Test Flashcards
What is a participating life insurance policy?
Contract that allows the policy owner to receive a share of surplus in the form of policy dividends
During the underwriting process for a group health policy, it was discovered that 15 out of 50 members of the group have major health issues. How would the insurer handle this?
Accept or reject the whole group
Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?
Reinsurance
What percentage of eligible employees must participate in a noncontributory group health plan before it can be put in effect?
100%
Which of the following is an insurer established by a parent company for the purpose of insuring the parent company’s loss exposure?
Captive insurer
Who is financially liable for the payment of covered claims in a fully insured group health plan?
Insurer
Life insurance surplus must be distributed to policy owners at what frequency?
Annually
Minimum participation standards exist for group health insurance plans in order to
prevent adverse selection
Business Overhead Expense Insurance pays for
business expenses when a business owner becomes disabled
Which of the following is NOT typically covered under vision care insurance?
Retina surgery
The problem of overinsurance is addressed in which health insurance provision?
Coordination of benefits
Buy-sell plans are typically funded by which two types of insurance?
Life insurance and disability insurance
A participating company is also referred to as which type of insurer?
Mutual insurer
Which of the following is NOT a benefit of insurance?
Losses due to fraud are eliminated
Which of the following would NOT be accomplished with the purchase of an insurance policy?
Risk is eliminated
Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?
Insurance contract
John has an insurance policy that gives him the right to share in the insurer’s surplus. What kind of policy is this?
Participating
Which of the following refers to a condition that may increase the chance of a loss resulting from a given cause of loss?
Hazard
An employee for XYZ Corp is injured on the job. Where does coverage for the employee’s injuries come from?
Workers’ Compensation
Individuals become eligible for Medicare Part A benefits at what age?
65
A situation in which there is ONLY a chance of loss or no loss is a
pure risk
Disabled workers are covered under Workers’ Compensation medical expense benefits for how long?
No limit
All of the following circumstances must be met for loss retention to be an effective risk management technique EXCEPT
Probability of loss is unknown
Medicare Part B has an initial enrollment period. How many months after an individual’s 65th birthday month does this enrollment period end?
3 months
Restoring an insured to the same condition as before a loss is known as
Principle of indemnity
Coverage for care received from a network provider pays more than care received from a non-network provider in what type of health plan?
Preferred Provider Organization (PPO)
Moral hazard is described as the
increased chance of a loss because of an insured’s dishonest tendencies
Which statement is TRUE regarding Workers’ Compensation coverage
Employer pays the entire premium for Workers’ Compensation coverage
Medicare Part A covers what type of care?
Skilled nursing facility care
Which of the following describes the increase in the probability of a loss due to an insured’s dishonest tendencies?
Moral hazard
How is a Medicare claim submitted?
Expenses are submitted to Medicare by the health provider
Which of the following describes the statement “The more times an event is repeated, the more predictable the outcome becomes”?
Law of large numbers
Which of the following is NOT considered to be a definition of the term “loss”?
Probability that an event will occur
Which of the following does Medicare Part A NOT provide coverage for?
Doctor’s services
Which of these statements correctly describes risk?
Pure risk is the only insurable risk
Which type of risk is gambling?
Speculative risk
Which of the following is NOT considered a definition of risk?
The cause of a loss
Which of the following is NOT an element of an insurable risk?
Loss must be catastrophic
Which of the following statements correctly describes a contract of indemnity?
One party is restored to the same financial position the party was in before the loss occurred
Which of the following contracts is defined as “one that restores an injured party to the condition that was present before the loss”?
Indemnity contract
Which principle is accurately described with the statement “Insureds are entitled to recover an amount NOT greater than the amount of their loss”?
Indemnity
A unilateral contract is one in which
only one party (the insurer) makes any kind of legally enforceable promise
The importance of a representation is demonstrated in what rule?
Materiality of concealment
Which course of action is the insurer entitled to when deliberate concealment is committed by the insured?
Rescinding the contract
Which of the following is NOT required in the content of a policy?
Probability of loss
John and Mary have a handicapped child that is financially dependent upon them. The death of one of the parents would not be financially disastrous, however the death of both likely would be. Which policy would be best suited for them?
