California Life, Accident, And Health Insurance Final Exam, Exams of Health sciences

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California Life, Accident, And Health Insurance Final Exam (160 Questions)

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What distinguishes a deferred annuity from an immediate annuity? – ANSWER: The time at which benefit payments start Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary? - ANSWER: 60 payments What is a common reason people purchase an annuity? - ANSWER: To protect against the risk of outliving their financial resources What kind of annuity pays income to two annuitants until their deaths? - ANSWER: Joint and survivor annuity What is a joint and survivor annuity? - ANSWER: Provides payments the annuity to two people. If either person dies, the same income payments continue to the survivor for life. When the surviving annuitant dies, no further payments are made to anyone. 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 - ANSWER: for a minimum of 120 months and a maximum of the remainder of her life Which of the following statements regarding a life insurance policy dividend is TRUE? - ANSWER: It is the distribution of excess of funds accumulated by the insurer on participating policies. An insured owned by its policyholders is called a - ANSWER: mutual insurer An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is the agreement called? - ANSWER: Reinsurance What is reinsurance? - ANSWER: An arrangement by which an insurance company transfers a portion of a risk it has assumed to another insurer Which of the following is NOT a characteristic of reinsurance? - ANSWER: Increases the unearned premium reserve Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event? - ANSWER: Insurance policy What is an insurance policy? - ANSWER: A contract where one party promises to indemnify another against loss that arises from an unknown event What is residual disability income insurance payments based on? - ANSWER: The amount of the insured's income is reduced by the disability 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 - ANSWER: Driving Which of the following is NOT a provision in a disability income policy? - ANSWER: Deductible and coinsurance provision

Which of these statements is NOT true concerning recurrent disabilities? - ANSWER: The insurer continues coverage after a new elimination period Kim is insured under a disability income insurance policy with an "own-occupation" clause. She was recently injured in an automobile accident and can no longer perform the tasks of her job. Kim is now considered to be - ANSWER: totally disabled What percentage of eligible employees must participate in a noncontributory group health plan before it can be put in effect? - ANSWER: 100% Business Overhead Expense Insurance pays for - ANSWER: business expenses when a business owner becomes disabled Minimum participation standards exist for group health insurance plans in order to - ANSWER: prevent adverse selection The problem of overinsurance is addressed in which health insurance provision? - ANSWER: Coordination of benefits What is the purpose of the coordination of benefits (COB) provision? - ANSWER: To avoid duplication of benefit payments and overinsurance when an individual is covered under more than one group health plan Who is financially liable for the payment of covered claims in a fully insured group health plan? - ANSWER: Insurer The insurer has the option of terminating a health insurance policy on a date stated in the contract. What type of policy is this? - ANSWER: Optionally renewable What is an optionally renewable policy? - ANSWER: A provision allowing an insurer to terminate the policy on a date specified in the contract 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? - ANSWER: Waiver of premium provision 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? - ANSWER: Nothing What type of health insurance policy cannot be canceled by the insurer nor increase the premiums? - ANSWER: Noncancellable The conditions, times, and circumstances under which an insured is NOT covered by a health policy are called? - ANSWER: exclusions What are exclusions in a health policy? - ANSWER: Specified hazards listed in a policy for which benefits will not be paid 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? - ANSWER: insuring clause What does an insuring clause state? - ANSWER: Under a health insurance policy, the provision that states the kind of benefits provided and the circumstances under which they will be paid

Which of these is NOT a relevant factor in the health insurance principle of morbidity? - ANSWER: Intelligence How does rising morbidity rates affect health insurance? - ANSWER: Increased premiums In health insurance, morbidity rates show - ANSWER: the expected incidence of sickness or disability within a given group during a given period of time Which of the following factors is NOT used in underwriting health insurance policies? - ANSWER: Intelligence Which of the following is NOT a requirement of a contract? - ANSWER: Equal consideration is required between the involved parties Which of the following statements correctly describes a contract of indemnity? - ANSWER: One party is restored to the same financial position the party was in before the loss occurred Which of the following is NOT required in the content of a policy? - ANSWER: Probability of loss Which statement is CORRECT when describing a contract of adhesion? - ANSWER: Contract may be accepted or rejected by the insured Restoring an insured to the same condition as before a loss is an example of the principle of - ANSWER: Indemnity Which course of action is the insurer entitled to when deliberate concealment is committed by the insured? - ANSWER: Rescinding the contract The importance of representation is demonstrated in what rule? - ANSWER: Materiality of concealment What is the price of insurance for each exposure unit? - ANSWER: Rate Which of the following is NOT an insurer policy expense? - ANSWER: Premiums A beneficiary receives only the death benefit earnings in which settlement option? - ANSWER: Interest option Which of these is the automatic mode of settlement for life insurance policy proceeds? - ANSWER: Lump-sum A spendthrift clause in a life insurance policy - ANSWER: restricts the ability of the beneficiary to sign benefits Premiums are best described as - ANSWER: the amount an insured pays per unit of coverage What does the grace period allow a life insurance policy owner to do? - ANSWER: Make a premium payment after the due date without any loss of coverage Which of the following does a policyowner NOT have a right to change? - ANSWER: Dividend schedule When does a life insurance policy's waiver of premium take effect? - ANSWER: Insured becomes totally disabled

