InsuranceTest Flashcards
(107 cards)
1
Q
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
- Fair Credit Reporting Act - Medical Information Bureau - Part III of the application - Life Insurance Buyer’s Guide
A
Fair Credit Reporting Act
The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant.
2
Q
In Texas, an individual life insurance policy is REQUIRED to have a grace period of
- 15 days - 20 days - 30 days - 31 days
A
31 days
An individual life insurance policy issued in Texas MUST have a grace period for premium payment of 31 days.
3
Q
A(n) ————— contained in a life insurance policy states that the policy will NOT cover certain risks.
- elimination - exclusion - limitation - curtailment
A
exclusion
An exclusion contained in a life insurance policy states that policy will NOT cover certain risks.
4
Q
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
- a medical information report - the initial premium - forward it immediately to the insurer - Attending Physician Statement
A
the initial premium
Coverage begins on the in which the producer collects the initial premium and as the applicant sign the life insurance contract.
5
Q
Who owns a stock insurance company?
- Board of Directors - Stockholders - Agents - Policyowners
A
Stockholders
A stock insurance company is owned by it’s stockholders.
6
Q
Which of the following costs would a Basic Hospital/Surgical likely cover?
- Surgically removing a facial birthmark - Care given at ta nursing home - Treating a wound from a soldier injured at war - Lost income caused by a hospital stay
A
Surgically removing a facial birthmark
A Basic Hospital/Surgical policy would most likely cover surgery to remove a facial birthmark
7
Q
A foreign insurance company conducting insurance business in Texas?
-Is not subject to Texas insurance laws
-Was formed under the laws of another state
-Was formed under the laws of another country
-Is only authorized to write business outside the
United States
A
Was formed under the laws of another state
A foreign insurance company is one that is incorporated under the laws of another state.
8
Q
Which of the following is NOT a required provision in group life policies?
- Free look - Incontestable - Conversion - Right to Loan
A
Right to Loan
Group life policies MUST include all of the following provisions EXCEPT Right to Loan Proceeds.
9
Q
An application MUST receive an Outline of Coverage when an application is taken for a(n)
- Endowment
- Annuity
- Medicare Supplement policy
- University life policy
A
Medicare Supplement policy
An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Medicare Supplement policy.
10
Q
Which of these is NOT an example of doing insurance business?
- Selling shares of stock - Receiving an insurance application - Collecting insurance premium - Delivering an insurance policy
A
Selling shares of stock
All of these are examples of doing insurance business EXCEPT selling shares of stock.
11
Q
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still force and unchanged, where would the death proceeds be direct?
- The employer’s family - Company Y - Company X - The employee’s estate
A
Company X
With Key Person Insurance, the company purchases, owns, pays the premiums and is the beneficiary of the life insurance policy on the key person.
12
Q
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
-Have the customer sign a blank application, then
take the application back to his complete prior to
sending it off to the insurance company
-Complete the application over the phone with the
customer, sign the application for the customer,
then send the application off to the insurance
company
-Complete the application and review the
information wit the customer prior to obtaining
the customer’s signature, then send the
application off to the insurance company
-Have the customer fill out the application and
send it to his office for him to sign, then send it off
to the insurance company
A
Complete the application and review the information wit the customer prior to obtaining the customer’s signature, then send the application off to the insurance company
If a customer wants to apply for an insurance policy, the agent should complete the application and review the information with the customer prior to obtaining the customer’s signature, then sent the application off to the insurance company.
13
Q
Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy?
-Past due premiums on a lapsed policy are
waived and coverage is restored
-The insured is paid a monthly benefit to deep
insurance premiums current in the event of total
disability.
-Premiums are waived after the insured has been
unemployed for a specified time period
-Premiums are waived after the insured has been
totally disabled for a specified time period.
A
Premiums are waived after the insured has been totally disabled for a specified time period.
The waiver of Premium provision waives the payment of premiums after the insured has been totally disabled for a specified period of time.
