Texas Health and Life Insurance Exam FX Questions and Answers., Exams of Socialization and the Life Course

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Texas Health and Life Insurance Exam FX Questions

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What is the purpose of the buyer's guide? Aalto Allow the consumer to compare the costs of different policies B. To provide the name and address of the agent. C. to list all policy riders. D. To provide information about the policy. - Correct Answer Aalto Allow the consumer to compare the costs of different policies Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? Adhesion Subrogation Warranty Dilatory - Correct Answer D. Lavatory What is the purpose of a conditional receipt? Alit is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. Bit is intended to provide coverage on a date earlier than the date of the issuance of the policy. City guarantees the applicant that a policy will be issued in the amount applied for in the application. Diet serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company. - Correct Answer Bit is intended to provide coverage on a date earlier than the date of the issuance of the policy. Which of the following is NOT the consideration in a policy? Ate promise to pay covered losses Bathe application given to a prospective insured Something of value exchanged between parties The premium amount paid at the time of application - Correct Answer B. The application given to a prospective insured. An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? AAgent's Report BUnderwriter's Report CInspection Report DMedical Information Bureau's report - Correct Answer C. Inspection Report

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? AAs of the policy delivery date BAs of the first of the month after the policy issue CAs of the policy issue date DAs of the application date - Correct Answer D As of the application date. In terms of parties to a contract, which of the following does NOT describe a competent party? AThe person must be mentally competent to understand the contract. BThe person must have at least completed secondary education. CThe person must not be under the influence of drugs or alcohol. DThe person must be of legal age. - Correct Answer B. The person must have at least completed secondary education. Which of the following is NOT an example of insurable interest? AEmployer in employee BChild in parent CDebtor in creditor DBusiness partners in each other - Correct Answer C. Debtor in creditor An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? ARepresentation BAdhesion CConsideration DGood faith - Correct Answer C. Consideration Which of the following includes information regarding a person's credit, character, reputation, and habits? AConsumer history BInsurability report CAgent's report DConsumer report - Correct Answer D. Consumer Report Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT AConsideration. BLegal purpose. COffer and acceptance. DConditions. - Correct Answer D. Conditions The Federal Fair Credit Reporting Act ARegulates telemarketing.

BPrevents money laundering. CRegulates consumer reports. DProtects customer privacy. - Correct Answer C. Regulates consumer reports If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about AWhich individual will pay the premium. BWhether an insurable interest exists between the individuals. CThe gender of the applicant. DThe type of policy requested. - Correct Answer B. Whether an insurable interest exist between the individuals. All of the following are duties and responsibilities of producers at the time of application EXCEPT AChange any incorrect statement on the application by personally initialing next to the corrected statement. BExplain the nature and type of any receipt the producer is giving to the applicant. CProbe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. DCheck to make sure that there are no unanswered questions on the application. - Correct Answer A. Change any incorrect statement on the application by personally initialing next to the corrected statement. Which of the following would be considered a nonmedical insurance application? AAn application that does not ask any questions about the applicant's medical history BAn application submitted with the Agent's Report CAny application for life insurance DAn application on which the medical information is completed by the applicant and the agent only. - Correct Answer D. An application on which the medical info is completed by the applicant and agent alone. Which of the following products requires a securities license? A. Equity Indexed Annuity B. Deferred Annuity C. Variable Annuity D. Fixed Annuity - Correct Answer C. Variable Annuity Which of the following products will protect an individual from outliving his or her money? AAdjustable life policy BPermanent life insurance CAnnuity DJoint and survivor policy - Correct Answer C. Annuity Which Universal Life option has a gradually increasing cash value and a level death benefit?

