California Life and Health Insurance Final Exam

California Life and Health Insurance
Final Exam| Questions and Answers
Medical expense premiums paid by sole proprietors or partners

are? - Correct Answer - They are fully deductible.
What is the Eligibility of a Qualified Plan? - Correct Answer -

ERISA prescribes that all full time employees who have worked
for at least 1 year and are age 21 or more must be covered in a
Qualified Plan, if offered.
If an insurance contract has "variable" features, which set of laws

does it come under? - Correct Answer - It is under the Federal
Securities Laws. They have met the definition of a security as
defined by the Federal Securities Act of 1933.
What insurance product has a flexible premium, fixed rate of

return, tax deferred growth and a death benefit equal to the cash
value? - Correct Answer - A flexible premium deferred annuity.
What is "Whole Life" insurance? - Correct Answer - It is

sometimes called "Cash Value" life insurance and is considered
to be permanent. It covers you until you die or until the policy
reaches maturity, which is normally age 100. A Whole Life policy
cannot be changed without the client's consent and it never has to
be renewed, although the premium may be paid annually or even
more frequently. Whole Life is said to have a relatively low net
cost, since it does develop a cash value after the third year that
belongs to the policyholder while living. However, upon death of
the insured, the policy will pay the "face amount" (policy limit), but
the company will keep the accumulated cash value.
Disability Income policies often do not begin paying benefits

immediately when an insured person becomes disabled. Usually,
the disability must continue for a period of time before benefits
begin. The period is known as the? - Correct Answer -
Elimination Period.
A contract where only one party, the insurer, makes an

enforceable promise is said to be? - Correct Answer - Unilateral
A survivorship life insurance policy will pay benefits when the? -

Correct Answer - The last party dies.
Speculative risk has a chance of? - Correct Answer - gain or

loss.
Nursing home coverage under Medicaid is based on? - Correct

Answer - Financial Need.
How many "classes" of insurance are in California? - Correct
Answer - There are 20 specific classes of insurance.
An insurance company that issues participating policies? -

Correct Answer - A Mutual Insurance company
Most assignments of a life-insurance policy are made in order to

protect the? - Correct Answer - The insured's personal or
business credit.
On an HMO, initial care and consultation is performed by... -

Correct Answer - The primary care physician.
Federal securities laws are enforced by? - Correct Answer - The

Securities and Exchange Commission.
Policy delivery refers to the delivery of the? - Correct Answer -

Completed insurance policy to the applicant.
The 'carry-over-deductible' applies to claims occurring within? -

Correct Answer - The last three months of the year.
In general Group Life Insurance is? - Correct Answer - The most

inexpensive type of life insurance, since it is usually sold to
employer groups on a payroll deduction plan, which lowers the
cost of administration compared to individual policies.
Ryder buys an annuity naming Gerry and Cheryl as co-

annuitants. The amount of the monthly payments during the
annuity period will be based upon? - Correct Answer - The joint
life span of both Gerry and Cheryl.
What are Nonprofit Service Organization (Insurers)? - Correct

Answer - They are organizations providing prepaid plans for
hospital, medical, and surgical expenses.
What changes on a Term Life insurance policy when an insured

exercises the "Reentry" option? - Correct Answer - Premium.
The period of time between the onset of a claim and the start of a
disability income benefits is called the? - Correct Answer -
Elimination period (Or waiting period).
What is Part B-Hospital Insurance for Medicare? - Correct

Answer - Sometimes called Supplementary Medical Insurance
(SMI) since it supplements Part A. Part B (the optional portion) is
generally designed to cover physicians' services.
An insurance company organized in Great Britain doing business

in California is considered to be? - Correct Answer - Alien
On a refund annuity, who is entitled to the refund? - Correct
Answer - The beneficiary.
What is Modified Premium and Graded Premium Whole Life? -

Correct Answer - Since level premium whole life is expensive,
many insurers offer premium discounts during the early years of a
policy to make it easier to sell.
What does an annuity provide to a retired person? - Correct

Answer - They provide protection for a retired individual from
outliving their savings.
Persons covered by Medicare are called? - Correct Answer -

Beneficiaries.
What are Stock Insurers? - Correct Answer - The individual

stockholder provides capital for the insurer. In return, they share
in any profits and any losses.
An insurance prospect wants to purchase a policy that will

accumulate the largest amount of cash by the age of 65. Which
policy would be most likely to satisfy the prospect's needs? -
Correct Answer - Endowment at age 65.
If the insured/owner of the policy does not pre-designate a
settlement option for the beneficiary prior to death, the beneficiary
may? - Correct Answer - The beneficiary may select the
settlement option upon the death of the insured.
When only one deductible applies to all family members it is

referred to as a? - Correct Answer - Family deductible.
With regard to the ethical behavior of a Life agent, which of the

following makes it easier for agents to conduct themselves in an
ethical manner? - Correct Answer - Always putting the best
interests of clients and policyholders first.
What is Limited Payment and Single Premium (Whole Life)? -

Correct Answer - These policies are exactly like Ordinary or
Stright Life policies, except, the premium is paid over a shorter
period of time.
What is an Endowment Policy? - Correct Answer - An

endowment policy is exactly the same as a Whole Life policy,
except maturity occurs at a predetermined time selected by the
insured.
Under the Legal Actions Provision, the insured cannot sue for
non-payment of a valid claim until after 60 days in order to? -
Correct Answer - Give the insurer time to investigate the claim.
What are the three types of ordinary life insurance? - Correct
Answer - W-E-T, Whole Life, Endowments, and Term.
Medicare Part B-Medical Insurance pays a percentage of? -

Correct Answer - The Medicare approved amount?
What are fraternal insurers? - Correct Answer - Fraternal benefit

societies are primarily life insurance carriers that exist as social
organization and usually engage in charitable and benevolent
activities. Fraternal insurers are distinguished by the fact that their
membership is usually drawn from those who are also members
of a lodge or fraternal organization.
To restore you financially after a claim is known as the? - Correct

Answer - The principal of indemnity.
A 46 year old is paralyzed in an accident on vacation. Disability

benefits would most likely be paid by? - Correct Answer - Social
Security.
What is the principle of indemnity? - Correct Answer - The

principle of indemnity restores the insured person, in whole or in
part, to the condition he or she enjoyed prior to the loss.
Restoration may take the form of payment, repair, or replacement.
Group health insurance normally specifies that what percentage
of those eligible must be enrolled under a noncontributory plan? -
Correct Answer - 100% in a noncontributory group plan.
A settlement option that provides for payment to be made in

regular installments of a specified amount until the principle and
interest are exhausted is? - Correct Answer - Fixed Amount
What is an accidental Injury? - Correct Answer - It is an injury

that is unintentional and unforeseen.
The Join and Survivor Life Annuity contract calls for the surviving
annuitant to receive a? - Correct Answer - Predetermined
income for life.
In the medical insurance field, the term "Coinsurance" means that

an insured person? - Correct Answer - Will have to pay a portion
of covered expenses.
A Keogh Plan is a qualified plan for? - Correct Answer - Keogh

plans are qualified plans for the self-employed and partners.
Corporate officers are not eligible. Employees of public schools
are eligible for Internal Revenue Code Sections 403b plans, also
known as Tax Sheltered Annuities.
The Misstatement of Age Provisions gives the insurance company
the right to? - Correct Answer - Adjust benefits payable.
Upon death of the annuitant during the accumulation period of a

deferred annuity, the proceeds are? - Correct Answer - The
proceeds are taxable to the beneficiary above the annuitant's cost
basis.
Most group life insurance is what type of coverage? - Correct

Answer - Level Term
A permanent life insurance that offers cash value at the lowest

premium is? - Correct Answer - A Whole Life policy.
When medical expense policies do not state specific dollar benefit

amounts, but instead base payments upon the charges for like
services in the same geographical area, benefits are based on? -
Correct Answer - the Usual, reasonable and customary.
Under HIPAA, health coverage is "portable" from one group to

another group without any new probationary period as long as
coverage was continuous with no gaps greater than ____ days? -
Correct Answer - 63 days.
What does Basic Medical Expense insurance policy cover? -