14
Q
Which of the following best describes a contingent beneficiary?
-Person designated by the insured to receive
policy proceeds in the event that the primary
beneficiary dies before the insured
-Person designed by the primary beneficiary’s
executor to receive policy proceeds
-Person designated by the state to receive policy
proceeds in the event that the primary
beneficiary dies
-Person designated by insurance company to
receive policy proceeds in the event the primary
beneficiary dies.
A
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
A contingent beneficiary is named by the insured to receive the policy proceeds if the primary if beneficiary dies before the insured.
15
Q
K is the insured and P is the sole beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster prevision, which of these statements is true?
-Proceeds will be paid to P’s estate
-Proceeds will be divided equally between K’s and
-P’s estate
-Proceeds will be paid to K’s estate
-The courts will decide who will receive death
benefits
A
Proceeds will be paid to P’s estate
Because the sole beneficiary outlives the insured, the proceeds will payable to the estate of the deceased beneficiary
16
Q
Which of the following are NOT managed care organizations?
- Point-of-Service plan (POS) - Preferred Provider Organization (PPO) - Medical information Bureau (MIB) - Health Maintenance Organization (HMO)
A
Medical information Bureau (MIB)
All of the following entities are managed care organizations EXCEPT MIB (Medical Information Bureau)
17
Q
A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need?
- Revocable - Contingent - Irrevocable - Primary
A
Irrevocable
An irrevocable designation may not be changed without the written consent of the beneficiary
18
Q
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
-Proceeds will go to the primary beneficiary’s
estate
-Probate will decide who receives proceeds
-Proceeds will go to the contingent beneficiary
-Proceeds will go to the insured’s estate
A
Proceeds will go to the contingent beneficiary
If the primary beneficiary dies before the insured, the contingent beneficiary will receive the proceeds when the insured dies.
19
Q
A life insurance policy would be considered a wagering contract WITHOUT:
- insurable interest - premium payment - agent solicitation - constructive delivery
A
insurable interest
Without insurable interest, a life insurance policy would be considered a wagering contract.
20
Q
Additional coverage can be added to a Whole Life policy by adding a(n)
- payor rider - accelerated benefit rider - decreasing term rider - automatic premium loan rider
A
decreasing term rider
A decreasing term rider can add additional coverage to a whole life policy
21
Q
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
- Mandatory income tax withholding on the
- transfer amount
- Paying transfer fees
- Paying trustees fees
- Ever paying income taxes on the distributions
A
Mandatory income tax withholding on the transfer amount
There is no federal tax withholding involved in a transfer of funds from one qualified plan into another. Rollovers, however, involve a 20% withholding. Once the rollover takes place to the new custodian, the remainder of the distribution is made.
22
Q
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:
- Bilateral - Unilateral - Aleatory - Adhesion
A
Bilateral
Unilateral, aleatory, and adhesion are all special features of insurance contracts Bilateral is not.
23
Q
Which of the following phrases refers to the fees charged by a healthcare professional?
- Deductible - Coinsurance - Usual, customary, and reasonable expenses - Hospital expense
A
Usual, customary, and reasonable expenses
The insurance phrase which considers a particular fee charged by a physician or other health professional is usual, customary, and reasonable expenses.
24
Q
A(n) _______________ beneficiary may be charged by the policyowner WITHOUT the consent of the beneficiary.
- Revocable - Irrevocable - Tertiary - Replaceable
A
Revocable
A revocable beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.
25
What is the primary factor that determines the benefits paid under a disability income policy?
- Education level
- Wages
- Type of occupation
- Age
Wages
The correct answer is “Wages”. The major factor in determining the benefit amount paid under a disability income policy is wages.
26
Which of the following statements about health coverage for newborns is NOT true?
-Coverage includes treatment of congenital
defects
-Coverage continues after the first 31 days upon
payment of first premium
-Coverage is limited to only congenital defects
-Coverage begins at moment of birth
Coverage is limited to only congenital defects
All of these statements about health coverage for newborns are correct EXCEPT “coverage is limited to congenital defects”.
