FLORIDA HEALTH AND LIFE INSURANCE EXAM ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS, Exams of Insurance Economics

Download FLORIDA HEALTH AND LIFE INSURANCE EXAM ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS and more Exams Insurance Economics in PDF only on Docsity! FLORIDA HEALTH AND LIFE INSURANCE EXAM ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS (VERIFIED ANSWERS) | ALREADY GRADED A+ The Accidental Death and Dismemberment (AD&D) provisions in a life insurance policy would pay additional benefits in the insured ----- CORRECT ANSWER------------is blinded in an accident N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot? -----CORRECT ANSWER------------Exclusion S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary? -----CORRECT ANSWER------------$50,000 Which of the following best describes a contingent beneficiary ----- CORRECT ANSWER------------Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured. J chooses a monthly premium payment mode on his Whole life insurance policy. Which of these statements is correct -----CORRECT ANSWER------- -----The gross premium is higher on a monthly premium mode as compared to being paid annually Which statement is true regarding minor beneficiary -----CORRECT ANSWER------------Normally a guardian is required to be appointed in the beneficiary clause of the contract. Which premium schedule results in the lowest cost to the policyownwer? --- --CORRECT ANSWER------------Annual If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who dies first, where are the death proceeds to be directed under the uniform Simultaneous Death Act? -----CORRECT ANSWER------------Insured's contingent beneficiary Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary? -----CORRECT ANSWER------------All proceeds are income tax free in the year they are received. Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary ? -----CORRECT ANSWER------------Life income The common Disaster clause provides that if both the insured and the sole named beneficiary where to die in a common accident, which of the following is true? -----CORRECT ANSWER------------The clause provides the payment of proceeds to the insured's estate P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own. -----CORRECT ANSWER------------Endowment at Age 70 All of these are characteristics of Adjustable life policy, EXCEPT: ----- CORRECT ANSWER------------face amount can be adjusted using policy dividends J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value? -----CORRECT ANSWER------------20- pay life What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? -----CORRECT ANSWER------------Family maintenance Policy K age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT: -----CORRECT ANSWER------------K's wife dies at age 66 Which statement is correct regarding the premium payment schedule for whole life policies? -----CORRECT ANSWER------------Premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured. Under a Graded Premium policy, the premiums -----CORRECT ANSWER-- ----------Are lower during the policy's early years Term insurance has which of the following characteristics? -----CORRECT ANSWER------------Expires at the end of the policy period How long does the coverage normally remain on a limited-pay life policy? -- ---CORRECT ANSWER------------age 100 Which of these is an element of a Variable Life policy -----CORRECT ANSWER------------A fixed, level premium Variable Whole Life insurance can be described as -----CORRECT ANSWER------------both an insurance and securities product Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability? -----CORRECT ANSWER------------ Conversion Privilege Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit? -----CORRECT ANSWER------------Variable life What does a Face Amount Plus Cash Value Policy pay upon the insured's death? -----CORRECT ANSWER------------Face amount plus the policy's cash value N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take? -----CORRECT ANSWER------------Claim will be denied What provision in a life insurance policy states that the application is considered part of the contract? -----CORRECT ANSWER------------Entire Contract provision B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will -----CORRECT ANSWER------------pay the amount that the premium would have purchased at the correct age K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT -----CORRECT ANSWER------------K will forfeit the right to use the automatic loan provision upon reinstatement Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled? -----CORRECT ANSWER------------Payor clause Which of these actions should a producer take when submitting an insurance application to an insurer? -----CORRECT ANSWER------------ Inform the insurer the relevant information not included on the application T is given a receipt after completing a life insurance application and paying the initial premium. Under this Situation T's coverage is -----CORRECT ANSWER------------conditional, depending on the insurer's underwriting guidelines Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation? -----CORRECT ANSWER------------Policy was returned within the free-look period, premium will be fully refunded Life insurance companies are required to establish and maintain a anti- money laundering compliance program according to which federal