LIFE, ACCIDENT AND HEALTH, CODE AND ETHICS Flashcards
What is a hazard?
Anything that increases the chance of loss A broken promise Any possibility of financial loss A peril or loss of property
Anything that increases the chance of loss
Complete the definition. A risk is:
A peril Certainty of loss Proximate cause Uncertainty of loss
Uncertainty of loss
A pure risk involves a chance of:
Neither Loss nor Gain Loss Gain Both Loss and Gain
Loss
The insurer’s right to recover its claim payment to an insured from a negligent 3rd party is known as:
Arbitration Subrogation Liberalization Assignment
Subrogation
The main purpose of insurance is to:
Reduce perils Reduce the risk Avoid hazards Transfer the risk
Transfer the risk
What does insurable interest mean in life insurance?
Benefits that the policy will develop over the policy life Financial interest in having the life of the insured continue Amount of loss must be large enough to cause a hardship Financial benefits of the policy that the beneficiary will receive
Financial interest in having the life of the insured continue
In life insurance insurable interest must exist:
When the insurance takes effect and the loss occurs When the loss occurs When the insurance takes effect and the loss occurs, but need not exist after the loss occurs When the insurance takes effect, but not at the time of death
When the insurance takes effect, but not at the time of death
Insurance contracts are __________________________ in that contractual performance depends upon an uncertain event.
Voidable Unilateral Conditional Aleatoric
Aleatoric
Which of the following is true regarding STOCK companies?
None of the choices are correct Stock companies are a special type of non-profit organization authorized to insure members and their families against the possibility of accident, sickness, or death. Stock companies are corporations owned by individuals who contribute capital to the company through the purchase of shares of stock. Stock companies are owned by policyholders who contribute capital through the purchase of policies.
Stock companies are corporations owned by individuals who contribute capital to the company through the purchase of shares of stock.
Which of the following best descibes a “Captive Agency System”?
The agent is a representative of a single insurer and is obligated to submit business only to that company, or at minimum give that company the “first right-of-refusal.” Is the term given to the process of searching for potential customers, selling policies, and servicing existing contracts. A person enters into agency agreements as an independent contractor and potentially represents more than one company at a time. All of the choices are correct
The agent is a representative of a single insurer and is obligated to submit business only to that company, or at minimum give that company the “first right-of-refusal.”
What is the Law of Large Numbers?
The larger the number of individual, but different, risks that are combined into a group, the easier it is to predict losses for that group over time. The larger the number of individual, but similar, risks that are combined into a group, the more difficult it is to predict losses for that group over time. The larger the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time. The smaller the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time.
The smaller the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time.
What is the process called whereby insurers decide which customers to insure and what coverage to offer?
Underwriting Rate making Adverse selection Marketing
Underwriting
The concept of spreading the financial loss which was created by one person’s death among a large number of people, thus minimizing the cost for each individual in the group refers to:
The principle of risk The principle of life insurance The principle of insurance The principle of indemnification
The principle of life insurance
Which of the descriptions below would best describe “insurable interest” in reference to life insurance?
Interest paid in excess of the premium by the policy Having a financial interest in the insured’s life to continue There must be a loss large enough to create economic hardship Financial benefits that arise out of the policy when the insured dies
Having a financial interest in the insured’s life to continue
Which best describes a plan where the insured members pay a part of the premium for a group policy?
A “mixed plan” policy A participating policy A contributory plan A reimbursement policy
A contributory plan
Which of the following is a true statement regarding the Social Security program?
The program is fully funded With only a few exceptions, this is a voluntary program The actuarial value of each person’s contributions are closely related to the actuarial value of each person’s benefits The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs
The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs
Which of the following are benefits of Life insurance?
Replacement of large possible losses with small known losses and security, peace-of-mind and reduction of uncertainty Motivating and stimulating disciplined savings and encouraging loss controls and providing investment capital which is significant to the economy. All of the choices are correct. Keeping families and businesses intact and providing a basis for credit.
All of the choices are correct.
What is the BLACKOUT PERIOD?
None of the choices are correct. The period of time following the youngest child’s 26th birthday until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent. The period of time following the youngest child’s 21st birthday (or up to age 24 if still in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent. The period of time following the youngest child’s 18th birthday (or up to age 19 if still in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent.
The period of time following the youngest child’s 18th birthday (or up to age 19 if still in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent.
Which of the following are components to be considered in the process of Estate Planning?
The amount of life insurance needed to cover these costs. All of the choices are correct How to best administer the estate based on the objectives of the estate owner and the amount of potential taxes, fees and other expenses The needs of the beneficiaries and heirs of the estate the type and amount of property in the estate
All of the choices are correct
Which of the following is a true statement?
When someone dies without a will, it is called dying “intestate” and property can only be transferred as an intestate distribution under state laws For Estate Planning purposes, the two main methods that may be used in order to calculate the proper amount of life insurance are 1. Human Life Value Approach 2. Needs Analysis All of the choices are correct The proper objective of any life insurance program is to provide the amount and type of insurance the prospect needs at a premium he or she can reasonably afford.
All of the choices are correct
When buying Life Insurance, a BASIC ILLUSTRATION must include?
Credit Life Insurance An Annuity The name of the insurer, the name of the proposed insured, and a brief description of the policy being illustrated, including a statement that it is a life insurance policy. Variable Life Insurance
The name of the insurer, the name of the proposed insured, and a brief description of the policy being illustrated, including a statement that it is a life insurance policy.
Which of the following will not cause the premiums to go up?
