Insurance Concepts and Terminology, Exams of Banking and Finance

Download Insurance Concepts and Terminology and more Exams Banking and Finance in PDF only on Docsity! AD Banker Comprehensive Exam 2024-2025. Questions and Correct, Verified Answers. Graded A+ _______ income benefits received by an employee are subject to taxation in proportion to the amount of premium that the employer paid. That income attributable to the employee's premium is not taxable. A Medical B Long-Term Care C Disability D Dental - ANSC _________ consist(s) of the amount of premium that is returned to the policyowner if the insurer achieves lower mortality and expense costs than expected. A The death benefit B A policy loan C A dividend D The cash value - ANSC _________ refers to the jurisdiction where an insurer was formed or incorporated. A Authorized B Approved C Domicile D Admitted - ANSC _____________ consists of groups of underwriters called syndicates, each of which specializes in insuring a particular type of risk. A Lloyds of London B Risk retention insurers C Self insurers D A foreign companyA company that is licensed to sell insurance in a particular state is: - ANSC A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n): A Unilateral Contract B Conditional Contract C Contract of Adhesion D Aleatory Contract - ANSC A document that provides information to the home office of an insurer for underwriting purposes is called a(n): A Rider B Amendment C Claim Form D Application - ANSD A group deferred annuity or an individual deferred annuity would be most likely used: A Both answers B To fund a defined benefit plan C Neither answer D To fund a defined contribution plan - ANSB A health benefit plan that provides coverage for surgical services for a mastectomy must provide screening mammography for women age 50 or older at least every: A 2 years B Year C 5 years D 3 years - ANSB A licensee must inform the Commissioner of a change of legal name or address within ______ days of the change. A 10 B 30 C 90 D 180 - ANSB A licensee must inform the Commissioner of a change of legal name or address within ______ days of the change. A 180 B 90 C 6 months D 90 days - ANSC A Medicare Supplement Policy must include, as a core benefit, Medicare Part B coinsurance in the amount of _______. A 10% B 15% C 25% D 20% - ANSD A minor aged ______ years or older may contract for insurance on his or her own life. A 15 B 10 C 14 D 12 - ANSA A non-school employer can set up a TSA plan for their employees under which of the following IRC section? A 501(c)(3) B 401(k) C 408(a) D 403(b) - ANSA A plan in which employees select health benefits from a variety of coverage options, based on their individual coverage needs is a: A COBRA continuation plan B HIPAA plan C Cafeteria plan D Staff model plan - ANSC A policy that pays surgical expense benefits does not schedule the approved benefit payable for every type of surgery. Instead, surgeries not listed are paid on the basis of a comparison to one or more types of commonly-performed major surgeries that are scheduled. Under this arrangement, the unscheduled surgeries are paid on the basis of: A Their stated value B Their limited value C Their relative value D Their common value - ANSC A producer gathers information about the applicant for the insurer in order to avoid adverse selection. This is considered to be: A Field underwriting B Buying a first vacation home C Qualified educational expenses D Death - ANSB A SEP uses employer funded _______ accounts. A Defined Benefit B Profit Sharing C IRA D 401(k) - ANSC A Short-Term Disability Policy generally is for a disability lasting for: A 2 weeks B 2-3 years C 3-5 years D Not more than 2 years - ANSD A split-dollar plan: A Is part of an entity buy-sell agreement B Insures key employees and is for the sole benefit of the employer in the event of the employees death C Divides the cost of additional insurance for an employee between that employee and the company D Is a qualified retirement plan for the employee with which premiums are split between both the employer and employee - ANSC A Taft-Hartley Trust is established by one or more: A Labor unions or associations B Employers in a Multiple Employer Trust C Employees working for more than one employer D Credit unions in the same area - ANSA A variable life policy: A Has a fixed death benefit B Death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum C Guarantees a minimum return on the cash value account D Has flexible premiums that can be changed as well as frequency - ANSB A whole life policy: A Requires the insured to pay premiums for life and endows at age 100 C Authority D Consideration - ANSC All of the following are eligible to participate in a HR-10 Keogh Plan, except: A Manager B Silent partner C Sales person D Secretary - ANSB All of the following are producer responsibilities to the