27
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):
- 1035 exchange
- Inter vivos gift
- Non-forfeiture option
- Living Benefit
Living Benefit
The Accelerated Death Benefit provision in a life insurance policy is also known as a “Living Benefit”.
28
Which of these is considered a true statement regarding Medicaid?
-Funded by both state and federal governments
-Intended to be used by individuals age 65 and
older
-Provides disability income benefits
Automatically covers those receiving Social
-Security disability benefits.
Funded by both state and federal governments
Medicaid is funded by both the federal and state governments.
29
What type of insurance offers permanent life coverage with premiums that are payable for life?
- Credit Life
- Renewable Term Life
- Whole Life
- Endowment
Whole Life
A policy that provides permanent life insurance with premiums payable for life is called Whole life.
30
The reason for backdating a policy is
-to avoid being considered a substandard risk due
to a recent cancer diagnosis
- to obtain a premium rate based on an earlier age
- to decrease the face amount
- to decrease the Contestable period
to obtain a premium rate based on an earlier age
The purpose of backdating a life insurance policy is to use premiums based on an earlier age.
31
An insured is past due on his life insurance premium but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
- Refund of all premiums paid, plus interest
- Refund of all premiums paid
- Full face amount minus any past due premiums
- Full face amount
Full face amount minus any past due premiums
If an insured dies during the Grace Period of a life insurance policy before paying the past due premium, the beneficiary will receive the face amount of the policy less any past due premiums.
32
The Consolidated Omnibus Budget Reconciliation Act (COBRA) give workers (and their families) whose employment has been terminated the right to:
- Continue group health benefits
- Take out tan individual health policy
- Transfer their coverage to another insurer
- Convert to disability coverage
Continue group health benefits
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers (and their families) whose employment has been terminated the right to continue group health benefits.
33
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the:
- Entire Contract provision
- Insuring clause
- Time Limit on Certain Defense provision
- Legal Contract clause
Entire Contract provision
The Entire Contract provision states that the application and policy contain all provisions and constitute the entire contract.
34
Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of
- 10 days
- 31 days
- 45 days
- 60 days
31 days
Fully insured group health plans and HMO’s must have at least one 31-day open enrollment period each year.
35
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
-additional Term Life coverage at nay time
-additional Term Life coverage at specified
intervals
-additional Whole Life coverage at any time
-additional Whole Life coverage at specified
timers
additional Whole Life coverage at specified timers
A guaranteed insurability option in a Whole Life Policy permits policyowner to purchase, with out evidence of insurability, stated amounts of whole Life insurance at specified times.
36
“A producer does not have the authority to change a policy or waive any of its provisions”. The health provision that best describes this statement is called the
- Grace Period
- Incontestable
- Entire Contract
- Time Limit on Certain Defenses
Entire Contract
The Entire Contract provision states that the producer does NOT have the authority to change the policy or waive any of its provisions.
37
Who is liable when tan insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
-The insured
-The agent and the insured
The agent and the company
-The Commissioner of insurance
The agent and the company
Any agent that sells a n insurance policy for an unauthorized insurer runs the risk of being responsible for unpaid claims if the unauthorized insurer does not pay.
38
Which of these statement is INCORRECT regarding a Preferred Provider Organization (PPO)?
-PPO’s normally have more providers to chose
from as compared to an HMO
-Prices are negotiated in advance for PPO
providers
-In-network PPO providers offer members better
coverage of incurred expense
-PPO’s are NOT a type of managed care systems.
PPO’s are NOT a type of managed care systems.
The correct answer is “PPO are NOT a type of managed care systems”. This is incorrect PPO’s ARE considered to be a managed health care system.
39
The provision that defines to whom the insurer will pay benefits to is called
- Entire Contract
- Proof of Loss
- Claim Forms
- Payment of Claims
Payment of Claims
The Payment of Claims provision in a Health Insurance policy states to whom claims will be paid.
