Life and Health PSI practice test

Question 1

Which type of life policy can be continued year after year without a required medical examination but rates are dependent on the insured’s current age?

Answer 1

Renewable Term

Question 2

All of the following are features of the spendthrift clause EXCEPT:

Answer 2

The beneficiary may encumber the proceeds

Question 3

All of the following are tax qualified retirement plans EXCEPT:

Answer 3

Section 529 plan

Question 4

What does it mean if a health policy is conditionally renewable?

Answer 4

Insurer may elect NOT to renew based on the health of the insured

Question 5

Which is a disadvantage to a flexible premium annuity?

Answer 5

The actual amount of the annuity benefit cannot be determined in advance

Question 6

When should a buy-sell agreement include a provision for the buy out of an owner’s business interest in the event of a disability?

Answer 6

When there is a buy sell agreement funded with disability insurance to buyout the interest of a decreased owner or partner

Question 7

What is the return of premium rider?

Answer 7

An increasing amount of term insurance that always equals the total of premiums paid up to the current point

Question 8

Which provision allows the physician to submit claim information before providing treatment?

Answer 8

Precertification provision

Question 9

In which of the following types of contracts is only one party legally required to do something after the insured has completed the act of paying the premium?

Answer 9

Unilateral

Question 10

The right to change the beneficiary is reserved to the policyowner UNLESS which of the following is true?

Answer 10

The policyowner has named an irrevocable beneficiary

Question 11

All of the following are TRUE regarding incomplete applications EXCEPT:

Answer 11

The incomplete application can be accepted with the missing information added later

Question 12

How long after being entitled to disability benefits will an individual be eligible to receive Medical Benefits?

Answer 12

2 years

Question 13

How might someone cover the extra expenses of child care and home-related costs?

Answer 13

Purchasing family term insurance

Question 14

How do most disability policies handle the case for a recurrent disability occurring at least 90 days after the first claim?

Answer 14

It must be handled as a new claim for a new period of disability, without requiring a new elimination period

Question 15

Short Term Disability insurance generally only covers injuries due to which of the following?

Answer 15

Non-Occupational injuries

Question 16

Which of the following policy types is considered double indemnity?

Answer 16

Accidental Death

Question 17

In order to AVOID being classified as an MEC, a policy must pass which of the follow?

Answer 17

Seven-pay test

Question 18

An insured and the beneficiary are both killed in a fatal accident. Which provision presumes the insured survived the beneficiary?

Answer 18

Common Disaster Clause

Question 19

What is the waiver of premium provision?

Answer 19

In a long term care contract, the premium is waived after the insured has been confined for a specified period of time

Question 20

The life insurance policy will not truly be effective until all of the following occur EXCEPT:

Answer 20

The agent has explained the policy to the client

Question 21

The group conversion option is allowed for all of the following EXCEPT:

Answer 21

During the annual benefit enrollment period

Question 22

Under which situation must insurable interest exist between the applicant and insured at the time of application?

Answer 22

When the applicant and the insured are the same person

Question 23

If the insurer wishes to share an applicant’s HIV status, the applicant must be given full notice of all of the following EXCEPT:

Answer 23

The treatment procedures that are covered by the policy

Question 24

Which of the following is TRUE for a flexible premium annuity?

Answer 24

The purchaser payment falling between a minimum and maximum amount

Question 25

Which of the following was specifically designed to address STOLI and IOLI practices?

Answer 25

NCOIL Act

Question 26

All of the following statements define preexisting conditions EXCEPT:

Answer 26

Any chronic health condition that presents symptoms and which was unknown at the time of application

Question 27

What is an impairment rider?

Answer 27

It lists specific conditions in the contract that are excluded from the contract

Question 28

All life insurance and health insurance contracts contain all of the following EXCEPT:

Answer 28

Representation

Question 29

Which is the primary purpose of Health Reimbursement Accounts (HRAs)?

Answer 29

To assist covered employees with the payment of medical expenses on a high deductible plan funded through pre-tax contributions

Question 30

Which is a common approach to addressing the problems inherent in naming a minor as a beneficiary to a life insurance policy?

Answer 30

Establishing a trust to administer proceeds

Question 31

In a level term policy, which ALWAYS remains constant?

Answer 31

Premium

Question 32

Under normal conditions which of the following is TRUE for proof of loss when a single loss is claimed?

Answer 32

The insured has 90 days for the date of loss to provide proof of loss

Question 33

Group AD&D policies may be deducted by whom and under which deduction category?

Answer 33

The employer under business expenses

Question 34

What is a MIB report?

Answer 34

Medical information on an applicant for assessing life or health insurance risk

Question 35

How does a noncancelable policy differ from a guaranteed renewable policy?

Answer 35

With the noncancelable policy, the insured may never increase the premiums under any circumstances

Question 36

According to the time period of payment of claims provision, the insurer must make the payment immediately after receiving proof of loss EXCEPT:

Answer 36

For claims involving periodic payments

Question 37

Which of the following determines whether a person passes the financial test to qualify for Medicaid?

Answer 37

State law

Question 38

Why are insurance policies considered conditional contracts?

Answer 38

Certain conditions need to be met to make the contract legally enforceable

Question 39

Which type of rider reimburses health and social expenses incurred in a convalescent or nursing home facility?

Answer 39

Long term care rider

Question 40

What does first dollar coverage mean?

Answer 40

As soon as covered medical expenses are incurred, the policy begins to pay

Question 41

Which of the following is considered the major advantage of HIPAA?

Answer 41

Portability

Question 42

During which period of a Disability Income Policy is coverage effective but during which no benefits will be paid under the policy?

