Insurance Concepts and Terminology, Exams of Insurance law

Download Insurance Concepts and Terminology and more Exams Insurance law in PDF only on Docsity!

Florida 2-15 Insurance License Exam/ 145+

Q&A/ 2024-2025.

Which statement is CORRECT about the Department of Financial Services' right to examine an agent's records? - Answer: An examination can be conducted at any time to discover any unfair trade practices. Bill gives Jim a couple of tickets to a Florida Gators game to thank him for purchasing a policy. This is an example of: - Answer: rebating ____________ term insurance provides a level amount of protection for a specified period, after which the policy expires. - Answer: Level Business overhead expense (B.O.E.) insurance does not provide benefits to cover the business owner's salary. - Answer: TRUE

Level, decreasing, and increasing insurance are all basic forms of ____________ insurance. - Answer: term Hospice services are covered under Medicare Part A. - Answer: TRUE Under Florida law, group health insurers must offer mental and nervous disorder insurance to policyowners. - Answer: TRUE Deductibles under a group major medical plan usually run from $250 to $500; whereas individual health plans usually run from: - Answer: $1,000 plus. Every HMO subscriber must receive a benefits package that includes a copy of the HMO contract and certificate, and: - Answer: a member's handbook. A life insurance policy will not be reinstated if it has been: - Answer: surrendered for its cash value. Which of the following is NOT a type of permanent life insurance? - Answer: Term Life In Florida, a ______________ must sign for and on behalf of a minor purchasing life insurance. - Answer: parent or legal guardian When an agent spreads a false story that damages a competing agent's reputation, the offense is called: - Answer: defamation

__________ is when policy values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions. - Answer: Churning Once an organization has filed an application to conduct insurance business, the Office of Insurance Regulation will begin its review for issuing a(n): - Answer: Certificate of Authority Florida law requires health insurance policies and HMO contracts to provide coverage for all medically necessary equipment, supplies and services used to treat diabetes when the patient's physician certifies that they are medically necessary. - Answer: TRUE If an insurance company reimburses the insured for medical expenses, can the insured deduct that amount from their federal income tax? - Answer: NO Which of the following is NOT a benefit to key person insurance? - Answer: Wage control The "currently insured" classification under Social Security limits survivorship benefits. In order to be eligible for Social Security survivor benefits, a person must have earned _________________ period ending with the quarter in which the worker died. - Answer: six credits during the 13-quarter

A prospectus for an individual variable insurance contract: - Answer: must accompany every sales presentation. Most group disability policies use the ___________ method to calculate the amount of the insured's earnings prior to the accident. - Answer: percentage Group health plans that are issued on an experience-rated basis can make both premium reductions and premium increases retroactive for 12 months. - Answer: FALSE Employees may be classified for group life insurance in all of the following categories EXCEPT which? - Answer: Gender Lauren wants to purchase an annuity that will pay her a guaranteed income for the remainder of her life once she retires. Which type of annuity should she purchase? - Answer: Straight Life Income Annuity According to Florida's Standard Valuation Law, the __________________ is mandatory. - Answer: legal reserve Equity indexed annuities are a form of: - Answer: fixed rate annuity. Of the following, who would most likely pay a lower premium amount? - Answer: A preferred risk client

The Statute of Limitations states that if a lawsuit is to be filed, it must be brought within ______ years after Proof of Loss is furnished to the insurance company. - Answer: five Which type of life insurance is sold by home service insurers? - Answer: Industrial life insurance Social Security provides welfare benefits to all citizens. - Answer: FALSE In general, the standard life insurance Incontestable Clause means that a policy is incontestable after: - Answer: two years. A medical expense policy states that it will pay a flat $200 a day for each day of hospitalization. The policy pays benefits on what basis? - Answer: Indemnity Basic Medical Expense insurance limits coverage to specific types of medical care.

