Insurance Concepts and Terminology, Exams of Nursing

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Texas Life and Health Insurance Exam with Updated

solutions 2024

What type of reinsurance contract involves two companies automatically sharing their risk exposure? - Answer ✓✓Treaty The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called - Answer ✓✓reserves When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have - Answer ✓✓insurable interest Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called - Answer ✓✓representations The part of a life insurance policy guaranteed to be true is called a(n)

• Answer ✓✓warranty Which of these is NOT a type of agent authority?

Express Implied Principal Apparent - Answer ✓✓Principal The Consideration clause of an insurance contract includes - Answer ✓✓the schedule and amount of premium payments 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 ✓✓In this situation, the proceeds from E's life insurance policy will go to F. Which term defines the legally enforceable promise in an insurance contract by the insurer? - Answer ✓✓Unilateral

Insurance contracts are known as because certain future conditions or acts must occur before any claims can be paid. - Answer ✓✓conditional Which of these require an offer, acceptance, and consideration? - Answer ✓✓Contract Which of these is NOT considered to be an element of an insurance contract? the offer acceptance negotiating consideration - Answer ✓✓negotiating An agent is an individual that represents whom? - Answer ✓✓Insurer Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? - Answer ✓✓Variable Life

Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life policy? - Answer ✓✓increase face amount When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply? - Answer ✓✓Conversion provision What type of life insurance are credit policies issued as? - Answer ✓✓Term How long does the coverage normally remain on a limited-pay life policy? - Answer ✓✓age 100 All of these statements about Equity Indexed Life Insurance are correct EXCEPT

• Cash value has a minimum rate of accumulation
• If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index -The premiums can be lowered or raised, based on investment performance

-Tied to an equity index such as the S&P 500 - Answer ✓✓The premiums can be lowered or raised, based on investment performance What type of life insurance incorporates flexible premiums and an adjustable death benefit? - Answer ✓✓Universal Life What type of life policy covers 2 lives and pays the face amount after the first one dies? - Answer ✓✓Joint Life Policy Life insurance that covers an insured's whole life with level premiums paid over a limited time is called - Answer ✓✓Limited- Pay Life What kind of life insurance product covers children under their parent's policy? - Answer ✓✓Term rider P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase? - Answer ✓✓Family Maintenance policy Which of the following statements about a Variable Whole Life policy is CORRECT? -It provides a minimum guaranteed Death benefit

• It is a combination of a Limited Period Endowment and a Decreasing Term policy
• Its premiums and benefits are variable
• It has a guaranteed rate of return - Answer ✓✓It provides a minimum guaranteed Death benefit Credit Life insurance is - Answer ✓✓issued in an amount not to exceed the amount of the loan When does Term Life expire? - Answer ✓✓At the end of the policy period What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? - Answer ✓✓Face amount plus the policy's cash value A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as - Answer ✓✓Variable Life What type of life policy covers two people and pays upon the death of the last insured? - Answer ✓✓Survivorship

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? - Answer ✓✓Renewable F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? - Answer ✓✓Decreasing term policy 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 The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is - Answer ✓✓the cost When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) - Answer ✓✓exclusions Which statement regarding the Misstatement of Age provision is considered to be true?

-Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered -Requires that a new policy must be applied for if a misstatement of age is found on the current policy -Misstatement of Age provision is valid only during the contestable period -Insurer may void the policy if a misstatement of age is discovered - Answer ✓✓Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? - Answer ✓✓Reinstatement provision T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay? - Answer ✓✓50, D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy

contains a War Exclusion clause. How much will D's beneficiary's receive? - Answer ✓✓$100, Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? -Coverage can be added at specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Evidence of insurability is required when the option is exercised -Coverage can be added at specific ages - Answer ✓✓Evidence of insurability is required when the option is exercised An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period? - Answer ✓✓Full face amount minus any past due premiums Which of these are NOT an example of a Nonforfeiture option? -Extended Term -Reduced Paid-up

-Cash Surrender -Life Income - Answer ✓✓life income When can a policyowner change a revocable beneficiary? - Answer ✓✓anytime K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? - Answer ✓✓daughter M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

• Answer ✓✓revocable K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, where will the money go? - Answer ✓✓To P's estate

A policyowner's rights are limited under which beneficiary designation?

• Answer ✓✓Irrevocable A level premium indicates - Answer ✓✓the premium is fixed for the entire duration of the contract On a life insurance policy, who is qualified to change the beneficiary designation? - Answer ✓✓Policyowner J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? -The gross premium is higher on a monthly payment mode as compared to being paid annually -The gross premium is lower on a monthly payment mode as compared to being paid annually -The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis -The face amount of a life policy paid on a monthly basis is higher than one paid on an annual b - Answer ✓✓The gross premium is higher on a monthly payment mode as compared to being paid annually

Any changes made on an insurance application requires the initials of whom? - Answer ✓✓Applicant In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and - Answer ✓✓the initial premium Which of these factors do NOT play a role in the underwriting of a life insurance policy? -Avocations -Credit status -Marital status

• Occupation - Answer ✓✓marital status An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors? -Height
• Weight -Gender -Medical history - Answer ✓✓gender

What type of group plan involves employees sharing the cost? - Answer ✓✓contributory plan A noncontributory group term life plan is characterized by - Answer ✓✓the entire cost of the plan is paid for by the employer W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n) -Flexible Premium Deferred annuity -Variable annuity -Immediate annuity -Straight Life annuity - Answer ✓✓Immediate annuity 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

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n) - Answer ✓✓Straight Life annuity Which of these statements concerning an Individual Straight Life annuity is accurate? - Answer ✓✓Payments are made to an annuitant for life Which type of contract liquidates an estate through recurrent payments?