Correct Answer - It covers first dollar coverage for scheduled
benefits. It has no deductible and pays up to the limit. For
example it will pay the first $2000 but no more. It is "Major
Medical" that covers high limits, deductible and co-insurance.
The words "disability (or health) insurance" could mean any of

these five types? - Correct Answer - 1. Disability Income
Insurance.
2. Accidental Death and Dismemberment (AD&D) Insurance.
3. Medical Expense Insurance.
4. Dental Insurance.
5. Long Term Care Insurance.
What happens at age 65 if one has been receiving Social Security

Disability Income benefits? - Correct Answer - At age 65 they
are simply converted into retirement benefits instead.
Remember this about noncontributory group health insurance! -

Correct Answer - All employees must be enrolled. 100%
participation is required.
Mr. Smith is insured on a contributory Group Disability Income

plan that pays benefits of $4,000 a month. If Mr. Smith has to pay
1/4th of the monthly premium, how much of his monthly benefit
will be taxable? - Correct Answer - $3,000
An employer's requirement for hospital pre-authorization on a
group health policy is designed to? - Correct Answer - Prevent
unnecessary hospitalization.
The uncertainty about loss that exists whenever more than one
outcome is possible is called? - Correct Answer - Risk.
When switching from one Group Medical Expense policy to

another, the insurer must? - Correct Answer - Give credit for
prior creditable coverage. - Under HIPAA, Group health insurers
must give terminated employees a Certificate of Creditable
coverage, stating how much of their probationary period has
already been satisfied under their prior group contract.
A Deferred Annuity is like? - Correct Answer - It is like stashing

our money in the bank for an extended period of time and it gains
interest. At some point in the future you can start making to
withdraw the premium plus interest earned.
The annuitants cost basis on a non qualified deferred annuity is? -

Correct Answer - The amount of the premiums paid in.
What is divisible surplus? - Correct Answer - It is another name

for policy dividends. Dividends paid by a mutual insurers to their
policyholder are not taxable as the IRS considers them a return of
overpayment of premium.
Under dental insurance, crowns are considered to be? - Correct
Answer - Restorative
A sworn statement of truth is a? - Correct Answer - Warranty.
When a person takes early retirement under Social Security at

age 62, when does coverage for Medicare Part A begin? -
Correct Answer - Automatically at age 65.
Something important to remember about annuities is that you are

betting you are going to live and the insurance company is
betting? - Correct Answer - You are going to die. Annuities are
the opposite of life insurance. They do not provide death benefit
though a beneficiary would receive the premium plus interest.
Retirement benefits under Social Security are based primarily

upon? - Correct Answer - Average monthly wages.
How do insurance company's make money? - Correct Answer -

The insurance companies collect premiums to cover expenses,
profits, and the cost of expected losses.
What type of licensee represents insureds or prospective insureds
and does not represent an insurance company? - Correct
Answer - An insurance broker.
The federal law that allows a terminated employee to continue

coverage in the group is known as? - Correct Answer -
Consolidated Omnibus Budget Reconciliation Act (COBRA). -
Don't confuse 'continuation' of coverage with 'conversion' of
coverage.
The purpose of a 75% participation requirement on a contributory

Group Health plan is to? - Correct Answer - Prevent adverse
selection.
The section of a health policy that states the causes of eligible

loss under which an insured is assumed to be disabled is the? -
Correct Answer - Insuring Clause.
When must isurable interest exist for life insurance? - Correct

Answer - For life insurance, insurable interest must exist at the
time of the application of insurance, but it need not exist at the
time of the insured's death.
In property and casualty and in medical-expense insurance, the

principle of making someone "whole" again after a loss by paying
only for actual losses is called? - Correct Answer - Indemnity
Medicaid is funded by? - Correct Answer - State and federal
moneys.
What is important to remember about Paid-up additions. - Correct

Answer - It is a dividend option, not an insurance rider.
A producer has just been told by a policyholder that she is 10

years younger than was listed on the application. The producer
should? - Correct Answer - Notify the insurance company to
adjust the existing policy to the correct age.
If a client would like to have both protection and cash

accumulation which type of insurance would satisfy both needs? -
Correct Answer - Cash Value life insurance, upon death the
policy will pay face amount to the beneficiary.
What are Mutual Insurers? - Correct Answer - There are no

stockholders. In a mutal company, ownership rests with the
policyholders.
A movie production company is concerned about the possibility

that their star might become disabled due to illness and become
incapable of completing the picture. What type of insurance
should they buy? - Correct Answer - Miscellaneous.
When an insured purchases a decreasing term policy, what
decreases each year? - Correct Answer - The face amount.
A life insurance policy dividends are considered to be a return of?

- Correct Answer - a premium overcharge.
A life insurance benefit payable while the insured is still living is? -
Correct Answer - Accelerated benefits.
A single premium used to buy a Whole Life policy will pay up the
policy for? - Correct Answer - The life of the policy!
So when speaking of a "Qualified" retirement plan it is? - Correct

Answer - A "qualified" plan in connection to any sort of retirement
plan, typically follows the ERISA and is paid in pre-tax (before tax)
dollars.
Business overhead insurance will pay for which of the following? -

Correct Answer - Rent.
Which whole life non-forfeiture option provides lifetime coverage?

- Correct Answer - Reduced Paid up!
To qualify for disability income benefits from Social Security, you

must? - Correct Answer - Have fully insured status. Social
Security is available only to those who are under age 65 and who
have attained "fully insured" status, which requires beneficiaries
to have contributed to Social Security for at least 40 quarters (10
years).
What is reducing a risk? - Correct Answer - A person who

reduces a risk may practice living healthier lifestyle and attempt to
reduce the chance of illness.
If the insured is not entirely satisfied with the policy issued, she
may return it to the insurance company for voiding and receive a
refund of premium at which of the following times? - Correct
Answer - Within a specified period from the date the insured
receives the contract.
What are reciprocal insurers? - Correct Answer - Reciprocal

insurers are unincorporated groups of people providing insurance
for one another through individual indemnity agreements. Each
individual who is a member of the reciprocal is known as a
subscriber.
What does a policy assignment do? - Correct Answer - It

transfers the owner's rights under the policy to the extent
expressed in the assignment form.
What is Medical Expense Insurance? - Correct Answer - It is the
most common type of disability insurance and covers doctor and
hospital bills.
What is the most expensive type of insurance? - Correct Answer

- Endowment policies are the most expensive.
Premiums paid for individual Disability Income policies are? -

Correct Answer - Not tax deductible.
A life insurance company may contest a policy during the

"Contestable Period" for which reason? - Correct Answer - A
Material Misrepresentation!
A Prepaid dental plan is similar to? - Correct Answer - They

operate in the same manner as HMOs.
What is a Profit Sharing and (401(k) Plans)? - Correct Answer -

These plans are voluntary, and if an employee elects to
participate, amounts deferred are not included in taxable gross
income and earnings credited to the account will grow tax-free
until distributed.
The maximum probationary period on a Medicare Supplement is?

- Correct Answer - 6 months.
What is an Equity Indexed Annuity? - Correct Answer - An EIA is
a fixed annuity where both the principle and the interest are
guaranteed. This is not considered a security.
When a creditor has a temporary interest in a life insurance

policy, it is known as a? - Correct Answer - Collateral
assignment.
What is a 1035 exchange considered to be? - Correct Answer -

A 1035 exchange is very similar to a rollover of a qualified plan. if
an insured takes cash surrender of their life insurance policy or
annuity they must pay ordinary income tax on any interest they
received. The IRS will allow the insured/annuitant to defer paying
this tax if they execute a 1035 exchange.
What is insurance? - Correct Answer - Insurance is a social

device for spreading the chance of financial loss among a large
number of people.
What is the main purpose of life insurance? - Correct Answer -

To offer protection to your survivors in the event of your death.
A participating whole life insurance policy treats dividends as? -

Correct Answer - Treats dividends as a return of an
overplayment of premium.
An insurance coverage that pays a certain dollar amount while an
insured is confined in a hospital, and under which the benefits are
not tied to the amount of incurred expenses, is? - Correct
Answer - A Hospital confinement indemnity insurance.
Which contract requires a series of benefit payments be made at

specified intervals? - Correct Answer - Annuity.
An insurable risk requires a "Large Number of Homogenous

Units". Explain. - Correct Answer - The expected loss
experience of a group of exposure units cannot be predicted with
any certainty unless there are a large number of exposure units in
that group. You needs lots of people or units in a pool to be able
to predict loss.
What is an "Absolute Assignment"? - Correct Answer - It

transfers all of the policyholder's rights to another party.
In a legal contract, each party must give something of value.