Scuba diving Parachuting Rollerblading Rock Climbing
Rollerblading
All of the following are required on a life insurance application except?
Health history. Age of the insured. The amount of disability income in force. Amount of life insurance in force.
The amount of disability income in force.
What has to accompany the request for an attending physician’s statement?
Signed authorization from the insured Policy illustration Signed application Underwriting criteria
Signed authorization from the insured
The Medical Information Bureau (MIB) is a non-profit organization supported by:
Insurance companies All of the choices are correct State governments The federal government
Insurance companies
Which of the following would have the lowest premium?
Standard Risk Substandard Risk Preferred Risk Classified Risk
Preferred Risk
Which of the following is used to establish life insurance rates?
Mortality, interest, and expense Morbidity, interest, and payments Mortality, savings, and expense Morbidity, interest, and expense
Mortality, interest, and expense
A way for insurers to avoid having to pay for large or catastrophic losses is:
Underwriting Reinsurance Claims handling Avoidance
Reinsurance
Which of the cases below is a common practice when using a non-medical application for life insurance?
If answers given on the health statement do not meet underwriting standards the insurer may require a medical examination No medical examination is required by the insurance company They are used for any amount of insurance and any age of proposed insured There is no limit as to the amount of insurance, but the insured must qualify by age
If answers given on the health statement do not meet underwriting standards the insurer may require a medical examination
When determining the amount of premium that must be charged for a life insurance policy, which will not be taken into consideration?
The death benefit Interest received The number of policyholders expected Interest received
The number of policyholders expected
The type of premium in which the insured pays an averaged amount that is more than enough to meet the cost of the contract in the early years and less than is necessary in the later years to meet the cost of the contract is called?
Natural premium Level premium Gross premium Net premium
Level premium
What does the acronym W.E.T. stand for?
1. Whole Life 2. Endowments 3. Term 1. Waivers 2. Endorsements 3. Trusts 1. Whole Life 2. Endowments 3. Trusts 1. Whole Life 2. Endorsements 3. Term
- Whole Life 2. Endowments 3. Term
Term Life insurance is classified as __________________ insurance because it provides protection for a designated period of time.
Permanent Designated Temporary Level
Temporary
Renewable term can be best described as:
Level death benefit; increasing premium Decreasing death benefit; level premium. Level death benefit; decreasing premium Increasing death benefit; level premium.
Level death benefit; increasing premium
Which of the following statements regarding advertisements TERM INSURANCE for AGED 55 or OLDER is true?
Television or radio advertisement for Term Life insurance directed to individuals 55 years of age or older must, in the spoken text, contain the statement “policy (or certificate) benefits and limitations should be carefully examined prior to purchase.” Clearly distinguish basic life insurance benefits from supplemental benefits such as accidental death benefits. Prominently note any condition affecting the policy or certificate holder’s continued insurability. If Term coverage terminates at a stated age, or at the end of any designated period, that fact and the specified age or designated period must also be disclosed. All of the choices are true.
All of the choices are true.
Whole Life insurance is permanent insurance provides a _________ death benefit combining __________ insurance protection and __________ cash value.
Level, Increasing, Decreasing Increasing, Level, Increasing Decreasing, Increasing, Level Level, Decreasing, Increasing
Level, Decreasing, Increasing
Which of the following choices are TRUE regarding Modified Endowment Contracts (MEC)?
All of the choices are correct If an insured-policyholder fails, the “seven-pay test” the result is full income taxation of any monies withdrawn or borrowed from the cash value of the policy exceeding the original cost. There is also a 10% penalty on these amounts if they are received before the age of 59½ (i.e. they are treated similarly to IRAs). This classification of policies has virtually eliminated sales of Single Premium Whole Life. Since 1988, any life insurance policy that is paid-up in fewer than seven payments or sooner than seven years (or if any unscheduled premium deposits exceed the seven-year limit) automatically becomes a MODIFIED ENDOWMENT CONTRACT (MEC). It is the responsibility of insurers to notify insureds when policies exceed the Seven-Pay Test and consequently become MECs. It is the responsibility of the producer to understand the law and its implications, as well as providing a full explanation of the ramifications of the law to prospects and clients.
All of the choices are correct
A flexible benefit cash value policy which earns a current rate of interest with flexible premiums is:
MEC Adjustable life Universal life Endowment
Universal life
One of the unique features of a Universal Life contract is its UNBUNDLED design; the contract will clearly define the internal components of the policy. This means that the policy specifically designates which portion of each premium dollar paid is allocated toward the ___________________________________ and how much towards commissions, acquisition costs, underwriting and administrative costs (expense loading). The balance is held in a ________________________________, earning a current interest rate that is guaranteed annually and subject to a minimum called a CONTRACT RATE.
Company Expenses, Savings account Insurance element (mortality), Contract fund (cash value) None of the choices are correct Life of the insured (mortality), Trust (cash value)
Insurance element (mortality), Contract fund (cash value)
A security-based life insurance policy in which the insured chooses how the cash values are invested:
variable life term life indexed universal whole life
variable life
The WAIVER OF PREMIUM provision prevents:
A policy from lapsing in the event the policyholder cannot pay due to a disability. In the event of a total and permanent disability the company will waive any premium payments after a specified period of time (usually six months). A policy from lapsing in the event the policyholder cannot pay due to a temporary disability. Has an initial face amount of fifteen thousand dollars ($10,000) or less that are designated by the purchaser for the payment of funeral and burial expenses Has an initial face amount of fifteen thousand dollars ($15,000) or less that are designated by the purchaser for the payment of funeral and burial expenses.