40
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
-Deposit the applicant’s check into his account
and make a personal check out to the insurance
company from his personal
-Return to the customer, collect a new check
made out to the insurance company, and send
the new check out to the insurance company
-Cross off his name on the “pay to” portion of the
check, write the name of the insurance company,
and send the check back to the insurance
company
-Deposit the check in to his personal account, use
the funds to purchase a cashiers check, and send
the new cashiers check back to the insurance
company.
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
If an agent receives a check made out to them instead of the insurance company, they should return the check to the customer and collect a new check properly made out to the insurance company.
41
According to the Mandatory Uniform Policy Provision, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid?
- 7 days
- 10 days
- 31 days
- 60 days
31 days
According to the Mandatory Uniform Policy Provisions, the maximum amount of time after premium due date during which the policy remains in force even though the premium has not been paid is 31 days.
42
In Texas, which of these statements regarding the suicide clause is TRUE?
-An insurer may not use suicide as a defense
against payment after the first year
-An insurer must always pay a death benefit when
the cause of death as suicide
-An insurance company may only deny a suicide
death claim if an exclusionary rider is attached
to the policy
-An insurer may not use suicide as a defense
against payment after the second year
An insurer may not use suicide as a defense against payment after the second year
Suicide may not be a defense against payment after the second year.
43
Which of these characteristics is consistent with Straight Life policy?
- Owner can adjust both premium and death benefit
-Premium are lower for the first five years, increase
the sixth year, then levels off for the remaining
length of the contract
-Owner has the option of converting to term
insurance
-Premiums are payable for as long as there is
insurance coverage in force
Premiums are payable for as long as there is insurance coverage in force
Straight whole life provides permanent level with level premiums from the time the policy is issued until the insured’s death (or age 100).
44
Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?
- Master policy
- Receipt of coverage
- individual policy
- Certificate of insurance
Certificate of insurance
Employees covered by an employer-sponsored group Term Life plan all receive a certificate of insurance.
45
Which of the following is a valid reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?
- Nonpayment of coverage
- Exceeding a specified number of claims
- Starting a cigarette habit
- Drinking alcohol
Nonpayment of coverage
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for coverage
46
Credit life insurance is
-illegal in this state
-insurance issued on a debtor to cover
outstanding loan balances
-not regulated in this state
-insurance issued to creditor to cover outstanding
loan balances
insurance issued on a debtor to cover outstanding loan balances
Credit Life insurance can be best described as insurance issued on a debtor to cover outstanding loan balances.
47
Why would the Insurance Commissioner examine the records of an insurance company?
- To determine the solvency of the company
- To set insurance rates for the company
- To assist in underwriting
- To assess the company’s value
To determine the solvency of the company
The Insurance Commissioner may examine the records of an insurance company in order to determine the solvency of the company.
48
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
- Subrogation
- Unenforceable
- Adhesion
- Unilateral
Unilateral
Insurance contracts are Unilateral. This means that only one party (the insurer) makes any kind of enforceable promise.
49
When a policyowner cash surrenders a Universal Life insurance policy in it’s early years, this may be considered a red flag for a(n):
- Federal Fair Credit Act
- Violation
- Title 18 Fraud violation
- Anti-Money Laundering violation
- Unfair Trade Practice violation
Anti-Money Laundering violation
When a policyowner cash surrenders a Universal Life Insurance policy in it’s early years, this may be considered a red flag for an Anti-Money Laundering violation.
50
Which of these is NOT considered to be a cost connected with an individual’s death?
- Funeral expense
- Tax liability
- Business expenses
- Probe costs
Business expenses
All of these are considered to be costs associated with a individual’s death EXCEPT business expenses.
51
A(n) ____________ annuity pays benefits based on units rather than stated dollar amounts
- Deferred
- Variable
- Immediate
- Unit
Variable
A variable annuity pays benefits based on units rather than specific dollar amounts.
