Quiz 3 105 - 150

Question 1

105. Which of the following is NOT a common life insurance policy rider?
     a) extended term
     b) automatic premium loan
     c) waiver of premium
     d) accidental death

Answer 1

A) extended term

Question 2

106. John applies for an insurance policy and is told by the producer agent that the insurer is bound to the coverage as of the application date or medical examination whichever is later. Assuming that he is an acceptable risk, what item is given to John?
     a) Binding receipt
     b) Conditional receipt
     c) Warranty receipt
     d) Backdated receipt

Answer 2

A) Binding receipt

Question 3

107. How are acts of war and aviation treated under a group life insurance policy?
     a) Optional rider
     b) Policy exclusion
     c) Covered hazard
     d) Mandatory provision

Answer 3

B) Policy exclusion

Question 4

108. M completes an application for Health Insurance, but does not pay the initial premium. All of these actions must occur before M’s policy goes into effect EXCEPT:
     a) Policy is delivered
     b) Free Look period has expired
     c) Insurance company issues policy
     d) Initial premium is collected

Answer 4

b) Free Look period has expired

Question 5

109. Premiums are best described as
     a) money paid by the insurer for settling a claim
     b) money paid by the insured to acquire a policy’s benefits
     c) the amount an insured pays per unit of coverage
     d) commissions payable to the writing agent

Answer 5

c) the amount an insured pays per unit of coverage

Question 6

110. Which of these do NOT constitute policy delivery?
     a) Policy mailed to applicant
     b) Policy mailed to producer agent
     c) Policy delivered to the applicant by the producer agent
     d) Policy issued with a rating

Answer 6

d) Policy issued with a rating

Question 7

111. Which is the automatic mode of settlement for life insurance policy proceeds?
     a) Fixed period
     b) Interest only
     c) Extended term
     d) Lump-sum

Answer 7

D) Lump-sum

Question 8

112. What is being delivered during a policy delivery?
     a) A binding receipt to the proposed insured
     b) Insurance contract to the proposed insured
     c) Application and initial premium to the insurer
     d) Policy summary sheet and disclosure material to the proposed insured

Answer 8

b) Insurance contract to the proposed insured

Question 9

113. Henry is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should he choose?
     a) Lump sum option
     b) Interest Option
     c) Life income option
     d) Fixed amount option

Answer 9

B) Interest Option

Question 10

114. An agent takes an individual insurance application, collects the appropriate premium and issues the prospective insured a conditional receipt. The next step the insurance company will take is to?
     a) Issue the policy only when the initial premium check has created
     b) Determine if the applicant is insurable by investigating family health history
     c) Issue the policy on a standard basis
     d) Determine if the applicant is an acceptable risk by completing standard underwritten procedures

Answer 10

d) Determine if the applicant is an acceptable risk by completing standard underwritten procedures

Question 11

115. What does the insurance term “indemnity “ refer to?
     a) Make whole
     b) Unequal consideration
     c) Law of large numbers
     d) Competent parties

Answer 11

A) Make whole

Question 12

116. Which of the following statements about the classification of applicants is false?
     a) Substandard applicants are never declined by underwriters
     b) Substandard applicants are never declined by underwriters
     c) Preferred risks Applicants typically have better premiums rates than standard risks applicants
     d) An applicant can be classified as substandard risk because of a hazardous job

Answer 12

a) Substandard applicants are never declined by underwriters

Question 13

117. The importance of a representation is demonstrated in what rule?
     a) Insurable interest
     b) Law of adhesion
     c) Materiality of concealment
     d) Consideration clause

Answer 13

c) Materiality of concealment

Question 14

118. An applicant’s medical information received from the Medical Information Bureau (MIB) may be furnished to the
     a) Producer agent
     b) Applicant’s spouse
     c) National Association of Insurance Commissioners (NAIC)
     d) Applicant’s Physician

Answer 14

D) Applicant’s Physician

Question 15

9. When handling premiums for an insured, an agent is acting in which capacity?
   a) Adhesion
   b) Fiduciary
   c) Conditional
   d) Aleatory

Answer 15

B) Fiduciary

Question 16

120. An incomplete insurance application submitted to an insurer will result in which of these actions?
     a) Application will be returned to the writing producer agent
     b) Application will be approved with restrictions
     c) Application will be pending until a MIB report is sent to the insurer
     d) Application will be automatically declined

Answer 16

a) Application will be returned to the writing producer agent

Question 17

121. Which of the following is NOT a requirement of a contract?
     a) Parties involved must be competent
     b) Equal consideration is required between the involved parties
     c) Contract must have a legal purpose
     d) Offer and acceptance must be involved

