California Life, Accident, and Health Insurance Exam, Exams of Nursing

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Final Exam California Life, Accident, and Health Insurance

150 Questions with Answers

The systematic liquidation of a sum of money is provided by a(n) - CORRECT ANSWER annuity An annuitant would like to determine the current value of her annuity. To do this, she multiplies the number of "accumulation units" she owns times the unit value of the "separate account". What kind of annuity BEST matches this description? - CORRECT ANSWER Variable annuity What kind of annuity pays income to two annuitants until their deaths? - CORRECT ANSWER Joint and survivor annuity What distinguishes a deferred annuity from an immediate annuity? - CORRECT ANSWER The time at which benefit payments start Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments

• CORRECT ANSWER for a minimum of 120 months and a maximum of the remainder of her life When a mutual insurer becomes a stock company, the process is called - CORRECT ANSWER Demutualization An insurer owned by its policyholders is called a - CORRECT ANSWER mutual insurer Which of the following statements regarding a life insurance policy dividend is TRUE? - CORRECT ANSWER It is the distribution of excess of funds accumulated by the insurer on participating policies A participating company is also referred to as which type of insurer? - CORRECT ANSWER Mutual insurer

Which of the following is NOT a benefit of insurance? - CORRECT ANSWER Losses due to fraud are eliminated Which of the following is NOT a provision in a disability income policy? - CORRECT ANSWER Deductible and coinsurance provision Which of these statements is NOT true concerning recurrent disabilities? - CORRECT ANSWER The insurer continues coverage after a new elimination period Allen has a disability income policy with a $2,500 monthly benefit and a 30-day elimination period. He is unable to work 90 days following an automobile accident. What will the policy pay? - CORRECT ANSWER $5, Manuel is considered to be a disabled person as defined by the Americans with Disabilities Act (ADA). As such, he is unable to perform any of the following life activities EXCEPT - CORRECT ANSWER Driving Under a disability income policy, which criteria must be met for "bodily injury" to be classified as accidental? - CORRECT ANSWER The cause may be intentional, but the result must be accidental During the underwriting process for a group health policy, it was discovered that 15 out of 50 members of the group have major health issues. How would the insurer handle this? - CORRECT ANSWER Accept or reject the whole group Coverage is limited for vision and dental insurance in all of the following ways, EXCEPT - CORRECT ANSWER Specific dollar amount for examinations An eligible individual who would like to obtain group health insurance without providing evidence of insurability must - CORRECT ANSWER enroll within a specified eligibility period In regards to a group health insurance plan, which statement is CORRECT? - CORRECT ANSWER A non-contributory group health plan must cover all eligible members

The problem of overinsurance is addressed in which health insurance provision? - CORRECT ANSWER Coordination of benefits A health insurance policy paid on a quarterly basis has a grace period of - CORRECT ANSWER 31 days Under a noncancellable health insurance policy, an insurer can - CORRECT ANSWER cancel the policy for nonpayment of premium The conditions, times, and circumstances under which an insured is NOT covered by a health policy are called? - CORRECT ANSWER exclusions In what situation does a waiver of premium provision keep a health insurance policy in force without premium payments? - CORRECT ANSWER When an insured becomes totally disabled Christine has a health insurance policy that has been in force beyond the incontestable period. The insurer has discovered that a fraudulent statement was made on the application. What would the insurer have to pay on a claim, assuming this wasn't a guaranteed renewable policy? - CORRECT ANSWER Nothing Under a health insurance policy, the provision that states the kind of benefits provided and the circumstances under which they will be paid is called the? - CORRECT ANSWER insuring clause Which of the following factors is NOT used in underwriting health insurance policies? - CORRECT ANSWER Intelligence What is the term used to describe the frequency and severity of certain illnesses and accidents? - CORRECT ANSWER Morbidity Which of the following is NOT considered to be insurer expenses? - CORRECT ANSWER Policy premiums Express power given to an agent in an agency agreement is - CORRECT ANSWER the authority to represent the insurer