• Answer: TRUE A _____________ group involves combining several parties into a group for the purpose of obtaining insurance. - Answer: fictitious The ____________________ Act mandated once and for all that insurance would be regulated by the states. - Answer: McCarran-Ferguson

The type of annuity that provides a guaranteed rate of return is called a variable annuity. - Answer: FALSE Mathew purchased an annuity naming his wife, Cher, beneficiary. Upon Mathew's death, Cher will receive the proceeds: - Answer: taxed as ordinary income above Mathew's cost basis. Policy reserves are the intangible amounts set aside by the _____________ out of the insurer's assets at the beginning of the policy period. - Answer: insurer SIMPLE plans can be structured as an IRA or a 401(k). - Answer: TRUE A complete examination of an HMO's affairs is conducted at least: - Answer: once every five years. A portion of a mutual insurer's premiums are paid out as policy dividends and are considered: - Answer: refunds COBRA provides health benefit extensions for ____________ after employment is terminated. - Answer: 18 months Which of the following expenses would NOT be covered under a Business Overhead Expense policy? - Answer: Owner's salary

Complete this sentence: "Typically, the shorter the premium-paying period, the _________________." - Answer: higher the premium. Florida statutes require licensees to notify the Department in writing within _____ days after a change of name, residence address, principal business street address, or mailing address. - Answer: 60 Which of the following best describes the basic principal of group insurance? - Answer: It provides coverage for a number of people under a single contract. Under the surgical schedule method of a basic medical expense plan, every procedure: - Answer: is assigned a dollar amount by the insurer. Which of the following is an example of "churning?" - Answer: Replacing a policy within the same company in a deceptive or misleading manner What is the Free Look Period for annuity contracts? - Answer: 14 days Using preprinted material in a sales presentation is recommended because: - Answer: such material generally has been reviewed for compliance. The Social Security payroll tax is known as ____________ tax. - Answer: FICA What is the operating objective of a stock insurance company? - Answer: To make a profit for its owners, the stockholders

Most adjustable life policies are more expensive than conventional term policies or whole life policies. - Answer: TRUE HMOs reimburse their insureds for covered medical expenses. - Answer: FALSE An agreement that provides that upon a business owner's death, surviving owners will purchase the deceased's interest, often with funds from life insurance policies owned by each principal on the lives of all other principals is the: - Answer: Buy- Sell plan. In Florida, which of the following groups are eligible for group life insurance? - Answer: Typically, any type of legitimate group is eligible to purchase a group life insurance policy. In a guaranteed renewable health policy, the company may increase premiums: - Answer: only for an entire class of insureds. Under the Uniform Provisions Law, which of the following provisions are optional for a health policy? - Answer: Change of Occupation The person who has a health maintenance contract is referred to as the: - Answer: subscriber

In order to qualify for Medicaid benefits, applicants must be at least age ____, blind or disabled, and meet other eligibility requirements. - Answer: 65 Under the Unfair Trade Practices Act, claim forms must be sent to the insured within _______ from the date a claim is reported. - Answer: 15 DAYS A life insurance policy's cash value belongs to the insured. - Answer: FALSE Agents should check with _________________ to determine if the insurer they are representing is a properly authorized insurer. - Answer: the Department of Financial Services Supplemental Medical Insurance, Medicaid, and U.S. Armed Services and Veterans Insurance are all examples of what type of insurer? - Answer: Government Insurers Section 1035 Exchanges are a way to move annuity funds: - Answer: income tax free. Which of the following titles can a life insurance agent use when conducting business - Answer: Neither financial planner, consultant, or investment advisor Group health insurers must either provide or offer chiropractic coverage. - Answer: TRUE

A term life insurance policy's cash value builds during a specifically limited period of time. - Answer: FALSE Insurable interest must exist at: - Answer: the time of application. Who regulates retirement plans in Florida? - Answer: ERISA Employee Retirement Income Security Act What type of insurance is most frequently used in group life plans? - Answer: Annual Renewable Term What is a Medicare supplement (Medigap) policies? - Answer: Medigap policies pay for some healthcare services not covered by Medicare, pay most, if not all, Medicare deductibles and copayments, and supplement Medicare benefits. Anyone under the age of _____ who has earned income may open a traditional IRA. - Answer: 70 1/ Which of the following types of insurance contracts are NOT considered valued contracts? - Answer: Medical expense plans Disability insurance provides an income stream for an individual who is unable to continue working due to accident or illness. However, if a person is under ______ disabled, he/she does not qualify for benefits. - Answer: 20%

Under the Law of Agency, an agent is the lawful representative of the: - Answer: principal Group health plans that are issued by mutual companies usually provide dividends, which are most likely to be paid if __________________ are less than anticipated. - Answer: expenses and claims costs Which of the following reimburses its insureds for covered medical expenses? - Answer: Commercial insurers Which of the following would most likely be considered a key person in a business? - Answer: An officer of the company Annuity payment amounts are based upon which of the following factors? - Answer: Starting principal, interest, and income period In regard to variable annuities, which of the following statements is FALSE? - Answer: The annuitant bears no risk. Prior to retirement, the purchaser of a variable annuity pays an agreed-upon periodic premium amount. When these periodic premiums are paid, the purchaser is credited with: - Answer: a number of accumulation units.

