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ALABAMA LIFE AND HEALTH INSURANCE EXAM PREP, Exams of Advanced Education

ALABAMA LIFE AND HEALTH INSURANCE EXAM PREP

Typology: Exams

2024/2025

Available from 11/30/2024

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ALABAMA LIFE AND HEALTH INSURANCE

EXAM PREP

The free-look provision allows for which of the following? - A right to return the policy for a full premium refund If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than - With the policy All of the following are characteristics of GROUP life insurance EXCEPT - Premiums being determined by the age, sex and occupation of each INDIVIDUAL certificate holder Which of the following may NOT be included in an insurance company's advertisement?

  • That its policies are covered by a State Guaranty Association A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why? - The purpose of the group was to purchase life insurance. The dividend option in which the policy-owner uses dividends to purchase a term policy for one year is referred to as the - One-year term option. Medicare Part A services do NOT include which of the following? - Outpatient Hospital Treatment Which of the following statements about a suicide clause in a life insurance policy is TRUE? - Suicide is excluded for a specific period of years and covered thereafter Which of the following entities established the Do-Not-Call Registry? - The Federal Trade Commission Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to - The insured. Which of the following documents must be provided to the policy-owner or applicant during policy replacement? - Notice Regarding Replacement Which of the following statements about the reinstatement provision is true? - It requires the policy-owner to pay all overdue premiums with interest before the policy is reinstated. Which of the following insurers are owned by stockholders? - Stock

Which of the following are the main factors taken into account when calculating residual disability benefits? - Present earnings and earnings prior to disability All of the following types of distributions are considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax EXCEPT - Participant's debt. In major medical insurance policies, when the insured's share of coinsurance reaches a certain amount, the insured is no longer obligated to pay it. This feature is known as - Stop-loss Which of the following is NOT an enrollment period for Medicare Part A applicants? - Automatic enrollment What would a physician utilize if he/she wanted to know if a treatment is covered under an insured's plan and at what rate it will be paid? - Prospective review An applicant buys a non-qualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? - Spouse Which of the following groups would most likely be covered under a blanket accident policy? - Students at a public school - A blanket policy covers members of a particular group when they are participating in a particular activity. Such groups include students, campers, passengers on a common carrier, or sports teams. Why should the producer personally deliver the policy when the first premium has already been paid? - To help the insured understand all aspects of the contract The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have? - Accident-only Which of the following is NOT typically excluded from life policies? - Death due to plane crash for a fare-paying passenger The death protection component of Universal Life Insurance is always - Annually Renewable Term What is the main purpose of the Seven-pay Test? - It determines if the insurance policy is a MEC. An insured misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued? - Adjust the claim benefit to reflect the insured's true age

Which of the following is the required number of participants in a contributory group plan? - 75% Which of the following is the required number of participants in a noncontributory group plan? - 100% Which of the following is NOT true regarding minors purchasing insurance policies in this state? - Minors at the age of 14 are allowed to buy their own policies. Which of the following is TRUE about nonforfeiture values? - They are required by state law to be included in the policy. What is a material misrepresentation? - A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company Other than for a qualified life event, when can a change be made in benefits for a Flexible Spending Account (FSA)? - During the open enrollment period What provision in an insurance policy extends coverage beyond the premium due date?

  • Grace period Can an individual who belongs to a POS plan use an out-of-network physician? - Yes, and they may use any preferred physician, even if not part of the HMO What are preferred risks? - An insured that an insurer deems has a lower than average chance of loss and that usually may pay a lower premium because of the past accidents, he was not a preferred risk. Which is generally true regarding insureds who have been classified as preferred risks?
  • Their premiums are lower If the Commissioner has not approved or disapproved any insurance form by the end of the judgment period, the insurer - Can assume the form is approved. Medicaid is sponsored by what kind of sources? - both state and federal Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? - Withdrawals are not taxable. For a producer to meet the state continuing education requirements, how many CE hours must be completed on the topic of ethics? - 3 hours on Ethics. 24 total CE hours. Who is a third-party owner of an insurance policy? - A policy-owner who is not the insured