A policy from lapsing in the event the policyholder cannot pay due to a disability. In the event of a total and permanent disability the company will waive any premium payments after a specified period of time (usually six months).
Which of the following are TRUE regarding Accidental Death Benefit riders?
Accidental Death Benefits automatically double the face amount of the policy Accidental Death Benefits are generally for older people (beyond the age of 55) None of the answers are correct Accidental Death is loosely defined as death resulting from an illness or accident
None of the answers are correct
Which rider gives the insured the option of obtaining additional insurance on their own life at certain selected dates in the future, at certain policy intervals or at specified ages. There is no evidence of insurability required at the time the option is exercised.
GUARANTEED INSURABILITY OPTION (GIO) COST-OF-LIVING ADJUSTMENT (COLA) LIVING NEEDS/ACCELERATED DEATH BENEFIT RETURN OF PREMIUM RIDER
GUARANTEED INSURABILITY OPTION (GIO)
In what form of insurance listed below will you find insurance protection combined with cash accumulation?
Term insurance Temporary insurance Extra insurance Permanent insurance
Permanent insurance
Choose the best description of “Universal Life”:
A policy which includes fixed premiums, cash value paying a fixed rate of return and insurance protection A policy which includes fixed premiums for a stated period of time, cash value paying a flexible rate of interest and insurance protection A policy which includes flexible premiums, cash value paying a current rate of return and insurance protection A policy which includes fixed premiums, cash value with a flexible rate of interest and insurance protection
A policy which includes flexible premiums, cash value paying a current rate of return and insurance protection
Which best describes an Endowment Policy?
That which will liquidate a sum of money by the payment of principal and interest That which will pay a face amount if either the insured dies during a specified number of years or, if the insured lives, pays the face amount at the end of the same period That which will pay a face amount if the insured dies at any time That which will pay a face amount if death occurs only within a stated time
That which will pay a face amount if either the insured dies during a specified number of years or, if the insured lives, pays the face amount at the end of the same period
Mr. Reeves purchases a home with a 20-year mortgage and wants to purchase a guarantee that his mortgage will be paid if he should die while the mortgage is in force. Which of the insurance types below would best satisfy this need?
A 30-year Endowment Policy A 20-year Level (end) Policy A 20-year Limited Payment Whole Life Policy A 20-year Decreasing Term Policy
A 20-year Decreasing Term Policy
A typical suicide clause states:
If the insured dies by suicide within the first two years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After two years the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first five years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After five years the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first year of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After one year the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first three years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After three years the insurer will pay the full death benefit in the case of suicide.
If the insured dies by suicide within the first two years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After two years the insurer will pay the full death benefit in the case of suicide.
Which of the following are common exclusions?
AVIATION CLAUSE All of the choices are correct HAZARDOUS ACTIVITIES CLAUSE WAR CLAUSE
All of the choices are correct
Who has the right to change life insurance policy beneficiaries?
The insurer B. The beneficiary The insured The policyholder
The policyholder
The complete transfer by the existing owner of all rights in an insurance policy to another person is:
Non-forfeiture Absolute assignment Collateral assignment Endowment
Absolute assignment
A Life Settlement Broker is:
A person who, on behalf of a beneficiary, and for a fee, commission, or other valuable consideration, offers or negotiates life settlement contracts between the owner and insurance providers. A person who, on behalf of an insurer, and for a fee, commission, or other valuable consideration, offers or negotiates life settlement contracts between the owner and insurer. A person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or negotiates life settlement contracts between the owner and insurance providers. None of the choices are correct
A person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or negotiates life settlement contracts between the owner and insurance providers.
If the insured has misstated his or her age, and that fact is discovered after the death of the insured, what will the company do?
Refuse to pay the claim Pay the face amount less 10% penalty Pay the face amount equal to that which the premium would have purchase at the correct age. Pay the face amount less 25% penalty
Pay the face amount equal to that which the premium would have purchase at the correct age.
If death occurs during the grace period:
The claim is denied. The death benefit is paid minus the premium due plus an additional 10% penalty. None of the choices are correct The death benefit is paid minus the premium due.
The death benefit is paid minus the premium due.
Which of the following is a type of Nonforfeiture Provision?
Extended Term Insurance Reduced Paid-up Insurance Cash Surrender All of the choices are correct
All of the choices are correct
Must one pay income tax on policy dividends?
Yes, because they are a type of interest earned No, because they are looked upon by the federal government as a return to the policyholder of excess premium charged. No, because they are never reported by the company Yes, because they add to the income of the policyholder
No, because they are looked upon by the federal government as a return to the policyholder of excess premium charged.
On a life policy when a settlement option has not been specified, the usual method of distribution is:
Lump sum payment Reduced paid-up Extended term Life income
Lump sum payment
All of the following statements about the election of a life insurance policy’s settlement options are true EXCEPT:
The use of a settlement option instead of a lump sum can create a steady stream of income for a person who does not have the ability, time, or inclination to manage a large amount of money. Beneficiaries can only make a choice of option if the policyholder has not already chosen it for them When no settlement option is chosen, the proceeds are automatically paid to the policy owner’s estate Settlement options are chosen at the time of application and can be changed by the policyholder before the insured’s death.
When no settlement option is chosen, the proceeds are automatically paid to the policy owner’s estate
Which settlement option allows only the death benefit earnings to be paid to the beneficiary?
Interest only option Fixed period option Cash option Fixed amount option
Interest only option
Who is the only party in a life insurance policy who has rights after the death of the insured?
