TX General Lines, Life, Accident & Health – Questions |ACCURATE QUESTIONS |VERIFIED ANS, Exams of Insurance Economics

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TX General Lines, Life, Accident &

Health – Questions |ACCURATE

QUESTIONS |VERIFIED ANSWERS |

LATEST UPDATE |NEW VERSION 2024-

2025|GUARANTEED PASS|

Q The exclusion ratio applies until all principal in the annuity contract has been paid out. After that, what happens?

• Ans - The full amount of future annuity payments is treated as taxable income. Q A worker with social security coverage for disability benefits has a work status of: - Ans - Fully Insured Q Life insurance underwriters are most likely to request a consumer (inspection) report on which of the following?
  • Ans - applicants who are seeking very high amounts of life insurance Q An insured's dental plan has an annual benefit limit for an individual. What is the typical range for this limit?
• Ans - $2,000 to $3, Q What level of government mainly regulates health insurance?
  • Ans - State level Q All of the following statements regarding reinsurance are correct except - Ans - Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement. Q Which of the following is most designed to discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising?
  • Ans - Market Value adjusted annuities Q How does the conformity with state statutes provision resolve provisions in a policy that conflict with the laws of the insured's state?
  • Ans - The policy will be automatically amended to comply with the laws of the insured's state. Q Policy Loans from a non-MEC life insurance policy are correct except:
• Ans - CORRECT ANSWER Policy loans are fully taxable if not repaid

Q Any after-tax contributions Tom makes toward the cost of his group life insurance coverage are treated in which of the following ways?

• Ans - They are subtracted from the imputed income of the employer's contributions on a dollar-for-dollar basis. Q Which is NOT one of the ways in which an endowment policy pays its face amount? - Ans - Cash value withdrawal to the beneficiary Q Which statement about HIPAA is not correct?
• Ans - It protects those who lose coverage under an employer's health insurance plan. Q All of the following statements about the fixed amount life insurance settlement option are correct EXCEPT : - Ans - Payments must be made on a monthly basis Q Which of the following most accurately describes who can be a life insurance policy beneficiary?
• Ans - It can be virtually any person or entity the policyowner chooses. (Beneficiary doesn't need insurance interest) Q Medicaid is administered by the - Ans - States (Federal government and state governments fund Medicaid, only states administer it) Q All of the following are characteristics of a stock insurance company EXCEPT:
• Ans - They are owned by policyowners Q An insurer's record of complaints must include all of the following information ЕХСЕРТ:
• Ans - The commissions paid on policies for which complaints were received -- The record must include the total number of complaints, classified by line of insurance. The record must also specify the nature of each complaint, the disposition, and the time spent processing each complaint. Q Jones is the policyowner and insured of a life insurance policy that contains a standard suicide provision. He commits suicide 18 months after the policy was issued, Jones's beneficiary will get which of the following from the insurer?
• Ans - Return of premiums paid, plus interest Q Pam is a vice president employed by Gulf, Inc., where she has $300,000 in coverage under the company's noncontributory group life insurance plan. What portion of that coverage is taxablé to Pam?
• Ans - 250,000 - Employees-including directors and officers-are liable for income taxes on the IRs Table I value of group life coverage exceeding $50,000. Q HMOs must provide their subscribers (enrollees) with evidence of coverage, which must include all the following EXCEPT

• Ans - a list of all approved medical care providers in the HMO's network // Reasoning
• While the evidence of coverage is intended to provide enrollees with important information about the HMO, it is not intended to list every approved network provider. Those lists are generally available through the HMO's website. Q When does a fixed deferred annuity contract provide a death benefit?
• Ans - only if the contract owner or annuitant dies during the accumulation period Q Advertisements for indeterminate premium whole life policies sold in Texas must prominently set forth all the following terms EXCEPT : - Ans - The fact that the nonguaranteed maximum premium can never be changed. Q All of the following statements about binding receipts are correct EXCEPT:
• Ans - Binding receipts are the most common type of premium receipt used with life insurance sales. - Reasoning If the applicant is found to be uninsurable, then the coverage provided under the binding receipt terminates when that underwriting determination is made. The insurer would refund the premium payment. Q Premiums that are paid into a variable annuity acquire : - Ans - Accumulation Units Q The free look period for Medicare Supplement policies extends for how many days from the policy delivery date? – Ans - 30 Days Q All the following are standard types of term life insurance EXCEPT:
• Ans - Variable Term Insurance // Annually increasing term insurance is a form of level term life insurance that provides coverage for one year and may be renewed for another year without requiring evidence of insurability. Q Which type of business disability insurance helps the owners purchase the share of a totally disabled partner?
• Ans - disability buy-out insurance Q Which statement about the waiver of premium rider in a disability income (DI) policy is correct?
• Ans - It is usually a standard provision. Q Why do most insurers require a waiting period of four to six months before the disability income benefit rider begins payments?
• Ans - They want to control claims by eliminating claims for short-term disabilities. Q When received in a lump sum, how are life insurance death benefits commonly taxed to the beneficiary?
• Ans - They are generally income tax free to the beneficiary. // Reasoning When received in a lump sum, the death benefits from a life insurance policy are generally not