AOption A BJuvenile life CTerm insurance DOption B - Correct Answer an Option A The term "fixed" in a fixed annuity refers to all of the following EXCEPT ADeath benefit BGuaranteed rate of interest CEqual annuity payments DAmount and length of payments - Correct Answer A. Death Benefit If the annuitant dies during the accumulation period, who will receive the annuity benefits? AInsurance company BEstate CBeneficiary DOwner - Correct Answer C. Beneficiary An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) AEquity Indexed Annuity. BVariable Annuity. CFlexible Annuity. DImmediate Annuity. - Correct Answer A Equity Indexed Annuity Which of the following determines the cash value of a variable life policy? AThe policy's guarantees. BThe premium mode CThe performance of the policy portfolio DThe company's general account - Correct Answer C. The performance of the policy portfolio. Which of the following is NOT true regarding the annuitant? AThe annuitant receives the annuity benefits. BThe annuitant must be a natural person. CThe annuitant cannot be the same person as the annuity owner. DThe annuitant's life expectancy is taken into consideration for the annuity. - Correct Answer C. The annuitant cannot be the same person as the annuity owner. All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT AMost term policies contain a convertibility option. BUpon conversion, the premium for the permanent policy will be based upon attained age.

CUpon conversion, the death benefit of the permanent policy will be reduced by 50%. DEvidence of insurability is not required. - Correct Answer C. Upon conversion, the death benefit of the permanent policy will be reduced by 50% Which statement is NOT true regarding a Straight Life policy? AIt has the lowest annual premium of the three types of Whole Life policies. BIts premium steadily decreases over time, in response to its growing cash value. CThe face value of the policy is paid to the insured at age 100. DIt usually develops cash value by the end of the third policy year. - Correct Answer B. Its premium steadily decreases over time, in response to its growing cash value Fixed annuities provide all of the following EXCEPT AMinimum guaranteed rate of interest. BFuture income payments. CHedge against inflation. DEqual monthly payments for life. - Correct Answer CHedge against inflation. Which of the following is NOT true regarding the accumulation period of an annuity? AIt is the period during which the annuity payments earn interest. BIt is the period over which the annuitant makes payments into an annuity. CIt is also known as the pay-in period. DIt would not occur in a deferred annuity. - Correct Answer DIt would not occur in a deferred annuity. An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? AThe insured may renew the policy for another 10 years at the same premium rate. BThe insured may renew the policy for another 10 years, but at a higher premium rate. CThe insured must provide evidence of insurability to renew the policy. DThe insured may only convert the policy to another term policy. - Correct Answer BThe insured may renew the policy for another 10 years, but at a higher premium rate. Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant. - Correct Answer DIt may last for the lifetime of the annuitant. The death benefit in a variable universal life policy AAlways equals the face amount stated in the policy. BDepends on the performance of a separate account. CIs guaranteed to be higher than when the policy is originally issued. DIs fixed. - Correct Answer BDepends on the performance of a separate account.

If an agent wishes to sell variable life policies, what license must the agent obtain? ASecurities BAdjuster CSurplus Lines DPersonal Lines - Correct Answer A. Securities Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be ADetermined by the health of the insured. BBased on the issue age of the insured. CDiscounted. DAdjusted to the insured's age at the time of renewal. - Correct Answer D. Adjusted to the insured's age at the time of renewal. All of the following are true regarding a decreasing term policy EXCEPT AThe payable premium amount steadily declines throughout the duration of the contract. BThe death benefit is $0 at the end of the policy term. CThe contract pays only in the event of death during the term and there is no cash value. DThe face amount steadily declines throughout the duration of the contract. - Correct Answer A. The payable premium amount steadily declines throughout the duration of the contract. An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? AThe insured may renew the policy for another 10 years, but at a higher premium rate. BThe insured must provide evidence of insurability to renew the policy. CThe insured may only convert the policy to another term policy. DThe insured may renew the policy for another 10 years at the same premium rate. - Correct Answer A. The insured may renew the policy for another 10 years, but at a higher premium rate. Equity indexed annuities AAre more risky than variable annuities. BAre security instruments. CInvest conservatively. DSeek higher returns. - Correct Answer D. Seek higher returns. An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an AInterest-sensitive Whole Life. BCredit Life. CAnnual Renewable Term.

