More Health & Life Answers

Question 1

Which of the following is NOT required by most states that have privacy acts?

Answer 1

Insurance privacy acts require that applicants be given notice of a particular action that the insurance company takes. The acts do not prohibit a company from doing anything. They only require companies to notify applicants.
The correct answer is: The company must not gather information from certain sources which the applicant tells them not to.

Question 2

Which disability rider allows the insured to increase the amount of disability benefit at a future date subject to increases in income, within the same policy?

Answer 2

The Future Increase Option (FIO) Rider allows the insured to increase the amount of disability benefit at a future date subject to increases in income, within the same policy. The Cost of Living Adjustment (COLA) rider kicks in once disability benefits begin and can go back to the original amount after the disability ends, but it is not a permanent increase that the insured elects to select sometime after the policy inception date.
The correct answer is: FIO

Question 3

Which of the following is a characteristic of executive bonus plans?

Answer 3

The executive bonus plan is a tax-deductible way to reward key executives. The plan can be offered to specific employees. The company gives the executive a bonus equal to the cost of the life insurance policy premium. The executive owns the policy and pays the premium. Cash values build on a tax-deferred basis and accumulated cash value is available for retirement. Any death benefit is income tax free.
The correct answer is: Any death benefit is income tax free.

Question 4

Which of the following would most help reduce cancellations because of a policy owner’s neglect or forgetting to pay the premium on time?

Answer 4

An automatic premium loan is an elective feature that borrows money from the policy’s cash value to pay any premium not paid by the end of the grace period. When and if the premium is paid, it pays off the premium loan, though interest may need to be paid. the reinstatement period makes it possible for the owner to pay the premium late if it was forgotten, but the automatic premium loan does not need to wait for any action by the policy owner.
The correct answer is: An Automatic Premium Loan

Question 5

A few states require and sponsor health plans that provide for non-occupational disability coverage. What are these types of plans called?

Answer 5

This is an example of a question you probably didn’t read about in the book you studied. If you don’t know what the question is talking about, try to define key words in the question. If a state requires something, it is done by law, also known as statute. Disability plans required by law could thus be deduced to be a statutory disability plan. There are only a few states that do require them.
The correct answer is: Statutory disability plans

Question 6

A is married to H and is covered by the group health insurance policy of H’s employer. If H’s employment is terminated and he takes the COBRA coverage, for which of the following could A’s COBRA coverage be stopped?

Answer 6

Any health insurance policy is cancelled if the insured does not pay the premium. The correct answer is: Non-payment of premium

Question 7

Which is NOT a business use of disability insurance?

Answer 7

Business overhead expense disability insurance may be used to cover overhead expenses in the event of the owner’s disability, not a key employee’s. Key Employee disability insurance is paid directly to the key employee, as a form of salary continuation, freeing funds for the employer to hire a replacement. The correct answer is: To cover overhead expenses in the event of a key employee’s disability.

Question 8

Which of the following is a benefit of third party ownership for a life insurance policy?

Answer 8

If the policy is not owned by the insured, death proceeds are payable directly to the beneficiary with no income or estate taxes.
The correct answer is: Proceeds are payable directly to the beneficiary with no estate taxes.

Question 9

What is the penalty for using HSA funds for non-medical purposes?

Answer 9

HSA (Health Saving Accounts) funds must be used for medical expenses or have an additional 20% penalty tax. This penalty is waived upon the HSA owner’s death or eligibility for Medicare.
The correct answer is: 20%

Question 10

The conversion provision allows an insured to do what?

Answer 10

The conversion provision allows an insured to convert one policy to another the company has without proof of medical insurability. For example, converting term to whole life. Also, group coverage may be convertible to an individual policy if the individual leaves the group.
The correct answer is: To convert to another policy the company has without proof of medical insurability

Question 11

If Maria applied for a Medicare Supplement policy on April 1 to replace one that she currently owns and the policy is delivered on April 25, When does Maria’s “free look” period end?

Answer 11

There is a 30-day “free look” provision for Medicare supplemental policies. The correct answer is: May 25

Question 12

Which of the following information does NOT need to be disclosed to a viator in a disclosure statement?

Answer 12

Receipt of the proceeds of a viatical settlement may adversely affect the viator’s eligibility for Medicaid or other government benefits or entitlements.
The correct answer is: That receiving proceeds from a viatical settlement will not affect the viator’s eligibility for Medicaid

Question 13

S is 40 years old and has a $500,000 annuity with PB&J Insurance. She has chosen the lifetime payment option as her payout choice when she annuitizes the annuity, which she plans to do when she reaches age 55. What will happen to the annuity proceeds if S dies next year?