Second-to-die policy
An insurance policy written after 1988 that fails to pass the seven-pay test is known as
a modified endowment contract
In a renewable term life insurance policy, the contract will usually
require a higher premium payable at each renewal
Which of the following is NOT a true description of non-medical life insurance?
Applicants are not required to answer medical questions on the application
A life insurance policy’s limit of liability would be
the policy’s face amount
A life insurance policy where the insured can choose where the cash value can be invested is called
variable life
A life insurance policy that pays the face amount if the insured survives to a specified period of time is called
endowment insurance
Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2?
10%
In a modified endowment contract, the penalty tax imposed on withdrawals is
10%
Which of the following types of life insurance combines a savings element along with a flexible premium option?
Universal life
Which of the following is a life insurance policy that does NOT require a physical exam?
Non-medical
Which of the following types of life insurance is normally associated with a mortgage loan?
Decreasing term
Which of the following is NOT true regarding a family policy that covers children?
Conversion of child’s coverage to permanent insurance requires evidence of insurability
What does the grace period allow a life insurance policyowner to do?
Make a premium payment after the due date without any loss of coverage
Which of these is NOT a valid policy dividend option?
Monthly income payments
If an insured dies because of an accident, which type of life insurance rider will provide additional coverage?
Accidental death rider
What time period allows an insured’s life insurance policy to remain in force even if the premium was not paid on the due date?
Grace period
In a life insurance policy, the entire contract consists of the
policy and attached application
What are collateral assignments normally associated with?
Bank loans
After a policy has lapsed, which provision allows the insured to continue coverage?
Reinstatement provision
When an accidental death benefit is added to a whole life policy, how does this affect the policy’s cash value?
Policy’s cash value is not affected
Jerry is an insured who understated his age on his life insurance application, paying $12 per $1,000 of insurance instead of $15 per $1,000. If he dies, how will the adjusted death benefit be calculated?
12/15th of the policy’s face amount
Which policy provision protects the policyowner from unintentional lapse of the contract?
Grace period
An insurer can be protected from adverse selection with which policy provision?
Suicide clause
Which statement is true regarding policy dividends?
A dividend option is selected by the insured at the time of policy purchase
How are acts of war considered under a group life insurance policy?
Policy exclusion
Which of the following is NOT a common life insurance policy rider?
extended term
When does a life insurance policy’s waiver of premium take effect?
Insured becomes totally disabled
Pam 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 she choose?
Interest Option
A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?
The insured’s estate
Which of the following is NOT a life insurance settlement option?
Extended term option
When calculating life insurance premium rates, which component would an agent’s commission fall under?
Insurer’s expenses
Premiums are best described as
money paid by the insured to acquire a policy’s benefits
When calculating life insurance premium rates, which component is affected by an insured’s age and gender?
Mortality
Which of the following is NOT a component of determining policy premiums?
Dividends
Which of the following describes the number of deaths in a year compared to the number of people in a select group?
Mortality rate
The probability of death, listed by year, are demonstrated in
mortality tables
When an insurance company requests an attending physician’s report, the request must be accompanied by a
copy of the signed authorization
Most U.S. life insurance companies belong to the
Medical Information Bureau
How does a conditional receipt differ from a binding receipt?
Binding receipts always provide insurance which starts from the date of receipt
Which of the following life insurance classifications charges the highest premium?
Substandard
Which of the following types of information is NOT required for a life insurance application?
Ethnicity
When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called
underwriting
Tim was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called?
Conversion
Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilege?
Provide proof of insurability
Which of the following is NOT a characteristic of the conversion privilege?
Employer pays the premium for the converted policy
All of the following are considered characteristics of group life insurance EXCEPT
individual policies
A terminated employee that has exercised the conversion privilege is able to convert
term group life coverage into permanent insurance
Which of the following describes a contributory group insurance plan?
Part of the premium is paid by the employee
Who is issued a certificate of insurance with a group insurance policy?
Participant
How does underwriting differ between group life and individual life insurance?
Medical questions must be answered on individual life insurance
Which of the following is NOT a feature of equity-indexed annuities?
Offers a maximum interest rate that increases annually
The systematic liquidation of a sum of money is provided by a(n)
annuity
An annuity which is backed by a life insurer’s separate account is called a(n)
variable annuity
At what age is a surviving spouse without dependents eligible for Social Security survivor benefits?