What are collateral assignments normally associated with? - ANSWER: Bank loans Jerry is an insured who understated his age on his life insurance application, paying $12 per $1,000 of insurance instead of $15 per $1,000. If he dies, how will the adjusted death benefit be calculated? - ANSWER: 12/15th of the policy's face amount How is a life insurance policy dividend legally defined? - ANSWER: A return of excess premium and not taxable If an insured dies because of an accident, which type of life insurance rider will provide additional coverage? - ANSWER: Accidental death rider What time period allows an insured's life insurance policy to remain in force even if the premium was not paid of the due date? - ANSWER: Grace period An insurer can be protected from adverse selection with which policy provision? - ANSWER: Suicide clause A life insurance policy can be surrendered for its cash value under which policy provision? - ANSWER: Nonforfeiture options In a modified endowment contract, the penalty tax imposed on premature withdrawals is - ANSWER: 10% A life insurance policy's limit of liability would be - ANSWER: the policy's face amount Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a - ANSWER: Joint life policy What is a joint life policy? - ANSWER: It covers two or more people and pays the face amount at the first insured's death Which of the following types of life insurance combines a savings element along with a flexible premium option? - ANSWER: Universal life An insurance policy written after 1988 that fails to pass the seven-pay test is known as - ANSWER: a modified endowment contract A life insurance policy where the insured can choose where the cash value can be invested is called - ANSWER: variable life Scott has just purchased a new house. He is now shopping for a life insurance policy that provides a death benefit that matches the projected outstanding debt of his mortgage. Which life policy would best suit his needs? - ANSWER: Mortgage redemption A life insurance policy that pays the face amount if the insured survives to a specified period of time is called - ANSWER: endowment insurance Which of the following is NOT a risk classification that an underwriter would use? - ANSWER: Dividend risk When an applicant applies for insurance, the process by which he insurer determines whether to issue a policy is called - ANSWER: underwriting

A report which is based on creditworthiness and personal characteristics that influences an insurance applicant's eligibility for life and health insurance is called a(n) - ANSWER: consumer report Which of the following types of information is NOT required for a life insurance application? - ANSWER: Ethnicity The Medical Information Bureau consists of - ANSWER: life and health insurance companies What must an applicant do in order to authorize the release of an attending physician report? - ANSWER: Sign a consent form What are members of the Medical Information Bureau (MIB) required to report? - ANSWER: Medical ailments discovered during the underwriting process Which of the following does specified disease insurance NOT cover? - 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) - ANSWER: deductible At what point does a self-insured group qualify for stop-loss coverage? - ANSWER: When claims exceed a specified limit in a set period of time What does a Hospital Confinement indemnity policy pay for? - ANSWER: Pays a specified daily amount while the insured is confined to a hospital Medical expense policies will typically cover which of the following? - ANSWER: Injuries caused by accidents All of these are examples of cost sharing in a health insurance policy EXCEPT - ANSWER: Coordination Wat is considered the most common type of specified disease insurance policy? - ANSWER: Cancer Moral hazard is described as - ANSWER: increased chance of a loss because of an insured's dishonest tendencies Which of the following is any situation that presents the possibility of a loss? - ANSWER: Loss exposure Which of the following is a situation where there is a possibility of either a loss or a gain? - ANSWER: Speculative risk Which of these statements correctly describes risk? - ANSWER: Pure risk is the only insurable risk All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT - ANSWER: Probability of loss is unknown A situation in which there is ONLY a chance of loss or no loss is a - ANSWER: pure risk Which of the following refers to a condition that may increase the chance of a loss? - ANSWER: Hazard A hazard can be best described as - ANSWER: a condition that may increase the likelihood of a loss occurring

How are Roth IRA's treated for tax purposes? - ANSWER: Non-deductible contributions and tax-free distributions Retirement plans are prevented from favoring highly compensated employees under which government regulation? - ANSWER: Nondiscrimination What doe ESOP stand for? - ANSWER: Employee Stock Ownership Plan ESOPs are typically invested in - ANSWER: employer stock What type of coverage pays a benefit for part-time nursing care that can be provided in a patient's home? - ANSWER: Home health care What portion does an insured pay for covered expenses under Medicare Part B after the deductible? - ANSWER: 20% Rating an individual's need for long-term care benefits can be measured by - ANSWER: activities of daily living Which of the following plans will cover medical costs that Medicare doesn't cover? - ANSWER: Medicare supplement Which Social Security status does a worker with 6 quarters of coverage during the last 13-quarter period have? - ANSWER: Currently insured The "blackout period" affects whose benefits? - ANSWER: Surviving spouse At what age is a surviving spouse without dependents eligible for Social Security survivor benefits? - ANSWER: 60 According to Social Security, an individual with 6 credits of coverage during the previous 13-quarter is considered to be: - ANSWER: currently insured An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be - ANSWER: fully insured In order to be considered "currently insured" under Social Security, an individual must be credited with: - ANSWER: 6 quarters of coverage during the last 13-quarter period Key person insurance is intended to - 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? - ANSWER: An individual's civic organization memberships The Human Life Value concept is based on - ANSWER: income An insurance policy issued in California may be called a comprehensive long-term care insurance policy if benefits are provided for - ANSWER: Institutional (nursing facilities) and home care According to the PPACA, an adult can be covered by a parent's health care plan until what age? - ANSWER: Age 26 Kimberly is an employee on leave under the Family and Medical Leave Act (FMLA). What will happen to her group health coverage? - ANSWER: She continues to be enrolled during the leave