The insured The policy owner The applicant The beneficiary
The beneficiary
A beneficiary that only receives proceeds if there are no living beneficiaries is called?
contingent beneficiary survivorship conditional beneficiary straight life settlement option
contingent beneficiary
The beneficiary class designation that means beneficiaries who are surviving will receive equal amounts of the death benefit is:
Per capita Per stirpes Class beneficiaries, equal shares Per diem
Per capita
The Uniform Simultaneous Death Act:
Is used when the time of death of the insured and beneficiary cannot be determined. Pays both the primary and the contingent beneficiary. Allows the money to go to the beneficiary’s estate. Prevents the insurer from paying the death benefit.
Is used when the time of death of the insured and beneficiary cannot be determined.
What is the purpose of “key person” insurance?
To give a key employee the ability to purchase the business. To cover decreased business earnings due to the death of a key employee. To give retirement benefits to key employees To provide health insurance benefits to key employees.
To cover decreased business earnings due to the death of a key employee.
The policy provision which prevents an insurer from voiding a policy for misstatements after two years is:
Misrepresentation Incontestability No loss, no gain Indemnity
Incontestability
A life insurance policy may be reinstated within certain time limits after it has lapsed for non-payment of premiums. How can this be done?
Upon submission of evidence of insurability plus payment of past due premiums The overdue premiums are paid, interest is paid, an application is submitted and evidence of insurability is provided Any past due premiums are paid plus any interest due The insured must submit a written request and pay all overdue premiums. No evidence of insurability is required
The overdue premiums are paid, interest is paid, an application is submitted and evidence of insurability is provided
Which of the following plans are life insurance ownership arrangements between two or more individuals or entities, whereby the premium payments, ownership rights, cash value and death benefit proceeds are split among the parties involved
Key-Employee insurance All choices are correct Deferred Compensation Split Dollar insurance
Split Dollar insurance
Which of the following has a vested interest in the proceeds of an insurance policy?
The contingent beneficiary The revocable beneficiary The irrevocable beneficiary The ineligible beneficiary
The irrevocable beneficiary
If a person is receiving Social Security retirement benefits, some members of their family also can receive benefits. Those who can include:
Wives or husbands who are younger than 62, if they are taking care of their child who is under age 16 or disabled. All of these are true Disabled children, even if they are age 18 or older Wives or husbands, if they are age 62 or older.
All of these are true
What is true about annuities?
They create an immediate estate. They only may be purchased by someone who is 59 ½. They liquidate an estate over a period of time. They liquidate an estate in a lump sum.
They liquidate an estate over a period of time.
In an annuity, which settlement option will pay the annuitant the greater amount over a period of time?
Period certain annuity. Joint and last survivor annuity. Straight life. Cash refund annuity.
Straight life.
A life annuity with a 10-year period certain:
Will pay the annuitant only for 120 months. Is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant. Will pay the annuitant for 10 years and continue to pay the annuitant after 10 years but the amount will be less. Will pay the annuitant for life and the beneficiary for 10 years after the death of the annuitant.
Is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant.
What is true about a variable annuity?
The number of annuity units changes. The value of the annuity unit may change. The value of an annuity unit is immaterial. None of the above.
The value of the annuity unit may change.
A variable annuity applicant requests that the premium be immediately invested in a stock portfolio. The annuity contract is returned to the insurer within the cancellation period. What is the applicant entitled to receive?
The contract value amount on the date the contract was delivered to the insured. A refund of the premium minus the surrender charge. The contract value amount on the date the returned contract was received by the insurer. A refund of the entire amount paid.
The contract value amount on the date the returned contract was received by the insurer.
Ed has annuity for which he has paid $50,000 in after tax dollars over the last 20 years. At 65 he will receive $4,000/year annual income based on a life expectancy of 25 years which will yield $100,000. The amount of taxable income will be:
Nothing $4,000 $800 $2,000
$2,000
The federal act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is:
COBRA DEFRA ERISA TEFRA
ERISA
According to the Employee Retirement Income Security Act (ERISA) fiduciary standards, benefit plans are operated for:
Plan participants and employees. Plan sponsors and employees. Plan participants and beneficiaries. Plan sponsors and beneficiaries.
Plan participants and beneficiaries.
How are ESOP usually invested?
Mutual Funds Money Markets Company stock Corporate Bonds
Company stock
Which of the following is true about an IRA?
There are no rules regarding when distributions must start. Distributions must start by age 65. It requires the forfeiting of any remaining funds when the owner dies. It grows tax deferred.
It grows tax deferred.
A contribution to which of the following retirement plans does not allow for a tax deduction in the year the contribution is made?
Roth IRA IRA 401K KEOGH
Roth IRA
When using an Immediate Annuity, following what period of time do payments begin?
Almost always a date in the distant future. A period of time that is mutually agreed upon by the company and the annuitant. A date in the next calendar year. A monthly period, or equal to the time between payments.
A monthly period, or equal to the time between payments.
The Social Security age of retirement is dependent upon:
The number of quarters earned. The individual’s date of birth. All of the above. The amount of compensation earned prior to retirement.
The individual’s date of birth.
Which of the following is a true statement?
An IRA is a method by which an individual under the age of 70½ can save money on a tax-favorable basis for use at retirement. An IRA is a method by which an individual with an earned income under the age of 70½ can save money on a tax-favorable basis for use at retirement. An IRA is a method by which an individual with an unearned income under the age of 70½ can save money on a tax-favorable basis for use at retirement. An IRA is a method by which an individual with an income under the age of 70½ can save money on a tax-favorable basis for use at retirement.