60
Which Social Security status does a worker with 6 quarters of coverage during the last 13-quarter period have?
Currently insured
A worker is entitled to Social Security disability benefits if all of the following are true EXCEPT for
worker cannot perform his or her current job, but is actively seeking other employment
Who is eligible for retirement benefits under Social Security?
Fully insured workers
How long is a person expected to be disabled in order to receive Social Security disability benefits?
12 months
Which of these factors affects the Social Security normal retirement age?
Year in which worker was born
In order to be considered “currently insured” under Social Security, an individual must be credited with
6 quarters of coverage during the last 13-quarter period
What is considered to be the definition of disability, according to Social Security?
Unable to engage in any substantial gainful activity
According to Social Security, an individual with 6 credits of coverage during the previous 13-quarter period is considered to be
currently insured
An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be
fully insured
What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)?
Disclosure and reporting
How are Roth IRAs treated for tax purposes?
Non-deductible contributions and tax-free distributions
What does ESOP stand for?
Employee Stock Ownership Plan
Retirement plans are prevented from favoring highly compensated employees under which government regulation?
Nondiscrimination
“Life insurance creates an immediate estate”. This phrase means
when the insured dies, a death benefit is paid
Key person insurance is intended to
cover business losses due to the death of a key employee
Which of the following pieces of information is NOT gathered during the personal financial planning process?
An individual’s civic organization memberships
Which statement regarding Medicare is true?
Benefits for diagnostic tests and X-rays performed on an outpatient basis are provided by Part B
Allen 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?
$5,000
Which of the following is NOT included in comprehensive major medical plans?
First-dollar coverage
Medical expense policies will typically cover which of the following?
Injuries caused by accidents
When does an insured qualify for stop-loss coverage?
When claims exceed a specified limit in a set period of time
Which of these statements is NOT true concerning recurrent disabilities?
The insurer continues coverage after a new elimination period
Which of the following terms is NOT associated with a Major Medical policy?
Capitation
What portion does an insured pay for covered expenses under Medicare Part B after the deductible?
20%
Which of the following would be considered an activity of daily living under a long term care policy?
Bathing
Periodic increases in policy benefits are allowed in which long-term care policy provision?
Inflation protection
All of these statements concerning Medicare are true EXCEPT
Long-term care is covered by Medicare Part C
Which of the following plans will cover medical costs that Medicare doesn’t cover?
Medicare supplement
Which of the following is NOT a required uniform provision in individual health policies?
Change of occupation
The misstatement of age provision in a health policy states that if an insured gives the wrong age at the time of application, what action can the insurance company take
Benefits can be adjusted
The conditions, times, and circumstances under which an insured is NOT covered by a health policy are called
exclusions
Under a health insurance policy, the provision that states the kind of benefits provided and the circumstances under which they will be paid is called the
insuring clause
In what situation does a waiver of premium provision keep a health insurance policy in force without premium payments?
When an insured becomes totally disabled
Under the Payment of Claims provision, when are benefits typically payable after proof of loss is received?
Immediately
The insurer has the option of terminating a health insurance policy on a date stated in the contract. What type of policy is this?
Optionally renewable
Which type of health insurance policy cannot be canceled by the insurer nor increase the premiums?
Noncancellable
Christine 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?
Nothing
A health insurance policy paid on a quarterly basis has a grace period of
31 days
What type of changes can be made to a guaranteed renewable health insurance policy?
The premium rates of the policyowner
Which of these factors do NOT affect the rates of medical insurance?
Race
Which of the following is NOT considered to be insurer expenses?
Policy premiums
Which of the following is NOT a factor in determining the morbidity of a group of individuals?
Race
Jim is the insured on a health insurance policy and holds 2 jobs. If “occupation” is used to classify the risk, the insurer will most likely classify Jim according to the occupation that
is most hazardous
Who acts as the gatekeeper in a Health Maintenance Organization (HMO)?
Primary care physician
The California Insurance Code defines “policy” as a(n)
written contract
The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is
no cost
Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)?
Traveling overseas with a spouse
The California Insurance Code allows an individual how many days to cancel a life policy for a full-refund?
