Health Insurance Programs and Policies, Exams of Nursing

Download Health Insurance Programs and Policies and more Exams Nursing in PDF only on Docsity! 2024 Florida Health Insurance Practice Test bank Actual Exam Questions and Answer Rated A+ Which of the following is NOT a form of medical insurance? -Business overhead expense -Surgical expense -Hospital expense -Long term care - ANSWER-Business overhead expense (Explanation:Business Overhead Expense insurance is designed to reimburse a business for overhead expenses in the event a business owner becomes disabled. Expenses such as rent, utilities, telephone, equipment, employees' salaries, etc.) All of the following are state or federal government programs that provide health insurance, EXCEPT? -Medicare -OASDI disability -Medicaid -Medigap - ANSWER-Medigap (Explanation:A Medigap policy is a Medicare supplement insurance policy sold by private insurance companies to fill "gaps" in Medicare Parts A and B.) What type of health insurance is available to assist low-income individuals? -Social Security disability -Medicare supplement -Medicare -Medicaid - ANSWER-Medicaid What types of reserves are set aside and held by health insurance companies? -Premium reserves -Premium and Claims reserves -Claims reserves -Deductible and Premium reserves - ANSWER-Premium and Claims reserves (Explanation:Reserves are set aside for the payment of future claims.) Group health insurance is generally written on a basis that provides for dividends or experience rating. What is the basis called? -Contributory -Noncontributory -Nonparticipating -Participating - ANSWER-Participating (Explanation:Group plans written by mutual companies provide for dividends while stock companies frequently issue experience-rated plans.) Which of the following is NOT TRUE regarding eligibility for subsidies for families under the new health care act? -For those who make between 100-400% of the Federal Poverty -Level -Cannot be covered by an employer -Cannot be eligible for Medicare -Can be eligible for Medicaid - ANSWER-Can be eligible for Medicaid Which of the following operates as a corporation, society, or association to provide life insurance primarily for the mutual benefit of its members, has a lodge or social system with rituals and representative form of government? A) Mutual companies B) Fraternal associations C) Stock companies -Fraternal benefit society - ANSWER-B) Fraternal associations What does each member pay in a typical HMO plan? -Fixed premium based on a deductible and copay -Fixed premium whether or not plan is used -Up to $200,00 -Up to $100,000 - ANSWER-Up to $200,00 Which of the following statements about Worker's Compensation laws is INCORRECT? -Employers can purchase coverage through the state program, private insurers or can self-insure -Worker's compensation provides benefits for work-related injuries, illness or death -Not all states have a workers compensation law -Basic principle is that work-related injuries are compensable by the employer without regard to fault - ANSWER-Not all states have a workers compensation law What year was the Social Security Act amended to add health insurance protection for the aged and disabled? -1973 -1965 -1985 -1935 - ANSWER-1965 All of the following are true statements about Workers Compensation, EXCEPT..? -Benefits are not paid unless there is employer negligence -Pays benefits for work related injuries and illnesses -Employee does not contribute to the plan -All states have Workers Compensation laws - ANSWER-Benefits are not paid unless there is employer negligence Which of the following is a state administered disability plan? -Social Security -Workers Compensation -Medigap -Medicare - ANSWER-Workers Compensation All of the following are nontraditional methods of providing health insurance, EXCEPT? -Multiple Employer Trusts -Multiple Employer Welfare Arrangements -Self-insurance -Commercial insurers - ANSWER-Commercial insurers All of the following are true about a multiple employer welfare arrangement (MEWA), EXCEPT? -Required by law to have an employment-related common bond -Often provide insurance on a self-insured basis -Tax-exempt entities -Large employers who have joined together to provide health insurance benefits - ANSWER-Large employers who have joined together to provide health insurance benefits (Explanation: MEWAs consist of small employers who join together to provide health insurance benefits for their employees) Grouping small businesses together to obtain health insurance as one large group is a characteristic of what type of group? -Multiple Employer Trust (MET) -Franchise Health plan -Health Maintenance Organization (HMO) -Blue Cross/Blue Shield - ANSWER-Multiple Employer Trust (MET) Casey has a medical expense policy that provides a fixed rate of $150 per day for hospitalization. Casey is hospitalized for 10 days and incurred covered medical expenses of $20,000. What will her medical expense policy pay? -$1,500 -$20,000 -$15,000 -$3,000 - ANSWER-$1,500 (Explanation: Casey's policy will only cover a fixed rate per day for hospitalization of $150. If she is hospitalized for 10 days, then her policy will pay $1,500 ($150 x 10) of the total $20,000 in expenses.) Jamie has a reimbursement type medical expense policy with a maximum benefit of $500,000. She is hospitalized and incurs $25,000 in covered medical expenses. What will her policy provide in coverage? -$20,000 -$25,000 -$10,000 -$12,500 - ANSWER-$25,000 (Explanation: A reimbursement type policy will provide coverage for expenses incurred. In this case that would be the total $25,000.) Which of the following will not be covered under "Miscellaneous Expenses" of a hospital expense policy? -Drugs -Lab fees -Daily room and board -Use of operating room - ANSWER-Daily room and board There are three different approaches used by insurers in providing basic surgical expense coverage and determining the benefits payable. Which of the following is NOT one of these approaches? -Reasonable and customary approach -Physician schedule approach -Relative value scale approach -Surgical schedule approach - ANSWER-Physician schedule approach Charlie has a hospital expense policy and a surgical expense policy. The hospital pays $100 a day for room and board and a maximum of $1,000 for miscellaneous hospital charges. The surgical policy pays a maximum of $500 for any one operation. If Charlie was hospitalized for 10 days and had charges of $200 per day for room and board, $1,500 for Travis has a Major Medical policy with a flat deductible of $500 and coinsurance of 80%/20% on the next $5,000 in covered expenses with 100% coverage for any remaining covered expenses. On an claim of $10,000, what amount will Travis pay? -$2,500 -$1,500 -$2,000 -$1,000 - ANSWER-$1,500 (Explanation: Travis will pay the first $500 (deductible) and then 20% of the next $5,000 ($5,000 x .20 = $1,000. So Travis will pay a total of $1,500 (deductible plus 20% of $5,000).) When comparing a major medical policy having an 80%/20% coinsurance provision with one having a 75%/25% coinsurance provision, the insured will pay more or less premium for the 80%/20% provision? -Less premium -The same premium -Significantly less premium -More premium - ANSWER-More premium (Explanation: Because the insured will be responsible for less of the cost for medical expenses (20% verses 25%), he will pay more in premium costs.) Jason has a Major Medical policy with a flat deductible of $500, coinsurance of 80%/20% and a stop-loss of $5,000. If he has a covered claim of $5,500, what will the insurance company pay? -$0 -$4,400 -$1,500 -$4,000 - ANSWER-$4,000 (Explanation: Jason will pay the first $500 (his deductible amount) of the total medical bills. After this Jason will pay 20% of the remainder ($5,000) and the insurance company will pay 80%. $5,000 (amount remaining) x .80 = $4,000 paid by insurance company.) All of the following are types of major medical policy deductibles, EXCEPT? -Franchise -Integrated -Corridor -Flat - ANSWER-Franchise What type of medical expense policy simply provides a daily, weekly, or monthly payment of a specified amount based on the number of days the insured is hospitalized? -Daily room and board expense policy -Surgical expense policy -Hospital Fixed-rate policy -Hospital expense policy - ANSWER-Hospital Fixed-rate policy What type of medical expense policy would be available to cover the high costs associated with a specific kind of illness such as cancer or heart disease? -Hospital expense -Surgical expense -Major medical -Limited risk - ANSWER-Limited risk (Explanation: Limited risk or dread disease policies are designed specifically to cover the high costs associated with a specific illness.) William was involved in a 2-car accident in which he is disabled and his passenger and the driver of the other car are injured. Which of the following would