California Life, Accident, and

Health Insurance| 300+ Questions

and Answers

1. An annuitant would like to determine the amount of an

annuity distribution that is exempt from taxation. What is
used to calculate this? - Correct Answer - exclusion ratio

2. Cindy buys a 10-year certain annuity with an installment

refund. After receiving monthly payments for 5 years, Cindy
dies. How many remaining payments will the insurer make to
her beneficiary? - Correct Answer - 60 payments

3. A savings vehicle designed to first accumulate funds and

then systematically liquidates the funds is called - Correct
Answer - Deferred annuity

4. Which of the following is not a feature of equity-indexed

annuities? - Correct Answer - Offers maximum interest rate
that increased annually

5. An annuity which is backed by a life insurer's separate

account is called a(n) - Correct Answer - variable annuity
6. An annuitant would like to determine the current value of her
annuity. To do this, she multiplies the number of
"accumulation units" she owns times the unit value of the
"separate account". What kind of annuity BEST matches this
description? - Correct Answer - Variable annuity

7. The systematic liquidation of a sum of money is provided by

a(n) - Correct Answer - annuity

8. Which of the following statements regarding a life insurance

policy dividend is TRUE? - Correct Answer - It is the
distribution of excess of funds accumulated by the insurer on
participating policies

9. An insurer enters into a contract with a third party to insure

itself against losses from insurance policies it issues. What is
this agreement called? - Correct Answer - Reinsurance

10. AAA insurance Company has transferred a portion of its

loss exposure to BBB Insurance company. In this
reinsurance transaction, what is AAA Insurance Company
called? - Correct Answer - Primary Insurer

11. When a mutual insurer becomes stock company, the

process is called? - Correct Answer - Demutualization
12. Which of the following is NOT a benefit of insurance? -
Correct Answer - Losses due to fraud are eliminated

13. A participating company is also referred to as which

type of insurer? - Correct Answer - Mutual insurer

14. Manuel is considered to be a disabled person as

defined by the Americans with Disabilities Act (ADA). As
such, he is unable to perform any of the following life
activities EXCEPT - Correct Answer - Driving

15. What are the residual disability income insurance

payments based on? - Correct Answer - The amount of the
insured's income is reduced by the disability

16. Which of these statements is NOT true concerning

recurrent disabilities? - Correct Answer - The insurer
continues coverage after a new elimination period

17. Allen has a disability income policy with a $2,500

monthly benefit and a 30-day elimination period. He is
unable to work 90 days following an automobile accident.
What will the policy pay? - Correct Answer - 5,000
18. Which of the following is NOT a provision in a disability
income policy? - Correct Answer - Deductible and
coinsurance provision

19. The elimination period in disability income policy serves

the same purpose as - Correct Answer - A deductible

20. Dyan is considered partially disabled by her insurance

company. Which of the following BEST describes her
situation? - Correct Answer - She is working part-time and
receiving lost income under her long-term disability benefit

21. Who is financially liable for the payment of covered

claims in a fully insured group health plan? - Correct
Answer - Insurer

22. In regards to a group health insurance plan, which

statement is CORRECT? - Correct Answer - A non-
contributory group health plan must cover all eligible
memebers

23. When a claimant has coverage under more than one

health plan, which group medical plan provision applies? -
Correct Answer - Coordination of benefits
24. Coverage is limited for vision and dental insurance in all
of the following ways EXCEPT - Correct Answer - Specific
dollar amount for examinations

25. An eligible individual who would like to obtain group

health insurance without providing evidence of insurability
must - Correct Answer - Enroll within a specified eligibility
period

26. Buy-sell plans are typically funded by which two types

of insurance? - Correct Answer - Life insurance and
disability insurance

27. Which of the following is NOT typically covered under

vision care insurance? - Correct Answer - Eye Surgery

28. Under the Payment of Claims provision, when are

benefits typically payable after proof of loss is received? -
Correct Answer - immediately

29. Under a health insurance policy, the provision that

states the kind of benefits provided and the circumstances
under which they will be paid is called the? - Correct
Answer - insuring clause
30. The insurer has the option of terminating a health
insurance policy on a date stated in the contract. What type
of policy is this? - Correct Answer - Optionally renewable

31. Which type of health insurance policy cannot be

canceled by the insurer nor increase the premiums? -
Correct Answer - Noncancellable

32. The conditions, times, and circumstances under which

an insured is NOT covered by a health policy are called? -
Correct Answer - Exclusions

33. The misstatement of age provision in a health policy

states that if an insured gives the wrong age at the time of
application, what action can the insurance company take? -
Correct Answer - Benefits can be adjusted

34. Bruce is involved in an accident and becomes totally

and permanently disabled. His insurance policy continues in
force without payment of further premiums. Which policy
provision is responsible for this? - Correct Answer - Waiver
of premium provision