regulation? -----CORRECT ANSWER------------USA PATRIOT Act A life insurance application must be signed by all these EXCEPT ----- CORRECT ANSWER------------Beneficiary T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red- flagged for violation of -----CORRECT ANSWER------------anti-money laundering rules on January 8, an applicant filled out an application of a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective -----CORRECT ANSWER------------January 26 Before a life insurance policy is issued, which of these components of the contract is required? -----CORRECT ANSWER------------Applicant's signature on application Before a life policy is issued, which of these contract elements is necessary? -----CORRECT ANSWER------------A signed application by the prospect P is a producer who notices 5 questions on a life application were not answered. What actions should P take? -----CORRECT ANSWER------------ Set up meeting with the applicant to answer the remaining questions. An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be -----CORRECT ANSWER------------converted to an individual permanent policy at an individual rate Which of the following statements about non contributory employee group life insurance is FALSE? -----CORRECT ANSWER------------A minimum number of employees is required to participate Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees? -----CORRECT ANSWER------------Portion of the premiums paid by the employer may be a tax deduction If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have? -----CORRECT ANSWER---------- --Contributory Which provision is NOT a requirement in a group life policy? ----- CORRECT ANSWER------------Accidental When an employee is terminated which statement about a group term life is true? -----CORRECT ANSWER------------Policy will be paid if the employee dies during the conversion period. Which of the following is an important underwriting principle of group life insurance? -----CORRECT ANSWER------------Everyone must be covered in the group S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits? -----CORRECT ANSWER------------full benefits payable under the Master contract What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? ----- CORRECT ANSWER------------Conversion Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for social security benefits? -----CORRECT ANSWER------------5 To be eligible for social security disability benefits, an employee must be unable to perform -----CORRECT ANSWER------------Any occupation What is Old Age and Survivors Health Insurance (OASDHI) also known as? -----CORRECT ANSWER------------Social Security Which of the following does Social Security not provide benefits for? ----- CORRECT ANSWER------------Dismemberment Which tax would an IRA participant be subject to on distributions received prior to age 59 1/2? -----CORRECT ANSWER------------ordinary income tax and a 10% tax penalty for early withdrawal In a qualified retirement plan, the yearly contributions to an employee's account -----CORRECT ANSWER------------are restricted to maximum levels set by the IRS Tom has qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted? ----- CORRECT ANSWER------------If Toms employment is terminated, 20% of the funds would be forfeited What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan? -----CORRECT ANSWER------------50% At the age of 45, an individual withdraws $50,000 from his Qualified Profit- Sharing Plan and then deposits this amount into a personal savings account. This action would result in -----CORRECT ANSWER------------ Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified plan. When funds are shifted straight from one IRA to another IRA, what percentage of the tax s withheld? -----CORRECT ANSWER------------none What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan ----- CORRECT ANSWER------------100 In an individual retirement account (IRA), rollover contributions are ----- CORRECT ANSWER------------Not limited by dollar amount Which of these retirement plans can be started by an employee, even if another plan is in existence? -----CORRECT ANSWER------------Individual Retirement Account (IRA) What type of employee welfare plans are not subject to ERISA regulations - ----CORRECT ANSWER------------Church plans According to Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid? ------CORRECT ANSWER------------31 days G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income? ------CORRECT ANSWER------------10 years E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? ------ CORRECT ANSWER------------F The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for: ------CORRECT ANSWER------------health information What do Dread Disease policies cover? ------CORRECT ANSWER------------ A specific disease or illness When an insurance application is taken by a producer, which of these statements is true? ------CORRECT ANSWER------------Any changes made on the application require the applicant's initials If an individual has an Accidental Death and Dismemberment policy and dies, and autopsy can be performed in all these situations, EXCEPT: ------ CORRECT ANSWER------------When the state prohibits this by law P is a producer who notices 5 questions on a life application were not answered. What actions should P take? ------CORRECT ANSWER----------- -Set up a meeting with the applicant