52
A life insurance arrangement which circumvents insurable interest status is called:
- a contract of adhesion
- an indemnity contract
- key person insurance
- Investor-Originated Life Insurance
Investor-Originated Life Insurance
Investor-Originated Life Insurance (or IOLI), is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefits when the insured dies.
53
Which Accident and Health policy provision addresses preexisting conditions?
- Proof of Loss
- Legal Actions
- Time Limit on Certain Defenses
- Payment of Claims
Time Limit on Certain Defenses
The Time Limit on Certain Defenses provision limits the period during which an insurer can deny a claim on the basis of a preexisting condition.
54
P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?
- A presumptive disability
- An occupational disability
- A residual disability
- A recurrent disability
A recurrent disability
A second period of disability from the same or related cause of a prior disability is called a recurrent disability.
55
The Notice of Claims provision requires a policyowner to:
-provide proof of loss to an insurer within a
specific time
-notify an insurer of a claim within a specific time
wait 60 days after filling a claim to initiate a
-lawsuit against an insurer
-notify their physician of a claim within a specific
time
notify an insurer of a claim within a specific time
The Notice of Claims provision spells out the insured’s duty to provide the insurer with reasonable notice in the event of a loss.
56
T sends proof of loss to her insurer for an acceptable medical expense claim under her individual Health Insurance policy. Upon receipt, the insurer must pay the benefits
- immediately
- within 6 months
- at the insurer’s discretion
- within 3months
immediately
Under the Time of Payment of Claims provision, the insurer must pay the benefit immediately after receiving proof of loss.
57
A level premium indicates:
-The premium is fixed for a period stated in the
contract, then becomes variable
-The premium can only be changed with the
consent of the insurer
-The premium stays level until policy’s renewal
date
-The premium is fixed for the entire duration of
the contract
The premium is fixed for the entire duration of the contract
A level premium means that the premium remains fixed through the life of a policy.
58
An insurer is NOT required to provide information on fraudulent claims if requested by
- the Texas department of Insurance
- the Attorney General
- the Commissioner
- an insured
an insured
On the written request of an authorized government entity (such as the Commissioner, Attorney General, or a local law enforcement agency), an insurer will provide to that entity any relevant information or material relating to a fraudulent matter under investigation.
59
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
- 10%
- 20%
- 30%
- None
None
There is no tax withheld on an IRA transfer.
60
A policyowner’s rights are limited under which beneficiary designation?
- Revocable
- Tertiary
- Contingent
- Irrevocable
Irrevocable
An irrevocable beneficiary designation requires the consent and signature of that named beneficiary before a change of beneficiary occurs.
61
When advertising, an insurance company MUST use its
- nickname
- Legal corporate name
- service logo
- corporate mark
Legal corporate name
An insurance company must use its true corporate name in its advertising.
62
As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the guilty of?
- Coercion
- Defamation
- Rebating
- Misrepresentation
Coercion
A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.
63
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
- Primary Insurance Amount (PIA)
- Total taxes paid into FICA
- Number of dependents
- State of residence
Primary Insurance Amount (PIA)
The Primary Insurance Amount (PIA) determines the full amount of retirement benefits for an eligible person.
64
A(n) _____________ of benefits of a Health Policy transfers payments to someone other than the policyowner.
- assignment
- transfer
- allocation
- designation
assignment
An assignment of benefits of a Health Policy transfers payments to someone other than the policyowner.
65
If an insured’s age was misstated on a life insurance contract, the Misstatement of Age provision requires that any death benefit payable would be
-reduced by 50%
-an amount that the premiums paid would have
purchased at the current age
- contested in front of an arbitrator
- forfeited
an amount that the premiums paid would have purchased at the current age
The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is an amount that the premiums paid would have purchased at the current age or ages.