35. In what situation does a waiver of premium provision

keep a health insurance policy in force without premium
 payments? - Correct Answer - When an insured becomes
totally disabled

36. Which of these factors do NOT affect the rates of

medical insurance? - Correct Answer - Race

37. How does rising morbidity rates affect health

insurance? - Correct Answer - Increased premiums

38. Which of these is NOT a relevant factor in the health

insurance principle of morbidity? - Correct Answer -
Intelligence

39. Which of the following is NOT a factor in determining

the morbidity of a group individuals? - Correct Answer -
Race

40. If a material warranty violation on the part of the insured

is found, what recourse does an insurer have? - Correct
Answer - Rescind the policy

41. Restoring an insured to the same condition as before a

loss is an example of the principle of - Correct Answer -
Indemnity
42. Which statement is CORRECT when describing a
contract of adhesion? - Correct Answer - Contract may be
accepted or rejected by the insured

43. Which course of action is the insurer entitled to when

deliberate concealment is committed by the insured? -
Correct Answer - Rescinding the contract

44. When handling premiums for an insured, an agent is

acting in which capacity? - Correct Answer - Fiduciary

45. Which of the following contracts is defined as "one that

restores an injured party to the condition that was present
before the loss"? - Correct Answer - Indemnity contract

46. What does the insurance term "indemnity" refer to? -

Correct Answer - Make whole

47. Which of the following is NOT required in the content of

a policy? - Correct Answer - Probability of loss

48. A contract requires - Correct Answer - an offer and

acceptance of the contract terms
49. What is the price of insurance for each exposure unit? -
Correct Answer - Rate

50. When calculating life insurance premium rates, which

component would an agent's commission fall under? -
Correct Answer - Insurer's expenses

51. A spendthrift clause in a life insurance policy - Correct

Answer - restricts the ability of the beneficiary to assign
benefits

52. How are death benefits that are received by a

beneficiary normally treated for tax purposes? - Correct
Answer - Exempt from federal income taxes

53. Which of the following is NOT a life insurance

settlement option? - Correct Answer - Extended term
option

54. When calculation life insurance premium rates, which

component affected by an insured's age and gender? -
Correct Answer - Mortality

55. A creditor would be allowed rights to life insurance

policy proceeds if which of the following beneficiaries is
chosen? - Correct Answer - The insured's estate
56. Pam is the primary beneficiary of a life insurance policy
and wants to let the death benefit accumulate and receive
only the monthly investment proceeds. Which settlement
option should she choose? - Correct Answer - Interest
option

57. Which provision will pay a portion of the death benefits

prior to the insured's death due to a serious illness? -
Correct Answer - Accelerated death benefit

58. What does the grace period allow a life insurance policy
owner to do? - Correct Answer - Make a premium payment
after the due date without any loss of coverage

59. Which of the following does a policy owner NOT have a

right to change? - Correct Answer - Dividend schedule

60. What does the guaranteed insurability option allow an

insured to do? - Correct Answer - Purchase additional
coverage with no evidence of insurability required

61. A life insurance policy can be surrendered for its cash

value under which policy provision? - Correct Answer -
Nonforfeiture options
62. If an insured dies because of an accident, which type of
life insurance rider will provide additional coverage? -
Correct Answer - An accidental death rider

63. When an accidental death benefit is added to a whole

life policy, how does this affect the policy's cash value? -
Correct Answer - Policy's cash value is not affected

64. Which statement is true regarding policy dividends? -

Correct Answer - A dividend option is selected by the
insured at the time of policy purchase

65. Which of these is NOT a valid policy dividend option? -

Correct Answer - Monthly income payments

66. Which policy provision protects the policy owner from

unintentional lapse of the contract? - Correct Answer -
Grace period

67. When a life insurance policy surrendered, how does the

cost recovery rule apply? - Correct Answer - The policy's
cost basis is exempt from taxation

68. Which of the following is NOT a common life insurance

rider? - Correct Answer - Extended term
69. An insurance policy written after 1988 that fails to pass
the seven-pay test is known as - Correct Answer - A
modified endowment contract

70. What is the proper order of initial life insurance

premiums, from lowest to highest? - Correct Answer -
Modified premium, ordinary life, single premium

71. Which of the following is NOT true regarding a family

policy that covers children? - Correct Answer - Conversion
of child's coverage to permanent insurance does NOT
require evidence of insurability

72. Scott has just purchased a new house. He is now

shopping for a life insurance policy that provides a death
benefit that matches the projected outstanding debt of his
mortgage. Which life policy would best suit his needs? -
Correct Answer - Mortgage redemption

73. Which of the following is NOT a true description of non-

medical life insurance? - Correct Answer - Applicants are
not required to answer medical questions on the application

74. John and Mary have a handicapped child that is

financially dependent upon them. The death of one of the
 parents would not be financially disastrous, however the
death of both likely would be. Which policy would be best
suited for them? - Correct Answer - Second-to-die policy