An organization outside the members of a self-insurance group which, for a fee, processes claims, completes benefits paperwork and often analyzes claims information is known as the: - Answer: third-party administrator (TPA). Since contributions to a 403(b) tax sheltered annuity are made with before-tax dollars, distributions are - Answer: 100% taxable. _____________ health insurance is issued to cover a group who may be exposed to the same risks, but the composition of the group is constantly changing. - Answer: Blanket The miscellaneous expense benefit in a basic hospital expense policy normally will cover: - Answer: hospital room and board. Florida law does not regulate retirement plans. - Answer: TRUE With regard to annuity investments by seniors, "senior consumers" are typically defined as those individuals who are age: - Answer: 65 or older. If an annuitant owns 300 annuity units and receives $1,500 a month, what is the value of each annuity unit? - Answer: $ The Free Look Period for long-term care policies is _______ days. - Answer: 30

AD&D policies make benefits payable in the form of principal sum and capital sum. - Answer: TRUE If a life insurance applicant is given a conditional receipt, what is the effective date of coverage? - Answer: The time the insurer accepts the application and issues the policy Service providers contract for and sell medical and hospital: - Answer: care services. _______________ policies are commonly used as a hedge against inflation to ward off decreased purchasing power. - Answer: Increasing term Toni decides to take a special vacation on her 40th birthday and withdraws $4, from her IRA. What penalty will she be subject to on the amount withdrawn? - Answer: $ An immediate annuity is designed to provide income: - Answer: Immediately. Henry has a Life with Period Certain annuity (life or ten years) in which is wife, Harriet, is beneficiary. If Henry dies after 5 years, what will Harriet receive? - Answer: Payments for the remaining five years Buy-sell agreements can only be drafted by: - Answer: an attorney.

HMOs and PPOs are required under Florida law to provide members direct access to which of the following? - Answer: All - Dermatologists and chiropractors, optometrists and OB gynecologists, and podiatrists Insurance is a contract of: - Answer: utmost good faith. The Deficit Reduction Act gives governors more flexibility to design _____________ benefits that efficiently and affordably meet their states' needs. - Answer: Medicaid The health policy that always renews without an increase of premium could be identified as: - Answer: noncancelable __________________ are the two most important factors in the health insurance underwriting process. - Answer: Medical history and occupation Which of the following is TRUE about a Limited Pay Whole Life policy? - Answer: Provides level premiums limited to certain time period, less than life In Florida, a child must be at least ____ years of age to sign a life insurance application. - Answer: 15 The ________________ means that the life insurance policy along with the application represents the complete contract. - Answer: Entire Contract provision

A man commits suicide 30 months after purchasing a life insurance policy and his wife is the named beneficiary. What amount will his wife receive? - Answer: The face amount of the policy Which type of insurer insures groups of individuals who are of the same class? - Answer: Risk Retention Groups Rachel owns a major medical health policy which requires her to pay the first $ of covered expenses each year before the policy pays its benefits. The $300 is the policy's: - Answer: deductible Self-insuring is an example of what type of risk? - Answer: Risk Retention When might a Statement of Continued Good Health be required regarding a life insurance policy? - Answer: When there is no premium accompanying the application Changing one's lifestyle to minimize a known risk is an example of: - Answer: Risk Reduction. A health plan with a $5-per-point conversion factor would pay _______ for a 200- point procedure. - Answer: $1, The disadvantage of naming an estate as beneficiary is that proceeds will be included in the insured's: - Answer: estate

All statements made on an application are considered ________________ because there can be no guarantee that they are true. - Answer: representations Which of the following is NOT a typical permanent exclusion in life insurance policies? - Answer: Suicide ___________ refers to the monies set aside by insurers for future claims costs. - Answer: Reserve funds Does Florida law specify what an insurer must do if an applicant indicates that a variable annuity would be the sole source of retirement income for the applicant?

