Insurance Flashcards
1
Q
When a policy pays dividends to its policyholders, it is said to be?
A
Participating.
2
Q
Which of these describe a participating insurance policy?
A
Policyowners are entitled to receive dividends.
3
Q
What year was the McCarran-Ferguson Act enacted?
A
1945.
4
Q
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the?
A
Fair Credit Reporting Act.
5
Q
Dividends payable to a policyowner are?
A
Declared by the insurance company.
6
Q
Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated?
A
1970 – Fair Credit Reporting Act.
7
Q
Who elects the governing body of a mutual insurance company?
A
Policyholders.
8
Q
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called?
A
Reserves.
9
Q
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have?
A
Insurable interest in the proposed insured.
10
Q
Life and health insurance policies are?
A
Unilateral contracts.
11
Q
A policy of adhesion can only be modified by whom?
A
The insurance company.
12
Q
At what point does an informal agreement become a binding contract?
A
When consideration is provided by one of the parties to the contract.
13
Q
When must insurable interest exist for a life insurance contract to be valid?
A
Inception of the contract.
14
Q
Which of the following BEST describes a warranty?
A
Statement guaranteed to be true.
15
Q
A policy of adhesion can only be modified by whom?
A
The insurance company.
16
Q
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of?
A
Adhesion.
17
Q
Insurance policies are offered on a “take it or leave it” basis, which make them?
A
Contracts of Adhesion.
18
Q
A life insurance policy would be considered a wagering contract WITHOUT?
A
Insurable interest.
19
Q
What is the consideration given by an insurer in the Consideration clause of a life policy?
A
Promise to pay a death benefit to a named beneficiary.
20
Q
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT?
A
Bilateral.
21
Q
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E’s life insurance policy be directed to?
A
F.
22
Q
Which of the following consists of an offer, acceptance, and consideration?
A
Contract.
23
Q
Which of these is considered a statement that is assured to be true in every respect?
A
Warranty.
24
Q
Who makes the legally enforceable promises in a unilateral insurance policy?
A
Insurance company.
25
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory.
26
Which of these in NOT considered to be an element of an insurance contract?
Negotiating.
27
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest).
28
Which of these in NOT a type of agent authority?
Principal.
29
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made.
30
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium.
31
M has an insurance policy that also has an outstanding policy loan at the time of M’s death. The insurer will deduct the outstanding loan balance from the?
Policy proceeds.
32
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider.
33
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 will forfeit the right to use the automatic loan provision upon reinstatement.
34
What action will an insurer take if an interest payment on a policy loan is not made on time?
Automatically add the amount of interest due to the loan balance.
35
A policyowner may generate taxable income from which of the following Dividend Options?
Accumulation at Interest.
36
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured’s death, EXCEPT?
Interest Only.
37
A Return of Premium life insurance policy is?
Whole life and increasing term.
38
Typically a life insurance death benefit is paid by a lump-sum payment. A(n) ______ option is a method of distributing a Life Insurance policy’s death benefit OTHER than by a lump sum payment?
Settlement.
39
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to.
40
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000.
41
All of these statements concerning Settlement Options are true, EXCEPT?
Only the beneficiary may select.
42
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
Extended term.
43
An insurer may normally delay the payment of a cash value loan or surrender value for up to?
6 months.
44
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)?
Living Benefit.
45
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled.
46
A Life insurance policyowner would like to take out a policy loan against the cash value in the Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n)?
Variable.
47
A Term Life rider offers the insured?
Additional life coverage.
48
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums.
49
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured’s death is called a(n)?
Insuring agreement.
50
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract Provision.
51
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?
Beneficiary’s age.
52
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision.
53
The _______ has the right to change a life insurance policy’s beneficiary?
Policyowner.
54
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?
Adjust the death benefit to a reduced amount.
55
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt.
56
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner’s Rights.
57
The Automatic Premium Loan provision is designed to?
Avoid a policy lapse.
58
A(n) _____ rider may be used to include coverage for children under their parents’ life insurance policy?
Term.
59
The free-look provision begins?
Upon receipt of the policy by the policyowner.
60
All of the following statements are true regarding a policy’s Grace period, EXCEPT?
Past due premiums are waived.
61
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered.
62
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor benefit rider.
63
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-up.
64
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates, specified in the contract with no evidence of insurability required.
65
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised.
66
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider.
67
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied.
68
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)?
Exclusion.
69
The Consideration clause in a life insurance policy indicates that a policyowner’s consideration consists of a completed application and?
The initial premium.
70
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract.
71
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T’s coverage is?
Conditional, depending on the insurer’s underwriting guidelines.
72
Which of these is an element of a Single Premium annuity?
Lump-sum payment.
73
An immediate annuity consists of a?
Single premium.
74
A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a?
Profit-sharing plan.
75
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused.
76
A(n) ______ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary?
Revocable.
77
Which of the following is NOT a limited benefit plan?
Life insurance policy.
78
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity.
79
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding.
80
What kind of premium does a Whole Life policy have?
Level
81
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at age 70.
82
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment.
83
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment.
84
All of these are characteristics of an Adjustable Life policy, EXCEPT?
Face amount can be adjusted using policy dividends.
85
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC).
86
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life policy with an Other insured Rider.
87
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy.
88
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT?
Change the policy’s interest rate.
89
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision.
90
J is 35 years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20 pay Life.
91
A Limited Pay Life policy has?
Premium payments limited to a specified number of years.
92
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
Face amount plus the policy’s cash value.
93
Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called?
Limited Pay Life.
94
What kind of insurance policy supplies an income stream over a set of period of time that starts when the insured dies?
Family Maintenance Policy.
95
N is a 40 year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid up at retirement. Which of these should N purchase?
30 Pay Life.
96
Under a Renewable Term policy?
The renewal premium is calculated on the basis of the insured’s attained age.
97
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level.
98
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract.
99
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.
100
The advantage of reinstating an original life policy is?
The premiums are based on a younger age.
101
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 paid the Death Benefit.
102
Variable Whole Life insurance can be described as?
Both an insurance and securities product.
103
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
Paid-Up Additional Insurance.
104
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued.
105
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life.
106
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision.
107
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of?
Additional Whole Life coverage at specified times.
108
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify.
109
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank.
110
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment.
111
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed.
112
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called?
Reinstatement.
113
B recently dies and as insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B has understated his age by 5 years at the time of application. In this situation, the insurer will?
Pay the amount that the premium would have purchased at the correct age.
114
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only.
115
Dividends paid from a life insurance policy are?
Issued by the insurer.
116
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the?
Policy Loan Provision.
117
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?
20-Pay Life accumulates cash value faster than Straight Life.
118
Which of these are NOT an example of a Nonforfeiture option?
Life Income.
119
The incontestable clause allows an insurer to?