75. Which of the following statements do NOT apply to a

child coverage in a family policy? - Correct Answer - Only
children born prior to policy's issue date may be included

76. Lynn owns a life policy that guarantees the right to

renew the policy each year, regardless of health, but at an
increased premium. What kind of policy is this? - Correct
Answer - Renewable term

77. A life insurance policy that pays the face amount if the
insured survives to a specified period of the time called -
Correct Answer - Endowment insurance

78. In a renewable term life insurance policy, the contract

will usually - Correct Answer - Require a higher premium
payable at each renewal

79. In a modified endowment contract, the penalty tax

imposed on premature withdrawals is - Correct Answer -
10%
80. What are members of the Medical information
Bureau(MIB) required to report? - Correct Answer -
Medical ailments discovered during the underwriting process

81. When an insurance company requests an attending

physician's report, the request must be accompanied by a -
Correct Answer - copy of the signed authorization

82. The risk selection process is primarily given to which

insurance company department? - Correct Answer -
Underwritting

83. Which of the following risk classifications charges the

lowest premium? - Correct Answer - Preferred

84. Which of the following types of information is NOT

required for a life insurance application? - Correct Answer -
Ethnicity

85. How does a conditional receipt differ from a binding

receipt? - Correct Answer - Binding receipts always
provide insurance which starts from the date of receipt

86. When an applicant applies for insurance, the process

by which the insurer determines whether to issue a policy is
called - Correct Answer - Underwriting
87. Which of the following is NOT a risk classification that
an underwriter would use? - Correct Answer - Dividend risk

88. The objective of underwriting is to - Correct Answer -

Avoid selecting a disproportionate number of bad risks

89. Which of the following terms is NOT associated with a

Major Medical policy? - Correct Answer - Capitation

90. All of these are examples of cost sharing in a health

insurance policy EXCEPT - Correct Answer - Coordination

91. The elimination period in a disability income policy

serves the same purpose as a(n)_______ in a medical
expense policy. - Correct Answer - Deductible

92. Medical expense policies will typically cover which of

the following? - Correct Answer - Injuries caused by
accidents

93. At what point does a self-insured group qualify for the

stop-loss coverage? - Correct Answer - When claims
exceed a specified limit in a set period of time
94. An insured is protected from the expense of a
catastrophic illness by which of the following health
insurance provisions? - Correct Answer - Stop-loss

95. Which of the following does specified disease insurance

NOT cover? - Correct Answer - Costs covered by medical
expense insurance

96. Which of the following types of policies pays a stated

amount of each day an individual is hospitalized - Correct
Answer - Hospital confinement indemnity

97. Major medical expense plans typically use a cost

containment measure for emergency hospital care. This is
referred to as a(n) - Correct Answer - Deductible

98. What is considered the most common type of specified

disease insurance policy? - Correct Answer - Cancer

99. An insurer having a large number of similar exposure

units is considered important because - Correct Answer -
The greater the number insured, the more accurately the
insurer can predict losses and set appropriate premiums
100. All of the following circumstances must be met for loss
retention to be an effective risk management technique,
EXCEPT - Correct Answer - Probability of loss is unknown

101. Which of the following is a situation where there is a

possibility of either a loss of a gain? - Correct Answer -
Speculative risk

102. Which of the following is NOT considered a definition of

risk? - Correct Answer - The cause of a loss

103. Which of these statements correctly describes risk? -

Correct Answer - Pure risk is the only insurable risk

104. A situation in which there is ONLY a chance of a loss or

no loss is - Correct Answer - Pure risk

105. Which of the following describes the increase in the

probability of a loss due to an insured's dishonest
tendencies? - Correct Answer - Moral hazard

106. Restoring an insured to the same condition as before a

loss is known as - Correct Answer - Principle of Indemnity
107. Which of the following is any situation that presents the
possibility of a loss? - Correct Answer - Loss exposure

108. Which of the following best describes the statement

"The more times an event is repeated, the more predictable
the outcome becomes"? - Correct Answer - Law of large
numbers

109. ESOPs are typically invested in - Correct Answer -

employer stock

110. How are Roth IRA's treated for tax purposes? -

Correct Answer - Non-deductible contributions and tax-free
distributions

111. What area of group health insurance is regulated under

the Employee Retirement Security Act of 1974 (ERISA)? -
Correct Answer - Disclosure and reporting

112. Employer contributions qualified plans are - Correct

Answer - Tax deductible by the employer

113. Under a 10 year- vesting schedule, what percentage of

employer contributions must be vested after 10 years of
service? - Correct Answer - 100%
114. Which of the following is NOT included under long-term
care insurance? - Correct Answer - Hospital acute care

