Missed from Practice Test

Question 1

If a licensed person is moving to Pennsylvania, he or she may become licensed as a resident if they submit a completed application within how many days of establishing residence in Pennsylvania with proof of licensing from their prior home state?

Answer 1

90 days

Question 2

Which of the following are NOT fundable by annuities?

a) A person’s retirement
b) Estate liquidation
c) Death benefits
d) Cash accumulation for any reason

Answer 2

D. Death Benefits

Question 3

When would a 20-pay whole life policy endow?

Answer 3

When the insured reaches age 100
A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.

Question 4

When a person applies for Medicare supplement insurance, whose responsibility is it to confirm that the applicant does not already have accident or sickness insurance in force?

Answer 4

Insurer.
Although it is illegal for an applicant to intentionally misrepresent himself in an insurance application, it is the insurer’s ultimate responsibility to make sure that the applicant does not already have another accident or sickness policy in force.

Question 5

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

Answer 5

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.

Question 6

While a claim is pending, how often can an insurance company require an independent exam?

Answer 6

As often as reasonably required.

Question 7

What are the personal uses of life insurance?

Answer 7

Personal uses of life insurance include 
survivor protection, 
estate creation and conservation, 
cash accumulation, 
and liquidity.

Question 8

Which authority is NOT stated in an agent’s contract but is required for the agent to conduct business?

Answer 8

Implied authority is not written in the agent’s contract but is required in order for the agent to conduct business. Implied authority exists because not every single detail of an agent’s authority can be written in a contract.

Question 9

Which of the following is true regarding a term health policy?

a) It is conditionally renewable.
b) It is guaranteed renewable.
c) It is noncancellable.
d) It is nonrenewable.

Answer 9

It is nonrenewable.

In term health policies, the owner has no rights of renewal.

Question 10

Which of the following insurance providers would be considered a risk sharing arrangement?

a) Surplus lines
b) Reciprocal
c) Stock
d) Mutual

Answer 10

When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

Question 11

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider?

Answer 11

Annuity Certain option allows the annuitant to select the time period or the amount for the benefits. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.

Question 12

Which of the following is NOT a way to determine the interest rate in a Universal Life Policy?

a) Maintain a profit margin between the interest credited on in-force policies and the interest earned on their own investment portfolio
b) Estimate market conditions for the life of the policy
c) Declare the annual rate by the company’s board of directors
d) Tie current interest rates to Treasury Bills

Answer 12

b) Estimate market conditions for the life of the policy

Some insurers tie their current interest rates to Treasury Bills, while others maintain a specified spread (profit margin) between the interest that they credit on their in-force policies and the interest that they are earning on their own investment portfolio. Some insurers have their current interest rate declared by the company’s board of directors each year, if not more frequently.

Question 13

Alden is involved in a small plane accident that renders him permanently deaf, although he does not sustain any other major injuries. Alden is still able to perform his current job. To what extent will he receive Presumptive Disability benefits?

Answer 13

Full Benefits

Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of at least two limbs (Loss of use does not qualify in some policies.), total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work.

Question 14

An employee quits his job on May 15 and doesn’t convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. What will happen?

Answer 14

The insurer will pay the full death benefit from the group policy to the beneficiary.

The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

Question 15

The paid-up addition option uses the dividend to…

Answer 15

purchase a single premium policy in addition to the face amount of the permanent policy.

Question 16

When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent?

Answer 16

Group insurance plans, which are terminated generally, provide for an extension of benefits to any totally disabled employee or dependent. This extension of benefits is generally provided up to a period of 12 months or until the individual is no longer totally or continuously disabled.

Question 17

A producer licensed in Pennsylvania must notify the Insurance Department of any change of address in his or her residence or business address within how many days?

Answer 17

Every producer licensed in Pennsylvania must notify the Insurance Department in writing, within 30 days, of any change of address in his or her residence or business address. The producer must also notify all the entities for which the producer holds an appointment.

Question 18

Who can surrender a deferred annuity contract?

Answer 18

If the need arises, a deferred annuity contract may be surrendered only by the annuity owner. At surrender the owner receives the value of the annuity minus a surrender charge.