Which of the following is NOT a requirement of a contract? - CORRECT ANSWER Equal consideration is required between the involved parties Which principle is accurately described with the statement "Insureds are entitled to recover an amount NOT greater than the amount of their loss"? - CORRECT ANSWER Indemnity Which statement is CORRECT when describing a contract of adhesion? - CORRECT ANSWER Contract may be accepted or rejected by the insured The importance of a representation is demonstrated in what rule? - CORRECT ANSWER Materiality of concealment What does the insurance term "indemnity" refer to? - CORRECT ANSWER Make whole Reasonably necessary acts that an agent must perform for carrying out his/her expressly authorized duties are covered by an agent's - CORRECT ANSWER Implied authority Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose? - CORRECT ANSWER Interest Option Which of the following describes the number of deaths in a year compared to the number of people in a select group? - CORRECT ANSWER Mortality rate Which of these is the automatic mode of settlement for life insurance policy proceeds? - CORRECT ANSWER Lump-sum What is the price of insurance for each exposure unit? - CORRECT ANSWER Rate When calculating life insurance premium rates, which component would an agent's commission fall under? - CORRECT ANSWER Insurer's expenses

Which of the following is NOT a life insurance settlement option? - CORRECT ANSWER Extended term option An insurer can be protected from adverse selection with which policy provision? - CORRECT ANSWER Suicide clause What does the grace period allow a life insurance policyowner to do? - CORRECT ANSWER Make a premium payment after the due date without any loss of coverage A life insurance policy can be surrendered for its cash value under which policy provision? - CORRECT ANSWER Nonforfeiture options Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10- year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT - CORRECT ANSWER Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance Which policy provision protects the policyowner from unintentional lapse of the contract? - CORRECT ANSWER Grace period What does the guaranteed insurability option allow an insured to do? - CORRECT ANSWER Purchase additional coverage with no evidence of insurability required Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this? - CORRECT ANSWER Waiver of premium provision After a policy has lapsed, which provision allows the insured to continue coverage? - CORRECT ANSWER Reinstatement provision Which statement is true regarding policy dividends? - CORRECT ANSWER A dividend option is selected by the insured at the time of policy purchase

Which of the following is NOT a common life insurance policy rider? - CORRECT ANSWER extended term Which of the following is a life insurance policy that does NOT require a physical exam? - CORRECT ANSWER Non-medical What is the proper order of initial life insurance premiums, from lowest to highest? - CORRECT ANSWER Modified premium, ordinary life, single premium An insurance policy written after 1988 that fails to pass the seven-pay test is known as - CORRECT ANSWER a modified endowment contract Lynn owns a life policy that guarantees the right to renew the policy each year, regardless of health, but at an increased premium. What kind of policy is this? - CORRECT ANSWER Renewable term A life insurance policy's limit of liability would be - CORRECT ANSWER the policy's face amount Which of the following types of life insurance combines a savings element along with a flexible premium option? - CORRECT ANSWER Universal life A life insurance policy that pays the face amount if the insured survives to a specified period of time is called - CORRECT ANSWER endowment insurance Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2? - CORRECT ANSWER 10% Which of the following is NOT an important reason for a life insurance application? - CORRECT ANSWER The beneficiary must sign the application before the insurer will issue the policy How does a conditional receipt differ from a binding receipt? - CORRECT ANSWER Binding receipts always provide insurance which starts from the date of receipt Which of the following types of information is NOT required for a life insurance application? - CORRECT ANSWER Ethnicity

The objective of underwriting is to - CORRECT ANSWER avoid selecting disproportionate number of bad risks When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called - CORRECT ANSWER underwriting Which of the following risk classifications charge the highest premium? - CORRECT ANSWER Substandard Most U.S. life insurance companies belong to the - CORRECT ANSWER Medical Information Bureau Which of the following does specified disease insurance NOT cover? - CORRECT ANSWER costs covered by medical expense insurance Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n) - CORRECT ANSWER deductible An insured is protected from the expense of a catastrophic illness by which of the following health insurance provisions? - CORRECT ANSWER Stop-loss Which of the following terms is NOT associated with a Major Medical policy? - CORRECT ANSWER Capitation Medical expense policies will typically cover which of the following? - CORRECT ANSWER Injuries caused by accidents Which of the following is NOT included in comprehensive major medical plans? - CORRECT ANSWER First-dollar coverage Which of the following types of policies pays a stated amount for each day an individual is hospitalized? - CORRECT ANSWER Hospital confinement indemnity Which of the following is NOT an element of an insurable risk? - CORRECT ANSWER Loss must be catastrophic