DAdjustable Life. - Correct Answer AInterest-sensitive Whole Life. Which of the following is TRUE for both equity indexed annuities and fixed annuities? ABoth are considered to be more risky than variable annuities. BThey invest on a conservative basis. CThey have a guaranteed minimum interest rate. DThey are both tied to an equity index. - Correct Answer C. They have a guaranteed minimum interest rate. Which of the following best describes what the annuity period is? AThe period of time from the accumulation period to the annuitization period BThe period of time during which money is accumulated in an annuity CThe period of time from the effective date of the contract to the date of its termination DThe period of time during which accumulated money is converted into income payments - Correct Answer DThe period of time during which accumulated money is converted into income payments Which of the following is another term for the accumulation period of an annuity? APremium period BLiquidation period CAnnuity period DPay-in period - Correct Answer D Pay in Period Which of the following is an example of a limited-pay life policy? ARenewable Term to Age 70 BLevel Term Life CStraight Life DLife Paid-up at Age 65 - Correct Answer DLife Paid-up at Age 65 Which of the following products will protect an individual from outliving his or her money? AAnnuity BJoint and survivor policy CAdjustable life policy DPermanent life insurance - Correct Answer a an Annuity An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called Single premium whole life. Modified Endowment Contract (MEC). Cleve term life. Degraded premium whole life. - Correct Answer A. Single Premium Whole Life Which of the following products requires a securities license? Variable annuity

Fixed annuity Equity Indexed annuity Deferred annuity - Correct Answer A. Variable annuity All of the following statements about equity index annuities are correct EXCEPT AThe annuitant receives a fixed amount of return. BThey have a guaranteed minimum interest rate. CThe interest rate is tied to an index such as the Standard & Poor's 500. DThey invest on a more aggressive basis aiming for higher returns. - Correct Answer AThe annuitant receives a fixed amount of return. Which of the following is NOT true regarding a Variable Universal Life policy? AThe cash values are not guaranteed. BThe death benefit is fixed. CThe policy owner can participate in some of the investment decisions. DThe minimum death benefit is guaranteed. - Correct Answer C. The Death benefit is fixed. Which of the following is TRUE regarding the accumulation period of an annuity? Alit is also referred to as the annuity period. Bit is a period of time during which the beneficiary receives income City is limited to 10 years. Diet is a period during which the payments into the annuity grow tax deferred. - Correct Answer D. It is a period during which the payments into the annuity grow tax deferred. Which of the following products requires a securities license? Affixed annuity Equity Indexed annuity Deferred annuity Variable annuity - Correct Answer D. Variable Annuity If an annuitant dies before annuitization occurs, what will the beneficiary receive? Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount Amount paid into the plan Dash value of the plan - Correct Answer an Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount Which of the following is NOT true regarding the annuitant? AThe annuitant's life expectancy is taken into consideration for the annuity. BThe annuitant receives the annuity benefits. CThe annuitant must be a natural person. DThe annuitant cannot be the same person as the annuity owner. - Correct Answer AThe annuitant's life expectancy is taken into consideration for the annuity

The policy owner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as AThe next month's premium is sufficient to cover both the current premium amount and the skipped amount. BThe policy contains sufficient cash value to cover the cost of insurance. CThe previous premium payments were high enough to create an excess of premium. DThe policy owner cannot skip premiums without the policy lapsing. - Correct Answer B. The policy contains sufficient cash value to cover the cost of insurance. An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? Nothing B$50, C$100, D$200,000 - Correct Answer C. $ When would a 20-pay whole life policy endow? When the insured reaches age 100 Bat the insured's age 65 Crafter 20 payments Din 20 years - Correct Answer When the insured reaches age 100 What kind of policy allows withdrawals or partial surrenders? Term policy Variable whole life Universal life D20-pay life - Correct Answer Universal life Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid Afford 20 years or until death, whichever occurs first. Until the policy owner’s age 65. For 20 years. Until the policy owner’s age 100, when the policy matures. - Correct Answer Afford 20 years or until death, whichever occurs first. Which policy component decreases in decreasing term insurance? Dividend Premium Cafe amount Dash value - Correct Answer C Face Amount A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy Required a premium increase each renewal.