most likely be covered by William's disability income policy? -Disability of the other driver -His lost income -William's medical expenses -Dismemberment of the passenger's leg - ANSWER-His lost income Cathy is a dentist and decides to purchase insurance that would cover a large portion of her income should she become disabled. What type of coverage will she purchase? -Disability income insurance -Business overhead expense insurance -Medical expense insurance -Lump sum disability - ANSWER-Disability income insurance All of the following are true regarding a disability income policy defining total disability as "own occupation", EXCEPT? -Insured is unable to work at their own occupation as a result of an accident or sickness -Difficult to qualify for -More advantageous to the insurer -More expensive than a policy providing "any occupation" - ANSWER- More advantageous to the insurer Which of the following terms relates to payments made for partial disabilities? -Residual amount -Gross amount -Net amount -Recurrent amount - ANSWER-Residual amount (Explanation: The amount of benefit payable when a policy covers partial disabilities depends on whether the policy stipulates a flat amount or a residual amount) Daniel's disability income policy defines total disability as "the insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience". This definition is known as? -Own occupation and is less restrictive than other definitions -Any occupation and is more restrictive than other definitions -Any occupation and is less restrictive than other definitions -Death - ANSWER-Broken arm (Explanation: AD&D is the primary form of pure accident coverage. It provides a stated lump-sum benefit in the event of accidental death or in the event of loss of bodily members due to an accidental injury.) What does the principal sum represent in an AD&D policy? -Amount payable for accidental loss of sight -Amount payable as a death benefit -Amount payable for dismemberment -Amount payable for accidental loss of sight or dismemberment - ANSWER-Amount payable as a death benefit An individual accidental death and dismemberment policy (AD&D) will pay benefits if an insured dies from... -Heart attack -Catastrophic illness -Head injury resulting from an auto accident -Occupational disease - ANSWER-Head injury resulting from an auto accident Michael has an AD&D policy. Which of the following statements is CORRECT? -The benefit for the loss of both eyes is 75% of the principal sum -Michael's beneficiary will receive the capital sum of $100,000 as a death benefit -Principal sum is the amount paid for the accidental loss of sight or dismemberment -The benefit amount for the loss of one foot or one hand is 50% of the principal sum - ANSWER-The benefit amount for the loss of one foot or one hand is 50% of the principal sum Which of the following is an example of a limited risk policy? -Surgical policy -Medical expense policy -Hospital policy -Aviation policy - ANSWER-Aviation policy A famous dancer decides to take out a special policy covering her legs for $1 million. What type of accident policy is this? -Disability income policy -Limited risk policy -Major Medical policy -Special risk policy - ANSWER-Special risk policy Margaret has a special risk policy. It will pay a benefit for... -Unusual hazards normally not covered by other policies -Death or dismemberment resulting from an aviation accident during a specified trip -Dreaded diseases -Special risks such as Lou Gehrig's disease or Parkinson's disease - ANSWER-Unusual hazards normally not covered by other policies What is the free-look period for a Medicare Supplement policy? -7-days -10-days -14-days -30-days - ANSWER-30-days Which of the following statements is true about a Medicare Supplement policy? -These policies are designed to cover deductibles and co-insurance -Only insurance companies affiliated with Medicare can provide Medicare Supplement policies -These policies may be issued to anyone 59 1/2 or older without evidence of insurability -Anyone who qualifies for Medicaid benefits may be issued these policies - ANSWER-These policies are designed to cover deductibles and co-insurance All of the following are correct regarding Medicare Supplement policies, EXCEPT -Must cover pre-existing conditions from the date the policy goes into effect -Must automatically adjust its benefits to reflect statutory changes in Medicare -Must cover all expenses not covered by Part A from the 61st to the 90th day -Must supplement both Part A and Part B of Medicare - ANSWER-Must cover pre-existing conditions from the date the policy goes into effect Which of the following is NOT a requirement for an agent soliciting Medicare supplements? -Explain to prospect where there will be overlapping coverage -Send a signed form to the company explaining why coverage could not be placed -Inquire from each prospect if they already have coverage -Have prospect sign a form acknowledging information has been provided - ANSWER-Send a signed form to the company explaining why coverage could not be placed Which of the following is NOT a category level of long-term care? -Custodial care -Intermediate nursing care -Hospitalization care -Skilled nursing care - ANSWER-Hospitalization care Long-term care insurance also provides for a short rest period for a family caregiver. What is the known as? -Home care -Custodial care -Continuing care -Respite care - ANSWER-Respite care -Employees receive separate policies -Debtor groups are eligible for group plans -Employer is issued a master policy - ANSWER-Employees receive separate policies Which of the following is CORRECT regarding group health insurance? -Insurer must ask health questions of each individual in the group -Labor unions are not eligible -A group may be eligible that is formed just for the purpose of purchasing insurance -Lodges are eligible - ANSWER-Lodges are eligible Florida requires what percentage of participation by employees in a contributory group health plan? -100% -50% -No minimum percentage -75% - ANSWER-No minimum percentage (Explanation: Most noncontributory group health plans require 100% participation by eligible members, whereas contributory group health plans often require participation by 75% of eligible members. Under Florida law there is no specific minimum percentage participation for employees covered by group health insurance.) Which of the following is CORRECT about a group health insurance plan? -Non-contributory plans are paid for by the employer and employee -Non-contributory plans require 100% participation -Contributory plans are paid for by the employer only -Contributory plans require 100% participation - ANSWER-Non- contributory plans require 100% participation All of the following are characteristics of group health insurance, EXCEPT? -Group plans may be contributory or noncontributory -More Americans are covered by individual health plans than by group health plans -Benefits are predetermined by the employer -Cost for insuring an individual under a group plan is less than the cost under an individual plan - ANSWER-More Americans are covered by individual health plans than by group health plans Generally when would an insurer engage in "individual underwriting" under a group health plan? -Never, this is prohibited by law -When the insurer is underwriting and evaluating the group -When an eligible employee tries to join the plan after initially electing not to participate -On an annual review - ANSWER-When an eligible employee tries to join the plan after initially electing not to participate What is the plan called if the employer pays the whole premium on a group policy? -Qualified -Non-qualified -Contributory -Non-contributory - ANSWER-Non-contributory Which of the following is NOT true about "coordination of benefits"? -Establishes which health plan is primary -Found in group and individual health plans -Limits total amount of claims paid from all involved insurers -Purpose is to avoid duplication of benefits and overinsurance - ANSWER-Found in group and individual health plans What is the purpose of COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)? -Allow terminated employees to continue their group medical expense coverage for up to 18 months -Gives terminated employees 31 days to convert their medical expense coverage to another plan -Allows terminated employees to keep their group medical coverage at the same premium rates -Automatically convert terminated employee's group medical expense coverage into an individual policy - ANSWER-Allow terminated employees to continue their group medical expense coverage for up to 18 months After COBRA continuation of benefits has expired, how long does the terminated employee have to convert their group certificate to an individual policy? -90 days -31 days -45 days -180 days - ANSWER-31 days Jake purchased group "credit