Between 10 and 30 days
Which of the following acts is NOT a Federal offense committed by an insurance agent?
Misrepresentation on an insurance application
The California Life and Health Insurance Guarantee Association covers all of these types of policies EXCEPT
Self-funded plans
Which of the following is NOT a primary objective of insurance regulation?
Interpret policy provisions
MRMIP is a
state program that offers health coverage to California residents who are not able to obtain coverage due to pre-existing conditions
Both the Federal and state governments jointly finance which health insurance entitlement program?
Medi-Cal
Where must you specifically reside to qualify for MRMIP?
California
What is the purpose of the Pre-Existing Condition Insurance Plan (PCIP)?
PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions
MRMIP stands for
Major Risk Medical Insurance Program
In what order are people on the MRMIP waiting list allowed to enroll?
Based on the date an individual’s application is received
What type of license is required for an individual who charges a fee to review an insured’s existing life insurance policy?
Life and disability analyst
What effect did the Pregnancy Discrimination Act have on the health industry?
Pregnancy must be treated as any other medical condition
Which of the following is NOT an accurate description of Access for Infants and Mothers Program (AIM)?
Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible
Which of the following does the California Department of Insurance (CDI) have NO jurisdiction over?
Medicare
According to PPACA, what is a health benefits exchange?
An entity to which individuals and small businesses can have access to affordable health coverage
An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n)
unfair method of competition
In California, an insurer organized under the state laws of Oregon is called a(n)
foreign insurer
Who does a life settlement broker represent?
Individual wanting to sell their life policy to a third party
How is an agent’s first year commission calculated for a replacement long-term policy?
Based on the difference between the new and original policy annual premiums
According to the California Insurance Code, how is the word “may” interpreted?
Permissive
What is an insurance solicitor authorized to do?
Help an agent or broker sell insurance
An insurance company entitled to transact business in California is called a(n)
admitted carrier
Which word implies permissiveness according to the California Insurance Code?
May
An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n)
life agent
What is the insurance term the State of California uses for an insurer that is eligible to transact business in this state?
Admitted
When selling a long term care insurance rider to an applicant, a life agent must take into consideration all of these factors EXCEPT
Attending physician’s statement
Which of the following does the California Insurance Code NOT require an insurance policy to specify?
Insurer’s financial rating
A representation may be altered or withdrawn
only before the insurance is in effect
How many “activities of daily living” must an insured be UNABLE to perform in order to meet the chronically ill requirement of a Long-Term Care policy?
Minimum of two activities of daily living
A person who asserts a right of recovery under an insurance policy is called
claimant
When intentional concealment is involved, what course of action is the injured party entitled to?
Rescission of the contract
What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?
Notice of appointment must be submitted to the Commissioner
Which of the following does NOT have to be included on life insurance policy illustrations?
Statement that all values and benefits are guaranteed
According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium?
Materiality
Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors?
Charge a fee
According to the PPACA, the medical enrollment tier that has 80% actuarial value is called
gold
Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of?
Theft
According to the PPACA, an adult can be covered by a parent’s health care plan until what age?
Age 26
What does the term “indemnity” mean as it pertains to insurance?
To make whole
According to the California Insurance Code, what is “insurance”?
A contract
The free-look period for life insurance policyowners age 60 or older is
30 days
In California, the elderly can receive information about health related issues from
Health Insurance Counseling and Advocacy Program (HiCAP)
Which of the following is NOT considered to be an act of insurance solicitation?
Publishing a magazine where one of the advertisers is an insurer
How long must a policy be in force before an insurer is prohibited from denying claims based on misstatements made on the health policy application?
2 years
Kimberly is an employee on leave under the Family and Medical Leave Act (FMLA). What will happen to her group health coverage?
She continues to be enrolled during the leave
Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n)
unnecessary replacement
The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount?.
Its paid-in capital
When an insurer has met the qualifications necessary to transact business in California, it is said to be
admitted
Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance
solicitor
According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwillfully commits an unfair method of competition?
. $5,000
How long must life agents keep their transaction records?
5 years
Life insurance surplus must be distributed to policyowners at what frequency?
Annually
What does the term coinsurance refer to?
After the deductible is satisfied, the percentage paid by the insured for the remaining covered expenses