People with low income can be provided with medical assistance through which program? - ANSWER: Medi-Cal When selling a long term care insurance rider to an applicant, a life agent must take into consideration all of these factors, EXCEPT - ANSWER: Attending physician's statement In what order are people on the MRMIP waiting list allowed to enroll? - ANSWER: Based on the date an individuals's application is received Which of the following is NOT an accurate description of Access for infants and Mothers Program (AIM)? - ANSWER: Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HICAP) counselors? - ANSWER: Charge a fee What is the purpose of the Pre-Existing Condition Insurance Plan (PCIP)? - ANSWER: PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions What effect did the Pregnancy Discrimination Act have on the health industry? - ANSWER: Pregnancy must be treated as any other medical condition The California Insurance Code allows an individual how many days to cancel a life policy for a full- refund? - ANSWER: Between 10 and 30 days What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - ANSWER: Incontestability clause What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code? - ANSWER: Presentation of policy features that includes non-guaranteed elements The free-look period for life insurance policyowners age 60 or older is - ANSWER: 30 days An agent's attempt to stop the replacement of an existing life insurance policy is known as - ANSWER: conservation Who does a life settlement broker represent? - ANSWER: Individual wanting to sell their life policy to a third party Paul has an existing annuity and is 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) - ANSWER: unnecessary replacement Which of the following does NOT have to be included on life insurance policy illustrations? - ANSWER: Statement that all values and benefits are guaranteed Which of the following describes a contributory group insurance plan? - ANSWER: Part of the premium is paid by the employee A terminated employee that has exercised the conversion privilege is able to convert - ANSWER: term insurance into permanent insurance How does underwriting differ between group life and individual life insurance? - ANSWER: Medical questions must be answered on individual life insurance

Tim was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called? - ANSWER: Conversion Who are the parties to the master contract in a group life insurance policy? - ANSWER: Insurer and employer Which of the following does Medicare Part A NOT provide coverage for? - ANSWER: Doctor's services Which of the following healthcare providers provides both the healthcare services and healthcare coverage? - Health Maintenance Organization (HMO) Individuals become eligible for Medicare Part A benefits at what age? - ANSWER: 65 After the annual deductible is met, a Medicare Part B patient will pay ____ of the remaining covered expenses. - ANSWER: 20% After the annual deductible is met, Medicare Part B will pay ____ of the remaining approved charges. - ANSWER: 80% Medicare Part B covers - ANSWER: physician expenses How is a Medicare claim submitted? - ANSWER: Expenses are submitted to Medicare by the health provider Jon's health plan pays benefits of 90% for in-network providers and 70% for out-of-network providers. What kind of plan is this? - ANSWER: PPO What is PPO? - ANSWER: A Preferred Provider Organization pays more for care received from a network provider than it pays for care from a non-network provider Individual health insurance coverage typically excludes injuries at an employee's workplace because - ANSWER: it's covered by the state Workers' Compensation program If a healthcare provider is considered to be a "service provider", what does this mean? - ANSWER: Payment for services goes directly to the provider Which statement is TRUE regarding Workers' Compensation coverage - ANSWER: Employer pays the entire premium for Workers' Compensation coverage Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct? - ANSWER: Jim must still disclose the conviction on his insurance license application 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? - ANSWER: Its paid-in capital When handling premiums for an insured, an agent is acting in which capacity? - ANSWER: Fiduciary An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n): - ANSWER: life agent Which of the following does the California Insurance Code NOT require an insurance policy to specify?

• ANSWER: Insurer's financial rating

Which of the following is NOT protected under the California Life and Health Guarantee Association? - ANSWER: Insurers Insurance agents and brokers must make their insurance records available to the Commissioner - ANSWER: at all times 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 - ANSWER: 30 days 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 - ANSWER: fine, suspension, and denial The California Insurance Code defines "policy" as a(n) - ANSWER: written contract Before an insurer is allowed to test an individual for HIV, what must be completed? - ANSWER: Consent form Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? - ANSWER: Prior approval Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of? - ANSWER: Theft Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance - ANSWER: solicitor According to the California Insurance Code, what is "insurance"? - ANSWER: A contract What does the term "indemnity" mean as it pertains to insurance? - ANSWER: To make whole According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium? - ANSWER: Materiality