115. Which of the following plans will cover medical costs

that Medicare doesn't cover? - Correct Answer - Medicare
supplement

116. What type of coverage pays a benefit for part-time

nursing care that can be provided in a patient's home? -
Correct Answer - Home health care

117. Which of the following would be considered an activity

of daily living under a long term care policy? - Correct
Answer - bathing

118. Under a long-term care insurance policy, adult day care

coverage will provide for - Correct Answer - part time care
at a facility for elderly individuals who live at home

119. Which type of worker has Social Security benefits

available to them? - Correct Answer - Fully insured

120. The reason for social insurance is to - Correct Answer

- protect certain vulnerable segments of the population
121. How long is a person expected to be disabled in order
to receive Social Security disability benefits? - Correct
Answer - 12 months

122. According to Social Security, an individual with 6 credits

of coverage during the previous 13-quarter period is
considered to be: - Correct Answer - Currently insured

123. At what age is a surviving spouse without dependents

eligible for Social security survivor benefits? - Correct
Answer - 60 years old

124. Which statement is NOT true regarding Social Security

benefits? - Correct Answer - Benefits are designed to
replace the entire amount of the worker's earnings

125. Which Social Security status does a worker with 6

quarters of coverage during the last 13-quarter period have?
- Correct Answer - Currently insured

126. In order to be considered "currently insured" under

Social Security, an individual must be credited with: -
Correct Answer - 6 quarters of coverage during the last 13-
quarter period
127. Which of the following pieces of information is NOT
gathered during the personal financial planning process? -
Correct Answer - An individual's civic organization
memberships

128. The Human Life Value is based on - Correct Answer -

Income

129. Bob and Tom are partners in a business. If one of them

were to die, which of the following would guarantee a market
for each of their share of the business? - Correct Answer -
buy-sell agreement

130. Buy-sell agreements are typically funded by which two

insurance products? - Correct Answer - Life insurance and
disability insurance

131. People with low income can be provided with medical

assistance through which program? - Correct Answer -
Medi-Cal

132. Which entity has jurisdiction over health care coverage

providers? - Correct Answer - Department of Insurance

133. According to PPACA, what is a health benefits

exchange? - Correct Answer - An entity to which
 individuals and small businesses can have access to
affordable health coverage

134. In what order are people on the MRMIP waiting list

allowed to enrolled? - Correct Answer - Based on the date
an individual's application is received

135. According to PPACA, how long can an adult be covered

as a dependent under their parents' insurance plan? -
Correct Answer - up to age 26

136. The cost of services charged by the Health Insurance

Counseling Advocacy Program (HiCap) is - Correct
Answer - No cost

137. An insurance policy issued in California may be called a

comprehensive long-term care insurance policy if benefits
are provided for - Correct Answer - Institutional(nursing
facilities) and home care

138. How long must a policy be in force before an insurer is

prohibited from denying claims based on misstatements
made on the healthy policy application? - Correct Answer -
2 years
139. Which of the following is NOT covered by the Family
and Medical Leave Act (FMLA) - Correct Answer -
Traveling overseas with spouse

140. How is an agent's first year commission calculated for a

replacement long-term policy? - Correct Answer - Based
on the difference between new and original policy annual
premiums

141. Which of the following actions is NOT allowed by Health

insurance Counseling and Advocacy Program(HiCAP)
counselors? - Correct Answer - Charge a fee

142. MRMIP stands for - Correct Answer - Major Risk

Medical Insurance Program

143. When selling a long term care insurance rider to an

applicant, a life agent must take into consideration all of
these factors, EXCEPT - Correct Answer - Attending
physician's statement

144. According to the PPACA, an adult can be covered by a

parent's health care plan until what age? - Correct Answer
- Age 26
145. The California insurance Code allows an individual how
many days to cancel a life policy for a full-refund? - Correct
Answer - between 10 and 30 days

146. An Agent's attempt to stop the replacement of an

existing life insurance policy is known as - Correct Answer
- conservation

147. Life insurance surplus must be distributed to

policyowners at what frequency - Correct Answer -
Annually

148. What prevents a life insurance policy from being

rescinded by the insurer after being in force for two years? -
Correct Answer - Incontestability clause

149. Who does a life settlement broker represent? - Correct

Answer - Individual wanting to sell their life policy to a third
party

150. What does the term "illustration" mean when used in

the phrase "life insurance policy illustration", according to the
California Insurance Code? - Correct Answer -
Presentation of policy features that includes non-guaranteed
elements
151. Paul has an existing annuity and is sold a new one, in
which the new policy holds no greater financial benefit to him
than the existing contract. This is considered a(n) - Correct
Answer - unnecessary replacement

152. The free-look period for life insurance policyowners age

60 or older is - Correct Answer - 30 days

153. Which of the following does NOT have to be included

on life insurance policy illustrations? - Correct Answer -
Statement that all values and benefits are guaranteed

