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FLORIDA HEALTH AND LIFE INSURANCE EXAM AND PRACTICE EXAM LATEST 2024 ACTUAL EXAM QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) |ALREADY GRADED A+ Which parts of a life insurance insurance policy are guaranteed to be true? - ANSWER-- Warranty Florida requires that coverage for newborns begins "from the moment of birth" and continues for - ANSWER--18 months Florida's 14-day free-look period for life insurance policies begins at the - ANSWER--date of delivery Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy? - ANSWER--Entire Contract Periodic health claim payments MUST be made at least: - ANSWER-- monthly A life policy loan in Florida cannot charge a fixed rate of interest higher than - ANSWER--10% What type of group insurance plan involved employees sharing the cost? - ANSWER--contributory plan The Florida Employee Health Care Access Act was established to make - 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? - 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? - 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: - 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: - ANSWER-- noncancellable A Multiple Employer Welfare Arrangement (MEWA) provides what type of benefits? - 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 - ANSWER--to an individual policy upon employment termination Which of the following statements describes what an Accident and Health policyowner may NOT do? - 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? - ANSWER--The premiums for the handicapped child are not paid 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? - 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) - ANSWER--20 An insurance company incorporated under the laws of the state in which its home office is located is called a(n) company. - 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? - 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: - ANSWER--buy additional coverage at a later date Group Life policies in Florida are required to contain a conversion privilege that allows for conversion - 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? - 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 - 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? - 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): - 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: - 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. - 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: - 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: - 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? - 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? - ANSWER--Family Maintenance Policy An agent selling Medicare Supplement policies must provide every applicant with a(n) - ANSWER--Suitability form A policy loan is made possible by which of these life insurance policy features? - ANSWER--Cash value provision Which of these life insurance riders allows the applicant to have excess coverage? - ANSWER-- Term rider A variable insurance policy: - ANSWER--does not guarantee a return on investment accounts Which of the following is NOT required in the Outline of Coverage for a health insurance policy? - ANSWER--Projection of the policy's future costs What percentage of eligible persons must a policy cover in a noncontributory group? - ANSWER--100% Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy? - 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: - ANSWER--$10,000 According to Florida's rules on disclosure, a life insurance applicant is expected to be provided with - 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: - ANSWER-- Reinstatement Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)? - 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? - ANSWER--Entire Contract Credit Life insurance is: - 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? - ANSWER--Single Premium What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies? - 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): - 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? - 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 - 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: - ANSWER--policy proceeds Which of the following actions is NOT possible with a Universal Life policy? - ANSWER-- Premiums may be applied as a credit against income tax Any changes made on an insurance application requires the initials of whom? - ANSWER-- Applicant The part of a life insurance policy guaranteed to be true is called a(n): - ANSWER--warranty Under an Individual Disability policy in Florida, what is the minimum schedule of time in which claims must be made to an insured? - ANSWER--Monthly The act of an insurance company publishing misleading information about its policy's provisions is called - ANSWER--false advertising Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy? - ANSWER--Reimbursement In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy? - ANSWER-- Owner's Rights The provision that defines to whom the insurer will pay benefits to is called: - ANSWER-- Payment of Claims How can an agent-in-charge have more than one location? - ANSWER-- Only if the agent-in- charge is present when insurance activity occurs Suitability - ANSWER--Factors that determine if an insurance product is appropriate for a particular customer. A+ Premium - ANSWER--A payment by the policy owner to the insurance company to keep the policy in force. Disclosure - 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? - 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? - ANSWER--Authorized What information are the members of the medical information bureau required to report? - ANSWER--Adverse medical information about the applicants or insureds. What type of beneficiary can be changed at any point by the policy