Exam #1 Quizzes (CH. 1-4, 6-7) Flashcards
(98 cards)
1
Q
To determine eligibility for residual disability benefits, under the loss of earnings method, residual benefits are usually payable if the insured’s earnings loss exceeds 20 percent.
A
True
2
Q
The risk of being unable to work is lower than the risk of untimely death for a person of any age.
A
False
3
Q
Keller works for SMITH’s Repairs, which permits employees to purchase disability insurance as part of a group plan with pre-tax dollars. If Keller is disabled, his benefits are not taxable.
A
False
4
Q
COLA adjustments for a disability policy are not tied to the insured’s income.
A
True
5
Q
An advantage of an any-occupation disability policy is that if the insured is disabled for purposes of their own occupation, they can still receive benefits and pursue a new career in any occupation.
A
False
6
Q
The elimination period for disability insurance is a form of self-insuring for smaller losses, otherwise known as risk reduction.
A
False
7
Q
It is estimated that 70 percent of people over the age of 65 will need some form of long-term care.
A
True
8
Q
Most individuals will have sufficient LTC coverage under Medicare, assuming they are age 65 or older.
A
False
9
Q
Which of the following is one of the six ADL?
A. Handling finances.
B. Doing laundry.
C. Preparing meals.
D. Transferring.
A
D. Transferring
Eating, bathing, dressing, transferring, toileting and continence are the six activities of daily living. The other choices are instrumental activities of daily living.
10
Q
Long-term care premiums are fully tax deductible.
A
False
11
Q
Bart exchanges his annuity for a life insurance policy. This transaction is not tax-free.
A
True
12
Q
Decreasing term insurance has a decreasing premium, but a stable death benefit.
A
False
13
Q
Factors that an underwriter considers include the person’s age, height and weight, gender, general state of health, lifestyle, medical history, profession, financial status, hobbies, driving record, and whether they use tobacco products.
A
True
14
Q
Neither the increase in cash value nor the proceeds are generally taxable to the insured on a life insurance policy if the beneficiary dies.
A
True
15
Q
People generally have a greater need for life insurance in the accumulation phase as compared to the distribution/gifting phase.
A
True
16
Q
The mortality risk of a term policy decreases each year.
A
False
17
Q
The owner of a term life insurance policy shifts the financial risk of death for the current year to the insurance company in return for the annual premium.
A
True
18
Q
The underwriting of a second-to-die whole life policy is based mainly on the healthier of the two individuals.
A
True
19
Q
Under a cross-purchase buy-sell agreement for a company with 12 partners, they would need to purchase 12 life insurance policies.
A
False
20
Q
There is no cash value associated with annually renewable term insurance.
A
True
21
Q
Preexisting conditions may not prevent a person from obtaining health insurance.
A
True
22
Q
Primary care physicians are generally required as gatekeepers for a policyholder under an HMO policy.
A
True
23
Q
Robin’s employer sponsors a group health insurance plan and a health care flexible spending account (FSA). This year, Robin contributed $1,000 to the FSA. Her out of pocket co-payments and deductibles for medical and dental care were $950, and she spent $50 to purchase Advil and over the counter cold remedies as prescribed by her physician for a cold. Which of the following statements concerning Robin’s FSA is correct?
A. The unused balance of Robin’s FSA may be carried forward and used for up to two additional tax years.
B. In order to receive a reimbursement from the FSA, the code requires Robin to incur the expenses and request a distribution by the end of this year.
C. Based on her expenses to date, Robin’s FSA will reimburse her $1000 if she timely filed for reimbursement.
D. Based on her expenses to date, Robin’s FSA will reimburse her $950 if she timely filed for reimbursement.
A
C. Based on her expenses to date, Robin’s FSA will reimburse her $1000 if she timely filed for reimbursement.
24
Q
Sal (who will turn age 65 in 3 months) is married to Norma (age 65), and they have 2 children, Lisa and Jennifer. Since Sal and Norma were married later in life, Lisa (age 19) and Jennifer (age 21) are both under age 24 and are currently enrolled in college. Sal worked for a large automobile manufacturer, and participated in several employee benefit programs, including an employer sponsored health insurance plan. Sal will be retiring on his 65th birthday, and has come to you with questions about the options available for him to provide health insurance coverage for his daughters until they graduate from college. Which of the following statements is correct?