to answer the remaining questions A disability elimination period is best described as a: ------CORRECT ANSWER------------time deductible Which type of insurance company allows their policyowners to elect a governing body? ------CORRECT ANSWER------------Mutual Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE? ------CORRECT ANSWER------------Each partner owns a $500,000 policy on their partner's life N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot? ------CORRECT ANSWER------------Exclusion A policyowner's rights are limited under which beneficiary designation? ----- -CORRECT ANSWER------------Irrecovable What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made? ------CORRECT ANSWER------------Irrevocable beneficiary Which type of contract liquidates an estate through recurrent payments? --- ---CORRECT ANSWER------------Annuity Under Florida law, a variable annuity policyowner must be notified of the accumulated value of the contract ------CORRECT ANSWER------------once each year J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? ------ CORRECT ANSWER------------Reinstatement provision Which is the purpose of the Life and Health Insurance Guaranty Association? ------CORRECT ANSWER------------Protects policyowners against insolvent insurance companies Which of the following Dividend options results in taxable income to the policyowner? ------CORRECT ANSWER------------Accumulation at Interest Accidental Death coverage is provided to commercial airline passengers in which of the following types of policies? ------CORRECT ANSWER------------ Blanket Accident policy A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as: ------ CORRECT ANSWER------------Variable Life When replacing or exchanging an annuity, the agent must disclose to the annuitant ------CORRECT ANSWER------------the possible tax ramifications as a result of the transaction When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the: ------CORRECT ANSWER------------Entire Contract provision Which of the following health policy provisions states that the producer does NOT have the authority to change the policy or waive any of its provisions? ------CORRECT ANSWER------------Entire Contract The waiting period for a pre-existing condition under a Medicare Supplement policy may NOT go beyond ------CORRECT ANSWER----------- -6 months Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is: ------CORRECT ANSWER------------Business Overhead Expense A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow? ------ CORRECT ANSWER------------Guaranteed Insurability Option rider An insurance company receives E's application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet? ------CORRECT ANSWER-------- ----Consideration clause If an agent would like to sell Variable annuities, which state examination must the agent pass? ------CORRECT ANSWER------------Life and Variable contracts During the course of an insurance transaction, if an agent makes a false of incomplete statement, he/she could be found guilty of ------CORRECT ANSWER------------misrepresentation Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy? ------ CORRECT ANSWER------------Entire Contract Periodic health claim payments MUST be made at least: ------CORRECT ANSWER------------monthly A life policy loan in Florida cannot charge a fixed rate of interest higher than ------CORRECT ANSWER------------10% What type of group insurance plan involved employees sharing the cost? -- ----CORRECT ANSWER------------contributory plan The Florida Employee Health Care Access Act was established to make --- ---CORRECT ANSWER------------group health insurance available to employers with up to 50 employees Which of these is NOT a legal entity for selling insurance in Florida? ------ CORRECT ANSWER------------Risk management advisors From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant? ------CORRECT ANSWER------------Fair Credit Reporting Act S wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a: ------ CORRECT ANSWER------------High-deductible health plan If an insurance company issues a Disability Income policy that it cannot cancel of for which it cannot increase premiums, the type of renewability that best describes the policy is called: ------CORRECT ANSWER------------ noncancellable A Multiple Employer Welfare Arrangement (MEWA) provides what type of benefits? ------CORRECT ANSWER------------Insurance T is an employee covered under a Group Life policy. If T's employment is terminated, the conversion privilege gives T the right to convert ------ CORRECT ANSWER------------to an individual policy upon employment termination Which of the following statements describes what an Accident and Health policyowner may NOT do? ------CORRECT ANSWER------------Adjust the premium payments According to Florida Law, in which of the following situations would a dependent handicapped child NOT be covered under a Family Health policy? ------CORRECT ANSWER------------The premiums for the handicapped child are not paid K is an agent who made an improper sales of an annuity to a client/ Which of the following corrective actions would the Department of Financial Services likely order K to take ------CORRECT ANSWER------------Pay a monetary restitution to the client J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value? ------CORRECT ANSWER------------20-pay Life Which