Contest a claim during the Contestable period.
120
What is the Suicide provision designed to do?
Safeguard the insurer from an applicant who is contemplating suicide.
121
Periodic health claim payments MUST be made at least?
Monthly.
122
The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the?
Initial deductible.
123
Which of the following is TRUE about a qualified retirement that is “top heavy”?
More than 60% of plan assests are in key employee accounts.
124
Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy?
Premiums are waived after the insured has been totally disabled for a specified time period.
125
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life.
126
Additional coverage can be added to a Whole Life policy by adding a(n)?
Decreasing term rider.
127
An employer that offers a qualified retirement plan to its employees is eligible to?
Make tax-deductible contributions to the plan.
128
An individual who purchases a Life annuity is given protection against?
The risk of living longer than expected.
129
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.
130
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured?
Is blinded in an accident.
131
Generally, how long is a benefit period for a Major Medical Expense Plan?
One year.
132
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?
Life settlement contract.
133
The policy provision that entitles the insurer to establish conditions the insured must meet a claim is pending is?
Time Limit on Certain Defenses.
134
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT?
The premiums can be lowered or raised, based on investment performance.
135
Long Term Care policies will usually pay for eligible benefits using which of the following methods?
Expense incurred.
136
How does group insurance differ from individual insurance?
Premiums are lower.
137
Which of the following does Social Security NOT provide benefits for?
Dismemberment.
138
To be eligible for Social Security disability benefits, an employee must be unable to perform?
Any occupation.
139
An employee with $25,000 group term life coverage was recently fired. This employee’s group coverage may be converted to a?
$25,000 individual whole life policy.
140
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory.
141
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as?
A fraternal benefit society.
142
A noncontributory group term life plan is characterized by?
The entire cost of the plan is paid for by the employer.
143
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance.
144
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion.
145
Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies?
Long-Term Care.
146
Which of the following types of care is typically not covered in a Long-Term Care policy?
Acupuncture.
147
P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receive $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$0.
148
All individuals covered under a group contract will receive a(n)?
Certificate.
149
Why must an insurance applicant answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy.
150
A statement made by an insured in an insurance application that must be true to the best of one’s knowledge and which becomes a part of the contract is known as?
A representation.
151
Which of these is NOT an element of Life insurance premiums?
Morbidity rate.
152
Group/voluntary long-term care premiums are typically deducted from the employee's income and,?
Are less costly as compared to individual long term care coverage.
153
A foreign insurance company conducting insurance business in Texas?
Was formed under the laws of another state.
154
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income.
155
Taking receipt of premiums and holding them for the insurance company is an example of?
Fiduciary responsibility.
156
Traditional individual retirement annuity (IRA) distribution must start by?
April 1st of the year following the year the participant attains age 70 ½.
157
M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim?
$1,600.
158
A(n) _________ contained in a life insurance policy states that the policy will NOT cover certain risks?
Exclusion.
159
All of these statements about the Waiver of Premium provision are correct, EXCEPT?
Insured must be eligible for Social Security disability for claim to be accepted.
160
A(n) _______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities?
Variable.
161
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew?
Without evidence of insurability.
162
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner.
163
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner of the investment aspect of the plan?
Variable universal life.
164
Which of the following is considered to be the time period after a Health Policy is issued, during which no benefits are provided for illness?
Probationary Period.
165
An insurance agent has a fiduciary responsibility to all of the following EXCEPT?
Other agents.
166
Which of these is NOT considered to be a cost connected with an individual’s death?
Business expenses.
167
P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA benefits, which of the following statements is TRUE?
She DOES need to provide evidence of insurability.
168
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)?
Installment Refund annuity.
169
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met.
170
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life.
171
A Whole Life insurance policyowner does NOT have the right to?
Change the grace period.
172
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
USA Patriot Act.
173
Which of these factors does NOT influence an applicant’s need for life insurance?
Self-maintenance expenses.
174
_____ of personal life insurance premiums is usually deductible for federal income tax purposes?
0%.
175
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will?
Continue coverage but exclude the heart condition.
176
All are true statements regarding the underwriting process, EXCEPT?
AIDS and HIV virus exams can be conducted in a discriminatory fashion.
177
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan.
178
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded.
179
A policy loan is made possible by which of these life insurance policy features?
Cash value provision.
180
The Coordination of Benefits provision?
Prevents an insured covered by two health plans from making a profit on a covered loss.
181
Which of the following phrases refers to the fees charged by a healthcare professional?
Usual, customary, and reasonable expenses.
182
What is the elimination period of an individual disability policy?
Time period a disabled person must wait before benefits are paid.
183
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?
Revocable.
184
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?
If the employee paid for qualified medical expenses, the reimbursement may be tax-free.
185
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K’s estate if P dies within a specified time.
186
The reason for backdating a policy is?
To obtain a premium rate based on an earlier age.
187
Who is NOT required to sign a life insurance application?
Beneficiary.
188
What is being delivered during a policy delivery?
Insurance contract to the proposed insured.
189
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan.
190
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?
ABC is the policyowner, C is the insured, and ABC is the beneficiary.
191
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners.
192
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?
Each partner owns a $500,000 policy on their partner’s life.
193
If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee?
Nothing.
194
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child.
195
Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?
6.
196
How long is the typical free look period for Long Term Care insurance policies?
30 days.
197
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances.
198
The guarantee of insurability option provides a long-term policyowner the ability to?
Buy additional coverage at a later date.
199
Which Long Term Care insurance statement is true?
Pre-existing conditions must be covered after the coverage has been in force for six months.
200
A life insurance arrangement which circumvents insurable interest statutes is called?
Investor-Originated Life Insurance.
201
Insurance policies are considered aleatory contracts because?
Performance is conditioned upon a future occurrence.
202
Which health policy clause specifies the amount of benefits to be paid?
Insuring.
203
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the?
Entire contract provision.
204
M’s insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force?
45 days.
205
If an individual is covered under an Accidental Death Policy and dies, an autopsy can be performed in all these situations, EXCEPT?
When the state prohibits this by law.
206
What should an insured to if the insurer does not send claims forms within the time period set forth in a health policy’s Claims Forms provision?
Submit the claim in any form.
207
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the?
Insurer dates the policy.
208
The Consideration clause of an insurance contract includes?
The schedule and amount of premium payments.
209
The Legal Actions provision of an insurance contract is designed to do all of the following, EXCEPT?
Protect the producer.
210
Which of the following will a Long Term Care plan typically provide benefits for?
Home health care.
211
T applied for a Disability Income policy and has a history of back injuries. The insurer issued the policy with a statement that excluded coverage for back injuries. This statement is called a(n)?
Impairment rider.
212
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Premiums may increase at time of renewal.
213
“A producer does not have the authority to change a policy or waive any of its provisions”. The health provision that best describes this statement is called the?
