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ALABAMA INSURANCE TEST
QUESTIONS WITH COMPLETE
SOLUTIONS!!
Which of the following best describes a Health Maintenance Organization (HMO)? - ANSWER-Provides full medical services that stress preventative medicine Medicare Advantage (Medicare Part C) allows the utilization of benefits through a(n): - ANSWER-HMO, PPO, or traditional insurer Pat the producer just sold an insurance policy to a client, explaining that he has authority to issue the policy. Pat was not specifically granted this power from the insurance company. Pat is exercising: - ANSWER-implied authority Within how many calendar days must all clean electronic health insurance claims be paid in Alabama? - ANSWER- 30 Which type of term policy allows the policyowner to switch to permanent insurance? - ANSWER-Convertible term What does renewable term guarantee? - ANSWER-The insured's insurability If an insured commits suicide, a life insurance policy's face amount will be paid only after the policy has been in force for at least: - ANSWER-two years Which welfare program provides assistance to the needy? - ANSWER-Medicaid Barbara has the right to change the beneficiary designation on her life insurance policy. Barbara's beneficiary is a(n): - ANSWER-revocable beneficiary Which of the following statements concerning a life insurance policy is TRUE? - ANSWER-An issued policy can never be changed by a producer The proceeds of a life insurance policy can be paid in a form other than a lump-sum payment. These forms of payment are called: - ANSWER-settlement options The withholding of facts in an insurance application is called: - ANSWER-concealment
A licensed Alabama insurance producer would NOT be disciplined by the Commissioner of Insurance for: - ANSWER-being convicted of a misdemeanor A disability policy that must be renewed, cannot be cancelled until age 65, and may not have an increase in premium for any reason is called a(n): - ANSWER-noncancellable policy Benefits under a health insurance policy may (with the insured's written request) be payable to: - ANSWER-a hospital, physician, or surgeon Bart is injured and provides notice of a health claim to his insurer. He later receives the required claims forms. Within how many days of the loss must Bart file proof of loss with the insurance company? - ANSWER- 90 Which of these statements regarding an insurance application is true? - ANSWER-A representation is valid as long as it is true An insurance company licensed to solicit insurance in a specific state is called: - ANSWER-an admitted company John purchases insurance because he expects to experience a loss. This is known as: - ANSWER-adverse selection Who would most likely own a Medicare Supplement policy? - ANSWER- 69 - year old female covered by Medicare Amy owns a disability income policy with a noncancellable renewal provision. Which of the following is guaranteed in her policy? - ANSWER-The coverage and premium rate are guaranteed According to Required Provision 4, when an insured applies for reinstatement of a health policy and receives a conditional receipt, how long does the insurer have to approve or deny? - ANSWER-within 45 days of the date of application Policy dividends for life insurance are: - ANSWER-not guaranteed What is a certificate of insurance? - ANSWER-A certificate issued to each individual covered by the group life insurance Which is NOT true regarding Medicare Supplement policies? - ANSWER-Must include a minimum 20-day Free-Look provision In Alabama, all Health Maintenance Organizations must: - ANSWER-have a complaint system to resolve written complaints from enrollees
An insurance premium can be defined as: - ANSWER-money paid to an insurance company for benefits provided in the policy Which of these statements accurately portray a whole life policy? - ANSWER-Endows at age 100 and paid up at a stated time John is an annuitant who has surrendered his annuity at age 55. What will he pay? - ANSWER-Tax on the interest earned A Preferred Provider Organization (PPO) contract typically uses which payment arrangement? - ANSWER-Negotiated fee-for-service Which entity is responsible for the majority of regulations imposed on the insurance industry? - ANSWER-State government A husband and wife purchases a life insurance policy that covers both of them. The policy paid nothing when the husband died. Two years later, the wife dies and a death benefit is paid to the beneficiary. Which type of policy is this? - ANSWER-Survivorship life policy An insurance producer must have which of the following in order to sell variable life insurance policies? - ANSWER-All of these Total disability can be defined as "the insured's inability to perform the occupation for which he/she is reasonably qualified by education, training, or experience." For disability income insurance purposes, this definition is known as: - ANSWER-the "own occupation" definition Which of the following limits an insurance company's total exposure under a major medical policy? - ANSWER-Maximum lifetime benefit and a coinsurance provision In regards to insurance applications, which of the following statements is true? - ANSWER-Changes on the application must be consented to in writing Shawn has a waiver of premium rider on his life insurance policy. He becomes disabled for 3 years, during which the insurance company waives $3,000 in premiums. When Shawn recovers, he must: - ANSWER-resume paying premiums again Which of these is NOT considered a form of advertisement in Alabama? - ANSWER-A producer sending a Christmas card to a client The exclusions and conditions in an insurance contract are required to be conspicuous, plain, and clearly stated. There should be no surprise when an insurance company denies a claim for a hidden clause. This is called the: - ANSWER-doctrine of reasonable expectations