parts of a life insurance insurance policy are guaranteed to be true? ------CORRECT ANSWER------------Warranty An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred? ------ CORRECT ANSWER------------$7,000 ($5,000 + 20% of the remaining bill = $7,000) Employers with less than __ employees are affected by Florida's Health Insurance Coverage Continuation Act (Mini COBRA) ------CORRECT ANSWER------------20 An insurance company incorporated under the laws of the state in which its home office is located is called a(n) ___ company. ------CORRECT ANSWER------------domestic J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application five years ago was found to be understated by ten years. Which of the following actions will the insurance company take? ------CORRECT ANSWER------------The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age The guarantee of insurability option provides a long-term care policyowner the ability to: ------CORRECT ANSWER------------buy additional coverage at a later date Group Life policies in Florida are required to contain a conversion privilege that allows for conversion ------CORRECT ANSWER------------to an individual policy for a stated period of time An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective? ------ CORRECT ANSWER------------When the conditions of the receipt are met With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's ------CORRECT ANSWER------------gross income at the time of the purchase Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy? ------CORRECT ANSWER------- -----Premiums are waived after the insured has been totally disabled for a specified time period A policy that becomes a Modified Endowment Contract (MEC): ------ CORRECT ANSWER------------will lose many of its tax advantages An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a: ------CORRECT ANSWER------------$25,000 individual whole life policy Agents that have been licensed for less than six years must complete ___ hours of continuing education every two years. ------CORRECT ANSWER-- ----------24 L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will: ------ CORRECT ANSWER------------adjust the death benefit to a reduced amount S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning: ------CORRECT ANSWER------------ November 1 (60 days after written proof of loss before legal action can be brought against the company) Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE? ------CORRECT ANSWER---- --------It is taxed as ordinary income What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? ------CORRECT ANSWER------------Family Maintenance Policy group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured) M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? ------ CORRECT ANSWER------------Revocable Which of the following is a standard provision of the conversion privileges in a Group Life policy? ------CORRECT ANSWER------------Group Life coverage can be converted to an individual policy at a regular rates on an attained-age basis B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have? ------CORRECT ANSWER------------Disability Income A person insured under a health policy is required to give the insurance company a Notice of Claim within how many days after a covered loss? ---- --CORRECT ANSWER------------20 Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy? ------CORRECT ANSWER------------Notice to existing and replacing insurers of intention to replace Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of: ------CORRECT ANSWER------------$10,000 According to Florida's rules on disclosure, a life insurance applicant is expected to be provided with ------CORRECT ANSWER------------a Buyer's Guide and Policy Summary The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called: ------CORRECT ANSWER- -----------Reinstatement Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)? ------CORRECT ANSWER------------More physicians to choose from Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract? ------CORRECT ANSWER------------Entire Contract Credit Life insurance is: ------CORRECT ANSWER------------issued in an amount not to exceed the amount of the loan S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation? ------CORRECT ANSWER------------Single Premium What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies? ------CORRECT ANSWER--------- ---Family Maintenance Policy The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n): ------CORRECT ANSWER---- --------Accidental Death and Dismemberment rider (AD&D) K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used? ------CORRECT ANSWER------------Conditional ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has ------CORRECT ANSWER------------waived one of its legal rights M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the: ------CORRECT ANSWER------------policy proceeds Which of the following actions is NOT possible with a Universal Life policy? ------CORRECT ANSWER------------Premiums may be applied as a credit against income tax Any changes made on an insurance application requires the initials of whom? ------CORRECT ANSWER------------Applicant Insured -----CORRECT ANSWER--------------The person covered by the insurance policy. Rider -----CORRECT ANSWER--------------A written modification attached to a policy that increases or decreases coverage and/or