66
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning:
- September 21
- October 16
- November 1
- December 1
November 1
The Insured must wait 60 days after written proof of loss before legal action can be brought against the company
67
How often must an insurance agent license normally be renewed?
- Every six months
- Each year
- Every two years
- Every three years
Every two years
Insurance agent licenses normally must be renewed every 2 years.
68
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
- Primary Beneficiary’s estate
- Primary beneficiary’s next of kin
- Insured’s estate
- Insured’s contingent beneficiary
Insured’s contingent beneficiary
Under the Uniform Simultaneous Death Act, if both insured and primary beneficiary are killed in the same accident and there is insufficient evidence to show who died first, policy proceeds will be paid as if the insured died last. In other words, the proceeds will be paid to the secondary or contingent beneficiary.
69
Which statement is TRUE in regards to a policy loan?
-Past-due interest payments not paid after 3
months will void the policy
-Past-due interest on a policy loan is added to the
total debt
-Insurance companies can send delinquent
interest accounts to a collection agency
-Insurance companies can change an interest rate
based on the policyowner’s credit report
Past-due interest on a policy loan is added to the total debt
Interest on a loan which is not paid when due is added to the total debt.
70
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
- Insurer
- Beneficiary
- Reinsurer
- Insured
Insured
In a contract of adhesion, any confusing language would be interpreted in the favor of the insured.
71
When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits?
- Residual Disability
- Presumptive Disability
- Recurrent Disability
- Repeat Disability
Recurrent Disability
In this situation, the insurer will provide the same benefits without a new elimination period under the Recurrent Disability benefit.
72
A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?
-When the applicant receives the policy and pays
the initial premium
- When the MIB report is received
- Upon a complete medical examination
- Upon policy approval
When the applicant receives the policy and pays the initial premium
Coverage on this policy becomes effective when the applicant receives the policy and pays the initial premium.
73
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is:
- Business Overhead Expense
- Disability Income
- Key Employee Life
- Contributory
Business Overhead Expense
A Business Overhead Expense policy’s purpose is to cover overhead expenses that continue when the business owner is disabled.
74
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life What type of annuity did N purchase?
- Fixed Period
- Fixed Deferred
- Fixed immediate
- Fixed Variable
Fixed Deferred
A Fixed Deferred annuity pays out a fixed amount for life starting at a future date.
75
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply
- Extended term option
- Conversion provision
- 1035 Exchange
- Incontestable period
Conversion provision
The option to convert gives the insured the right to convert or exchange the term policy for a whole life (or permanent) plan without evidence of insurability.
76
S wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a:
- Low-deductible health plan
- Medicare Supplement
- High-deductible health plan
- Flexible savings plan
High-deductible health plan
To be eligible for a Health Savings Account, an individual must be covered by a high-deductible health plan (HDHP), must not be covered by other health insurance (does not apply to accident insurance, disability, dental care
77
With whom may an agent legally share commissions?
- The insured
- The applicant
- The beneficiary
- Another agent with the same line of insurance
Another agent with the same line of insurance
An agent may legally share commissions only with another agent who is licensed in the same line of insurance.
78
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy?
- Waiver
- Exceptions and Reductions
- Incontestable
- Entire Contract
Entire Contract
An Entire Contract policy provision prohibits an insurance company from incorporating external documents into a insurance policy.
79
The Automatic Premium Loan provision is design to:
-Provide a source of revenue to the insurance
company
- Avoid a policy lapse
- Allow a policyowner to request a policy loan
-Allow a policyowner to take out additional
coverage without evidence of insurability
Avoid a policy lapse
The purpose of the automatic premium loan is to keep the policy from lapsing
80
Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured’s age was misstated on the application?
-Pay an amount reduced by specified percentage
of the face amount
-Pay nothing
-Pay an amount the premiums would have
purchased at the insured’s actual age
-Pay 50% of the initial death benefit
Pay an amount the premiums would have purchased at the insured’s actual age
The company will most likely pay the policy proceeds in the amount the premiums would have purchased at the insured’s actual age.