An accidental death rider claim is usually paid if the insured: - ANSWER-dies within 90 days of the accident Which of the following is an example of a "nonforfeiture value"? - ANSWER-After a policyowner cancels his/her permanent policy, the cash value accumulation must be made available to the policyowner The number of an insurance company's health insureds that is expected to become sick or injured is called: - ANSWER-morbidity experience Wayne is covered under a nonoccupational group health policy. He is hurt while traveling for business and requires a lengthy hospital stay. His group health policy refuses to pay for hospital expenses because - ANSWER-this is considered a job- related accident Who does a disability income policy normally cover? - ANSWER-Wage earners How are employer-paid premiums for employee group health insurance normally treated for tax purposes? - ANSWER-Tax deductible to the employer/Nontaxable to the employee Which of the following life insurance policies will build up cash value the fastest? - ANSWER-Single premiums Which of the following provisions may NOT be adjusted in an adjustable life policy? - ANSWER-The insured Who does the insurance agent legally represent? - ANSWER-The insurance company Pat applies for insurance, pays the initial premium, and receives a document from the agent. This document indicates that if the policy is issued, coverage begins on the date of the document. This document is called a(n): - ANSWER-conditional receipt A waiver of premium: - ANSWER-waives the premiums when the policyowner becomes totally disabled When an estate is named beneficiary to a life insurance policy, the policy proceeds are:
- ANSWER-distributed according to state law A husband and wife are receiving annuity payments. When the husband dies, the wife still receives annuity payments for life. What kind of annuity is this? - ANSWER-Joint and survivor life annuity Kris is receiving annuity payments that has not yet paid an amount which is equal to the purchase price of the annuity. If she were to die, her beneficiary would continue
Extended residence in a nursing home is covered by a(n): - ANSWER-long-term care policy Nick has a Major Medical insurance policy with a $1,000 deductible, an 80% coinsurance clause, and a $1,500 stop-loss feature. He is hospitalized and incurs the following covered expenses: $10,000 hospital room and board, $2,500 surgeon's fee. What is Nick responsible for paying? - ANSWER-$1, What is a certificate of insurance? - ANSWER-A certificate issued to each individual covered by the group life insurance A disability policy in Alabama that is paid on a monthly basis is required to have a grace period of: - ANSWER- 10 The monthly benefit of an Annuity Certain is determined by: - ANSWER-the annuitant's payout period selection What percentage of eligible employees must be covered by noncontributory group insurance plans? - ANSWER-100% Alabama's annuity disclosure regulation: - ANSWER-requires the delivery of a buyer's guide and a disclosure document to an annuity applicant Kim has purchased a straight life annuity. What will this type of annuity provide her with? - ANSWER-A periodic income to the annuitant for life An insured owns a policy which includes a disability income rider. The disability benefit amount paid to the insured is based on the: - ANSWER-face amount of the policy John has recently died and it was discovered that he was actually ten years older than what was listed on his life insurance policy. What will the insurer pay his beneficiary? - ANSWER-The amount of insurance that his premiums would have purchased at his correct age An insured should be restored to the approximate financial condition occupied before the loss occurred. This is called the: - ANSWER-principle of indemnity Which of the following statements about a noncancellable policy is FALSE? - ANSWER- The premium rate CAN be increased over time A life insurance policy owned by a third party: - ANSWER-is used largely in estate- planning as well as business situations Which of the following does NOT describe a life income settlement option? - ANSWER- Income is paid until the principal amount decreases to zero