taxable to the beneficiary. The question of "gain" is only a concern in transfer-for-value situations. Q The Genetic Information Nondiscrimination Act (GINA) essentially does which of the following? - Ans - it prohibits insurance companies from discriminating on the basis of information derived through a genetic test. Q Endowment contracts issued today no longer qualify as life insurance (for tax purposes), but those issued before what date were grandfathered and still retain favorable life insurance taxation?

• Ans - 1986 Q Which governments regulate group health insurance?
• Ans - Both State and Federal Q In a typical basic medical expense policy, how does the insurer reimburse covered expenses?
• Ans - Reimbursement is paid at up to 100 percent of covered expenses, subject to a maximum limit. Q What does ERISA NOT require of claims procedures and appeals under a group health plan? - Ans - Claimants may designate the plan's fiduciary as their representative. // Reasoning - ERISA requires group health plans to have written rules that specify how claims must be filed and how participants appeal denials of coverage. Appeal processes must be fair and timely.
• Ans - Q Which of the following statements regarding the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association is correct?
• Ans - Neither a producer nor an insurer may use the existence of the guaranty association to sell insurance covered by the association. Q Which of the following is NOT a method used for providing accelerated benefits? - Ans - Percentage of death benefit method Q A producer who intentionally does not tell an applicant for long-term care insurance that the policy has a cap on the amount of benefits that it will pay so that the applicant will buy the policy thinking it will cover all of her long-term care expenses has committed:
  • Ans - Misrepresentation Q Which account uses employee contributions to pay for qualified medical care expenses that an employer's health plan does not cover?
• Ans - Flexible Spending account FSA

Q How does Part C change the delivery of health care services under Medicare?

• Ans - It uses managed care providers Q Which one of the following statements about variable life insurance is correct?
• Ans - With a variable life insurance policy, the policyowner assumes most of the investment risk. // Reasoning - The unsecured investment subaccounts used with variable life policies are kept in a separate account apart from the insurer's general accounts. Q In general, all settlement options with a life contingency base payments on which of the following?
  • Ans - The beneficiary's life expectancy Q A business overhead expense policy does NOT provide : - Ans - Tax Free Benefits Q Which of the following statements regarding the replacement of a life insurance policy is correct?
• Ans - replacing a policy will require the insured to go through a new contestability period Q Which of the following is NOT a mandatory provision for an individual life insurance policy issued in Texas?
  • Ans - Ten Day Grace Period Q All the following statements regarding life insurance cost comparison methods are correct EXCEPT:
• Ans - All cost comparison methods recognize the role of the cash value in projecting future costs of coverage. Q Medicare supplement insurance policies supplement coverage of which Medicare Part?
• Ans - Medicare A & B Only Q When pricing health insurance policies, the morbidity rates indicate: - Ans - the average number of persons in a large group who are expected to become disabled because of accident or sickness Q During the probationary period of a health insurance policy, the policy usually will cover losses from
• Ans - accidents Q The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? – Ans - accidental death benefit rider

Q For tax purposes, a self-employed person includes all of the following, EXCEPT: - Ans - An incorporated business owner Q Which of the following statements about methods for determining life insurance needs is correct?

• Ans - The needs approach takes into account actual family financial goals and objectives. Q Which of the following does NOT constitute an unfair claims settlement practice in Texas?
• Ans - Failing to pay a claim for which the insurer's liability is uncertain. Q Under a survivorship life insurance policy, when does the insurer pay the death benefit?
• Ans - upon the death of the insured who dies second Q What happens if a person submits an insurance application without the first premium?
• Ans - The insurer must make an offer to the applicant. Q Which of the following best describes how the insured's money is handled in a variable life insurance policy? - Ans - Premiums are placed in investment subaccounts selected by the policyowner. Q Group long-term disability (LTD) coverage typically has a maximum benefit period of:
• Ans - At least 2 years Q How does the Pregnancy Discrimination Act prevent discrimination against pregnant employees? - Ans - They must be treated the same under the plan as non-pregnant employees. Q Providers who do not accept Medicare assignments may still treat Medicare patients and can charge more than Medicare's billing limits, though Medicare limits this additional charge to - Ans - 15 percent over what Medicare typically pays for a service or procedure. Q Under the "bring-back rule," the death benefit of a life insurance policy that was transferred to a third party by the insured is included in the insured's estate if made within - Ans - 3 years prior to the insured's death Q Ralph's AGI is $100,000. His unreimbursed medical expenses are $11,000. He also paid $10,000 for health insurance premiums. How much is Ralph's medical expense deduction? - Ans - 13, Q An insurance producer's responsibilities to insurance applicants include all the following EXCEPT: - Ans - offer the same rebate to every applicant