81
T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the change of Occupation provision, which of the following actions may her insurance company take?
-Allow her to take a tax deduction on unearned
premiums
- Increase her policy’s coverage amount
- Decrease her policy’s coverage amount
- Nothing
Increase her policy’s coverage amount
Under the Change of Occupation provision in an Accident & Health policy, if the insured notifies the insurance company of a less hazardous occupation, the insurance company may increase the policy’s coverage.
82
An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the
- Attorney General
- NAIC
- Commissioner
- National HMO Association
Commissioner
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the Commissioner of Insurance.
83
An example of false advertising would be
-Paid testimonials from celebrity endorsements
-An insurer exaggerating its dividends in a
magazine advertisement
-A producer spending more than $25on marketing
gifts for a client
-An insurer advertising in an insurance trade
journal
An insurer exaggerating its dividends in a magazine advertisement
An insurance company may be judged guilty of false advertising if it exaggerates its dividends in a magazine advertisement.
84
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards. How will the insurer likely consider this condition?
-Insurer will require a higher deductible for any
claims resulting from this condition
-Insurer is required to initially cover this pre-
existing condition
-Insurer will permanently exclude the condition
from the policy
-Insurer will likely treat as a pre-existing condition
which may not be covered for one year
Insurer will likely treat as a pre-existing condition which may not be covered for one year
This condition would likely be considered a pre-existing condition and may not be covered for one year
85
What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to preform to qualify for Long Term Care Benefits?
- 1
- 2
- 3
- 4
2
A qualified Long Term Care policy must stipulate that the insured be incapable of performing at least two of the ADL’s without assistance for at least 90 days to qualify for benefits.
86
What is an organization that solicits insurance only to its members?
- Domestic society
- Singular company
- Limited liability company
- Fraternal benefit society
Fraternal benefit society
An organization that solicits insurance only among its members is known as a fraternal benefit society.
87
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is:
- Business Overhead Expense
- Disability Income
- Key Employee Life
- Contributory
Business Overhead Expense
A Business Overhead Expense policy’s purpose is to cover certain overhead expenses that continue when the business owner is disabled
88
T, age 70, withdraws cash from profit-sharing plan and purchases a straight Life Annuity. What will this transaction provide?
- Income for a fixed period stated in the contract
- Income that cannot be outlived by the owner
- Inflation protection
- Tax-free income
Income that cannot be outlived by the owner
A Straight Life Annuity will provide an income that the insured cannot outlive.
89
Which of these is NOT considered to be a right given to a policyowner?
- Surrendering the policy’s cash value
- Modify a provision in the insurance contract
- Assignment of ownership
- Change the beneficiary, if revocable
Modify a provision in the insurance contract
Changing contract provisions is not a policyowner right
90
Which of the following medical expenses does Caner insurance NOT cover?
- Chemotherapy
- Radiation Treatment
- Physician visit
- Arthritis
Arthritis
Cancer insurance typically covers all of these medical expenses except for arthritis.
91
Which of the following characteristics is associated with a large group disability income policy?
- No waiting periods
- No medical underwriting
- No elimination periods
- No limit of benefits
No medical underwriting
A large group disability income policy can be distinguished by no medical underwriting.
92
In order to sell a(n) _______________ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA).
- Variable
- Adjustable
- Straight
- Term
Variable
In order to sell a Variable Life policy, the producer must register with Financial Industry Regulatory Authority (FINRA).
93
What is the MINIMUM benefit period that must be offered by a Long-Term policy
- 12 months
- 18 months
- 36 months
- 48 months
12 months
A Long-Term Care policy must offer a MINIMUM benefit period of 12 months.
94
Which is true concerning a Variable Universal Life policy?