Answer 42

Elimination Period

Question 43

Which of the following is characteristic of a nonqualified plan?

Answer 43

Plan does not meet federal guidelines for tax benefits

Question 44

When will a policy pay on a UCR basis?

Answer 44

When particular benefits are not listed on a payment schedule

Question 45

All of the following are characteristics of variable whole life EXCEPT:

Answer 45

The premium is level

Question 46

Which plan is most commonly paired with a High Deductible Health Plan?

Answer 46

Health Savings Account (HSA)

Question 47

Why is relying solely on employer group life insurance generally considered inadequate for most individual’s needs?

Answer 47

It is financially insufficient to cover end of life expenses

Question 48

Some states require life insurance policies to include a provision that gives the insurer the right, at its own expense, to do which of the following?

Answer 48

Perform a medical examination on the beneficiary

Question 49

Which of the following is the most common method to supplement Medicare Coverage?

Answer 49

Coverage offered by private insurers

Question 50

All of the following are characteristics of COBRA EXCEPT:

Answer 50

Change in medical privacy procedures

Question 51

All of the following are disadvantages to an annually renewable term life policy EXCEPT:

Answer 51

The living benefits decrease over time

Question 52

Which type of annuity covers two or more annuitants and provides monthly income only until the first annuitant dies?

Answer 52

Joint Life annuity

Question 53

What is the maximum amount of time the insured has to file legal action against the insurer after written proof of loss is provided?

Answer 53

3 years

Question 54

Which of the following is common in an increasing term life policy?

Answer 54

It begins with little or no insurance protection

Question 55

Which type of life policy can be continued year after year without a required medical examination but rates are dependent on the insured’s current age?

Answer 55

Renewable term

Question 56

Which of the following is exempted from the incontestability provision in insurance policies?

Answer 56

Fraudulent Misstatements

Question 57

Which policy type is backed by equity investments and allows the policyholder to adjust the death benefit?

Answer 57

Variable universal life

Question 58

What is the major reason that insurance regulators are often critical of dread disease insurance policies?

Answer 58

Buyers often think they are getting broader coverage than they actually purchase

Question 59

Which type of coverage pays the operating costs of a small business when the owner becomes disabled?

Answer 59

Business overhead expense disability insurance

Question 60

What is the purpose of Stranger-originated life insurance (STOLI)?

Answer 60

It is a fraudulent policy for financial gain of someone unknown to the insured

Question 61

What is business overhead expense disability insurance?

Answer 61

Insurance that covers business expenses if the owner becomes disabled ## Footnote It helps maintain business operations during the owner's disability.

Question 62

What is key person expense disability insurance?

Answer 62

Insurance that covers expenses related to the loss of a key employee due to disability ## Footnote It helps businesses manage the financial impact of losing critical personnel.

Question 63

What is buy-sell disability insurance?

Answer 63

Insurance that funds the purchase of a business interest if an owner becomes disabled ## Footnote It ensures business continuity by allowing remaining owners to buy out a disabled partner.

Question 64

What is individual expense disability insurance?

Answer 64

Insurance that covers personal living expenses if the insured becomes disabled ## Footnote It provides financial support for individuals unable to work due to disability.

Question 65

What is the purpose of Stranger-originated life insurance (STOLI)?

Answer 65

It is a fraudulent policy for financial gain of someone unknown to the insured ## Footnote STOLI policies are originated primarily for resale, avoiding proof of insurable interest.

Question 66

What procedure protects an insurer in case of a dispute regarding application changes?

Answer 66

The application and possibly the agent initial any changes made ## Footnote This ensures that both parties acknowledge modifications before submission.

Question 67

Which of the following is an example of a premium payment mode?

Answer 67

Annual premium payment ## Footnote Other modes include payment by check and automatic deduction.

Question 68

Why is rehabilitation considered worthy of federal help under workers’ compensation?

Answer 68

It reduces insurance losses and helps regain the workers' dignity ## Footnote Rehabilitation services support workers in returning to work and maintaining their quality of life.

Question 69

What are two characteristics of Health Maintenance Organizations (HMOs)?

Answer 69

Containing costs and early treatment ## Footnote HMOs focus on preventative care and managing healthcare expenses.

Question 70

What is the maximum amount of time for reinstatement of a policy after a conditional receipt when premium is paid late?

Answer 70

45 days ## Footnote This is the timeframe allowed for reinstating a policy after the grace period.

Question 71

When courts look at a contract, what is considered to determine the intent of the parties?

Answer 71

The entire contract ## Footnote Courts assess the full context of the contract rather than isolated clauses.

Question 72

In which type of insurance is individually purchased coverage commonly more economical than group offered coverage?

Answer 72

Disability insurance ## Footnote Individual policies can be tailored and may provide better benefits than group plans.

Question 73

What is a requirement for producers when applying for a policy with an accelerated benefit provision?

Answer 73

Provide the applicant a summary of coverage ## Footnote This summary must include effects on cash value and eligibility for Medicaid.

Question 74

Which policy provision subtracts an amount equal to the premium due from the cash value?

Answer 74

Automatic premium loan ## Footnote This provision prevents the lapse of the policy by using cash value to cover premium payments.

Question 75

What happens when the lifetime maximum benefit limit has been reached?

Answer 75

The insured will pay all of the remaining medical costs for as long as the policy is in force ## Footnote Once the limit is reached, the insurer stops covering costs.

Question 76

What does the grace period protect the policyholder from?

Answer 76

An unintentional lapse of the policy ## Footnote It allows time to pay the premium without losing coverage.