Question 19

Which of the following terms is used to name the nontaxed return of unused premiums?

Answer 19

The return of unused premiums is called a dividend. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums.

Question 20

When a producer holding a certificate or a broker’s license has a change in his/her residence or business address, he/she must notify the Department of Insurance and any company for which the producer holds an appointment within

Answer 20

within 30 days. Time parameters for sending notice of a change of address are established by the Insurance Code.

Question 21

What is the elimination period for Social Security disability benefits?

Answer 21

5 months

Question 22

An agent selling variable annuities must be registered with

Answer 22

FINRA (formerly NASD) and hold a securities license in addition to a life agent’s license in order to sell variable annuities.

Question 23

How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people?

Answer 23

Since each person would have a policy on each of the other people, among the 3 owners, the total number of policies would be six.

Question 24

An insured’s long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged a $100 per day. How much will the insurance company pay?

Answer 24

Most LTC policies will pay the benefit amount in a specific fixed dollar amount per day, regardless of the actual cost of care.

Question 25

describe an unfair trade practice of defamation

Answer 25

Making oral or written statements directly or indirectly which are derogatory or maliciously critical of another insurer would be an example of an unfair trade practice of defamation.

Question 26

In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?

Answer 26

If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.

Question 27

Which of the following will NOT be an appropriate use of a deferred annuity?

Answer 27

Deferred Annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children’s college education. Unlike life insurance, annuities do not create an estate, but liquidate it.

Question 28

Which factor about the insured determines the amount of disability benefit that the insured will receive?

Answer 28

Disability benefits are paid to those who are unable to work as they normally would, due to an accident or illness. Benefits are designed to help the insured recover income lost as a result of the disability. The amount of benefits that an insured receives is determined by the insured’s earned income and is usually limited to a certain percentage of that amount.

Question 29

A hospital indemnity policy will pay

Answer 29

Hospital confinement indemnity policies pay specific amounts that depend on the amount of time the insured is confined to the hospital.

Question 30

The risk of loss may be classified as

Answer 30

Pure risks and Speculative Risks:

Pure risks involve the probability or possibility of loss with no chance for gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.

Question 31

In a group health policy, a probationary period is intended for people

Answer 31

Who joined the group after the effective date.

The probationary period is the waiting period new employees must satisfy before becoming eligible for benefits.

Question 32

What type of insurance policy may be used to fund a buy sell agreement?

Answer 32

Any form of Life insurance may be used to fund a buy-sell agreement.

Question 33

Under which of the following circumstances can financial institutions share insurance coverage information with third parties, for the purpose of soliciting the purchase of insurance?

Answer 33

Financial institutions are prohibited from sharing insurance coverage information with a third party for the purpose of selling or soliciting the purchase of insurance. However, if notice is given, and the customer does not sign and return such a form within 30 days, such information may be shared.

Question 34

All of the following are Nonforfeiture options EXCEPT

a) Reduced paid-up
b) Interest only
c) Cash surrender
d) Extended term

Answer 34

Nonforfeiture values include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

Question 35

Which of the following provisions is mandatory for health insurance policies?

a) Illegal occupation
b) Unpaid premiums
c) Intoxicants and narcotics
d) Physical examination and autopsy

Answer 35

Physical examination and autopsy is a mandatory provision required by law.

Question 36

What protects consumers against the circulation of inaccurate or obsolete personal or financial information?

Answer 36

The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information, and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.

Question 37

Which type of Medicare policy requires insureds to use specific healthcare providers and hospitals, EXCEPT in emergency situations?

Answer 37

Medicare SELECT policies require insureds to use specific healthcare providers and hospitals, except in emergency situations. In return, the insured pays lower premium amounts.

Question 38

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Answer 38

_____? A 20-year term policy is written to provide a level death benefit for 20 years.

Question 39

Which of the following dental insurance categories would cover the filling of cavities?

Answer 39

Routine and major restorative care covers the costs of dental work, such as oral surgery, bridges, dentures, and cavity treatment. Routine and preventative maintenance covers routine dental check-ups only.