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Alabama State Life & Health Insurance Exam (6 Sets of Exam’s) questions verified, Exams of Insurance Economics

Alabama State Life & Health Insurance Exam (6 Sets of Exam’s) questions verified with 100% correct answers 1. Which policy accumulates cash value at the fastest rate? ANS A. 10-pay life policy 2. The legal doctrine that prevents one from exercising a right of privilege is called ANS Estoppel 3. If the consideration clause states that the premium payment keeps the policy in force until the next premium is due plus 30 days thereafter, the policy ANS contains a grace period. 4. If an insurance carrier decides to cancel a producer's appointment, each of the following is true EXCEPT ANS The Commissioner can immediately cancel the producer's license based upon the Company's allegation of wrong doing by the producer.

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Alabama State Life & Health Insurance

Exam

(6 Sets of Exam’s)

Alabama State Life & Health Insurance Exam

Set 1

1.Which policy accumulates cash value at the fastest rate? ANS A. 10-pay life policy

  1. The legal doctrine that prevents one from exercising a right of privilege is called ANS Estoppel
  2. If the consideration clause states that the premium payment keeps the policy in force until the next premium is due plus 30 days thereafter, the policy ANS contains a grace period.
  3. If an insurance carrier decides to cancel a producer's appointment, each of the following is true EXCEPT ANS The

Commissioner can immediately cancel the producer's license based upon the Company's allegation of wrong doing by the producer.

  1. Under the waiver of premium provision of a life insurance policy, if a dis- ability proves total and permanent, what happens to any premiums paid by the policyowner during the waiting period ANS All premiums paid by the policyholder during the waiting period are typically refunded.
  2. A company chartered in Alabama would be considered what type of insur- ance company in Ohio? ANS Foreign 7.The Entire Contract Provision stipulates each of the following EXCEPT ANS Any verbal changes made by the agent are permissible if in writing.
  3. If the insurance company accepts a special class risk ANS the premium will be higher than for a normal risk.
  4. The Optional Provisions of a standard Health policy address the issue of claims arising from "illegal occupations," "commission of felonies," and "use of narcotics." According to these provisions ANS the insurer is not liable for claims arising under the conditions described in these provisions.

10.The application has two parts. Part 1 is? ANS General information about the applicant. 11.All Health Insurers must pay claims as prescribed by Alabama law. Which of these statements is FALSE? ANS. Insurers may decide which claim forms they will accept 12.Darlene dies without having paid the $500 premium on her $50,000 policy that was due a week before her death. With no outstanding policy loans, Darlene's beneficiary can expect to receive ANS $49,500, which is the face amount less the premium owed. 13.Legally, who does an insurance agent (producer) represent? ANS only the com- pany

  1. Benefits paid under an employer-paid Group Health Insurance policy are?- ANS The benefits are non-taxable to the employee, but the premiums are taxable as remuneration to the employee.

15.When a dependent child covered under the parents' major medical policy reaches the limiting age, what is the provision that allows the child to purchase his or her own policy without establishing insurability? ANS conversion privilege 16.When Jonas died, it was discovered that he was actually six years older than he had claimed when applying for an insurance policy. Upon his death what will the insurance company pay? ANS The company will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age. 17.If you qualify for COBRA, coverage under the group health plan ANS all of the above 18.The duties of the Alabama Insurance Commissioner include all of the following EXCEPT ANS. Represent the State of Alabama in any legal proceedings. 19.If Todd has been named the irrevocable beneficiary of a life insurance policy, he ANS cannot be replaced as beneficiary without his consent 20.Why are insurance contracts said to be contracts of adhesion? ANS One party writes the contract and the other party

must accept or reject the contract as written. 21.How can 'Key Employee' disability income insurance purchased by a business be used by the business? ANS Both of the above. 22.All of the following are examples of insurable interest EXCEPT ANS an airline insuring the lives of its passengers. 23.A beneficiary is always which of the following? ANS The person named to receive the sum specified in a life insurance contract when the insured dies. 24.A straight life annuity provides which of the following? ANS A periodic income to the annuitant for life 25.A defined contribution plan ANS promises a specified payment to the plan by the employer 26.Which of the following is TRUE concerning willful violations of Alabama insurance regulations? ANS All of the above are correct. -Each instance of violation is considered as a separate offense.