Under contract law, this is referred to as? - Correct Answer -
Consideration
What is key person insurance? - Correct Answer - A "Key

Person" insurance, in which a business owner buys life insurance
on a key employee, since the business would suffer if the key
party died.
Premiums paid by sole proprietors for individual health insurance

coverage are? - Correct Answer - Fully deductible.
What is Annual Renewable Term insurance? - Correct Answer -

A policy in which the face amount stays level, but as the insured
gets older, the premium increases each year. For example, a 30-
year old male in good health could buy a $100,000 ART policy for
an annual premium of about $100. However, he would have to
renew the oplicy next year and the premium would increase to
about $110.
When a person jumps off a street car and breaks their ankle, this
injury is considered to be? - Correct Answer - Sudden and
unforeseen.
What is Level Premium Term? - Correct Answer - Since most

clients do not like their premiums to increase each year, most
insurers also offer level for a period of time, such as five years, 10
years or even 20 years.
The premium paid by your employer for qualified long-term care

insurance is? - Correct Answer - Excluded from the employee's
gross income.
A product with a flexible premium, guaranteed minimum rate of
return, tax deferred earnings and tax free death benefits is? -
Correct Answer - Universal Life
To take cash surrender on an annuity, the insurer needs the

permission of the? - Correct Answer - Owner! Remember the
owner may not actually be the annuitant.
If the client goes out of network for services on a PPO... - Correct

Answer - The amount paid will be reduced.
Explain the business use of life insurance called, "Buy and Sell
Agreements". - Correct Answer - Cross Purchase Buy/Sell
Agreements help with the orderly continuation of a business in the
event that an owner dies prematurely.
"Home Service" is another name for? - Correct Answer -

Industrial life
A producers underwriting responsibility would include which of the

following? - Correct Answer - Making sure all material facts are
included in the application. - The producer is sometimes referred
to as a 'front-line' underwriter, since they generally have personal
contact with the applicant.
A Hospital Confinement Indemnity policy will do which of the
following? - Correct Answer - Pay a state amount only if in the
hospital.
Buying Insurance does not eliminate? - Correct Answer - Risk
What are Participating Policies? - Correct Answer - Mutual

companies do not have stock. Although they are corporations,
they are owned by the policy holders. If the Board of Directors
declares a dividend, it will be paid to the policyholders. The IRS
has ruled that these dividends are return of premium already paid,
so they are not taxable. Mutual companies issue participating
policies. Dividends may never be guaranteed.
The IRS does not tax which of the three major benefit programs?
- Correct Answer - Welfare benefits, Social Security Disability
benefits, and Workers Compensation benefits are not taxed.
The life insurance policy clause that prevents an insurance

company from denying payment of a death claim after a specified
period of time is known as the? - Correct Answer -
Incontestability Clause.

Security
"Ambulatory" services are generally those that stress? - Correct
Answer - Outpatient surgery.
Does the common disaster clause protects the Insurance

Company if a lot of clients die due to the same disaster? -
Correct Answer - False. It is for cases where both the primary
beneficiary and insured die in the same accident. it is designed to
protect the interests of the contingent beneficiary.
in the property and casualty insurance field, "insurable interest"

must exist when? - Correct Answer - At the time of application
and at the time of loss.
If an individual wants to purchase a policy that would provide the

broadest coverage for medical expenses they should purchase? -
Correct Answer - Comprehensive major medical.
There is no cost basis for an annuitant when you create an? -

Correct Answer - Immediate annuity. - Be sure to know the
difference between an immediate annuity and a deferred annuity.
On an immediate annuity, you give the insurer the money and
they start paying you back with monthly payments right away.
Your cost basis is the amount of money you gave them, which
was money you already paid taxes on (after tax dollars).
The insurance business is regulated primarily by? - Correct
Answer - State laws
Employees covered under a group health policy who attain age

65 may? - Correct Answer - continue in the group with no
change in coverage.
The insured is required to submit a Notice of Claim to the

insurance company within how many days after a loss? - Correct
Answer - 20 days.
The authority of an insurance agent that is spelled out in the

written words of the agency contract between the agent and the
insurer is? - Correct Answer - Express Authority.
A producer offering a variable contract must also give his client a

disclosure document commonly known as a? - Correct Answer -
Prospectus.
The group insurance provision that prevents two insurers from

paying more than the actual loss is called? - Correct Answer -
Coordination of Benefits.
Tom O'Hara was hospitalized for two weeks and received a bill for
$2,100. He has Major Medical policy with a $100 deductible. His
coinsurance is 80/20, figured after reducing the bill by the
deductible amount. Mr. O'Hara is expected to pay a total of? -
Correct Answer - $500
What is a sickness? - Correct Answer - A sickness or disease

which first manifests itself after the effective date of the insurance
policy.
A valid 1035 Exchange of a life insurance contract must be? -

Correct Answer - On the life of the same person?
The main purpose of HIPAA is? - Correct Answer - HIPAA is to

regulate probationary periods.
What term describes the concept that the insurer and the insured
share in the cost of medical expenses, with the insurer bearing
the greater share? - Correct Answer - Coinsurance.
Is it true that the definition of total disability is standardized by all

insurers? - Correct Answer - It is false. Total disability is
specified in the individual policy.
The insured can receive the face amount of an endowment policy

if they are still living when the policy's? - Correct Answer - Cash
value equals the face amount.
The premium your employer pays for qualified long-term care
insurance is tax deductible the same as? - Correct Answer -
Medical expense insurance.
In a disability policy, an Elimination (waiting) Period Provision

refers to the period? - Correct Answer - Between the first day of
disability and the day to which the disability must continue before
it can result in the insured receiving benefits.
What does the law of large numbers allow an insurance company

to predict? - Correct Answer - The law of large numbers allows
the insurance company to predict the expected losses of a group.
The greater the number of people being insured the more
predictable the number of future losses.
Medicare Part A Hospital coverage is supported by? - Correct

Answer - Withholding and self-employment taxes.
Upon your death, if your beneficiary chooses the interest only

settlement option. The interest becomes? - Correct Answer -
The interest is taxable.
Which rider is added to a policy written on the life of a child to

make sure the premium is paid if the policyholder dies or
becomes disabled? - Correct Answer - Payor benefit rider.
Which financial services product creates an immediate estate? -
Correct Answer - Life Insurance!
Ms. Smith is covered by a non-contributory group disability

income plan where she works. The policy has a 30 day waiting
period and offers benefits of $2,000 per month. If she is off work
for 7 months due to a covered disability, she will receive? -
Correct Answer - $12,000, all of which is taxable.
Health Maintenance Organizations are not required to provide

for? - Correct Answer - Prescription drugs.
A qualified Employee Benefit plan that gives employees part

ownership in the company for which they work is known as a? -
Correct Answer - Employee Stock Ownership plan.
The purpose of a Grace Period provision is to? - Correct Answer

- protect the policyholder against unintentional lapse.
A collateral assignment on a life insurance policy is? - Correct

Answer - Is a partial assignment of some rights to a creditor.
A client is 65 today. His LP 65 will reach maturity? - Correct

Answer - At age 100. He just finished paying his premiums at 65.
Individuals covered under Medicare are called? - Correct
Answer - Beneficiaries.
Under Dental insurance, crowns are considered to be? - Correct

Answer - Restorative.
Distributions that are taken from a Medical Savings Account

(MSA) that are used to purchase a new sport utility vehicle are? -
Correct Answer - Taxable as ordinary income plus a 15%
penalty.
A Certificate of Insurance issued to an employee covered by a