Which of the following is NOT considered a definition of risk? - CORRECT ANSWER The cause of a loss Which of the following refers to a condition that may increase the chance of a loss? - CORRECT ANSWER Hazard Which of the following is considered to be any situation that has the potential for loss? - CORRECT ANSWER Loss exposure A hazard can be best described as - CORRECT ANSWER a condition that may increase the likelihood of a loss occurring Moral hazard is described as the - CORRECT ANSWER increased chance of a loss because of an insured's dishonest tendencies Which type of risk is gambling? - CORRECT ANSWER Speculative risk Which of the following is any situation that presents the possibility of a loss? - CORRECT ANSWER Loss exposure What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? - CORRECT ANSWER Disclosure and reporting Retirement plans are prevented from favoring highly compensated employees under which government regulation? - CORRECT ANSWER Nondiscrimination How are the Roth IRA's treated fro tax purposes? - CORRECT ANSWER Non- deductible contributions and tax-free distributions ESOPs are typically invested in - CORRECT ANSWER employer stock Which of the following plans will cover medical costs that Medicare doesn't cover? - CORRECT ANSWER Medicare supplement Periodic increases in policy benefits are allowed in which long-term care policy provision? - CORRECT ANSWER Inflation protection

All of these statements concerning Medicare are true EXCEPT - CORRECT ANSWER Long-term care is covered by Medicare Part C What portion does an insured pay for covered expenses under Medicare Part B after the deductible? - CORRECT ANSWER 20% What is considered to be the definition of disability, according to Social Security? - CORRECT ANSWER Unable to engage in any substantial gainful activity Who is NOT eligible for Social Security survivor benefits? - CORRECT ANSWER A deceased worker's dependent parents of any age Which type of worker has Social Security benefits available to them? - CORRECT ANSWER Fully insured Which Social Security status does a worker with 6 quarters of coverage during the last 13-quarter period have? - CORRECT ANSWER Currently insured According to Social Security, an individual with 6 credits of coverage during the previous 13-quarter period is considered to be: - CORRECT ANSWER currently insured The reason for social insurance is to - CORRECT ANSWER protect certain vulnerable segments of the population Life insurance creates an immediate estate. The phrase means: - CORRECT ANSWER when the insured dies, a death benefit is paid Key person insurance is intended to - CORRECT ANSWER cover business losses due to the death of a key employee Which of the following pieces of information is NOT gathered during the personal financial planning process? - CORRECT ANSWER An individual's civic organization memberships

Both the Federal and state governments jointly finance which health insurance entitlement program? - CORRECT ANSWER Medi-Cal Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)? - CORRECT ANSWER Traveling overseas with a spouse The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is - CORRECT ANSWER no cost In what order are people on the MRMIP waiting list allowed to enroll? - CORRECT ANSWER Based on the date an individual's application is received What effect did the Pregnancy Discrimination Act have on the health industry? - CORRECT ANSWER Pregnancy must be treated as any other medical condition When selling a long term care insurance rider to an applicant, a life agent must take into consideration all of the factors, EXCEPT - CORRECT ANSWER Attending physician's statement An insurance policy issued in California may be called a comprehensive long-term care insurance policy if benefits are provided for - CORRECT ANSWER Institutional (nursing facilities) and home care Where must you specifically reside to qualify for MRMIP? - CORRECT ANSWER California In California, the elderly can receive information about health related issues from

• CORRECT ANSWER The Health Insurance Counseling and Advocacy Program (HiCap) How long must a policy be in force before an insurer is prohibited from denying claims based on misstatements made on the health policy application? - CORRECT ANSWER 2 years Which of the following does NOT have to be included on life insurance policy illustrations? - CORRECT ANSWER Statement that all values and benefits are guaranteed

