Life Ins Questions

Question 1

With a non-qualified plan, which of the following does the government tax as income?

Answer 1

Generally, income tax on life insurance and annuities is determined by the growth/interest gained by investing what has already been taxed-the premium.
The correct answer is: The interest from each annuity payment

Question 2

Life insurance policy disclosure rules do NOT require that:

Answer 2

Disclosure requirements include 1) Copies of the Buyers Guide and Policy Summary must be given to prospective insureds (NOT just if they are requested), 2) Agents/ Producers must tell prospects the full name of the company they represent. 3) They must describe themselves as producers and not as investment advisors or financial planners to imply that their compensation is not related to the sale unless it clearly is not related. 4) Any references to policy dividends must also state that dividends are not guaranteed.
The correct answer is: A copy of the policy summary must only be given to the insured if it is requested.

Question 3

K owns a life insurance policy on the life of his daughter and made his wife the beneficiary. Who has the right to choose the settlement option if no option has been selected and the daughter is still alive?

Answer 3

The policy owner has the right to select a settlement option while the insured lives. That right passes to the beneficiary if no settlement option had previously been chosen at the time of the insured’s death.
The correct answer is: K

Question 4

Which of the following dental coverages would provide coverage for correcting abnormally aligned teeth?

Answer 4

Orthodontia is the correcting abnormally aligned teeth, such as braces. The correct answer is: Orthodontics

Question 5

M has just concluded a four-year contract with the Air Force. If he is trying to decide whether to convert his SGLI coverage to VGLI, how long does he have to make his decision before he will need to provide evidence of insurability?

Answer 5

Upon release from the military, an individual has a 120 day free look extension during which they can convert their Servicemen’s Group Life Insurance (SGLI) coverage to a Veteran’s Group Life Insurance (VGLI) policy. The correct answer is: 120 days

Question 6

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

Answer 6

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

Question 7

G has a pre-existing knee problem that is the result of a high school football injury. If he buys an individual health insurance policy, how long can his new insurance company exclude coverage for any medical problems resulting from the injury?

Answer 7

Coverage for pre-existing conditions can be excluded for up to two years, after which time coverage is available.
The correct answer is: Two years

Question 8

To be insurable, a risk must have the chance of a loss but not the certainty of loss. This characteristic is described by the term:

Answer 8

Insurers look to insure pure risks, where there is the chance but not the certainty of loss. Speculative risks, where there is the chance of loss or gain, are not insurable. The correct answer is: Pure risk

Question 9

Medicare SELECT insurers are most like:

Answer 9

As with PPOs, each Medicare SELECT insurer has specific hospitals and often also has specific doctors that must be used except in an emergency in order to get full benefits, usually resulting in lower premiums. The correct answer is: PPOs.

Question 10

Which is NOT a characteristic of Social Security Disability?

Answer 10

Social Security Disability has a waiting period of 5 months before benefits begin, but the disability must be expected to last at least 12 months or to result in death to be eligible for Social Security benefits.
The correct answer is: The disability must be expected to last at least 5 months or result in death.

Question 11

What is an “accountable health plan?”

Answer 11

An entity that offers, issues or otherwise provides a health benefits plan and is approved by the director is an accountable health plan
The correct answer is: An entity that offers, issues or otherwise provides a health benefits plan and is approved by the director

Question 12

David has straight life insurance with a face value of $100,000 dollars and a premium of $250 every six months. What is another name for David’s policy?

Answer 12

Continuous premium is another name for straight life insurance. Premiums are paid regularly throughout the entire contract period.
The correct answer is: Continuous premium

Question 13

Which of these situations does NOT represent a common exclusion from dental plans?

Answer 13

Common dental plan exclusions include 1) cosmetic services unless required because of an accident, 2) oral hygiene training, 3) replacement or duplication of prosthetic devices such as dentures or bridgework (first 5 years), 4) injuries covered by Workers’ Compensation, 5) services by or on behalf of governmental agencies, 6) services that began prior to the date of coverage, and 7) orthodontics installation is not considered oral surgery and may be excluded.
The correct answer is: Tony requires a crown on one of his teeth just 11 months after he buys the plan.