If a producer changes his residential address who must he/she notify? - This change will need to be reported to the Commissioner. Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? - An endowment policy In which of the following locations would skilled care most likely be provided? - In an institutional setting The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over what period of time? - 2 years Which of the following provisions would prevent an insurance company from paying a reimbursement claim to someone other than the policy-owner? - Payment of Claims Which of the following is TRUE about a class designation? - Beneficiaries are not identified by name. - A class of beneficiary is using a designation such as "my children". It is vague. The Life Insurance Solicitation Regulation was promulgated to do the following: - Provide adequate information to consumers regarding relative cost of insurance products. Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? - Fraternal benefit society Which of the following is a term for a person who seeks insurance from an insurer? - The applicant What is the maximum age for qualifying for a catastrophic plan? - 30 The primary eligibility requirement for Medicaid benefits is based upon - Need. (Medicaid is a program operated by the state with some federal funding to provide medical care for those in need) Medicare Part D provides - Prescription drug benefit. The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called - Life income with period certain. When the insurer stipulates the time period for payment of claims, how soon must the insurer pay a death benefit claim after receiving the proof of death? - 2 months

Which of the following is true of the Fair Credit Reporting Act? - The purpose of the act is to protect the consumer's right to privacy by making certain that underwriting data is confidential, accurate, relevant and properly used An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen? - The PPO will pay reduced benefits. A policy available to business owners that provides payment for normal business expenses in the event that the owner is disabled is called - Business Overhead Expense What term is used to describe when the medical caregiver provides services to only members or subscribers of a health organization, and contractually is not allowed to treat other patients? - Closed panel An insured who has an Accidental Death and Dismemberment policy loses her left arm in an accident. What type of benefit will she most likely receive from this policy? - The capital amount in a lump sum Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss? - Notice of claim Which of the following statements is TRUE about a policy assignment? - It transfers rights of ownership from the owner to another person. Which of the following is NOT true regarding a Certificate of Authority? - It is issued to group insurance participants. COBRA applies to employers with at least - 20 employees. An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? - Fair Credit Reporting Act Insurance is a contract by which one seeks to protect another from - Loss The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? - Conditional A 35-year-old spouse of the insured collects early distributions from her husband's retirement plan as a result of a divorce settlement. What penalties, if any, will she have to pay? - No penalties Most health insurance policies exclude all of the following EXCEPT - Accidental injury

Which of the following government programs allows a blackout period? - Social Security Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? - Those who have been insured under the plan for at least 5 years Which of the following would be considered an illegal inducement to purchase insurance? - Confirming future dividends in a life insurance proposal An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? - The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the Commissioner suspects that a person is violating an insurance law or other regulation, what can be issued that would order the person to stop committing the act of violation? - Cease and Desist Order What is the income period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for Social Security survivor benefits? - Preretirement Period During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal? - Taxable interest will be withdrawn first and the 10% penalty will be imposed if under 59 ½ Which of the following will NOT be an appropriate use of a deferred annuity? - Creating an estate What does "level" refer to in level term insurance? - Face Amount What is the purpose of a conditional receipt? - It is intended to provide coverage on a date prior to the policy issue Which provision allows the policyholder a period of time, while coverage is in force, to examine a health insurance policy and determine whether or not to keep it? - Free look period A business entity acting as an insurance producer is required to do all of the following EXCEPT - Be a publicly owned company What is the purpose of key person insurance? - To lessen the risk of financial loss because of the death of a key employee What phase begins after a new policy is delivered? - Free look period

A situation in which a person can only lose or have no change represents - Pure Risk An insured receives an annual life insurance dividend check. What term best describes this arrangement? - Cash Option The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the - Incontestability clause. Which of the following is the best reason to purchase life insurance rather than annuities? - To create an estate Which of the following premium modes would result in the highest annual cost for an insurance policy? - Monthly. If the policy-owner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have the additional expenses in billing the premium. What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? - It determines who receives policy benefits if the primary beneficiary is deceased. The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? - $100,000. The death must not be contributed to the insured in any manner. A long stretch of national economic hardship causes a 7% rate of inflation. A policy- owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? - Cost of Living Rider Which of the following is the basis for a claim against an insurance policy? - Loss Which of the following components of dental insurance does NOT require the payment of a deductible? - Routine and preventive maintenance What is the advantage of reinstating a policy instead of applying for a new one? - The original age is used for premium determination. If an agent wishes to sell variable life policies, what license must the agent obtain? - Securities In order for an insured under Medicare Part A to receive benefits for care in a skilled nursing facility, which of the following conditions must be met? - The insured must have first been hospitalized for 3 consecutive days.