A. Sal can elect to continue to purchase coverage for his children under his employer’s group plan for up to 18 months.
B. Sal’s only option is to purchase individual coverage for his children.
C. Sal can elect to continue to purchase coverage for his children under his employer’s group plan for up to 36 months.
D. Sal can elect to continue to purchase coverage for his children under his employer’s group plan for up to 29 months.
A
C. Sal can elect to continue to purchase coverage for his children under his employer’s group plan for up to 36 months.
25
To be classified as a qualified health plan under the Affordable Care Act, the plan must provide an essential benefits package in one of four categories: Copper, Bronze, Gold, or Platinum.
False
26
Under the ACA, health insurance companies may offer catastrophic plans to individuals under the age of 40 and individuals who are exempt from the individual mandate.
False
27
Which of the following statements concerning major medical plans is (are) correct?
1. Major medical expense plans contain a coinsurance provision, whereby the plan will pay only a specified percentage of the covered expenses including the deductible.
2. Many major medical contracts contain coverage for hospital, physician's, and surgeon's fees, medications, and durable medical equipment (such as wheelchairs and hospital beds).
A. Both 1 and 2.
B. Neither 1 nor 2.
C. 1 only.
D. 2 only.
28
Which of the following statements regarding COBRA benefits is incorrect?
A. Employers must offer coverage for 18 months if the employee is terminated and for 36 months if the employee dies.
B. The benefit recipient must pay the full cost of coverage plus up to 2% of the premium to cover administrative expenses (if required by the employer).
C. Qualifying events for COBRA include death of a covered employee and reduction of an employee's full time hours to part time hours.
D. None of the statements are incorrect.
E. COBRA requires certain employers to provide previously covered persons with the same coverage received prior to the discontinuation of coverage.
D. None of the statements are incorrect.
29
A subrogation clause prohibits the insurer from seeking reimbursement from a negligent third party for any claims paid to the insured.
False
30
The National Association of Insurance Commissioners (NAIC) is involved in the regulation of insurance by:
1. Direct involvement through the development of specific regulations for all states to follow.
2. The regulation of the insurance commissioners of all states.
3. (Indirectly) The exchange of information and preparation of recommendations.
4. Assuring that all states insurance regulations are uniform.
5. The accreditation of all state insurance regulatory offices.
A. 1, 3, and 4.
B. 1, 2, and 5.
C. 3 and 5.
D. 1, 2, 3, 4 and 5.
C. 3 and 5
31
Loss severity:
A. Is the probability that a liability judgment may exceed the individual's net worth
B. Measures the dollar magnitude or the absolute dollar amount of the expected financial loss were it to occur.
C. Determines how often the event is likely to occur.
D. Is the probability that any particular property may be totally lost or destroyed.
B. Measures the dollar magnitude or the absolute dollar amount of the expected financial loss were it to occur
32
Loss frequency:
A. Is how often the event is likely to occur.
B. Is the probability that a liability judgment may exceed the individual's net worth.
C. Is the probability that any particular property may be totally lost or destroyed.
D. Is the size of the losses that may occur.
A. Is how often the event is likely to occur.
33
A pure risk is where there is:
A. A possibility of either profit or loss.
B. Only the possibility of loss or no loss.
C. A possibility of neither profit nor loss.
D. Only the possibility of profit.
B. Only the possibility of loss or no loss.
34
A peril is defined as:
A. The immediate cause and reason for a loss occurring.
B. A condition that creates or increases the chance of a loss.
C. The probability that a loss will occur.
D. A moral hazard.
A. The immediate cause and reason for a loss occurring.
35
An circumstance which increases the chance or probability of an automobile accident, is a (an):
A. Morale hazard.
B. Uninsurable risk.
C. Moral hazard.
D. Physical hazard.
D. Physical hazard
36
The values exchanged between the insured and the insurer in an insurance contract are unequal. This means the contract is:
A. A contract of adhesion.
B. A unilateral contract.
C. An aleatory contract.
D. A conditional contract.
C. An aleatory contract
37
What is the effect of an insurance policy being adhesive?