Life insurance surplus must be distributed to policyowners at what frequency? - CORRECT ANSWER Annually What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - CORRECT ANSWER Incontestability clause Who does a life settlement broker represent? - CORRECT ANSWER Individual wanting to sell their life policy to a third party What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code? - CORRECT ANSWER Presentation of policy features that includes non-guaranteed elements Paul has an existing annuity and sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n) - CORRECT ANSWER unnecessary replacement Why is a life insurance policy's delivery date important? - CORRECT ANSWER The free-look period begins on the policy delivery date The free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30 days Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilege? - CORRECT ANSWER Provide proof of insurability How is the cost of employer-provided group life insurance with coverage amounts above $50,000 treated for tax purposes? - CORRECT ANSWER Taxable income to the employee Which of the following describes a contributory group insurance plan? - CORRECT ANSWER Part of the premium is paid by the employee Which of the following NOT a characteristic of the conversion privilege? - CORRECT ANSWER Employer pays the premium for the converted policy

Employee participation in a noncontributory group life plan must be - CORRECT ANSWER 100% Coverage for care received from a network provider pays more than care received from a non-network provider in what type of health plan? - CORRECT ANSWER Preferred Provider Organization (PPO) Medicare Part B has an initial enrollment period. How many months after an individual's 65th birthday month does this enrollment period end? - CORRECT ANSWER 3 months If a healthcare provider is considered to be a service provider, what does this mean? - CORRECT ANSWER Payment for services goes directly to the provider At age 65, which of the following is available at no cost to all individuals? - CORRECT ANSWER Medicare Part A Which statement regarding Medicare is true? - CORRECT ANSWER Benefits for diagnostic tests and X-rays performed on an outpatient basis are provided by Part B Individual health insurance coverage typically excludes injuries at an employee's workplace because - CORRECT ANSWER it's covered by the state Workers' Compensation program Which of the following is NOT a characteristic of a preferred provider organization (PPO)? - CORRECT ANSWER Primary physicians serve as gatekeepers Which of the following does Medicare Part A NOT provide coverage for? - CORRECT ANSWER Doctor's services Who acts as the gatekeeper in a Health Maintenance Organization (HMO)? - CORRECT ANSWER Primary care physician Medicare Part A covers what type of care? - CORRECT ANSWER Skilled nursing facility care

Which of the following is an example of a third-party administrator? - CORRECT ANSWER Outside organization that process claims for an employer's self-funded group plan When intentional concealment is involved, what course of action is the injured party entitled to? - CORRECT ANSWER Rescission of the contract In California, an insurer organized under the state laws of Oregon is called a(n) - CORRECT ANSWER foreign insurer Which of the following does the California Insurance Code NOT require an insurance policy to specify? - CORRECT ANSWER Insurer's financial rating An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n) - CORRECT ANSWER unfair method of competition When handling premiums for an insured, an agent is acting in which capacity? - CORRECT ANSWER Fiduciary Under the California Insurance Code, a licensee's license number must be printed a what size on all price quotes, business cards, and printed material? - CORRECT ANSWER The same size print as the licensee's phone number, fax number or address Insurance agents and brokers must make their insurance records available to the Commissioner - CORRECT ANSWER at all times According to the California code governing claim settlement practices, which of the following is NOT considered to be an act of unfair discrimination? - CORRECT ANSWER Denial of claim based on reckless behavior Which of the following is NOT protected under the California Life and Health Guarantee Association? - CORRECT ANSWER Insurers

Which of the following is NOT considered to be an unfair claims settlement practice? - CORRECT ANSWER Advising a claimant to hire an attorney Any changes in background information that occur after a producer application has been submitted or a license has been issued MUST be reported to the Insurance Commissioner within - CORRECT ANSWER 30 days According to California Insurance Code, who is responsible for a submitting a life agent's appointment? - CORRECT ANSWER Insurer What type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? - CORRECT ANSWER Prior approval Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance - CORRECT ANSWER solicitor Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to - CORRECT ANSWER all of these (fine, suspension, denial) The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount? - CORRECT ANSWER Its paid-in capital According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium? - CORRECT ANSWER Materiality