Built cash values. Required proof of insurability every year. Decreased death benefit at each renewal. - Correct Answer required a premium increase each renewal. Which type of life insurance policy generates immediate cash value? Continuous Premium Single Premium Cleve Term Decreasing Term - Correct Answer B. Single Premium What happens when a policy is surrendered for its cash value? AThe policy can be converted to term coverage. Coverage ends and the policy cannot be reinstated. Coverage ends but the policy can be reinstated at any time. DThe policy can be reinstated by paying back all policy loans and premiums. - Correct Answer B. Coverage ends and the policy cannot be reinstated. A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payer Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? AThe insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. BThe insured's premiums will be waived until she is 21. CThe premiums will become tax deductible until the insured's 18th birthday. Since it is the policy owner, and not the insured, who has become disabled, the life insurance policy will not be affected. - Correct Answer B. The insured's premiums will be waived until she is 21. Which of the following policy components contains the company's promise to pay? Entire contract provision Insuring clause Premium mode Consideration clause - Correct Answer B. Insuring Clause Which no forfeiture option provides coverage for the longest period of time? Extended term Paid-up option Accumulated at interest Deduced paid-up - Correct Answer D. Reduced Paid-Up The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A1 year B2 years C5 years

D7 years - Correct Answer B. 2 years Which of the following is TRUE about no forfeiture values? AA table showing no forfeiture values for the next 10 years must be included in the policy. BPolicyowners do not have the authority to decide how to exercise no forfeiture values. CThey are required by state law to be included in the policy. DThey are optional provisions. - Correct Answer C. They are required by state law to be included in the policy. What is the term for how frequently a policy owner is required to pay the policy premium? AConsideration Bode Schedule Grace period - Correct Answer B Mode An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this? Waiver of premium provision Incontestable clause Grace period Reinstatement provision - Correct Answer D. Reinstatement Provision Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? Children’s rider Additional insured rider CFamily term rider DSpouse rider - Correct Answer C. Family Term Rider Which of the following best describes fixed-period settlement option? AThe death benefit must be paid out in a lump sum within a certain time period. BIncome is guaranteed for the life of the beneficiary. CBoth the principal and interest will be liquidated over a selected period of time. DOnly the principal amount will be paid out within a specified period of time. - Correct Answer C. Both the principal and interest will be liquidated over a selected period of time 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 AInsuring clause. BMisstatement of Age clause. CIncontestability clause. DReinstatement clause. - Correct Answer C Incontestability Clause

Which of the following is true about the mandatory free look in a Life Insurance policy? AIt commences when the policy is delivered. BIt commences when the application is signed. CIt applies only to term life insurance policies. DIt is optional on all life insurance policies. - Correct Answer A It commences when the policy is delivered. Which of the following information will be stated in the consideration clause of a life insurance policy? AThe parties to the contract BThe time period allowed for the payment of premium CThe conditions for insurability DThe amount of premium payment - Correct Answer D The amount of premium payment Which of the following is true about the premium on the children's rider in a life insurance policy? AIt decreases when the oldest child reaches the age of 21. BIt increases when a newborn baby is added to the policy. CIt decreases when an adopted child is added to the policy. DIt remains the same no matter how many children are added to the policy. - Correct Answer DIt remains the same no matter how many children are added to the policy. An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called Conditions. But most good faith. CAcceptance. DConsideration. - Correct Answer D. Consideration In a life settlement contract, whom does the life settlement broker represent? AThe beneficiary BThe life settlement intermediary CThe owner DThe insurer - Correct Answer C. The owner What is the name of the insured who enters into a viatical settlement? AContingent BViatical broker CViator DThird party - Correct Answer C Viator All of the following are personal uses of life insurance EXCEPT ACash accumulation. BBuy-sell agreement.

CSurvivor protection. DEstate creation. - Correct Answer B Buy-Sell Agreement A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as AJuvenile protection provision BSurvivor protection CLife planning DSurvivorship insurance - Correct Answer B. Survivor Protection What percentage of a company's employees must take part in a noncontributory group life plan? A0% B25% C75% D100% - Correct Answer D 100% What is the main purpose of the Seven-pay Test? AIt ensures that the policy benefits are paid out in 7 years. BIt guarantees interest minimum. CIt determines if the insurance policy is an MEC. DIt requires level premium payments for 7 years. - Correct Answer C. It determines if the insurance policy is an MEC. Which of the following types of insurance policies would perform the function of cash accumulation? ACredit life BIncreasing term CWhole life DTerm life - Correct Answer C. Whole Life The premiums paid by the employer in a business life insurance policy are ANever taxable to the employee. BTax deductible by the employer. CTax deductible by the employee. DAlways taxable to the employee. - Correct Answer B. Tax deductible by the employer Who is a third-party owner? AAn irrevocable beneficiary BA policyowner who is not the insured CAn insurer who issues a policy for two people DAn employee in a group policy - Correct Answer B. A policy owner who is not the insured.