-Each violation is punishable as a misdemeanor. -Each violation, upon conviction, may result in both fines and hard labor 27.The factors that determine the amount of each payment to a beneficiary under the fixed period (fixed time) option are the ANS length of the fixed period and the death benefit of the policy, and interest. 28.The settlement option under which the principal never decreases unless the beneficiary makes withdrawals is the ANS interest only option. 29.Which of the following is CORRECT concerning the payment of commis- sions for insurance in Alabama? ANS An insurer who violates the Alabama rules on

commission payments may be fined up to three times the amount of the commis- sions paid. 30.Which of the following riders could decrease the amount of the policy death benefit if utilized? ANS Automatic Premium Loan Rider 31.A company domiciled in another state that has received permission from the insurance commissioner to do business in this state is called a/an ANS foreign admitted company. 32.Contracts must have consideration. Insurance contracts are considered to be aleatory contracts. This means what? ANS The promise to pay claims will most likely not be equal to all premium payments. 33.Billy is the owner of a life insurance policy and has chosen a policy set- tlement option under which the company will pay the beneficiary (his widow) an income each month for as long as she lives. Payment stops at her death. Which settlement option has Billy selected? ANS Life income option 34.Medical expense policies generally provide ANS medical service or expense reimbursement benefits.

35.Under the typical Coordination of Benefits Clause in Group Health Insur- ance, how is primary coverage determined? ANS The husband's policy is primary and the other is excess 36.Which policy will have immediate cash? ANS Single premium 37.An Attending Physician's Statement is used to do what? ANS Obtain detailed information regarding a specific medical condition.

  1. Many major medical policies include a provision whereby when expenses reach a certain dollar amount, the insured no longer shares in the cost of expenses; the insurer pays 100% of remaining covered charges. This is referred to as the ANS maximum benefit. 39.Each of the following statements is true about Disclosures EXCEPT ANS You must deliver a Policy Summary at policy delivery. 40.If an insured under a Major Medical insurance policy with a $200 deductible and an 80% coinsurance clause incurred the following covered expenses ANS Hospital room and board $2,000; Surgeon's fee $1,500. How much would the policy pay? ANS $2,640 [2,000 + 1,500 = 3,500 - 200 = 3,300 x .80] 41.What are the two major approaches to defining "totally disabled" for Dis- ability Income insurance? ANS "Actual" disability or "Presumptive" disability
  2. If you have not met the Continuing Education requirement when it is time to renew your license, you may? ANS
  1. ANS Use of large amounts of direct mail to market a specific LTC policy.

44.Which of the following is CORRECT regarding a Health Maintenance Or- ganization (HMO) operating in Alabama? ANS Every HMO must have a complaint system to resolve written complaints from enrollees. 45.Alabama's "replacement" regulation applies to all of the following EX- CEPT ANS credit life insurance. 46.When must the insurable interest exist for life insurance? ANS at the time of application 47.When does the 10-day Free Look begin? ANS Date of policy delivery 48.For life insurance purposes, all persons are considered to be statistically 'dead' at age ANS 100. 49.If you suffer a loss linked directly to your use of intoxicants or non-pre- scribed narcotics, what is the effect? ANS Your claim may be denied by the carrier. 50.A man applied for a Long Term Care (LTC) policy. Three months earlier he was diagnosed with diabetes. Can the LTC policy exclude future health problems linked with diabetes? ANS yes for 6 months 51.An insured can increase the monthly benefits paid under a disability income policy by a specified percentage or in relation to an economic index with which of the following riders? ANS cost of living adjustment 52.A life insurance policy is a unilateral contract because ANS only the insurance company is bound to live up to the terms of the

agreement. 53.Insurance policies issued by companies which are owned by stockholders and do not pay policy dividends are known as ANS non-participating policies. 54.The Grace Period has what effect? ANS An extension of time to pay a late premi- um. 55.If you misstate your age when applying for Disability Income insurance, you may suffer what consequence at claim time? ANS Your benefits will be reduced if your age is higher than stated 56.The income period when a surviving spouse does not qualify for Social Security survivor or retirement benefits is called the ANS Blackout Period. 57.In noncontributory group insurance plans, what percentage of eligible employees must be covered by the plan? ANS 100% 58.The type of health insurance policy most likely used to cover all students attending a large university is ANS a blanket policy. 59.The usual payment arrangement under a Preferred Provider Organization (PPO) contract is ANS a negotiated fee-for-service. 60.For weekly premium disability policies in Alabama, there must be a grace period of ANS 7 days 61.With respect to an insurance application ANS all statements made by the appli- cant are considered to be representations.