Bert purchased an immediate annuity with quarterly payments. When will this annuity start making payments? - ANSWER-3 months after the annuity is bought Which of these is a correct statement? - ANSWER-Policy dividends cannot be guaranteed Which of these statements regarding an insurance application is true? - ANSWER-A representation is valid as long as it is true Which type of life insurance policy combines insurance protection with an accumulation of cash value? - ANSWER-permanent insurance XYZ Insurance Company issued a new life policy to an insured that replaced an existing policy. XYZ Insurance Company is considered to be the: - ANSWER-replacing insurer The objective of insurance is: - ANSWER-the transfer of risk Insurance policies issued by companies which allow their policyowners to participate in the favorable experience of the company through payment of dividends are known as: - ANSWER-participating policies In Alabama, an insurer who violates state laws for the payment of insurance commissions may be fined up to: - ANSWER-three times the amount of the commissions paid Ed has an insurance policy with an insurance company. Before Ed's policy will pay a claim, certain events must occur. Because of this, an insurance policy is considered to be: - ANSWER-conditional Which type of assignment transfers a portion of the policyowner's right to another party in order to secure a debt to that party? - ANSWER-Collateral assignment Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plan's conversion option. Two weeks later, Ann dies in an automobile accident. How will this situation be handled? - ANSWER-Full benefits must be paid by the insurer An insurance company may cancel a life insurance policy under which of the following conditions? - ANSWER-The outstanding policy loan exceeds the cash value of the policy When does "adverse selection" exist? - ANSWER-When the risks accepted for insurance has a HIGHER likelihood of experiencing loss than an average group The aviation exclusion: - ANSWER-excludes coverage when the insured is riding in certain kinds of air travel
A retirement plan intended for a sole proprietor and his/her employees would be a(n): - ANSWER-Keogh Plan Any individual who has failed two Alabama insurance licensing examinations must wait how long before retaking it a third time? - ANSWER-three months Risk is best defined as the: - ANSWER-uncertainty of loss An individual unable to perform two or more Activities of Daily Living (ADLs) will trigger coverage from a _____ policy. - ANSWER-Long Term Care (LTC) An insurance producer represents the: - ANSWER-the insurance company Julio, the insurance producer, has allowed his license to lapse. He would like to reinstate his license without retaking a prelicense course or passing a written examination. To do this, Julio must reinstate the license within ___ months from the renewal date. - ANSWER- 12 An insurance producer who offers a potential client something of value as an incentive to purchase insurance is engaging in: - ANSWER-rebating Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called? - ANSWER- Viatical settlement agreement In Alabama, when are newborns covered under a health policy? - ANSWER-The moment of birth Which of the following is a TRUE statement regarding dental insurance? - ANSWER- Comprehensive dental care policies usually cover a percentage of reasonable and customary charges for non-routine treatment What use does a business have for a key employee disability insurance policy? - ANSWER-Temporarily replace a disabled key employee The period of time during which a surviving spouse does not qualify for Social Security survivor or retirement benefits is called: - ANSWER-The Blackout Period Required Provision 3 states that the minimum grace period for all policies (except those with monthly or weekly premium modes) is: - ANSWER-31 days Which statement concerning Alabama's life insurance solicitation regulations is true? - ANSWER-All of these Which of the following dividend options allows the continuation of cash value accumulation? - ANSWER-Reduced paid-up insurance
Medicare eligibility is typically based on: - ANSWER-age What is vesting? - ANSWER-The employee's right to the employer's contributions in a retirement plan if employment terminates prior to retirement Katherine is a retiree and was recently hospitalized for 10 days. Which type of insurance policy would best cover her for excess hospital expenses? - ANSWER- What kind of risk are amateur pilots normally classified as? - ANSWER-Special class risks What does Disability Buy-Sell insurance provide? - ANSWER-lump-sum benefits When medical expenses reach a certain dollar amount, the insured is no longer responsible for sharing the cost of expenses. The insurance company then pays 100% of the covered expenses. This major medical policy provision is called a(n): - ANSWER- stop-loss limit Which of the following statements is NOT correct? - ANSWER-Agents are allowed to waive certain policy provisions Individual disability income policies normally have a premium that: - ANSWER-adjusts annually If a Long Term Care (LTC) policy in Alabama has been in effect for more than ___, the insurer CANNOT contest any material representation on the application. - ANSWER- 2 years What is a disability income policy designed to do? - ANSWER-Pay benefits to maintain the insured's current standard of living A substandard or special class risk typically results in: - ANSWER-a premium that is higher than for a normal risk What do Major Medical policies typically cover? - ANSWER-Usual, customary, and necessary expenses Paula has an insurance policy that has a guaranteed minimum cash value, a guaranteed death benefit, fixed premiums, and grows at a rate reflected by a selected fund index. Which type of life policy fits this description? - ANSWER-Equity indexed life Tim has a Universal Life policy. The cash value growth in his policy is: - ANSWER- interest sensitive
