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PSI LIFE: BEYOND THE LIMIT
⏹ Upon the issuance of a conditional receipt for a renewal when the premium is paid AFTER the time granted by the insurer, what is the maximum amount of time for reinstatement of the policy? Answer: 30 days ⏹ Which of the following statements regarding a pure life annuity payout option is correct? Answer: This option provides the highest monthly income. ⏹ Which of the following does not apply to the time limit on certain defenses provision in health insurance policies? Answer: fraudulent misstatements ⏹ If an individual is insured by both their own health insurance policy and their spouse's policy, which policy pays first in the event of an illness? Answer: The individual's policy pays first, the spouse's policy pays the remaining up to coverage amount. ⏹ When can the premiums of an individually owned health insurance policy be deducted from the individual's income tax? Answer: when the taxpayer's unreimbursed medical expenses exceed 7.5% of adjusted gross income during a taxable year
⏹ When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during the policy's initial Answer: 2 year period. ⏹ Which of the following is a characteristic of Health Maintenance Organizations (HMOs)? Answer: preventive care ⏹ The life insurance policy will not be truly effective until all of the following occur EXCEPT Answer: the producer has explained the policy to the client. ⏹ Under which situation must insurable interest exist between the applicant and insured at the time of application? Answer: when a third- party applicant names themselves beneficiary ⏹ Which of the following is a distinguishing feature of a variable life insurance policy? Answer: The cash value earnings are based on the performance of the separate account. ⏹ The person who receives the benefit of an annuity is known as the Answer: annuitant. ⏹ Which of the following is an example of a premium payment mode? Answer: annual premium payment ⏹ How do most disability policies handle the case of a recurrent disability occurring at least 90 days after the first claim? Answer: it
⏹ If a policy is determined to be a Modified Endowment Contract (MEC), funds received under the policy will be Answer: considered taxable income first. ⏹ Which type of annuity attempts to offset inflation by providing a benefit linked to an underlying investment account? Answer: variable ⏹ What is a MIB report? Answer: medical information on an applicant for assessing life or health insurance risk ⏹ Group Life Policies typically include which of the following provisions? Answer: conversion privilege ⏹ In a case where an individual's health is insured by both their own policy and their spouse's policy, which policy pays in the event of an illness? Answer: The individual's policy pays first, the spouse's policy pays the remaining up to coverage amount. ⏹ The feature of a Life Insurance Policy stating that the policy will NOT cover certain risks is known as Answer: exclusion. ⏹ The primary purpose of Health Reimbursement Accounts (HRAs) is to assist Answer: covered employees with the payment of medical expenses on a high deductible plan funded through pre-tax contributions. ⏹ What type of insurance should a company purchase if it wants to insure the life of its CEO? Answer: key person insurance
⏹ Which is the major reason why long term care insurance is becoming increasingly important? Answer: As life expectancy increases, the chances of needing long term care also increase. ⏹ Which of the following requires the claim information to be submitted to the insurer prior to treatment to determine whether the treatment is covered and how much the insured's plan will pay? Answer: precertification provision ⏹ Which policy provision permits the policyowner to take a specified number of days to examine the contract, and allows for cancellation and a full refund if the policyowner rejects the terms or costs? Answer: free look ⏹ A life insurance policy may be returned for cancellation and full refund if it is returned NO later than Answer: 20 days after receipt by the policyholder. ⏹ Which of the following features makes Universal Life Insurance different from other forms of Whole Life Insurance? Answer: premium schedules ⏹ Which of the following is TRUE in a key employee life insurance policy? Answer: The corporation is the applicant and policy holder. The employee is the insured.