154. Why is a life insurance policy's delivery date important?

- Correct Answer - The free-look period begins on the
policy delivery date

155. Who are the parties to the master contract in a group

life insurance policy? - Correct Answer - Insurer and
employer

156. How is the cost of employer-provided group life

insurance with coverage amounts above $50,00 treated for
tax purposed - Correct Answer - taxable income to the
employee
157. Which of the following is NOT a characteristic of the
conversion privilege - Correct Answer - Employer pays the
premium for the converted policy

158. Tim was recently terminated from his employment and

opted to change his existing group term life insurance to
individual permanent life insurance. What is this process
called? - Correct Answer - Conversion

159. Which of the following describes a contributory group

insurance plan? - Correct Answer - Part of the premium is
paid by the employee

160. Employer-provided group term life insurance is exempt

from income taxation up to - Correct Answer - $50,000

161. How does underwriting differ between group life and

individual life insurance? - Correct Answer - Medical
questions must be answered on individual life insurance

162. at age 65, which of the following is available at no cost

to all individuals? - Correct Answer - Medicare part A

163. Individuals become eligible for Medicare Part A benefits

at what age? - Correct Answer - 65
164. Coverage for care received from a network provider
pays more than care received from a non-network provider
in what type of health plan? - Correct Answer - A preferred
Provider Organization (PPO)

165. An employee for XYZ Corp is injured on the job. Where

does coverage for the employee's injuries come from? -
Correct Answer - Worker's compensation

166. Which of the following services are health maintenance

organizations (HMO's) NOT required provide? - Correct
Answer - Prescription drugs

167. Who acts as the gatekeeper in a Health Maintenance

Organization (HMO)? - Correct Answer - Primary care
physician

168. Individual health insurance coverage typically excludes

injuries at an employee's workplace because? - Correct
Answer - It's covered by the state Worker's Compensation
program

169. Which of the following healthcare providers provides

both the healthcare services and healthcare coverage? -
Correct Answer - Health Maintenance Organization(HMO)
170. Medicare Part B covers - Correct Answer - Physician
expenses

171. How is a Medicare claim submitted? - Correct Answer

- Expenses are submitted to Medicare by the health provider

172. Which statement about Health Maintenance

Organization is NOT true? - Correct Answer - When a
member uses out-of-network providers, a higher monthly fee
is charged

173. Who would be most likely to submit a Medicare Part A

claim? - Correct Answer - Hospital

174. Medicare Part B has an initial enrollment period. How

many months after an individual's 65th birthday month does
this enrollment period end? - Correct Answer - 3 months

175. Which of the following is NOT a characteristic of a

preferred provider organization (PPO) - Correct Answer -
Primary physician serve as gatekeepers
176. After the annual deductible is met, Medicare Part B will
pay ___ of the remaining approved charges - Correct
Answer - 80%

177. According to the California Insurance Code, which of

the following is NOT an example of an insurable event? -
Correct Answer - An insured suffers a financial loss in the
state lottery

178. Jim is applying to become an insurance agent and has

a past misdemeanor conviction that was latter expunged due
to California Penal Code 1203.4. Which of the following
statement is correct? - Correct Answer - Jim must still
disclose the conviction on his insurance license application

179. Which of the following is NOT a primary objective of

insurance regulation? - Correct Answer - Interpret policy
provisions

180. insurance agents and brokers must make their

insurance records available to the commissioner - Correct
Answer - At all times

181. Which of the following does the California Department

of Insurance(CDI) have NO jurisdiction over? - Correct
Answer - Medicare
182. What is an insurance solicitor authorized to do? -
Correct Answer - Help an agent or broker sell insurance

183. When an insurer has met the qualifications necessary

to transact business in California, it is said to be - Correct
Answer - Admitted

184. How long must life agents keep their transaction

records? - Correct Answer - 5 years

185. The California Insurance Code has authorized

standards for names used by life insurance agents. Which of
the following, if any, are automatically acceptable for Lance
Manyon, a holder of the CLU designation? - Correct
Answer - Lance Manyon Insurance Services

186. An insurance company entitled to transact business in

California is called a(n) - Correct Answer - Admitted carrier

187. The California Insurance Code requires that an insurer

must have enough assets to cover its liabilities and for
reinsurance of all outstanding risks. To remain solvent, it
must also possess additional assets equal to what amount? -
Correct Answer - Its paid-in capital
188. Which of the following is NOT protected under the
California life and Health Guarantee Association? - Correct
Answer - Insurers

189. According to the California Insurance Code, how is the

word may interpreted? - Correct Answer - Permissive

190. Which of the following does the California Insurance

Code NOT require and insurance policy to specify? -
Correct Answer - Insurer's financial rating

191. According to the California Insurance Code, who is

responsible for submitting a life agent's appointment? -
Correct Answer - Insurer

192. According to the California Insurance Code, what term

is used to describe a fact so important it could affect the
policy premium? - Correct Answer - Materiality

