Insurance Concepts and Terminology, Exams of Nursing

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CALIFORNIA LIFE AND HEALTH INSURANCE EXAM 2024 |

INCLUDES AN ACTUAL EXAM AND 2 PRACTICE EXAMS

WITH STUDY GUIDES | EXPERT VERIFIED FOR

GUARANTEED PASS | GRADED A | LATEST UPDATE

On an HMO, initial care and consultation is performed by... - CORRECT ANSWER The primary care physician.

Federal securities laws are enforced by? - CORRECT ANSWER The Securities and Exchange Commission.

Policy delivery refers to the delivery of the? - CORRECT ANSWER Completed insurance policy to the applicant.

The 'carry-over-deductible' applies to claims occurring within? - CORRECT ANSWER The last three months of the year.

In general Group Life Insurance is? - CORRECT ANSWER The most inexpensive type of life insurance, since it is usually sold to employer groups on a payroll deduction plan, which lowers the cost of administration compared to individual policies.

Ryder buys an annuity naming Gerry and Cheryl as co-annuitants. The amount of the monthly payments during the annuity period will be based upon? - CORRECT ANSWER The joint life span of both Gerry and Cheryl.

What are Nonprofit Service Organization (Insurers)? - CORRECT ANSWER They are organizations providing prepaid plans for hospital, medical, and surgical expenses.

What changes on a Term Life insurance policy when an insured exercises the "Reentry" option? - CORRECT ANSWER Premium.

The period of time between the onset of a claim and the start of a disability income benefits is called the? - CORRECT ANSWER Elimination period (Or waiting period).

What is Part B-Hospital Insurance for Medicare? - CORRECT ANSWER Sometimes called Supplementary Medical Insurance (SMI) since it supplements Part A. Part B (the optional portion) is generally designed to cover physicians' services.

An insurance company organized in Great Britain doing business in California is considered to be? - CORRECT ANSWER Alien

On a refund annuity, who is entitled to the refund? - CORRECT ANSWER The beneficiary.

What is Modified Premium and Graded Premium Whole Life? - CORRECT ANSWER Since level premium whole life is expensive, many insurers offer premium discounts during the early years of a policy to make it easier to sell.

What does an annuity provide to a retired person? - CORRECT ANSWER They provide protection for a retired individual from outliving their savings.

Persons covered by Medicare are called? - CORRECT ANSWER Beneficiaries.

What are Stock Insurers? - CORRECT ANSWER The individual stockholder provides capital for the insurer. In return, they share in any profits and any losses.

An insurance prospect wants to purchase a policy that will accumulate the largest amount of cash by the age of 65. Which policy would be most likely to satisfy the prospect's needs? - CORRECT ANSWER Endowment at age 65.

If the insured/owner of the policy does not pre-designate a settlement option for the beneficiary prior to death, the beneficiary may? - CORRECT ANSWER The beneficiary may select the settlement option upon the death of the insured.

When only one deductible applies to all family members it is referred to as a? - CORRECT ANSWER Family deductible.

With regard to the ethical behavior of a Life agent, which of the following makes it easier for agents to conduct themselves in an ethical manner? - CORRECT ANSWER Always putting the best interests of clients and policyholders first.

What is Limited Payment and Single Premium (Whole Life)? - CORRECT ANSWER These policies are exactly like Ordinary or Stright Life policies, except, the premium is paid over a shorter period of time.

What is an Endowment Policy? - CORRECT ANSWER An endowment policy is exactly the same as a Whole Life policy, except maturity occurs at a predetermined time selected by the insured.

Under the Legal Actions Provision, the insured cannot sue for non-payment of a valid claim until after 60 days in order to? - CORRECT ANSWER Give the insurer time to investigate the claim.

What are the three types of ordinary life insurance? - CORRECT ANSWER W-E-T, Whole Life, Endowments, and Term.

Medicare Part B-Medical Insurance pays a percentage of? - CORRECT ANSWER The Medicare approved amount?

What are fraternal insurers? - CORRECT ANSWER Fraternal benefit societies are primarily life insurance carriers that exist as social organization and usually engage in charitable and benevolent activities. Fraternal insurers are distinguished by the fact that their membership is usually drawn from those who are also members of a lodge or fraternal organization.

To restore you financially after a claim is known as the? - CORRECT ANSWER The principal of indemnity.

A 46 year old is paralyzed in an accident on vacation. Disability benefits would most likely be paid by? - CORRECT ANSWER Social Security.

