CALIFORNIA LIFE ACCIDENT AND HEALTH INSURANCE FINAL EXAM ACTUAL EXAM QUESTIONS AND ANSWERS, Exams of Insurance Economics

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CALIFORNIA LIFE ACCIDENT AND

HEALTH INSURANCE FINAL EXAM

ACTUAL EXAM QUESTIONS AND

CORRECT ANSWERS | ALREADY

GRADED A+

What is an insurance solicitor authorized to do? - Correct Answer-Help an agent or broker sell insurance According to the California Insurance Code, what is "insurance"? - Correct Answer-A contract What does a Hospital Confinement indemnity policy pay for? - Correct Answer-Pay a specified daily amount while the insured is confined to a hospital According to the California Insurance Code, how is the word "may" interpreted? - Correct Answer-Permissive Which statement is CORRECT when describing a contract of adhesion? - Correct Answer-Contract may be accepted or rejected by the insured. Retirement plans are prevented from favoring highly compensated employees under which government regulation - Correct Answer-Nondiscrimination

When calculating life insurance premium rates, which component would an agent's commission fall under? - Correct Answer-Insurer's expenses All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT - Correct Answer-Probability of loss is unknown An insurance policy written after 1988 that fails to pass the seven-pay test is known as - Correct Answer-a modified endowment contract All of these are reasons the Commissioner may disapprove a licensee's request to use a fictitious name EXCEPT - Correct Answer-The name is the licensee's actual name Which of the following services are health maintenance organizations (HMO's) NOT required to provide? - Correct Answer-Prescription drugs Which of the following is NOT true regarding a family policy that covers children? - Correct Answer-Conversion of child's coverage to permanent insurance requires evidence of insurability Which of the following types of life insurance combines a savings element along with a flexible premium option? - Correct Answer-Universal life

What determines the Social Security normal retirement age? - Correct Answer-Year in which worker was born When an insurance company requests an attending physician's report, the request must be accompanied by a

• Correct Answer-copy of the signed authorization A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a - Correct Answer-deferred annuity what does ESOP stand for? - Correct Answer-Employee Stock Ownership Plan Which Social Security status does a worker with 6 quarters of coverage during the last 13-quarter period have? - Correct Answer-Currently insured When a claimant has coverage under more than one health plan, which group medical plan provision applies? - Correct Answer-Coordination of benefits How is an agent's first-year commission calculated for a replacement long-term policy? - Correct Answer-Based on the difference between the new and original policy annual premiums 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? - Correct Answer-12/15th of the policy's face amount What is considered the most common type of specified disease insurance policy? - Correct Answer-Cancer Cancer affects 1 in 2 men and 1 in 3 women and typically involves a lot of out-of-pocket expenses. Considered most common type of specified disease insurance. Both the Federal and state governments jointly finance which health insurance entitlement program? - Correct Answer-Medi-Cal Which of these is NOT a valid policy dividend option? - Correct Answer-Monthly income payments 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 According to the PPACA, an adult can be covered by a parent's health care plan until what age? - Correct Answer-Age 26 Under a noncancellable health insurance policy, an insurer can - Correct Answer-cancel the policy for nonpayment of premium

AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called? - Correct Answer-Primary Insurer 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 type of worker has Social Security benefits available to them? - Correct Answer-Fully insured 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 a claim based on reckless behavior At what point does a self-insured group qualify for stop- loss coverage? - Correct Answer-When claims exceed a specified limit in a set period of time 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 is a situation where there is a possibility of either a loss or a gain? - Correct Answer- Speculative risk In a life insurance policy, the entire contract consists of - Correct Answer-policy and attached application Which of the following is NOT a component of determining policy premiums? - Correct Answer-Dividends 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? - Correct Answer-Jim must still disclose the conviction on his insurance license application Insurance agents and brokers must make their insurance records available to the Commissioner - Correct Answer-at all times The Human Life Value concept is based on - Correct Answer-income At age 65, which of the following is available at no cost to individuals? - Correct Answer-Medicare Part A The importance of a representation is demonstrated in what rule - Correct Answer-Materiality of concealment