A. The insured cannot assign the policy without the insurer's consent.
B. The insurer can require the insured to pay any premiums.
C. The insured gets the benefit of the doubt if a policy contains ambiguities or uncertainties.
D. The insurer can refuse to pay claims unless the insured has complied with all policy
provisions.
38
Which of the following statements concerning the legal requirements of insurance as a contract is (are) correct?
1. The agreement by which insurance is effected is a contract in which the insurer, in consideration of the payment of a specified sum by the policyowner, agrees to make good the losses suffered through the occurrence of a designated unfavorable contingency.
2. To be valid and enforceable, insurance contracts must meet four general legal requirements: an offer by one party and an acceptance by another party; a legal purpose or object; legal competence of both parties; and consideration exchanged by both parties to the agreement.
A. Neither 1 nor 2.
B. Both 1 and 2.
C. 1 only.
D. 2 only.
B. Both 1 and 2
39
The risk that individuals of higher than average risk will seek out or purchase insurance policies is called:
A. Peril
B. Hazard
C. Law of Large Numbers
D. Adverse Selection
D. Adverse Selection
40
The principle of indemnity requires:
A. A person is entitled to compensation only to the extent that financial loss has been suffered.
B. Insured cannot indemnify himself from both the insurance company and a negligent third party for the same claim.
C. Be insured must be subject to financial hardship, resulting from the loss
D. The insured and insure must both be forthcoming with all Ralph and facts about the insured risk and coverage provided for that risk.
A. A person is entitled to compensation only to the extent that financial loss has been suffered.
41
When must an insurable interest exist for a life insurance claim?
A. at the policy inception and time of loss.
B. at the policy inception only.
C. At the time of the loss only.
D. either at the policy inception or at the time of the loss.
B. at the policy inception only.
42
Joe walks into his insurance agent's office and notices his agent's name on a business card and the insurer's name on letterhead. If an agency agreement exists, what type of authority does Joe believe his agent has to enter into an insurance contract?
A. Express Authority
B. Implied Authority
C. Apparent Authority
D. None of the above
B. Implied Authority
43
Which of the following statements regarding loss severity is true?
1. Loss severity is the expected number of losses that will occur within a given time period.
2. Loss severity is the potential size of a loss.
A. 1 only
B. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
B. 2 only
44
Noncancelable health insurance contracts are different from guaranteed renewable contracts because:
A. Non-cancelable policies are not guaranteed renewable
B. Non-cancelable policies cannot be canceled in mid-term
C. Non-canceled policies cannot have a premium change
D. Non-cancelable policies have more liberal health benefits
C. Non-canceled policies cannot have a premium change
45
D. 1, 2, 3, and 4.
Mr. Johns has a major medical insurance policy with a $1,000 deductible, an 80% coinsurance clause, and an out-of-pocket maximum of $4,000. He becomes ill and is admitted to the hospital for several days. When he is discharged, his hospital bill is $5,000, and his doctor bills are $2,500. What is the amount that his insurance co-pay will pay?
A. $5,200
B. $6,000
C. $6,500
D. $7,500
A. $5,200
46
COBRA coverage is available for which of the following persons?
1. A retiring employee
2. An employee who is terminated
3. Spouses and dependents of a deceased employee
4. An employee no longer able to work due to disability
A. 3 only
B. 3 and 4
C. 1, 2, and 3
D. 1, 2, 3, and 4
D. 1, 2, 3, and 4
47
The Watson family has a family medical policy that provides the following coverage for all four family members:
$1,000 per person embedded deductible; $4000 family deductible
$4000 out-of-pocket limit per person
80/20 coinsurance provision
On a family trip, the Watson's were involved in a bizarre accident when Mr. Watson, in the lead of the group, lost footing on a steep hiking trail and plowed into the rest of the family members, causing them all to tumble down the slope. All four family members were hurt. Each person incurred medical expenses of $21,000. How much will the insurance company pay?