Entire Contract.
214
Under an individual Health Insurance policy, the Time Limit of Certain Defenses provision states that nonfraudulent misstatements first become incontestable two years?
From the date that the policy was issued.
215
Health Insurance benefits NOT covered due to an act of war are?
Excluded by the insurer in the contract provisions.
216
An insurer must provide an insured with claim forms within _____ days after receiving notice of a loss?
15 days.
217
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
Monthly.
218
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File written proof of loss.
219
T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?
Increase her policy’s coverage amount.
220
A(n) _______ of benefits of a Health Policy transfers payments to someone other than the policyowner?
Assignment.
221
The ______ clause identifies which losses resulting from an accident or sickness are insured by the policy?
Insuring.
222
P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?
A recurrent disability.
223
How long does the coverage normally remain on a limited-pay life policy?
Age 100.
224
The investment gains from a Universal Life Policy usually go toward?
The cash value.
225
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy.
226
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term.
227
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided.
228
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax.
229
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life.
230
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term.
231
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit.
232
What advantage does the renewability feature give to term policy?
The insured may extend the coverage period.
233
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D.
234
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 Year Convertible Term.
235
Under an interest Sensitive Whole Life policy?
Cash values are determined by interest rates.
236
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for?
Modified Whole Life.
237
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material.
238
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life.
239
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor clause.
240
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans.
241
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental Death and Dismemberment clause.
242
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child.
243
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life.
244
A life insurance policy that provides a policyowner with cash value along with a level face amount is called?
Whole life.
245
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as?
Variable Life.
246
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy.
247
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be?
Universal Life.
248
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment.
249
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy.
250
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy?
Universal.
251
Which of these is an element of a Variable Life policy?
A fixed, level premium.
252
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
253
Who has the option to renew a Renewable Term policy?
Insured.
254
Credit Life insurance is?
Issued in an amount not to exceed the amount of the loan.
255
Which of the following types of permanent life insurance policies offers the highest initial cash value?
Single premium.
256
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision.
257
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of life insurance policy is this?
Modified Premium Life.
258
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the?
Expense charges.
259
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life.
260
What type of life policy covers two lives and pays the face amount after the first one dies?
Joint Life Policy.
261
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured’s lifetime/coverage lasts until death of the insured.
262
Under a Graded Premium Whole Life policy?
The premium increases each year during the early years of the contract and remains the same after that time.
263
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force.
264
A(n) _______ ____________ life policy combines investment choices with a form of Term coverage?
Variable Universal.
265
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n)?
Third-party with no insurable interest.
266
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term.
267
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
Increase face amount.
268
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds.
269
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period?
Varies according to the contract.
270
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable.
271
A(n) ______ term life policy is normally used when covering an insured’s mortgage balance?
Decreasing.
272
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G’s family receive an income?
10 years.
273
A policy that becomes a Modified Endowment Contract (MEC)?
Will lose many of its tax advantages.
274
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life.
275
A Cost of Living rider gives the insured?
Additional death benefits.
276
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70.
277
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)?
Accidental Death and Dismemberment rider (AD&D).
278
The purpose of the ______ Period clause is to avoid an unintentional lapse of a life insurance policy?
Grace.
279
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege.
280
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life.
281
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?
Cost of insurance.
282
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life.
283
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship.
284
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured.
285
What type of life insurance are credit policies issued as?
Term.
286
Term insurance has which of the following characteristics?
Expires at the end of the policy period.
287
Which of the following is NOT included in a life insurance illustration?
Company’s mortality table.
288
During a sales presentation for a participating life insurance policy, an agent MUST?
Make a prospect understand that dividends are NOT guaranteed.
289
In life insurance, the needs approach is used mostly to establish?
How much life insurance a client should apply for.
290
In a Life insurance contract, an insurance company’s promise to pay stated benefits is called the?
Insuring clause.
291
The provision in a health insurance policy that suspends premiums being paid to the insurer while the insured is disabled is called the?
Waiver of Premium.
292
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 second year.
293
Which of these types of coverage is best described as a short term medical policy?
Interim coverage.
294
B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?
Disability Income.
295
What is required for an agent whose license has been revoked?
Wait at least five years before applying for a new license.
296
Medicare Part C is?
Available to those who are enrolled in Medicare Part A and Part B.
297
The insured and insurance company will share the cost of covered losses under which health policy feature?
Payment of Claims Provision.
298
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life.
299
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent.
300
The Notice of Claims provision requires a policyowner to?
Notify an insurer of a claim within a specified time.
301
Which type of policy would pay an employee’s salary if the employer was injured in a bicycle accident and out of work for six weeks?
Business Overhead Expense.
302
Who has the right to change a revocable beneficiary?
Policyowner.
303
The underwriting process involves all of these, EXCEPT for?
Policy loan.
304
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty.
305
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act.
306
Which of these statements concerning an individual Straight Life annuity is accurate?
Payments are made to an annuitant for life.
307
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term.
308
An immediate annuity consists of a?
Single premium.
309
Which of the following is NOT included in the policy face?
Exclusions.
310
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary.
311
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Amount of the benefits available from other sources.
312
K pays on a $20,000 20-year endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit.
313
What is Medicare?
A hospital and medical expense insurance program.
314
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.
315
The ________ is authorized to assign a Life Insurance policy as collateral for a loan?
Policyowner.
316
A 55 year old recently received a $30,000 distribution from a previous employer’s 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000.
317
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
Key Person Life insurance.
318
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term.
319
The amount of coverage on a group credit life policy is limited to?
The insured’s total loan value.
320
A Nonforfeiture clause gives the policyowner?
Guaranteed values even if the policy has lapsed.
321
Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?
Discourages overutilization of the insurance coverage.
322
A level premium indicates?
The premium is fixed for the entire duration of the contract.
323
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement.
324
W is a 39 year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n)?
Immediate annuity.
325
Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?
Guaranteed insurability rider.
326
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company.
327
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner.
328
Which statement is true regarding a minor beneficiary?
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract.
329
An example of rebating would be?
Returning a portion of a premium as inducement to purchase insurance.
330
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
Reimbursement.
331
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
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.
332
In the event of an illness, a(n) ___________ ____________ policy would reimburse an insured for loss of earnings?
Disability Income.
333
What does a 401 (k) plan generally provide its participants?
Salary-deferral contributions.
334
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of Premium rider.
335
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Conditional receipt.
336
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term.
337
An insured’s inability to perform two or more activities of daily living may trigger which type of life policy rider?
Long term care.
338
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period.
339
What is the purpose of the U.S.A Patriot Act?
Detect and deter terrorism.
340
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Contributory.
341
Insurance contracts are known as _______ because certain future conditions or acts must occur before any claims can be paid?
Conditional.
342
N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 ½ months. N’s total benefit received on this claim is?
$1,250.