193. Which of the following acts is NOT a Federal offense

committed by an insurance agent? - Correct Answer -
Misrepresentation on an insurance applicantion

194. Pete is a life agent who has misappropriated fiduciary

funds to his own use. What is Pete guilty of? - Correct
Answer - Theft
195. All of these are reasons the Commissioner may
disapprove a licensee's request to use a fictitious name
EXCEPT - Correct Answer - The name is the licensee's
actual name

196. What is required after a life agent sells an insurance

policy to an applicant without being appointed by the
insurer? - Correct Answer - Notice of appointment must be
submitted to the commissioner

197. Which of the following is NOT considered to be an

unfair claims settlement practice? - Correct Answer -
advising a claimant to hire an attorney

198. Any changes in background information that occur after

a producer application has been submitted or a license has
been issued MUST be reported to the Insurance
Commissioner within - Correct Answer - 30 days

199. In California, an insurer organized under the state laws

of Oregon is called a(n) - Correct Answer - Foreign insurer

200. What kind of annuity pays income to two annuitants

until their deaths? - Correct Answer - Joint and survivor
annuity
201. What distinguishes a deferred annuity from immediate
annuity? - Correct Answer - The time at which benefit
payments start

202. Victoria owns a life annuity and elects to receive

annuity payments monthly for the remainder of her life with
"ten years certain". Her annuity will make payments -
Correct Answer - For a minimum of 120 months and a
maximum of the remainder of her life

203. What is a participating life insurance policy? - Correct

Answer - Contract that allows the policyowner to receive a
share of surplus in the form of policy dividends

204. An insurer owned by its policyholders is called a -

Correct Answer - mutual insurer

205. Which of the following is a contract that involves one

part which indemnifies another when a loss arises from an
unknown event? - Correct Answer - Insurance policy

206. John owns an insurance policy that gives him the right
to share in the insurer's surplus. What kind of policy is this? -
Correct Answer - Participating
207. Which of the following is a characteristic of the disability
elimination period? - Correct Answer - Benefits are not
payable

208. Under a disability income insurance policy, which

criteria must be met for "bodily injury" to be classified as
accidental? - Correct Answer - This cause may be
intentional, but the result must be accidental

209. An individual covered under a disability income policy

may be eligible for a partial disability benefit if - Correct
Answer - The insured can perfom some of their job activities
on a part-time basis

210. Business Overhead Expense Insurance pays for -

Correct Answer - business expenses when a business
owner becomes disabled

211. Express power given to an agent is an agency

agreement is - Correct Answer - The authority to represent
the insurer

212. Which of these is the automatic mode of settlement for

life insurance policy proceeds? - Correct Answer - Lump-
sum
213. Jerry is an insured who understated his age on his life
insurance application, paying $12 per $1,000 of insurance
instead of $15 per $1,000. If he dies, how will the adjusted
death benefit be calculated? - Correct Answer - 12/15th of
the policy's face amount

214. Which provision will pay a portion of the death benefit

prior to the insured's death due to a serious illness? -
Correct Answer - Accelerated death benefit

215. Mike and Ike are 30 year old identical twins. Both are in
excellent health. Each brother purchases a life policy that
has a $750 annual premium. Mike buys a 10-year renewable
term policy. Ike purchases a whole life policy. All of these
following statements are true EXCEPT - Correct Answer -
Mike has the option of using his cash value to purchase a
reduced amount paid-up whole life insurance

216. Tom is shopping for a policy that covers two people and
would pay the face amount ONLY when the first person dies.
The type of life policy he is looking for is called a - Correct
Answer - Joint life policy

217. A report which is based on creditworthiness and

personal characteristics that influences an insurance
applicant's eligibility for life and health insurance is called
a(n) - Correct Answer - consumer report
218. Which of the following is NOT included in
comprehensive major medical plans? - Correct Answer -
First-dollar coverage

219. What does ESOP stand for? - Correct Answer -

Employee Stock Ownership Plan

220. Retirement plans are prevented from favoring highly

compensated employees under which government
regulation? - Correct Answer - Nondiscrimination

221. Non-deductible contributions are typically associated

with a - Correct Answer - roth IRA

222. Periodic increases in policy benefits are allowed in

which long-term care policy provision? - Correct Answer -
Inflation protection

223. Key person insurance is intended to - Correct Answer

- cover business losses due to the death of a key employee

224. Which of the following is NOT an accurate description

of Access for Infants and Mothers Program (AIM) - Correct
Answer - Only women who have private insurance plans
 with a maternity-only deductible or copayment greater than
$1,500 are eligible

225. Which of the following is NOT a valid reason to replace

an existing long-term care policy? - Correct Answer - New
policy has higher premium with fewer benefits

226. A terminated employee that has exercised the

conversion privilege is able to convert - Correct Answer -
term insurance into permanent insurance