Answer 17

b) Equal consideration is required between the involved parties

Question 18

122. All of these are considered sources of underwriting information about an applicant EXCEPT?
     a) Inspection Report
     b) Credit Report
     c) Rating Services
     d) Medical Information Bureau

Answer 18

C) Rating Services

Question 19

123. Which of the following factors is NOT used in underwriting health insurance policies?
     a) Sex
     b) Intelligence
     c) Age
     d) Income

Answer 19

B) Intelligence

Question 20

124. Which of these factors do NOT play a role in the underwriting of a life or health insurance policy?
     a) Avocations
     b) Credit status
     c) Marital status
     d) Occupation

Answer 20

C) Marital status

Question 21

125. Under a noncancellable health insurance policy, an insurer can
     a) cancel the policy for any reason
     b) change the policy provisions
     c) cancel the policy for nonpayment of premium
     d) increase the premium

Answer 21

c) cancel the policy for nonpayment of premium

Question 22

126. Any changes made on an insurance application requires the initials of whom?
     a) Insured
     b) Producer
     c) Applicant
     d) Beneficiary

Answer 22

C) Applicant

Question 23

127. The conditions, times, and circumstances under which an insured is NOT covered by a health policy are called?
     a) reinstatements
     b) deductibles
     c) inclusions
     d) exclusions

Answer 23

D) Exclusions

Question 24

128. Which of these actions should a Producer take when submitting an insurance application to an insurer?
     a) Issue a binding receipt to applicant if no initial premium is submitted
     b) Disclose to the Applicant the amount of commissions to be earned on this transaction
     c) Inform insurer of relevant information not included on the application
     d) Arrange for a copy of the Attending Physician Statement (APS) to be sent to the producer

Answer 24

c) Inform insurer of relevant information not included on the application

Question 25

129. John has a health insurance policy that has been in force beyond the incontestable period. The insurer has discovered that a fraudulent statement was made on the application. What would the insurer have to pay on a claim, assuming this wasn’t a guaranteed renewable policy?
     a) Nothing
     b) 50% of the claim’s amount
     c) 75% of the claim’s amount
     d) 100% of the claim’s amount

Answer 25

A) Nothing

Question 26

130. Henry applied for Life Insurance and submitted the initial premium Jan 1. The policy was issued Feb 1, but it was not delivered by the agent until Feb 7. Henry is dissatisfied and returns the policy Feb 13. How will the insurer handle this situation? a) Premium will be fully refunded minus a surrender charge
     b) Policy was not returned within the Free Look period, premium will not be refunded
     c) Policy was returned within the Free Look, period premium will be fully refunded

Answer 26

c) Policy was returned within the Free Look, period premium will be fully refunded

Question 27

131. What percentage of eligible employees must participate in a noncontributory group health plan before it can be put in effect?
     a) 0%
     b) 25%
     c) 50%
     d) 100%

Answer 27

D) 100%

Question 28

132. Which Federal Law allows an insurer to obtain an inspection report on a potential insured?
     a) Medical Information Bureau Act
     b) Freedom of Information Act
     c) Fair Credit Reporting Act
     d) Medical Information Act

Answer 28

c) Fair Credit Reporting Act

Question 29

133. Overinsurance is addressed in which health insurance provision?
     a) Entire contract
     b) Suitability
     c) Reinstatement
     d) Coordination of benefits

Answer 29

d) Coordination of benefits

Question 30

134. Which Accident and Health Policy provision addresses preexisting conditions?
     a) Proof of Loss
     b) Legal Actions
     c) Time Limit on Certain Defenses
     d) Payment of Claims

Answer 30

c) Time Limit on Certain Defenses

Question 31

135. Business Overhead Expense Insurance pays for
     a) business expenses when a business owner becomes disabled
     b) a business owner’s salary in the event of the owner’s disability
     c) any loss in value of a business if the owner becomes disabled
     d) business expenses during an economic downturn

Answer 31

a) business expenses when a business owner becomes disabled

Question 32

136. John files a claim on his accident and health policy after being treated for an illness. The insurance company believes that John misrepresented his actual health on the initial insurance application and is therefore disputing the claim’s validity. The provision that limits the time period during which the company may dispute a claim’s validity is called?
     a) Insuring
     b) Time Limit on Certain Defenses
     c) Grace Period
     d) Free-Look

Answer 32

b) Time Limit on Certain Defenses

Question 33

137. Henry has a disability income policy with a $2,500 monthly benefit and a 30-day elimination period. He is unable to work 90 days following an automobile accident. What will the policy pay?
     a) $0
     b) $2,500
     c) $5,000
     d) $7,500

Answer 33

C) $5,000

Question 34

138. When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
     a) Void the policy if found during the Contestable period
     b) Void the policy, no matter when it is discovered
     c) Void the policy at any time only if it is found to be material
     d) Void the policy only if it is discovered during the Contestable period and proven to be material.