applicant, except: A Reviewing and evaluating the applicant's current insurance coverage, limits, and risks B Offering and selling only the lowest premium policy C Forwarding premium on to the insurer on a timely basis D Seeking and gaining knowledge of the applicant's insurance needs - ANSB All of the following are true regarding advertising in life insurance, except: A Premiums cannot be referred to as 'deposits', 'deposit premiums', or 'investments', they may be referred to as 'premiums' only B Advertisements may not omit the words 'life insurance' or 'annuity' from a policy's name C Premiums cannot be mentioned in an advertisement at all D Any reference to policy dividends must state that they are not guaranteed - ANSC All of the following are true regarding the States Second Injury Fund, except: A It limits the employers liability for a previously disabled employees second injury B It is funded by assessments against insurers and those who self insure C It is used to relieve the state of any burden for Workers' Compensation benefits D It promotes the employment of previously injured or handicapped workers - ANSC All of the following statements about noncancellable policies are true, except: A A noncancellable policy is also called a noncancellable and guaranteed renewable policy B The insurer may regain the right to cancel or not to renew when the insured reaches an age specified in the policy C The only right to cancel the noncancellable policy is for nonpayment of premium D The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date - ANSD All of the following statements regarding an insurance application are correct, except: A It is not included as part of the contract B It is a formal written request by an applicant to an insurer requesting a policy B 3 months C 6 months D 2 years - ANSA An annuity or pure endowment contract must provide a grace period of: A 15 days B 20 days C 4 weeks D 1 month of at least 30 days - ANSD An annuity policyowner may do all of the following, except: A Select or change the settlement option prior to death B Name and change the beneficiary C Change the annuity date D Determine the policy's interest credit - ANSD An applicant who fails two examinations for the same line of authority must wait ______ to take another examination for that line of authority. A 1 year B 2 years C 6 months D 3 months - ANSD An indeterminate premium policy offers: A Whole life insurance with a flexible payment schedule of premiums and flexible face amount of coverage B A limited payment schedule C A low initial premium with succeeding premiums based on the company's investment return, mortality and expenses D An interest sensitive premium on a whole life policy - ANSC An individual jumps off a roof and breaks his leg. Which of the following statements is correct? A Jumping of the roof was an accident and breaking his leg was intentional B Jumping off the roof was intentional and breaking his leg was intentional C Jumping off the roof was an accident and breaking his leg was an accident D Jumping off the roof was intentional and breaking his leg was an accident - ANSD An individual long-term care insurance policy may not be terminated for nonpayment of premium unless the insurer has give notice to the insured and any designated persons at least _____ days before the effective date of the termination. A 30 B May exercise any nonforfeiture option it deems appropriate C Applies the remaining cash values into a deferred annuity D Will automatically institute the extended term option - ANSD An insured forgets to pay his insurance premium. Instead of the policy lapsing, the premium is paid by the company. This would suggest that a __________ policy was purchased. A Whole Life B Decreasing term C Level term D Renewable term - ANSA An insured has paid $1,000 in annual premiums for her permanent life insurance policy for 12 years. Now upon surrendering the policy she is due to receive $15,000 of cash value. How much of this cash value is taxable? A Zero B $3,000 C $15,000 D $12,000 - ANSB An insured may find it more difficult to qualify for benefits, but will enjoy a lower premium, when a more restrictive definition of _________ is found in a Disability Income policy. A Disability B Transplant C Rehabilitation D Benefit - ANSA An insured should receive necessary claim forms within _____ days after notice of claim. A 15 B 5 C 10 D 20 - ANSA An insured with an individual LTC policy is deducting the premiums he is paying for the plan on his income taxes. Once he begins to receive benefits from this plan, what will be the tax consequences on this income? A Fully taxed B Not taxable C Tax-deferred D 7.5% is taxable - ANSB An insurer can deny an otherwise valid claim under a long-term care insurance policy solely on the basis of a misrepresentation that is material to the acceptance for coverage: A B Their guaranteed rate of interest C Their market value on the date of valuation D Their market value at any given time - ANSC Before Cranston was disabled, he was a full time engineer earning about $70,000 annually. Now, two years later, he is able to work part-time, earning about $25,000 annually. It is likely that Cranston would be classified as: A Totally disabled B Permanently disabled C Partially disabled D Completely disabled - ANSC Benefits received from an individual Long-Term Care Policy are not subject to ______, regardless of the deductibility of the premiums paid for the plan. A Income tax B Sales tax C Deductibles D Premiums - ANSA Collateral for a policy loan is: A The cash value of the policy itself B The premiums applied to the cash value account minus the load C Not required at all D Provided by the policy's death benefit - ANSA Comprehensive dental plans usually provide: A Non-routine dental care without any regard to deductibles or coinsurances B Routine dental care services without deductibles or coinsurance C Routine care without deductibles, but subject to coinsurance D Routine care such as preventative care is provided after satisfying a required deductible - ANSB Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: A Paid-up additions increase the amount of future dividends credited B Eventually, no more premiums will be due on the policy C Paid-up additions have their own increasing cash values D These single premium additions do not change the face value of the original policy - ANSB Controlled business may be defined as insurance sold: A To individuals needing an increased amount of term insurance B May only be received in interest only payments C Are always received tax-free D Are received tax-free only if they result from previously taxed contributions - ANSD Dividends if declared are paid __________. A Annually B Monthly C Quarterly D Semi-annually - ANSA Each of the following is a source of life insurance policy dividends, except: A Guaranteed cash value accumulations B Reductions in operating expenses C Savings in mortality D Additional interest earnings - ANSA Each of the following statements about policy loans is correct, except: A A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value B If a policy has cash value, the insurance company cannot refuse to lend the policyowner money C The loan value of a policy cannot exceed the current cash value D Policy loans may be made on any type of policy - ANSD Each of the following would be an element in the definition of fraud, except: A A false statement on the application that is material to the acceptance of the risk B Withholding of known material facts C Intentional material misrepresentation with the intent of causing injury to another party D An individual warrants a fact stated on the application - ANSD Each of the following would be found in the insuring clause of an insurance policy, except: A Definitions B General information about the named insured C General scope of coverage D Conditions under which benefits are payable - ANSB Eligibility for the payment of benefits under a long-term care insurance policy may require either a deficiency in the ability to perform no more than _______ of the activities of daily living or the presence of cognitive impairment. A 0 B $100,000 total death benefit amount to Wilma immediately C Nothing, until a period of 5 years has elapsed D Equal lump sum payments to both Wilma and Pebbles immediately - ANSA George, who has a group policy, may upon leaving his place of employment: A Convert it to permanent insurance without proof of insurability, within a specified period B May continue his current coverage with no change in premium C May convert it to permanent insurance provided he does so within 90 days and can prove insurability D Convert it to an individual term insurance plan, without proof of insurability - ANSA Guaranteed Renewable means: A Renewable only at the option of the insurer B Renewable with adjustable premiums, by classification only C Renewable with guaranteed premium D Renewable with adjustable premiums determined by frequency of claim - ANSB How are employer paid premiums on a group life insurance plan treated for tax purposes? A As compensation in lieu of cash B As an ordinary and necessary business expense C As a personal expense paid on behalf of the employee D A barter transaction - ANSB How can an annuity payout an income benefit income tax free? A Purchase the annuity within a Roth IRA account B When the annuity was purchased as a Traditional IRA with premiums tax deductible C When the annuity payout is going to the estate of the deceased D When the annuitant is over age 70 1/2 - ANSA How large must a group plan be for the requirement to include maternity benefits on the same basis as nonmaternity benefits to apply? A 20 members B 5 members