premiums. What is a unilateral contract? -----CORRECT ANSWER--------------A contract in which only one of the parties is legally bound to fulfill its obligations. What law protects consumers from the circulation of inaccurate or obsolete information? -----CORRECT ANSWER--------------The Fair Credit Reporting Act. What are the three types of agent authority? -----CORRECT ANSWER------- -------Implied, Express, and Apparent. Agent -----CORRECT ANSWER--------------An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer. What is name of the process that insurance companies use to determine whether or not an applicant is insurable? -----CORRECT ANSWER----------- ---Underwriting The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility? --- --CORRECT ANSWER--------------Fiduciary What is a third-party ownership? -----CORRECT ANSWER--------------An insurance arrangement in which the policy owner and the insured are not the same person. Suitability -----CORRECT ANSWER--------------Factors that determine if an insurance product is appropriate for a particular customer. Premium -----CORRECT ANSWER--------------A payment by the policy owner to the insurance company to keep the policy in force. Disclosure -----CORRECT ANSWER--------------Providing sufficient information to help someone make informed decision. An agent offer a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of? ----- CORRECT ANSWER--------------Rebating If an insurer meets the states financial requirements and is approved to transact business in the state, it is considered what type of insurer? ----- CORRECT ANSWER--------------Authorized What information are the members of the medical information bureau required to report? -----CORRECT ANSWER--------------Adverse medical information about the applicants or insureds. What type of beneficiary can be changed at any point by the policy owner? -----CORRECT ANSWER--------------Revocable What document describes the specific information about a policy? ----- CORRECT ANSWER--------------Policy Summary What is the term for the causes of loss insured against in an insurance policy? -----CORRECT ANSWER--------------Peril Whom does an insurance agent represent? -----CORRECT ANSWER-------- ------Insurance Company What is an unfair trade practice? -----CORRECT ANSWER--------------Any fraudulent, deceptive, or dishonest business practice that is prohibited by statutes and regulations. Insurer -----CORRECT ANSWER--------------The company that issues an insurance policy. Peril -----CORRECT ANSWER--------------Cause of loss Nonrenewal -----CORRECT ANSWER--------------Termination of a policy by an insurer on the anniversary or renewal date. Representation -----CORRECT ANSWER--------------A statement made by the applicant on the insurance application that is believed to be true. What is a warranty? -----CORRECT ANSWER--------------An absolutely true statement that, if breached, may viod an insurance contract. In insurance, when is the offer usually made on a contract? -----CORRECT ANSWER--------------When the insurance application is submitted. When a change needs to be made on the application for insurance, which is the best method for correcting the information? -----CORRECT ANSWER--------------Complete a new application or ask the applicant to initial the correction on the original application. A situation in which a person can only experience a loss and no gain represents what type of risk? -----CORRECT ANSWER--------------Pure Risk Who is responsible for the contents of insurance advertisements? ----- CORRECT ANSWER--------------The Insurance Company What is the entire contract in health insurance underwriting? ----- CORRECT ANSWER--------------The policy with riders and endorsements, plus a copy of the application. What is the main purpose for requiring a person to be licensed to transact insurance? -----CORRECT ANSWER--------------To protect the general public. Who is an insurance agent? -----CORRECT ANSWER--------------A person authorized to sell, solicit, and negotiate insurance contracts. What illegal act does a producer commit what representing a policy in a more favorable light than the policy really is? -----CORRECT ANSWER------ --------Misrepresentation Field Underwriter -----CORRECT ANSWER--------------An insurance agent who conducts an initial policy solicitation and application. (The company's front line of underwriting) Policyowner -----CORRECT ANSWER--------------The person entitled to exercise the rights and privileges in the policy. What is solvency? -----CORRECT ANSWER--------------An insurer's ability to meet its financial obligations of policy owners, insureds, and beneficiaries. What entities make up the medical information bureau (MIB)? ----- CORRECT ANSWER--------------Insurers What is the foundation of statistical prediction of loss upon which rate for insurance are calculated? -----CORRECT ANSWER--------------Law of Large Numbers Adverse Selection -----CORRECT ANSWER--------------The tendency of risk with higher probability of loss to purchase and maintain insurance more often than the risks who represent lower probability of loss. Concealment -----CORRECT ANSWER--------------The withholding of known facts that, if material, can void a contract. What is the purpose of a cease and desist order? -----CORRECT ANSWER--------------To prevent a producer or insurer from violating