A. $64,000.
B. $67,200.
C. $68,000
D. $84,000.
C. $68,000
$84,000 - [out of pocket x 4] = $68,000
48
Which of the following is a characteristic of guaranteed renewability?
1. The insurer guaranteed to renew the policy to a stated age.
2. The policy is non-cancelable and the premium may not be increased.
3. Renewal is solely at insurer's discretion.
4. The insurer has the right to increase the premium rates for the underlying Class in which the insured is placed. Note: not for a single individual.
A. 1 only
B. 1 and 4
C. 1, 2, and 4
D. 1, 2, 3, and 4
B. 1 and 4
49
Gunther has a disability income policy that pays a monthly benefit of $2,400. Gunther has been disabled for 60 days, but he only received $1,200 from his disability insurance. Which of the following is the probable reason that he only received $1,200?
A. The policy has a deductible of $1200
B. The elimination period is 45 days
C. The policy has a 50% coinsurance clause
D. Gunther is concerned to be only 50% disabled
B. The elimination period is 45 days
50
Andrea owns and runs a printing company that is organized as an S corporation. Unfortunately, she has an accident with a printing press and is rendered disabled. She receives $4,000 per month in disability payments. The S corporation had paid the premiums on the policy, but reported the payments on her W-2. How much of the benefit is subject to income tax?
A. $0
B. $2000
C. $3000
D. $4000
A. $0
51
Which of the following statements regarding disability insurance is false?
A. The longer the elimination period, the less expensive of the policy.
B. An own occupation policy will provide disability benefits if the insured is unable to perform the duties of his or her own occupation.
C. An any occupation policy is less expensive than an own occupation policy
D. A residual benefit clause provides the insured with benefits extend beyond the disability.
D. A residual benefit clause provides the insured with benefits extend beyond the disability.
52
How long would someone wait to receive Social Security disability benefits if they qualify?
A) 5 months
B) 6 months
C) 12 months
D) Benefits are paid immediately if eligible
A) 5 months
53
Medicare is primarily for those people who meet the following eligibility requirements:
A. Disabled
B. Children
C. Low income
D. Elderly
D. Elderly
54
Medicaid is primarily for those people who meet the following eligibility requirements:
A. Disabled
B. Children
C. Low income
D. Elderly
C. Low income
55
All of the following are activities of daily living (ADLs) as provide under the health insurance portability and accountability act (qualified plans), except:
A. Eating
B. Bathing
C. Maintaining continence
D. Cognitive thinking
D. Cognitive thinking
56
There is more than one way to obtain benefits for nursing home coverage. All the following sources provide some benefits, except:
A. LTC insurance.
B. Health insurance.
C. Medicare.
D. Medicaid.
B. Health insurance.
57
Which of the following is the highest level of care under the category of long-term care?
A. Custodial care
B. intensive care
C. Skilled nursing care
D. Advanced nursing care
C. Skilled nursing care
58
All of the following statements concerning the legal characteristics of insurance contracts are correct EXCEPT:
A. An insurance contract is a "contract of adhesion" whereby the insurer prepares all contract provisions and the policy owner either accepts or rejects the policy as prepared (adheres to it).
B. An insurance contract is a contract that follows the property rather than the person concerned.
C. Insurance contracts are conditional in nature; that is, the failure of one party to perform relieves the other party of his or her obligations.
D. It is generally held that where the terms of an insurance policy are ambiguous, obscure, or susceptible to more than one interpretation, the construction most favorable to the insured will prevail.
B. An insurance contract is a contract that follows the property rather than the person concerned.
59
Filing a claim with the auto insurance company indicating that a theft occurred when it did not for purposes of collecting insurance proceeds is an example of a:
A. Risk.
B. Moral hazard.
C. Physical hazard.
D. Morale hazard.
B. Moral hazard.
60
The use of increased deductibles by the insured in insurance contracts is an example of:
A. Risk avoidance.
B. Risk transfer.
C. Risk retention.
D. Risk reduction
C. Risk retention.
61
What type of hazard results from the indifference that a person has to the potential loss because he or she has insurance?