-Policyowner controls where the investment will
go and selects the amount of the premium
payment
-Policyowner has no say where the investment will
go but can choose the premium mode
-The investment vehicle for this type of policy is
held in the insurer’s general portfolio
-The death benefit can very but the policyowner
has no say in the premium amount paid
Policyowner controls where the investment will go and selects the amount of the premium payment
With Variable Universal Life, the policyowner controls the investment of cash values and selects the timing and amount of premium payments.
95
P and Q are married and have three children. P is the primary beneficiary on Q’s Accidental Death and Dismemberment (AD&D) policy and Q’s sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are Killed instantly. The Accidental Death benefits will be paid to:
- R’s estate
- Q’s estate
- P and Q’s estate
- P only
P only
In this situation, benefits will be paid to P because P survived the accident and is the primary beneficiary.
96
When is the face amount of a Whole Life policy paid?
-At the policy’s maturity date only
-When the insured dies or at the policy’s maturity
date, whichever happens first
- Only when the insured dies
- When the policy is surrendered
When the insured dies or at the policy’s maturity date, whichever happens first
The face amount of a Whole Life policy will be paid when the insured dies or on maturity of the policy, whichever occurs first.
97
Which Unfair Trade Practice involved an agent telling a prospective client that a policy’s dividends are guaranteed?
- Twisting
- Rebating
- Misrepresentation
- Sliding
Misrepresentation
An agent who tells a client that dividends are guaranteed may be guilty of misrepresentation.
98
Q is hospitalization for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?
- $2,100
- $2,020
- $2,000
- $100
$2,100
In this situation, $10,000 X 20% coinsurance + $100 deductible = $2,100
99
Which of the following is NOT included in a life insurance illustration?
-Underwriting classification upon which the
illustration is based
- Insurer’s name
- Amount of death benefit
- Company’s mortality table
Company’s mortality table
A life insurance illustration is NOT required to include the company’s mortality table.
100
During a sales presentation for a participating life insurance policy, an agent MUST
-make a prospect understand that dividends are
not guaranteed
-make a prospect understand that dividends are
guaranteed
-offer to the prospect a minimum return of
investment
-offer to the prospect a portion of the
commissions
make a prospect understand that dividends are not guaranteed
During a sales presentation for a participating life insurance policy, an agent MUST include a statement that dividends are not guaranteed.
101
Which of the following BEST describes how pre-admission certification is used?
- Used to assist in underwriting
- Used to prevent nonessential medical costs
- Used to minimize hospital lawsuits
- Used to help process claims
Used to prevent nonessential medical costs
Pre-admission certification is used to prevent unnecessary medical costs.
102
Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?
-Activate insurance companies’ financial reserves
-Administer the worker’s compensation system in
this state
- Issue insurance licenses
- Regulate the business of insurance in this state.
Activate insurance companies’ financial reserves
The Commissioner of Insurance has the power and duty to take all of these actions EXCEPT active insurance companies’ financial reserves.
103
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
- When the policy is issued
- The date of policy delivery
- When the conditions of the receipt are met
- The date the sales appointment was set
When the conditions of the receipt are met
A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
104
Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurance has the right to change the premium rate for the overall risk class?
- Conditionally Renewable
- Noncancelable
- Guaranteed Renewable
- Optionally Renewable
Guaranteed Renewable
The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specific age. These usually have increasing premiums.
105
A domestic insurance company in Texas is considered a company that
-own real estate in Texas
-write insurance on risks located only in Texas
-is incorporated and formed in Texas
-honors the charter of the National Association of
Insurance Commissioners (NAIC)
is incorporated and formed in Texas
In Texas, a domestic insurance company is defined as a company that is incorporated and formed in Texas.
106
An insured’s inability to perform two or more activities of daily living may trigger which type of life policy rider?
- Waiver of premium
- Long term care
- Accelerated death benefit
- Accidental
Long term care
A long term care rider is trigged by the insured’s inability to perform two or more activities of daily living.
107
The accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
- Dies of natural causes
- Becomes critically ill
- Becomes chronically ill
- Is blinded in an accident
Is blinded in an accident
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured is blinded in an accident.