Answer 13

If S had annuitized the annuity with the lifetime payment option before she died, PB&J would have won the lottery and kept all the proceeds that had not been paid out. However, S had not yet annuitized the annuity when she died, so the annuity acts as a life insurance policy and the policy amount will go as a death benefit to the beneficiary. Nothing is said about the money being transferred into another annuity or some other arrangement being made, so the full amount will be paid to the beneficiary.
The correct answer is: The money in the annuity will immediately pass to the annuity beneficiary.

Question 14

Under the Occupational Accidents and Health provision of a major medical policy, which of the following statements is correct?

Answer 14

Injuries or illnesses that are work-related are handled under workers’ comp policies rather than by major medical policies. Work related health problems are excluded from the medical policy coverage.
The correct answer is: Work-related injuries or sicknesses are covered by Workers Compensation insurance rather than by the major medical policy.

Question 15

All but which of the following statements about LTC insurance is correct?

Answer 15

LTC benefits are paid in set amounts, usually $2,000- $5,000/ month.
The correct answer is: Benefits are paid for the exact amount of the cost of services and differs from one month to the next.

Question 16

When an insurer issues a policy that replaces a policy of another company, which of the following does the replacing insurer NOT need to do?

Answer 16

An insurer must require the agent to submit copies of the replacement notice. They must also send a Buyers Guide to the applicant, send the existing insurer a notice of intent to replace the existing policies, describing the insured and the intended policies to be replaced, and give an expanded free look provision of 20 days.
The correct answer is: The replacing insurer must send a policy comparison to the insured, showing the similarities and differences between the existing policy and the replacement policy.

Question 17

M has already met her health plan’s annual deductible. If she requires dental work and does not need to pay another deductible for the dental services, what type of dental/ health policy does she have?

Answer 17

Plans where the dental coverage is integrated with the health plan also have an integrated deductible, involving only one deductible for both health and dental. Stand alone dental plans have only the dental deductible. The correct answer is: Integrated

Question 18

What is a group called in which several employers pool their risks and self-insure?

Answer 18

A group called in which several employers pool their risks and self-insure is called a Multiple Employer Welfare Association or Arrangement (MEWA). The correct answer is: Multiple Employer Welfare Association

Question 19

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

Answer 19

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 20

The amount paid on an AD&D policy as the result of the loss of sight or dismemberment is a percentage of the:

Answer 20

The principal sum is the amount paid as the face amount or death benefit of the policy. The capital sum is the amount paid as the result of the loss of sight or dismemberment, and it is a percentage of the principal sum. This is a trick question. What you are being asked is, what is this a percentage of? The correct answer is the principal sum.
The correct answer is: Principal sum.

Question 21

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

Answer 21

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

Question 22

A Reinsurer:

Answer 22

Reinsurers are insurance companies that insure other insurance companies. The company transferring some of their loss potential to the reinsurer is called the “ceding company.”
The correct answer is: Insures other insurance companies against catastrophic losses such as earthquakes.

Question 23

Which of the following is NOT a privilege that an individual leaving a group can receive within 31 days when converting to a personal policy?

Answer 23

Only members of the group who were covered for at least 5 years can take advantage of the conversion privilege when the group’s policy is terminated.
The correct answer is: When the group policy terminates, all members can purchase an individual policy up to the group policy’s face amount or $10,000.

Question 24

Social Security provides benefits for retired citizens for families upon the premature death of the family breadwinner. All of the following are possible benefits EXCEPT:

Answer 24

Social Security pays $255 toward final expenses.
The correct answer is: It pays $275 toward final expenses.

Question 25

Which of the following is NOT typical of the Waiver of Premium rider?

Answer 25

The Waiver of Premium rider is used with Disability Income and Long Term Care (LTC) Policies. The insured does not pay premiums, including additional premium for the rider, for the duration of the disability, usually with a 3 to 6 month waiting period. Premiums paid during the waiting period are reimbursed to the insured if they are still disabled at end of the waiting period. Rider terminates and coverage stops at insured’s age 60 or 65. If an insured is disabled before the rider has been dropped from the policy, the premium will be waived for life or until the insured is no longer disabled.
The correct answer is: There is no extra premium for the rider in the policy.

Question 26

Which of the following statements about group disability insurance is CORRECT?