Q All of the following statements regarding the extended term nonforfeiture option are correct EXCEPT: - Ans - Coverage under the extended term insurance option continues for the insured's entire life. Q HMOs must bond their officers for what amount? - Ans - 100, Q Which statement about deferred annuity surrender charges is correct? - Ans - The surrender charge percentage typically decreases over the surrender charge period. Q Most states permit insurers to include a.provision in their life insurance policies that does which of the following? - Ans - excludes coverage of death that occurs while the insured is operating an aircraft Q While indexed annuities are fairly complex products, the basic concept is best described as which one of the following? - Ans - Changes in the selected stock index are the basis for determining the current interest rate credited to the annuity. Which of the following components of Medicare will pay for the costs of a surgeon and anesthetist? - Ans - Part B Explanation: Part B pays for physician and other provider services, outpatient services, and medical supplies and services not covered by Part A. What do most insurance agents and buyers use today to figure out how much life insurance to buy? - Ans - The Needs Approach Explanation The human life value approach is not the preferred method of determining the correct amount of life insurance needed because it does not consider a person's unique needs Shannon, age 52, forgot to pay the $1,000 premium for her whole life insurance policy, and the policy lapsed. She can reinstate the policy by doing all of the following EXCEPT: - Ans - Apply for reinstatement before the policy matures Explanation Shannon can reinstate her policy if she submits a written request or application for reinstatement, provides of proof of insurability, and pays all back premiums plus interest. Which of the following most correctly describes the basic purpose for the MIB? - Ans - Reduce Adverse Selection Explanation To help protect the confidential nature of the information collected by MIB, impairments are identified as numeric codes, with no personal details. ABC Insurers determined through the underwriting process that an applicant is more likely to file a future disability insurance claim than other applicants. What will ABC NOT do as a result? - Ans - Issue the policy at a standard rate. In an owner-driven deferred annuity contract, what happens upon the death of the contract owner prior to annuitization if the annuitant is still alive? - Ans - The contract terminates and the death benefit is paid to the beneficiary.

If an endowment policy is exchanged for another endowment policy under Section 1035, the maturity date of the new policy must be: - Ans - No Later than the current policy's maturity date Joanne buys a Medicare supplement policy but decides not to keep it. How many days does she have to return it for a full refund of the premium she paid? - Ans - 30 Disability income insurance is NOT typically provided through: - Ans - a basic medical expense policy If a group life insurance plan participant's employer-paid coverage exceeds $50,000, the value of the excess coverage is taxed on what basis? - Ans - IRS Table I, which lists the monthly cost-per-$1,000 of group life coverage by age. After Sandra submitted the initial premium with her application for an individual health insurance policy, the producer gave her a conditional receipt. The next week, Sandra suffered a serious injury in a car accident. If Sandra was found to be uninsurable as of the date of application, what is the insurer's responsibility? - Ans - The insurer is not liable for coverage but must refund the premium The return of premium option in a long-term care insurance policy allows for a paid-up policy with reduced benefits if the policyholder: - Ans - Stops paying the premium All of the following statements regarding basic hospital, surgical, and physician policies are generally correct EXCEPT: - Ans - They restrict the insured's right to choose a health care provider. Harry is diagnosed with a cognitive disorder. To become eligible for payments under his policy's long-term care rider, which condition must he meet? - Ans - within the past 12 months, a physician-certified that his health or safety would be at risk without supervision Universal life insurance policies do not offer waiver of premium riders. Instead, they offer two closely related alternatives: a waiver of stipulated premium rider and a: - Ans - waiver of cost of insurance rider Which of the following correctly identifies the way(s) in which major medical expense insurance policies are generally available? - Ans - as a supplement to a basic plan or as a comprehensive stand-alone plan When classifying insurance risks, insurance underwriters most often use the: - Ans - Numerical Rating System The Texas Consumer Information Privacy Regulation was enacted to protect consumers' personal health and financial information from unwanted disclosure. Which of the following is NOT required of insurers under this regulation? - Ans - explain the