What is the principle of indemnity? - CORRECT ANSWER The principle of indemnity restores the insured person, in whole or in part, to the condition he or she enjoyed prior to the loss. Restoration may take the form of payment, repair, or replacement.

Group health insurance normally specifies that what percentage of those eligible must be enrolled under a noncontributory plan? - CORRECT ANSWER 100% in a noncontributory group plan.

A settlement option that provides for payment to be made in regular installments of a specified amount until the principle and interest are exhausted is? - CORRECT ANSWER Fixed Amount

What is an accidental Injury? - CORRECT ANSWER It is an injury that is unintentional and unforeseen.

The Join and Survivor Life Annuity contract calls for the surviving annuitant to receive a? - CORRECT ANSWER Predetermined income for life.

Medical expense premiums paid by sole proprietors or partners are? - CORRECT ANSWER They are fully deductible.

What is the Eligibility of a Qualified Plan? - CORRECT ANSWER ERISA prescribes that all full time employees who have worked for at least 1 year and are age 21 or more must be covered in a Qualified Plan, if offered.

If an insurance contract has "variable" features, which set of laws does it come under? - CORRECT ANSWER It is under the Federal Securities Laws. They have met the defition of a security as defined by the Federal Securities Act of 1933.

What insurance product has a flexible premium, fixed rate of return, tax deferred growth and a death benefit equal to the cash value? - CORRECT ANSWER A flexible premium deferred annuity.

What is "Whole Life" insurance? - CORRECT ANSWER It is sometimes called "Cash Value" life insurance and is considred to be permanent. It covers you until you die or until the policy reaches maturity, which is normally age 100. A Whole Life policy cannot be changed without the client's consent and it never has to be renewed, although the premium may be paid annually or even more frequently. Whole Life is said to have a relatively low net cost, since it does develop a cash value after the third year that belongs to the policyholder while living. However, upon death of the insured, the policy will pay the "face amount" (policy limit), but the company will keep the accumulated cash value.

Disability Income policies often do not begin paying benefits immediately when an insured person becomes disabled. Usually, the disability must continue for a period of time before benefits begin. The period is known as the? - CORRECT ANSWER Elimination Period.

A contract where only one party, the insurer, makes an enforceable promise is said to be? - CORRECT ANSWER Unilateral

A survivorship life insurance policy will pay benefits when the? - CORRECT ANSWER The last party dies.

Speculative risk has a chance of? - CORRECT ANSWER gain or loss.

Nursing home coverage under Medicaid is based on? - CORRECT ANSWER Financial Need.

How many "classes" of insurance are in California? - CORRECT ANSWER There are 20 specific classes of insurance.

An insurance company that issues participating policies? - CORRECT ANSWER A Mutual Insurance company

Most assignments of a life-insurance policy are made in order to protect the? - CORRECT ANSWER The insured's personal or business credit.

In the medical insurance field, the term "Coinsurance" means that an insured person? - CORRECT ANSWER Will have to pay a portion of covered expenses.

A Keogh Plan is a qualified plan for? - CORRECT ANSWER Keogh plans are qualified plans for the self-employed and partners. Corporate officers are not eligible. Employees of public schools are eligible for Internal Revenue Code Sections 403b plans, also known as Tax Sheltered Annuities.

The Misstatement of Age Provisions gives the insurance company the right to? - CORRECT ANSWER Adjust benefits payable.

Upon death of the annuitant during the accumulation period of a deferred annuity, the proceeds are? - CORRECT ANSWER The proceeds are taxable to the beneficiary above the annuitant's cost basis.

Most group life insurance is what type of coverage? - CORRECT ANSWER Level Term

A permanent life insurance that offers cash value at the lowest premium is? - CORRECT ANSWER A Whole Life policy.

When medical expense policies do not state specific dollar benefit amounts, but instead base payments upon the charges for like services in the same geographical area, benefits are based on?

• CORRECT ANSWER the Usual, reasonable and customary.

Under HIPAA, health coverage is "portable" from one group to another group without any new probationary period as long as coverage was continuous with no gaps greater than ____ days? - CORRECT ANSWER 63 days.

What does Basic Medical Expense insurance policy cover? - CORRECT ANSWER It covers first dollar coverage for scheduled benefits. It has no deductible and pays up to the limit. For example it will pay the first $2000 but no more. It is "Major Medical" that covers high limits, deductible and co-insurance.

The words "disability (or health) insurance" could mean any of these five types? - CORRECT ANSWER 1. Disability Income Insurance.

2. Accidental Death and Dismemberment (AD&D) Insurance.
3. Medical Expense Insurance.
4. Dental Insurance.
5. Long Term Care Insurance.