62.The "entire contract" law in Alabama says ANS the policy and the application (or a summary of the application) constitute the entire contract. 63.Interest Sensitive Whole Life is also called? ANS Universal Term. 64.Most major medical policies include as eligible expenses coverage of ANS all of the above. -hospital room and board, intensive care, and hospital medical and surgical services. -physicians' medical, diagnostic and surgical services.

  • nursing services, outpatient services and ambulance charges. 65.Dividend options are defined as ways in which the policyowner can ANS use or collect policy dividends 66.If William has a major medical plan on himself, his wife Harriet, and their son Bill, what happens when daughter Bess is born? ANS She is covered from the moment of birth even if the policy does not provide maternity benefits. 67.When may agents change a policy or waive its provisions, according to Required Provision 1 of a standard Health policy? ANS Never. 68.Annuities have two basic stages. They are called what? ANS Accumulation Peri- od and Income Period 69.The General Provisions that apply to all Medicare

Supplement Plans (MSPs) are all of the following EXCEPT ANS MSPs must be more restrictive than Medicare. 70.If an agent tells a proposed insured he has authority to issue a policy, which he is actually disallowed to do by his agency contract, the insured may reasonably assume the agent had this authority. This is an example of ANS implied authority. 71.The Suicide Clause has what effect? ANS It excludes suicide during the first two years.

  1. When an insurer cedes part of an insured's coverage to another insurance company, retaining only part of the risk for itself, the insurer is engaging in ANS reinsurance. 73.A family medical expense policy typically covers ANS every member of the family. 74.Which part of Medicare requires premium payment by most eligible partic- ipants? ANS Part B, supplementary medical insurance 75.If Louise allows her whole life policy to lapse, which nonforfeiture option should she elect to obtain the most life insurance protection? ANS Extended term option

76."Community Rating" generally means the insurer charges ANS the same rate for everyone in a geographic area. 77.The basic purpose for the coinsurance provision in a major medical policy is to ANS limit over-utilization of the policy benefits. 78.Paid-up Additions act as a default if the Policyholder doesn't indicate an option. Paid-up Additions are ANS Single payment premiums which purchase additional amounts of insurance which add to the face amount. 79.To sell a variable life insurance policy, an insurance producer must ANS All of the above. -have a valid life insurance license. -have a variable life and variable annuity products license. -be registered with FINRA (the Financial Regulatory Authority) 80.Mr. and Mrs. Carter receive annuity payments. Mr. Carter dies, but Mrs. Carter continues to receive payments for the rest of her life. The Carters have a ANS joint and survivor life annuity. 81.The kind of life insurance that acquires no cash value is ANS term life.

  1. Under a credit disability policy, what is the maximum amount payable? ANS - The amount of outstanding indebtedness at any given time 83.An insured allows a permanent policy to lapse. Most insurance companies will ANS automatically institute the extended

term option. 84.The life and health insurance marketing system utilizing producers that represent multiple insurance companies at the same time, are compensated on a commission basis, and own their own "book of business" is the ANS indepen- dent agency system. 85.What is the definition of Risk? ANS uncertainty or chance of loss 86.Which of the following characteristics apply to Medicare Supplement Poli- cies (MSPs)? ANS All of the above. -First-time applicants (over age 65) for MSPs cannot be turned down. -The definitions used in MSPs must be the same definitions used in Medicare. -MSPs may not duplicate coverage provided by Medicare. 87.A disability income policy typically covers ANS just the wage earners. 88.A life insurance company may pay a death claim for less than the face amount of a policy under which of the following conditions? ANS All of the above