penalties that apply if the applicants and policyholders do not return a signed copy of the privacy notice to the insurer To qualify for and get the favorable tax treatment given to life insurance, a universal life insurance policy must meet which of the following tests? - Ans - guideline premium test Regarding life insurance policy dividend options, another term for the 'fifth dividend option' is: - Ans - one-year term option If it cannot be determined which of two people died first in an accident, how does the "common disaster clause" resolve the question in cases where the two people are the insured and primary beneficiary of a life insurance policy? - Ans - the beneficiary is assumed to have died first allowing the proceeds to be paid to the contingent beneficiary. To overcome the coverage limitations of basic medical expense insurance, the health insurance industry developed which of the following? - Ans - major medical insurance Basic hospital, surgical, and physician policies offer insureds all of the following benefits, EXCEPT: - Ans - unlimited coverage and no ceiling on the amounts that the insurer will pay Which of the following provides an additional death benefit for death due to any cause, whether accident or illness? - Ans - term rider Marilyn, 72, pays a lot for medical expenses. She wants to transfer assets to her son so that she can qualify for Medicaid. How will Medicaid's look-back rules apply to her? - Ans - They will consider any transfers of assets she made during the 60 months before she applied for Medicaid Which of the following best describes how annuities owned by corporations are taxed? - Ans - They are taxed differently than personally owned annuities are taxed. Under a policy's facility of payment provision, what does an insurer do with the death benefit if a valid beneficiary is not identifiable? - Ans - The insurer names a blood relative or someone with a valid claim as the new beneficiary. Oliver's variable annuity has a subaccount in which each accumulation unit is currently valued at $10. This value is known as which of the following? - Ans - net asset value In addition to defining the insurer's rights to cancel coverage, what else do renewability provisions define? - Ans - the right of policyowners to continue the policy's coverage beyond the current coverage period Which statement about health savings accounts is correct? - Ans - They are available on an individual or group basis

All of the following statements about annuities are generally correct, EXCEPT: - Ans - The historic purpose of annuities is to create estates over a certain period. The type of life insurance policy delivery that requires delivery to the client in-person by the producer and an explanation of the conditions to be met is called: - Ans - legal delivery Ben, a single working father, dies at age 50. How much will his only child, Tom, age 16, receive from Social Security in a lump-sum death benefit? - Ans - 255 How long can the look-back period be for pre-existing conditions before the insured enrolled in a group health plan that has 'grandfather' status under the Affordable Care Act? - Ans - 6 Months When children are covered by the health plans of two employed parents, which plan will provide primary coverage? - Ans - The plan of the parent whose birthday occurs first in the year For universal life insurance, an insurer credits interest to a policy's cash value based on which of the following? - Ans - Current Interest Rates When a person annuitizes a deferred annuity or buys an immediate annuity, the monthly income payments it generates consist of which of the following? - Ans - partly tax-free principal and partly taxable interest earnings The 12 mandatory provisions included in health insurance policies originated with: - Ans

• NAIC With what type of health insurance policies are guaranteed insurability riders typically associated? - Ans - Disability Income Insurance Policies Which entity spreads the cost of losses among its members by having each member pay a pro-rata share of these losses? - Ans - Reciprocal Insurer The states' "any willing provider" laws limit the ability of health insurers to: - Ans - exclude hospitals and doctors from their networks XYZ Co. is a close corporation with several shareholders. Under which of the following types of buy-sell sell arrangement would XYZ Co. use life insurance proceeds to buy a deceased owner's shares in the business? - Ans - Stock Redemption Agreement Which of the following best describes the purpose for the laws of agency? - Ans - to govern the relationships between agents to regulate an insurance agency's business transactions to regulate insurance agencies and their agents

CORRECT: to govern the authority granted agents to represent insurers A supplemental major medical plan supplements a basic plan. A comprehensive major medical plan replaces a basic and a supplemental plan. Benefits under a comprehensive major medical plan are typically: - Ans - High Settlement options for annuities are similar to those for life insurance in all of the following ways EXCEPT: - Ans - both offer a lump sum cash payment as one of the options Many insurance companies set up a special account that acts like a checking account for beneficiaries who want to control when and how much of a policy's death benefit is distributed. These accounts are called: - Ans - Retained Asset Account Brian and Paul are the same age. Each buys a disability income policy from the same insurer. However, Paul's disability income policy uses an any occupation definition of total disability while Brian's policy has an own occupation definition. Which of the following statements is correct? - Ans - An insured would prefer a policy like Brian's. Explanation: Insureds can more easily qualify for total disability benefits under policies that use the own occupation definition of total disability. The any occupation definition is much more difficult to meet. Q Which statement about profit-sharing plans is correct? - Ans - Contribution limits for profit-sharing plans are the same as those that apply to all defined contribution plans. Q Which statement accurately describes the work of the MIB (Medical Information Bureau)? - Ans - It reports medical information about insurance applicants to member insurance companies. Q Which statement correctly describes the income tax treatment of employer-funded group life insurance coverage on a covered employee? - Ans - The value of coverage exceeding $50,000 is taxable to the employee; below that, it is tax free. Q After buying a health insurance policy, the insured takes a job that increases the risk of injury. What will the insurer do to accommodate the increased risk? - Ans - Reduce Benefits Q Which statement about disability buy-out insurance policies is correct? - Ans - They may be used with either a cross-purchase buy-sell agreement or an entity purchase buy-sell agreement. Q All the following statements regarding life insurance cost-of-living (COL) riders are correct EXCEPT: - Ans - As the consumer price index (CPI) increases, so does the policy-owner's coverage providing the insured can prove insurability