What happens at age 65 if one has been receiving Social Security Disability Income benefits? - CORRECT ANSWER At age 65 they are simply converted into retirement benefits instead.

Remember this about noncontributory group health insurance! - CORRECT ANSWER All employees must be enrolled. 100% participation is required.

Mr. Smith is insured on a contributory Group Disability Income plan that pays benefits of $4, a month. If Mr. Smith has to pay 1/4th of the monthly premium, how much of his monthly benefit will be taxable? - CORRECT ANSWER $3,

An employer's requirement for hospital pre-authorization on a group health policy is designed to? - CORRECT ANSWER Prevent unnecessary hospitalization.

The uncertainty about loss that exists whenever more than one outcome is possible is called? - CORRECT ANSWER Risk.

When switching from one Group Medical Expense policy to another, the insurer must? - CORRECT ANSWER Give credit for prior creditable coverage. - Under HIPAA, Group health insurers must give terminated employees a Certificate of Creditable coverage, stating how much of their probationary period has already been satisfied under their prior group contract.

A Deferred Annuity is like? - CORRECT ANSWER It is like stashing our money in the bank for an extended period of time and it gains interest. At some point in the future you can start making to withdraw the premium plus interest earned.

The annuitants cost basis on a non qualified deferred annuity is? - CORRECT ANSWER The amount of the premiums paid in.

What is divisible surplus? - CORRECT ANSWER It is another name for policy dividends. Dividends paid by a mutual insurers to their policyholder are not taxable as the IRS considers them a return of overpayment of premium.

Under dental insurance, crowns are considered to be? - CORRECT ANSWER Restorative

A sworn statement of truth is a? - CORRECT ANSWER Warranty.

When a person takes early retirement under Social Security at age 62, when does coverage for Medicare Part A begin? - CORRECT ANSWER Automatically at age 65.

Something important to remember about annuities is that you are betting you are going to live and the insurance company is betting? - CORRECT ANSWER You are going to die. Annuities are the opposite of life insurance. They do not provide death benefit though a beneficiary would receive the premium plus interest.

Retirement benefits under Social Security are based primarily upon? - CORRECT ANSWER Average monthly wages.

How do insurance company's make money? - CORRECT ANSWER The insurance companies collect premiums to cover expenses, profits, and the cost of expected losses.

What type of licensee represents insureds or prospective insureds and does not represent an insurance company? - CORRECT ANSWER An insurance broker.

The federal law that allows a terminated employee to continue coverage in the group is known as? - CORRECT ANSWER Consolidated Omnibus Budget Reconciliation Act (COBRA). - Don't confuse 'continuation' of coverage with 'conversion' of coverage.

The purpose of a 75% participation requirement on a contributory Group Health plan is to? - CORRECT ANSWER Prevent adverse selection.

The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the? - CORRECT ANSWER Insuring Clause.

When must isurable interest exist for life insurance? - CORRECT ANSWER For life insurance, insurable interest must exist at the time of the application of insurance, but it need not exist at the time of the insured's death.

In property and casualty and in medical-expense insurance, the principle of making someone "whole" again after a loss by paying only for actual losses is called? - CORRECT ANSWER Indemnity

Medicaid is funded by? - CORRECT ANSWER State and federal moneys.

What is important to remember about Paid-up additions. - CORRECT ANSWER It is a dividend option, not an insurance rider.

A producer has just been told by a policyholder that she is 10 years younger than was listed on the application. The producer should? - CORRECT ANSWER Notify the insurance company to adjust the existing policy to the correct age.

If a client would like to have both protection and cash accumulation which type of insurance would satisfy both needs? - CORRECT ANSWER Cash Value life insurance, upon death the policy will pay face amount to the beneficiary.

What are Mutual Insurers? - CORRECT ANSWER There are no stockholders. In a mutal company, ownership rests with the policyholders.

A movie production company is concerned about the possibility that their star might become disabled due to illness and become incapable of completing the picture. What type of insurance should they buy? - CORRECT ANSWER Miscellaneous.

When an insured purchases a decreasing term policy, what decreases each year? - CORRECT ANSWER The face amount.

A life insurance policy dividends are considered to be a return of? - CORRECT ANSWER a premium overcharge.

A life insurance benefit payable while the insured is still living is? - CORRECT ANSWER Accelerated benefits.

A single premium used to buy a Whole Life policy will pay up the policy for? - CORRECT ANSWER The life of the policy!

