Prep 2 - Arizona Life Insurance Exam Flashcards
(187 cards)
1
Q
Which statement best defines what a Policy Title means on an insurance policy?
A
Every policy must have a title on the face and on the back of the policy, briefly describing the policy
2
Q
A licensee whose name or address changes must notify the Department of Insurance within ___ days.
A
30 days
3
Q
A(n) ________ insurer restricts the exposures it writes to those of its owners.
A
Captive
4
Q
A(n) _________ company is licensed by the Department of Insurance to conduct insurance business in Arizona.
A
authorized
5
Q
An insurer markets its products by soliciting customers by mass media advertising and mail WITHOUT using the services of a producer. Which of these marketing systems does the insurer utilize?
A
Direct response
6
Q
How long must a producer maintain customer records for an insurance transaction?
A
Three years
7
Q
A policyowner decides to surrender the cash value of a whole life insurance policy. The insurer has up to ___ month(s) to delay this payment.
A
6
8
Q
A statement MUST be signed by the _________ for any illustrations used in the sale of a life insurance policy.
A
producer
9
Q
After an annuity has been in force for ___ year(s), it becomes incontestable.
A
2
10
Q
The Telemarketing Sales Rule states that ______ is the LATEST time of day that telemarketing calls may be received.
A
9:00 PM
11
Q
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
A
31 days
12
Q
If a life insurance applicant is shown future premiums are to be paid out of non-guaranteed values, the illustration used in the sales presentation MUST
A
disclose that premium payments may need to be resumed depending on actual results
13
Q
Which of the following actions may result in a producer’s license being suspended?
A
Misappropriation of premiums
14
Q
If a producer replaces a client’s existing life insurance policy with a new one, which of these actions is advisable?
A
Wait until the new policy is issued and delivered before surrendering existing policy
15
Q
Which of the following may be considered an act of misrepresentation?
A
Misleading or failing to adequately disclose the title and true nature of a policy offered to a client
16
Q
Which of these individuals may NOT obtain a temporary producer license?
A
An employee of a retired licensed producer
17
Q
Which of the following entities does NOT establish regulations for variable insurance products?
A
State attorney general
18
Q
Who manages the premiums collected from a group’s members for a reciprocal insurer?
A
Attorney in fact
19
Q
Which of the following is NOT a valid reason for an insurer to contest a life insurance policy during the policy’s first two years of existence?
A
Misstatement of age
20
Q
A group health certificate for coverage issued in Arizona MUST contain a(n)
A
summary of policy features and benefits
21
Q
A television advertisement features a health insurance product that is endorsed by a specific group. In this advertisement,
A
any control by the insurer over this group must be disclosed
22
Q
A trade association group is seeking coverage for group medical benefits. The members of this association
A
are probably in the same industry
23
Q
An individual is seeking coverage for nursing home (custodial) care that does NOT require any previous period of hospitalization. Which program offers these specifications?
A
AHCCCS
24
Q
An insurance producer must keep usual and customary records that pertain to transactions under the producer’s license, at their ________________.
A
principal place of business
25
An insured has been court-ordered to provide a child's health insurance. Upon this order, the insurer must allow the enrollment of this child
at any time
26
Enrollees in a staff model HMO normally have which of the following pharmacy options available?
In-house pharmacy
27
If a Medicare Supplement policy is cancelled by the insurer, which of these circumstances does NOT require prior approval by the Arizona Department of Insurance?
Nonpayment of premium
28
When is it acceptable to charge or receive a fee or service charge in addition to the premium in connection with the transaction of insurance?
If the amount of the fee or service charge is reasonably related to the cost of the service
29
The main purpose of an annuity is to
create a stream of income
30
When an annuity contract has been fully surrendered, how will the surrender charges affect the final contract settlement?
Final contract settlement will be reduced
31
An agent's authority to bind an insurer to an insurance contract may be granted in the
agent's contract and the insurance company's appointment
32
Any employee insured under a group life insurance plan is normally
covered with term life insurance
33
Which annuity allows contributions to an IRA?
Deferred
34
Group life insurance is typically issued as
level term insurance
35
According to the Affordable Care Act (ACA), dependent children may remain on their parent's plan until what age?
Age 26
36
Which of the following outlines the authority given to the producer on behalf of the insurer?
Producer contract
37
Which of the following accurately describes a participating insurance policy?
Policyowners may be entitled to receive dividends
38
A large corporation pension plan purchased an accumulation annuity contract where all of the participating employees received certificates of participation. What is this contract called?
Group deferred annuity
39
Which of these describe a participating life insurance policy?
Policyowners are entitled to receive dividends
40
Under the Affordable Care Act (ACA), it is anticipated that every state will have a health insurance exchange to provide coverage by the year
2014
41
Disability income policies provide protection for which of the following?