Answer 34

d) Void the policy only if it is discovered during the Contestable period and proven to be material.

Question 35

139. John is considered partially disabled by his insurance company. Which of the following BEST describes his situation?
     a) He is working part-time and receiving lost income under his long-term disability benefit
     b) He has lost hearing in one ear because of an accident on the job
     c) He is unable to work and receiving workers’ compensation
     d) His employer pays half of his disability benefit

Answer 35

a) He is working part-time and receiving lost income under his long-term disability benefit

Question 36

140. A Disability income policy owner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
     a) Claim will be paid and coverage will remain in force
     b) Claim will be denied and coverage will remain in force
     c) Claim will be denied and coverage will be cancelled
     d) Claim will be denied the coverage cancelled and all premiums paid will be refunded

Answer 36

a) Claim will be paid and coverage will remain in force

Question 37

141. Which of the following is an insurer established by a parent company for the purpose of insuring the parent company’s loss exposures?
     a) Mutual insurer
     b) Fraternal insurer
     c) Captive insurer
     d) Participating insurer

Answer 37

C) Captive insurer

Question 38

142. Tom took a $50,000 Life Insurance Policy with an Accidental Death and Dismemberment rider. Five years later, Tom commits suicide. How much will the insurer pay?
     a) The total premiums paid minus any policy loans
     b) Nothing
     c) $50,000
     d) $100,000

Answer 38

C) $50,000

Question 39

143. Which of the following is NOT a benefit of insurance?
     a) Source of investment funds
     b) Reduces the uncertainty of loss exposures
     c) Losses due to fraud are eliminated
     d) Makes a loss whole again

Answer 39

c) Losses due to fraud are eliminated

Question 40

144. Joan, the beneficiary under her husband’s AD&D policy, submitted an accidental death claim on May 1 2010 following his death. However the company denies the claim on the basis that death was due to natural causes. She decides to talk to her attorney. What is the earliest date for taking legal action against the insurer?
     a) May 2, 2010
     b) June 1, 2010
     c) July 1, 2010
     d) May 1, 2011

Answer 40

C) July 1, 2010

Question 41

145. Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?
     a) Insurance policy
     b) Warranty arrangement
     c). Loss contract
     d) Indemnification arrangement
     An insurance policy is a contract where one party promises to indemnify another against loss that arises from an unknown event

Answer 41

A) Insurance policy

Question 42

146. An insured must notify an insurer of a medical claim within how many days after an accident?
     a) 10
     b) 20
     c) 30
     d) 40

Answer 42

B) 20

Question 43

147. Which of the following is NOT a feature of equity-indexed annuities?
     a) Offers long term inflation protection
     b) Offers a minimum guaranteed rate
     c) Offers a maximum interest rate that increases annually
     d) Offers protection during a decline in the stock market
     Equity-indexed annuities offer all of these features EXCEPT”an annually increasing maximum rate of interest”

Answer 43

c) Offers a maximum interest rate that increases annually

Question 44

148. What is the purpose of the Time of Payment of Claims Provisions?
     a) Requires the insured to wait 60 days after submitting Proof of Loss before filing a Lawsuit
     b) Prevents delayed claim payments made by the insurer
     c) Requires a probation period for each claim filed by the insured
     d) Protects the insurer from frivolous lawsuits

Answer 44

b) Prevents delayed claim payments made by the insurer

Question 45

149. What distinguishes a deferred annuity from an immediate annuity?

a) The time at which benefit payments start
b) The benefit payment amount
c) The taxation of benefit payments
d) The age at which the annuity can be purchased
The difference between deferred and immediate annuities is when annuity benefit payments begin.

Answer 45

a) The time at which benefit payments start

Question 46

150. The provision that defines to whom the insurer will pay benefits to is called?
     a) Entire Contract
     b) Proof of Loss
     c) Claim Form
     d) Payment of Claims

Answer 46

d) Payment of Claims

Question 47

150. The provision that defines to whom the insurer will pay benefits to is called?
     a) Entire Contract
     b) Proof of Loss
     c) Claim Form
     d) Payment of Claims

Answer 47

d) Payment of Claims