A. Peril
B. Morale Hazard
C. Moral Hazard
D. Physical Hazard
B. Morale Hazard
62
When must an insurable interest exist for a life insurance policy?
A. At the time of death.
B. At the time the beneficiary is paid.
C. Both at the time of death and at the inception of the policy.
D. At the inception of the policy.
D. At the inception of the policy.
63
When must an insurable interest exist for a property insurance policy?
A. At the time the loss settlement process takes place.
B. At the time of loss.
C. At the inception of the policy.
D. Both at the time of loss and at the inception of the policy.
D. Both at the time of loss and at the inception of the policy.
64
Which of the following describes the concept of adverse selection?
A. Costs are reduced.
B. Premiums will decline.
C. The insurer's financial results will be improved.
D. Persons most likely to suffer losses are also most likely to seek insurance.
D. Persons most likely to suffer losses are also most likely to seek insurance.
65
All of the following statements regarding a Health Savings Account are true except:
A. A 20% penalty applies to medical expense withdrawals prior to age 65.
B. Distributions from the HSA that are not used to pay for medical expenses are included in income.
C. Contributions made to the HSA by the plan participant are tax-deductible as an adjustment to gross income (above the line).
D. If an employer makes contributions to an HSA on behalf of an employee, and the contribution limits are not exceeded, the employer contribution is not included in the taxable income of the employee.
A. A 20% penalty applies to medical expense withdrawals prior to age 65.
66
Which of the following statements is correct regarding the difference between a non-cancellable policy and a guaranteed renewable policy?
A. Guaranteed renewal policies guarantee policy renewal until age 65 with no premium increases.
B. Non-cancellable policies are generally more expensive than guaranteed renewable policies.
C. Guaranteed renewable policies may be renewed in the sole discretion of the insurer.
D. Non-cancellable policies permit the insurance company to increase the premium based on the insured's claim experience, but must offer to renew the policy.
B. Non-cancellable policies are generally more expensive than guaranteed renewable policies.
67
Paula participates in an employer sponsored high deductible health insurance plan. When the employer switched to a high deductible plan, a health savings account (HSA) was established for each employee, and the company contributed the policy deductible to the HSA. Which of the following statements concerning this situation is correct?
A. If Paula leaves her current job and accepts a position with an employer that does not sponsor a high deductible health insurance plan, she will forfeit the balance in the HSA.
B. Employer contributions to the HSA up to the plan limit will be included in Paula's income.
C. If Paula does not use the funds in the HSA by the end of the year, she will forfeit the balance to her employer.
D. Paula will receive an income tax deduction for contributions she makes to the HSA (up to a specified maximum).
D. Paula will receive an income tax deduction for contributions she makes to the HSA (up to a specified maximum).
68
Brenna dances with the Houston Ballet. Before the most recent show, her best friend innocently tells her to "break a leg Brenna!" To her dismay, Brenna does in fact, break a leg in a nasty fall. Fortunately she has a major medical policy with a $1,500 annual deductible and an 80/20 coinsurance provision, with a $3,500 stop loss provision. The break requires a surgery that costs $15,000. How much will she have to pay for the surgery including the deductible? How much will the insurance pay?
A. $4,200; $10,800
B. $1,500; $13,500
C. $3,500; $11,500
D. $2,900; $12,100
C. $3,500; $11,500
69
Brandy, age 65 was employed full-time at a construction company until she was laid off this year. The company has 27 full-time and 12 part-time employees. They do not offer group health insurance. What should Brandy do for health insurance while unemployed?
A. Elect COBRA for up to 36 months or until she has group coverage with a new employer.
B. Elect 18 months of COBRA coverage.
C. Elect Medicare coverage.
D. Purchase individual health insurance until she can obtain group coverage with a different employer.
C. Elect Medicare coverage.
70
All of the following statements concerning the methods of providing life insurance protection are correct EXCEPT
A. Because the mortality rate increases with age, the net premium for annually renewable term insurance also increases with age.