Q Which optional provision applies when an insured has coverage for the same expenses with another insurer but has not notified this insurer of other existing coverage? - Ans - Insurance with another insurer Q A cancellable policy allows the insurer to - Ans - Increase the premium Q How may a person eligible for Medicare avoid automatic enrollment in Part B? - Ans - notify the Social Security Administration that the person wants to opt out Q In Texas, new enrollees to an HMO who do not choose a primary care physician within an established period of time can have their coverage cancelled how many days following written notice by the HMO? - Ans - 30 Days Q Social Security does NOT provide benefits for - Ans - Medical Care Q If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium? - Ans - It goes down - The Policy's Death Benefit is reduced, so the premium goes down

• Ans - Q All the following statements about standard policy exclusions are correct ЕХСЕРТ: - Ans - The war and commission of a felony exclusions are required by law. Q A basic physician expense policy typically specifies - Ans - The maximum benefit amount per visit and the maximum number of visits per injury or illness Q Which statement about the taxation of accidental death and dismemberment policy benefits is correct? - Ans - Interest earnings on benefits held by the insurer are taxed. Q Bob was reading an advertisement for a long-term care policy which stated that the policy had a level premium, which means the policy is - Ans - Noncancellable Q On June 1, Sandra submitted proof of her uncle's death and her right as beneficiary to receive the proceeds of his life insurance policy. A life insurance policy settlement must take place by: - Ans - August 1 - 60 days Q HIPAA applies to group health insurance plans that cover at Leadeth how many people? - Ans - 2 Q Lorraine replaced the Medicare Supplement policy that she has had for four months with a new Medicare Supplement policy that imposes a six-month preexisting condition exclusion period. What is the maximum length of the preexisting condition exclusion period under the new policy? - Ans - Two months

Over-funded life insurance policies where the proceeds are subject to taxation are called: - ANSWER MECs (Modified Endowment Contracts) Modified endowment contracts are over-funded life insuance policies in which proceeds are subject to taxation. The most common plan used with an HSA is: - ANSWER HDHP HSAs (Health Savings Accounts) are frequently used with HDHPs (high deductible health plans). Sally is a self-employed software programmer that works from home. If she becomes unable to work due to a disability, which type of policy would pay her rent? - ANSWER Individual disability income policy She is self-employed, an individual disability income policy would cover her. What approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities? - ANSWER Needs The needs approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities. A decreasing term life policy would be the most appropriate for: - ANSWER A 41 year old lawyer who wants a policy to pay his mortgage if he dies. A decreasing term life policy would be the most appropriate for a 41 yr old lawyer who wants a policy to pay his mortgage if he does. Which of the following must happen before an HIV test is performed on an applicant? - ANSWER A consent form must be signed by the applicant prior to the test. The applicant must consent to the test and sign a consent form before the test is performed. An agent's appointment remains in force: - ANSWER Until terminated or surrendered An appointment remains in force until the insurer terminates the appointment or the agent surrenders their appointment. What type of insurer is formed under the laws of anyplace outside of the United States?

• ANSWER Alien An alien insurer is one formed under the laws of any place outside the United States.

How many continuing education credit hours must Texas agents complete during each license period? - ANSWER 24 Agents must complete 24 hours of continuing education during every licensing period (every 2 years). Cindy has a new medical plan that provides both health care services and health care insurance. She is covered by: - ANSWER An HMO (Health Maintenance Organization) She is covered under an HMO. According to the Physical Examination and Autopsy provision, who is responsible for paying the cost of examining the insured? - ANSWER The insurer Where not prohibited by law, the insurer may request that a physical examination or autopsy of the insured be performed while a claim is pending. The cost of such procedure is the insurer's responsibility. Samson has a policy that allows the insurer to cancel the policy at any date specified in the contract, and to raise his premiums. Which type of policy is it? - ANSWER Optionally Renewable An optionally renewable policy allows the insurance company to cancel the policy for any reason, on dates set in the contract. The insurer can also increase the premiums. In life insurance, insurance interest must be present at the time of: - ANSWER Application Insurable interest must be present when the application is made. Tyler owns a major medical policy with 70/30 coinsurance and a $3,000 deductible. If he submits a claim for $20,000, how much will he pay? - ANSWER $8, He'll pay $8,100. The math works out $20,000 - $3,000 = $17,000. Then $17,000 x. = $5,100. Then add the $3,000 deductible with the $5,100 coinsurance ($3,000 + $5,100= $8,100). In a life policy, a statement of good health is needed when: - ANSWER The application does not include the premium. A statement of good health is needed when the application does not include the initial premium with the application. If an applicant states their age is 30 on an application for life insurance, when they were actually 37, what is the insurer likely to do? - ANSWER Pay the death benefit based on the applicant's actual age.

