Health & Life

Question 1

L bought a life insurance policy and stated that he did not fly in any non-commercial aircraft. He had, however, started flying lessons 2 months earlier. If L dies in a plane that belongs to his flying club when it malfunctions and crashes 6 months later, how much will his beneficiary receive?

Answer 1

The Dangerous Occupation/Recreational Activities exclusion common to life insurance policies would likely have excluded coverage for Louis in the event of death due to his flying a plane-especially due to his very little experience. The company was not able to check this out. Since L died during the 2-year contestable period, the company has the right to cancel the policy due to L’s misrepresentation and will only refund paid premium to L’s beneficiary.
The correct answer is: The amount of premium that L paid into the policy.

Question 2

The term insurance means:

Answer 2

Insurance is a contractual coverage binding the insurer to indemnify the insured against a specified loss in return for paid premiums.

The correct answer is: A contractual coverage binding the insurer to indemnify the insured against a specified loss in return for paid premiums.

Question 3

Which of the following policy sections states the amount and frequency of the premium payments?

Answer 3

The premium of a life insurance policy is also called the consideration. The consideration clause of a life policy states the amount and frequency of premium payments.
The correct answer is: Consideration clause

Question 4

M and N want to establish an Education IRA for their daughter and contribute the maximum amount. If the daughter is five years old and allowed contributions stay at the current level, how much will her parents end up investing in her IRA if she starts college when she is 19?

Answer 4

Contributions to an Education IRA (Coverdell Education Savings Account) must be made in cash, before the beneficiary is 18, and cannot exceed $2,000 in any one year. If the daughter is currently five years old, it will be 13 years until she is 18. 13 x $2,000 = $26,000 as the maximum amount that could be invested.
The correct answer is: $26,000

Question 5

Which of the following would be a result of a life insurance policy’s disability income rider?

Answer 5

The insured will receive an income benefit as long as he/she remains disabled. If the insured’s disability as defined by the policy improves, then the insured would lose benefits. Benefits are not taxable as long as the insured was the one who initially made the payments.
The correct answer is: The insured will receive an income benefit as long as he/she remains disabled.

Question 6

The Director issued a cease and desist order to Agent D. What is the maximum fine Agent D can receive?

Answer 6

The Director may impose the following civil penalties:

up to $250 for each unintentional violation, up to an aggregate civil penalty of $2,500
up to $2,500 for each intentional violation, up to an aggregate civil penalty of $15,000
restitution to any party damaged by the licensee’s actions.
The civil penalty will be paid to the Director, who will then deposit it into the state general fund. The correct answer is: $15,000

Question 7

The Policy Summary that must be given to insureds does NOT include:

Answer 7

The Policy Summary contains 1) the issuing company and producer’s name and address and the procedure to obtain answers about the policy, 2) The policy’s GENERIC name, 3) The policy loan interest rate, 4) Life Cost indexes for 10 and 20 years, 5) The Equivalent Level Annual Dividend, 6) The date of statement preparation, and 7) the following amounts for the first five policy years and representative years thereafter a) The annual premium for the basic policy and all riders, b) The guaranteed death benefit, c) The total guaranteed cash surrender value, d) Cash dividends payable.
The correct answer is: The name the policy is marketed under.

Question 8

M married at age 17 and told her spouse she was 21. When applying for a life insurance policy, she put her birth date as January 22, 1979 instead of January 22, 1983. What will the insurer do if this fact is discovered before the death benefit is paid out?

Answer 8

Since M’s age was actually lower than that stated in the policy, M paid more premium than necessary for the death benefit. The excess premiums will be returned along with the policy death benefit.
The correct answer is: Any excess in premiums paid will be returned at the time the death benefit is paid.

Question 9

An insurer authorized by a state’s insurance department to transact business in that state is called a what?

Answer 9

An admitted insurer is an insurer authorized by a state’s insurance department to transact business in that state. The correct answer is: Admitted Insurer

Question 10

Which of the following is NOT true regarding the members of the NAIC?

Answer 10

All state insurance directors/ commissioners are members of the National Association of Insurance Commissioners. There are no official legislative powers. The commissioners try to standardize insurance laws throughout the country by recommending model legislation.
The correct answer is: The NAIC is a board made up of 13 state insurance commissioners elected by all of the state commissioners.