So when speaking of a "Qualified" retirement plan it is? - CORRECT ANSWER A "qualified" plan in connection to any sort of retirement plan, typically follows the ERISA and is paid in pre- tax (before tax) dollars.

Business overhead insurance will pay for which of the following? - CORRECT ANSWER Rent.

Which whole life non-forfeiture option provides lifetime coverage? - CORRECT ANSWER Reduced Paid up!

To qualify for disability income benefits from Social Security, you must? - CORRECT ANSWER Have fully insured status. Social Security is available only to those who are under age 65 and who have attained "fully insured" status, which requires beneficiaries to have contributed to Social Security for at least 40 quarters (10 years).

What is reducing a risk? - CORRECT ANSWER A person who reduces a risk may practice living healthier lifestyle and attempt to reduce the chance of illness.

If the insured is not entirely satisfied with the policy issued, she may return it to the insurance company for voiding and receive a refund of premium at which of the following times? - CORRECT ANSWER Within a specified period from the date the insured receives the contract.

What are reciprocal insurers? - CORRECT ANSWER Reciprocal insurers are unincorporated groups of people providing insurance for one another through individual indemnity agreements. Each individual who is a member of the reciprocal is known as a subscriber.

What does a policy assignment do? - CORRECT ANSWER It transfers the owner's rights under the policy to the extent expressed in the assignment form.

What is Medical Expense Insurance? - CORRECT ANSWER It is the most common type of disability insurance and covers doctor and hospital bills.

What is the most expensive type of insurance? - CORRECT ANSWER Endowment policies are the most expensive.

Premiums paid for individual Disability Income policies are? - CORRECT ANSWER Not tax deductible.

A life insurance company may contest a policy during the "Contestable Period" for which reason? - CORRECT ANSWER A Material Misrepresentation!

A Prepaid dental plan is similar to? - CORRECT ANSWER They operate in the same manner as HMOs.

What is a Profit Sharing and (401(k) Plans)? - CORRECT ANSWER These plans are voluntary, and if an employee elects to participate, amounts deferred are not included in taxable gross income and earnings credited to the account will grow tax-free until distributed.

The maximum probationary period on a Medicare Supplement is? - CORRECT ANSWER 6 months.

What is an Equity Indexed Annuity? - CORRECT ANSWER An EIA is a fixed annuity where both the principle and the interest are guaranteed. This is not considered a security.

When a creditor has a temporary interest in a life insurance policy, it is known as a? - CORRECT ANSWER Collateral assignment.

What is a 1035 exchange considered to be? - CORRECT ANSWER A 1035 exchange is very similar to a rollover of a qualified plan. if an insured takes cash surrender of their life insurance policy or annuity they must pay ordinary income tax on any interest they received. The IRS will allow the insured/annuitant to defer paying this tax if they execute a 1035 exchange.

What is insurance? - CORRECT ANSWER Insurance is a social device for spreading the chance of financial loss among a large number of people.

What is the main purpose of life insurance? - CORRECT ANSWER To offer protection to your survivors in the event of your death.

A participating whole life insurance policy treats dividends as? - CORRECT ANSWER Treats dividends as a return of an overplayment of premium.

An insurance coverage that pays a certain dollar amount while an insured is confined in a hospital, and under which the benefits are not tied to the amount of incurred expenses, is? - CORRECT ANSWER A Hospital confinement indemnity insurance.

Which contract requires a series of benefit payments be made at specified intervals? - CORRECT ANSWER Annuity.

An insurable risk requires a "Large Number of Homogenous Units". Explain. - CORRECT ANSWER The expected loss experience of a group of exposure units cannot be predicted with any certainty unless there are a large number of exposure units in that group. You needs lots of people or units in a pool to be able to predict loss.

What is an "Absolute Assignment"? - CORRECT ANSWER It transfers all of the policyholder's rights to another party.

In a legal contract, each party must give something of value. Under contract law, this is referred to as? - CORRECT ANSWER Consideration

What is key person insurance? - CORRECT ANSWER A "Key Person" insurance, in which a business owner buys life insurance on a key employee, since the business would suffer if the key party died.

Premiums paid by sole proprietors for individual health insurance coverage are? - CORRECT ANSWER Fully deductible.

What is Annual Renewable Term insurance? - CORRECT ANSWER A policy in which the face amount stays level, but as the insured gets older, the premium increases each year. For example, a 30-year old male in good health could buy a $100,000 ART policy for an annual premium of about $100. However, he would have to renew the oplicy next year and the premium would increase to about $110.