laws for transacting insurance. What is the purpose of the Florida Guaranty Association? -----CORRECT ANSWER--------------To protect policy owners, insureds, and beneficiaries from financial losses caused by insolvent insurers. Who's responsible for paying the cost of a medical examination required in the process of underwriting? -----CORRECT ANSWER--------------The Insurer Under what non-forfeiture option does the company pay the policy's surrender value and have no further obligations to the policy owner? ----- CORRECT ANSWER--------------Cash Surrender What provision in a life insurance policy extends coverage beyond the premium due date? -----CORRECT ANSWER--------------Grace Period. In term policies, what happens to the premium throughout the term of the policy? -----CORRECT ANSWER--------------The premium remains level. What type of whole life insurance policy only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and endows at the insured's age 100? -----CORRECT ANSWER--- -----------Single premium whole life. What are the characteristics of the group that underwriters will consider before issuing a group life policy? -----CORRECT ANSWER-------------- Groups purpose, size, financial strength, and turnover. What is the main advantage of converting from group life insurance to individual coverage? -----CORRECT ANSWER--------------Evidence of insurability is not required What is included in Part 2 of a life insurance application? -----CORRECT ANSWER--------------Medical information about the prospective insured. Term Insurance -----CORRECT ANSWER--------------Coverage for a specified period of time without cash values or living benefits. Lump Sum -----CORRECT ANSWER--------------A payout method that pays the beneficiary the entire benefit in one payment. What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2? -----CORRECT ANSWER--------------10% penalty Whose life expectancy is taken into consideration in an annuity contract? -- ---CORRECT ANSWER--------------Annuitant Who bears the investment risk in a fixed annuity? -----CORRECT ANSWER--------------The insurer What is the primary purpose of a 401(k) plan? -----CORRECT ANSWER---- ----------Provide retirement income. What does the term "double indemnity" mean? -----CORRECT ANSWER--- -----------The insurer will pay a benefit of twice the face amount. What type of beneficiary is next in line after the primary beneficiary? ----- CORRECT ANSWER--------------Contingent Beneficiary. Who controls changes in premium payments, face changes, and loans in a life insurance policy? -----CORRECT ANSWER--------------Policy owners. When would a 20-pay whole life policy endow? -----CORRECT ANSWER--- -----------When the insured reaches age 100. Who owns a group life insurance contract? -----CORRECT ANSWER-------- ------The employer. In a joint life policy, when is the death benefit paid? -----CORRECT ANSWER--------------Upon the first death (if first-to-die policy), or upon the second death (if survivor ship policy) What is the blackout period for Social Security Benefits? -----CORRECT ANSWER--------------A period of time during which the surviving spouse does not receive social security benefits. What are the personal uses of life insurance? -----CORRECT ANSWER----- ---------Survivor protection, estate creation and conservation, cash accumulation and liquidity. Non-forfeiture Options -----CORRECT ANSWER--------------Methods of distribution of guaranteed values in a life insurance policy. What are the two phases of an Annuity? -----CORRECT ANSWER------------ --Accumulation and Annuitization (Pay-in and Pay-out) What annuity settlement option provides income payments to the annuitant for the duration of his or his life, and also guarantees payment for a specified number of years? -----CORRECT ANSWER--------------Life income with period certain. For a retirement plan to be qualified, it must be designed for whose benefit? -----CORRECT ANSWER--------------Employees What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled? -----CORRECT ANSWER--------------Waiver of Premium What beneficiary designation has the first claim to the death proceeds of a life insurance policy? -----CORRECT ANSWER--------------Primary Beneficiary What happens to the proceeds of a life insurance policy if there is no named beneficiary? -----CORRECT ANSWER--------------The proceeds are paid to the insured's state. A whole life policy that requires premium payments only for a specified number of years is known as what kind of policy? -----CORRECT ANSWER--------------Limited-Pay Whole Life What are the death benefit options in universal life policies? -----CORRECT ANSWER--------------Option A: Level Death Benefit Option B: Increasing Death Benefit Why are policy loans not available on term insurance? -----CORRECT ANSWER--------------There is no cash value to borrow against. What document must a producer provide to the insured during policy replacement? -----CORRECT ANSWER--------------Notice regarding replacement When must insurable interest exist in a life insurance policy? ----- CORRECT ANSWER--------------At the time of application. Participating Policy -----CORRECT ANSWER--------------Insurance in which policy owners share in profits or losses and receive dividends when available. If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer? -----CORRECT ANSWER------------- -Lump-Sum