Which of the following determines whether disability insurance benefits are taxed? - Whether the premiums were tax deductible What is the waiting period on a Waiver of Premium rider in life insurance policies? - 6 months All of the following are true of the Key Person disability income policy EXCEPT - Benefits are considered taxable income to the business. If the insured under a disability income insurance policy change to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following? - Adjust the benefit in accordance with the increased risk Which of the following describes the tax advantage of a qualified retirement plan? - The earnings in the plan accumulate tax deferred. All of the following are correct about the required provisions of a health insurance policy EXCEPT - A reinstated policy provides immediate coverage for an illness. When would a 20-pay whole life policy endow? - When the insured reaches age 100 The term illustration in a life insurance policy refers to - A presentation of non- guaranteed elements of a policy. Which of the following is the term used when a person, in a fiduciary position, has used funds in manner for which they were not intended such as the wrongful taking or use of money belonging to another? - Misappropriation of funds What term is used to describe when a medical caregiver contracts with a health organization to provide services to its members or subscribers, but retains the right to treat patients who are not members or subscribers? - Open panel An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? - Pay the death benefit Should an insurer accept business from a producer who is not appointed as that insurer's agent, what penalty may be exacted? - The insurer is fined 3 times the amount of the premium received on that business If an insured continually uses the automatic premium loan option to pay the policy premium - The policy will terminate when the cash value is reduced to nothing.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? - Family term rider What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? - War or military service Which is TRUE about the cash surrender nonforfeiture option? - Funds exceeding the premium paid are taxable as ordinary income. Which of the following is NOT provided by an HMO? - Reimbursement. The HMO provides financing, patient care and also benefits in the form of services rather than in the form of reimbursement for the services of the physician or hospital. An insurance producer who by contract is bound to write insurance for only one company is classified as a/an - Captive Agent How long must an insurer retain an advertisement for its long-term care policies? - 3 years Which nonforfeiture option provides coverage for the longest period of time? - Reduced paid-up What is the elimination period for Social Security disability benefits? - 5 months An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? - The date of medical exam Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policy-owner? - Third-party ownership What type of annuity activity will cause immediate taxation of the interest earned? - Surrendering the annuity for cash A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? - Guaranteed A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as - Survivor protection. If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? - Jumping juvenile policy

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? - The insured may renew the policy for another 10 years, but at a higher premium rate. Evaluating information that establishes adverse selection risk is the purpose of which stage of insurance? - Underwriting Insurance is the transfer of? - Risk Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? - Law of large numbers Should an authorized insurance company have their certificate of authority suspended, during the period of the suspension, the insurer must do all of the following EXCEPT - Reapply for the Certificate of Authority. What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? - Application What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy? - Modified Life In order to collect Social Security disability benefits, the claimant must be able to demonstrate that the disability will last at least - 12 months If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may - Require evidence of insurability. Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? - Paid-up option Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid - For 20 years or until death, whichever occurs first. When transacting business in this state an insurer formed under the laws of another COUNTRY is known as a/an - Alien Insurer When transacting business in this state an insurer formed under the laws of another STATE is known as a/an - Foreign Insurer

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? - The insured may choose to convert to term or permanent individual coverage An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? - The insured will need a written consent of the insurer. When health care insurers negotiate contracts with health care providers or physicians to provide health care services for subscribers at a favorable cost, it is called - Preferred Provider Organization (PPO) Which nonforfeiture option has the highest amount of insurance protection? - Extended Term What is the minimum age for an individual to buy an insurance policy in Alabama? - 15 years old What was created to keep telemarketers from calling consumers who do not wish contacted? - National Do Not Call Registry The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the - Insuring clause Events or conditions that increase the chances of an insured loss occurring are referred to as - Hazards HIPAA applies to groups of - 2 or more Every small employer carrier must actively offer to small employers at least how many health benefit plans? - 2 plans What limits the amount that a policy-owner may borrow from a whole life insurance policy? - Cash value. The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest. Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to - Prevent over-utilization and malingering. "Get them back to work" What type of account will most likely be established for a minor? - Trust - Very specific types of trusts that are used to hold and distribute property or assets to minors

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? - The beneficiary will only receive payments of the interest earned on the death benefit. What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? - Common Disaster Clause In a replacement situation, all of the following must be considered EXCEPT - Assests