• Answer ✓✓Annuity P, age 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 ✓✓Deferred One becomes eligible for Social Security disability benefits after having been disabled for - Answer ✓✓5 months What is Old Age and Survivors Health Insurance (OASDHI) also known as? - Answer ✓✓Social Security Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits? - Answer ✓✓ 5

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company? - Answer ✓✓Annuity An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age? - Answer ✓✓59 1/ A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed? - Answer ✓✓Company X All students attending a large university could be covered by - Answer ✓✓a blanket policy The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for - Answer ✓✓health information Which type of provider is known for stressing preventative medical care? - Answer ✓✓Health Maintenance Organizations (HMO's)

The individual who provides general medical care for a patient as well as the referral for specialized care is known as a - Answer ✓✓Primary Care Physician The health insurance program which is administered by each state and funded by both the federal and state governments is called - Answer ✓✓Medicaid Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures? - Answer ✓✓Commercial insurer What does Medicare Parts A and B cover? - Answer ✓✓Part A covers hospitalization; Part B covers doctor's services Medicare - Answer ✓✓is a hospital and medical expense insurance program Medicaid was designed to assist individuals who are - Answer ✓✓below a specific income limit Which of the following does Social Security NOT provide benefits for? -Survivorship

-Dismemberment -Disability -Retirement - Answer ✓✓Dismemberment In order to establish a Health Reimbursement Arrangement (HRA), it MUST - Answer ✓✓be established by the employer All of the following are limited benefit plans EXCEPT -cancer policies

• life insurance policies
• dental policies -critical illness policies - Answer ✓✓life insurance policies K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income? - Answer ✓✓Disability Income If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses? - Answer ✓✓Medicare Supplement

Which of the following will a Long Term Care plan typically provide benefits for? - Answer ✓✓home health care How long is the typical free look period for Long Term care insurance policies? - Answer ✓✓30 days A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim? - Answer ✓✓Claim will be paid and coverage will remain in force 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 An insurer must provide an insured with claim forms within days after receiving notice of a loss. - Answer ✓✓ 15

An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the - Answer ✓✓insurer dates the policy What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled? - Answer ✓✓Waiver of Premium rider Which of the following are NOT managed care organizations? - Answer ✓✓Medical Information Bureau (MIB) In general, what percent of personal health insurance premiums is deductible for federal income tax purposes? - Answer ✓✓100% A life insurance illustration is NOT required to include the - Answer ✓✓company's mortality table An insurance company must do which of the following to terminate an agent's appointment? - Answer ✓✓Send notice of the termination to the Texas Department of Insurance An organization that solicits insurance only among its members is known as a - Answer ✓✓fraternal benefit society

Before holding a hearing regarding an agent's unfair or deceptive practice, the Insurance Commissioner MUST give how many days notice? - Answer ✓✓30 days A newly licensed General Lines agent must complete a MINIMUM of how many hours of continuing education within 24 months after initial license? - Answer ✓✓24 hours Insurance agent licenses normally must be renewed every - Answer ✓✓ 2 years An insurance agent does NOT have fiduciary responsibilities to

• Answer ✓✓other agents If an insurance company is organized under the laws of New Jersey and licensed to do business here, it is considered which of the following in Texas? - Answer ✓✓a foreign company In Texas, a domestic insurance company is defined as a company that - Answer ✓✓is incorporated and formed in Texas

Under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of - Answer ✓✓2 years A certificate of authority does which of the following? - Answer ✓✓Permits an insurance company to transact business in Texas After the initial enrollment period, an HMO must hold an open enrollment period of how many days at LEAST once in every 12-month period? - Answer ✓✓ 31 A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the - Answer ✓✓Commissioner of Insurance A Long-Term Care policy must offer a MINIMUM benefit period of how many months? - Answer ✓✓ 12 A foreign insurance company is one that is incorporated - Answer ✓✓under the laws of another state

Under an individual life insurance policy, an insured may assign a MAXIMUM of what percentage of policy ownership? - Answer ✓✓100% Who can purchase a plan through the Marketplace? - Answer ✓✓Any legal resident except those incarcerated An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for which of the following reasons? - Answer ✓✓Failure to pay for coverage Under Texas insurance law, the term "transacting business" includes - Answer ✓✓collecting premiums A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of - Answer ✓✓coercion An agent who tells claimants that their rights may be impaired if they fail to complete a release form within a given period of time could be guilty of - Answer ✓✓coercion

Which of the following is an example of rebating? - Answer ✓✓returning a portion of a premium as inducement to purchase insurance A stock insurance company is owned by it's - Answer ✓✓stockholders An agent who tells a client that dividends are guaranteed may be guilty of - Answer ✓✓misrepresentation An individual life insurance policy issued in Texas MUST have a grace period for premium payment of how many days? - Answer ✓✓ 31 An agent may legally share commissions only with - Answer ✓✓another agent who is licensed in the same line of insurance An agent whose license has been revoked is required to - Answer ✓✓wait at least five years before applying for a new license The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days? - Answer ✓✓ 90

Insurance company agent appointments remain in force for which of the following maximum periods of time, if any? - Answer ✓✓Until terminated or withdrawn If an insured sustains a loss on a policy sold by an agent through an insurance company that is not authorized to do business in Texas, which of the following would be liable? - Answer ✓✓The agent and the company