payment What type of annuity is purchased with multiple payments, and begins income payments no sooner than one year after the purchase? ----- CORRECT ANSWER--------------Flexible premium deferred annuity According to the taxation rules of life insurance policies, how are cash value increases taxed? -----CORRECT ANSWER--------------Cash value growth is tax-deferred Who does the common disaster clause protect? -----CORRECT ANSWER-- ------------The contingent beneficiary Which non-forfeiture option provides coverage for the longest period of time? -----CORRECT ANSWER--------------Reduced paid-up What provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability? ----- CORRECT ANSWER--------------Reinstatement What does "level" refer to in level term insurance? -----CORRECT ANSWER--------------Face Amount What elements of an adjustable life policy can be changed by the policy owner? -----CORRECT ANSWER--------------The amount and payment period of the premium, and the period of protection. In variable universal life insurance, to what policy component does the term "variable" refer? -----CORRECT ANSWER--------------Cash value and face amount What is the main reason for purchasing an annuity? -----CORRECT ANSWER--------------To provide income that the annuitant cannot outlive. SIMPLE plans are available to groups of how many employees? ----- CORRECT ANSWER--------------No more than 100 What type of health insurance would pay for hiring a replacement for a valuable employee who becomes disabled? -----CORRECT ANSWER------- -------Key-person disability insurance What is a presumptive disability provision? -----CORRECT ANSWER--------- -----Provision found in most disability income policies that specifies the conditions that will automatically qualify for full disability benefits. Under an individual disability income policy, the benefits must be paid on at least what schedule? -----CORRECT ANSWER--------------Monthly What is a probationary period in group health insurance? -----CORRECT ANSWER--------------The period of time that must lapse before an employee is eligible for group health coverage. Who decides which optional provisions would be included in the health policy? -----CORRECT ANSWER--------------The insurance company Which Medicare part helps pay for inpatient hospital care, inpatient care in skilled nursing facility, home health care, and hospice care? -----CORRECT ANSWER--------------Part A Can Alzheimer's disease be excluded from coverage under a ling-term care policy? -----CORRECT ANSWER--------------NO, organic cognitive disorders, such as Alzheimer's or Parkinson's must be covered. How many consecutive months of coverage must long-term care insurance provide? -----CORRECT ANSWER--------------12 Months Under a fully contributory health plan, how are the benefits received by the employee? -----CORRECT ANSWER--------------Income tax free How are the benefits of a group accidental death and dismemberment policy received? -----CORRECT ANSWER--------------Income Tax free What is overinsurance? -----CORRECT ANSWER--------------An excessive amount of insurance that would result in over payment to the insured in the event of a loss. Most health policies will pay accidental death benefits if the death is caused by an accident and occurs within how many days? -----CORRECT ANSWER--------------90 Days In health insurance, what is considered a sickness? -----CORRECT ANSWER--------------An illness that first arises while the policy is in force. What do individual insureds receive as proof of their group health coverage? -----CORRECT ANSWER--------------Certificate of Insurance In health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract characteristic does this describe? ----- CORRECT ANSWER--------------Unilateral How do insurers determine that cost for a group health policy? ----- CORRECT ANSWER--------------The main variables are the ration of men and women in the group, and the average age of the group. Who is responsible for making premium payments in an HMO plan? ----- CORRECT ANSWER--------------Subscribers What health policy provision describes the insured's right to cancel coverage? -----CORRECT ANSWER--------------Renewability Provision When can an irrevocable beneficiary be changed? -----CORRECT ANSWER--------------With the written consent of the beneficiary. Which policy rider in a health insurance policy allows an insured to purchase additional amounts of disability income coverage without evidence of insurability? -----CORRECT ANSWER--------------Guaranteed Insurablility Rider What Medicare part provides prescription drug benefit? -----CORRECT ANSWER--------------Part D How is Medicaid funded? -----CORRECT ANSWER--------------Medicaid is a federal and state funded program How are individually owned disability income benefits taxed once received by that insured? -----CORRECT ANSWER--------------Disability benefits are not taxed; they are received income tax free How long do short-term disability group plans pay benefits? -----CORRECT ANSWER--------------For a period of less than two years In health insurance, when would an excess plan pay benefits? ----- CORRECT ANSWER--------------After the primary plan has paid it's full promised benefit, the excess plan will pay the balance. What is Long-Term Care? -----CORRECT ANSWER--------------Health and social services provided for individuals