When a person jumps off a street car and breaks their ankle, this injury is considered to be? - CORRECT ANSWER Sudden and unforeseen.

What is Level Premium Term? - CORRECT ANSWER Since most clients do not like their premiums to increase each year, most insurers also offer level for a period of time, such as five years, 10 years or even 20 years.

The premium paid by your employer for qualified long-term care insurance is? - CORRECT ANSWER Excluded from the employee's gross income.

A product with a flexible premium, guaranteed minimum rate of return, tax deferred earnings and tax free death benefits is? - CORRECT ANSWER Universal Life

To take cash surrender on an annuity, the insurer needs the permission of the? - CORRECT ANSWER Owner! Remember the owner may not actually be the annuitant.

If the client goes out of network for services on a PPO... - CORRECT ANSWER The amount paid will be reduced.

Explain the business use of life insurance called, "Buy and Sell Agreements". - CORRECT ANSWER Cross Purchase Buy/Sell Agreements help with the orderly continuation of a business in the event that an owner dies prematurely.

"Home Service" is another name for? - CORRECT ANSWER Industrial life

A producers underwriting responsibility would include which of the following? - CORRECT ANSWER Making sure all material facts are included in the application. - The producer is sometimes referred to as a 'front-line' underwriter, since they generally have personal contact with the applicant.

A Hospital Confinement Indemnity policy will do which of the following? - CORRECT ANSWER Pay a state amount only if in the hospital.

Buying Insurance does not eliminate? - CORRECT ANSWER Risk

What are Participating Policies? - CORRECT ANSWER Mutual companies do not have stock. Although they are corporations, they are owned by the policy holders. If the Board of Directors declares a dividend, it will be paid to the policyholders. The IRS has ruled that these dividends are return of premium already paid, so they are not taxable. Mutual companies issue participating policies. Dividends may never be guaranteed.

The IRS does not tax which of the three major benefit programs? - CORRECT ANSWER Welfare benefits, Social Security Disability benefits, and Workers Compensation benefits are not taxed.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the? - CORRECT ANSWER Incontestability Clause.

A 46 year old is paralyzed in an accident on vacation. Disability benefits would most likely be paid by? - CORRECT ANSWER Social Security

"Ambulatory" services are generally those that stress? - CORRECT ANSWER Outpatient surgery.

Does the common disaster clause protects the Insurance Company if a lot of clients die due to the same disaster? - CORRECT ANSWER False. It is for cases where both the primary beneficiary and insured die in the same accident. it is designed to protect the interests of the contingent beneficiary.

in the property and casualty insurance field, "insurable interest" must exist when? - CORRECT ANSWER At the time of application and at the time of loss.

If an individual wants to purchase a policy that would provide the broadest coverage for medical expenses they should purchase? - CORRECT ANSWER Comprehensive major medical.

There is no cost basis for an annuitant when you create an? - CORRECT ANSWER Immediate annuity. - Be sure to know the difference between an immediate annuity and a deferred annuity. On an immediate annuity, you give the insurer the money and they start paying you back with monthly payments right away. Your cost basis is the amount of money you gave them, which was money you already paid taxes on (after tax dollars).

The insurance business is regulated primarily by? - CORRECT ANSWER State laws

Employees covered under a group health policy who attain age 65 may? - CORRECT ANSWER continue in the group with no change in coverage.

The insured is required to submit a Notice of Claim to the insurance company within how many days after a loss? - CORRECT ANSWER 20 days.

The authority of an insurance agent that is spelled out in the written words of the agency contract between the agent and the insurer is? - CORRECT ANSWER Express Authority.

A producer offering a variable contract must also give his client a disclosure document commonly known as a? - CORRECT ANSWER Prospectus.

The group insurance provision that prevents two insurers from paying more than the actual loss is called? - CORRECT ANSWER Coordination of Benefits.

Tom O'Hara was hospitalized for two weeks and received a bill for $2,100. He has Major Medical policy with a $100 deductible. His coinsurance is 80/20, figured after reducing the bill by the deductible amount. Mr. O'Hara is expected to pay a total of? - CORRECT ANSWER $

What is a sickness? - CORRECT ANSWER A sickness or disease which first manifests itself after the effective date of the insurance policy.

A valid 1035 Exchange of a life insurance contract must be? - CORRECT ANSWER On the life of the same person?

The main purpose of HIPAA is? - CORRECT ANSWER HIPAA is to regulate probationary periods.

What term describes the concept that the insurer and the insured share in the cost of medical expenses, with the insurer bearing the greater share? - CORRECT ANSWER Coinsurance.