disability" insurance to cover a loan. He was injured and disabled for 7 months. What benefits were paid under this policy? -Insured's loan is paid off at the beginning of his disability -Creditor receives monthly payments equal to the monthly loan payments -Creditor receives monthly payments equal to the loan amount less loan interest charges -Insured receives monthly disability income payments - ANSWER- Creditor receives monthly payments equal to the monthly loan payments Generally what type of health insurance policies offer dental and vision care benefits? -Individual -Franchise -Blanket -Group - ANSWER-Group -Disability buy-out - ANSWER-Employee disability Why were Cafeteria Plans designed? -Provide insurer greater control over benefits selected for employees -Allow employees to pick and choose from a menu of benefits to tailor their own benefit package -Allow employers to pick and choose benefits from a menu that best suits their company needs -Provide diversity of insurance company and HMO - ANSWER-Allow employees to pick and choose from a menu of benefits to tailor their own benefit package Which of the following will NOT be covered under Business Overhead Expense Insurance? -Leased equipment -Mortgage payments -Owner's salary -Employees' salaries - ANSWER-Owner's salary (Explanation: Business Overhead Expense insurance is designed to reimburse a business for overhead expenses in the event a businessowner becomes disabled.) As compared to individual disability income policies, group disability income policies are generally? -More costly and have less liberal provisions -Tied more closely to Social Security disability benefits -Less costly and have more liberal provisions -More restrictive in terms of covered medical expenses - ANSWER-Less costly and have more liberal provisions What is the typical maximum coverage provided to an individual by a group disability income insurance policy? -100% of pre-disability gross earnings -60% of pre-disability gross earnings -75% of pre-disability gross earnings -50% of pre-disability gross earnings - ANSWER-60% of pre-disability gross earnings Which of the following is NOT a reform provided by the new Health Care Reform Act? -Companies cannot deny pre-existing conditions -Children can stay on parent's insurance plans until age 26 -There will be a fine for those who do not purchase health insurance -Illegal immigrants now eligible for Medicaid - ANSWER-Illegal immigrants now eligible for Medicaid All of the following are considered "rights of ownership" for a life insurance policy, EXCEPT? -Right to change irrevocable beneficiary -Right to assign ownership of the policy to someone else -Right to cancel the policy and select a nonforfeiture option -Right to select how the death proceeds will be paid - ANSWER-Right to change irrevocable beneficiary When someone other than the insured is the owner of a life insurance policy, the owner may do all of the following without consent of the insured, EXCEPT? -Change the beneficiary -Take out a policy loan -Increase the amount of insurance -Surrender the policy for its cash value - ANSWER-Increase the amount of insurance Group health insurance is generally written on a basis that provides for dividends or experience rating. What is the basis called? -Participating -Contributory -Noncontributory -Nonparticipating - ANSWER-Participating (Explanation: Group plans written by mutual companies provide for dividends while stock companies frequently issue experience-rated plans.) Workers Compensation will not provide which of the following benefits? -Rehabilitation to return the person to work -Unemployment insurance -Replacement of wages due to disability -Payment for medical expenses - ANSWER-Unemployment insurance Which of the following is NOT one of the three most important factors in underwriting a health insurance policy? -Parents' medical history -Occupation -Physical condition -Moral hazards - ANSWER-Parents' medical history When an application for health insurance is submitted without an initial premium, the earliest effective date is the date on which the? -Policy is received by the agent -Policy is delivered to the client by the agent and the premium is collected -Application is taken by the agent -Insurance company issues the policy - ANSWER-Policy is delivered to the client by the agent and the premium is collected All of the following are additional risk factors used in underwriting a health insurance policy, EXCEPT? -Avocations -Policy premiums of other health insurance -Age -Family history - ANSWER-Policy premiums of other health insurance Barry suffered a heart attack 26 months ago. What type of risk would he be considered? Health insurance costs tend to increase as the age of the insured increases. The older the insured, the higher the applicable premium rate. Disabilities among women under the age of 55, on the average, have a greater frequency and longer duration than among men, so female premium rates for certain coverages are higher than premium rates for males.) Both life and health insurance use all of the following factors in determine premiums, EXCEPT? -Interest factor -Expense factor -Morbidity -Age - ANSWER-Morbidity An insurer authorized to do business within this state is considered what type of insurer? A) Foreign B) Domestic C) Admitted D) Certified - ANSWER-Admitted (An insurer authorized to do business in this state is referred to as admitted, and could be either domestic, foreign, or alien domiciled.) Charging different rates or providing different benefits to insureds of the same actuarial class or hazard category is which of the following? A) Sliding B) Unfair discrimination C) Fictitious grouping D) Defamation - ANSWER-Unfair discrimination (Unfair discrimination is knowingly making or permitting individuals of the same actuarially supportable class and equal expectation of life to be charged different rates, paid different dividends or have different terms/conditions regarding any life insurance contract.) A bank or credit union will not give a loan unless the borrower buys insurance from a specific company. This is known as? A) Misrepresentation B) Rebating C) Churning D) Coercion - ANSWER-Coercion (It is an unfair trade practice to enter into any agreement to commit, any act of boycott, coercion, or intimidation resulting in an unreasonable restraint of, or monopoly in, the business of insurance.) An agent may have no more than of his total business within a 12-month period be from controlled business. A) 25% B) 35% C) 50% D) 65% - ANSWER-50% (Controlled business is the practice of an agent selling policies or annuity contracts to himself or family members, officers, directors, stockholders, partners, or employees of a business in which he or a family member is engaged, or the debtors of a firm, association, or corporation of whom he or she is an officer, director, stockholder, partner, or employee.) If you are found guilty of any crime punishable by imprisonment one year or more, you must report it to the Insurance Department within how many days? A) 15 B) 20 C) 30 D) 60 - ANSWER-30 (If you are declared guilty of any crime that is punishable by imprisonment for 1 year or more, you must report it to the Insurance Department within 30 days, even if you pleaded 'no contest' or it occurred outside of Florida or even the U.S.) An insurance license may NOT be suspended for which of the following? A) Cheating on the license exam B) Twisting C) Over-insuring a health insurance risk D) Violating the code of ethics - ANSWER-Over-insuring a health insurance risk (An agent's license will not be suspended for over-insuring a health insurance risk unless the agent willfully over-insured it.) Which of the following is NOT true about a fiduciary? A) A fiduciary holds a position of special trust and confidence B) Giving an agent a premium payment is the same as giving it to the insurer C) If an agent is holding a premium payment for less than 3 days, it can be put in his personal account D) A fiduciary responsibility is to offer advice about financial security - ANSWER-If an agent is holding a premium payment for less than 3 days, it can be put in his personal account (An agent or agency must keep funds belonging to each insurer in a separate account so it can be properly audited. An agent must never commingle the insurer's premium with personal funds, or otherwise use it for personal purposes.) An agent may write insurance under which of the following circumstances? A) Agent's company rejected the insurance so the agent submitted it to another company The Office of Insurance Regulation is NOT concerned with which of the following? -The assets and investments of insurance companies -The types and degree of risks of investments made by insurance companies -The examination of agent's income records -Limiting the amount that insurers can invest in different types of