227. Which of the following is NOT a requirement for a

terminated employee that has exercised the conversion
privilege? - Correct Answer - Provide proof of insurability

228. Which of the following does Medicare Part A NOT

provide coverage for? - Correct Answer - Doctor's services

229. Which statement regarding Medicare is true? - Correct

Answer - Benefits for diagnostic tests and X-rays performed
on an outpatient basis are provided by Part B

230. What is a common reason people purchase an annuity?

- Correct Answer - To protect against the risk of outliving
their financial resources
231. Which of the following is NOT a characteristic of
reinsurance? - Correct Answer - Increases the unearned
premium reserve

232. Christine has a health insurance policy that has been in

force beyond the incontestable period. The insurer has
discovered that a fraudulent statement was made on the
application. What would the insurer have to pay on a claim,
assuming this wasn't a guaranteed renewable policy? -
Correct Answer - Nothing

233. Reasonably necessary acts that an agent must perform

for carrying out his/her expressly authorized duties are
covered by an agent's - Correct Answer - implied authority

234. What are collateral assignments normally associated

with? - Correct Answer - Bank loans

235. An insurer can be protected from adverse selection with

which policy provision? - Correct Answer - Suicide clause

236. Which of the following types of life insurance is normally

associated with a mortgage loan? - Correct Answer -
Decreasing term
237. Which of the following types of life insurance combines
a savings element along with a flexible premium option? -
Correct Answer - Universal life

238. Which of the following is a type of insurance where an

insurer transfers loss exposures from policies written for its
insureds? - Correct Answer - Reinsurance

239. Which of the following could lower the premium of a

proposed disability income policy? - Correct Answer -
Increasing the elimination period

240. The consolidated Omnibas Budget Reconciliation Act

(COBRA) applies to employers who employ at least? -
Correct Answer - 20 Employees

241. Which of the following is NOT a required uniform

provision in individual health policies? - Correct Answer -
Change of occupation

242. What type of change can be made to a guaranteed

renewable health insurance policy? - Correct Answer - The
premium rates of the policyowner
243. Under a noncancellable health insurance policy, an
insurer can - Correct Answer - Cancel the policy for
nonpayment of premium

244. What is the term used to describe the frequency and

severity of certain illnesses and accidents? - Correct
Answer - Morbidity

245. Jim is the insured on a health insurance policy and

holds 2 jobs. If "occupation" is used to classify the risk, the
insurer will most likely classify Jim according to the
occupation that - Correct Answer - is most hazardous

246. Which of the following is NOT considered to be insurer

expenses? - Correct Answer - Policy premiums

247. Which principle is accurately described with the

statement "Insureds are entitled to recover an amount NOT
greater than the amount of their loss"? - Correct Answer -
Indemnity

248. Which of the following statements about aleatory

contracts is NOT true? - Correct Answer - The insured and
the insurer contribute equally to the contract
249. Which of the following statements correctly describes a
contract of indemnity? - Correct Answer - One party is
restored to the same financial position the party was in
before the loss occurred

250. The probability of death, listed by year, is demonstrated

in? - Correct Answer - Mortality tables

251. Which of the following describes the number of deaths

in a year compared to the number of people in a select
group? - Correct Answer - Mortality rate

252. A beneficiary receives only the death benefit earnings

in which settlement option? - Correct Answer - Interest
option

253. When does a life insurance policy's waiver of premium

take effect? - Correct Answer - Insured becomes totally
disabled

254. A life insurance policy's limit of liability would be? -

Correct Answer - The policy's face amount

255. Which of the following is a life insurance policy that

does NOT require a physical exam? - Correct Answer -
Non-medical
256. Which of the following risk classifications charges the
highest premium? - Correct Answer - Substandard

257. The Medical Information Bureau consists of? - Correct

Answer - Life and health insurance companies

258. What does the term coinsurance refer to? - Correct

Answer - After the deductible is satisfied, the percentage
paid by the insured for the remaining covered expenses

259. Medical expense policies will typically cover which of

the following? - Correct Answer - Injuries caused by
accidents

260. At what point does a self-insured group qualify for stop-

loss coverage? - Correct Answer - When claims exceed a
specified limit in a set period of time

261. Which type of risk is gambling? - Correct Answer -

Speculative risk

262. Moral hazard is described as the - Correct Answer -

increased chance of a loss because of an insured's
dishonest tendencies
263. Which of the following is a situation where there is a
possibility of either a loss or a gain? - Correct Answer -
Speculative risk

264. which of the following is NOT considered a definition of

risk? - Correct Answer - The cause of a loss

265. Which of the following would NOT be accomplished

with the purchase of an insurance policy? - Correct Answer
- Risk is eliminated

266. A hazard can be best described as - Correct Answer -

a condition that may increase the likelihood of a loss
occuring

267. Under a 10-year vesting schedule, what percentage of

employer contributions must be vested after 10 years of
service? - Correct Answer - 100%