C 30 members D 15 members - ANS15 If a company wishes to share information about a customer's health with a third party: A The customer must opt-out of allowing disclosure immediately B Tax on the entire withdrawal plus a 10% tax penalty C Tax and 10% penalty tax on the withdrawal that represents earnings D Tax on cost basis and 10% tax penalty on the tax deferred portion of the withdrawal - ANSC If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company will: A Void the policy B Continue the waiver of premium rider C Increase the premium D Cancel the waiver of premium rider - ANSB If an insured has an outstanding loan of $5,000 on a policy with a face amount of $25,000, at death the company will: A Pay the beneficiary $20,000, after subtracting the amount of the outstanding loan B Cancel the policy C Pay the beneficiary the full $25,000 face amount D Institute a required loan repayment schedule before allowing the death claim to be processed - ANSA If an insured pays a premium that is lower than others that are in the same class, this insured is considered to be rated as? A Substandard B Preferred C Reduced D Standard - ANSB If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance: A On his own life at certain specified ages without proof of insurability B On his own life at specified periods of time at a fixed guaranteed premium C Anytime before the age of 65 D On his own life at specified periods, but must prove insurability - ANSA If the Commissioner denies a request for an extension to comply with the continuing education requirements, the licensee must complete the continuing education requirements within _______ days after being notified of the denial. A 20 B 45 C 30 D 60 - ANSC If the insurer issues a health insurance policy without an initial premium, the producer must obtain a signed: A A The underwriting certificate of completion B The policy C The certificate of insurance D The approval certification - ANSB In many jurisdictions, permanent policies are required to have some cash value by the end of: A The fourth year B The first year C The second year D The third year - ANSD In order for a claimant to be eligible for _______ benefits, they must qualify based upon need. A Medicaid B Medicare Supplement C Long-Term Care D Medicare - ANSA In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as: A Restricted persons B Considerations C Competent parties D Agreement - ANSC In the context of replacement, the term 'conservation' means any attempt by the: A Insured to negotiate a lower premium with the agent B All the answers listed C Insured to cancel the policy in an attempt to conserve premium dollars D Existing insurer or its agent to continue existing life insurance in force - ANSD In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what else must the agent obtain to make the delivery complete? A Postage and handling fees B Additional payment reflecting lost interest C A statement of good health D An affidavit from the applicant - ANSC In which of the following circumstances would the accidental death benefit not apply? A B Policy renewal C Application D Policy delivery - ANSC Insurers generally calculate premiums on: A A weekly basis B An annual basis C A monthly basis D A daily basis - ANSB It is the _________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state. A Secretary of State B State Senate C State Insurance Commissioner D State Congress - ANSC Jay, who is employed by Carson Company, is assigned to work temporarily in another state. While in the other state, Jay is injured on the job. He is entitled to benefits of the Workers' Compensation law in the state in which he was hired even though his injury occurred in a different state. This indicates that the Workers' Compensation law in the state where Jay was hired: A Is competitive B Includes extraterritorial provisions C Has COBRA provisions D Is monopolistic - ANSB Jeanne has a $100,000 whole life insurance policy that has $1,000 of dividend additions, a $6,000 outstanding loan that includes unpaid interest, and a monthly premium of $500. If she dies during the grace period, which of the following insurance settlements would be permitted? A $93,000 B $92,500 C $94,500 D $100,000 - ANSC John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John? A His health policy pays all expenses B Health covers medical; disability covers income C Medicaid pays the medical expenses D John is liable for all expenses - ANSD Medicare supplement policies must provide a 'free look' period of: A 15 days B 25 days C 30 days D 20 days - ANSC Michelle is 65 and starting to receive Social Security benefits. To receive Medicare Part A, she needs to: A Do nothing B Complete an open enrollment application C Complete an open enrollment application along with the first months premium D Enroll in Medicare Part B at the same time - ANSA