343
A non-contributory plan requires ____ participation of all eligible employees?
100%.
344
In order to sell a(n) ______ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA)?
Variable.
345
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion.
346
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Inspection report.
347
What is an organization that solicits insurance only to its members?
Fraternal benefit society.
348
What is the initial requirement for an insured to become eligible for benefits under the Waiver of Premium provision?
Insured must be under a physician’s care.
349
The percentage of an individual’s Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?
Social Security Disability Income.
350
What is the purpose of the Time of Payment of Claims provision?
Prevents delayed claim payments made by the insurer.
351
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee.
352
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000.
353
The premiums paid by an employer for his employee’s group life insurance are usually considered to be?
Tax-deductible to the employer.
354
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$6,000.
355
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent.
356
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a?
Risk retention group.
357
The cash value in a(n) _______ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal.
358
Which of the following BEST describes a Hospital Indemnity policy?
Coverage that pays a stated amount per day of a covered hospitalization.
359
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred.
360
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 describes this policy is called?
Noncancellable.
361
Statements made on an insurance application that are believed to be true to the best of the applicant’s knowledge are called?
Representations.
362
With whom may an agent legally share commissions?
Another agent with the same line of insurance.
363
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D’s beneficiary’s receive?
The full face amount.
364
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term.
365
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event N was killed while flying as a student pilot?
Exclusion.
366
When can a policyowner change a revocable beneficiary?
Anytime.
367
Credit Life insurance is?
Issued in an amount not to exceed the amount of the loan.
368
J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J’s age, as stated on the application five years ago, was found to be understated by ten years. Which of the following actions will the insurance company take?
The insurer will adjust the benefit to what the premiums paid would have purchased at the insured’s actual age.
369
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife.
370
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate.
371
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.
372
M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate?
Earned, but unpaid benefits.
373
P and Q are married and have three children. P is the primary beneficiary on Q’s Accidental Death and Dismemberment (AD&D) policy and Q’s sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to?
P only.
374
An employee is covered under a company group life plan with a $50,000 death benefit. What is the MAXIMUM amount a spouse may be insured for under this program?
$25,000.
375
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life.
376
Which of these needs is satisfied by Adjustable Life insurance?
Insured’s need for flexible premiums.
377
On an Accidental Death and Dismemberment (AD&D) insurance policy, who is qualified to change the beneficiary designation?
Policyowner.
378
Which statement about a whole life policy is true?
Cash value may be borrowed against.
379
Who owns a stock insurance company?
Stockholders.
380
The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as?
Employee’s premiums paid by the employer is tax-deductible to the employer as a business expenditure.
381
Which of the following information is NOT required to be included in a Whole Life policy?
Policy’s guaranteed dividend table.
382
What does the insuring agreement in a Life insurance contract establish?
An insurer’s basic promise.
383
Which of the following statements is correct regarding an employer/employee group health plan?
The employer receives a master policy and the employees receive certificates.
384
What must the policyowner provide to the insurer for validation that a loss has occurred?
Proof of Loss.
385
An insurance company organized under New York laws and licensed to do business in Texas is considered a(n)?
Foreign company.
386
All of the following statements about traditional individual retirement accounts are false EXCEPT?
10% penalty is applied to withdrawals before age 59 ½.
387
Which of the following situations does a Critical Illness plan cover?
Leukemia.
388
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium.
389
A major medical policy typically?
Provides benefits for reasonable and necessary medical expenses, subject to policy limits.
390
What does a Guaranteed Insurability rider provide a Disability Income policyowner?
The ability to periodically increase the amount of coverage without evidence of insurability.
391
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate.
392
The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for?
Health information.
393
Which of the following is the reimbursement of benefits for the treatment of a beneficiary’s injuries caused by a third party?
Subrogation.
394
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life.
395
A 45 year old woman won $100,000 in a scratch-off 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?
Deferred Fixed annuity.
396
Major Medical policies typically?
Contain a deductible and coinsurance.
397
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life.
398
A Business Disability Buyout plan policy is designed?
To pay benefits to the Corporation or other shareholders.
399
A variable insurance policy?
Does not guarantee a return on its investment accounts.
400
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards. How will the insurer likely consider this condition?
Insurer will likely treat as a pre-existing condition which may not be covered for one year.
401
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application.
402
An insured covered by Accidental Death and Dismemberment (AD&D) insurance has just died. What will happen if the primary beneficiary had already dies before the insured and contingent beneficiary?
Proceeds will go to the contingent beneficiary.
403
Which of the following statements about a Guaranteed Renewable Health Insurance policy is CORRECT?
Premiums normally increase at time of renewal.
404
The part of a life insurance policy guaranteed to be true is called a(n)?
Warranty.
405
An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?
31 days.
406
An example of an unfair claims settlement practice is?
Turning down a claim without providing the basis of denial.
407
An underwriter determines that a life insurance applicant’s risk should be reclassified due to a health issue. This policy may be issued with a(n)?
Extra premium.
408
Which of the following statements about the classification of applicants is INCORRECT?
Substandard applicants are never declined by underwriters.
409
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement.
410
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant’s signature on application.
411
When an insurance application is taken by a producer, which of these statements is true?
Any changes made on the application require the applicant’s initials.
412
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for Social Security disability benefits?
5 months.
413
What kind of life insurance product covers children under their parent’s policy?
Term rider.
414
Which of the following claims are typically excluded from Medical expense policies?
Intentionally self-inflicted injuries.
415
C is the policy owner 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 the claim in full minus the premium due.
416
Which of the following is the MOST important factor when deciding how much Disability Income coverage an applicant should purchase?
Applicant’s monthly income
417
A disability elimination period is best described as a?
Time deductible.
418
Which of these is considered a mandatory provision?
Payment of Claims.
419
D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?
Residual Benefit clause.
420
An individual Disability Income insurance applicant may be required to submit all the following information, EXCEPT?
Spouse’s occupation.
421
An insured must notify an insurer of a medical claim within _____ days after an accident?
20 days.
422
Which of the following actions may NOT be taken by an insurance company to insure a substandard applicant for disability income coverage?
Lengthen the contestability period.
423
J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?
Nonoccupational coverage.
424
What is the primary factor that determines the benefits paid under a disability income policy?
Wages.
425
V is insured under an individual Disability Income policy with a 30-day Elimination period. On July 1, he is involved in an accident and temporarily disabled. He returns to work on December 1. How many months of benefit are payable?
4 months.
426
X owns a disability income policy. X recently suffered a disability which was due to the same cause as a previous disability. These disabilities both occurred over a four-month span. Which of the following provisions allows X's second disability to be covered without a new elimination period?
Recurrent Disability.
427
When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits?
Recurrent Disability.
428
R becomes disabled and owns an individual Disability Income policy. When is R eligible to receive disability benefits?
Upon satisfying the elimination period requirement.