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) AKey person policy. BFraternal association. CAleatory contract. DExecutive bonus. - Correct Answer D. Executive bonus Which of the following is NOT true of life settlements? AThey could be used for a key person coverage. BThey could be sold for an amount greater than the current cash value. CThey involve insurance policies with large face amounts. DThe seller must be terminally ill. - Correct Answer D. The seller must be terminally ill. In a direct rollover, how is the money transferred from one plan to the new one? AFrom the participant to the new plan BFrom the original plan to the original custodian CFrom trustee to trustee DFrom trustee to the participant - Correct Answer C. From trustee to trustee All of the following are examples of third-party ownership of a life insurance policy EXCEPT AA company purchases a life insurance policy on their manager, who is an important part of the operation. BWhen an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. CAn insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. DAn insured couple purchases a life insurance policy insuring the life of their grandson.

• Correct Answer CAn insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. Which of the following is an example of liquidity in a life insurance contract? AThe money in a savings account BThe cash value available to the policyowner CThe death benefit paid to the beneficiary DThe flexible premium - Correct Answer B. The cash value available to the policy owner. An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have, and then leaves. What did he forget to do? AAsk the applicant to sign a statement that acknowledges that the policy had been delivered BCollect a late payment fee CAsk her to sign a statement of good health

DOffer her a secondary policy - Correct Answer C. Ask her to sign a statement of good health Whose responsibility is it to determine if all of the questions on an application have been answered? AThe applicant BThe beneficiary CThe agent DThe insurer - Correct Answer C. The agent Who must pay for the cost of a medical examination required in the process of underwriting? AApplicant BUnderwriters CDepartment of Insurance DInsurer - Correct Answer D. Insurer On a health insurance application, a signature is required from all of the following individuals EXCEPT AThe agent. BThe spouse of the policyowner. CThe proposed insured. DThe policyowner. - Correct Answer B. The spouse of the policy owner. Before a customer's agent delivers his policy, the insurer makes a last-minute change to the policy. The agent informs the customer of this change, and he accepts it. What must the agent do now? AThe agent should ask the customer to sign a statement acknowledging that he is aware of the change. BNothing. After the explanation, the agent is not legally bound to do anything else. CThe agent must notify the beneficiary of the change in policy. DIf the change would affect the premium, the agent must have the customer sign a statement acknowledging the change. - Correct Answer AThe agent should ask the customer to sign a statement acknowledging that he is aware of the change. Which is true regarding obtaining underwriting sources? AThe insurer only needs to inform the applicant of how the information is being gathered; it is not necessary to disclose the sources. BIt is illegal to obtain information from outside sources in order to determine an applicant's insurability. CThe applicant must be informed of the sources contacted and how the information is being gathered. DThe insurer does not need to inform the applicant of how the information is gathered; informing only of the source is sufficient. - Correct Answer CThe applicant must be informed of the sources contacted and how the information is being gathered.

Which of the following is true about the requirements regarding HIV exams? AResults may be disclosed to the agent and the underwriter. BPrior informed oral consent is required from the applicant. CHIV exams may not be used as a basis for underwriting. DThe applicant must give prior informed written consent. - Correct Answer DThe applicant must give prior informed written consent. Which of the following entities can legally bind coverage? AAgent BInsurer CThe insured DFederal Insurance Board - Correct Answer B. Insurer If an applicant does not receive a new insurance policy, who would be held responsible? AThe agent BThe state CThe insurer DThe applicant - Correct Answer A. The Agent Which of the following is true regarding health insurance underwriting for a person with HIV? AThe person may not be declined for medical coverage solely based on HIV status. BA person may be declined for HIV but not AIDS. CThe person may be declined. DThe person may only be declined if he/she has symptoms. - Correct Answer AThe person may not be declined for medical coverage solely based on HIV status. An insurer is attempting to determine the insurability of an applicant and decides to obtain medical information from several different sources. Which entity must be notified of the investigation? AThe applicant BThe Commissioner of Insurance CThe medical examiner DThe State Department of Insurance - Correct Answer A. The Applicant What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? APolicy Request BInsurance Request Form CRequest for Insurance DApplication - Correct Answer D. Application An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point?