• Answer: NO Medicare patients have a lifetime reserve of ________ days of hospital coverage. - Answer: 60 In the process of selling life insurance and when evaluating the needs of your client, the Human Life Value approach has been largely replaced by the more practical Needs Approach. - Answer: TRUE Which of the following is a Nonforfeiture Option that provides continuing cash value buildup? - Answer: Reduced Paid-up

Mortality Tables indicate the average number of individuals from a given group who will die in a given year. - Answer: TRUE An agent engaged in churning as a result of fraudulent conduct is subject to a fine of ________ for each willful violation. (2012) - Answer: $50, FICA taxes are applied to employees' incomes up to certain limits, called the: - Answer: taxable wage base. A Variable annuity separate account will be invested in: - Answer: common stocks and other securities. Depending upon the contract, annuity payments can begin immediately or they can be deferred to a future date. The investment configuration: - Answer: can be either a fixed or a variable rate of return. Roland invested $30,000 in a deferred annuity when he was 30 years old, which grew to $60,000 in 20 years. At age 50, he decides to take a partial withdrawal in the amount of $15,000. What are the tax implications? - Answer: The $15, withdrawal is taxable as ordinary income plus a 10% premature distribution penalty applies. In 2004, the Florida legislature addressed the special needs of senior consumers with regard to annuity investments. For instance, an agent is required to maintain records relating to such transactions for ________ years. - Answer: five

What does OASDI stand for? - Answer: Old Age, Survivors, Disability & Hospital Insurance Both supplementary and comprehensive major medical plans contain deductibles and coinsurance. - Answer: true With a Roth IRA, the contributory funds are taxed as income ______ the contributions are made. - Answer: before Evan decides to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will: - Answer: continue to increase The three basic levels of long-term care are - Answer: institutional care, home- based care, and community care. Which of the following risks is insurable? - Answer: Pure risks Commercial insurers operate on the _____________ method. - Answer: reimbursement Medical Expense insurance is based on a contract of reimbursement. - Answer: TRUE FIGA is the acronym for: - Answer: Florida Insurance Guaranty Association.

Bob's life insurance policy cash value is $10,000 and he has paid $8,000 in premiums. He now wants to surrender the policy for its cash value. How much is considered taxable? - Answer: $2, Lorraine was diagnosed with breast cancer in 2005 but has been cancer free since

2006. However, she still requires follow-up care. Lorraine secured a new job in
2007. Is her breast cancer follow-up care considered a preexisting condition? Why? - Answer: No - Breast cancer follow-up care is prohibited from being considered a preexisting condition, unless breast cancer is found. Accumulation units are converted into annuity units: - Answer: at the time of annuity payout. A group life insurance plan in which the employer pays the entire premium is known as a ________________ plan. - Answer: noncontributory If a disabled worker covered under Social Security disability benefits recovers and then is disabled again within five years, a new waiting period is required before benefits begin again. - Answer: FALSE Robert had an accident and qualified for Social Security disability. Given the waiting period, when will Robert begin to receive benefits? - Answer: After 5 months

The Insuring Clause includes all of the following EXCEPT the - Answer: beneficiary Mutualization occurs when a stock company turns to a __________ company. - Answer: mutual To provide a safeguard for insureds, most major medical policies contain a ____________ feature that limits the insured's out-of-pocket expenses. - Answer: stop-loss Tom is a newly appointed life, health and variable annuity agent with Acme Insurance Agency. He is writing his first insurance policy on his brother-in-law's life. Who does Tom legally represent in this transaction? - Answer: Acme Insurance Agency An insurance clause is a distinct article in a formal document that establishes the rules in the contract that _____________________ must adhere to. - Answer: both the insurer and the insured "ACC" refers to the type of disability that prevents someone from performing the job he was performing prior to the disability. - Answer: FALSE Accumulation units are converted into annuity units: - Answer: at the time of annuity payout.

A group life insurance plan in which the employer pays the entire premium is known as a ________________ plan. - Answer: noncontributory If a disabled worker covered under Social Security disability benefits recovers and then is disabled again within five years, a new waiting period is required before benefits begin again. - Answer: FALSE Robert had an accident and qualified for Social Security disability. Given the waiting period, when will Robert begin to receive benefits? - Answer: After 5 months The Insuring Clause includes all of the following EXCEPT the - Answer: beneficiary Mutualization occurs when a stock company turns to a __________ company. - Answer: mutual To provide a safeguard for insureds, most major medical policies contain a ____________ feature that limits the insured's out-of-pocket expenses. - Answer: stop-loss Tom is a newly appointed life, health and variable annuity agent with Acme Insurance Agency. He is writing his first insurance policy on his brother-in-law's life. Who does Tom legally represent in this transaction? - Answer: Acme Insurance Agency

An insurance clause is a distinct article in a formal document that establishes the rules in the contract that _____________________ must adhere to. - Answer: both the insurer and the insured "ACC" refers to the type of disability that prevents someone from performing the job he was performing prior to the disability. - Answer: FALSE