
120 days
No limit
60 days
In IRA’s and qualified plans, the time limit for rollover funds is 60 days, or the funds could be subjected to income taxes and a penalty tax.
Generally, how long is a benefit period for a Major Medical Expense Plan?
One year
Two year
Three year
Four year
One year
Generally, Major Medical Expense Plans have a one year benefit period.
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
inherent risk
commission rate
inflation factor
cost of insurance
cost of insurance
The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the cost of insurance.
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
Annually
Semiannually
Quarterly
Monthly
Monthly
The time of payment for claims is usually specified in different policies as 60 days, 45 days, or 30 days. However, if the claim involves disability income benefits, the benefits must be paid not less frequently than monthly
A(n) _______ contained in a life insurance policy states that the policy will NOT cover certain risks.
elimination
exclusion
limitation
curtailment
exclusion
An exclusion contained in a life insurance policy states that the policy will NOT cover certain risks.
An example of rebating would be
returning a portion of a premium as inducement to purchase insurance
advertising cheaper insurance rates than competitors
a mutual insurance company paying dividends to its policyowners
an offer of rated insurance coverage
returning a portion of a premium as inducement to purchase insurance
Returning a portion of a premium as inducement to purchase insurance is an example of rebating.
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
decrease face amount
increase premium-paying period
decrease premium payment
increase face amount
All of these actions can be taken by a policyowner without proof of insurability except for increasing the face amount.
Why is an applicant’s signature required on a life insurance application?
To attest that the statements on the application are warranties
To attest that the statements on the application are accurate to the best of the applicant’s knowledge
To give Power of Attorney to the producer if needed
To attest that all statements on the application are guaranteed to be true
To attest that the statements on the application are accurate to the best of the applicant’s knowledge
An applicant’s signature represents that the statements on the application are true to the best of the applicant’s knowledge.
Who makes the legally enforceable promises in a unilateral insurance policy?
Beneficiary
Insurance company
Insured
Applicant
Insurance company
Under a unilateral insurance policy, the insurance company makes the legally enforceable promises.
Which of the following BEST describes a Hospital Indemnity policy?
Coverage that reimburses an insured for surgeon expenses
Coverage that pays a stated amount per day of a covered hospitalization
Coverage that replaces lost income due to hospitalization
Coverage that pays for hospital room and board
Coverage that pays a stated amount per day of a covered hospitalization
The typical Hospital Indemnity policy pays a stated amount per day of a covered hospitalization.
In life insurance, the needs approach is used mostly to establish:
which type of life insurance a client should apply for
how much life insurance a client should apply for
which company a client should use when applying for life insurance
what the maximum amount the client can spend on life insurance
how much life insurance a client should apply for
The “needs approach” in life insurance is most useful in determining the amount of life insurance to be recommended to a client.
Which of these arrangements allows one to bypass insurable interest laws?
Concealment
Indemnity contract
Contract of adhesion
Investor-Originated Life Insurance
Investor-Originated Life Insurance (or IOLI)
Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or NOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
Qualified Long-Term Care policies may take into consideration an applicant’s pre-existing conditions for a maximum of not more than month(s) prior to the effective date of coverage.
01
6
12
24
6
If a pre-existing condition waiting period applies, the policy must not exclude coverage for any pre-existing conditions that occurred more than 6 months prior to the effective date of coverage. These conditions cannot be excluded beyond 6 months after the policy is issued.
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is:
Business Overhead Expense
Disability Income
Key Employee Life
Contributory
Business Overhead Expense
A Business Overhead Expense policy’s purpose is to cover certain overhead expenses that continue when the business owner is disabled.
A temporary agent’s license issued by the Commissioner of Insurance is valid for up to days.
60
90
120
180
90
The Commissioner may issue a temporary insurance agent license for 90 days to an applicant for license who is being considered for appointment as an agent.
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Geographical location
Source of income
Risk classification
Marital status
Risk classification
To determine the premium rate on a Whole Life policy, an insurance company will consider the risk classification of the applicant.
As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?
Coercion
Defamation
Rebating
Misrepresentation
Coercion
A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.