AApproved the application BIssued the policy CNeither approved the application nor issued the policy DBoth approved the application and issued the policy - Correct Answer CNeither approved the application nor issued the policy What document describes an insured's medical history, including diagnoses and treatments? APhysician's Review BIndividual Medical Summary CComprehensive Medical History DAttending Physician's Statement - Correct Answer DAttending Physician's Statement An agent makes a mistake on the application and then corrects his mistake by physically entering the necessary information. Who must then initial that change? AApplicant BExecutive officer of the company CInsured DAgent - Correct Answer A. Applicant An insured loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will she most likely receive from this policy? AThe principal amount in monthly installments BThe capital amount in a lump sum CThe principal amount in a lump sum DThe capital amount in monthly installments - Correct Answer B The capital amount in a lump sum Which of the following would be an example of a limited accident and health insurance policy? AA long-term care policy BA dread disease policy CAn accidental death and dismemberment policy DA Medicare policy - Correct Answer B. A dread disease policy Which of the following is NOT covered under a long-term care policy? AAdult day care BHospice care CHome health care DAcute care in a hospital - Correct Answer D Acute care in a hospital An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? APartial benefits

BFull benefits until the blindness lifts CNo benefits DFull benefits - Correct Answer C. No benefits This arrangement specifies who will purchase a disabled partner's interest in the event he or she becomes disabled. AKey-person insurance BEmployee benefit plan CDisability buyout DBusiness overhead expense - Correct Answer Disability buyout In abasic expense policy, after the limits of the basic policy are exhausted, the insured must pay what kind of deductible? AFull BHalf CNone DCorridor - Correct Answer D Corridor Which of the following statements is NOT correct concerning the COBRA Act of 1985? AIt applies only to employers with 20 or more employees that maintain group health insurance plans for employees. BCOBRA stands for Consolidated Omnibus Budget Reconciliation Act. CIt requires all employers, regardless of the number or age of employees, to provide extended group health coverage. DIt covers terminated employees and/or their dependents for up to 36 months after a qualifying event. - Correct Answer CIt requires all employers, regardless of the number or age of employees, to provide extended group health coverage. What is the purpose of COBRA? ATo protect the insureds against insolvent insurers BTo provide continuation of coverage for terminated employees CTo provide coverage for the dependents DTo provide health coverage for people with low income - Correct Answer B To provide continuation of coverage for terminated employees Which of the following would be a qualifying event as it relates to COBRA? AEligibility for Medicare BTermination of employment due to downsizing CTermination of employment for stealing DEligibility for coverage under another group plan - Correct Answer B Termination of employment due to downsizing A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability? ABusiness overhead expense policy

BKey-person insurance CDisability buy-sell agreement DBusiness disability policy - Correct Answer A Business overhead expense policy Which statement accurately describes group disability income insurance? AShort-term plans provide benefits for up to 1 year. BThe extent of benefits is determined by the insured's income. CIn long-term plans, monthly benefits are limited to 75% of the insured's income. DThere are no participation requirements for employees. - Correct Answer B The extent of benefits is determined by the insured's income What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered? AContestable period BElimination period CGrace period DProbationary period - Correct Answer D Probationary period Hospital indemnity/hospital confinement indemnity policy will provide payment based on AThe premiums paid into the policy. BThe medical expense incurred. CThe number of days confined in a hospital. DThe type of illness. - Correct Answer C The number of days confined in a hospital Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? AFull B50% C25% DNone - Correct Answer D None Which of the following special policies covers unusual risks that are NOT normally included under Accidental Death and Dismemberment coverage? ACredit Disability BSpecial Risk Policy CLimited Risk Policy DSpecified Disease Policy - Correct Answer B Special Risk Policy What is the purpose of coinsurance provisions? ATo help the insurance company to prevent overutilization of the policy BTo have the insured pay premiums to more than one company. CTo ensure payment to the doctors and hospitals DTo share liability among different insurance companies - Correct Answer A. To help the insurance company to prevent over utilization of the policy.