Is it true that the definition of total disability is standardized by all insurers? - CORRECT ANSWER It is false. Total disability is specified in the individual policy.

The insured can receive the face amount of an endowment policy if they are still living when the policy's? - CORRECT ANSWER Cash value equals the face amount.

The premium your employer pays for qualified long-term care insurance is tax deductible the same as? - CORRECT ANSWER Medical expense insurance.

In a disability policy, an Elimination (waiting) Period Provision refers to the period? - CORRECT ANSWER Between the first day of disability and the day to which the disability must continue before it can result in the insured receiving benefits.

What does the law of large numbers allow an insurance company to predict? - CORRECT ANSWER The law of large numbers allows the insurance company to predict the expected losses of a group. The greater the number of people being insured the more predictable the number of future losses.

Medicare Part A Hospital coverage is supported by? - CORRECT ANSWER Withholding and self-employment taxes.

Upon your death, if your beneficiary chooses the interest only settlement option. The interest becomes? - CORRECT ANSWER The interest is taxable.

Which rider is added to a policy written on the life of a child to make sure the premium is paid if the policyholder dies or becomes disabled? - CORRECT ANSWER Payor benefit rider.

Which financial services product creates an immediate estate? - CORRECT ANSWER Life Insurance!

Ms. Smith is covered by a non-contributory group disability income plan where she works. The policy has a 30 day waiting period and offers benefits of $2,000 per month. If she is off work for 7 months due to a covered disability, she will receive? - CORRECT ANSWER $12,000, all of which is taxable.

Health Maintenance Organizations are not required to provide for? - CORRECT ANSWER Prescription drugs.

A qualified Employee Benefit plan that gives employees part ownership in the company for which they work is known as a? - CORRECT ANSWER Employee Stock Ownership plan.

The purpose of a Grace Period provision is to? - CORRECT ANSWER protect the policyholder against unintentional lapse.

A collateral assignment on a life insurance policy is? - CORRECT ANSWER Is a partial assignment of some rights to a creditor.

A client is 65 today. His LP 65 will reach maturity? - CORRECT ANSWER At age 100. He just finished paying his premiums at 65.

Individuals covered under Medicare are called? - CORRECT ANSWER Beneficiaries.

Under Dental insurance, crowns are considered to be? - CORRECT ANSWER Restorative.

Distributions that are taken from a Medical Savings Account (MSA) that are used to purchase a new sport utility vehicle are? - CORRECT ANSWER Taxable as ordinary income plus a 15% penalty.

A Certificate of Insurance issued to an employee covered by a Group Medical Expense plan must contain? - CORRECT ANSWER A summary of the policy coverages and provisions.

If a life-insurance policy does not permit the policyholder to change the beneficiary, the beneficiary is? - CORRECT ANSWER Irrevocable.

When must insurable interest exist for property and casaulty insurance? - CORRECT ANSWER For property and casualty insurance, insurable interest must exist at the time of loss.

Does cancer and dread disease policies follow the principle of indemnity? - CORRECT ANSWER No they do not follow the rule of indemnity and you can have as many as you like and will pay in addition to one another.

To make the insured "whole" again after a loss is referring to? - CORRECT ANSWER Principle of Indemnity

In general what conversion benefit is available to a terminated employee under a group life insurance policy? - CORRECT ANSWER The employee may convert to an individual permanent life policy within 31 days without submitting evidence of insurability.

PPOs were started by insurance companies as? - CORRECT ANSWER as a means of competing with HMOs.

Physicians and Surgeons services are covered by? - CORRECT ANSWER Medicare Part B for an additional premium.

Risk is defined as? - CORRECT ANSWER An uncertainty of loss.

What is the contractual element that consists of "Offer" and the "Acceptance"? - CORRECT ANSWER Agreement

Most people buy deferred annuities to? - CORRECT ANSWER Earn tax deferred income to supplement retirement.

The waiting period before a qualified person can receive Social Security disability benefits is? - CORRECT ANSWER Five months.

Carlos Rivera is involved in a two-car accident in which he is disabled, and his passenger and the other driver are injured. Which would most likely be covered by his Disability Income policy? - CORRECT ANSWER His lost income.

Because an insurer writes the policy language and the insured has little or no control over the content, any ambiguity in the wording is usually resolved in favor of the insured. Because the design and wording of a policy are in the hands of the insurer, insurance policies are said to be? - CORRECT ANSWER Contracts of adhesion

The Legal Actions Provision of a disability policy requires that? - CORRECT ANSWER An insured waits at least 60 days after submission of Proof of Loss before initiating a lawsuit.