The Consideration clause in a life insurance policy indicates that a policyowner’s consideration consists of a completed application and
the initial premium
agreeing to a physical examination
delivery of policy
disclosure of any medical conditions
the initial premium
The Consideration clause states that the policyowner’s consideration consists of a completed application and the first initial premium.
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to never cancel coverage
Promise to pay a death benefit to a named beneficiary
Promise to not raise premiums
Promise to accept an insured’s assignment of benefits
Promise to pay a death benefit to a named beneficiary
Consideration is given by the insurer by promising to pay a death benefit to a named beneficiary.
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
Straight life accumulates faster than Limited-pay Life
20-Pay Life accumulates cash value faster than Straight Life
Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer’s financial rating
20-Pay Life and Straight Life accumulate cash value at the same rate
20-Pay Life accumulates cash value faster than Straight Life
In this situation, the statement “20-Pay Life accumulates cash value faster than Straight Life” would be correct.
In Texas, which of these statements regarding the Suicide clause is TRUE?
An insurer may not use suicide as a defense against payment after the first year
An insurer must always pay a death benefit when the cause of death was suicide
An insurance company may only deny a suicide death claim if an exclusionary rider is attached to the policy
An insurer may not use suicide as a defense against payment after the second year
An insurer may not use suicide as a defense against payment after the second year
Suicide may not be a defense against payment after the second year.
Which type of provider is known for stressing preventative medical care and routine physical examinations?
Multiple Employer Welfare Arrangements (MEWA)
Major medical provider
Health Maintenance Organizations (HMO’s)
Preferred Provider Organizations (PPO’s)
Health Maintenance Organizations (HMO’s)
The health provider that stresses preventive medical care is known as a Health Maintenance Organization.
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Accelerated Benefits
Waiver of Premium
Cost of Living
Return of Premium
Waiver of Premium
The Waiver of Premium is a rider on a life insurance policy that guarantees that the premium will be paid if the insured is disabled for a specified period of time.
Which of these are NOT an example of a Nonforfeiture option?
Extended Term
Reduced Paid-up
Cash Surrender
Life Income
All of these are examples of Nonforfeiture options EXCEPT Life Income.
An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500. If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim?
$500
$1,000
$1,250
$1,750
3.5 months - 1 month elimination period = 2.5 months. 2.5 months X $500 monthly indemnity = $1,250.
ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering
twisting
false advertising
rebating
unfair methods of competition
unfair methods of competition
Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the Texas Insurance Code covering unfair methods of competition.
Which Accident and Health policy provision addresses preexisting conditions?
Proof of Loss
Legal Actions
Time Limit on Certain Defenses
Payment of Claims
Time Limit on Certain Defenses
The Time Limit on Certain Defenses provision limits the period during which an insurer can deny a claim on the basis of a preexisting condition.
Question 96
Select the appropriate response
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
Cash surrender
Life settlement contract
Buy-sell arrangement
1031 Exchange
Life settlement contract
A Life settlement contract allows a policyowner to sell a life insurance policy for more than its cash value.
Under a Guaranteed Renewable health insurance policy, the insurer
may refuse to continue coverage upon policy renewal
is permitted to require proof of insurability upon policy renewal
will typically decrease the premium upon policy renewal
may cancel the policy for nonpayment only
may cancel the policy for nonpayment only
Under a Guaranteed Renewable health insurance policy, the insurer may cancel the policy for nonpayment of premium only.
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Medicaid
Long-term care
Medicare
Her group health plan
Her group health plan
If the employer has more than 20 employees, the group health plan generally pays first.
Which of these statements concerning an individual Disability Income policy is TRUE?
Premiums are normally tax-deductible
Age of the insured determines the amount of the benefits
Normally includes an Elimination period
Benefits are normally taxable
Normally includes an Elimination period
Disability Income policies typically contain an Elimination period.
An example of false advertising would be
Paid testimonials from celebrity endorsements
An insurer exaggerating its dividends in a magazine advertisement
A producer spending more than $25 on marketing gifts for a client
An insurer advertising in an insurance trade journal
An insurer exaggerating its dividends in a magazine advertisement
An insurance company may be judged guilty of false advertising if it exaggerates its dividends in a magazine advertisement.
What is the maximum Social Security Disability benefit amount an insured can receive?