Express power given to an agent in an agency agreement is - Correct Answer-the authority to represent the insurer The risk selection process is primarily given to which insurance company department? - Correct Answer- Underwriting Why is a life insurance policy's delivery date important? - Correct Answer-The free-look period begins on the policy delivery date An employee for XYZ Corp is injured on the job. Where does coverage for the employee's injuries come from? - Correct Answer-Workers' Compensation Rating an individual's need for long-term care benefits can be measured by - Correct Answer-Activities of daily living When handling premiums for an insured, an agent is acting in which capacity? - Correct Answer-Fiduciary Individual health insurance coverage typically excludes injuries at an employee's workplace because - Correct Answer-it's covered by the state Worker's Compensation program Which of the following does specified disease insurance NOT cover - Correct Answer-costs covered by medical expense insurance

Which of the following is NOT a requirement of a contract - Correct Answer-Equal consideration is required between the involved parties ESOPs are typically invested in - Correct Answer- employer stock Buy-sell agreements are typically funded by which two insurance products? - Correct Answer-Life insurance and disability insurance Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)? - Correct Answer-Traveling overseas with a spouse The "blackout period" affects whose benefits? - Correct Answer-Surviving spouse Employer contributions to qualified plans are - Correct Answer-Tax deductible by the employer Which of the following healthcare providers provides both the healthcare services and healthcare coverage? - Correct Answer-Health Maintenance Organization (HMO) A terminated employee that has exercised the conversion privilege is able to convert - Correct Answer-term insurance into permanent insurance The elimination period in a disability income policy serves the same purpose as - Correct Answer-a deductible

What type of coverage pays a benefit for part-time nursing care that can be provided in a patient's home? - Correct Answer-Home health care A life insurance policy can be surrendered for its cash value under which policy provision? - Correct Answer- Nonforfeiture options When a mutual insurer becomes a stock company, the process is called - Correct Answer-Demutualization 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 How many "activities of daily living" must an insured be UNABLE to perform in order to meet the chronically ill requirement of a Long-Term Care policy? - Correct Answer-Minimum of two activities of daily living Medical expenses policies will typically cover which of the following? - Correct Answer-Injuries cause by accidents A situation in which there is ONLY a chance of loss or no loss is a fundamental risk - Correct Answer-pure risk Which statement about Health Maintenance Organization is NOT true? - Correct Answer-When a member uses out- of-network providers, a higher monthly fee is charged

Who does a life settlement broker represent? - Correct Answer-Individual wanting to sell their life policy to a third party What effect did the Pregnancy Discrimination Act have on the health industry? - Correct Answer-Pregnancy must be treated as any other medical condition What time period allows an insured's life insurance policy to remain inform even if the premium was not paid on the due date? - Correct Answer-Grace period A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?

• Correct Answer-The insured's estate What distinguishes a deferred annuity from an immediate annuity? - Correct Answer-The time at which benefit payments start The elimination period in a disability income policy serves the same purpose as(n) __________ in a medical expense policy - Correct Answer-deductible When a life insurance policy is surrendered, how does the cost recovery rule apply? - Correct Answer-The policy's cost basis is exempt from taxation

An insured is protected from the expense of a catastrophic illness by which of the following health insurance provisions? - Correct Answer-Stopp-loss Which of the following is NOT required in the content of a policy? - Correct Answer-Probability of loss The insurer has the option of terminating a health insurance policy on a date stated in the contract. What type of policy is this? - Correct Answer-Optionally renewable According to section 1729.2 of the California Insurance Code, which of these does NOT qualify as "background information"? - Correct Answer-Misdemeanor Charles filed, not resulting in conviction If an insured dies because of an accident, which type of life insurance rider will provide additional coverage? - Correct Answer-Accidental death rider 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 Who is eligible for retirement benefits under Social Security? - Correct Answer-Fully insured workers 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 The objective of underwriting is to - Correct Answer-Avoid selecting a disproportionate number of bad risks MRMIP Stands for - Correct Answer-Major Risk Medical Insurance Program Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? - Correct Answer-Prior approval When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called - Correct Answer-underwriting When an accidental death benefit is added to a while life policy, how does this affect the policy's cash value? - Correct Answer-Policy's cash value is not affected Which of the following acts is NOT a Federal offense committed by an insurance agent - Correct Answer- Misrepresentation on an insurance application A contract requires - Correct Answer-an offer and acceptance of the contract terms A beneficiary receives only the death benefit earnings in which settlement option? - Correct Answer-Interest option