Group Medical Expense plan must contain? - Correct Answer - A
summary of the policy coverages and provisions.
If a life-insurance policy does not permit the policyholder to

change the beneficiary, the beneficiary is? - Correct Answer -
Irrevocable.
When must insurable interest exist for property and casaulty

insurance? - Correct Answer - For property and casualty
insurance, insurable interest must exist at the time of loss.
Does cancer and dread disease policies follow the principle of

indemnity? - Correct Answer - No they do not follow the rule of
indemnity and you can have as many as you like and will pay in
addition to one another.
To make the insured "whole" again after a loss is referring to? -

Correct Answer - Principle of Indemnity
In general what conversion benefit is available to a terminated

employee under a group life insurance policy? - Correct Answer
- The employee may convert to an individual permanent life policy
within 31 days without submitting evidence of insurability.
PPOs were started by insurance companies as? - Correct

Answer - as a means of competing with HMOs.
Physicians and Surgeons services are covered by? - Correct

Answer - Medicare Part B for an additional premium.
Risk is defined as? - Correct Answer - An uncertainty of loss.
What is the contractual element that consists of "Offer" and the

"Acceptance"? - Correct Answer - Agreement
Most people buy deferred annuities to? - Correct Answer - Earn

tax deferred income to supplement retirement.
The waiting period before a qualified person can receive Social
Security disability benefits is? - Correct Answer - Five months.
Carlos Rivera is involved in a two-car accident in which he is

disabled, and his passenger and the other driver are injured.
Which would most likely be covered by his Disability Income
policy? - Correct Answer - His lost income.
Because an insurer writes the policy language and the insured

has little or no control over the content, any ambiguity in the
wording is usually resolved in favor of the insured. Because the
design and wording of a policy are in the hands of the insurer,
insurance policies are said to be? - Correct Answer - Contracts
of adhesion
The Legal Actions Provision of a disability policy requires that? -

Correct Answer - An insured waits at least 60 days after
submission of Proof of Loss before initiating a lawsuit.
Individual disability insurance policies are required to contain 12

mandatory provisions in order to protect the consumer. What are
they? - Correct Answer - Entire Contract, Time Limit on Certain
Defenses, Grace Period, Reinstatement, Notice of Claim, Claim
Forms, Proof of Loss, Time payment of claims, Payment of
Claims, Physical Exams and Autopsy, Legal Actions, Change of
Beneficiary.
A Single Premium Annuity is also called a? - Correct Answer -
Immediate Annuity!
A guaranteed renewable Health insurance policy. - Correct

Answer - May be renewed at the insured's option up to a certain
specified age.
Distributions taken from a tax-sheltered annuity (TSA) are? -

Correct Answer - Taxable as ordinary income in the year of the
distribution.
For tax purposes, all Modified Endowment Contracts (MEC)

issued to an insured will be considered to be one Modified
Endowment Contract if issued? - Correct Answer - Within 12
months.
Which annuity guarantees payments for a specific period of time

even if the annuitant dies? - Correct Answer - Period certain!
What is Part C-Medicare Advantage Plans for Medicare? -

Correct Answer - Seniors who elect to enroll in an Advantage
Plan are entitled to the same benefits that HMOs and PPOs
provide to their youngest subscribers.
The owner of a business is insured under a $100,000 Key

Employee Life policy that contains a Double Indemnity clause and
a Suicide Clause. The business has paid the annual premium of
$2,000. Six months after the inception date of the policy, the
insured commits suicide. The insurance company will pay the
beneficiary? - Correct Answer - $2,000 - The premium paid.
The Workers Compensation Second Injury Fun requires? -

Correct Answer - Both the first and second injury to be job
related in order for the fund to pay.
In health insurance policies, a "Preexisting Condition" is one

which an? - Correct Answer - Applicant received medical advice
or treatment for prior to applying.
An insurable risk does not cover everything and has the

"Exclusion of Catastrophic Perils". Explain. - Correct Answer -
Certain types of perils do not lend themselves to prediction. Such
perils, when they cause losses, do not establish a pattern of
predictability that can be relied upon for future predictions of
anticipated loss. These perils are uscually excluded from
coverage, such as war, nuclear risk and floods.
Which claims condition makes health insurance claims easier to

process? - Correct Answer - Assignment of benefits.
Which policy provides the greatest amount of protection for an
insured's premium dollar as well as some cash accumulation? -
Correct Answer - Whole life
In CA, LTC policies must? - Correct Answer - Offer inflation

protection.
What is the amount the customer pays for the coverage provided?
- Correct Answer - The premium.
What does the Elimination Period do on a Disability Income

policy? - Correct Answer - The waiting (or elimination) period
starts at the onset of a disability. It is selected by the insured
when they buy the policy, and the longer it is, the lower the
premium will be. It is like a deductible, except it is state in time
rather than in dollars. It is not retro-active.
Treatment of overseas emergency medical care for senior citizens

is? - Correct Answer - Covered by some Medicare Supplements.
Which of the following terms is the definition of the potential for

loss? - Correct Answer - Risk
The policy provision that prevents an insurance company from

altering its agreement with a policyholder by referring to
documents or other items not contained in the policy is called the?
- Correct Answer - Entire Contract Provision.
Preexisting conditions are defined as? - Correct Answer -

Sickness you had prior to the effective date of the policy.
An individual is covered under a group Dental Expense plan and

needs to have some bridgework done. They are looking in their
policy to see if it will be covered. Bridgework is also known as? -
Correct Answer - Prosthodontics.
On most qualified retirement plans, such as traditional IRAs,

distributions must begin no later than age 70 1/2. If they don't, an
excise tax of what percent applies? - Correct Answer - 50%
excise tax is levied on the amount that should have been
distributed, but wasn't.
Which type of Life insurance utilizes the 'level premium concept'?

- Correct Answer - Traditional Whole Life.
An item that is not part of the life insurance policy on paper is? -
Correct Answer - The Conditional Receipt
In the simplest way, "Annuities" are considered to be? - Correct

Answer - The opposite of life insurance. (Annuities are unique in
that they pay only if you live, not if you die!)
An employer's requirement for hospital pre-authorization on a
group health policy is designed to? - Correct Answer - Prevent
unnecessary hospitalization.
The Cost of Living Rider is tied to the cost of living index and? -
Correct Answer - Increases coverage automatically based on the
index, but the premium increases.
What is a presumptive disability? - Correct Answer - It is a

disability that prevents them from ever working again and they will
no longer have to go to the insurer's doctor every 6 months to
prove that they are still totally disabled. (Disability Income policy)
Life insurance creates an immediate estate upon death of the

insured. Annuities on the other hand do what with an estate? -
Correct Answer - Annuities liquidate an estate over a persons
life span.
A Disability Income policy has a 7 day waiting period. If the

insured is disabled for 15 days, how many days of benefits will the
policy pay? - Correct Answer - Eight.
In California, a Life Agent represents the? - Correct Answer -

Insurance company.
Nursing Home care under Medicare is? - Correct Answer -
Extremely limited.
If an insured is disabled and receiving benefits under a disability

policy that provides payment to the insured for at least two years,
at what intervals must the insured provide notice of continuing
loss? - Correct Answer - Six months.
The reduced paid-up non-forfeiture option will create a new policy

in what way? - Correct Answer - It will be a single premium
whole life policy with a reduced face amount.
A reinstatement of a lapsed Life insurance policy is not based on?