Economic death
42
What are premiums for group credit life insurance based on?
Flat rate unrelated to the borrower's age
43
A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called
period certain
44
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
45
Mark is covered by a policy that uses the regular occupation (own-occ) definition of total disability. Using this definition, he will be considered disabled if unable to
perform the substantial and material duties of his regular occupation
46
An individual, age 45, would like to help pay for his daughter's college expenses in 10 years. Which annuity would be appropriate for this individual?
Deferred annuity
47
For purposes of disability income insurance, earned income would include all of the following EXCEPT
Dividends
48
Which of the following would most likely purchase an immediate annuity?
Retiree having a lump sum to invest
49
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group
50
Which statement concerning a deferred annuity contract is correct?
The owner can be the beneficiary, annuitant, or neither
51
How do benefit payments fluctuate over time in a variable life annuity?
Reflects changes in the market value of assets in a separate account
52
How many days notice does the Affordable Care Act require insurers to give before rescinding coverage?
30
53
The Coordination of Benefits provision is added to a group health plan in order to
avoid over insurance
54
Jonas is covered with disability insurance through his employer. The employer pays 75% of the premium, while Jonas pays the other 25%. What is Jonas' tax liability for any benefits paid from the disability plan?
Taxes must be paid on 75% of the benefits received
55
An employer pays the accident and health insurance premiums for its employees. The premiums paid by the employer are
deductible to the business
56
John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract?
Mary - the annuitant is the person whose life the annuity is based on
57
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?
If the interest rate falls below a specified level, the surrender charge is waived
58
Specialty care is provided by which of the following health maintenance organization (HMO) providers?
Neurologist
59
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will
remain a constant dollar amount for the duration of the annuity period
60
What should Alan do if he needs emergency health services as an enrollee of an HMO with a gatekeeper system?
Proceed to the nearest emergency room
61
Who prosecutes insurance crimes that affect interstate commerce?
US Attorney General
62
What type of contract is an accumulation annuity contract bought for 2,000 employees?
Group deferred annuity
63
What does the annuitant in a single premium deferred annuity (SPDA) do?
Makes only one premium payment
64
How is an insured's accident and health claim handled if it occurs during the policy's grace period?
The unpaid premium may be subtracted from the reimbursement
65
What type of annuity payout option pays the annuitant $495 per month until the contract value is exhausted?
Fixed amount
66
Who has the authority to change the beneficiary in an individual annuity?
Owner
67
What benefits do employees generally receive from workers compensation?
Lost wages and medical expenses due to occupational accidents
68
What do the standard provisions of an accident and health insurance policy require?
The policy, endorsements, and attached papers constitute the 'entire contract'
69
What are the tax implications for Mary, who pays for part of her disability income policy premium?
Residual benefits will be received income tax-free
70
According to the Federal Fraud and False Statements Act, what is considered an intentional violation?
Making false entries in a company's books
71
Who receives dividends from a mutual company?
Policyowners
72
Which of the following is NOT an objective of the National Association of Insurance Commissioners?
Regulate state insurance commissioners
73
Which federal agency handles Medicare enrollment and public information?
Social Security Administration
74
How is community rating used for underwriting purposes?
The same rates are charged for individual and group plans in the same geographical area
75
What pharmacy options are available to enrollees in a staff model HMO?
In-house pharmacy
76
How many days does an insured have to notify an insurer of a medical claim after an accident?
20
77
Which statement regarding hospital pre-admission authorization is NOT true?
It encourages weekend admission
78
How much of the $100,000 death benefit will be added to the beneficiary's gross income for federal income tax purposes?
Nothing
79
How are death benefits from a life insurance policy normally treated for federal income tax?
Exempt from federal income tax
80
What best describes the presumptive disability provision?
Waives the typical total disability requirements
81
What effect does the change of occupation provision have if Omar is hurt while performing a more hazardous job?
Reduce the benefit level
82
Who elects the governing body of a mutual insurance company?
Policyholders
83
How can the automatic premium loan provision be accurately described?
Provision that provides a policy loan to pay any premiums by the end of the grace period
84
What occurrence could improve an insurer's ability to reduce premiums?
Rate of earnings on investments increase
85
What qualifies as acceptance of an insurance contract offer?
An issued policy
86
What is an insurance contract that identifies individuals by relationship to a specific organization?
Group insurance
87
What is an example of an insured collecting benefits for recurrent disability?
An insured collecting benefits after returning to work and then becoming disabled again from the same cause
88
When is evidence of insurability required for a person with a variable universal life policy?
When the death benefit is increased
89
Which of these is NOT a factor during the health insurance underwriting process?
Former residence
90
Who supplies the privacy notice when a producer submits an application with personal information?