429
Which of these statements concerning an individual Disability Income policy is TRUE?
Normally includes an Elimination Period.
430
What is the maximum Social Security Disability benefits amount an insured can receive?
100% of the insured’s Primary Insurance Amount (PIA).
431
What does Medicare Parts A and B cover?
Part A covers hospitalization; Part B covers doctor’s services.
432
J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a predetermined price. What type of plan does J belong to?
Health Maintenance Organization.
433
Which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements?
HMO.
434
Medicare is intended for all of the following groups, EXCEPT?
Those enrolled as a full-time student.
435
Medicare Part A and Part B do NOT pay for?
Dental work.
436
In an individual retirement account (IRA), rollover contributions are?
Not limited by dollar amount.
437
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the?
Marital deduction.
438
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse’s IRA.
439
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA).
440
Which of the following reimburses its insured for covered medical expenses?
Commercial insurers.
441
In a Disability Income policy, which of these clauses acts as a deductible?
Elimination Period.
442
A life insurance application may be rejected on the basis of all of these factors EXCEPT?
Gender.
443
Which of the following is an example of a nonforfeiture option?
Reduced Paid-up option.
444
Which of the following BEST describes a short-term medical expense policy?
Nonrenewable.
445
Disability policies do NOT normally pay for disabilities arising from which of the following?
War.
446
Premature IRA distributions are assessed a penalty tax of?
10%.
447
Post-tax dollar contributions are found in?
Roth IRA investments.
448
A sole proprietor may use this plan ONLY if the employee of this business are included?
Keogh Pension Plan.
449
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100.
450
An IRA owner can start making withdrawals and NOT be subject to a tax penalty beginning at what age?
59 ½.
451
The combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy?
Decreasing.
452
The clause in an Accident and Health policy which defines the benefit amounts the insurer will pay is called the?
Insuring clause.
453
Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?
Pay an amount the premiums would have purchased at the insured’s actual age.
454
Which type of provider is known for stressing preventative medical care and routine physical examinations?
Health Maintenance Organizations (HMO’s)
455
Medicare Part B does NOT cover?
Inpatient hospital services.
456
According to the Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid?
31 days.
457
A characteristic of Preferred Provider Organizations (PPOs) would be?
Discounted fees for the patient.
458
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell.
459
Under what system do a group of doctors and hospitals in a designated are contract with an insurer to provide services at a prearranged cost to the insured?
PPO.
460
The sections of an insurance contract which limit coverage are called?
Exclusions.
461
Which of the following Nonforfeiture options offers the highest death benefit?
Extended term.
462
With Optionally Renewable Health policies, the insurer may?
Review the policy annually and determine whether or not to renew it.
463
T has Disability Income policy that pays a monthly benefit of $5000. If T becomes partially disabled, what can he likely expect?
Less than $5,000 per month benefit regardless of the cause.
464
Which of the following provisions specifies how long a policyowner’s health coverage will remain in effect it the policyowner does not pay the premium when it is due?
Grace Period.
465
The provision that defines to whom the whom the insurer will pay benefits to is called?
Payment of Claims.
466
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium.
467
Variable Life products require a producer to?
Hold a Life insurance license and a Securities license.
468
The most important factor to consider when determining whether to convert term insurance at the insured’s attained age or the insured’s original age is?
The cost.
469
Whole Life insurance is sometimes referred to as “Straight Life”. What does the word “Straight” indicate when using this phrase?
The duration of premium payments.
470
A term life insurance policy matures?
Upon the insured’s death during the term of the policy.
471
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)?
Variable Universal Life policy.
472
What is issued to each employee of an employer health plan?
Certificate.
473
All students attending a large university could be covered by?
A blanket policy.
474
The provision in a Group health policy that allows the insurer to postpone coverage for a covered illness 30 days after the policy’s effective date is referred to as the?
Waiting Period.
475
K has an Accidental Death and Dismemberment (AD&D) insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
Daughter.
476
S is employed by a large corporation that provides group health coverage for its employees and their dependents. If S dies, the company must allow his surviving spouse and dependents to continue their group health coverage for a maximum of how many months under COBRA regulations?
36 months.
477
K is the insured and P is the sole beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to P’s estate.
478
Which of the following BEST describes how a policy that uses the “accidental bodily injury” definition of an accident differs from one that uses the “accidental means” definition?
Less restrictive.
479
All of the following statements regarding group health insurance is true, EXCEPT?
An individual policy is given to each member.
480
The difference between group insurance and blanket health policies is?
Blanket health policies do not issue certificates.
481
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion.
482
How do life insurance companies handle cases where the insured commits suicide within the contract’s stated Contestable period?
Claims are denied under the Suicide clause of the policy.
483
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions.
484
A life insurance application must be signed by all of these, EXCEPT?
Beneficiary.
485
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and?
The initial premium.
486
What is the purpose of a Policy Summary?
It highlights the critical parts of the policy issued.
487
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine?
Probability of making timely premium payments.
488
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
At the time of application.
489
An applicant’s medical information received from the Medical Information Bureau (MIB) may be furnished to the?
Applicant’s physician.
490
When does a life insurance contract become effective if the initial premium is not collected during the application process?
When producer delivers policy and collects initial premium.
491
A Medical Information Report (MIB) report may disclose which of the following?
Prior use of marijuana.
492
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application.
493
Under which of the following circumstances will the benefits under COBRA continuation coverage end?
All group health plans are terminated by the employer.
494
XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is?
100%.
495
Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is?
Business Overhead Expense.
496
Which of the following statements does NOT accurately describe the tax treatment of premiums and benefits of individual Accident and Health insurance?
Disability income policy premiums are tax-deductible.
497
Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the sale of a business?
Business owner becoming disabled.
498
What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made?
Irrevocable beneficiary.
499
An accident policy will most likely pay a benefit for a(n)?
Off-the-job accident.
500
Which of the following would be a likely candidate for disability income on a key employee?
Company executive.
501
C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?
$720.
502
Which of the following services is NOT included under hospitalization expense coverage?
Surgical fees.
503
T is covered by two health insurance plans: a group plan through his employer and his spouse’s plan as a dependent. Under the Model Group Coordination of Benefits provision, when T files a claim, his employer’s plan is considered the?
Primary carrier.
504
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?
Irrevocable.
505
P loses an arm in a farm accident and is paid $10,000 from his Accidental Death and Dismemberment policy. This benefit is known as the?
Capital Sum.
506
Group health plans typically contain a coordination of benefits (COB) provision. This provision’s purpose is to?
Avoid the duplication of benefit payments.
507
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers (and their families) whose employment has been terminated the right to?
Continue group health benefits.
508
Before a life policy is issued, which of these contract elements is necessary?
A signed application by the prospect.
509
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was NOT submitted with the application.
510
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act.
511
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Conditional.
512
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?