investments - ANSWER-The examination of agent's income records The best definition of a legal reserve is? -The amount set aside by federal reserve banks as required by law -The amount set aside by the company for future liabilities as required by law -A leeway provision -None of the above - ANSWER-The amount set aside by the company for future liabilities as required by law Fines and penalties for violating provisions of the agent's qualification laws include? -The denial, suspension, revocation and nonrenewal of License -A misdemeanor fine of not less than $500 nor more than $3500 -Imprisonment for not more than 6 months as well A misdemeanor fine of not less than $500 nor more than $3500 -All of the above - ANSWER-All of the above Florida holds which of the following responsible for the content of any Medicare Supplement as using their name even if they did not approve the ad? -The insurer -The agent who ran the ad -The advertising association -The Agency of Ethical Conduct - ANSWER-The insurer Must a mail-order insurance company be authorized to solicit insurance in the state of Florida? -Yes, and the applications must be taken by a Florida State Agent -No, since there is no personal contact any company can solicit by mail -Yes, but the applications do not have to be sent to a Florida address -No, Florida prohibits the sale of insurance without personal contact - ANSWER-Yes, and the applications must be taken by a Florida State Agent Which of the following is NOT considered one of the renewability classifications? A) Optionally renewable B) Guaranteed renewable C) Conditionally cancellable D) Conditionally renewable - ANSWER-Conditionally cancellable are set aside by an insurance company and designated for the payment of future claims. A) Reserves B) Dividends C) Capital accounts D) Premiums - ANSWER-Reserves Most individual health insurance is written on a basis. A) Nonparticipating B) Participating C) Group D) Franchise - ANSWER-Nonparticipating (Individual is commonly nonparticipating, group is commonly participating.) Health protection is offered in three different forms, which is NOT one of those forms? A) Accidental Death and Dismemberment B) Group Coverage C) Medical Expense D) Disability Income - ANSWER-Group Coverage (Group is how those plans may be distributed) The two types of reserves set aside by insurers are? A) Premium and loss reserves B) Premium and liability reserves C) Claim and settlement reserves D) Earned and Unearned premium reserves - ANSWER-Premium and liability reserves Reimbursement benefits may be paid directly to the medical providers under which condition? A) Scheduled benefits B) Assignment of benefits C) Loss of income benefits D) Injury benefits - ANSWER-Assignment of benefits When a group is covered by a MET, who is issued the Master Policy? A) The sponsor B) The insurer C) The trust D) None is issued - ANSWER-The trust (The sponsor develops the plan, sets the underwriting rules and administers the plan, but the trust itself is the Master Policy owner.) When a Medical Expense plan pays eligible expenses directly to the hospital, physician, or surgeon, it is paying on a? A) Reimbursement basis B) Service basis C) Cash basis D) Scheduled basis - ANSWER-Service basis Which is not a provider type? A) Medical Expense Policy B) Basic Physician's Expense Policy C) Major Medical Policy D) Supplementary Major Medical Policy - ANSWER-Medical Expense Policy (Key word was in the question "expenses". The question is describing a Medical Expense Policy, sometimes referred to as a Regular (Basic) Medical Expense Policy.) Ed and Mavis own a Major Medical Policy for their entire family with a $250 per person/per accident deductible, 80/20 coinsurance and a stop- loss of $2,000. Their contract also contains the Carry-Over Provision, the Common Accident Provision and the Restoration of Benefits Provision. In June, Ed and 2 of his daughters were injured in an auto accident with a total medical bill of $2,000. In July, Ed and his son were also injured in a different incident for a total of $4,500 medical expenses. How much did the insurer have to pay for both accidents? A) $3,400 B) $1,700 C) $4,800 D) $4,500 - ANSWER-$4,800 (Read Carefully: Since Ed and Mavis's Major Medical Policy contains a Common Accident Provision, only one deductible applies per claim even though more than one person was injured. Claim #1 ($2,000 - $250 deductible=$1750 X 80%=$1,400 the insurer's portion); Claim #2 ($4,500 - $250 deductible=$4,250 X 80%=$3,400 the insurer's portion). Insurer's total for the two claims=$4,800.) A Medical Expense Policy list of the amount the insurer will pay for each medical expense incurred is known as a _ . ? A) Conclusion of Benefits B) Schedule of Benefits C) Secluded Emergency Benefits D) Social Insurance Benefits - ANSWER-Schedule of Benefits (Under a Schedule of Benefits, the amount payable is itemized for each medical expense covered by the plan.) The percentage of Scheduled Coverage in a Major Medical Plan is how much greater than in a Basic Medical Expense Plan? A) There are no schedules in a Major Medical Policy. B) 40% better coverage. C) 20% better coverage. D) Same coverage, major medical has more exclusions. - ANSWER- There are no schedules in a Major Medical Policy. (Remember, a Major Medical Plan provides protection against health losses that may be catastrophic in nature with a lifetime maximum limit; usually there are no schedules included.) Hank was in the hospital last month for 3 days, today he received a check for $330. Is this a refund or a payment from a health policy? A) A benefit payment from his Hospital Income or Indemnity Policy. B) A refund from his doctor. C) A refund of premium triggered by hospitalization. D) He submitted the claim wrong and this is the total benefit. - ANSWER-A benefit payment from his Hospital Income or Indemnity Policy. (The Hospital Income or Indemnity Policy pays directly to the insured a specified dollar (cash) amount per day during hospitalization.) Which type of insurance policy combines Basic Medical Expense Coverage with Major Medical Coverage? A) Supplemental Major Medical B) Hospital Expense C) Comprehensive Major Medical D) Surgical Expense - ANSWER-Comprehensive Major Medical (A Comprehensive Major Medical Policy combines the best features of the basic policies and Major Medical policy into a single policy and provides the most complete hospital coverage.) Many insurers pay benefits based on the average fee charged in a geographical area. This is referred to as? A) Reimbursement B) Cash C) Scheduled D) Usual Customary and Reasonable - ANSWER-Usual Customary and Reasonable (UCR is not scheduled, but is based on the average fee charged by all doctors in a given geographical area.) Which policy may be written with Basic Medical Expense Coverage utilizing a Corridor Deductible after the basic plan benefits have been exhausted and before Major Medical benefits begin? A) Supplementary Major Medical B) Hospital Expense C) Comprehensive Major Medical D) Surgical Expense - ANSWER-Supplementary Major Medical (The question is describing the characteristics and mechanics of a Supplemental Major Medical Policy.) Which type of Accident and Health policy would provide reimbursement for expenses involved with a broken hip? A) Endowment Policy. B) Medical Expense Policy. C) Accidental Death and Dismemberment Policy. D) Disability Income Policy. - ANSWER-Medical Expense Policy. C) Partial Disability D) Total Disability - ANSWER-Residual Disability (Residual Disability recognizes one's ability to continue to work, but at a reduction of earnings.Arthritis is what forms as a result of an injury from an accident or otherwise, therefore it's considered a residual disability.) Steve Borden, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision? A) Presumptive Disability B) Total Disability C) Partial Disability D) Residual Disability - ANSWER-Presumptive Disability (Presumptive Disability is where a loss is presumed to be total and permanent due to loss of sight, hearing, speech or loss of two limbs.) This provision states that if there is a second disability due to the same cause within a specified period, then the elimination period may not apply the second time. It is which provision? A) Rehabilitation Disability B) Residual Disability C) Recurrent Disability D) Second Disability - ANSWER-Recurrent Disability (Under Recurrent Disability, if a second disability - NOT a left over as in Residual, is suffered due to the same cause as the first, within a given period, the elimination period may not apply the second time. The benefit period will be considered as a continuous period of disability.) Which of the following would meet the definition of Presumptive Disability? A) The loss of a leg below the knee. B) The loss of sight in an eye. C) The loss of the ability to speak. D) The loss of hearing in an ear. - ANSWER-The loss of the ability to speak (The only response that reflects complete loss of a function is the ability to speak. 