Manuel is considered to be a disable 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 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 - Correct Answer-Family income policy Which of the following factors is NOT used in underwriting health insurance policies? - Correct Answer-Intelligence How does underwriting differ between group life and individual life insurance? - Correct Answer-Medical questions must be answered on individual life insurance Which of the following are two examples of activities of daily living (ADL's) used in qualifying for long-term care benefits? - Correct Answer-Eating and dressing According to the California Insurance Code, what is used to describe a fact so important it could affect the policy premium? - Correct Answer-Materiality An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? - Correct Answer-Exclusion ratio

What is considered to be the definition of disability, according to Social Security? - Correct Answer-Unable to engage in any substantial gainful activity Paul has existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him that the existing contract. This is considered a(n) - Correct Answer-unnecessary replacement Which of the following is NOT a common life insurance policy rider? - Correct Answer-extended term Under a disability income insurance 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 An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n) - Correct Answer-Life agent What is the insurance term the State of California uses for an insurer that is eligible to transact business in the state?

• Correct Answer-Admitted Which of the following is NOT an insurer policy expense? - Correct Answer-Premiums Which word implies permissiveness according to the California Insurance Code? - Correct Answer-May

According to PPACA, what is a health benefits exchange?

• Correct Answer-An entity to which individuals and small businesses can have access to affordable health coverage Which of the following plans will cover medical costs that Medicare doesn't cover? - Correct Answer-Medicare supplement Which of the following is NOT an accurate description of Access for Infants and Mothers Program (AIM)? - Correct 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 statements correctly describes a contract of indemnity? - Correct Answer-One party is restored to the same financial position the party was in before the loss occurred 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 What are members of the Medical Information Bureau (MIB) required to report? - Correct Answer-Medical ailments discovered during the underwriting process Which of the following statements about aleatory contracts is NOT true? - Correct Answer-The insured and the insurer contribute equally to the contract

What is a common reason people purchase an annuity? - Correct Answer-To protect against the risk of outliving their financial resources The California Insurance Code defines "policy" as a(n) - Correct Answer-Written contract Where must you specifically reside to qualify for MRMIP? - Correct Answer-California The probability of death listed by year, is demonstrated in - Correct Answer-Mortality tables Which of these is NOT a relevant factor in the health insurance principle of morbidity? - Correct Answer- Intelligence Which of the following is NOT included in comprehensive major medical plans? - Correct Answer-First-dollar coverage An insurance company entitled to transact business in California is called a(n) - Correct Answer-admitted carrier The free-look period for life insurance policy owners age 60 or older is - Correct Answer-30 days Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event? - Correct Answer-Insurance policy

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 A life insurance policy's limit of liability would be - Correct Answer-the policy's face amount How is a life insurance policy dividend legally defined? - Correct Answer-A return of excess premium and not taxable What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - Correct Answer-Incontestability clause 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 An individual covered under a disability income policy may be eligible for a partial disability benefit if - Correct Answer-The insured can perform some of their job activities on a part-time basis

Moral hazard is described as the - Correct Answer- increased chance of a loss because of an insured's dishonest tendencies 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? - Correct Answer-60 payments Which of the following is NOT a true description of non- medical life insurance? - Correct Answer-Applicants are not required to answer medical questions on the application 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? - Correct Answer-Conversion What type of changes can be made to a guaranteed renewable health insurance policy? - Correct Answer-The premium rates of the policyowner Business Overhead Expense Insurance pays for - Correct Answer-business expenses when a business owner becomes disabled Which of the following is NOT an element of an insurable risk? - Correct Answer-Loss must be catastrophic