Free-look period has expired.
513
A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?
When the applicant receives the policy and pays the initial premium.
514
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of?
$10,000.
515
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has?
Waived one of its legal rights.
516
What type of annuity has a cash value that is based upon the performance of it’s underlying investment funds?
Variable.
517
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain.
518
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase.
519
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner.
520
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium.
521
A Variable Annuity has which of the following characteristics?
Underlying equity investments.
522
Which of the following are Equity Indexed annuities typically invested in?
S&P 500.
523
A(n) ______ annuity pays benefits based on units rather than stated dollar amounts?
Variable.
524
Which of the following statements is CORRECT about an agent who is taking an insurance application?
The agent should have the applicant initial any changes made on the application.
525
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?
Carryover provision.
526
Comprehensive Major Medical policies usually combine?
Major Medical with Basic Hospital/Surgical coverage.
527
The individual Health Insurance policy that offers the broadest protection is a(n) ______ ______ policy?
Major Medical.
528
Under a Basic Medical Expense policy, what does the hospitalization expense portion cover?
Hospital room and board.
529
All of these are characteristics of a Health Reimbursement Arrangement (HRA) EXCEPT?
HRA is entirely funded by the employee.
530
Deductibles are used in health policies to lower?
Overuse of medical services.
531
Which of the following statements BEST describes dental care indemnity coverage?
Services are reimbursed after insurer receives the invoice.
532
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)?
Internal limit.
533
Which of the following types of health coverage frequently uses a deductible?
Major Medical policy.
534
Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT?
Partial withdrawal features beyond a surrender charge period.
535
K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?
Single Premium Immediate Joint with Survivor Annuity.
536
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom’s employments is terminated, 20% of the funds would be forfeited.
537
Under a graded premium policy, the premiums?
Are lower during the policy’s early years.
538
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT?
Income derived from the TSA is received income tax-free.
539
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable.
540
Which premium schedule results in the lowest cost to the policyowner?
Annual.
541
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy’s primary beneficiary?
All proceeds are income tax free in the year they are received.
542
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?
Irrevocable.
543
Quarterly premium payments increase the annual cost of insurance because?
Interest to the insurer is decreased while the administrative costs are increased.
544
Basic Medical Expense insurance?
Has lower benefit limits than Major Medical insurance.
545
A catastrophic illness would be best covered by which of the following health insurance plans?
Major Medical.
546
What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?
Dread disease insurance.
547
A Major Medical policy typically contains a provision that requires the insurer to pay only part of a loss, while the balance is paid by the insured. This provision is called?
Coinsurance.
548
An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred?
$7,000.
549
The payments on Q’s annuity are no less than $250 quarterly. Which of the following annuities does Q own?
Flexible Installment Deferred.
550
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)?
Straight Life annuity.
551
Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?
Transportation to and from a treatment facility.
552
A Disability Income policy that only the policyowner can terminate and which the rates will never go up is considered to be?
Noncancellable.
553
A pilot applies for Life insurance. The insurer approves the application with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will the likely issue the coverage with a(n)?
Aviation Exclusion.
554
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification.
555
J’s Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay?
$3,600.
556
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider.
557
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable life.
558
What is the excise tax rate the IRS impose on individuals aged 70 ½ or older who do not take the required minimum distributions from their qualified retirement plan?
50%.
559
The benefits under a Disability Buy-Out policy are?
Payable to the company or another shareholder.
560
P is the insured on a participating life policy. Which statement is true if P’s premiums are waived due to a disability?
P will still receive declared dividends.
561
B’s policy provides coverage on an in-hospital basis only and contains a limited daily room and board benefit. Which of these policies does B have?
Basic Hospital.
562
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance.
563
Which of the following actions is required by an insured who leaves the primary area of medical coverage and seeks medical care?
Obtain prior approval from the insurer for the medical service.
564
Basic Hospital and Surgical policy benefits are?
Lower than the actual expenses incurred.
565
This type of deductible provision states that should more than one family member be involved in a common accident, or suffer the same illness, only one individual deductible amount shall be applied?
Common accident deductible.
566
Which rider provides coverage for a child under a parent’s life insurance policy?
Child term rider.
567
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion.
568
K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
Reinstatement.
569
Which of the following characteristics is associated with a large group disability income policy?
No medical underwriting.
570
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?
Her group health plan.
571
When will a hearing be held after a notice of hearing, alleging participation in an unfair or deceptive act, is served to a licensee or insurer by the Commissioner?
No sooner than 6 days.
572
Which of these is considered a statement that is assured to be true in every respect?
Warranty.
573
Variable annuities may invest premiums in each of the following, EXCEPT?
Insurer’s corporate business account.
574
A policyowner is able to choose the frequency of premium payments through what policy feature?
Premium Mode.
575
What is the monetary penalty for willfully violating a cease-and-desist order?
A fine of up to $500.
576
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy’s maturity date, whichever happens first.
577
The USA Patriot Act was enacted in?
2001.
578
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral.
579
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?
Sign an enrollment card.
580
S wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a?
High-deductible health plan.
581
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL’s)
582
When does a Probationary Period provision become effective in a health insurance contract?
At the policy’s inception.
583
Which Accident and Health policy provision addresses preexisting conditions?
Time Limit on Certain Defenses.
584
Which parts of a life insurance policy are guaranteed to be true?
Warranty.
585
In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT?
Insured.
586
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy.
587
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?
Entire Contract.
588
Under a Long Term Care policy, which benefit would be typically excluded or limited?
Alcohol rehabilitation.
589
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 66.
590
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured.
591
K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered?
Guaranteed renewable.
592
A promotional advertising item is not considered a rebate unless it has a value equal to less or less than what amount?
$25.
593
Which of these provisions is NOT required in life insurance policies?
Extended Term.
594
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.
595
All of these are characteristics of an Adjustable Life policy, EXCEPT?
Face amount can be adjusted using policy dividends.
596
Which of these terms accurately defines an underwriter’s assessment of information on a life insurance application?
Risk classification.
597
In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?
2 years.
598
When will a hearing be held after a notice of hearing, alleging participation in an unfair or deceptive act, is served to a licensee or insurer by the Commissioner?
No sooner than 6 days.
599
Which of the following is a valid reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?
Nonpayment of coverage.
600
Why would the Insurance Commissioner examine the records of an insurance company?
To determine the solvency of the company.
601
A license may be denied, suspended, or revoked if the licensee?
Is found guilty of misrepresentation in obtaining the license.
602
Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?
Transportation to and from a treatment facility.
603
Which of the following is a requirement for obtaining a Texas insurance agent’s license?
Be honest, trustworthy, and reliable.
604
A Medicare Supplement policy may be cancelled for which of the following reasons?
The premium has not been paid by the insured.
605
Which of the following statements about health coverage for newborns is NOT true?