50% of the insured’s Primary Insurance Amount (PIA)
75% of the insured’s Primary Insurance Amount (PIA)
100% of the insured’s Primary Insurance Amount (PIA)
100% of the insured’s Primary Insurance Amount (PIA) minus any monies received from a retirement plan
100% of the insured’s Primary Insurance Amount (PIA)
The MAXIMUM Social Security Disability benefit an insured may receive is equal to 100% of the insured’s Primary Insurance Amount (PIA).
The _______ policy clause identifies which losses resulting from an accident or sickness are insured by the
Identification
Benefit
Payment
Insuring
Insuring
The Insuring clause identifies which losses resulting from an accident or sickness are insured by the policy.
A life insurance application may be rejected on the basis of all of these factors EXCEPT
Medical history
Hobbies
Gender
Weight
gender
An insurance company may NOT reject a prospective insured’s life application on the basis of gender.
P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the
Fair Credit Reporting Act
Medical Information Bureau
Part III of the application
Life Insurance Buyer’s Guide
Fair Credit Reporting Act
The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant.
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent
Application will be approved with restrictions
Application will be pending until a MIB report is sent to the insurer
Application will be automatically declined
Application will be returned to the writing agent
If the company discovers a mistake or incompletion, it usually returns the application to the producer.
An insurer must provide an insured with claim forms within days after receiving notice of a loss.
05
10
15
20
15
Under the Claims Forms provision, an insurer must provide an insured with claim forms within a MAXIMUM of 15 days after receiving notice of a loss.
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
Face amount plus the policy’s cash value
Face amount plus the policy’s dividends
The greater amount of the policy’s death benefit or the cash value
Face amount plus total premium paid throughout the life of the policy
Face amount plus the policy’s cash value
A Face Amount Plus Cash Value Policy is a contract that promises to pay at the insured’s death the face amount of the policy plus a sum equal to the policy’s cash value.
Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurer has the right to change the premium rate for the overall risk class?
Conditionally Renewable
Noncancellable
Guaranteed Renewable
Optionally Renewable
Guaranteed Renewable
The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specified age. These usually have increasing premiums.
Which of the following groups may NOT be insured by a group life insurance policy?
Employees
Supervisors
Administrators
Individuals who are related by blood
Individuals who are related by blood
A group life insurance policy may NOT insure groups consisting exclusively of persons who are related by marriage, blood or legal adoption.
A Medical Information Report (MIB) report may disclose which of the following:
Prior preferred rating
Prior use of marjuana
Prior lapsing of policy
Prior bankruptcy judgement
Prior use of marjuana
A Medical Information Report (MIB) may disclose lifestyle habits such as drugs, drinking, overeating and smoking
Quarterly premium payments increase the annual cost of insurance because
insurer risk exposure is greater
interest to the insurer is increased while administrative costs are decreased
mortality costs are greater
interest to the insurer is decreased while the administrative costs are increased
interest to the insurer is decreased while the administrative costs are increased
The higher the frequency of payments, the higher the premiums.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary is a minor at the time of the insured’s death
If the primary beneficiary dies before the insured
If the insured died of accidental causes
If the insured died of natural causes
If the primary beneficiary dies before the insured
A contingent beneficiary will receive the policy proceeds if the primary beneficiary dies before the insured’s death.
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
half of the current surrender value
the current contract surrender value
the premiums paid to date
nothing
the current contract surrender value
If an annuity is terminated prior to beginning of the income payment period, the contract owner receives the contract surrender value at that time.
Which of the following statements is CORRECT about an agent who is taking an insurance application?
The agent should avoid asking the applicant questions that may cause embarrassment
The agent should have the applicant initial any changes made on the application
The agent may allow a member of the applicant’s immediate family to sign the application if the applicant is not available
The agent may answer routine questions on the application for the applicant
The agent should have the applicant initial any changes made on the application
An agent who is taking an insurance application should have the applicant initial any changes made on the application.
A license may be denied, suspended, or revoked if the licensee?
engages in replacement of an existing policy
is found guilty of misrepresentation in obtaining the license
Ofiles for bankruptcy
fails to meet a sales quota
is found guilty of misrepresentation in obtaining the license
The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who is found guilty of misrepresentation or fraud in obtaining the license
The phrase “transacting business” includes
obtaining an insurance license
collecting premiums
setting insurance rates
advertising a new product in a trade journal
collecting premiums
Under Texas insurance law, the term “transacting business” includes collecting premiums.