Question 11

D purchased a $100,000 Whole Life policy with an automatic premium loan provision 15 years ago. If she stopped paying premiums 2 years ago, which is the automatic non-forfeiture option that will have been exercised?

Answer 11

The automatic premium loan provision is an elective policy feature that borrows money from the policy’s cash value to pay any premiums not paid by the end of the grace period and helps reduce cancellations because of the policy owner’s neglect or forgetting to pay the premium on time. As a result of this feature, D’s policy continued in force, and no non-forfeiture option needed to be exercised.
The correct answer is: No non-forfeiture option needs to be exercised.

Question 12

A Reciprocal Company:

Answer 12

Reciprocal Companies consist of groups which exchange insurance on each other. An attorney is empowered to bind the members together and the members share in profits through lower premiums or losses by assessments.
The correct answer is: has an attorney bind the members together to insure each other.

Question 13

The Policy Summary must be given to the applicant no later than what time?

Answer 13

The Policy Summary must be given to the applicant no later than the date the application is signed, and is usually given along with the Surrender Comparison Index Disclosure.
The correct answer is: The date the application is signed

Question 14

A Risk Retention Group:

Answer 14

A Risk Retention Group is a mutual company that insures people in the same profession or business.
The correct answer is: is a mutual company that insures people in the same profession or business.

Question 15

Which of the following is not considered to be one of the non-forfeiture options in a life insurance policy?

Answer 15

The three non-forfeiture options in a life insurance policy include 1) the Cash Surrender Value Option, 2) Reduced Paid-up Insurance, and 3) the Extended Term Option
The correct answer is: Extended Ordinary Life Option

Question 16

Fifteen days’ notice is required for which of the following circumstances involving health insurance policies?

Answer 16

An insurer must give an insured at least 15 days’ notice before canceling the policy. 20 days are required for the insured to notify the insurer of a claim. Proof of loss must be given the insurer within 90 days. The policy’s standard grace period is 31 days.
The correct answer is: The insurer wants to cancel an insured’s policy.

Question 17

The three principal types of health benefit policies do NOT include:

Answer 17

A specified disease policy covers only one risk, such as cancer or stroke. It is a category under Medical Expense policies, but is not considered one of the principle types of coverage
The correct answer is: Specified Disease

Question 18

Optional Uniform Policy Provision 6, Relation of Earnings/ Average Earnings, does which of the following?

Answer 18

The relation of earnings to insurance clause is a clause included in some guaranteed renewable or non-cancelable individual disability policies that limits the amount of benefits in which an insurer will participate when the total amount of disability benefits from all insurers exceeds an insured’s usual earnings. Also known as a participation limit.
The correct answer is: It limits the amounts of benefits an insured can receive from more than one insurer or more than one policy.

Question 19

V has a medical insurance policy that includes a $5,000 Basic Hospitalization along with a Major Medical supplement with a 1 million lifetime benefit, $500 deductible and 70/30 co-pay. What will be the corridor deductible if V is hospitalized and has bills of $20,000?

Answer 19

When a Major Medical policy supplements a Basic Medical policy, the deductible of the Major Medical policy is called the corridor deductible. As long as the bills are over $5,500, it doesn’t matter what the expense is, the corridor deductible is $500 (the deductible of the Major Medical policy).
The correct answer is: $500

Question 20

One of the optional Uniform Policy Provisions, Conformity with State Statutes requires that when changes in state laws occur that affect the policy, written notice must be given the insured within how many days?

Answer 20

Changes in state laws occurring while the policy is in effect automatically change the policy to conform without written notice having to be added to the policy or sent to the insured.
The correct answer is: No written notice is needed.

Question 21

F contracted a strange virus and was in the hospital for 3 months. Which of the following policies would pay for his lost wages while in the hospital?

Answer 21

Disability policies are designed to pay for loss of income due to either injury or sickness, as long as the probationary and elimination periods have been met. Benefits are coordinated if the individual is both injured and sick - they will not be paid for both at the same time. Hospitalization Income would pay a set amount for each day of hospitalization, but is not a wage-based coverage. Worker’s Comp would pay for the lost wages if F contracted the virus from a work-related situation, but that is not mentioned.
The correct answer is: Disability Income

Question 22

Which of the following would be considered an advertisement?