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? - Correct Answer-Mortgage redemption What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? - Correct Answer-disclosure and reporting The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT

• Correct Answer-Self-funded plans All of the following are considered characteristics of group life insurance, EXCEPT - Correct Answer-Individual policies A hazard can be best described as - Correct Answer-a condition that may increase the likelihood of a loss occuring Retirement plans cannot favor highly compensated employs. The government regulation that prevents this from happening is called - Correct Answer- Nondiscrimination Which of the following is NOT considered a definition of risk? - Correct Answer-The cause of a loss

Which of the following is NOT typically covered under vision care insurance? - Correct Answer-Eye surgery The Medical Information Bureau consists of - Correct Answer-life and health insurance companies Which of the following could lower the premium of a proposed disability income policy? - Correct Answer- Increase in the elimination period Which of the following is NOT considered to be insurer expenses? - Correct Answer-Policy premiums In order to be considered "currently insured" under Social Security, an individual must be credited with: - Correct Answer-6 quarters of coverage during the last 13-quarter period Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies? - Correct Answer-Moral hazard 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 An applicant has revealed conditions that require information. Which of the following is needed next? - Correct Answer-Attending physician's statement

Who acts as the gatekeeper in a Health Maintenance Organization (HMO)? - Correct Answer-Primary care physician Which type of risk is gambling? - Correct Answer- Speculative risk What is a participating life insurance policy? - Correct Answer-Contract that allows the policyowner to receive a share of surplus in the form of policy dividends After the annual deductible is met, a Medicare Part B patient will pay____ of the remaining covered expenses. - Correct Answer-20% 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 The systematic liquidation of a sum of money is provided by a(n) - Correct Answer-Annuity Which statement is TRUE regarding Workers' Compensation coverage - Correct Answer-Employer pays the entire premium for Workers' Compensation coverage Which of the following does Medicare Part A NOT provide coverage for? - Correct Answer-Doctor's services

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 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 valid reason to replace an existing long-term care policy? - Correct Answer-New policy has higher premium with fewer benefits Which of the following is a life insurance policy that does NOT require a physical exam? - Correct Answer-Non- medical Life insurance creates an immediate estate. This phrase means - Correct Answer-when the insured dies, a death benefit is paid A spendthrift clause in a life insurance policy - Correct Answer-restricts the ability of the beneficiary to assign benefits An agent's attempt to stop the replacement of an existing life insurance policy is known as - Correct Answer- conservation Minimum participation standards exist for group health insurance plans in order to - Correct Answer-prevent adverse selection

The California Insurance Code allows an individual how many days to cancel a life policy for a full-refund? - Correct Answer-Between 10 and 30 days Under a 10-year vesting schedule, what percentage of employer contributions must be vested after 10 years of service? - Correct Answer-100% What is the price of insurance for each exposure unit? - Correct Answer-Rate 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 loner perform the tasks of her job. Kim is now considered to be - Correct Answer-totally disabled How are acts of war and aviation treated under a group life insurance policy? - Correct Answer-policy exclusion Individuals age 65 or older are exclusively eligible for which optional program? - Correct Answer-Medicare Part B Which of the following is NOT a required uniform provision in individual health policies? - Correct Answer-Change of occupation Which of the following is NOT included under long-term care insurance - Correct Answer-Hospital acute care

Which of the following is NOT considered to be an act of insurance solicitation? - Correct Answer-Publishing a magazine where one of the advertisers is a insurer Which of the following is NOT protected under the California Life and Health Guarantee Association? - Correct Answer-Insurers 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 a characteristic of the conversion privilege? - Correct Answer-Employer pays the premium for the converted policy Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could be subject a license or applicant to - Correct Answer-All of these: Suspension, Fine, Denial 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 ABC Insured Company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and $20,000 for

physical therapy treatments. ABC later discover this was a fraudulent claim. How much may the insured be fined? - Correct Answer-$170,000 can increase up to double the value of the defrauded amount An annuity which is backed by a life insurer's separate account is called a(n) - Correct Answer-