An IRA is a method by which an individual with an earned income under the age of 70½ can save money on a tax-favorable basis for use at retirement.
Under the IRS recommended “7-Schedule” what percentage of the employer’s contributions will the employee own by year five of employment?
70% 60% 0% 50%
60%
Health insurance protects against:
none of the choices are correct possible losses resulting from injury only. possible losses resulting from the injury or sickness of an insured person. possible losses resulting from sickness only.
possible losses resulting from the injury or sickness of an insured person.
The Major Risk Medical Insurance Program provides medical coverage to persons with pre-existing health conditions who cannot obtain health insurance or affordable coverage options in the individual commercial market. To qualify for the program a person must be:
Ineligible for both Part A and Part B of Medicare, unless eligible solely because of end-stage renal disease. Ineligible to purchase any health insurance for continuation of benefits under COBRA or CAL-COBRA. A California resident and be unable to secure adequate coverage. All of the choices are correct
All of the choices are correct
All of these are contributing factors to the concept of morbidity except:
Age Income Sex Intelligence
Intelligence
Supplemental insurance used to pay for hospital confinement to treat cancer is also known as:
Specified medical Temporary major medical Dread disease Urgent stay
Dread disease
A hospital confinement insurance policy pays:
An indemnity to the insured for all expenses incurred when the insured is confined to a hospital 100% of the covered medical expenses less the deductible and co-insurance percentage. The amount of the actual hospital expenses. The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital
The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital
The basic feature of an indemnity plan is that the participants:
Pre-select a clinic and submit claims to the insurance company. Pre-select a physician and third-party claims administrator. Select a provider at work and claims processor. Select a provider and submit claims to the insurance company.
Select a provider and submit claims to the insurance company.
Deductibles, coinsurance, and co-payments in a health insurance policy are cost-effective choices that have the effect of:
Cost evasion Cost sharing Cost avoidance Cost containment
Cost sharing
To be classified as accidental under a disability income insurance policy, the following criteria must be used:
The cause may be intentional, but the result must be accidental. Both the cause and the result must be accidental. Only the result need be accidental Only the cause need be accidental.
The cause may be intentional, but the result must be accidental.
Which of the following is true regarding the structure of Disability Income contracts?
OCCUPATIONAL disability policies will provide disability benefits for a disability occurring on or off the job. Disability policies can be written on an occupational or nonoccupational basis, whether or not the disability is caused by a sickness or accident. NONOCCUPATIONAL disability policies will provide benefits only if the disability occurred off the job and is not work related. All of the choices are true
All of the choices are true
During the disability income elimination period:
No benefits are payable Occupational claims are payable Residual benefits are payable. All claims are payable
No benefits are payable
What is the tax treatment for individual disability income policies?
Deductible premiums and tax-free benefits. Deductible premiums and taxable benefits. Non-deductible premiums and tax-free benefits. Non-deductible premiums and taxable benefits.
Non-deductible premiums and tax-free benefits.
A single deductible amount for all members of the same family is known as:
Family deductible Flat deductible Stop loss revenue Corridor deductible
Family deductible
Certain healthcare providers are called service type providers. This means:
Payments for services are made directly to the insured Payments for services are made directly to the provider They are more service oriented than the average provider They provide broader services to their insureds
Payments for services are made directly to the provider
All of the following statements about Social Security disability benefits are true, EXCEPT:
Benefits will continue as long as the recipient cannot work at all Workers must be totally disabled for at least 5 months to be eligible for benefits Benefits will replace the entire amount of the worker’s earnings Benefits are based upon the worker’s earnings up to the time of disability
Benefits will replace the entire amount of the worker’s earnings
Disabilities considered a result of the same or related cause are:
Recurrent Residual Presumptive Delayed
Recurrent
What is not a feature of major medical policies?
Coinsurance Deductibles Maximum limits First dollar coverage
First dollar coverage
An amount that must be paid after the basic health policy benefits are exhausted and before the excess coverage becomes effective is:
Extended benefits Corridor deductible Co-payment Coinsurance
Corridor deductible
HMOs are involved in all of the following except:
Providing health care financial coverage. Providing health care services. Controlling costs by encouraging preventative care. Emphasizing the use of specialty physicians.
Emphasizing the use of specialty physicians
A health maintenance organization (HMO) plan contains costs by promoting:
Preventative care Generic care After-hours care Fee for service care
Preventative care
If a doctor is paid a fixed monthly fee for each patient by the HMO, it is referred to as:
Capitation Gatekeeper system Open panel Closed panel
Capitation
Under an individual guaranteed renewable health contract, the insurer has the right to:
Cancel the policy for health reasons. Discontinue coverage on the basis of employment. Make unilateral benefit changes. Change premiums for a class of insureds.
Change premiums for a class of insureds.
Which of the following renewability provisions of a disability contract is likely to change the contract the least and cost the most?
Guaranteed renewable contract. Expense arrangement contract. Continuous indemnity contract. Non-cancellable contract.
Non-cancellable contract.
When a claimant is covered by more than one health plan, the situation is resolved through:
Coinsurance. Maximum benefit payment amounts. Integration. Coordination of benefits.
Coordination of benefits.
Which of the following statements concerning the usual coordination-of benefits provision is correct?
Medicare coverage is always primary to “medical coverage”. If only one plan has the COB provision, the plan with the provision is considered to be primary and pays first. When the plans both have the provision, coverage as an employee is primary to coverage as a dependent. Coverage under any plan with the provision is primary to coverage under any plan without the provision.