- Correct Answer - Current Age. - The future premiums will be
based on the insured's original age.
The Guaranteed Insurability rider does? - Correct Answer - It

allows the insured to increase coverage at certain intervals
without a physical.
What is Captive Insurers? - Correct Answer - Captive insurers

are formed to serve the insurance needs of their stockholders
while avoiding the uncertainties related to commercial insurance
availability and costs. A captive insurer's stock is controlled by
one interest or a group of related interests who hve direct
involvement and influence over the company's operations. For
example, an association of self insured corporations may
purchase reinsurance from a captive insurer that they control.
Most captive insurers are non-admitted alien corporations.
A woman has inherited a sum of money. She is age 60 and

desires to purchase an annuity that will appreciate with market
and economic conditions. What type of annuity should she
consider? - Correct Answer - Variable! (Very Risky)
An annuity is not used to create a? - Correct Answer - They are

not used to create an estate for the insured's family. They are to
provide income to the annuitant, typically for retirement.
A 30-year mortgage obligation is best protected by what type of

insurance? - Correct Answer - Decreasing Term
What type of Health Insurance policy would you buy to provide

you with funds for retraining if a valued employee becomes
disabled? - Correct Answer - Key Person Disability.
A "morale" hazard is? - Correct Answer - Is a careless client. A

"moral" hazard on the other hand is someone who lies.
Producers usually use two methods to calculate how much

insurance coverage a client needs, what are these two types of
methods? - Correct Answer - The "Needs Approach" and the
"Human Life Value Approach".
Under the California Insurance Code, anyone who diverts or

appropriates customer funds while acting in a fiduciary capacity to
their own use is guilty of? - Correct Answer - Theft.
The face amount of a Credit Life policy is limited by? - Correct

Answer - The amount of the loan.
Health coverage becomes effective when the? - Correct Answer

- First premium has been paid and the application has been
approved.
Some important employees or officers of a company have a

profound impact on the companies economic health. Death of
such a person can result in interruption of the business, loss of
sales and revenue, and an expensive search for a replacement.
To protect against this situation companies may use? - Correct
Answer - Key person life insurance.
In group health insurance, the contract is between the? - Correct

Answer - Employer and the insurance company.
The doctrine of adhesion states? - Correct Answer - That any
ambiguity in an insurance contract is always construed against
the party who wrote it, the insurer.
When the primary beneficiary predeceases the insured, the

proceeds are paid to the? - Correct Answer - Contingent
beneficiary.
Medicare's hospital insurance benefits may also pay benefits for?

- Correct Answer - Home health care.
An insurance company domiciled in another state but transacting

business in California is known as a? - Correct Answer - Foreign
company.
What is the Needs Approach of determining life insurance? -

Correct Answer - The producer simply determines the needs of
the individual client and presents a plan that will meet these
needs. Needs would include burial expense, family maintenance,
children's education and continuing income for the surviving
spouse.
A Major Medical Expense policy has a $100 per family, per year
deductible and 80/20 co-insurance. Three claims occur during the
year as follows: The first claim was for $200, the second claim
was for $400 and the third claim was for $500. How much will the
insurer pay? - Correct Answer - $800
When a dentist uses mechanical devices to straighten teeth, it is

known as? - Correct Answer - Orthodontics.
A Medical Expense policy covers? - Correct Answer - Hospital

and doctor bills.
The principle use of an annuity is to? - Correct Answer - Arrange

an income for old age.
Consideration is defines as? - Correct Answer - The exchange of

values.
What is Continuous Premium - Straight Life (Whole Life)? -

Correct Answer - premium payments are based upon client's
(original) age at issue and can never be changed. Whole Life
policies must accumulate a cash value after the third year in
force. A Whole Life policy can never be canceled or changed by
the insurance company. Policies reach maturity at age 100.
Which settlement option might provide payments that exceed the

proceeds of the policy and the interest earned? - Correct Answer
- Life annuity.
Clients of an HMO are known as? - Correct Answer -
Subscribers.
A life insurance rider added to cover a child is usually what "Type"

of insurance? - Correct Answer - Level Term - This is typically a
"Family RIder" to a Whole Life policy.
In regards to Medicare Supplements insurance companies may? -

Correct Answer - Sell only the "core" plan if they choose. They
must always sell the A plan though. They can not offer any plan
above A without A as well.
What is a Market Value Adjusted Annuity? - Correct Answer -

This type of variable annuity where the policy owner commits a
sum of money for a certain period of time, usually one year, two
years or three years.
The purpose of the Time Limit on Certain Defenses Provisions is

to limit the time during which the? - Correct Answer - Insurance
company can challenge the contract because of material
misstatements in the application.
Taxes, if required, on the accumulated interest in the cash value

account of a whole life policy are due? - Correct Answer - Upon
cash surrender.
Benefits paid to participants in a Medical Savings Account (MSA)
are? - Correct Answer - Not taxable.
Be careful not to confuse 'concealment' with fraud. - Correct

Answer - The failure to disclose a material fact that a party knows
and ought to communicate is defined as 'concealment', not fraud.
What is "Excess and Surplus Lines" (insurance)? - Correct

Answer - Occassionally, it may be difficult to place a risk in the
normal marketplace. If the risk is very large or unusual in nature,
typical carriers may be unwilling to assume it. For some special
risks, the only market may be with specialty carriers. Such
business must be placed through a licensed excess or surplus
lines broker, who will attempt to place it with an unauthorized
carrier located in another state or out of the country (such as
Lloyd's of London).
The Pre-existing Condition Exclusion in disability insurance is

designed to protect the insurance company from? - Correct
Answer - Adverse selection.
In 1990, Mr. Smith bought a Life insurance policy on his 6 year

old son, Jimmy, naming himself the beneficiary. Now that Jim is
18 years old, Mr. Smith may transfer all rights of ownership in the
policy to him be executing a? - Correct Answer - Absolute
assignment.
When does a Part A Medicare claim begin? - Correct Answer -
Date of hospitalization.
Agents who sell Long Term Care (LTC) must meet which of the
following LTC continuing education requirements in California? -
Correct Answer - 8 hours every year for the first 4 years, then 8
hours each licensing period.
A Certificate of Insurance issued to an employee covered by a

Group Medical Expense plan must contain? - Correct Answer - A
summary of the policy coverages and provisions.
Medicare Part B does not cover? - Correct Answer -

Hospitalization.
Explain the business use of life insurance called "Key Person Life
Insurance". - Correct Answer - This type of coverage protects a
business against loss of its most valuable assets - a key
employee.
Consideration is? - Correct Answer - Consideration is defined as

an exchange of values and is required in order for a contract to be
legally enforceable. It is not required to be equal and is required
when the contract is entered into, not at the time of loss.
A group of individuals who band together to assume risks, where
each individual is responsible only for the share of the risk they
assumed is known as? - Correct Answer - Lloyd's Association
In which company may policyholders receive policy dividends

when there is a profit? - Correct Answer - Mutual
A specialized dental service that provides for treatment of missing

teeth is known as? - Correct Answer - Prosthodontics.
An agent's obligation to act in an insurance applicant's insured's

best interest, based on the faith and trust placed on the agent by
members of the insurance-buying public, is known as: - Correct
Answer - A fiduciary duty.
A pure life annuity is also known as a? - Correct Answer - Life

income annuity.
Signatures of each party are not necessary for the formation of a

legally valid contract. (True or False?) - Correct Answer - True.
Signatures are NOT required for a legally valid contract.
On a Group Medical Expense policy, what provision allows the

insured to collect in full while avoiding over insurance? - Correct
Answer - Coordination of Benefits.
Which statement is usually true about the benefits of a group
Short-term Disability Income policy? - Correct Answer - They are
not payable for accidents covered by Workers Compensation.
If the beneficiary of a life policy wants the proceeds to be paid out

in equal monthly payments, they should select which settlement
option? - Correct Answer - Fixed Amount
A person who has contributed to Social Security 6 out of the last

13 quarter has what status? - Correct Answer - Currently
insured.
What is a SIMPLE plan? (Savings Incentive Match Plan for

Employees)? - Correct Answer - A simplified retirement plan for
small employers (less than 100 employees) who do not have
another type of retirement plan to offer their employees. This plan
may be structured as an IRA or a 401(k) and allows for elective
contributions by employers.
What does the word term mean? - Correct Answer - The word
means time and term insurance is written for temporary periods of
time.
Why would an annuitant consider making a 1035 exchange to
another contract issued by the same insurer? - Correct Answer -
The new contract has a higher interest rate.
A licensed agent must notify the commissioner of a change of

address? - Correct Answer - Immediately
Rates in a Guaranteed Renewable Health Insurance policy can

be changed by? - Correct Answer - Rates may be changed by
class only.
When the insured lists a group of beneficiaries it is known as a? -