Th insurer will pay the death benefit, but it will be reduced based on what the premium should have been with the applicant's correct age. Take note: even an intentional misstatement of age is not considered material enough to void the policy. Which of the following could be used to prevent a lapse in the payment of life insurance premiums? - ANSWER Automatic premium loan The automatic premium loan allows the insurer to tap into the cash value of a policy to pay an overdue premium. Dylan is looking at buying an equity-indexed life policy; it will likely be tied to: - ANSWER Dow Jones Industrial Average An equity- indexed life policy is tied to and equity index. Examples of equity index include the S & P 500 or the Dow Jones Industrial Average. What document authorizes an insurer to engage in the insurance business? - ANSWER Certificate of Authority A certificate of authority issued to an insurer authorizes the insurer to engage in the business of insurance in Texas. Sam works for large corporation and is eligible for both his company's health plan and Medicare. Which plan would be primary? - ANSWER Work Employer sponsored health plans, are always primary, and Medicare is secondary, as long as the company plan has more than 20 employees. The policyowner's obligation to pay the premium is the: - ANSWER Consideration Clause The consideration clause states that a policyowner must pay a premium in exchange for the insurer's promise to pay benefits, and the frequent premium payments. Which of the following statements is correct when pertaining to coordination of benefits by a group long-term disability plan with Social Security? - ANSWER Group and Social Security benefits pay a combined maximum limit. They can be integrated when group and Social Security benefits pay a combined maximum limit. When an HMO's license is suspended, who are the only people that can be enrolled? - ANSWER Newborns

When an HMO's license is suspended, it cannot enroll additional members, except for newborns. Alex's life policy lapsed, which Nonforfeiture option would the insurer send him the value of the policy? - ANSWER Cash Surrender The cash surrender option allows the policyowner to receive the policy's cash value. What are the two most common adjustments made during a month with a universal life insurance policy? - ANSWER Cost of death protection deducted and current interest rate credited Each month, the cost of the death protection is deducted from the cash value, and the current interest rate is credited. What kind of contract pays an income to an insured until the insured dies? - ANSWER Life Annuity A life annuity would pay income until the insured died. How does Texas define chemical dependency? - ANSWER The abuse of, a psychological or physical dependence on, or an addiction to alcohol or a controlled substance. Texas defines chemical dependency as the abuse of, a psychological or physical dependence on, or an addiction to alcohol or a controlled substance. The Beauty Shop Cosmetic Company purchases a life insurance policy on Anna, the company's leading salesperson. Which business continuation plan does this company have? - ANSWER Key person insurance The Beauty Shop Cosmetic Company purchased key person insurance. Anna is a key employee, because she is responsible for much of the company's profitability. What is the advantage of a Waiver of Premium provision in a life policy? - ANSWER Waive an insured's premiums if he/she becomes disabled. If an insured becomes totally disabled before a certain age, this provision would waive the premiums. What is the grace period for life insurance policies in Texas? - ANSWER 31 days In Texas, life insurance policies have a grace period of 31 days or one month.

Jeff and Mike own an architect firm with 20 employees and worry about the company if one of them becomes permanently disabled. What type of policy should they buy? - ANSWER Disability Buy-Out They should buy a disability buy-out policy. Gregory recently purchased a one-year term insurance policy. At the end of the year, he can purchase an identical policy without having to show proof of insurability. Why type of policy did he purchase? - ANSWER Renewable term It is a renewability term policy that allows the policyowner to purchase another identical policy at the end of the year without proving insurability. Which of the following is an improper form of policy replacement? - ANSWER Twisting Twisting is an improper type of replacement along with churning. Twisting is replacing another companys policy, whereas churning is replacing a policy within the same company. Tina has a policy that only covers cancer-related medical expenses. What kind of policy does she have? - ANSWER Dread disease Dread disease policies are limited policies that pay for a specific disease or medical condition. In the state of Texas, when must newborn child coverage begin? - ANSWER From the moment of birth Newborns must be covered from the moment of birth. What part of the policy directs the insurer on the recipients of benefits? - ANSWER Payment of Claims provision The Payment of Claims provision stipulates to whom claim payments are made. If James has an increasing term policy, which of the following must increase? - ANSWER The death benefit The death benefit increases. What is the biggest source of information used in underwriting? - ANSWER Application The application is the biggest source of information used in underwriting.