When the plans both have the provision, coverage as an employee is primary to coverage as a dependent.
HMOs are involved in all of the following, EXCEPT:
Providing health care coverage. Emphasizing the use of specialty physicians. Providing health care services. Controlling costs by encouraging preventative care.
Emphasizing the use of specialty physicians.
Traditional comprehensive major medical plans include all of the following, EXCEPT:
Deductibles. First-dollar coverage. Co-insurance. Out-of-pocket maximums.
First-dollar coverage.
Which of the following is a type of deductible that charges the insured after basic medical benefits have been paid, and before other medical coverage begins?
Carry-over provision. Out-of-pocket limit. Calendar deductible. Corridor deductible.
Corridor deductible.
Under the FMLA (Family and Medical Leave Act), how many weeks of leave must be provided in a 12 month period due to pregnancy?
12 weeks. 16 weeks. 4 weeks. 6 weeks.
12 weeks.
The provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA) apply to companies with what number of employees?
40 20 60 10
20
Under COBRA (Consolidated Omnibus Budget Reconciliation Act) all are qualifying events, except:
Death of employee Employee becomes eligible for Medicare Marriage Reduction in hours or Termination (other than for gross misconduct)
Marriage
Retirement benefits under Social Security are available only for workers who are:
Fully insured. Defined insured Medicare insured. Currently insured.
Fully insured.
To be consider currently insured under social security, what must a worker have?
At least 12 quarters of coverage during a 13 quarter period. At least 40 quarters of coverage during 13 quarter period. At least 6 quarters of coverage during 13 quarter period. There is no requirement to be considered currently insured.
At least 6 quarters of coverage during 13 quarter period.
Under social security, when does an individual receives retirement benefits?
Age 65. Age 67. Depends upon the individual date of birth. Age 100.
Depends upon the individual date of birth.
What individual collecting Social Security benefits would be affected by a black out period?
The insured’s children. The insured. The insured’s spouse. The insured’s dependent parents.
The insured’s spouse.
The Social Security definition of disability is the inability to engage in which of the following:
The person’s chosen career. An approved occupation. An activity with a given level of compensation. Any substantial gainful activity.
Any substantial gainful activity.
In California, what is the name of the program to support the state’s medical public assistance plans for needy individuals of any age?
Medicaid. COBRA. Medi-Cal. Social Security.
Medi-Cal.
Which of the following services are covered for an individual with a Medi-Cal Benefits Identification Card (BIC)?
All of the above. Drug & alcohol addiction services. Regular checkups and diagnostics. Pharmacy services.
All of the above.
True or False: You could legally sell health/disability insurance to a Medi-Cal beneficiary aged 65 plus.
True. False.
false
All of the following are not covered under Part A of Medicare, except:
Inpatient physicians’ and surgeons’ services. Private duty nursing. Hospital stays and inpatient mental health care. The first 3 pints of blood.
Hospital stays and inpatient mental health care.
Physician services in the hospital, doctor’s office, or clinic are covered under:
Medicare Part B; no additional premium. Medicare Part A; no additional premium. Medicare Part B; additional premium due. Medicare Part A; additional premium due.
Medicare Part B; additional premium due.
After receiving care by a doctor, how is the insured notified of Medicare’s decision to cover the claim?
Doctors billing statement. Explanation will be found in your policy. Notice from the Social Security Administration. None of the above.
Notice from the Social Security Administration.
The federal law that requires that employers with 20 or more employees provide for the continuation of the employer’s group health benefits and options for former employees and their families is:
COBRA. DEFRA. Cal-COBRA. ERISA.
COBRA.
Which of the following accurately describes Medicare eligibility:
Persons who are eligible for Social Security and who are 65 or older. Persons who will pay a premium, who are not eligible for Social Security and who are 65 or older. Persons of any age entitled to disability benefits for 24 months. All of the above.
All of the above.
Eight months ago, a man slipped and fell down a flight of stairs at home. As a result, he has a paralysis for which he is not expected to recover. This 40-year old person may be able to collect disability income benefits from which of the following?
Medicaid. Social Security. Workers’ Compensation. Medicare.
Social Security.
Which of the following applies to Medicare coverage?
Part A has no deductibles or co-insurance for the first 60 days of hospitalization. Part B provides benefits for diagnostic tests and x-rays performed on an out-patient basis. Both Part A and Part B provide benefits for skilled nursing facilities. Benefits are available only to persons age 65 or older.
Part B provides benefits for diagnostic tests and x-rays performed on an out-patient basis.
Which statement is true regarding Medicare supplement insurance plans?
Insurers may create insurance policies for approval by the California Department of Insurance. Insurers may freely offer whatever supplemental coverages they prefer to market. Insurers may offer policies that contain only the core benefits. Insurers may offer only broad coverage plans that contain both core benefits and additional benefits.
Insurers may offer policies that contain only the core benefits.
Long Term Care (LTC):
Is a provided coverage under Medicare. Is least needed by the very poor and the very rich. Is needed by the indigent. Medi-Cal is an LTC policy purchased by many middle-class individuals.
Is least needed by the very poor and the very rich.
A measure for rating an individual’s need for LTC benefits is called:
Case management. Co-insurance. The gatekeeper mechanism. Activities of daily living.
Activities of daily living.
Triggers to receive long term care (LTC) benefits include the following except:
Incontinence. Dementia. Alzheimer’s disease. Deafness.
Deafness
What is the term used to apply to a break (rest) given to people caring full-time for an individual in their home?