Coverage is limited to only congenital defects.
606
Which Unfair Trade Practice involves an agent telling a prospective client that a policy’s dividends are guaranteed?
Misrepresentation.
607
In Texas, an individual life insurance policy is REQUIRED to have a grace period of?
31 days.
608
To terminate an agent’s appointment, an insurance company must?
Send termination notice to the Texas Department of Insurance.
609
Which of the following is NOT a required provision in group life policies?
Right to Loan.
610
If an insured’s age was misstated on a life insurance contract, the Misstatement of age provision requires that any death benefit payable would be?
An amount that the premiums paid would have purchased at the current age.
611
All of these statements about the Commissioner of Insurance are true EXCEPT?
The Commissioner must be elected.
612
An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the?
Commissioner.
613
B, an insurance agent, tells his client that their rights may be impaired if they fail to complete a release form within a given period time. B may be found guilty of?
Coercion.
614
Credit Life Insurance is?
Insurance issued on a debtor to cover outstanding loan balances.
615
Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
Activate insurance companies’ financial reserves.
616
Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
The agent.
617
A temporary agent’s license issued by the Commissioner of Insurance is valid for up to _____ days?
90 days.
618
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?
$ 1,000.
619
A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for?
Experimental and investigative services.
620
An insured covered by a group Major Medical plan is hospitalized after sustaining injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the INSURED be responsible to pay with $11,000 in covered medical expenses?
$3,000.
621
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?
The maximum amount considered eligible for reimbursement by an insurance company under a health plan.
622
Which of these options can an individual use their medical flexible spending account to pay for?
Prescription drugs.
623
In order to establish a Health Reimbursement Arrangement (HRA), it MUST?
Be established by the employer.
624
All of the following statements about Major Medical benefits are true EXCEPT?
Benefits have no maximum limit.
625
This type of deductible provisions waives the deductible for all family members after some of them have satisfied individual deductibles within the same year?
Family maximum deductible.
626
Which provision allows a portion of any used medical benefits to be restored following a particular amount of benefit has been used, or after the policy has been in effect for a particular period of time?
Restoration of used benefit.
627
Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?
$2,100.
628
R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?
Residual Disability.
629
A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow?
Guaranteed Insurability Option rider.
630
Non-occupational disability coverage is designed for?
Employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation.
631
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.
632
T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?
The insurer will rescind the policy, deny the claim, and recover all payments made.
633
Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year. Z will become eligible to receive benefits starting on?
March 1.
634
With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's?
Gross income at the time of purchase.
635
When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is?
Income.
636
A "reimbursement policy" pays what amount of covered Long-Term Care expenses?
Actual covered expenses up to the daily maximum.
637
If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses?
Medicare Supplement.
638
The individual most likely to buy a Medicare Supplement policy would be a(n)?
68-year old male covered by Medicare.
639
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?
6.
640
What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?
2.
641
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
Disability Income.
642
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?
Consideration clause.
643
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
Entire Contract.
644
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 insured.
645
The insuring clause?
States the scope and limits of the coverage.
646
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.
647
Which of the following statements describes what an Accident and Health policyowner may NOT do?
Adjust the premium payments.
648
P is a Major Medical policyowner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim?
Claim will be denied.
649
T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim’s validity. The provision that limits the time period during which the company may dispute a claim’s validity is called?
Time Limit on Certain Defenses.
650
In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments?
After an insured has become totally disabled as defined in the policy.
651
An insurance company would MOST likely pay benefits under an Accidental Death and Dismemberment policy for which of the following losses?
Loss of eyesight due to an accidental injury.
652
P is insured under a basic cancer plan. Which of the following conditions would be covered under this plan?
Operation for a malignant tumor.
653
J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedge, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
$25,000.
654
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from an accident on a commercial flight, what will the policy pay B's beneficiary?
$300,000.
655
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.
656
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured.
657
Which mode of payment is NOT used by health insurance policies?
Single Premium.
658
A Business Overhead Expense policy?
Covers business expenses such as rent and utilities.
659
A policyowner's rights are limited under which beneficiary designation?
Irrevocable.
660
Dental care coverage is designed to cover the costs of all of the following EXCEPT?
Loss of income.
661
Accidental Death coverage is provided to commercial airline passengers in which of the following types of policies?
Blanket Accident policy.
662
Which of the following medical expenses does Cancer insurance NOT cover?
Arthritis.
663
Common exclusions to the continuation of group coverage include?
All of the above (dental care, vision care, and other prescription drugs)
664
The reason for a business having a Business Overhead Expense Disability Plan is to cover?
Fixed business expenses.
665
Which of these statements is INCORRECT regarding a Preferred Provider Organization (PPO)?
PPO’s are NOT a type of managed cared systems.
666
The individual who provides general medical care for a patient as well as the referral for specialized care is known as a?
Primary Care Physician.
667
Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)?
More physicians to choose from.
668
A Key employee policy is taken out by company X on its vice president. Ten years later, this employee leaves company X and begins working for company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
669
Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies.
670
Which statement regarding a Key Employee Life policy is NOT true?
The beneficiary is named by the key employee.
671
The health insurance program which is administered by each state and funded by both the federal and state governments is called?
Medicaid.
672
A medical care provider which typically delivers health services at its own local medical facility is known as a?
Health Maintenance Organization.
673
T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company?
Does NOT have to make any further payments.
674
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA).
675
One becomes eligible for Social Security benefits after having been disabled for?
5 months.
676
An employee of 20 years recently retired at age 59 ½. This employee’s group life contract can be?
Converted to an individual permanent policy at an individual rate.
677
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributary group term life plan to all its eligible employees?
Portion of the premium paid for by the employer may be a tax deduction.
678
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract.
679
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the15 years. Which type of annuity did P purchase?
Deferred.
680
A contract owner terminates an annuity before the income payment period begins. The owner will then receive?
The current contract surrender value.
681
Variable annuities may invest premiums in each of the following, EXCEPT?
Insurer’s corporate business account.
682
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index.
683
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity.
684
Which of the following is NOT included in an annuity contract?
AD&D rider.
685
What is the basic function of an annuity?
The systematic liquidation of accumulated funds.
686
Which type of contract liquidates an estate through recurrent payments?
Annuity.
687
All of these are considered to be a benefit under Social Security, EXCEPT for?
Unemployment.
688
Which of these is NOT a source of funding for Social Security benefits?
Federal Government.
689
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security.
690
How are Roth IRA distributions normally taxed?
Distributions are received tax-free.
691
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
None.
692
Which tax would an IRA participant be subjected to on distributions received prior to age 59 ½?
Ordinary income tax and a 10% tax penalty for early withdrawal.
693
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid?
Mandatory income tax withholding on the transfer amount.
694
The type of annuity that must be purchased with one monetary deposit is called a(n)?
Immediate annuity.
695
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in?
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified plan.