How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?
1 month
4 months
6 months
9 months
6 months
A company shall reserve the r6 monthsight to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy.
Which mode of payment is NOT used by health insurance policies?
Monthly premium
Annual premium
Single premium
Semi-annual premium
single premium
A single premium is not used when paying for health insurance policies.
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
Person designated by the primary beneficiary’s executor to receive policy proceeds
Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies
Person designated by the insurance company to receive policy proceeds in the event that the primary beneficiary dies
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
A contingent beneficiary is named by the insured to receive the policy proceeds if the primary beneficiary dies before the insured.
Which of the following reimburses its insureds for covered medical expenses?
Health maintenance organizations
Preferred provider organizations
Commercial insurers
Service providers
Commercial insurers
Commercial insurance companies function on the reimbursement approach. Policyowners obtain medical treatment from whatever source they feel is most appropriate and submit their charges to their insurer for reimbursement.
C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
C is the policyowner, the insured, and the beneficiary
ABC is the policyowner, C is the insured, and ABC is the beneficiary
C is the policyowner and the insured, and ABC is the beneficiary
ABC is the policyowner, C is the insured, and her husband is the beneficiary
ABC is the policyowner, C is the insured, and ABC is the beneficiary
In this situation, ABC is the policyowner, C is the insured, and ABC is the beneficiary.
Which of the following consists of an offer, acceptance, and consideration?
Warranty
Estoppel
Contract
Representation
Contract
Offer, acceptance, and consideration are all elements of a contract.
A 45 year-old woman won $100,000 in a scratch-off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Which of these annuities did this woman purchase?
Immediate Variable annuity
Immediate annuity
Deferred Fixed annuity
Variable annuity
Deferred Fixed annuity
Because the annuity will pay a fixed amount beginning at a future date, it is considered a Deferred Fixed annuity.
C is the policyowner of a Comprehensive individual Major Medical policy. C pays an annual premium which is due September 1. If C forgets to pay the premium and is hospitalized September 10, how will the insurer handle this claim?
Pay half the claim and keep remaining balance until premium is paid
Deny the claim
Cancel the policy and deny the claim
Pay the claim in full minus the premium due
Pay the claim in full minus the premium due
Because the grace period is 31 days for individual Accident and Health policies paid annually, this claim will be paid minus the premium due.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be denied the claim
Beneficiary will be denied the claim and refunded all paid premiums
Beneficiary will be paid the Death Benefit
Beneficiary will be paid a partial Death Benefit
Beneficiary will be paid the Death Benefit
The incontestable clause prevents the insurer from canceling the contract even for a material misrepresentation
G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G’s policy, who is responsible for paying the medical bills?
The reinsurer
The insured
The insurer
The Guaranty Association
The insured
In this situation, the insured is liable for the medical bills.
P 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?
Authorize for payroll deductions
Agree to a physical examination
Sign an enrollment card
Register with her state of residency
Sign an enrollment card
A new employee must sign an enrollment card during the open enrollment period.
In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?
6 months
1 year
2 years
3 years
2 years
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of two years.
The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is:
Grace Period
Physical Examination and Autopsy
Entire Contract
Time Limit on Certain Defenses
Time Limit on Certain Defenses
This provision limits the Time Limit on Certain Defensesperiod during which an insurer can deny a claim based on a misstatement made by the insured.
Which of these is considered a mandatory provision?
Payment of Claims
Insurance with Other Insurers
Misstatement of Age
Change of Occupation
Payment of Claims
Payment of Claims is considered a mandatory provision and directs where the claim benefits will go. The others are considered optional provisions.
A level premium indicates:
the premium is fixed for a period stated in the contract, then becomes variable
the premium can only be changed with the consent of the insurer
the premium stays level until the policy’s renewal date
the premium is fixed for the entire duration of the contract
the premium is fixed for the entire duration of the contract
A level premium means that the premium remains fixed through the life of a policy
How long is the typical free look period for Long Term care insurance policies?