with chronic disease or disabilities who requires living assistance at home or in a nursing home facility. What type of health insurance plans cover all accidents and sicknesses that are not specifically excluded in the policy? -----CORRECT ANSWER--- -----------Comprehensive plans What is the purpose of managed care health insurance plans? ----- CORRECT ANSWER--------------To control health insurance claims expenses. If an agent makes a correction on the application for health insurance, who must initial the correct answer? -----CORRECT ANSWER--------------The Applicant What is "own occupation" disability? -----CORRECT ANSWER-------------- Insured's inability to perform duties of his or her current job or an occupation for which the insured is educated and trained. According to the reinstatement provision, once a lapsed policy is reinstated, how soon will coverage be available for accidents? -----CORRECT ANSWER--------------Immediately If the insured pays a monthly premium for health insurance, how long will the grace period be on the policy? -----CORRECT ANSWER--------------10 Days What is a deductible in a health insurance policy? -----CORRECT ANSWER--------------A specified dollar amount that the insured must pay before the insurer pays any policy benefits. In which Medicare supplemental plans are the core benefits found? ----- CORRECT ANSWER--------------All plans (A-N) When is the initial enrollment period for Medicare part A? -----CORRECT ANSWER--------------When an individual first becomes eligib;e for Medicare, starting three months before turning age 65 and ending three months after the 65th birthday. What part of Medicare is known as medical insurance? -----CORRECT ANSWER--------------Part B What type of disabilities will be covered by occupational coverage? ----- CORRECT ANSWER--------------Disabilities that result from accidents or sicknesses on OR off the job How are benefits received by the business from a key person disability insurance? -----CORRECT ANSWER--------------Income tax free What is a service plan? -----CORRECT ANSWER--------------An insurance plan in which benefits are provided to subscribers in the form of services instead of monetary benefits. What is the elimination period? -----CORRECT ANSWER--------------A waiting period imposed on the insured from the onset of disability until benefit payments begin. What is Major medical insurance? -----CORRECT ANSWER-------------- Health insurance that provides coverage for catastrophic losses, and features deductibles and coinsurance, and high limits of coverage. What are two types of expenses that are covered by health plans? ----- CORRECT ANSWER--------------Medical expenses and loss of income expenses If the insureds share in the cost of health insurance premiums with the employer, this would be known as what type of group health plan? ----- CORRECT ANSWER--------------Contributory Who must sign a health insurance application? -----CORRECT ANSWER--- -----------The agent and the insured (and the policy owner if different from the insured) What is the time requirement for terminated employees to covert the group health coverage to an individual plan without evidence of insurability? ----- CORRECT ANSWER--------------31 days after termination of the employment According to the time limit on certain defenses provision in health insurance policies, when can an insurer contest fraudulent misstatements on a health insurance application? -----CORRECT ANSWER--------------Any time while the policy is in force. What health policy renewal ability provision allows the insurer to terminate coverage for any reason, and to increase the premiums for any class of insureds? -----CORRECT ANSWER--------------Optionally renewable What health policy provision defines the insured's duty to provide the insurer with reasonable notice in the event of a loss? -----CORRECT ANSWER--------------Notice of Claim Which term describes the specific dollar amount beyond which the insured no longer participates in the sharing of expenses? -----CORRECT ANSWER--------------Stop-Loss What is the purpose of Medicare supplement plans? -----CORRECT ANSWER--------------To fill the gaps in Medicare coverage Who qualifies for Medicare coverage? -----CORRECT ANSWER-------------- People age 65 of older, or anyone who has been entitled to Social Security disability income benefits for two years, of who has chronic kidney disease. According to the coordination of benefits provision, if both parents have coverage for a child and their employers' policies, which policy would pay first? -----CORRECT ANSWER--------------The order of payment will be determined by the birthday rule. In group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? ----- CORRECT ANSWER--------------100% According to the Affordable Care Act, what are the cost-sharing requirements for preventive care? -----CORRECT ANSWER--------------No cost sharing. What is a hospital indemnity plan? -----CORRECT ANSWER--------------A policy that provides a benefit based only on the number of days confined in the hospital, regardless of medical expenses incurred. What is the main principle of an HMO plan? -----CORRECT ANSWER------- -------Preventive Care What does the amount of group disability benefit an insured can receive depend upon? -----CORRECT ANSWER--------------The insured's income prior to a disability.