owner? - ANSWER-- Revocable What document describes the specific information about a policy? - ANSWER--Policy Summary What is the term for the causes of loss insured against in an insurance policy? - ANSWER--Peril Whom does an insurance agent represent? - ANSWER--Insurance Company What is an unfair trade practice? - ANSWER--Any fraudulent, deceptive, or dishonest business practice that is prohibited by statutes and regulations. Insurer - ANSWER--The company that issues an insurance policy. Peril - ANSWER--Cause of loss A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision - ANSWER--Payor Provision Which of the following actions is NOT possible with Universal Life policy - ANSWER--Premiums may be applied as a credit against income tax A life policy with death benefit and cash value that can fluctuate according to performance of its underlying investment portfolio is referred to as - ANSWER--Variable life Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? - ANSWER--Variable life 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. - ANSWER--Endowment at Age 70 All of these are characteristics of Adjustable life policy, EXCEPT: - 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? - 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? - 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: - ANSWER--K's wife dies at age 66 Which statement is correct regarding the premium payment schedule for whole life policies? - ANSWER--Premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured. Under a Graded Premium policy, the premiums - ANSWER--Are lower during the policy's early years Term insurance has which of the following characteristics? - ANSWER- -Expires at the end of the policy period A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached? - ANSWER--waiver of premium A cost of living rider gives the insured - ANSWER--additional death benefits B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes? - ANSWER--Interest only All of these statements about the waiver of premium provision are correct, EXCEPT: - ANSWER-- Insured must be eligible for social security disability of claim to be accepted. Whose life is covered on a life insurance policy that contains a payor benefit clause - ANSWER-- Child D owns a whole life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture option will the insurer likely proceed with? - ANSWER--Extended Term What action can a policyowner take if an application for a bank loan requires collateral? - ANSWER--Assign policy ownership to bank 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 - ANSWER--policy proceeds An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider? - ANSWER--Long term care Variable whole life insurance can be described as - ANSWER--both an insurance and securities product The Accidental Death and Dismemberment (AD&D) provisions in a life insurance policy would pay additional benefits in the insured - 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? - 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? - ANSWER-- $50,000 Which of the following best describes a contingent beneficiary - 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 - ANSWER--The gross premium is higher on a monthly premium mode as compared to being paid annually Which statement is true regarding minor beneficiary - 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? - 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? - 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? - 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 ? - 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? - ANSWER--The clause provides the payment of proceeds to the insured's estate A policyowner is allowed to pay premiums more than once a year under which provision? - ANSWER--Mode of premium 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 - 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 - ANSWER-- January 26 Before a life insurance policy is issued, which of these components of the contract is required? - ANSWER--Applicant's signature on application Before a life policy is issued, which of these contract elements is necessary? - 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? - 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 - 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? - 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? - 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? - ANSWER--Contributory Which provision is NOT a requirement in a group life policy? - ANSWER--Accidental When an employee is terminated which statement about a group term life is true? - 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? - 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? - 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? - ANSWER--Conversion what type of group insurance plan involves employees sharing the cost? - ANSWER--contributory plan N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase? - ANSWER--Fixed Deffered A+ A contract owner terminates an annuity before the income payment period begins. The owner will the receive - ANSWER--current contact surrender value T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? - ANSWER--Life Annuity with Period Certain How does an indexed annuity differ from a fixed annuity? - ANSWER-- Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index P, aged 50, purchased an annuity that P will fund with $500/month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase? - ANSWER--Deffered K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase? - ANSWER--Single premium Immediate Joint with Survivor Annuity A+ 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? - ANSWER--Single Premium In an individual retirement account (IRA), rollover contributions are - ANSWER--Not limited by dollar amount Which of these retirement plans can be