All of the following are true regarding advertising of life insurance policies in Texas, EXCEPT: - ANSWER Agents are responsible for the form and content of advertisements. Insurers are responsible for the form and content of all advertisements. The open enrollment period for a group HMO lasts for how many days? - ANSWER 30 days The open enrollment period for an HMO typically lasts for 30 days. Kim's policy remained in force for a certain number of days even though she forgot to pay the premium. The provision that allows this is called: - ANSWER The grace period provision The grace period allows the policy to remain in force for a specified number of days beyond the premium due date. Who of the following might take out a credit life policy? - ANSWER A car dealer who is financing someone's car Credit life policies are taken out by a creditor to cover the life of a debtor. The car dealer is the only one who is financing a debt. Which type of policy would best suit someone who retires in good health with a large amount of cash, whose investment goals are conservative? - ANSWER Single premium whole life insurance A single premium whole life insurance would best suit this person. Buying insurance with a single premium is less than the policy would cost with continuous payments. It has immediate cash value, and is not front-end-loaded. What type of premiums payment can employers deduct as an ordinary business expense? - ANSWER Group Employers can deduct premium payments for group insurance. Jamie has a renewable term policy. Which of the following is not an incorrect statement about this type of policy. - ANSWER Renewability is the insurers option Renewability is the insurers option- is the only correct statement. What guarantees Jason the right to question the source and validity of consumer information used to rate a policy? - ANSWER Fair Credit Reporting Act

The Fair Credit Reporting Act (Insurance Information and Privacy Protection Act), give him the right to question the source and validity of the information. What right of renewability does not guarantee insurability if certain circumstances happen and allows the insurer to increase premiums? - ANSWER Conditionally renewable Conditionally renewable policies allow the insurer the right not to renew the contract for a reason specified in the policy. An example of a condition is a change to a dangerous job. Policy premiums can also be increased. A life insurance policy in Texas must contain all the following provisions, except: - ANSWER Settlement A life insurance policy in Texas must contain the following provisions: entire contract, payment of premiums, grace period, reinstatement, incontestability, statements of insured, misstatement of age, payment of claim, legal action, assignment, and accelerated life benefits. Comprehensive major medical health policies typically have an Eligible Expenses provision that specifies coverage for all but: - ANSWER Experimental services Experimental and investigative services are not normally considered eligible expenses.. If the cash values of an annuity are invested in securities, it is a: - ANSWER Variable annuity All of the following are typical groups that would be eligible for group life insurance, except: - ANSWER A family An employer, labor union, government entity, public employee association, non-profit organization and creditors are all eligible for group life insurance. A family is not eligible for a group policy. How many days does an insured have to file a notice of claim? - ANSWER 20 days A notice of claim must be given to the insurer within 20 days. Nick has a policy that the insurer can cancel when he turns 65. Which type of policy is it? - ANSWER Conditionally renewable A conditionally renewable policy allows the insurer to cancel the policy if certain stated conditions happen. Examples of conditions are losing a job or reaching a specified age, such as 65.

To determine the coverage and benefits to pay for a surgery based on what is considered fair and common for an area is: - ANSWER Usual, reasonable, and customary Under the usual, reasonable, and customary method, an insurer looks at what is considered reasonable and customary for a geographic area. On November 5, Zoe fills out an application for a life policy. On November 6, the agent accepts the premium for the policy. The policy is delivered on November 7. Which date does the Free Look period start? - ANSWER November 7 The free look starts upon delivery of a life policy, which is November 7. A program that includes prehospitalization authorization is an example of: - ANSWER Managed care A preauthorization program is an example of managed care. Which of the following is NOT a feature of the Patient Protection and Affordable Care Act? - ANSWER The premium tax credit is always paid to the individual as soon as they pay their premium Some key features of the Patient Protection and Affordable Care Act are; larger tax credits for older Americans who face higher premiums, the amount of the premium tax credit is generally fixed based on a benchmark, the premium tax credit is fully refundable, and an advance payment of the premium tax credit will be made by the Department of the Treasury directly to the insurance company. Which type group plan requires 75% participation? - ANSWER Contributory With a contributory plan, the group members share the cost of the coverage with the employer, and must have at least 75% participation. The insurer has a maximum of how many days after receiving notice of a claim to provide claims forms? - ANSWER 15 days Claims forms must be provided to the claimant a maximum of 15 days after receiving a notice of claim. If more than one beneficiary is named, who is the first in line? - ANSWER Primary The primary beneficiary is the first in line, and the contingent is the second in line. The producer realizes that the prospective client omitted information about a prior illness. What should the producer do? - ANSWER Tell the prospective client that a claim might be rejected later due to the omission.