Producer
91
When can group accident and health insurance be offered by an insurer?
When the sponsoring group provides an employer-employee relationship
92
What type of major medical contract covers all medical expenses?
Comprehensive
93
What is the excise tax rate imposed by the IRS on individuals aged 70 1/2 or older who do not take required minimum distributions?
50%
94
What is an example of pre-admission testing?
Tim being referred to an outpatient clinic for diagnostic tests before surgery
95
What describes an agent whose actions exceed the authority granted by contract?
Not backed by the insurer
96
Who bears the cost of a physical exam requested by an insurance company?
The insurer
97
What is the term for the grouping of two or more small employers to obtain group health insurance at a favorable rate?
Multiple employer trust
98
Which tax is normally associated with an individual's death?
Federal estate tax
99
What is the main role of accident and health and disability insurance?
Protect against medical care costs and the loss of earning power
100
Which type of life insurance policy allows flexible premium payments and investment choices?
Variable universal life
101
What is correct when disability buy-sell insurance benefits exceed a partner's cost basis?
The full amount is non-taxable to the partner
102
How can Medicare be described?
A federal health insurance program for individuals over the age of 65 or permanently disabled
103
Why do employers often purchase life insurance on a key employee?
To pay for finding and training a replacement if the employee dies prematurely
104
What is correct regarding the cash value of a whole life insurance policy?
Available to the policyowner when policy has been surrendered
105
What is the minimum age for open enrollment in Medicare Supplement insurance?
No minimum age
106
What is a physician who accepts assignment on all Medicare claims called?
Participating provider
107
What is a life policy with lower premiums during the early years called?
Modified life
108
What tax penalty applies to nonqualified medical expense distributions from an HSA?
20%
109
What best describes the tax treatment of medical expense policies for the self-employed?
100% of medical expense plan premiums are tax deductible
110
What are bathing, eating, and transferring classified as?
Activities of daily living
111
How many quarters must one work in a covered occupation to become fully insured on a permanent basis under Social Security disability income requirements?
40 quarters
112
What is considered the collateral on a life insurance policy loan?
The policy's cash value
113
What is referred to as the total of premiums paid into a life insurance policy minus total dividends received in cash or used to offset premiums?
Cost basis
114
Which accident and health plan will be primary for Tonya diagnosed with kidney failure?
Her employer's group accident and health plan
115
What is a statement made by an applicant during the application process that becomes part of the contract?
Warranty
116
Which is NOT an allowable exclusion for long-term care insurance policies?
Care for incurable conditions
117
Which underwriting requirement is likely NOT needed when applying for a large amount of life insurance coverage?
Eye examination
118
Who typically receives the death proceeds of a credit life insurance policy?
Lender
119
What characterizes Major Medical policies?
Flat deductible
120
Which situation allows funds to be deposited into a rollover IRA?
An employee quits her job and receives $50,000 from her qualified plan
121
When does the producer give a premium receipt for a life insurance application?
When the initial premium has been paid with the application
122
How does an underwriter take into account an applicant's marital status?
When determining who is eligible for dependent coverage
123
Which health insurance plan charges a premium that cannot be increased?
Noncancelable
124
What is NOT a valid reason to add the waiver of premium rider to a life insurance policy?
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled
125
What document may an insured be required to sign at policy delivery to ensure no adverse medical conditions have occurred since the application?
Good health statement
126
What kind of arrangement gives the policyowner the right to change the beneficiary?
Revocable designation
127
Which statement regarding universal life insurance is NOT accurate?
Policy loans are not permitted
128
What type of care does Medicare Part A cover?
Skilled nursing facility care
129
When there is a named beneficiary on a life insurance policy, how are the death benefits handled?
They are paid directly to the beneficiary without interference from the insured's creditors
130
In what situation could an insurance policy's coverage be modified?
Applicant is a substandard risk
131
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
132
What will the insurer pay if Dan incurs covered medical expenses of $100 in November and $400 in January under a major medical expense policy with a $200 deductible and an 80/20 coinsurance provision?
$240
133
What factor is considered when determining premiums for insurance?
The expenses of the insurer
134
Which does medical expense insurance NOT typically cover?
Treatment in a government facility
135
What is true regarding the exchange of consideration among parties involved in an insurance contract?
Can be unequal
136
According to the IRS, what may a company NOT do regarding funds in a qualified retirement plan?
Repossess the funds for business purposes
137
How is a collateral assignment used in a life insurance contract?
Transfers specific ownership rights to a creditor
138
How is the initial premium for an accident and health insurance policy typically paid?
It is typically obtained by the agent and forwarded to the insurer
139
What does the 'Use it or Lose it' rule apply to?
Flexible Savings Accounts
140
What is true regarding accident and health insurance claims that reimburse on an indemnity basis?