B. Term insurance is a form of life insurance in which the death proceeds are payable in the event of the insured's death after a specified period and nothing is paid if the insured dies during that period.
C. An insurance company can use two approaches to provide life insurance protection; term insurance, which is temporary, or cash value insurance, which is permanent protection that builds up a reserve or savings component.
D. The net premium for term insurance is determined by the mortality rate for the age of the individual involved.
B. Term insurance is a form of life insurance in which the death proceeds are payable in the event of the insured's death after a specified period and nothing is paid if the insured dies during that period.
71
All of the following statements regarding a MEC are correct EXCEPT:
A. A 10% penalty applies to withdrawals from a MEC prior to age 59½.
B. A life insurance policy that passes the 7 pay test is deemed a MEC.
C. The primary issue on a MEC is the taxation of death benefits because withdrawals (loans) are generally subject to tax and penalties.
D. Withdrawals from a MEC are subject to LIFO tax treatment.
D. Withdrawals from a MEC are subject to LIFO tax treatment.
72
All of the following statements concerning whole life insurance are correct EXCEPT
A. If the whole life insurance premiums are to be paid throughout the insured's lifetime, the insurance is known as ordinary life; if the whole life insurance premiums are to be paid only during a specified period, the insurance is designed as limited payment.
B. Whole life insurance provides for the payment of the policy's face amount, upon the death of the insured, regardless of when death occurs.
C. The protection afforded by the whole life insurance contract is for a set term that expires, then the policy has to be renewed or converted.
D. Whole life insurance offers permanent protection with cash values, and it can be either participating or nonparticipating.
C. The protection afforded by the whole life insurance contract is for a set term that expires, then the policy has to be renewed or converted.
73
All of the following statements concerning variable life insurance are correct EXCEPT:
A. Variable whole life is a type of whole life insurance that has a fixed premium and fluctuating death benefit and cash values.
B. If the variable universal life policy investment experience is poor, the death benefit amount may be reduced to zero.
C. Variable whole life policies must be regulated by the Securities and Exchange Commission (SEC).
D. The owner of a variable universal life policy has the option to invest in a variety of investments.
B. If the variable universal life policy investment experience is poor, the death benefit amount may be reduced to zero.
74
Jake is a young executive with a pharmaceutical firm. He earns $125,000 per year, and expects his income to increase at a rate of 3% over his career. Jake estimates that he consumes 18% of his salary personally, that his combined federal and state income tax bracket is 25%, and that inflation will average 2% over his career. The riskless rate of return is 6%. Using the Capitalized Earnings Approach to calculating life insurance needs, how much life insurance should Jake purchase?
A. $1,961,097.
B. $1,687,294.
C. $3,282,667.
D. $2,083,333.
A. $1,961,097.
75
Larry, a 38 year old salesperson, earns $90,000 per year and plans to work until age 67. He is married to Joan and has 2 children. He expects his annual salary increases to be 2%, the rate of return to be 6%, and their average tax bracket (state and federal) is 25%. Larry estimates that 20% of his after-tax income is used for personal consumption. Based on the Human Life Value approach to life insurance needs analysis, how much life insurance should Larry purchase?
A. $722,865.
B. $925,696.
C. $1,038,527.
D. $856,269.
B. $925,696.
76
Which of the following statements concerning term life insurance is (are) correct?
1. Because mortality rises at an increasing rate with age, the mortality cost for term insurance also rises at an increasing rate.
2. Term insurance does not have a cash value.
A. Both 1 and 2.
B. Neither 1 nor 2.
C. 1 only.
D. 2 only.
A. Both 1 and 2.
77
Which of the following statements concerning life insurance is (are) false?
1. Term insurance is a form of life insurance in which the death proceeds are payable in the event of the insured's death during a specified period and nothing is paid if the insured survives past the end of that period.
2. The mortality risk decreases as a person ages which translates into a lower life insurance premium for older individuals.