Individual disability insurance policies are required to contain 12 mandatory provisions in order to protect the consumer. What are they? - CORRECT ANSWER Entire Contract, Time Limit on Certain Defenses, Grace Period, Reinstatement, Notice of Claim, Claim Forms, Proof of Loss, Time payment of claims, Payment of Claims, Physical Exams and Autopsy, Legal Actions, Change of Beneficiary.

A Single Premium Annuity is also called a? - CORRECT ANSWER Immediate Annuity!

A guaranteed renewable Health insurance policy. - CORRECT ANSWER May be renewed at the insured's option up to a certain specified age.

Distributions taken from a tax-sheltered annuity (TSA) are? - CORRECT ANSWER Taxable as ordinary income in the year of the distribution.

For tax purposes, all Modified Endowment Contracts (MEC) issued to an insured will be considered to be one Modified Endowment Contract if issued? - CORRECT ANSWER Within 12 months.

Which annuity guarantees payments for a specific period of time even if the annuitant dies? - CORRECT ANSWER Period certain!

What is Part C-Medicare Advantage Plans for Medicare? - CORRECT ANSWER Seniors who elect to enroll in an Advantage Plan are entitled to the same benefits that HMOs and PPOs provide to their youngest subscribers.

The owner of a business is insured under a $100,000 Key Employee Life policy that contains a Double Indemnity clause and a Suicide Clause. The business has paid the annual premium of $2,000. Six months after the inception date of the policy, the insured commits suicide. The insurance company will pay the beneficiary? - CORRECT ANSWER $2,000 - The premium paid.

The Workers Compensation Second Injury Fun requires? - CORRECT ANSWER Both the first and second injury to be job related in order for the fund to pay.

In health insurance policies, a "Preexisting Condition" is one which an? - CORRECT ANSWER Applicant received medical advice or treatment for prior to applying.

An insurable risk does not cover everything and has the "Exclusion of Catastrophic Perils". Explain. - CORRECT ANSWER Certain types of perils do not lend themselves to prediction. Such perils, when they cause losses, do not establish a pattern of predictability that can be relied upon for future predictions of anticipated loss. These perils are uscually excluded from coverage, such as war, nuclear risk and floods.

Which claims condition makes health insurance claims easier to process? - CORRECT ANSWER Assignment of benefits.

Which policy provides the greatest amount of protection for an insured's premium dollar as well as some cash accumulation? - CORRECT ANSWER Whole life

In CA, LTC policies must? - CORRECT ANSWER Offer inflation protection.

What is the amount the customer pays for the coverage provided? - CORRECT ANSWER The premium.

What does the Elimination Period do on a Disability Income policy? - CORRECT ANSWER The waiting (or elimination) period starts at the onset of a disability. It is selected by the insured when they buy the policy, and the longer it is, the lower the premium will be. It is like a deductible, except it is state in time rather than in dollars. It is not retro-active.

Treatment of overseas emergency medical care for senior citizens is? - CORRECT ANSWER Covered by some Medicare Supplements.

Which of the following terms is the definition of the potential for loss? - CORRECT ANSWER Risk

The policy provision that prevents an insurance company from altering its agreement with a policyholder by referring to documents or other items not contained in the policy is called the? - CORRECT ANSWER Entire Contract Provision.

Preexisting conditions are defined as? - CORRECT ANSWER Sickness you had prior to the effective date of the policy.

An individual is covered under a group Dental Expense plan and needs to have some bridgework done. They are looking in their policy to see if it will be covered. Bridgework is also known as? - CORRECT ANSWER Prosthodontics.

On most qualified retirement plans, such as traditional IRAs, distributions must begin no later than age 70 1/2. If they don't, an excise tax of what percent applies? - CORRECT ANSWER 50% excise tax is levied on the amount that should have been distributed, but wasn't.

Which type of Life insurance utilizes the 'level premium concept'? - CORRECT ANSWER Traditional Whole Life.

An item that is not part of the life insurance policy on paper is? - CORRECT ANSWER The Conditional Receipt

In the simplest way, "Annuities" are considered to be? - CORRECT ANSWER The opposite of life insurance. (Annuities are unique in that they pay only if you live, not if you die!)

An employer's requirement for hospital pre-authorization on a group health policy is designed to? - CORRECT ANSWER Prevent unnecessary hospitalization.

The Cost of Living Rider is tied to the cost of living index and? - CORRECT ANSWER Increases coverage automatically based on the index, but the premium increases.