Question 14

Another term for Interest sensitive whole life insurance is:

Answer 14

Interest sensitive insurance products have cash value amounts that are invested in variable investment vehicles such as mutual funds, or tied to indexes that can make the face and cash values of the policy fluctuate. Cash values are not guaranteed and can disappear altogether. These are sometimes also called current assumption whole life insurance. Variable and Equity-indexed policies are TYPES of interest sensitive products but are not other terms for same.
The correct answer is: Current Assumption Whole Life Insurance.

Question 15

Which of the following regarding a Limited Health Services Organization is NOT correct?

Answer 15

Limited Health Services Organizations (LHSOs) are similar to HMOs, but offer only limited types of health services, such as dental and vision.

The correct answer is: LHSOs are called such because of the limited geographical area in which they offer services.

Question 16

Which is not guaranteed under COBRA?

Answer 16

COBRA allows the terminating individual the right to purchase a temporary plan covering the individual for a certain period of time (up to 18 months), while the individual looks for coverage elsewhere.
The correct answer is: Renewability

Question 17

LTD policy characteristics do NOT include that:

Answer 17

If the benefit period is longer than 2 years, the definition of disability usually changes to an “any occupation” definition.
The correct answer is: If the benefit period is longer than 2 years, the definition of disability usually changes to a “your occupation” definition.

Question 18

If a health policy lapses due to late premium payment, there is often a waiting period of how long before coverage will be reinstated?

Answer 18

Unless the insured has been notified in writing that the policy will not be reinstated, there is a 45 day waiting period after late payment is made and evidence of continued good health is accepted by the insurer before the policy will be reinstated.
The correct answer is: 45 days

Question 19

C’s family had an adjusted gross income of $100,000 this year. They also experienced a surgery and other medical expenses of $6,000, and paid premiums for various health policies of $4,500. How much of her medical expenses, if any, can C deduct from income taxes this year?

Answer 19

Any medical expenses including premiums that exceed 7.5% of the individual’s adjusted gross income are income tax deductible. This amount includes premiums that are paid for medical, disability, and LTC insurance policies. In this case, C’s total medical expenses, including premiums, are $10,500. $7,500 is 7.5% of the family’s AGI, so: $10,500 (total expenses) - $7,500 (7.5%) = $3,000 (amount deductible from income taxes). The correct answer is: $3,000

Question 20

An insurance policy in which the insurance company retains the right to terminate the policy at any time is referred to as:

Answer 20

If the insurer can cancel at any time, the policy is cancelable.
The correct answer is: cancelable

Question 21

A policy is cancelable if..

Answer 21

A policy is Cancelable if the insurer can cancel the policy at any time simply by notifying the insured and refunding any advance premiums that have been paid.
The correct answer is: the insurer can cancel the policy at any time simply by notifying the insured and refunding any advance premiums that have been paid.

Question 22

Which of the following is NOT an example of a health plan administrator?

Answer 22

Health Maintenance Organizations offer the coverage, the service, and the administration of the contract. Administrative Services Only plans handle claim and benefit administration. Third Party Administrators are a type of ASO that is not an insurer. All of these are examples of health plan administrators. Medicare is a federally funded insurance program, but is not an administrator.
The correct answer is: Medicare

Question 23

ohn was out of work for 8 months due to a back injury. He returned to work for one week then could not return the next week because of continued back problems. Which provision in his disability income policy allowed John to continue receiving benefits without waiting for a new elimination period?

Answer 23

Recurrent disability is a second period of disability arising out of the same or a related cause of an initial disability after the initial disability appeared to have disappeared. If the insured has returned to work for less than a specified period of time after the initial disability (90 days - 6 months), then it is considered to be a recurrent disability and benefits continue as before. If for longer than the specified period, then it is treated as a new disability and is subject to a new elimination period. The correct answer is: Recurrent Disability

Question 24

Which of the following needs to be covered by a Medicare Supplement policy?

Answer 24

Medigap Plans A-N contains the basic/core benefits, which includes the Part A coinsurance amount. Plans K and L have reduced benefits. Plan K covers 50%, and Plan L 75% of the coinsurance amount.
The correct answer is: At least 50% of the Part A coinsurance amount

Question 25

How does Universal Life’s Option B help the policy avoid becoming a MEC?