-When there is an outstanding policy loan. -When the policy is in the grace period because of an unpaid premium. -When the age of the insured was understated on the application 89.This rider can be attached to a permanent life insurance policy to add more coverage for a limited time. ANS term rider 90.A contract requires an Offer and Acceptance. What constitutes a valid offer? ANS An application and premium payment submitted to the company or one of its agents. 91.In Health Maintenance Organizations (HMOs), the use of a primary care physician or PCP is common as part of ANS the gatekeeper system. 92.Renewable Term guarantees ANS the insured's insurability 93.Under a collateral assignment, the policyowner ANS assigns only a portion of the policy proceeds to the assignee. 94.Which of the following is INCORRECT concerning premiums collected by an insurance producer in Alabama? ANS Premium payments become the property of the producer 95.You must notify the Company of a health insurance claim within how many days (or as soon thereafter as reasonable possible)? ANS 20 days 96.Alabama law regulates Life insurance benefits with respect to minors. Which statement is FALSE? ANS Minors can receive benefits without restriction. 97.COBRA and HIPAA both address portability. What is the difference between them? ANS COBRA provides a coverage bridge,

HIPAA addresses coverage under plans for new entrants. 98.An immediate annuity with quarterly payments will begin making pay- ments ANS 3 months after the annuity is purchased. 99.The primary components in premium calculations include each of the following EXCEPT ANS Profit margins.

  1. An individual insurance producer who allows his or her license to lapse may, within a maximum period of months from the due date of the renewal fee, reinstate the same license without having to complete the prelicensing course or pass a written examination. ANS 12
  2. If you surrender your policy early or simply stop paying premiums, you still own the equity you have built. You can choose to ANS get a check for the remaining cash values
  3. According to Required Health Policy Provisions, the insured is prevented from filing suit against the insurer for at least ANS 60 days and not longer than three years from the date of proof of loss
  4. Which of these is NOT a feature of Health Savings Accounts? ANS the ac- counts earn no interest
  1. How can interest rates or investments affect premiums? ANS companies pass the cost of borrowing money along to customers
  2. An applicant for insurance may pay the initial premium and receive a document from the agent indicating that if the policy is issued as requested, coverage begins on the date of the document. What is this document called?- ANS Conditional receipt
  3. Withholding of facts that should be included in an application for insur- ance is called ANS concealment.
  4. Which of the following statements is true? ANS policy dividends cannot be guaranteed
  5. In the life insurance agency relationship, what party is the principal? ANS The insurance company
  6. When the owner of a life insurance policy transfers ownership to a third party in return for payment of a large percentage of the death benefit, this is known as ANS a viatical settlement agreement
  7. When a policy claim contains a deductible and a coinsurance provision, the policyholder's portion of the claim is calculated by ANS applying the deductible first
  8. To receive some Social Security benefits and be considered "currently insured", an individual must have ANS at least 6 quarters of coverage
  9. The State's Nonforfeiture Law is supported by? ANS Nonforfeiture Clause.
  1. Under which of the following circumstances will the payor rider waive premiums and allow a life insurance policy to remain in force? ANS if the policy owner dies or becomes disabled prior to the insured reaching either age 21 or 25
  2. Which of the following accurately describes the 'free look' provision? ANS - Allows the insured to look over the issued policy for a specific number of days and return it for a premium refund if desired.
  3. Which of the following statements about key employee life insurance is true? ANS The business is always the owner and beneficiary of key employee insurance.
  4. A preferred classification would most like be given to an applicant who?- ANS Any or all of the above. -is at the ideal weight for their height. -Is a non-smoker, and only rarely consumes alcohol. -Has normal blood pressure and cholesterol levels
  5. Which of the following statements describes the aviation exclusion? ANS It limits or excludes coverage when the insured is participating in only certain kinds of air travel.
  1. Normally, Blue Cross and Blue Shield organizations make payments for medical expenses ANS directly to the providers.
  2. Disability income policies are designed to ANS pay you enough to maintain your current standard of living.
  3. If administrative action is taken against you, or you are criminally pros- ecuted in another jurisdiction, you have how long to submit notice to the Alabama Commissioner? ANS 30 days
  4. Which of the following premium payment modes will result in the highest total premium? ANS Monthly
  5. The Alabama Life and Disability Insurance Guaranty Association covers the contractual obligations of an insolvent life and disability insurer, but its aggregate liability for CASH VALUES shall not exceed ANS $100,000.
  6. When a policy is written so that no one may change the beneficiary, the policy has ANS an irrevocable beneficiary.
  7. In a decreasing term policy which of the following decreases each year?- ANS The cash value
  8. Oliver has a life insurance policy with a $50,000 death benefit. At his death, there is a $5000 policy loan outstanding. Which of the following state- ment is CORRECT? ANS The insurer will subtract the amount of the loan and pay $45,000 to the beneficiary.
  1. Laws have been enacted to prohibit cancellation of a Medicare supple- ment policy on the sole basis of age or deterioration of health. This require- ment is called ANS guaranteed renewability
  2. The fact that insurance is more likely to be purchased by people who expect to experience a loss is known as ANS adverse selection.
  3. The current rate of interest paid to the cash value account of a universal life policy consists of ANS Guaranteed Interest plus Excess interest
  4. A certificate of insurance ANS is issued to each individual covered by the group life insurance.
  5. A parent who purchases a policy on the life of a minor child and wishes to retain complete control of the policy until the child reaches age 18 may do so by means of ANS the ownership clause.
  6. Regardless of where the insurance company was chartered, in order to operate in Alabama, which statement is most accurate ANS All companies doing business in Alabama must comply with Alabama Code.
  7. Which life policy starts as term insurance but after a certain period of time automatically converts to whole life? ANS Modified Life.
  8. Bill's Major Medical policy is reinstated on September
  9. If he is hit by a truck and hospitalized on September 15, he