268. Employer contributions to qualified plans are? -

Correct Answer - Tax deductible by the employer
269. Retirement plans cannot favor highly compensated
employs. The government regulation that prevents this from
happening is called? - Correct Answer - Nondiscrimination

270. What portion does an insured pay for covered

expenses under Medicare Part B after the deductible? -
Correct Answer - 20%

271. Which of the following are two examples of activities of

daily living (ADL's) used in qualifying for long-term care
benefits? - Correct Answer - Eating and dressing

272. What determines the Social Security normal retirement

age? - Correct Answer - Year in which worker was born

273. The "blackout period" affects whose benefits? -

Correct Answer - surviving spouse

274. an individual that has 40 quarters of coverage, for

Social Security purposes, is considered to be - Correct
Answer - fully insured

275. Who is NOT eligible for Social Security survivor

benefits? - Correct Answer - A deceased worker's
dependent parents of any age
276. All of these common personal uses of life insurance
EXCEPT - Correct Answer - Fund a Buy-Sell agreement

277. Which of the following is NOT an accurate description

of Access for Infants and Mothers Program (AIM)? -
Correct Answer - Only women who have private insurance
plans with a maternity0only deductible or copayment greater
than $1,500 are eligible

278. What is the purpose of the Pre-existing Condition

Insurance Plan (PCIP)? - Correct Answer - PCIP was
created by the PPACA for people rejected by private health
insurers due to pre-existing conditions

279. An insurance policy insurred in California may be called

a comprehensive long-term care insurance policy if benefits
are provided for? - Correct Answer - Institutional (nursing
facilities) and home care

280. MRMIP is a - Correct Answer - state program that

offers health coverage to California residents who are not
able to obtain coverage due to pre-existing conditions

281. Kimberly is an employee on leave under the Family and

Medical Leave Act (FMLA). What will happen to her group
 health coverage? - Correct Answer - She continues to be
enrolled during the leave

282. The cost of services changed by the Health Insurance

Counseling Advocacy Program (HiCap) is - Correct
Answer - No cost

283. What effect did the Pregnancy Discrimination Act have

on the health industry? - Correct Answer - Pregnancy must
be treated as any other medical condition

284. When selling a long term care insurance rider to an

applicant, a life agent must take into consideration all of
these factors EXCEPT - Correct Answer - Attending
physician's statement

285. Paul had an existing annuity and is sold a new one, in

which the new policy holds no greater financial benefit to him
than the existing contract. This is considered a(n) - Correct
Answer - unnecessary replacement

286. An agent's attempt to stop the replacement of an

existing life insurance policy is known as - Correct Answer
- Conservation
287. Who is issued a certificate of insurance with a group
insurance policy? - Correct Answer - Participant

288. which of the following describes a contributory group

insurance plan? - Correct Answer - Part of the premium is
paid by the employee

289. All the following are considered characteristics of group

life insurance, EXCEPT - Correct Answer - Individual
policies

290. How is the cost of employer-provided group life

insurance with coverage amounts above $50,000 treated for
tax purposed? - Correct Answer - taxable income to the
employee

291. Which of the following is NOT a characteristic of the

conversion privilege? - Correct Answer - employer pays
the premium for the converted policy

292. Medicare Part A covers what type of care? - Correct

Answer - Skilled nursing facility care

293. Which statement is TRUE regarding Workers'

Compensation coverage? - Correct Answer - Employer
 pays the entire premium for workers' Compensation
converage

294. which statement about Health Maintenance

Organizations is NOT true? - Correct Answer - When a
member uses out-of-network providers, a higher monthly fee
is charged

295. According to the California Insurance Code, what is the

maximum penalty per violation for anyone who unwillfully
commits an unfair method of competition? - Correct
Answer - 5,000

296. What is an "insurance broker" according to California

Insurance Code? - Correct Answer - A person
compensated for transacting insurance on behalf of another
person with an insurer

297. When intentional concealment is involved, what course

of action is the injured party entitled to? - Correct Answer -
Rescission of the contract

298. which of the following is NOT considered to be an unfair

claims settlement practice? - Correct Answer - Advising a
claimant to hire an attorney
299. Failure to report background changes within 30 days as
required under section 1729.2 of the California insurance
code could subject a license or applicant to - Correct
Answer - Fine, suspension, and denial

300. Anyone employed in California to assist an insurance

agent in transacting insurance is called an insurance -
Correct Answer - Solicitor

301. An insurer that has been found using higher rates

based on race, religion, or ethnicity is said to be engaging in
- Correct Answer - Unfair discrimination

302. According to the California Insurance Code, how is the

word "may" interpreted? - Correct Answer - permissive

303. What is the insurance term the State of California uses

for an insurer that is eligible to transact business in this
state? - Correct Answer - Admitted