Correct Answer - A class designation.
The 1940 McCarran Act states? - Correct Answer - The federal

government has the right to regulate the business of insurance,
but only to the extent that it is not regulated by state law.
In disability insurance, several riders are available for insured to

purchase. The "return of premium" rider? - Correct Answer -
Provides for the return of a percentage of premiums paid at
periodic intervals, provided the insured remains disabled.
When a corporation enters into an agreement with their

shareholders to buy their shares back in the event of their death,
it is known as an? - Correct Answer - Buy-Sell Agreement.
An insured's individual health insurance policy was reinstated
effective June 1. On June 8 the insured became ill, was
hospitalized and returned to work June 15. The insured's policy
would provide? - Correct Answer - No benefits. Health insurance
policies contain a 10-day probationary period upon reinstatement.
It only applies to sickness, not accidents. Thus, any sickness
occurring within the first 10 days of reinstated policy would not be
covered since the insurer considers it to be pre-existing.
The Social Security Rider is utilized to? - Correct Answer -

Eliminate confusion and allow the insured to receive Social
Security Benefits?
If an Agent wants to surrender their insurance license to the

Commissioner, but it is in the possession of their employer, what
is the procedure? - Correct Answer - Send written notice to the
Commissioner requesting cancellation.
If the client exercises the extended term nonforfeiture option it

provides? - Correct Answer - Paid-up term coverage equal to
that of the original policy.
Charles Adams advised his insurance company of a loss covered

by his Major Medical policy. If the insurance company does not
provide Mr. Adams with the proper claim forms within 15 days, he
has the right to? - Correct Answer - Submit a description of the
loss, in his own words, as Proof of Loss. (If the insurer does not
comply with a condition in the policy, then they have waived it and
the insured may submit Proof of Loss in any form.
Something that may increase the seriousness of a loss if loss

occurs, or that increases the likelihood that a loss will occur is
called? - Correct Answer - A Hazard.
Withholding of facts that should be included in an application for

insurance is called? - Correct Answer - Concealment
A set amount that some Managed Care Plans (HMOs) charge for
each doctor visit is known as? - Correct Answer - A co-payment.
What are some of the early-withdrawal penalties? - Correct

Answer - 10% IRS tax! Annuities should be considered a long
term investment!
Clients of a HMO are known as? - Correct Answer - Subscribers.
Comprehensive Medical Expense insurance combines which of

the following coverage in one policy? - Correct Answer - Basic
Hospital/Surgical and Major Medical
What is a speculative risk? - Correct Answer - A speculative risk
is a risk situation that offers the opportunity for gain as well as the
possibility of loss. This type of risk is not supposed to be insured
and should not be covered.
On an Adjustable Whole Life policy adjusting the premium will? -

Correct Answer - Also adjust the face amount.
A cancelable policy of health insurance may be cancelled? -

Correct Answer - By either the insurer or the insured.
A Medical Expense policy covers? - Correct Answer - Hospital

and doctor bills.
Clients of an HMO are known as? - Correct Answer -

Subscribers.
A policy available to business owners that will provide payment

for normal business expenses in the event that the owner is
disabled, best describes? - Correct Answer - Business Overhead
Expense. This is often purchased by small employers to pay the
ongoing business expenses (such as payroll) in the event the
owner of the business becomes disabled.
List the types of Insurers - Correct Answer - Stock Insurers,

Mutual Insurers, Nonprofit Service Organization, Reciprocal
Insurers, Fraternal Insurers, Reinsurance, Captive Insurers,
Excess and Surplus Lines, Government Insurers.
Mutual insurers don't offer a dividend option on life insurance

policies that yield a - Correct Answer - Extended term option.
What is a Join Life (First-to-Die) Policy? - Correct Answer -

These are Whole Life contracts written with two or more persons
as the named insured. Most commony the policy is issued on two
lives, with the insured amount payable on the death of the first
insured to die.
How do you figure out the persons taxable cost basis for an
annuity? - Correct Answer - Divide the cost basis by their
lifespan. (???)
Statements made by an applicant for a life insurance policy that

the applicant says are true to the best of his or her knowledge are
referred to as? - Correct Answer - Representations
Nursing home care for those who are not sick, but cannot take
care of themselves is provided by? - Correct Answer - Medicaid.
What is the Human Life Value Approach of determining life

insurance? - Correct Answer - This is based on the earning
potential of the insured projected over a period of future years. in
this method, the producer calculates what a family would lose in
income by the death of the principal wage earner and presents a
plan that would reimburse that loss.
What is the waiver of premium rider? - Correct Answer - It is a

rider that can be added to any policy, that will pay the insureds
premium after a waiting period if the insured becomes totally
disabled. (I believe this is for Term insurance.)
An insurance company owned by it's policy holders, who receive

a return of unused premiums in the form of policy dividends, is
a(n)? - Correct Answer - Mutual company
What is the term that means an insurance contract is dependent

upon chance or uncertain outcome? - Correct Answer - Aleatory.
Insurance is a means of? - Correct Answer - Transferring risk
What is the Non-Descrimination clause in a Qualified plan? -

Correct Answer - ERISA specifies that all workers must be
treated alike, that is, the employer must contribute the same
percentage for lower paid workers that is contributed for higher
paid workers, such as managers.
On a Group Medical Expense policy, what provision allows the
insured to collect in full while avoiding over insurance? - Correct
Answer - Coordination of Benefits.
To take cash surrender on an annuity, the insurer needs the

permission of the? - Correct Answer - Owner of the annuity.
What is Part A-Hospital Insurance for Medicare? - Correct

Answer - Covers hospitalization, post-hospital skilled nursing
care, home-health care, hospice care, and blood transfusions.
To avoid over insurance and reinforce the Principle of Indemnity

insurers will often? - Correct Answer - Limit Disability Income
coverage amounts.
What is a company owned by the policyholders? - Correct

Answer - A Mutual Company
If the insured understated his age and the error is discovered after
the insured's death, the insurance company will? - Correct
Answer - Pay the amount the premium would have purchased at
the correct age.
If a provider for a family is receiving Social Security disability

benefits and dies, the survivors? - Correct Answer - May be
eligible for a portion of benefits.
An insured died during the grace period of her life insurance
policy and had not paid the required annual premium. The
insurance company is obligated to pay? - Correct Answer - The
face amount of the policy less any earned premiums.
The princple of indemnity states that? - Correct Answer - You

cannot recover more than you lost.
The main purpose of HIPAA is? - Correct Answer - To waive the

probationary period when switching group coverages. HIPAA
mainly addresses the portability of your Group Medical Expense
coverage from one employer to another.
What is a Nonparticipating Policy? - Correct Answer - Stock

companies issue nonparticipating policies, meaning that company
profits may be returned to the stockholders (who own the
company) in the form of dividends. The policyholders are not
entitled to share in the company profits. Dividends paid to
stockholders of a stock company are considered to be ordinary
income and are taxable.
On term life insurance, the re-entry option is contingent upon? -

Correct Answer - Being able to pass a physical exam.
What does the common exclusion of Pre-existing Conditions
clause do? - Correct Answer - It protects the insurance company
from applicants who do not tell the truth to the best of their
knowledge regarding prior health problems on their application.
Even so if the applicant tells the truth the under writer may add an
impairment rider or rate up the premium to cover the additional
conditions. Once the probationary period is over, all pre-existing
conditions (whether mentioned on the application or not) are
covered, unless the insured can be proven to have deliberately
attempted to deceive the insurer (fraud), in which case there
would still be no coverage.
An individual is enrolled in a group dental expense policy, which

pays claims based on what is usual, reasonable and customary.
This means - Correct Answer - the policy benefits will vary
depending on the cost of the services provided in various
geographic locations.
In order to cover children that are born or adopted after a family

policy is issues? - Correct Answer - Children are automatically
provided with term insurance after a short waiting period upon
birth or adoption. No notification need be provided to the insurer.
An insured on a tight budget who has a Whole Life insurance

policy written by a mutual insurer should select which dividend
option? - Correct Answer - Reduction of premiums
An insurer incorporated under the laws of the state in which it is
operating is considered to be a(n): - Correct Answer - Domestic
Insurer
When does the authority to transact insurance by an agent

become effective? - Correct Answer - When the "Notice of
Appointment" is signed by the insurer.
Dental Expense policies generally have a deductible that does not

typically apply to? - Correct Answer - Preventative Care
What is the main reason annuities are purchased? - Correct