An insured pays her Major Medical Insurance premium annually on March 1. Last March she forgot to mail her premium to the company. On March 19, she had an accident and broke her leg. The insurance company would APay half of her claim because the insured had an outstanding premium. BPay the claim. CHold the claim as pending until the end of the grace period. DDeny the claim. - Correct Answer B. Pay the Claim. Under the Physical Exam and Autopsy provision, how many times can an insurer have the insured examined, at its own expense, while a claim is pending? A2 examinations per week of the claim processing period BUnlimited CNone at all D1 examination per week of the claim processing period - Correct Answer B. Unlimited Insurers may change which of the following on a guaranteed renewable health insurance policy? ACoverage BIndividual rates CNo changes are permitted. DRates by class - Correct Answer D. Rates By Class While a claim is pending, an insurance company may require AThe insured to be examined only once annually. BAn independent examination only once every 45 days. CAn independent examination as often as reasonably required. DThe insured to be examined only within the first 30 days. - Correct Answer C An independent examination as often as reasonably required Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to ABeneficiary of the death benefit. BThe spouse of the insured. CThe insured. DCreditors. - Correct Answer C. The insured In a group health policy, a probationary period is intended for people AWho want lower premiums. BWho joined the group after the effective date. CWho had a pre-existing condition at the time they joined the group. DWho have additional coverage through a spouse. - Correct Answer B. Who joined the group after the effective date. How soon following the occurrence of a covered loss must an insured submit written proof of such loss to the insurance company? AAs soon as possible

BWithin 20 days CWithin 60 days DWithin 90 days or as soon as reasonably possible, but not to exceed 1 year - Correct Answer D. Within 90 days or as soon as reasonably possible, but not to exceed 1 year. All of the following are true regarding a decreasing term policy EXCEPT AThe contract pays only in the event of death during the term and there is no cash value. BThe face amount steadily declines throughout the duration of the contract. CThe payable premium amount steadily declines throughout the duration of the contract. DThe death benefit is $0 at the end of the policy term. - Correct Answer C. The payable premium amount steadily declines throughout the duration of the contract. Variable Life insurance is based on what kind of premium? ADecreasing BGraded CLevel fixed DIncreasing - Correct Answer C. Level Fixed Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? AThose who have worked in the company for at least 3 years BThose who have dependents CThose who have no history of claims DThose who have been insured under the plan for at least 5 years - Correct Answer D Those who have been insured under the plan for at least 5 years All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT AAny type of insurance policy may be used. BThe employer pays a bonus to a selected employee to fund the policy. CIt is considered a nonqualified employee benefit. DThe policy is owned by the company. - Correct Answer D The policy is owned by the company. It is owned by the employee. An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his AExperience Rating. BGroup rate. CInsurer's scheduled rate. DAttained age. - Correct Answer D Attained age

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? ABoard of directors is the owner, and the board of directors pays the premium. BCompany is the owner, and the company pays the premium. CExecutive is the owner, and the executive pays the premium. DCompany is the owner, but the executive pays the premium. - Correct Answer C. Executive is the owner and the executive pays the premium. A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a AStock redemption plan. BCross-purchase plan. CKey person plan. DSplit-dollar plan. - Correct Answer B Cross-purchase plan A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then AThe benefit is subject to the exclusionary rule. BIRS has no jurisdiction. CThe benefit is received as taxable income. DThe benefit is received tax free. - Correct Answer D The benefit is received tax free. What does "liquidity" refer to in a life insurance policy? AThe policyowner receives dividend checks each year. BThe insured is receiving payments each month in retirement. CCash values can be borrowed at any time. DThe death benefit replaces the assets that would have accumulated if the insured had not died. - Correct Answer C Cash values can be borrowed at anytime. All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT AThe plan is not approved for favorable tax treatment by the IRS. BThe employer can receive a current tax deduction for any contributions made to the plan. CThe plan is a legal method of accumulating money for retirement needs. DThe plan can discriminate as to who may participate. - Correct Answer B The employer can receive a current tax deduction for any contributions made to the plan. A key person insurance policy can pay for which of the following? AHospital bills of the key employee BCosts of training a replacement CLoss of personal income DWorkers compensation - Correct Answer B Cost of training a replacement Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? AThe key employee is the owner and the employer is the beneficiary.