will receive ANS full benefits.

  1. A form of welfare that provides assistance to the needy is ANS Medicaid
  2. All of the following would likely be eligible for group life insurance EX- CEPT ANS members of a coal miner's union.
  3. A man with an Accidental Death & Dismemberment (AD&D) policy having a Principal Sum of $100,000 and a Capital Sum of $50,000 loses a leg due to a blood clot which was not due to an accident. The policy will pay ANS $0
  4. A level term policy is one where ANS the premium and the protection remain constant for the term of the policy.
  5. In general, advertising would include each of the following EXCEPT ANS - Communication of administrative matters.
  6. Which of the following are true regarding Medicare Prescription Drug Coverage (Part D)? ANS all of the above -there is a monthly premium -there is an annual deductible -there are copay requirements
  7. Which of the following is CORRECT regarding Alabama's annuity suitabil- ity regulation? ANS all of the above are correct. -The producer must make every effort to obtain information to clarify the prospective purchaser's financial status, tax status and investment objectives.

-The producer must have reasonable grounds to believe the recommended annuity purchase is suitable based on the facts disclosed. -The producer must maintain records of information obtained for at least three years after the transaction.

  1. The Convertibility Option offers what major advantage to the insured? ANS - Insurability is not a factor.
  2. Which of the following is NOT a Workers Compensation benefit? ANS Extra income benefits
  3. An entities chance of loss is determined by reviewing loss experience for large numbers of entities with similar risk characteristics. This predictability of loss relies upon what principle? ANS The Law of Large Numbers
  4. Which of the following most specifically describes a type of policy intend- ed to cover extended residence in a nursing home? ANS Long-term care policies
  5. Joe, whose life insurance policy has a waiver of premium rider, becomes disabled for two years, during which time the company pays over $1,500 in premiums. Joe recovers and now must ANS begin paying the premiums again as they become due.
  1. The Accidental Death Rider pays double the face amount (or another multiple of the face) if death is caused by what? ANS Accidental cause and within 90 days of the accident.
  2. A disability that is presumed to result from the same or a related cause of prior disability is called a ANS recurrent disability
  3. The fundamental insurance concept that an insured should not profit from a loss but should be restored in whole or in part to the approximate finan- cial condition occupied before the loss is known as the principle of ANS indemnity.
  4. The "elimination period" refers to ANS the time period after a disability starts and before the insured may begin receiving disability income benefits.
  5. When a policyowner permanently turns over all rights in a policy to an assignee it is called ANS an absolute assignment.