started by an employee, even if another plan is in existence? - ANSWER--Individual Retirement Account (IRA) What type of employee welfare plans are not subject to ERISA regulations - 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? - 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? - 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? - ANSWER--F The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for: - ANSWER--health information What do Dread Disease policies cover? - ANSWER--A specific disease or illness When an insurance application is taken by a producer, which of these statements is true? - ANSWER--Any changes made on the application require the applicant's initials A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following? - ANSWER-- Aviation exclusion What is the consideration given by an insurer in the Consideration clause of a life policy? - ANSWER--Promise to pay a death benefit to a named beneficiary Which of the following reimburses its insureds for covered medical expenses? - ANSWER-- Commercial insurers Under Florida law, which of the following provisions is NOT required in a Medicare Supplement policy? - ANSWER--Limitation on pre-existing conditions for up to 12 months Which organization was established to provide funds to protect an insured in the event of an insurer's insolvency? - ANSWER--Florida Life and Health Insurance Guaranty Association A+ Major Medical policies typically: - ANSWER--contain a deductible and coinsurance The Life and Health Insurance Guaranty Association is - ANSWER-- funded by admitted insurance companies through assessments P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to: - ANSWER--P only Which of the following is considered an accurate statement of an unfair trade practice? - ANSWER--Twisting involves an agent using misrepresentation to convince a policyowner to cancel their current policy so that they can purchase a new life insurance policy with another company Which of the following is an example of an Unfair Trade Practice? - ANSWER--Coercison The Legal Actions provision of an insurance contract is designed to do all of the following, EXCEPT: - ANSWER--protect the producer A+ Which of these actions should a producer take when submitting an insurance application to an insurer? - ANSWER--Inform insurer of relevant information not included on the application A Health Reimbursement Arrangement MUST be established: - ANSWER--by the employer 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: - ANSWER-- Entire Contract provision A+ 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? - ANSWER--Entire Contract The waiting period for a pre-existing condition under a Medicare Supplement policy may NOT go beyond - 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: - ANSWER--Business Overhead Expense K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered: - ANSWER-- guaranteed renewable Information obtained from a phone conversation to the proposed insured can be found in which of these reports? - ANSWER--inspection report On a life insurance policy, who is qualified to change the beneficiary designation? - ANSWER-- Policyowner An example of false advertising would be - ANSWER--An insurer exaggerating its dividends in a magazine advertisement A+ Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? - ANSWER--The income from the TSA is received income tax-free According to Florida law, a Group Life insurance policy requires a minimum of how many insureds? - ANSWER--No minimum A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an Increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? - ANSWER--Paid-Up Additional Insurance What type of renewability guarantees premium rates and renewability? - ANSWER-- Noncancellable What provisions in a life insurance policy states that the application is considered part of the contract? - ANSWER--Entire Contract provision Which of the following is NOT included in the policy face? - ANSWER--Exclusions What would the Medical Information Bureau (MIB) identify? - ANSWER--Testing positive for marijuana use from a previous screening J owns a business and has a Group Life policy covering her employees. J decides to cancel the policy by letting it lapse on the renewal date. What action must be taken? - ANSWER--All of the employees must be notified of the cancellation wither by the insurance company of through J Florida requires that an insurance agent must complete hours of continuing education on the subject of law and ethics every two years. - ANSWER--5 After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms? - ANSWER--File written proof of loss 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? - 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? - ANSWER-- Consideration clause If an agent would like to sell Variable annuities, which state examination must the agent pass? - 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 - ANSWER-- misrepresentation A+ Representation - ANSWER--A statement made by the applicant on the insurance application that is believed to be true. What is a warranty? - ANSWER--An absolutely true statement that, if breached, may viod an insurance contract. In insurance, when is the offer usually made on a contract? - 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? - 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? - ANSWER--Pure Risk Who is responsible for the contents of insurance advertisements? - ANSWER--The Insurance Company What is the entire contract in health insurance underwriting? - ANSWER--The policy with riders and endorsements, plus a copy of the application. A+ What is the main purpose for requiring a person to be licensed to transact insurance? - ANSWER--To protect the general public. Who is an insurance agent? - 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? - ANSWER-- Misrepresentation