'The loss of a leg below the knee does not represent loss of two limbs, and loss of sight in an eye or hearing in an ear does not reflect loss of all sight or hearing.) Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability? A) Recurrent Disability B) Presumptive Disability C) Residual Disability D) Restorative Disability - ANSWER-Residual Disability Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the? A) Waiting Period B) Elimination Period C) Policy Period D) Probationary Period - ANSWER-Elimination Period (Upon reinstatement accidents are covered immediately, and sickness after 10 days. This avoids the motivation for one to want to reinstate a policy because they are already sick.) Martha's Disability Income policy contains a definition of 'Presumptive Disability'. Each of the following situations would meet this definition, except? A) Loss of a limb B) Loss of sight C) Loss of hearing D) Loss of speech - ANSWER-Loss of a limb (Presumptive Disability involves the loss of two or more limbs, not the loss of one limb only.) Which measure could an underwriter use to reduce the risk when underwriting a Disability Income Policy? A) Increase the benefit period and shorten the elimination period. B) Shorten the elimination period and increase the amount of the benefit. C) Shorten the benefit period and increase the elimination period. D) Increase the benefit period and increase the amount of the benefit. - ANSWER-Shorten the benefit period and increase the elimination period. (All other possible answers actually increase the risk.) Penelope received benefits from her disability policy and went back to work. After 30 days she found she was not able to work and began to immediately receive her disability payments. Which of following provisions made this possible? A) Recurrent Disability Provision B) Residual Disability Provision C) Presumptive Disability Provision D) Second Injury Provision - ANSWER-Recurrent Disability Provision Accident and Health Insurance, insures for two major perils, they are? A) Driving under the influence and driving while intoxicated. B) On the job and off the job. C) Accidental injury and sickness. D) Automobile and home health care. - ANSWER-Accidental injury and sickness. Which contract would a bus line passenger purchase to cover injuries sustained while traveling across the United States? A) Blanket B) Limited Accident A) Part B is optional and offered to applicants when they become entitled to Part A. B) Part A is premium free to those who qualify through Social Security or railroad retirement or government employment. C) Part B covers routine physical exams and dialysis for those with kidney failure. D) Part B - outpatient service benefits are determined by consulting a national fee schedule. - ANSWER-Part B covers routine physical exams and dialysis for those with kidney failure. A program designed to provide increased assistance to those who are unable to pay for their medical needs is known as? A) Medicaid (In California, Medi-Cal) B) Medicare Part A C) Supplemental Security Income D) State Supplemental Payment Program - ANSWER-Medicaid (In California, Medi-Cal) (Medicaid (in California, Medi-Cal) is the federal and state administered program that provides increased assistance to those who are unable to pay for their own medical needs.) Part A of Medicare is known as? A) Medical Insurance B) Medicare + Choice C) Outpatient Insurance D) Hospital Insurance - ANSWER-Hospital Insurance (Part A of Medicare is formally known as Hospital Insurance (Inpatient). Part B is formally known as Medical Insurance (Outpatient)) This is a product designed to provide coverage for necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. This product is called? A) Long-Term Care B) Medicare Supplement C) Retirement Benefits D) Outpatient Care - ANSWER-Long-Term Care (The question is describing a Long-Term Care Policy. Medicare Supplement is incorrect as it covers skilled nursing care only, and then on a limited basis by number of days.) Exclusions listed in the policy are NOT covered. Which of the following is not an exclusion? A) Intentionally self-inflicted injuries B) Elective cosmetic surgery C) Nonoccupational injuries D) Care in a government facility - ANSWER-Nonoccupational injuries (Nonoccupational injuries are covered. Job related or occupational injuries are typically excluded as they are covered by Workers' Compensation.) Which Long-Term Care definition does not match the coverage? A) Residential Care - health care provided in one's home under a planned program established by his/her attending physician. B) Respite Care - provides relief to the caregiver not the long-term care patient. C) Custodial Care Facility - a licensed facility, operated according to the laws of the state, under the supervision of an R.N. D) Skilled Nursing Facility - a licensed facility, operated in accordance with the laws of the state, providing skilled nursing care under the supervision of a physician. - ANSWER-Residential Care - health care provided in one's home under a planned program established by his/her attending physician. (This is the definition of Home Convalescent Care, not Residential Care, which occurs within a long-term care facility.) Every LTC Policy that provides benefits of homecare or community- based services shall provide all of the following except? A) Adult day care B) Hospice services C) Respite care D) Acute care - ANSWER-Acute care An insurer offering Medicare Supplements to the senior clients of this state must? A) Offer Core Benefit Plan A if they sell any of the other plans. B) Offer the broader coverage plans only. C) Offer any plan from C to S. D) Offer Core Benefit Plans only. - ANSWER-Offer Core Benefit Plan A if they sell any of the other plans (If an insurer is going to offer Medicare Supplement insurance, they must make Plan A available if they offer any of the 10 plans.) All of the following could be approved as Long-Term Care facilities, except? A) A skilled nursing facility B) A sanitarium for weight loss C) An intermediate care facility D) A custodial care facility - ANSWER-A sanitarium for weight loss Which optional LTC coverage is designed to provide relief to the actual caregiver in an LTC situation? A) Respite Care B) Adult Day Care C) Hospice Care D) Home Health Care - ANSWER-Respite Care (All responses are optional coverages to LTC insurance, but the question is specifically making reference to the caregiver, not the insured.) in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity.) Which statement is INACCURATE regarding the Change of Occupation Provision? A) Change to a less hazardous occupation, insured may apply for a rate reduction. B) Change to a more hazardous occupation, upon claim, benefits will be reduced to that which premiums paid would have purchased at the more hazardous occupation. C) Insured must notify the insurer of a change of occupation, or policy will be cancelled. D) If the insured works at two occupations, rates for the most hazardous occupation will be charged. - ANSWER-Insured must notify the insurer of a change of occupation, or policy will be cancelled. (Failure to notify the insurer of a change of occupation will not result in cancellation of the policy.) Optional Uniform Provisions are included in the contract at the option. A) Insured's B) Insurer's C) Commissioner's D) No one's option, they are regulated by statute. - ANSWER-Insurer's (The Optional Uniform Provisions are included at the insurer's option; however, if used they must conform to that state's Insurance Code.) If liability is denied due to the insured being intoxicated or under the influence, it is because of which provision? A) Legal Actions B) Illegal Act C) Conformity with State Statutes D) Intoxicants and Narcotics - ANSWER-Intoxicants and Narcotics (Intoxicants and Narcotics (an Optional Uniform Provision) allows the insurer the right to deny liability if the insured is under the influence or intoxicated at the time of loss.) Albert owns a printing business in which he, at times, prints counterfeit money. One day while processing funny money, his arm was severely damaged. His insurance will? A) Not pay since he was involved in an illegal act at the time of injury. B) Pay as he was injured on equipment normally used for legal purposes. C) This is classified as a Workers' Compensation claim. D) Will pay but will cancel his contract when he is convicted of the crime. - ANSWER-Not pay since he was involved in an illegal act at the time of injury. (Illegal Occupation/Act (an Optional Uniform Provision) allows the insurer the right to deny liability if the insured is injured while performing an illegal occupation or committing an illegal act.) Three years ago, Charles purchased a health policy from the QRS Company; he has purchased two additional contracts from the same insurer since. Each contract contains the Other Insurance With This Insurer Provision. What happens if Charles has a claim? A) Only one policy will pay, the premiums for the other contracts will be returned. B) Each contract will pay in direct proportion to the loss. C) Benefits are paid in full by all contracts. D) The insurer will cancel all contracts because of intent to defraud. - ANSWER-Only one policy will pay, the premiums for the other contracts will be returned. (Other Insurance With This Insurer (an Optional Uniform Provision) stipulates that if the insured has more than one policy of the same type with the same insurer, the insured may elect the policy to be used, and excess premiums for the excess coverage will be returned.) Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount? A) $2,000 B) $4,000, the contract amount C) The average of her income over the life of the contract D) $3,500 - ANSWER-$3,500 (Relations of Earnings to Insurance (a Optional Uniform Provision) establishes that disability benefits shall not exceed the monthly earnings of an insured at the time the disability commenced, or his/her average earnings for the 2 years immediately preceding a disability, whichever is greater.) If an insurer cancels a contract, a written notice must be provided within 5 to 31 days. The contract must have which of the following provisions? A) Legal Actions B) Conformity with State Statutes C) Entire Contract D) Cancellation - ANSWER-Cancellation (Cancellation (an Optional Uniform Provision) establishes that the insurer may cancel, with written notice of 5 to 31 days, to the insured.) Hank has medical coverage to age 70. He submits a claim for hospitalization. The insurer discovers Hank is actually 73, when his contract states he is 68. What will the insurer do? A) The insurer must prove fraud to be relieved from making payments. B) The insurer must refund the excess premiums Hank paid after his 70th birthday. C) The insurer pays what the premiums would have purchased at the correct age. C) Free Look Provision D) Insuring Clause - ANSWER-Insuring Clause (The Insuring Clause states who is covered, by whom, for how much, and for what period, against what peril.) Abigail has a preexisting condition noted in her new A & H policy. If she submits a claim for this condition during the probationary period, what will the insurer do? A) Reduce the benefits paid. B) Pay a reduced amount or deny any claim payment. C) Pay benefits in full. D) Provide coverage only if this claim is nonoccupational. - ANSWER- Pay a reduced amount or deny any claim payment. (Since Abigail's claim occurred during the Probationary Period, the insurer would likely deny any claim outright or at least pay a reduced amount.) Insurers include provisions in contracts to help reduce unnecessary claims and the overpayment of claims. Which of the following is NOT one of those provisions? A) Concurrent Review B) Mandatory Second Surgical Option C) Consideration Clause D) Ambulatory Service - ANSWER-Consideration Clause (The other choices are Case Management Provisions designed to contain costs. The Consideration Clause stipulates that the payment of the first premium and statements in the application are the applicant's consideration, and the insurer's consideration is the promise to pay within the contract terms.) A health policy not conforming to the Uniform Individual Accident and Sickness Policy Provisions Law... A) Is invalid. B) May be voided. C) Will be construed as if it conformed to the Law. D) The insurer is fined and the policy corrected - ANSWER-Will be construed as if it conformed to the Law. (According to the Conformity with State Statutes Provision (an Optional Uniform Provision), any provision on the policy effective date that is in conflict with statutes of the state is automatically amended to meet state requirements.) An application for disability insurance may be altered by? A) The insurer B) The Commissioner C) The agent D) No one without the applicant's written consent. - ANSWER-No one without the applicant's written consent. (Only the applicant may alter statements on the application.) All states have adopted the Uniform Individual Accident and Sickness Policy Provision Law. If an insurer changes any of these provisions, they must make sure it does not? A) Weaken the application wording. B) Conform to NAIC requirements. C) Create a less favorable meaning than the original wording. D) Cancel the law of large numbers. - ANSWER-Create a less favorable meaning than the original wording. (The insurer must assure that any variation must be at least as favorable as the original wording and no provision may be deleted.) One of your clients just reinstated their Accident and Health policy. When is coverage effective for sickness and accident? A) 30 days sickness, immediate coverage for accidents. B) Immediately for both accident and sickness. C) 10 days sickness and immediately for accidental injuries. D) 10 days accident and 48 hours for sickness. - ANSWER-10 days sickness and immediately for accidental injuries. (Upon reinstatement, accidents are covered immediately, and sickness is covered after 10 days.) Which of the following is NOT a Mandatory Uniform Provision of an Accident and Health policy? A) Payment of Claims. B) Time limit on certain defenses. C) Proof of Loss. D) Waiver of Premium. - ANSWER-Waiver of Premium. (Other choices are Mandatory Uniform Provisions. Waiver of Premium is a provision that may or may not be included.) If the insurer cancels an individual health plan, what happens to the unearned premium? A) It is used to offset underwriting costs. B) The total is refunded. C) It is refunded on a short rate basis. D) It is refunded on a pro rate basis. - ANSWER-It is refunded on a pro rata basis. (According to the Cancellation Provision (an Optional Uniform Provision), if the insurer cancels on the insured, unearned premiums are refunded on a pro rate basis.) Which provision is a Mandatory Uniform Provision? A) Legal Actions B) Misstatement of Age C) Conformity with State Statutes D) Illegal Occupation - ANSWER-Legal Actions C) Sickness - an illness or disease that first manifests itself, or that is first diagnosed and treated, while the policy is in force. D) Blanket payments - is a lump sum payment for a maximum number of days. - ANSWER-Blanket payments - is a lump sum payment for a maximum number of days (Blanket pays a set maximum overall benefit limit with no itemizing; not a maximum number of days.) Which of the following would be considered a good result from an underwriter's action when an individual Accident and Health Policy is issued? A) Issued rated-up B) Issued standard C) Issued with exclusions or limitations D) Application is rejected - ANSWER-Issued standard (To be issued standard is the most favorable action listed, as the coverage requested is issued at the rate that was quoted.) All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual cases, EXCEPT? A) Physical condition B) Medical history C) Nationality D) Gender - ANSWER-Nationality (Underwriting for nationality would be discriminatory.) Managed Health Care attempts to contain health care costs by controlling the behavior of participants through all of the following, EXCEPT? A) Unlimited access to providers. B) Comprehensive case management. C) Preventive care. D) Risk sharing. - ANSWER-Unlimited access to providers. (Managed Health Care attempts to contain health care costs by controlled access to providers as opposed to unlimited access.) The chart that shows the chance of a disability at any given age is called? A) Disability Table B) Mortality Table C) Morbidity Table D) Chance of Loss Table - ANSWER-Morbidity Table (Morbidity Tables reflect the likelihood of disability. Mortality Tables reflect the likelihood of death.) To reduce a substandard disability risk, an insurer may take all of the following actions, EXCEPT? A) Charge additional premium B) Increase the period of elimination C) Reduce the amount of benefit D) Remove all of the exclusion riders - ANSWER-Remove all of the exclusion riders (The underwriter might utilize a Full Exclusion Rider when a condition appears certain to result in recurrent disabilities.) The average person has a 3 to 1 chance of being disabled at any working age than dying. This is a comparison of? A) Adverse selection to Normal selection. B) Adverse selection to Mortality. C) Adverse Selection to Morbidity. D) Morbidity to Mortality. - ANSWER-Morbidity to Mortality. (The statement is comparing Morbidity (the likelihood of one being is disabled) to Mortality (the likelihood of one dying). A procedure used by dental insurance carriers to determine the benefit to be paid is known as? A) Preliminary Evaluation B) Pretreatment Examination C) Precertification D) Least Coverage Provision - ANSWER-Precertification (Precertification or Predetermination of Benefits, although not normally mandatory, allows both the patient and the dentist to know what will be covered before treatment.) Amy owns her own individual Medical Expense Policy. Which of the following is TRUE about taxation circumstances? A) In most cases, the premiums for Medical Expense policies are not deductible. B) If she itemizes deductions and her medical expenses exceed 10% of her adjusted gross income, the portion exceeding that may be deducted. C) Benefits she received from her policy are taxable. D) When itemizing deductions, the deduction for reimbursed medical expenses normally applies to premiums that are paid for medical expenses. - ANSWER-In most cases, the premiums for Medical Expense policies are not deductible. (The answer 'the premiums for Medical Expense policies are not deductible' is the only correct response. Expenses that exceed 7.5% may be deducted; benefits received are not taxable; and the deduction for non-reimbursed medical expenses normally applies.) Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax? A) $10,000 B) $2,500 C) $7,500 C) Gregg's utility bills D) Gregg's personal lost income - ANSWER-Gregg's personal lost income (The intent of the policy is to offset expenses, not to replace the disables owner's personal lost income. If Ole is concerned about his own personal lost income he should own an individual Disability Income policy.) Under which business-related use of Disability Income Insurance would the premiums be tax deductible? A) Disability coverage on each partner of a partnership. B) Entity purchase agreement in a partnership. C) Business Overhead Expense Coverage. D) Key Person Disability Income - ANSWER-Business Overhead Expense Coverage. (Business Overhead Expense Coverage is deductible as the plan is used to offset expenses if the owner of the business were to become disabled. Any benefits received would be taxable to the owner and must be reported as income.) Under which business related plan are benefits taxable as income to the owner? A) Business Overhead Expense. B) Disability Buy-Sell Agreement. C) Both Business Overhead Expense and Disability Buy-Sell Agreement. D) Neither Business Overhead Expense nor Disability Buy-Sell Agreement. - ANSWER-Business Overhead Expense. (Since the proceeds of the policy are being used by the disabled owner to offset expenses the benefits received are taxable.) An annuity purchased 10 years ago would have some value at this time. The accumulation units may now be converted to annuity units. What type of annuity is this? A) Fixed B) Ten Year Certain C) Variable D) Taxable Annuity - ANSWER-Variable (Remember, Variable Annuities are paid in terms of units, rather than dollars. Upon annuitization, accumulation units are converted to annuity units, and the income is paid on the value of the annuity units.) Before VA benefits can be paid, they must be converted into? A) Accumulation units B) Annuity units C) Payout units D) Cash - ANSWER-Annuity units (Annuity units remain the same, the value of each unit varies) On what basis may a variable annuity be purchased? A) Fixed or variable B) Flexible or fixed C) Deferred or immediate D) Delayed or detained - ANSWER-Deferred or immediate (The annuitant may receive payments either immediately or in the future.) Which of the following definitions are INCORRECT? A) Annuity units are the basic measure and method by which annuity income is determined. B) The two factors that determine the annuitant's dollar income are the number of annuity units and the value of each unit. C) A variable annuity does not have a loan value because of its variable value. D) There is no capital gains tax to the individual during the accumulation period of a variable annuity. - ANSWER-A variable annuity does not have a loan value because of its variable value. (There is a cash value so there is a loan value.) Can you add a waiver of premium to a variable annuity contract? A) Yes, only during the accumulation period. B) No, because of the fluctuation. C) Yes, throughout the lifetime of the entire contract, no limitations. D) No, because of the tax consequences. - ANSWER-Yes, only during the accumulation period. (Once payouts begin, the contract pays according to how it was set up.) Which is NOT a rating factor for small employer carriers? A) All plans issued or renewed in the same calendar month shall have the same rating period. B) They use anticipated claim experience. C) They shall apply rating factors consistent among all small employers. D) Preexisting conditions may not be excluded any longer than 1 year. - ANSWER-They use anticipated claim experience. (Small employer carriers utilize actual claim experience, not anticipated claim experience.) Which statement is INCORRECT regarding HMOs? A) HMOs must provide basic health care services to include hospitalization, laboratory services, optical services, physical therapy, dental care and preventive services. B) HMOs are sponsored by medical schools, hospitals, employers, labor unions, consumer groups, commercial insurers, governments, and hospital-medical service plans. (The Office of Financial Regulation protects the public against unauthorized behavior by audited insurance companies at least once every 3 years, and more frequently if warranted.) Unlicensed entities is a regulatory concern due to which of the following issues? A) Rates are higher B) Potential for criminal activity C) State insurance department has minimal oversight over unlicensed entities D) Federal funds will pay unpaid claims - ANSWER-Potential for criminal activity (Unlicensed entities also have an adverse economic impact on authorized insurers, potential for unpaid claims due to dishonesty and lack of sound actuarial decisions, and the state and federal guaranty funds do not pay for those unpaid claims.) The administration of state insurance law is the responsibility of which of the following? A) Attorney General B) Director of Financial Regulation C) Governor D) Chief Financial Officer - ANSWER-Chief Financial Officer (The administration of state insurance law is the responsibility of the Chief Financial Officer (CFO), Financial Services Commission, and Director of the Office of Insurance Regulation.) Which state entity decides conflicts between insurance companies and policyholders? A) State legislature B) State judicial system C) Office of Insurance Regulation D) Department of Financial Services Division - ANSWER-State judicial system (The State judicial system also enforces the code by administering criminal penalties and decides if new laws are constitutional.) A false statement in the application that can render the contract void, if material to the acceptance of the risk, is known as a? A) Representation B) Concealment C) Fraud D) Misrepresentation - ANSWER-Misrepresentation (A misrepresentation can render the contract void, if material to the acceptance of the risk.) The intentional misrepresentation, deceit, or withholding of a material fact known to a person with the intention of causing injury to another party is? A) Concealment B) Fraud C) Warranty D) Utmost good faith - ANSWER-Fraud (key word here is deceit) To act as an agent for an insurer, the producer must be? A) Elected B) Endorsed C) Certified D) Appointed - ANSWER-Appointed (Insurers must file an appointment for each agent who represents them.) Making false, oral or written statements that are critical or derogatory of an insurer's financial condition and is intended to cause injury to someone in the insurance business is called? A) False Advertising B) Twisting C) Intimidation D) Defamation - ANSWER-Defamation If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a? A) Notice of Conservation B) Notice of Replacement C) Statement of Release D) Cancellation of Service - ANSWER-Notice of Replacement Making a false statement about the benefits or nature of a policy is called? A) Twisting B) False Advertising C) Misrepresentation D) Illegal Inducement - ANSWER-Misrepresentation Group life insurance policies are... A) Bound by replacement requirements. B) More restrictive in replacement rules. C) Exempt from replacement requirements. D) Contracts of Adhesion. - ANSWER-Exempt from replacement requirements. (Group policies are not affected by Replacement Regulations.) An officer, director or employer who receives a commission... A) If unlicensed, must place the commission in tertiary funds. B) If licensed, must share the commission with the producer. C) Must be licensed to receive the commission. D) These personnel cannot receive commissions. - ANSWER-Must be licensed to receive the commission. C) Maintain copies of proposals and receipts for at least 1 year. D) Terminating the replaced policy immediately upon receipt of the replacement notice. - ANSWER-Making