Answer 26

Long term disability has a maximum benefit period of 2 years with an “own occupation” definition, after which time the definition changes to an “any occupation.” Group short term disability benefits (13-26 weeks) are paid weekly.
The correct answer is: The definition of disability changes from “your own occupation” to “any occupation” after two years of disability.

Question 27

Life and Health insurance companies that specialize in one or more types of health or disability insurance usually on a reimbursement basis are called what?

Answer 27

This is the definition of a private insurer, which is the majority of insurance companies.
The correct answer is: Private Insurers

Question 28

Which of the following is NOT a characteristic of Return of Premium policies?

Answer 28

Return of Premium Policies guaranty the return of all premiums paid towards the policy once the policy term has expired (assuming the insured outlives the policy term). Even if the policy is cancelled prior to the expiration of the policy term, a portion of the premium may be refunded. Products typically feature: level death benefit term plans with fully guaranteed level premiums for the first 15, 20 or 30 years, with coverage expiring at age 95. Premium costs usually range approximately 30% higher than the most competitive term life insurance products available. ROP policy forms are not available in all states.
The correct answer is: ROP policies are generally whole life insurance.

Question 29

Which part of a life insurance policy contains information regarding the insurance company’s promise to fulfill its obligation to pay?

Answer 29

The insuring clause is in reference to the company’s purpose for insuring and is in accordance with a guarantee to pay (IC = Insuring Clause and the Insurance Company’s part in the agreement).
The correct answer is: Insuring Clause

Question 30

Which of the following would not be an advantage of a High Deductible Health Plan (HDHP)?

Answer 30

The major advantages of High Deductible Health Plans (HDHP) are that the premiums are lower and health costs are lowered because consumers become more cost conscious. HSAs and HRAs, often paired with HDHPs, provide a tax advantaged way to save for future medical expenses.
The correct answer is: HDHPs provide a tax advantaged way to save for future medical expenses.

Question 31

E said that she was 28 when she applied for her insurance policy. When she files a claim for disability benefits, it is discovered that she was actually 35 at the time of application. What will be the effect on the policy of Optional Uniform Policy Provision 2, Misstatement of Age?

Answer 31

Benefits will be reduced to what the premium would have provided at the correct age if it is discovered prior to payment of benefits that the insured’s age was understated on the application. If the insured’s age is overstated, overpayment of premiums must be returned. With the Misstatement of Age provision, benefits will either decrease or premiums will decrease. The insurer will not put itself in the position to pay more benefits than were in the original contract.
The correct answer is: Benefits will be reduced to what the premium would have provided at the correct age.

Question 32

QRZ Electronics bought a Key Employee life policy on one of its best employees, Raven. When Raven retired QRZ wanted to extend the coverage to Raven’s replacement. What rider would allow QRZ to keep the policy with its cash values in force and meet this need at the same time?

Answer 32

he Substitute or Change of Insured Rider requires the submission of an application signed by both the owner and substitute insured, and requires evidence of the insurability of the substitute insured. Premiums can be adjusted according to the insurance costs of the substitute insured, and must contain the policy date and face amount, the premium payment method, and the insurance plan type.
The correct answer is: Change of insured

Question 33

Which of the following could sell insurance in this state?

Answer 33

The non-resident producer is the only one of these choices that may sell insurance. These individuals are already licensed in their resident states and have acquired a non-resident authorization in this state. Residents DO need to pass the state exam, but must also obtain a producer license from the state. Staff employees may not sell insurance unless they themselves are licensed. Claims adjusters must obtain a license to process claims but may not sell insurance with that license.
The correct answer is: non-resident licensed producer.

Question 34

In dental insurance, Prosthodontia care refers to what?

Answer 34

Prosthodontia care refers to the artificial replacement of teeth (dentures or bridgework).
The correct answer is: Artificial replacement of teeth

Question 35

A Risk Retention Group:

Answer 35

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

Question 36

Which of the following is not considered an insurance advertisement?

Answer 36

Internal company communications about insurance benefits or other insurance related topics that are not intended for the general public are not considered advertisements. Once the communications are intended for the public they become advertisements.
The correct answer is: Information on benefit programs for internal/company use.

Question 37

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

Answer 37

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 38

Which of the following is not correct about federal or state government insurance?

Answer 38

Insurers in each state are required to participate in shared or involuntary markets. These markets provide coverage for high-risk insurance applicants that do not meet normal underwriting standards.
Some states require that these high-risk applicants be assigned to individual insurers on a predetermined basis while others require that losses from these individuals be shared.
The correct answer is: The premiums are paid with tax dollars.