A. Neither 1 nor 2.
B. 1 only.
C. Both 1 and 2.
D. 2 only.
D. 2 only.
78
Which of the following statements concerning universal life insurance is (are) correct?
1. The policyowner has the ability to direct the investment of the policy's cash values.
2. Universal life policyowners can choose the amount of premium they pay into their policies, subject to insurer minimums and maximums.
A. Both 1 and 2.
B. Neither 1 nor 2.
C. 2 only.
D. 1 only.
C. 2 only.
79
Which of the following statements regarding loss severity is true?
1. Loss severity measures the dollar magnitude or absolute dollar amount of the expected financial loss if it were to occur.
2. Low severity and low frequency risks should be transferred through the use of insurance.
A. 2 only.
B. 1 only.
C. Both 1 and 2.
D. Neither 1 nor 2.
B. 1 only.
80
A client, age 78, is confined to a nursing home. Which of the following programs is / are likely to pay benefits towards the cost of the nursing home?
1. Medicare may pay for up to 100 days of care after a 20-day deductible.
2. Medicaid may pay if the client has income and assets below state thresholds.
3. Private medical insurance may pay part if it is a comprehensive major medical policy.
4. Long-term care insurance may pay part if coverage of the facility type is broad enough.
A. 4 only.
B. 2 and 4.
C. 1, 2, and 3.
D. 1 and 3.
B. 2 and 4.
81
All of the following statements concerning disability income insurance are correct EXCEPT:
A. The definition of disability is the same from one policy to another.
B. Premiums for disability income insurance coverage are a function of factors such as: the insured's health, gender, age, and the level of income benefits provided by the policy.
C. There are three primary sources of disability benefits: the government, employers, or individual/group policies.
D. The Social Security program requires the disabled person to wait at least five months before receiving benefits.
A. The definition of disability is the same from one policy to another.
82
Assume Paul, a heart surgeon, suffered an injury causing a disability, while covered by a valid disability policy. Which of the following definitions of disability would be the most beneficial to him?
A. Split definition.
B. Modified own occupation.
C. Any occupation.
D. Own occupation.
D. Own occupation.
83
For a long-term disability policy, what is the typical elimination period?
A. 1-2 years.
B. 5-30 days.
C. 30-180 days.
d. 180-270 days
C. 30-180 days.
84
In which of the following scenarios would the disability insurance benefits be tax-free if the individual were to be disabled?
A. A company pays 60% of the premium for disability insurance and the employee pays the remaining 40% using pre-tax dollars.
B. An employee purchased disability insurance as a part of a group plan using pre-tax dollars.
C. An employee purchased disability insurance as a part of a group plan using after-tax dollars.
D. A company pays the entire premium for disability insurance for an employee.
C. An employee purchased disability insurance as a part of a group plan using after-tax dollars.
85
Kim is struck in the rear of her candy apple red sports car. Her injuries are severe, leaving her unable to work as a hostess at a high-end restaurant in New Orleans. The restaurant offers employees disability insurance, which she has elected as part of her benefits package. She pays for 50 percent of the insurance on an pre-tax basis. The employer pays the remainder of the policy premium on a pre-tax basis. Her monthly benefit is $2,500 per month. Which of the following is correct?
A. Two-thirds of her benefit will be subject to income tax.
B. 100% of her benefit will be subject to income tax.
C. 50% of her benefit will be subject to income tax.
D. None of her benefit will be subject to income tax.
B. 100% of her benefit will be subject to income tax.
86
Long-term care policies may exclude coverage for all of the following except?
A. Care provided by a family member.
B. Mental and nervous disorders.
C. Pre-existing conditions.
D. Biologically based mental illness.
D. Biologically based mental illness.
87
Medicaid is provided to certain individuals and families with low income or resources. Which of the following is/are counted towards the income limits?
A. Housing assistance provided by the federal government.
B. Home energy assistance.
C. Food stamps.
D. Rental income from property owned and rented out.
D. Rental income from property owned and rented out.
88
Steve is the librarian in his city's library. The library provides group disability insurance where premiums are paid by employees with after-tax dollars. He enrolls in a policy through the employer that provides a benefit of $4,200 a month. If he is in the 25% tax bracket and is disabled, what are his benefits after tax?