Restoration. Intermediate care. None of the above. Respite.
Respite.
Which of the following is included under a comprehensive LTC policy?
Nursing Facility only. Nursing Facility and Home Care. Home Care only. None of the above.
Nursing Facility and Home Care.
What California governmental organization has a stated mission of “to provide accurate and objective counseling, advocacy, and assistance with Medicare, health insurance, and related coverage plans for Medicare beneficiaries, their representatives, or persons imminent of Medicare eligibility, and to educate the public about Medicare and health insurance issues.”
Medicaid Cal-COBRA HICAP (Health Insurance Counseling Advocacy Program) LTC (Long-Term Care)
HICAP (Health Insurance Counseling Advocacy Program)
How much could the HICAP assistance charge?
Free of charge. A percentage of how much insurance is purchased. Based on sliding scale. Based on a dollar amount subject to a cost of living adjustment.
Free of charge.
To meet the chronically ill trigger of a Long-Term Care Policy, an individual must be unable to perform a minimum of:
2 activities of daily living. 4 activities of daily living. 1 activity of daily living. 3 activities of daily living.
2 activities of daily living.
Which of the following may be offered by insurers providing Medicare Supplement insurance?
Plans that exclude the core benefits. Plans without an open enrollment. The core benefit plan without any additional benefits. Non-standard plans.
The core benefit plan without any additional benefits.
Which of the following is/are standard levels of care for a LTC policy?
Custodial care. Intermediate care. Skilled nursing care. All of the above
All of the above
The adult day-care coverage of a LTC policy provides for:
Part-time home health care for the elderly. Full-time institutional care. Part-time community care for a person who lives at home. Full-time nursing at home for a convalescent patient.
Part-time community care for a person who lives at home.
According to the California Department of Insurance which term means mandatory?
Warranty. May. Shall. Oath.
Shall.
According to the California Department of Insurance which term means permissive?
Oath Shall. May. Twisting.
May
According to Proposition 103, the commissioner of insurance became an elected official. The commissioner may serve:
One term only. No mention is made in the insurance code as to term limits. Two consecutive terms (8 years). As many terms for which he is elected.
Two consecutive terms (8 years).
The insurance commissioner:
Is appointed by the governor. Is appointed by the state attorney general. Is elected by the state legislature. Is elected by the public
Is elected by the public
Which of the following describes an insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks?
Guaranteed. Non-participating. Insolvent. Solvent.
Insolvent.
Who is allowed to work with non-admitted carriers when the insurance cannot be found in the ordinary market?
Gap insurance. Surplus lines brokers. Non-ordinary companies. Health only agents.
Surplus lines brokers.
In the California Insurance Code there is a definition that reads, in short, “…a person who offers to advise for a fee, any insured having interest in life or disability insurance contracts…” This is a:
A life and disability analyst. An insurance broker paid on a fee for service. A claims adjuster. A solicitor.
A life and disability analyst.
The insurance code definition of an “insurance broker” is:
Someone appointed to transact insurance with admitted insurers and receives commissions from them, but acts on behalf of the clients. Any agent that writes more difficult to place business with specialty insurers who have appointed him. Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer. Someone appointed by a fire and casualty broker-agent(employer), receiving commissions from the employer, transacting insurance with the insurers the employer represents and acting on behalf of the clients.
Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer.
What are the three main types of direct marketing systems?
Non-Insurance Sponsors. Vending Machine Sales. Direct Writing Companies. All of the above.
All of the above.
Which of the following is true about brokers?
Brokers can charge a fee for the services they provide. Brokers are appointed by several insurers. Brokers are licensed to sell all classes of insurance. None of the above.
Brokers can charge a fee for the services they provide.
According to the California Department of Insurance which term means mandatory?
Warranty Oath. Shall. May.
Shall.
According to the California Department of Insurance which term means permissive?
Twisting. May. Shall. Oath
May
According to Proposition 103, the commissioner of insurance became an elected official. The commissioner may serve:
One term only. Two consecutive terms (8 years). No mention is made in the insurance code as to term limits. As many terms for which he is elected.
Two consecutive terms (8 years).
The insurance commissioner:
Is appointed by the state attorney general. Is elected by the public. Is elected by the state legislature. Is appointed by the governor.
Is elected by the public.
Which of the following describes an insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks?
Guaranteed. Insolvent. Non-participating. Solvent.
Insolvent.
Who is allowed to work with non-admitted carriers when the insurance cannot be found in the ordinary market?
Gap insurance. Surplus lines brokers. Non-ordinary companies. Health only agents.
Surplus lines brokers.
In the California Insurance Code there is a definition that reads, in short, “…a person who offers to advise for a fee, any insured having interest in life or disability insurance contracts…” This is a:
An insurance broker paid on a fee for service. A life and disability analyst. A claims adjuster. A solicitor.
A life and disability analyst.
The insurance code definition of an “insurance broker” is:
Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer. Someone appointed by a fire and casualty broker-agent(employer), receiving commissions from the employer, transacting insurance with the insurers the employer represents and acting on behalf of the clients. Someone appointed to transact insurance with admitted insurers and receives commissions from them, but acts on behalf of the clients. Any agent that writes more difficult to place business with specialty insurers who have appointed him.
Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer.
What are the three main types of direct marketing systems?
Vending Machine Sales. Non-Insurance Sponsors. All of the above. Direct Writing Companies.
All of the above.
Which of the following is true about brokers?
Brokers are licensed to sell all classes of insurance. Brokers are appointed by several insurers. Brokers can charge a fee for the services they provide. None of the choices are correct.