The producer has the duty to inform the prospective insured that a claim might be rejected later on with possible repercussions. This is a form of fraud, and a claim might be rejected on this basis. Paul has a basic medical policy. It will pay for: - ANSWER doctor visits Doctor visits are covered under basic medical policies. An insurance application is not complete unless it has: - ANSWER The signature of the insured (unless not an adult), and the agent The signature of the insured is required in order for an application to be complete, and the signature of the agent/producer. The services are provided on a prepaid per person basis called capitation in: - ANSWER HMOs HMOs pay for services on a prepaid per person basis, which is called capitation. On April 9, an application is submitted without the initial premium. The insurer requires a medical exam, and it is completed on April 14. On April 18, the insurer issued the policy, and the producer delivers it on April 21. When is coverage effective? - ANSWER April 21, after the statement of good health is signed, and the initial premium is paid. Coverage begins on April 21, after the statement of good health is signed, and the initial premium is paid. Which of the following is NOT a nonforfeiture option that will protect the value of a health insurance policy in the event of default in the payment of premiums? - ANSWER Lengthened Benefit Period If insurers must provide a provision for nonforfeiture benefits that must provide for a benefit available in the event of a default in the payment of any premiums. The nonforfeiture benefit must be reduced paid-up, extended term, or shortened benefit period coverage. Which is NOT a nonforfeiture option that will protect the cash value of a permanent life insurance policy in the event of lapse? - ANSWER Lengthened benefit period If the policyowner fails to make premium payments, the policy will lapse. Nonforfeiture options protect the cash value of permanent life insurance policies (whole life, universal life, etc.) Insurers must provide at least one of the following nonforfeiture options: reduced, paid-up coverage, extended term coverage, shortened benefit period, or cash.

Which of the following policies would pay for a company's rent, utilities, and other operating expenses if the owner becomes disabled? - ANSWER Business overhead expense A business overhead expense policy pays a company's operating expenses, such as rent or payroll, if an owner becomes disabled. It will not pay the owner's salary. Life insurance death benefits that can be accessed tax-free when the insured is still alive are called: - ANSWER Accelerated benefits Accelerated benefits allow policyowners to use a policy's death benefits tax-free while they are still alive, or if they are terminally or chronically ill. How are dividends treated for tax purposes? - ANSWER Never taxed Dividends are never taxed. They are considered a return of premiums. The life insurance rider that pays the face amount plus the total premiums paid into the policy is known as: - ANSWER Return of premium The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. The death benefit is comprised of the face amount plus the total premiums paid into the policy. What type policy would pay the death benefits after the first person dies, if it covers two or more lives? - ANSWER Joint life Joint life pays the death benefits after the first person dies. A survivorship life policy pays after the second person or last survivor dies. Dylan tells the insurer to keep the dividend and apply it to his next premium. He is using which dividend option? - ANSWER Reduction of premium The reduction of premium dividend option allows the insurer to keep the dividend and apply it to the next premium. Remember dividends are not taxed. All of the following are considered to be acts of the agent, except: - ANSWER Waives terms of the contract when necessary An agent is not authorized to waive terms of a contract. The solicitation of business, receiving and transmitting the application, premiums and policy back and forth between the insured and the insurer, and the examination of potential risks are all considered acts that are considered to be acting for the insurer. An individual has a disability income policy with a Change of Occupation clause when he changes to a new more hazardous job. He neglects to inform the insurer. What

happens if one year later he files a claim when he becomes disabled? - ANSWER The insurer will pay the claim based on what the premiums would have purchased had the hazardous occupation been known. HSAs are frequently used with: - ANSWER HDHPs (Health Savings Accounts) used with (High deductible health plans). Jacob, James and Jonathan are triplets, and all applied for the same type of insurance coverage at the same time. For James and Jonathan the rates were the same. Jacob's rate was quite a bit higher. What is the most likely reason for this difference? - ANSWER Risk classification Which of the following is not one of the elements required to make a contract legal? - ANSWER Ambiguities Ambiguities are things that are unclear in a contract. Sue's hospital bill is $4,500. Her major medical policy has a $500 deductible and then it pays 80% of the remaining bill. The policy also has a maximum out-of-pocket of $2,000. How much of the total bill will the insurance company pay? - ANSWER $3,200 The bill is $4,500. Subtract $500 for the deductible. The company will pay 80% of the balance, which is .80 x $4,000 = $3,200 Which of the following would not be allowed in the advertising of life insurance policies in Texas? - ANSWER Mentioning rumors about competitors An insurance advertisement may contain testimonials from famous actors, as long as they're genuine, guaranteed interest rates for specific time periods and comparisons with other insurers, as long as there is a required caveat. Mentioning rumors about competitors is not allowed.