Answer - They are purchased for retirement purposes.
What is the authority of an insurance agent, which is spelled out

in the written words in their contract with the Insurance Company
they represent? - Correct Answer - Express authority
What is a Simplified Employee Pension (SEPs)? - Correct

Answer - Is an Employer sponsored IRAs. This type of plan offers
corporations the opportunity to establish an employer-funded
pension plan for eligible employees. With the exception of
annuities, IRAs may not be funded by life insurance products.
A premium that is due could be deducted from a claims payment

if? - Correct Answer - The loss occurred during the grace period.
Distributions taken from a tax-sheltered annuity (TSA) are? -
Correct Answer - Taxable as ordinary income in the year of the
distribution. - Tax sheltered annuities (or TSAs) are qualified
retirement plans that are available to employees of public schools,
certain types of hospitals and non-profit charities on a payroll
deduction basis. They are also known as IRC 403b plans and are
similar to 401k plans.
An applicant for a disability insurance policy has a heart condition

of which he is unaware and therefore he answers "no" to the
question pertaining to heart problems. His answer is considered
to be a? - Correct Answer - Representation. The client told the
truth to the best of his knowledge, which is defined as a
"representation."
What is a moral hazard? - Correct Answer - Any situation that

creates a desire or tendency to create a loss on purpose in order
to collect from the insurance company.
What is a Fixed Annuity product? - Correct Answer - This type of

annuity has a fixed rate of return, usually a minimum of around
4%.
What is the name of the type of insurer consisting of an

unincorporated group of persons who provide insurance among
themselves through an inter-exchange of indemnity agreements?
- Correct Answer - Reciprocal insurer
On a medical expense policy, the requirement that the insured

seek a second surgical opinion prior to having surgery will result
in? - Correct Answer - Fewer claims.
If an insured buys the "Return of Premium RIder" and dies, the

policy will pay the beneficiary? - Correct Answer - The face
amount plus all premiums paid up until the date of death.
The gap between the Basic Plan and Major Medical in a

Comprehensive Major Medical policy is known as a? - Correct
Answer - Corridor deductible.
Occupational coverage provides coverage? - Correct Answer -

On and off the job.
What is a non-qualified plan? - Correct Answer - Retirement

plans that do not meet the requirements of the ERISA are known
as non-qualified plans.
On an A&H policy there are two types of clauses for accidental

injury. Explain both "accidental means" and "accidental bodily
injury". - Correct Answer - If a policy has an "accidental means"
clause, no coverage will apply if the insured meant to do whatever
it was that caused his injury. And the broader "accidental bodily
injury" clause, states that accidental injuries are covered whether
the insured meant to engage in the activity or not. (As I
understand it "means" basically only covers if something outside
of you causes the accident.)
Changing provisions in a policy is not the responsbilities of an? -

Correct Answer - Agent.
What does HICAP stand for? - Correct Answer - It stands for the
Health Insurance Counseling and Advocacy Program. It is a
nonprofit, volunteer program to assist seniors.
A conditional receipt is? - Correct Answer - It is an interim

insuring agreement.
What are the three major sources of insurers? - Correct Answer

- Private Commercial Insurers, Private Commercial Service
Organizations, And the United States Government.
An insurance company may defer payment for how long when an

insured wishes to cash in the policy? - Correct Answer - They
may defer the payment for as long as six months.
Under HIPAA, health coverage is "portable" from one group to

another group without any new probationary period as long as
coverage was continuous with no gaps greater than ____ days. -
An insurable risk is one that has "Economic Hardship". Explain. -

Correct Answer - The nature of the loss must be such that an
economic hardship would occur should the loss occur. The nature
of the loss must be such that it is worthwhile to incur the premium
cost to cover potential loss.
Something to remember about Dental Coverage that is important

is? - Correct Answer - Insurers are reluctant to write individual
dental coverage since you might wait to buy it just before you
need treatment.
Life insurance has been primariyl regulated by? - Correct

Answer - By state law, not federal law.
What does Vesting mean? (In a Qualified Plan?) - Correct

Answer - Vesting means ownership. All Qualified Plans must
establish a vesting schedule where all employer contributions to
the plan will belong to the employee no later than the end of the
sixth year (three years for some plans).
A life insurance policy that will always provide enough protection

to pay off your mortgage is known as? - Correct Answer -
Mortgage redemption.
A claim filed under an individual Accident and health policy might
be denied if the loss was do to? - Correct Answer - Alcohol and
Narcotics
When a party appears to have given up a particular right by acts

or by inaction that another party has relied on, the legal basis for
asserting the original right may have been lost. This is known as
the legal doctrine of? - Correct Answer - Estoppel
An individual health policy is considered reinstated after how

many days following the request if the policyholder has not heard
from the insurer? - Correct Answer - 45 days.
An independent agent represents? - Correct Answer - An

independent agent represents more than one insurance company.
Are Annuities used to create an estate? - Correct Answer - No!

Life insurance is used to create an estate. Annuities are the
opposite, and are used to liquidate an estate by paying the
beneficiary monthly payments over a period of time, usually for
life.
Coverage under Medicaid for custodial care in a nursing home is

based upon? - Correct Answer - Low income and asset levels.
An insurable risk require a "Loss Must Be Uncertain". Explain. -
Correct Answer - Uncertainty arises out of NOT knowing what is
going to happen, or being able to predict what is going to happen
to the individual exposure unit.
What non-forfeiture option provides continuing cash-value

buildup? - Correct Answer - Reduced Paid-up
What is a Refund Life Annuities (Cash or Installments)? - Correct

Answer - This option has very little risk since the insurance
company promises to make a refund of the balance of your
account if you die before you collect it all.
What is Field Underwriting? - Correct Answer - The underwriter's

principal functions are to review applications to eliminate those
that do not meet underwriting standards.
Which statement about a typical Suicide Clause in a life insurance

policy is true? - Correct Answer - Suicide is excluded for a
specific period of years and covered thereafter.
What is an employee's evidence of participation in a group life

plan? - Correct Answer - The Certificate of Insurance.
The 'black-out' period under Social Security starts when the

youngest child is age? - Correct Answer - 16 years old.
Under Internal Revenue Code Section 1035, an annuity may be
exchange for? - Correct Answer - For another annuity written on
the same annuitant with a different insurer.
What is a re-entry option on term insurance? - Correct Answer -

A common feature where if the insured passes a physical exam at
the end of the term in order to qualify for a lower premium rate.
List three types of dividend options! - Correct Answer - Cash,

Paid up additions, Apply to premium.
What is a pure risk? - Correct Answer - A pure risk is a risk with

the possibility that a certain event will occur, for example an
accident or sickness. However, it is the purpose of the insurance
to restore the insured to his or her original position. Take make
them whole, there is no profit.
The Entire Contract Provision in a health policy states? - Correct

Answer - The policy, with attached endorsements and other
papers, constitutes the Entire Contract between the policyholder
and the insurance company.
Which Life insurance settlement option takes into account the life
span of the beneficiary? - Correct Answer - Life income option.
What is a Variable Annuity product? - Correct Answer - The
clients funds are invested into the stock market directly and the
insurance company maintains a separate investment account for
that purpose. The annuitant bears all the investment risk in this
type or product and it is considered a security.
Failure to discolse a known fact or facts when filling out an

insurance application is an act of? - Correct Answer -
Concealment
Which of the following is true about a presumptive disability? -

Correct Answer - It is a disability that generally will cause the
insured to no longer have to prove total disability.
If an individual becomes totally and permanently disabled, Social

Security Disability benefits may begin after? - Correct Answer -
Five Months.
On a tax deferred annuity, distributions must begin by age? -