What is a presumptive disability? - CORRECT ANSWER It is a disability that prevents them from ever working again and they will no longer have to go to the insurer's doctor every 6 months to prove that they are still totally disabled. (Disability Income policy)

Life insurance creates an immediate estate upon death of the insured. Annuities on the other hand do what with an estate? - CORRECT ANSWER Annuities liquidate an estate over a persons life span.

A Disability Income policy has a 7 day waiting period. If the insured is disabled for 15 days, how many days of benefits will the policy pay? - CORRECT ANSWER Eight.

In California, a Life Agent represents the? - CORRECT ANSWER Insurance company.

Nursing Home care under Medicare is? - CORRECT ANSWER Extremely limited.

If an insured is disabled and receiving benefits under a disability policy that provides payment to the insured for at least two years, at what intervals must the insured provide notice of continuing loss? - CORRECT ANSWER Six months.

The reduced paid-up non-forfeiture option will create a new policy in what way? - CORRECT ANSWER It will be a single premium whole life policy with a reduced face amount.

A reinstatement of a lapsed Life insurance policy is not based on? - CORRECT ANSWER Current Age. - The future premiums will be based on the insured's original age.

The Guaranteed Insurability rider does? - CORRECT ANSWER It allows the insured to increase coverage at certain intervals without a physical.

What is Captive Insurers? - CORRECT ANSWER Captive insurers are formed to serve the insurance needs of their stockholders while avoiding the uncertainties related to commercial insurance availability and costs. A captive insurer's stock is controlled by one interest or a group of related interests who hve direct involvement and influence over the company's operations. For example, an association of self insured corporations may purchase reinsurance from a captive insurer that they control. Most captive insurers are non-admitted alien corporations.

A woman has inherited a sum of money. She is age 60 and desires to purchase an annuity that will appreciate with market and economic conditions. What type of annuity should she consider?

• CORRECT ANSWER Variable! (Very Risky)

An annuity is not used to create a? - CORRECT ANSWER They are not used to create an estate for the insured's family. They are to provide income to the annuitant, typically for retirement.

A 30-year mortgage obligation is best protected by what type of insurance? - CORRECT ANSWER Decreasing Term

What type of Health Insurance policy would you buy to provide you with funds for retraining if a valued employee becomes disabled? - CORRECT ANSWER Key Person Disability.

A "morale" hazard is? - CORRECT ANSWER Is a careless client. A "moral" hazard on the other hand is someone who lies.

Producers usually use two methods to calculate how much insurance coverage a client needs, what are these two types of methods? - CORRECT ANSWER The "Needs Approach" and the "Human Life Value Approach".

Under the California Insurance Code, anyone who diverts or appropriates customer funds while acting in a fiduciary capacity to their own use is guilty of? - CORRECT ANSWER Theft.

The face amount of a Credit Life policy is limited by? - CORRECT ANSWER The amount of the loan.

Health coverage becomes effective when the? - CORRECT ANSWER First premium has been paid and the application has been approved.

Some important employees or officers of a company have a profound impact on the companies economic health. Death of such a person can result in interruption of the business, loss of sales and revenue, and an expensive search for a replacement. To protect against this situation companies may use? - CORRECT ANSWER Key person life insurance.

In group health insurance, the contract is between the? - CORRECT ANSWER Employer and the insurance company.

The doctrine of adhesion states? - CORRECT ANSWER That any ambiguity in an insurance contract is always construed against the party who wrote it, the insurer.

When the primary beneficiary predeceases the insured, the proceeds are paid to the? - CORRECT ANSWER Contingent beneficiary.

Medicare's hospital insurance benefits may also pay benefits for? - CORRECT ANSWER Home health care.

An insurance company domiciled in another state but transacting business in California is known as a? - CORRECT ANSWER Foreign company.

What is the Needs Approach of determining life insurance? - CORRECT ANSWER The producer simply determines the needs of the individual client and presents a plan that will meet these needs. Needs would include burial expense, family maintenance, children's education and continuing income for the surviving spouse.

A Major Medical Expense policy has a $100 per family, per year deductible and 80/20 co- insurance. Three claims occur during the year as follows: The first claim was for $200, the second claim was for $400 and the third claim was for $500. How much will the insurer pay? - CORRECT ANSWER $800

When a dentist uses mechanical devices to straighten teeth, it is known as? - CORRECT ANSWER Orthodontics.

A Medical Expense policy covers? - CORRECT ANSWER Hospital and doctor bills.

The principle use of an annuity is to? - CORRECT ANSWER Arrange an income for old age.