⏹ All of the following are required signatures on a life insurance application EXCEPT Answer: the minor in a juvenile policy. ⏹ What is the tax advantage of a non-qualified annuity? Answer: Growth is tax deferred. ⏹ Under an individual policy, an insured who CANNOT perform the duties of his/her own occupation for a specific period of time is Answer: totally disabled. ⏹ A few small employers in the same industry join together to become eligible for group insurance. The type of health insurance they have created for each other is known as Answer: Multiple Employer Trust (MET). ⏹ Which of the following is an example of a moral hazard? Answer: filing a false insurance claim ⏹ According to the time of payment of claims provision, the insurer must make the payment immediately after receiving proof of loss EXCEPT Answer: for claims involving periodic payments. ⏹ When are dividends paid from a participating policy considered taxable? Answer: when the amount received exceeds the total amount of premiums paid for the policy
⏹ Which whole life policy premium type is the most common? Answer: continuous premium ⏹ Which of the following is the time limit on certain defenses after which the policy becomes incontestable? Answer: 2 years ⏹ The accumulation period in an annuity is the period in which Answer: interest is credited on a tax-deferred basis. ⏹ All of the following are disadvantages to an annually renewable term life policy EXCEPT Answer: the living benefits decrease over time. ⏹ Obtaining consumer information reports under false pretenses is prosecutable by which of the following? Answer: Fair Credit Reporting Act ⏹ Which of the following coverage types pays a monthly cash benefit following the elimination period for total disability due to accident or sickness? Answer: disability income insurance ⏹ Which of the following, by definition, provides benefits for expenses incurred as a result of in-hospital medical treatment and surgery as well as certain outpatient expenses such as doctor's visits, laboratory tests, and diagnostic services? Answer: hospitalization insurance
⏹ In noncontributory plans, which percentage of eligible members must participate? Answer: 1 ⏹ All the following are elements of an uninsurable loss EXCEPT Answer: affordable premiums can be charged. ⏹ The right to change the beneficiary or dispose of the policy or its benefits in any manner one chooses is reserved to the policyowner UNLESS which of the following is true? Answer: The policyowner has named an irrevocable beneficiary. ⏹ Which of the following defines the term peril? Answer: cause of loss ⏹ Which of the following are defined as a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional? Answer: warranties ⏹ If an insurance company obtains an investigative consumer report on a prospective insured, it MUST inform the prospect that it is permitted to do so under which of the following Federal laws? Answer: the Fair Credit Reporting Act ⏹ A fraternal benefit society is one that Answer: provides life insurance benefits to its members. ⏹ What is the maximum amount of time an insurer has to provide the claimant the forms for filing proof of loss? Answer: 15 days
⏹ Which principle holds that the insurer relies on the truthfulness of the applicant and in return promises and has the ability to pay claims? Answer: good faith ⏹ Standard nonforfeiture benefits include Answer: reduced paid-up insurance. ⏹ What does coinsurance mean? Answer: The insurer and the insured share expenses over the deductible. ⏹ How are term riders used? Answer: to purchase insurance on a family member of the originally insured ⏹ A Basic Hospital Policy pays expenses for Answer: hospital room and board. ⏹ Which of the following is TRUE for a flexible premium annuity? Answer: The purchaser has the option to vary the amount of each premium payment falling between a minimum and maximum amount. ⏹ Under the Free Look Provision, an insured may cancel a policy and receive a full refund within 10 days of the date that the Answer: producer delivered the policy.
⏹ Which type of plan is used to buy out a partner's business interest in the event of a disability? Answer: disability buy-sell agreement ⏹ Compared to basic hospital, medical and surgical policies, which type of insurance provides broader coverage, fewer gaps, higher individual benefits, and higher policy maximums? Answer: major medical insurance ⏹ All of the following are requirements to qualify for Social Security disability benefits EXCEPT when Answer: unable to work in the occupation in which the worker was trained or educated. ⏹ Which of the following is common in an increasing term life policy? Answer: It begins with little or no insurance protection. ⏹ The aspect of a policy that allows a policyholder to select the timing of premium payments is known as Answer: premium mode. ⏹ The insurance contract in which ONLY one party, the insurer, makes a promise to another is known as Answer: unilateral. ⏹ Current assumption whole life policies are sensitive to which of the following? Answer: interest rates
⏹ Which of the following statements regarding federal taxation of individual life insurance premiums is correct? Answer: Premiums are not tax-deductible and are paid with after-tax dollars. ⏹ All of the following can be used to qualify for Medicare Parts A and B EXCEPT Answer: financial need. ⏹ All of the following are common exclusions from accident and health policies EXCEPT Answer: loss of income from disability. ⏹ All of the following are TRUE regarding incomplete applications EXCEPT Answer: the incomplete application can be accepted with the missing information added later. ⏹ The policy that is designed to provide nursing home benefits on an extended basis for NOT less than 12 consecutive months is Answer: Long-Term Care. ⏹ What will result in a misstatement of age on a life insurance application? Answer: change in benefits to reflect premium purchase for the correct age ⏹ Which of the following is considered an element of insurable risk? Answer: Premiums must be calculable based on prior loss statistics.