Answer 25

There are two primary types of universal life, based on the level of death benefits. Option A universal policies pay a fixed, level death benefit, generally the face amount of the policy. Option B universal policies generally pay the face amount of the policy plus the accumulated cash values- as the cash values grow, so does the potential death benefit . This helps to meet the “corridor” requirements of the TAMRA act and keeps the policy from becoming a modified endowment contract (MEC).
The correct answer is: Cash values are added to the death benefit.

Question 26

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

Answer 26

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

Question 27

Which of the following would not be considered a limited coverage health policy?

Answer 27

Limited policies protect against specified, limited perils, e.g., cancer, heart disease, travel accidents, prescription drugs, hospital indemnity, etc. The correct answer is: Long Term Care policy

Question 28

R’ s disability policy has a triple indemnity rider. If the policy’s principle sum amount is $10,000, and the capital sum amount is set at 30%, how much will the policy pay if R looses his arm at the shoulder in a farming accident?

Answer 28

The capital sum is the amount payable as the result of lost sight or dismemberment. It is usually determined as a percentage of the principal sum-in this case, 30%, or $3,000. The principal sum of an AD&D policy is the amount payable as a DEATH benefit. If someone DIES under certain specified circumstances, some AD&D policies will pay double (double indemnity) or triple (triple indemnity) the principal sum amount. The correct answer is: $3,000

Question 29

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

Answer 29

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

Question 30

What happens to the remaining money of a straight life annuity when the annuitant dies one and a half months after annuitizing the contract?

Answer 30

A life annuity is a contract that provides an income for the annuitant’s entire life. Once the annuitant dies the insurance company’s payment obligation is over. If the annuitant were to live 50 years, the insurer would need to make payments for 50 years. In this case, the insurer hit the jackpot.
The correct answer is: The insurance company keeps whatever money is left.

Question 31

L owns a small manufacturing company. What is the maximum number of employees L can have to participate in a SIMPLE Plan?

Answer 31

Savings Incentive Match Plan for Employees (SIMPLE) Plans are targeted for businesses of 100 or fewer employees.
The correct answer is: 100

Question 32

C is 53 and owns a $100,000 life insurance policy on her life with $30,000 cash value. What tax will C need to pay if she cancels the policy and elects to receive the cash value as a lump sum?

Answer 32

A life insurance policy’s cash value is made up of premiums the insured has paid in as well as interest on that cash accumulation. C only needs to pay income tax on the portion of the cash value that represents interest.
The correct answer is: C will need to pay tax only on that portion of the cash value that exceeds the amount of premium she paid.

Question 33

Consumer Reports may contain information older than 7 years regarding which of the following?

Answer 33

Consumer Reports may not contain information for more than 10 years regarding bankruptcy cases. The correct answer is: Bankruptcy

Question 34

All of the following are considered advertising EXCEPT:

Answer 34

General announcements that new employees are eligible for group insurance or other company internal communications not intended for the general public are NOT considered advertising.
The correct answer is: general announcements that new employees are eligible for group insurance or other company internal communications not intended for the general public

Question 35

Policy Design is:

Answer 35

Policy Design is a cost containment method that requires the insured to have higher deductibles or coinsurance amounts.
The correct answer is: the requiring of higher deductibles or coinsurance amounts.

Question 36

Which of the following is NOT a possible feature for a Basic Medical Policy?

Answer 36

While there is no deductible associated with Basic Medical insurance, and it is typically mono-line coverage, the benefit period for reimbursement of daily room and board while hospitalized may be as short as 30 days or as long as 365 days.
The correct answer is: Reimbursement of daily room and board while hospitalized for as long as necessary.

Question 37

Which of the following is the BEST answer for where an individual can establish an Individual Retirement Account?

Answer 37

Some of the answers have correct but not as complete information. IRA’s and Keogh plans can be established through banks, government bonds, life insurance annuity plans, mutual funds, and stock brokerage firms.
The correct answer is: Banks, government bonds, life insurance annuity plans, mutual funds, and stock brokerage firms