Answer 22

Advertising extends to all media, but doesn’t include 1) material in an insurer’s internal company communications or not intended for use by the general public, 2) Personal communications not intended to produce a sale, or 3) General announcements about new group coverage eligibility.
The correct answer is: A sales presentation by an insurance producer in someone’s home or office.

Question 23

If covered in a dental plan, which service typically has a separate deductible, coinsurance amount and maximum limit?

Answer 23

Orthodontics installation (braces) is not considered oral surgery and may be excluded. If covered, orthodontia usually has a separate deductible, coinsurance amount and maximum limit.
The correct answer is: Orthodontia

Question 24

Ray was admitted to a long-term residential nursing facility. Ray had to pay costs at the facility until he had a pre-determined asset amount remaining, and then Medicaid began paying his expenses. What type of insurance policy did Ray own?

Answer 24

Typically an individual must spend down to a no-asset limit before Medicaid will pay anything. A partnership LTC policy allows the individual to keep a certain stipulated amount, such as $100,000 or $300,000, in order to provide for a wife or children.
The correct answer is: Partnership LTC

Question 25

How many lifetime reserve days does Medicare Part A allot a patient for Inpatient Hospital Care that they can use at their discretion after the standard 90 days covered per benefit period?

Answer 25

Medicare pays for 90 days of Inpatient hospital care in each benefit period. If an individual is in the hospital longer than 90 days in a benefit period, there are 60 lifetime reserve days that can be used at any time, but there is no coverage beyond the benefit period when these reserve days are exhausted.
The correct answer is: 60 days

Question 26

Which of the following provisions in LTC policies is NOT designed to protect coverage for someone confined in a residential nursing home?

Answer 26

To protect the insured’s right to coverage, LTC policies generally 1) are non-cancelable, 2) are guaranteed renewable, and 3) include waiver of premium riders.
The correct answer is: Pre-existing condition provisions

Question 27

Insurance organizations that organize groups of hospitals, physicians and clinics to provide services at discounted rates, and insureds need to choose a health care provider from within that group is called a(n):

Answer 27

Preferred Provider Organizations organize groups of hospitals, physicians and clinics to provide services at discounted rates. Health Maintenance Organizations provide the health care coverage as well as the medical care itself. Producer Cooperatives are designed so that providers receive payment directly from the plan, rather than from the individual receiving treatment. Point-of-Service plans are open-ended PPOs.
The correct answer is: PPO.

Question 28

Which of the following statements about Optional Uniform Policy Provision 1, Change of Occupation is correct?

Answer 28

With the Change of Occupation provision, benefits may be reduced if the insured changes occupations to one classified by the insurer as more hazardous or if accepting payment for performing anything in such an occupation. Benefits are then reduced to the proportion that the paid premium would have covered for that occupation. If the occupation change is to one less hazardous premiums must be lowered.
The correct answer is: Benefits may be reduced if the insured changes occupations to one classified by the insurer as more hazardous.

Question 29

If L receives benefit payments on an individual disability policy she owns, which of the following statements is CORRECT about taxation requirements?

Answer 29

Disability benefits are subject to FICA (Social Security) taxation, even though no income tax may be owed if the benefits are received on an individual disability policy.
The correct answer is: L must pay FICA tax on benefits she receives.

Question 30

A non-cancelable policy is:

Answer 30

In a non-cancelable policy, the insurer cannot cancel the policy except for non-payment of premium and cannot increase the premium, but gains the right to cancel the policy or increase the premium once the insured reaches a certain age, such as 60, 65, or 70.
The correct answer is: one on which the premium may be increased when the insured reaches a certain age, such as 60, 65 or 70.

Question 31

Jolene has a group disability policy through her place of employment as well as an individual disability policy. Which of the following statements is NOT true of her individual policy if Jolene becomes disabled?

Answer 31

Individual disability plans usually do not coordinate with other group benefits the insured may have, but can be either long or short-term. Premiums for the policy are not tax-deductible. Because benefits are not subject to income tax the benefits are limited to a maximum of 60% of the individual’s income so they will not have more income when disabled than when working.
The correct answer is: Benefits will provide long term coverage after the group benefits are used up.