Non-financial regulatory activities are known as: A Market conduct B Risky conduct C Hazardous conduct D Financial conduct - ANSA On which of the following policies would any proceeds be taxable? A Business overhead expense insurance B The death benefit proceeds of an individually purchased life insurance policy paid to a beneficiary C A key employee disability income policy paid for and owned by the business and the business is the beneficiary D A disability policy that is used to fund a buy-sell agreement - ANSA Once issued, the application becomes part of the ___________, when attached. A Part 2 B Agent's Report C Entire contract D Part 1 - ANSC One of the benefits of an annuity in regards to taxes is: A Premiums are tax deferred B Premiums are tax deductible C Death benefits are income tax free D Earnings are tax deferred during the accumulation phase - ANSD Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as: A Policy Abilities Provisions B Case Management Provisions C Miscellaneous Provisions D Protect Insurer Provisions - ANSB Primary support for Medicare Part A comes from: A Local tax revenues B Federal bond fund C Medicaid D Social Security payroll taxes - ANSD Regarding COBRA, which of the following is not true? A It provides continuation of coverage for 36 months for a surviving spouse B It covers participants who have resigned for 36 months following the date of their resignation C It provides continuation of coverage for 36 months for an individual losing dependent status D It provides continuation of coverage for 29 months for the disabled - ANSB Required Provision 'Reinstatement' addresses reinstatement of a lapsed policy. According to this provision, when an insured applies for reinstatement and receives a conditional receipt, how long does the insurer have to approve or deny reinstatement before the policy will be automatically reinstated? A 90 days from the date of the conditional receipt B 120 days from the date of the conditional receipt C 45 days from the date of the conditional receipt D 20 days from the date of the conditional receipt - ANSC Required/Mandatory Provision 'Proof of Loss' indicates that except in the absence of the insured's legal capacity, if it was not reasonably possible for the insured to provide proof of loss as required in a policy, the latest time the proof of loss may be furnished is: A 1 year from the time proof is otherwise required B 6 months from the time proof is otherwise required C 5 years from the time proof is otherwise required D Within 60 days of the time proof is otherwise required - ANSA Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________. A Short-term disability B Partial disability C Long-term disability D Warranties - ANSB Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective? A Single Premium Immediate Annuity B Flexible Premium Deferred Annuity C Single Premium Deferred Annuity D Flexible Premium Immediate Annuity - ANSA TEFRA is intended to: A Require labor unions to establish a trust for employee pension accounts B Regulate and standardize Medicare supplement plans C Prevent group plans from discriminating in favor of key employees D Regulate social insurance programs - ANSC Term insurance differs from permanent insurance in that term: A Builds cash value and provides limited death benefit options only B Costs more than permanent insurance C Builds no cash value, pays a death benefit only D Provides a variety of living benefits - ANSC The _________ alerts insurer home office underwriters of errors, omissions, or misrepresentations made on insurance applications. A MIB B Medical Doctors Association C Federal Insurance Information Bureau D State Insurance Inspection Department Report - ANSA The ___________ decides which dividend option is in effect and can change their election at any time. A Board of Directors B Beneficiary C Insurer D Policyowner - ANSD The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers. A Reciprocal B Reinsurance C D Still tax favored for annuitants over the age of 70 - ANSC The factors that determine the amount of each payment under the fixed period settlement option are: A Length of the fixed period, face amount of the policy and interest B Age of the beneficiary only C Length of the fixed period, face amount of the policy, interest, and age of the beneficiary D Length of the fixed period payout only - ANSA The field underwriter is the _________ and is not a determiner of insurability. A Paramedical examiner B Producer C Medical doctor D Actuary - ANSB The first year commission for the sale of a Medicare supplement policy may be no more than ________ of the commission paid for selling or servicing the policy in the second year. A 50% B 500% C 100% D 200% - ANSD The following statement is true concerning the income received from an individually owned disability income policy: A Premiums