BThe employer is the owner and beneficiary. CThe employer is the owner and the key employee is the beneficiary. DThe key employee is the owner and beneficiary. - Correct Answer B The employer is the owner and beneficiary What is the purpose of key person insurance? ATo provide health insurance to the families of key employees BTo insure retirement benefits are available to all key employees CTo maintain an account that insures the owner of a company remains solvent DTo lessen the risk of financial loss because of the death of a key employee - Correct Answer D To lessen the risk of financial loss due to the death of a key employee All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT AThe policy is owned by the company. BAny type of insurance policy may be used. CThe employer pays a bonus to a selected employee to fund the policy. DIt is considered a nonqualified employee benefit. - Correct Answer A The policy is owned by the company Which of the following describes the tax advantage of a qualified retirement plan? AEmployer contributions are not taxed when paid out to the employee. BThe earnings in the plan accumulate tax deferred. CDistributions prior to age 59½ are tax deductible. DEmployer contributions are deductible as a business expense when the employee receives benefits. - Correct Answer B The earnings in the plan accumulate tax deferred. Who is a third-party owner? AAn insurer who issues a policy for two people BAn employee in a group policy CAn irrevocable beneficiary DA policyowner who is not the insured - Correct Answer D A policyowner who is not the insured. A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a AKey person policy. BSplit-dollar plan. CStock redemption plan. DBuy-sell agreement. - Correct Answer D buy-sell agreement For a retirement plan to be qualified, it must be designed for the benefit of AEmployer. BIRS. CEmployees. DKey employee. - Correct Answer C Employees

Which of the following is the best reason to purchase life insurance rather than annuities? ATo create regular income payments BTo liquidate a sum of money over a lifetime CTo create an estate DTo liquidate a sum of money over a period of years - Correct Answer C To create an estate An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? AViatical settlement BEstate liquidation CNonpayment of premium DChange of beneficiary - Correct Answer A Viatical settlement Employer contributions made to a qualified plan AMay discriminate in favor of highly paid employees. BAre after-tax contributions. CAre taxed annually as salary. DAre subject to vesting requirements. - Correct Answer D Are subject to vesting requirements Which of the following best defines the "owner" as it pertains to life settlement contracts? AA financial entity that sponsors the transaction BA fiduciary for the contract CThe insurance provider DThe policyowner of the life insurance policy - Correct Answer D The policyowner of the life insurance policy The minimum number of credits required for partially insured status for Social Security disability benefits is A4 credits. B6 credits. C10 credits. D40 credits. - Correct Answer B 6 credits All of the following are true of key person insurance EXCEPT AThe plan is funded by permanent insurance only. BThere is no limitation on the number of key employee plans in force at any one time. CThe employer is the owner, payor and beneficiary of the policy. DThe key employee is the insured. - Correct Answer A The plan is funded by permanent insurance only

Which of the following is NOT true regarding policy loans? APolicy loans can be repaid at death. BAn insurer can charge interest on outstanding policy loans. CA policy loan may be repaid after the policy is surrendered. DMoney borrowed from the cash value is taxable. - Correct Answer D Money borrowed from the cash value is taxable A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as ASurvivor protection BLife planning CSurvivorship insurance DJuvenile protection provision - Correct Answer A Survivor Protection An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? A$8,000, no tax consequence B$8,000, tax on growth only C$10,000, tax on growth only D$10,000, no tax consequence - Correct Answer D $10,000 no tax consequence Who is a third-party owner? AAn employee in a group policy BAn irrevocable beneficiary CA policyowner who is not the insured DAn insurer who issues a policy for two people - Correct Answer C A policyowner who is not the insured When an employee terminates coverage under a group insurance policy, coverage continues in force AUntil the employee can obtain coverage under a new group plan. BUntil the employee notifies the group insurance provider that coverage conversion policy is issued. CFor 31 days. DFor 60 days. - Correct Answer C For 31 days A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a ASplit-dollar plan. BStock redemption plan. CCross-purchase plan. DKey person plan. - Correct Answer C Cross-purchase plan