Question 32

Which of the following Medicare supplement policies does not cover the Part A deductible?

Answer 32

Medicare supplement plan A is the only Medigap plans that does not cover any of the Part A deductible. Plan A is the plan with the minimum core benefits that Medicare supplement polices offer.
The correct answer is: Plan A.

Question 33

Which of the following statements about Point-of-Service limited health service contracts is NOT true?

Answer 33

Any services that a POS limited health service plan offers out-of-plan must also be offered in-plan.
The correct answer is: POS limited health insurance plans may not offer orthodontic services out-of-plan that are not also offered in-plan.

Question 34

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 protects the health insurance coverage for workers when they have a new dependent if they have already been covered for how many months before the change?

Answer 34

Changing or losing jobs and having a new dependent are all covered by HIPAA if the change occurs after the insured has been covered for 12 months or more.
The correct answer is: 12 months

Question 35

Which of the following types of plans would most likely NOT coordinate benefits with the others?

Answer 35

Individual disability plans usually do not coordinate with other group benefits the insured may have.
The correct answer is: Individual disability

Question 36

While cheering in the stands at a soccer match one day U received a head injury when some fans stampeded onto the field in response to a call they didn’t like. When she came out of the coma, U was no longer able to remember details necessary for her job. Which disability policy would best cover her needs?

Answer 36

A “Your Occupation Disability” policy would be best, because U can no longer perform the duties of her regular profession. She can probably work in some capacity, so an “Any Occupation” policy would not be of much if any benefit. A partial disability policy would only pay benefits for a limited period of time once U was able to return to work in some capacity, and a residual disability would provide benefits only in proportion to the reduction in income once U was able to return to work in some capacity.
The correct answer is: Your Occupation

Question 37

In group insurance policies, the process of using a group’s past premium and claims experience to calculate premium rates is what?

Answer 37

In group insurance policies, the process of using a group’s past premium and claims experience to calculate premium rates is called Experience Rating. If the previous years experience was favorable, premium rates for the coming year could be reduced, and vice versa.
The correct answer is: Experience Rating

Question 38

In a POS plan that requires the insured to get a referral from an in-plan physician in order to receive covered treatment from a specialist outside of the plan, the in-plan physician is called the:

Answer 38

The primary care physician (PCP) is called the “gatekeeper.” This doctor must refer the insured to a doctor/specialist outside the plan before the plan will provide coverage.
The correct answer is: gatekeeper/PCP.

Question 39

A dental plan with benefits paid at the usual and customary rate in a particular geographic area is a:

Answer 39

Benefits of a Comprehensive Dental Plan are paid at the usual and customary rate, or the average cost in a particular geographic area.
The correct answer is: Comprehensive Dental Plan

Question 40

Which of the following is correct about the taxation of group health benefits?

Answer 40

Benefits received for group hospital or medical usually are not subject to income tax. Benefits received for group disability benefits are subject to income tax, but if the employee pays (contributes) a portion of the disability insurance premium that same percentage of benefit they later receive is not subject to income tax because the employee cannot deduct the premium from his own taxes.
The correct answer is: The portion of disability for which the employee pays premium is not subject to income tax.

Question 41

All of the following are core benefits of any Medicare Supplement policy EXCEPT:

Answer 41

Medicare Supplement policies must offer coverage for the 20% coinsurance amount of Part B, regardless of the length of confinement, but subject to the annual deductible.
The correct answer is: Coverage for the annual deductible and 20% coinsurance amount of Part B, regardless of the length of confinement.

Question 42

How many months of full-time employment status does an employee usually need before they will be eligible to participate in group insurance plans?

Answer 42

New members must usually meet certain requirements before being eligible for benefits, usually consisting of 1-3 months of full-time employment status.
The correct answer is: 1-3 months

Question 43

Which type of HMO is allowed to limit the number of health care providers its subscribers can use to those in the selected group?

Answer 43

When an HMO limits the number of health care providers its subscribers can use, the HMO subscribers must receive their health care from those within this closed panel.
The correct answer is: Closed Panel