696
In a qualified retirement plan, the yearly contributions to an employee’s account?
Are restricted to maximum levels set by the IRS.
697
A qualified profit-sharing plan is designed to?
Allow employees to participate in the profits of the company.
698
What type of employee welfare plans are not subject to ERISA regulations?
Church plans.
699
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes.
700
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate.
701
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents.
702
Which of these is considered a true statement regarding Medicaid?
Funded by both state and federal governments.
703
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
Commercial insurer.
704
Which of the following statements is true about most Blue Cross/Blue Shield organizations?
They are nonprofit organizations.
705
The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n)?
Closed Panel.
706
In Major Medical Expense policies, what is the objective of a Stop Loss provision?
Limits an insured’s out-of-pocket medical expenses.
707
Which of the following costs would a Basic Hospital/Surgical policy likely cover?
Surgically removing a facial birthmark.
708
Under a Guaranteed Renewable health insurance policy, the insurer?
May cancel the policy for nonpayment only.
709
When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following?
Residual disability.
710
M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for?
Determined by the terms of the policy.
711
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT?
Signed HIPAA disclosure.
712
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D must?
Correct the information and have the prospect initial the change.
713
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement.
714
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured.
715
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26.
716
When a policyowner cash surrenders a Universal Life insurance policy in it’s early years, this may be considered a red flag for a(n)?
Anti-Money Laundering violation.
717
T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for violation of?
Anti-money laundering rules.
718
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
Marital Status.
719
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium.
720
All of these are considered sources of underwriting information about an applicant, EXCEPT?
Rating Services.
721
Company XYZ offers a group Term Life Insurance plan to its employees. What does each employee covered under this plan receive?
Certificate of Insurance.
722
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group.
723
Which provision is NOT a requirement in a group life policy?
Accidental.
724
Group life insurance policies are generally written as?
Annually renewable term.
725
What type of group insurance plan involves employees sharing the cost?
Contributory plan.
726
Under a trustee group life policy, who would be eligible for a certificate of coverage?
Employee.
727
How long does an individual have to “rollover” funds from an IRA or qualified plan?
60 days.
728
K is an insured under a life insurance policy owned by a third party. Which of these statements is true?
K has no ownership rights.
729
Why is an applicant’s signature required on a life insurance application?
To attest that the statement on the application are accurate to the best of the applicant's knowledge.
730
A Health Reimbursement Arrangement MUST be established?
By the employer.
731
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?
Guaranteed Renewable.
732
S is the policy owner for a Major Medical Policy. The premiums are paid monthly and due on the 1st of each month. S fails to make September's payment and is hospitalized October 15th. When S files the claim for this hospitalization the insurer will likely?
Deny the claim.
733
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates?
Change of occupation provision.
734
X is insured with a Disability income policy that provides coverage until age 65. This policy allows the insurer to change the premium rate for the overall risk class assigned. Which of these renewability features does this policy contain?
Guaranteed Renewable.
735
Which of the following health insurance policy provisions specifies the health care services a policy will provide?
Insuring clause.
736
Medicaid was designed to assist individuals who are?
Below a specific income limit.
737
Which of the following statements BEST describes what the Legal Actions provision of an Accident and Health policy requires?
An insured must wait at least 60 days after Proof of Loss has been submitted before a lawsuit can be filed.
738
What type of renewability guarantees premium rates and renewability?
Noncancellable.
739
S filed a written Proof of Loss for a Disability income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning?
November 1.
740
With Accidental Death and Dismemberment policies, what is the purpose of the Grace Period?
Gives the policyowner additional time to pay overdue premiums.
741
A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take?
Send a notice to the MIB that the applicant was declined.
742
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
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.
743
Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy?
Issue the policy with an altered Time of Payment of Claims provision.
744
T is receiving $3,000/month from a Disability Income policy in which T’s employer had paid the premiums. How are the $3,000 benefit payments taxable?
Benefits are taxable to T.
745
An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to?
Determine if the applicant is an acceptable risk by completing standard underwriting procedures.
746
Pre-hospitalization authorization is considered an example of?
Managed care.
747
Which of the following BEST describes how pre-admission certification is used?
Used to prevent nonessential medical costs.
748
Insurers may request a hearing within _____ if their policy is rejected?
20 days.
749
Which type of plan normally includes hospice benefits?
Managed care plans.
750
An example of false advertising would be?
An insurer exaggerating its dividends in a magazine advertisement.
751
A domestic insurance company in Texas is considered a company that?
Is incorporated and formed in Texas.
752
An insured may assign up to _____ of policy ownership under an individual life insurance policy?
100%.
753
Which mode of payment is NOT used by health insurance policies?
Single premium.
754
Which of the following are NOT managed care organizations?
Medical Information Bureau (MIB).
755
Which of these provisions in NOT required in life insurance policies?
Extended Term.
756
Which of these is NOT an example of doing insurance business?
Selling shares of stock.
757
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?
Unfair methods of competition.
758
A new general property and casualty licensee must complete at LEAST _____ hours of continuing education within 24 months of initial licensure?
24 hours.
759
What is the MINIMUM benefit period that must be offered by a Long-Term Care policy?
12 months.
760
How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?
6 months.
761
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0.
762
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income.
763
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
Irrevocable beneficiary.
764
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured’s contingent beneficiary.
765
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually.
766
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.
767
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost.
768
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary.
769
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed.
770
A policyowner is able to choose the frequency of premium payments through what policy feature?
Premium Mode.
771
The entity whose sole purpose is sharing medical data among its member companies is called the?
Medical Information Bureau (MIB).
772
Which of these statements in INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable.
773
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the common disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
Daughter.
774
What is the initial source of underwriting for an insurance policy?
Application containing statements from the insured.
775
T is the policyowner for a Life Insurance policy with an irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the?
Beneficiary.
776
Any changes made on an insurance application requires the initials of whom?
Applicant.
777
The phrase “transacting business” includes?
Collecting premiums.
778
A certificate of _________ permits an insurance company to transact business in Texas?
Authority.
779
A plan through the Marketplace may be purchased by?
Any legal resident (except those imprisoned).
780
Which of these do NOT constitute policy delivery?
Policy issued with a rating.
781
Which of the following groups may NOT be insured by a group life insurance policy?
Individual who are related by blood.
782
How often must an insurance agent license normally be renewed?
Every two years.
783
An applicant MUST receive an Outline of Coverage when an application is taken for a(n)?
Medicare Supplement policy.
784
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.
785
An insurer is NOT required to provide information on fraudulent claims if requested by?
An insured.
786
Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of?
31 days.
787
______ of continuing education MUST be completed in the classroom or classroom equivalent?
50%.
788
For which of the following expenses does a Basic Hospital policy pay?
Hospital room and board.
789
How long does an insurance company appointment remain in force?
Until terminated.