⏹ What is the order in which beneficiaries receive proceeds from a life insurance policy? Answer: succession of beneficiaries ⏹ Which of the following occurs immediately after the application is submitted and the initial premium paid? Answer: The underwriting process begins. ⏹ What is the difference between copayment and coinsurance? Answer: A copayment is a set dollar amount, while coinsurance is set as a percentage. ⏹ Whose responsibility is it to make sure that the company is notified of a death claim at the earliest possible opportunity (in most cases)? Answer: the producer ⏹ When would dependent children's benefits for Social Security disability payments end? Answer: when the dependent reaches age 18 or 19 if still in high school ⏹ All life insurance and health insurance contracts contain all of the following EXCEPT Answer: inmaterial representations. ⏹ An employee is laid off and converts a group health plan to an individual policy. In this situation, the new policy Answer: premium rate will be higher than the group rate.
⏹ What is the waiver of premium provision or rider? Answer: It waives the premium after the insured has been disabled for a specific period of time. ⏹ Under the Medicare Part B home health care benefit, all of the following are eligible expenses EXCEPT Answer: blood transfusions. ⏹ A health insurance policy that covers dependent children MUST provide coverage for newborns beginning Answer: at the moment of birth. ⏹ An annuity that guarantees benefit payments for a specified number of years to the annuitant or the named beneficiary is Answer: an annuity certain. ⏹ Which of the following is TRUE regarding the owner's rights if an irrevocable beneficiary is designated? Answer: The owner retains the right to make the premium payment. ⏹ In which of the following cases are premiums paid by a business NOT tax deductible as a business expense? Answer: key person disability income insurance ⏹ How do warranties differ from representations? Answer: A warranty is guaranteed to be true, a representation is believed to be true to the best of one's knowledge.
⏹ Health insurance policies include a uniform provision that gives the insurer the right, at its own expense, to do which of the following? Answer: require an autopsy ⏹ Which of the following types of insurers operates within the United States, but outside of the state in which it is incorporated? Answer: foreign ⏹ Group AD&D policies may be deducted by whom and under which deduction category? Answer: the employer under business expenses ⏹ At which point are contractual death benefit settlement options determined and by whom? Answer: at the time the policy is purchased by the owner of the policy ⏹ Which type of insurance provides benefits for expenses incurred as a result of hospitalization, surgical procedures, and outpatient expenses such as office visits, laboratory tests, and diagnostic services? Answer: medical expense ⏹ The group conversion option is allowed for all of the following EXCEPT Answer: during the annual benefits enrollment period. ⏹ Which of the following is a characteristic of a fixed annuity? Answer: the insurer is obligated to pay a guaranteed minimum interest rate.
⏹ The period beginning at the time of an insured loss that an insured must wait before benefits are payable is called the Answer: elimination period. ⏹ Which type of coverage pays the operating costs of a small business when the owner becomes disabled? Answer: business overhead expense disability insurance ⏹ When may a policyowner change a revocable beneficiary? Answer: at any time ⏹ What is granted to the insured in the consideration clause? Answer: the right to insurance coverage if premiums are paid ⏹ In a disability income policy, the specified period of time after the effective date and before coverage goes into effect is the Answer: probationary period. ⏹ Which of the following is CORRECT about Medicaid? Answer: It is a public program assisting individuals with insufficient income to pay for medical care. ⏹ A prospective insured makes statements on an insurance application that he believes are true to the best of his knowledge and belief. These statements are considered Answer: representations.