Field Underwriter - ANSWER--An insurance agent who conducts an initial policy solicitation and application. (The company's front line of underwriting) Policyowner - ANSWER--The person entitled to exercise the rights and privileges in the policy. What is solvency? - 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)? - ANSWER--Insurers What is the foundation of statistical prediction of loss upon which rate for insurance are calculated? - ANSWER--Law of Large Numbers Adverse Selection - 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 - ANSWER--The withholding of known facts that, if material, can void a contract. What is the purpose of a cease and desist order? - ANSWER--To prevent a producer or insurer from violating laws for transacting insurance. What is the purpose of the Florida Guaranty Association? - 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? - ANSWER--The Insurer Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third-party? - ANSWER--Absolute Assignment Who may share in the commissions from the sale of a life insurance policy? - ANSWER--Only producers properly licensed for the type of insurance transaction. (Ex. Life insurance agents may share commissions for life insurance transactions) Who must be a member of a state insurance guaranty association? - ANSWER--Any authorized insurer within a state. When should an agent obtain a statement of good health from the insured? - ANSWER--When the premium was paid upon delivery rather that at the time of application. What is included in Part 2 of a life insurance application? - ANSWER-- Medical information about the prospective insured. Term Insurance - ANSWER--Coverage for a specified period of time without cash values or living benefits. Lump Sum - 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? - ANSWER--10% penalty Whose life expectancy is taken into consideration in an annuity contract? - ANSWER--Annuitant Who bears the investment risk in a fixed annuity? - ANSWER--The insurer What is the primary purpose of a 401(k) plan? - ANSWER--Provide retirement income. What does the term "double indemnity" mean? - ANSWER--The insurer will pay a benefit of twice the face amount. What type of beneficiary is next in line after the primary beneficiary? - ANSWER--Contingent Beneficiary. Who controls changes in premium payments, face changes, and loans in a life insurance policy? - ANSWER--Policy owners. When would a 20-pay whole life policy endow? - ANSWER--When the insured reaches age 100. Who owns a group life insurance contract? - ANSWER--The employer. In a joint life policy, when is the death benefit paid? - 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? - ANSWER-- A period of time during which the surviving spouse does not receive social security benefits. What are the personal uses of life insurance? - ANSWER--Survivor protection, estate creation and conservation, cash accumulation and liquidity. Non-forfeiture Options - ANSWER--Methods of distribution of guaranteed values in a life insurance policy. With the interest-only settlement option, what happens to the policy's death benefit? - ANSWER--Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary. If there is no named beneficiary for the annuity benefits, where do the benefits go? - ANSWER-- Annuitant's estate What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy? - ANSWER--Death benefits are generally not subject to income taxes. What is the purpose of the automatic premium loan provision? - ANSWER--To prevent the unintentional lapse of a policy because of nonpayment of premium. Which non-forfeiture option is automatically selected by the company if not chosen by the policy owner? - ANSWER--Extended Term. What life insurance policy provision prevents an insurer form disputing or denying a claim due to misstatements on the application after a certain period of time? - ANSWER--Incontestability In annually renewable term policies, what is the annual premium based upon? - ANSWER--The insured's attained age. In what type of life insurance policy can the policy owner skip premium payments without the policy lapsing? - ANSWER--Universal Life Participating Policy - 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? - 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? - ANSWER--Flexible premium deferred annuity According to the taxation rules of life insurance policies, how are cash value increases taxed? - ANSWER--Cash value growth is tax-deferred Who does the common disaster clause protect? - ANSWER--The contingent beneficiary Which non-forfeiture option provides coverage for the longest period of time? - 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? - ANSWER--Reinstatement What does "level" refer to in level term insurance? - ANSWER--Face Amount What elements of an adjustable life policy can be changed by the policy owner? - 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? - ANSWER--Cash value and face amount What portion of a partial withdrawal from a universal life policy will be taxed? - ANSWER-- Interest earned on the withdrawn cash value In calculating the amount of life insurance needed, on what is the needs approach based? - ANSWER--The predicted needs of the family after the premature death of the insured. Settlement Options - ANSWER--Methods used to pay the death benefits to a beneficiary upon the insured's death. Insurable Interest - ANSWER--A financial interest in the life of another person with the possibility of losing something of value if that person dies. If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be? - ANSWER--Permanent What is policy replacement? - ANSWER--A new policy is issued while an existing policy is terminated or reissued with reduction in cash value. What type of life insurance is best suited to cover a mortgage? - ANSWER--Decreasing Term