20 days
30 days
40 days
50 days
30 days
Most Long Term Care policies require a 30-day free look period.
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Endowment policy
Limited-Pay Whole life
Convertible Term
Decreasing Term
Convertible Term
Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability.
Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?
Inpatient treatment
Transportation to and from a treatment facility
Group therapy
Outpatient treatment
Transportation to and from a treatment facility
Benefits for drug and alcohol treatment under a group health policy must include all of these services EXCEPT transportation to and from a treatment facility
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
Tertiary
Irrevocable
Revocable
Contingent
Revocable
With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.
The provision that defines to whom the insurer will pay benefits to is called:
Entire Contract
Proof of LoSS
Claim Forms
Payment of Claims
Payment of Claims
The Payment of Claims provision in a Health Insurance policy states to whom claims will be paid.
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
Endowment
Graded whole life policy
Return of premium policy
Equity index insurance
Equity index insurance yields greater gains than bonds but will still protect the principal with a minimum of risk.
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Noneligible
Noncontributory
Eligible
Contributory
Contributory
Employees share in the premium costs with contributory plans.
Which of these Nonforfeiture Options continue a build-up of cash value?
Waiver of Premium
Extended Term
Reduced Paid-Up
Cash Surrender
Reduced Paid-Up
A Reduced Paid-Up option would provide continuing cash value build-up.
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Partially taxable
Tax deductible
Nontaxable
Taxed as ordinary income
taxed as ordinary income
Accumulated interest earned on dividends from an insurance policy is taxed as ordinary income.
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company
Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company
Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company
Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company
Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company
If a customer wants to apply for an insurance policy, the agent should complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company.
All of the following statements about Major Medical benefits are true, EXCEPT:
The deductible can be expressed as a fixed dollar amount
The benefit period begins only after a specified amount of expenses have accrued
Benefits are generally expressed as a percentage of eligible expenses
Benefits have no maximum limit
Benefits have no maximum limit
Major Medical benefits normally have a maximum limit.
For which of the following expenses does a Basic Hospital policy pay?
Hospital room and board
Prescription medication
Surgical fees
Physician’s fees
Hospital room and board
A Basic Hospital policy pays expenses for hospital room and board, as well as other miscellaneous medical expenses incurred during hospitalization.
Accidental Death coverage is provided to commercial airline passengers in which of the following types of policies?
Disability Income policy
Accident Reimbursement Accounts
Accident Savings Plans
Blanket Accident policy
Blanket Accident policy
A Blanket Accident policy provides Accidental Death coverage to airplane passengers.
K’s whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy’s reinstatement EXCEPT
K must reinstate within a stated period
K must pay back interest and premiums
K will forfeit the right to use the automatic loan provision upon reinstatement
K must provide evidence of insurability
All of these statements concerning reinstatement is correct EXCEPT “K will forfeit the right to use the automatic loan provision upon reinstatement”.
An insurer is NOT required to provide information on fraudulent claims if requested by
the Texas Department of Insurance
the Attorney General
the Commissioner
an insured
an insured
On the written request of an authorized government entity (such as the Commissioner, Attorney General, or a local law enforcement agency), an insurer will provide to that entity any relevant information or material relating to a fraudulent matter under investigation.
P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$20,000
$14,000
$6,000
$0
$0
Disability income benefits that derive from an individual policy which was paid entirely by the policyowner is not subject to federal income tax.
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted from the death benefit
Deducted when the policy is discontinued
Deducted from policy’s cash value
Deducted when assigned to another policyowner
Deducted when the policy is discontinued
In a policy with a rear-end loaded provision, surrender charges are deducted when the policy is discontinued
In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments:
Whenever an insured is unable to work
During the time an insured is confined in a hospital
Following an accidental injury, but not during sickness
After an insured has become totally disabled as defined in the policy
After an insured has become totally disabled as defined in the policy
The waiver of premium provision keeps the coverage in force without premium payments if the insured has become totally
disabled as defined in the policy.
If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best desribes this policy is called:
noncancellable
conditionally renewable
cancellable
guaranteed renewable
noncancellable
A noncancellable policy is one which the insurance company cannot cancel and which premiums cannot be increased.