paid with after tax dollars, Income benefit taxable B Premiums are tax sheltered, Income benefit taxable C Premiums are tax sheltered, Income benefit not taxable D Premiums paid with after tax dollars, Income benefit not taxable - ANSD The grace period for an individual health insurance policy being paid on a quarterly basis is: A 10 days B 45 days C 31 days D 7 days - ANSC The head of the state department of insurance has all of the following powers, except: A Approving rates and rate increases for regulated lines of insurance B Imposing penalties for violations of the insurance code, including but not limited to fines, suspensions or revocations of licenses and Certificates of Authority, and requesting that the Attorney General prosecute a violator C C $50,000 for cash value on one life and $150,000 for all benefits D $100,000 for cash value on one life and $500,000 for all benefits - ANSA The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of a: A Qualified plan B Nonqualified plan C 401(k) D Keogh Plan - ANSB The main benefit of 501(c)9 trusts is: A Costs of setting up these trusts are always lower than other types of plans B That distributions from the trust are always received tax-free C Contributions to these trusts may be deducted immediately, instead of when benefits are distributed D Contributions to these trusts are not tax deductible at all - ANSC The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except: A Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations B Transferring the proceeds of the policy C Encumbering the proceeds of the policy D Commuting the proceeds of the policy - ANSA The mathematical probability table used by insurance companies to determine loss due to sickness or injury is the: A Rate Table B Mortality Table C Morbidity Table D Claims Table - ANSC The maximum liability of the Life and Disability Insurance Guaranty Association for all benefits, including cash values, for any one life is: A $100,000 B $250,000 C $300,000 D There is no limit - ANSC The maximum liability of the Life and Disability Insurance Guaranty Association for cash values, for any one life is: A $200,000 Reduced paid-up option C Paid up additions option D Cash surrender option - ANSA The reinsurance agreement that allows the reinsurer an opportunity to reject coverage for individual risks or price them higher due to their higher risk is known as a(n) ___________ agreement. A Treaty B Facultative C Reciprocal D Residual - ANSB The reinsurance agreement that automatically accepts all new risks presented by the company seeking or requesting reinsurance from the reinsurer is known as a ____________ agreement. A Reciprocal B Facultative C Treaty D Residual - ANSC The relationship of a person who acts on behalf of a company whereby the person's actions can bind the company is known as: A Surplus lines or excess insurance B The law of large numbers C The law of agency D Brokerage business - ANSC The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is called the: A Life income period certain option B Joint life option C Fixed amount option D Fixed period option - ANSD The situation below that most likely calls for the purchase of term insurance is: A Roger is age 62 and is approaching retirement after working for a corporation for 30 years B Mary is 44 years old, is a career school teacher and has no children C George has two years of medical school to complete; he and his wife have one child D Kathy, age 60 and married, has two adult children, both of which are married - ANSC The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following? A Waiting period Disability Reducing Term B Buy-Sell Agreement C Business Overhead Expense D Key Employee Insurance - ANSC The type of policy that can be changed from one that does not accumulate cash values to one that does is a: A Universal life policy B Variable life policy C Permanent policy D Convertible term policy - ANSD The waiting period from the start of a disability to be eligible to apply for Social Security disability is: A 3 months B 12 months C 6 months D 5 months - ANSD The waiver of premium rider normally expires at age: A 55 B 60 C 70 D 65 - ANSB Third-party ownership refers to: A A situation where the beneficiary has no insurable interest in the insured B A situation where the beneficiary is irrevocable C A situation where the policyowner is someone other than the insured D A situation where the applicant is someone other than the payor - ANSC To address adverse selection what can an insurer legally do? A Limit the amount of coverage issued B Raise the premium higher than most people can afford to pay C Establish and enforce sound underwriting practices D Not offer policies to those over age 55 - ANSC To be able to start operations, a mutual company must have all of the following, except: A A minimum number of stockholders