Brokers can charge a fee for the services they provide.
All of the following are valid reasons for the insurance commissioner to deny the application for an insurance license except:
Applicant does not have a good business reputation Applicant is not properly qualified to perform Applicant does not have a California business address Applicant lack integrity
Applicant does not have a California business address
When may an agent transact for an insurance company?
When the commissioner receives the application At the beginning of the fiscal year. When the appointing company signs the action notice of appointment When the agent receives the action notice.
When the appointing company signs the action notice of appointment
An agent held one appointment with an insurance company. The appointment was terminated. What is correct?
The agent must be re-appointed by the same company The license is inactive The license is active until the end of the term The agent is required to have another action notice of appointment filed within 30 days
The license is inactive
If a licensee wants to terminate and surrender his license, what must he do?
Destroy the original and notify the commissioner Nothing Destroy the original license Deliver the license to the commissioner
Deliver the license to the commissioner
In insurance terms, a representation can be considered:
None of the choices are correct An express warranty An implied warranty An absolute fact
An implied warranty
When may a representation be withdrawn?
It cannot be withdrawn At any time as long as all parties agree Only after the policy is in effect Only before the insurance is in effect
Only before the insurance is in effect
According to the California Insurance Code, an insurance policy must specify all of the following except:
The perils insured against The property or life being insured The financial rating of the insurer The policy period
he financial rating of the insurer
When advertising on the internet in California. An agent or broker must provide all the following except.
Expiration date of the license Office address License number Name of the licensee
Expiration date of the license
A person who acts in a capacity that requires an active license without having a valid license is guilty of a:
Misrepresentation Misdemeanor Fraud Felony
Misdemeanor
Which of the following describes the concept of utmost good faith?
C. Each party to a contract should be able to rely on the representations of the other party All choices are correct A judge usually would resolve a dispute over unclear language in an insurance contract in favor of the insured Only the insurer is bound by the terms of the insurance contract
Each party to a contract should be able to rely on the representations of the other party
How long must an agent maintain records specified by the Commissioner?
A minimum of 3 years A minimum of 2 years A minimum of 1 year A minimum of 5 years
A minimum of 5 years
When must an agents records be open to inspection by the Commissioner?
At all times Within 3 days of written notice by the Commissioner Within 10 days of written notice by the Commissioner Within 30 days of written notice by the Commissioner
At all times
The Fair Credit Reporting Act:
Provides protection for consumers against abuses of their personal information. All of the choices are correct That insureds be advised in advance when consumer reports are requested about them. Contains consumer safeguards that require that Consumer Reporting Agencies respond to consumer complaints regarding inaccurate information about them
All of the choices are correct
Which of the following is material information?
Information that the insurer does not need to know Information that influences a person’s estimate of the disadvantages of a proposed contract Information that influences a person’s estimate of the advantages of a proposed contract Information that does not affect the decision to enter into a contract
Information that influences a person’s estimate of the disadvantages of a proposed contract
What happens to the license after the death of the natural person who held it?
The license must be returned to the Commissioner It always terminates The license becomes inactive It may be transferred
It always terminates
Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision is known as:
None of the above. Material information. Boycotting. Concealment.
Concealment.
What term is defined as the refusal to enter into a business transaction with another person until he or she complies with certain conditions or grants specific concessions?
Coercion. Twisting. Intimidation. Boycott.
Boycott
According to the California Department of Insurance fraudulent is considered:
A forgiveness. A misdemeanor. An infraction. A felony.
A felony.
According to the California Insurance Code, what must appear on a Notice of Claim form given to an insured?
Telephone number of the Department of Insurance. Information regarding an Insurance Claims Analyst Bureau. Information regarding the Arson Bureau. A notice stating that any person who knowingly presents a false, or fraudulent claim, is guilty of a crime; and may be subject to fines and confinement in state prison.
A notice stating that any person who knowingly presents a false, or fraudulent claim, is guilty of a crime; and may be subject to fines and confinement in state prison.
How long must records of an agent or broker be available to the commissioner?
15 days after the license is issued. At all times. Never. Only after written notice from the commissioner.
At all times.
How long must an agent maintain records sold in CA?
6 years. 2 years. 10 years. 5 years.
5 years.
When an agent accepts premium from the insured and uses the money for personal gain, it is considered:
Fraud. Misrepresentation. Concealment. Theft.
Theft.
All of the following might make an agent act unethically except:
Associating with unethical agents. Being pressured as production is not up to quota. Being mostly concerned about earnings. Placing clients’ interests first.
Placing clients’ interests first.
Identify the penalty for each violation for a person engaging in any unfair method of competition:
No more than $5,000 for each act, or no more than $10,000 for each act if found to be willful. No more than $5,000 per agent. No more than $10,000 total no matter how many violations or type of violation. $5,000 for each violation up to a total of $10,000.
No more than $5,000 for each act, or no more than $10,000 for each act if found to be willful.
According to the code, all insurers must maintain a department to investigate:
Possible arson. Possible fraudulent claims from insureds. Possible abuses of rating laws. Possible fraud by insurers.
Possible fraudulent claims from insureds.
Which of the following is not an unfair claims practice?
Failing to affirm or deny coverage of claims within a reasonable period of time after proof of loss statements have been completed and submitted by the insured. Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy for the denial of a claim or the offer of a compromise settlement. Failing to acknowledge and to act reasonably and promptly upon communications with respect to claims arising under insurance policies. Directly advising a claimant to obtain the services of an attorney.
Directly advising a claimant to obtain the services of an attorney.