When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured? - ANSWER--Evidence of Insurability. What are the "living benefits" of whole life insurance? - ANSWER-- Cash Value Statements on the application made by an applicant for a life insurance policy are known as what? - ANSWER--Representations What dividend option can increase the death benefit of the existing life policy> - ANSWER-- Paid-up additions A+ What are the most common exclusions in life insurance policies? - ANSWER--War and Military service, hazardous occupation, and Aviation. If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed? - ANSWER--Interest Only What do individual insureds receive as proof of their group health coverage? - 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? - ANSWER--Unilateral How do insurers determine that cost for a group health policy? - 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? - ANSWER--Subscribers What health policy provision describes the insured's right to cancel coverage? - ANSWER-- Renewability Provision When can an irrevocable beneficiary be changed? - ANSWER--With the written consent of the beneficiary. Under the uniform required provisions for health insurance policies, proof of loss usually needs to be filed within how many days? - ANSWER--90 Days What is the required free-look period for Medicare supplement policies? - ANSWER--30 Days Who qualifies for Medicaid? - ANSWER--People with insufficient income and insufficient assets. What type of insurance covers an employee who is hurt on the job? - ANSWER--Worker's Compensation Under what employer sponsored plan are the benefits taxable to an employee in proportion to the amount of premium paid by the employer? - ANSWER--Disability income When are LTC benefits received tax-free by an individual? - ANSWER- -LTC benefits are always received tax-free What is the gatekeeper model? - ANSWER--An HMO model that uses the insured's primary care physician as the initial contact for the insured for medical care and for referrals. What are the common exclusions in most health insurance policies? - ANSWER--War, self- inflicted injuries, elective cosmetic surgeries, injuries caused by participating in illegal activities, and workers compensation benefits. What is the term for a period of time immediately following a disability during which benefits are not payable? - ANSWER--Elimination Period How can health insurance policies be delivered to the insured? - ANSWER--Personally delivered by the agent or mailed. What is the purpose of respite care in long-term care insurance? - ANSWER--To provide relief for a caregiver. In what type of health insurance plans are providers paid for services in advance, regardless of the services provided? - ANSWER--Prepaid plans When an individual is covered under two health plans that have duplicate benefits, the benefit will be prorated to avoid what? - ANSWER--Overinsurance What is the main difference between coinsurance and co-pay? - ANSWER--Co-pay is a set dollar amount; coinsurance is a percentage of the expenses Which policy rider in a health insurance policy allows an insured to purchase additional amounts of disability income coverage without evidence of insurability? - ANSWER-- Guaranteed Insurablility Rider What Medicare part provides prescription drug benefit? - ANSWER-- Part D What type of disabilities will be covered by occupational coverage? - 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? - ANSWER-- Income tax free What is a service plan? - 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? - ANSWER--A waiting period imposed on the insured from the onset of disability until benefit payments begin. Who are the parties in a group health contract? - ANSWER--The employer and the Insurer A waiver of premium provision may be included with what type of health insurance policies? - ANSWER--Disability income and LTC What type of hospital policy pays a fixed amount each day that the insured is in the hospital? - ANSWER--Hospital Indemnity How can AD&D coverage be written? - ANSWER--As a rider to a health insurance policy, or as a seperate policy. What is a fee-for-service health plan? - ANSWER--Under a fee-for- service plan, providers receive payments for each service provided. The insured on a health policy misstated his age on the insurance application. If this misrepresentation is discovered, what will happen to the policy? - ANSWER--The benefit amount payable under the policy will be adjusted to the insured's correct age. What is the purpose of the coinsurance provision in health insurance policies? - ANSWER--To prevent overutilization of the policy benefits. How will changing one's occupation to be more hazardous, affect the health insurance policy in force? - ANSWER--Claim benefits will be reduced to what the premium would have brought for a more hazardous occupation. How is Medicare part B funded? - ANSWER--By monthly premiums and from the general revenues of the federal government. What are the activities of daily living? - ANSWER--Bathing, Dressing, Eating, Transferring, Toileting, and Continence. What benefits are provided by Medicare part C? - ANSWER--Expanded benefits for a fee through private insurance programs such as HMO's or PPO's. What is a tax advantage of the employer paying disability insurance premiums for its employees? - ANSWER--Premiums are deductible as a business expense. How are excess funds in an employee's health savings account (HSA) handled? - ANSWER--The funds can be carried forward to the next year. What is Major medical insurance? - 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? - 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? - ANSWER--Contributory Who must sign a health insurance application? - 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? - 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? - ANSWER--Any time while the policy is in force.