Claims can be sent directly to the insured
141
Which life insurance policy provision prohibits a beneficiary from 'commuting, encumbering, withdrawing, or assigning' any portion of the proceeds prior to actual receipt from the company?
Spendthrift clause
142
How is the insured protected if a payor benefit rider is attached to the life insurance policy?
Premium payments are waived in the event the premium payor dies or becomes disabled
143
What type of deductible must be satisfied again for each illness or accident in a major medical plan?
Per-cause
144
What typically happens to the death benefit of a variable universal life policy with a variable death benefit option?
Fluctuate with changes in the cash account
145
Which statement regarding the joint and survivor life insurance settlement option is NOT true?
The amount of each installment is larger than the single life income option
146
What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?
Under $50,000 initially, but increases over time
147
What may a producer working for an insurance company be personally liable for?
Acts performed which are prohibited in the agency contract
148
To which group plans do HIPAA rules NOT apply?
Disability income
149
When may a signed good health statement be requested by a life producer?
At the time of policy delivery
150
Who normally pays the premiums for group credit life insurance?
Borrower
151
In an individual retirement account (IRA), how are rollover contributions treated?
Unlimited by dollar amount
152
How will an insurance company handle a claim if a policyowner suffers a covered accident and health insurance loss on June 30 and submits proof of loss on July 10 after cancelling coverage on July 2?
Claim must be paid after proof of loss is received
153
What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?
Responsible for acts by the producer that are authority only
154
What type of coverage was added when Laura added a children's rider to her life insurance policy?
Level term
155
What is a Keogh plan?
Qualified retirement plan for the self employed
156
When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld?
None
157
What does needs analysis involve when planning to protect a family with life insurance?
Identifies the needs of an individual and the individual's dependents
158
What is considered an advantage of purchasing term life insurance?
The initial premium is lower compared to an equivalent amount of whole life coverage
159
What may a life insurance producer's underwriting duties include?
Seeking additional information requested by the insurance company
160
What is purchasing insurance an example of?
Risk transference
161
What tax benefit does an employer offering a qualified retirement plan have?
Make tax-deductible contributions to the plan
162
What is the maximum deductible IRA contribution allowable for an individual with a gross income of $5,000?
$5,000
163
Which plans allow a participant to choose either a network or non-network provider at the time of medical care?
Point-of-service
164
How will a pre-existing conditions exclusion affect Karen's new insurance contract?
May reduce her benefits
165
What type of premiums are associated with individual mortgage protection life insurance policies?
Level premiums
166
What does a Medicare Advantage enrollee typically pay for?
Small co-pay per visit or per service
167
When must a producer provide disclosure about information practices to an applicant?
Prior to or at the time of signing the application
168
What penalty tax applies to premature IRA distributions?
10%
169
Which is NOT considered an expense for surviving family members of a deceased wage earner?
Unemployment tax expenses
170
What is a TRUE statement regarding universal life insurance?
Policy indicates how much of each premium is used toward company expenses
171
What is NOT a duty that a producer may be required to perform when delivering an insurance policy?
Leave a conditional receipt with client
172
What happens when a ten year renewable term life insurance policy issued at age 45 is renewed?
The premium rate will be the current rate for ten year term insurance for a person aged 55
173
Which is NOT considered a type of limited payment whole life insurance?
Endowment at age 70
174
What is a juvenile life insurance policy?
A life policy that covers the life of a minor
175
What may happen to Scott's life insurance policy dividends that are left with the insurance company?
This particular policy may be paid up when the cash value plus accumulated dividends equal the net single premium for the same face amount at the insured's attained age
176
What is NOT guaranteed in a whole life policy?
Dividend scale
177
Which may NOT be deducted from premium payments or the cash value of a variable life insurance policy?
Federal premium taxes
178
What must XYZ Corp's qualified retirement plan NOT do?
Discriminate in favor of highly compensated employees
179
What does a life insurance guaranteed insurability rider allow the insured to do?
Periodically purchase additional insurance without proving insurability
180
Which statement regarding insurance is false?
As the number of insured units increases, the number of losses decreases
181
Where is the principal source of information concerning an applicant's identity, age, and marital status found?
Completed application
182
What is a hold-harmless clause an example of?
Risk transfer
183
What is required for an insurable risk?
That the chance of loss be calculable
184
What function may a MET third-party administrator NOT perform?
Marketing the plan
185
What can Julie expect with the Mandatory Second Surgical Opinion provision in her group health plan?
Out-of-pocket expenses are lower when a second surgical opinion is obtained as opposed to having only one
186
What is an example of pre-admission testing?
Tim being referred to an outpatient clinic for diagnostic tests before hospitalization
187
Under HIPAA, how long may medical plan late enrollees be excluded for pre-existing conditions?
18 months