certain that all replacement actions comply with state regulations. (Two of the remaining choices are actions of the replacing insurer, but the periods in each response are erroneous. The other choice applies to the existing insurer.) Which of the following is not an Unfair Claims Practice? A) Settling a claim based on an altered application. B) Failing to affirm or deny coverage after receipt of proof of loss. C) Failing to act promptly on communications of claim. D) Refusing to pay the claim without receiving a proof of loss. - ANSWER-Refusing to pay the claim without receiving a proof of loss. (It is permissible for an insurer to require a proof of loss before paying a claim.) Commissions may not be paid to which of the following persons? A) Licensed life and health agent. B) An unlicensed person acting as a producer or agent. C) A nonresident agent. D) A properly licensed registered agent. - ANSWER-An unlicensed person acting as a producer or agent. Lawson, an insurance agent with AOKAY Insurance Agency, is in the habit of offering potential clients a 10% premium discount on the first year's premium if they will buy their insurance from him instead of one of his competitors. Lawson, in doing so, is guilty of? A) Rebating B) Twisting C) Defamation D) Coercion - ANSWER-Rebating Which action would NOT constitute an unfair claim settlement practice on the part of the Lampoon Insurance Company in their claim handling or processing? A) Making claim payments that are not accompanied by statements containing the coverage under which payments are being made. B) Offering an insured substantially less than a lawsuit would award him/her. C) Offering an insured a prompt explanation in denial of a claim or offer of compromise. D) Disclosing a history of appealing arbitrated decisions in order to threaten the claimant into accepting less than the settlement awarded. - ANSWER-Offering an insured a prompt explanation in denial of a claim or offer of compromise. (Offering an insured a prompt explanation in denial of a claim or offer of compromise, is in fact what an insurer should do in order to avoid an allegation of an unfair) With of the following is NOT correct with regard to the Chief Financial Officer? A) The CFO oversees Divisions of: Insurance Agents and Agency Services, Insurance Fraud, Consumer Services and Office of Consumer Advocate B) The CFO is appointed by the Governor C) The administration of Florida insurance law is the responsibility of the CFO D) The CFO acts as head of Department of Financial Services - ANSWER-The CFO is appointed by the Governor (The CFO is elected as part of the Governor's cabinet.) The Financial Services Commission... A) Protects the public through oversight of insurance company solvency B) Is headed by the CFO C) Is headed by the Commissioner of the Office of Insurance Regulation D) Directly regulates financial planners - ANSWER-Protects the public through oversight of insurance company solvency (The Financial Services Commission is made up of the Governor, CFO, Attorney General, and Commissioner of Agriculture and appoints the Commissioner of the Office of Insurance Regulation. The Financial Services Commission does not directly regulate financial planners.) With regard to agent and adjuster licensing and investigations? A) The DFS does not investigate agents or adjusters B) The DFS does not supervise agent licensing C) The DFS may interrogate an applicant or agent on any matter is deemed necessary for the protection of the public D) The CFO does not impose penalties for violations of the Insurance Code - ANSWER-The DFS may interrogate an applicant or agent on any matter is deemed necessary for the protection of the public (The DFS does investigate agents or adjusters and supervises agent and adjuster licensing; the CFO does impose penalties for violations of the Insurance Code.) Which of the following is NOT a function of the Division of Consumer Services? A) Compile and distribute information the DFS deems necessary to assist consumers B) Receive inquiries and complaints C) Report alleged violations of law by persons licensed by the DFS, OIR, or OFR to the appropriate regulator D) Examine and investigate licensees - ANSWER-Examine and investigate licensees Which of the following is a function of the Bureau of Financial Investigations? A) Supervise insurer and agent licensing B) Prosecute violations of Insurance or Criminal law C) A Certificate of Authority is not required for authorized reinsurance transactions D) Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority commits a misdemeanor - ANSWER-Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority commits a misdemeanor (Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority commits a felony of the 1st, 2nd or 3rd degree.) Which of the following is NOT a purpose of licensing? A) To authorize and enable the licensee to actively and in good faith engage in the insurance business as an agent B) For the applicant to be familiar with the Florida insurance laws C) To authorize the agent to insure risks D) To facilitate the public supervision of such activities in the public interest - ANSWER-To authorize the agent to insure risks The following qualifications are required for a life or health agent license, except? A) Be at least 21 years of age B) Pass a written licensing examination C) Complete 40 hours of classroom or correspondence instruction within 4 years immediately preceding the application D) Submit fingerprints and a background check - ANSWER-Be at least 21 years of age ( You have to be at least 18 years of age) How many credit hours of continuing education must an new agent complete every two years? A) 12 (with 1 hour in ethics and no more than 3 hours in agency management) B) 24 (with at least 2 in unauthorized insurers and 3 in ethics) C) 30 (with at least 2 in unauthorized insurers and 3 in ethics) D) 12 (with at least 2 in unauthorized insurers and 3 in ethics) - ANSWER-24 (with at least 2 in unauthorized insurers and 3 in ethics) Which of the following are part of the legal responsibility of maintaining an insurance license? A) An agent must inform the Department of any change in address within 10 days B) An agent must inform the Department of any change in address within 30 days C) An agent must inform the Department of any change in address within 60 days D) An agent must inform the Department of any change in address within 90 days - ANSWER-An agent must inform the Department of any change in address within 30 days Which of the following is INCORRECT with regard to commissions and compensation? A) An insurer and producer must keep a copy of their producer compensation agreement for 3 years B) An agent may not share a commission with anyone who does not have a license and appointment for the type of insurance sold C) Commissions are a percentage of the first year premium, and thereafter, a percentage of subsequent renewal premiums D) Commissions may be shared with a person who is licensed and appointed in a different line of business - ANSWER-Commissions may be shared with a person who is licensed and appointed in a different line of business (Commissions may be shared only with a person who is licensed and appointed in the same line of business.) With regard to civil immunity and testimony, which of the following is FALSE? A) A person may ask to be excused from testifying or producing records involving an examination, hearing, or investigation conducted by the DFS or Office of Insurance Regulation, for fear of self-incrimination B) Any person may provide the Department or Office with information about the financial condition of an insurer C) A person providing truthful information about the financial condition of an insurer may still be subject to civil liability D) Only a person providing untruthful information about the financial condition of an insurer may be subject to civil liability - ANSWER-A person providing truthful information about the financial condition of an insurer may still be subject to civil liability (Only a person who knowingly provides false information is subject to civil liability.) Which of the following is NOT an example of behavior prohibited by the Code of Ethics? A) Defamation B) Backdating C) Rebating D) Twisting - ANSWER-Backdating Which of the following are FALSE regarding the Life and Health Insurance Guaranty Association? A) It prevents financial loss to policyholders when an insurer becomes insolvent B) An insurer has the option of becoming a member of the Association C) The Association is not liable for more than $300,000 in the aggregate for any one life D) No one may use the existence of the Association as an inducement to sell insurance - ANSWER-An insurer has the option of becoming a member of the Association An agent is not considered to be holding a license for the purpose of controlled business as long as?