A. $1,050.
B. $4,200.
C. $0.
D. $3,150.
B. $4,200.
89
The premiums for long-term care policies are complicated. Which one of the following statements is correct?
A. The elimination period and the premium are directly related.
B. Men are generally charged higher premiums, all other factors being equal.
C. Inflation protection will generally increase the premium.
D. The lifetime benefit and the premium are not related.
C. Inflation protection will generally increase the premium.
90
There are various factors that influence the need for long-term care insurance. Which of the following is not correct regarding these factors?
A. A family history of debilitating health conditions increases the likelihood of needing long-term care.
B. There is an indirect relationship between life expectancy and the need for long-term care.
C. Women generally need long-term care services more than men.
D. Net worth and the need for long-term care insurance are directly related - the higher the net worth, the lower the need for LTC insurance.
B. There is an indirect relationship between life expectancy and the need for long-term care.
91
Today, many long-term care policies are treated as tax-qualified contracts. Which of the following is not correct regarding tax-qualified long-term care contracts?
A. These policies allow employers to provide this benefit, take a current income tax deduction and allow the employee to avoid income inclusion.
B. Tax-qualified long-term care policies must provide benefits that are limited to long-term care services.
C. The premiums for these policies may be deductible either above the line or below the line.
D. These policies can be provided under an employer sponsored cafeteria plan.
D. These policies can be provided under an employer sponsored cafeteria plan.
92
When is disability coverage generally no longer needed?
A. When the individual is injured or ill.
B. When the individual reaches normal retirement age.
C. When the individual changes his or her place of employment.
D. When the individual earns a promotion.
B. When the individual reaches normal retirement age.
93
Which of the following is best defined as a provision that provides payments that are less than those paid for a total disability?
A. Partial Disability.
B. Long-Term Disability.
C. Short-Term Disability.
D. Split Definition.
A. Partial Disability.
94
Which one of the following statements regarding disability insurance is incorrect?
A. Disability benefits may be taxable to the extent the premiums are paid for by the employer.
B. An own occupation policy will provide disability benefits if the insured is unable to perform the duties of his or her own occupation.
C. An any-occupation policy is more expensive than an own-occupation policy.
D. The longer the elimination period, the less expensive the disability policy.
C. An any-occupation policy is more expensive than an own-occupation policy.
95
Which of the following statements regarding disability insurance is false?
A. Insured individuals with a policy renewed each year are subject to the risk of policy
cancellation.
B. Employer-sponsored plans are usually portable.
C. A future increase option rider allows the insured to increase benefits in the future
D. Disability insurance is a contract of adhesion.
B. Employer-sponsored plans are usually portable.
96
Which of the following statements is false?
A. As an individual grows older, the likelihood of a long-term disability increases.
B. Workmen's compensation laws protect employees who sustain an injury while working.
C. Before Social Security disability benefits can begin, there is a five month waiting period.
D. Social Security disability benefits will provide adequate income replacement for disability regardless of age.
D. Social Security disability benefits will provide adequate income replacement for disability regardless of age.
97
Which of the following statements is correct about paying for long-term care services?
A. Medicare provides adequate long-term care benefits as long as the person is fully insured and over the age of 65.
B. Medicaid provides for care for those with limited assets and income and requires a look-back period of ten years.
C. Special needs trusts can be established to provide for benefits while maintaining eligibility for federal and state benefits.
D. Paying for long-term care services out-of-pocket is a viable option for most married individuals.
C. Special needs trusts can be established to provide for benefits while maintaining eligibility for federal and state benefits.
98
Which of the following is not a trigger for eligibility for long-term care benefits?
A. A person is chronically ill.
B. A person is unable to cook or eat on their own.
C. A person is unable to bathe or dress on their own.
D. A person suffers from a substantial cognitive impairment that endangers them or others.
B. A person is unable to cook or eat on their own.