Correct Answer - No age limit applies if you want to keep
accumulating.
A Whole Life policy is being kept in force by the waiver of

premium rider. What effect does this have on the cash value
accumulation? - Correct Answer - NONE - This rider will go into
effect if the insured becomes disabled and is unable to pay their
premium. This rider will not pay the premium for the insured, it will
waive the premium while the insured is disabled.
What is convertible term insurance? - Correct Answer - Most

level and decreasing term policies are convertible at any time to
Whole Life insurance without a physical exam.
If the insured needs to be paid for a loss what must they do? -
Correct Answer - They must notify the insurer by making a claim.
Once the insurer receives notice of a claim from the insured, the
insurer is responsible for? - Correct Answer - Sending the
insured claim forms.
Which statement about the Time Limit on Certain Defenses

Provision is true? - Correct Answer - It may prohibit an insurance
company from denying a claim on the basis of misstatements in
an application.
Medical Information Bureau (MIB) members must report? -

Correct Answer - Health conditions discovered during the
underwriting process.
What is risk? - Correct Answer - Risk is the possibilty

(uncertainty) that a loss might occur and is the reason people buy
insurance.
What type of policy has both a Capital and Principal sum? -
Correct Answer - Accidental Death and Dismemberment (AD&D)
insurance.
The purpose of the Coinsurance Clause in Major Medical policies

is to? - Correct Answer - Motivate the insured to minimize
unnecessary care.
Hospital Indemnity policies do not follow the principle of? -

Correct Answer - Indemnity. They are limited health type
insurance policies that do not follow the principle of indemnity and
instead pay out a certain amount. In this case maybe $250 a day
for hospital stay.
What are the four ways to manage risks? - Correct Answer - A

risk may be retained, avoided, reduced, or transferred.
What is a Life Income Annuity with Period Certain? - Correct

Answer - Sometimes called an Annuity Certain or a Period
Certain Annuity, this annuity guarantees benefits will be paid for a
fixed minimum period of time to be selected by the annuitant
when he/she annuitizes, say 10 years. if the annuitant were to die
during the period certain, the beneficiary would receive what the
annuitant would have received had he/she lived until the end of
the period certain.
Insurable risks must involve only? - Correct Answer - The
possbility of LOSS only.
The primary purpose of the Coordination of Benefits Provision

found in group Medical Expense coverage is to? - Correct
Answer - Prevent the claimant from profiting from an injury or
sickness.
Who is capable of taking cash surrender on an annuity? - Correct

Answer - The contract owner.
An annuitant wants to be paid for as long as he/she lives at age

60. What are some of the insurance company factors that project
payments? - Correct Answer - 1. The expected life span!
2. The amount of money accumulated.
3. The type of pay-out option selected (fixed or variable pay-out)
If the annuitant lives longer than the projected life span, he/she
will recover more than the value of the account.
On Health insurance, the actuarial table used by insurers to

determine product benefits and pricing is known as the? - Correct
Answer - Morbidity table. - Morbidity tables are to health
insurance, as mortality tables are to Life insurance.
Remember this about Long Term Care policies. - Correct
Answer - Long Term Care policies do not place limit on the care
provided to individuals.
A rider added to a life policy to create coverage for your entire

family is the? - Correct Answer - Family Rider
The Continuing education requirement needed to sell long term

care is? - Correct Answer - The standard Continuing Education
(which includes 8 hours for LTC).
The extra premium that is charged for the waiver of premium rider
does not? - Correct Answer - Does not apply to the policy's cash
value.
On a fixed annuity, the interest rate that is paid the first year,
which could decline thereafter is known as the? - Correct
Answer - Current interest rate
Which statement about group insurance is true? - Correct

Answer - Group insurance is essentially reduced-cost mass
protection.
Security.
Medical Savings Accounts (MSAs) are available to small business

employees and self employed individuals who have? - Correct
Answer - High deductible health insurance.
What is Government Insurers? - Correct Answer - The federal

government provides life and health insurance through various
sources. The federal government has offered a variety of mility life
insurance plans as well as Medicare for seniors, which is part of
Social Security. This is typically because private insurance
policies exclude catastrophic risks.
A husband and wife are co-annuitants and decide to select the

"joint life" payout option upon annuitization. They will receive
monthly annuity payments from the insurer until? - Correct
Answer - Either the husband or wife dies.
A client wants to name his children as beneficiaries to receive

proceeds equally, but if one dies, he wants their interest
distributed equally between survivors. He should name them? -
Correct Answer - Per capita. - Per capita is latin for each head.
Could an agent use any name for use without approval of the
commissioner? - Correct Answer - No. All business names to be
used must be filed with the Commissioner for approval.
A life insurance rider that provides Whole Life on the primary

insured and Term Life on the insured's spouse and children is
the? - Correct Answer - Family Rider
The purpose of the Illegal Occupation Provision is to? - Correct

Answer - The Illegal Occupation Provision is like an exclusion, in
that it states that no coverage applies if the insured is injured
during the commission of a felony.
An agent is a representative of? - Correct Answer - The

insurance company.
An agent's license is considered to be inactive if? - Correct

Answer - They hold no appointments by an insurer.
What is a Pure (Straight) Life Annuity. - Correct Answer - This

option pays the annuitant for as long as he/she lives, but the
payments cease entirely upon death with no refund to survivors.
(This is the most-risky option!)
Some agents supervise all of an insurance company's business

within a specified territory. These agents appoint other agents,
supervise their business, and receive an overriding commission
on that business. What is the formal name of this type of agent: -
Correct Answer - A General Agent
Group disability income benefits are usually? - Correct Answer -

Based on a percentage of the employee's gross income.
The free-look when replacing Long Term Care insurance and

Medicare Supplements is? - Correct Answer - 30 days.
A Family deductible is commonly defined as? - Correct Answer -

A deductible that applies to the family and once satisfied no
longer applies during the year.
Medicare Supplements are not approved by? - Correct Answer -

Medicare.
What is avoiding a risk? - Correct Answer - A person might avoid

a risk by staying home rather than drive somewhere for example.
Which type of life insurance offers only pure protection? - Correct

Answer - Term
The insuring agreement or clause in a Life insurance policy
contains everything but how to change the? - Correct Answer -
Beneficiary.
What is a main eligibility requirement for Social Security Disability

Income benefits? - Correct Answer - Fully insured status.
The life span of the "beneficiary" of a life insurance policy is

needed to? (Think annuities) - Correct Answer - The life span is
needed to determine the amount of monthly payments that will be
taxable if the life income option is selected.
Mr. Shulin owns a 30-Pay life policy that he purchased at age 30.
The cash value will equal the face amount of the policy when he
reaches the age of? - Correct Answer - 100! (Remember whole
life typically reaches face value at age 100 even if the premium
was payed on day one!)
Parents of children ages 6 to 8 are considering IRAs for them.

What would you advise them? - Correct Answer - To consider
alternative investments, since IRAs are only for those with
earnings and their spouses.
A producer selling these variable contracts must have? - Correct

Answer - A federal National Association of Securities Dealers
(NASD) license (either series 6 or series 7) in addition to his state
life insurance license.
An insurer who provides for all of its liabilities and purchases

reinsurance on all of its outstanding risks is considered to be? -
Correct Answer - Insolvent.
Many Major Medical policies include a provision whereby when

expenses reach a certain dollar amount, the insured no longer
shares in the cost of expenses, the insurer pays 100% of
remaining covered charges. This is referred to as the? - Correct
Answer - Stop-loss limit.
Which policy is generally used to accumulate funds for education?

- Correct Answer - Endowment!
If the insured's age was overstated at the time of life-insurance

policy was purchased and the error is discovered on the death of
the insured, the insurance company will? - Correct Answer -
Provide the additional insurance in the amount that has been
purchased by the additional premium.
A property and casualty insurance agent frequently has the

authority to provide temporary insurance coverage known as a? -
Correct Answer - Binder
Dividends paid to a policyholders of a Mutual insurance company
are? - Correct Answer - Not taxable.
Which Disability Income policy would have the highest premium?

- Correct Answer - 14 day waiting period / 5 year benefit period.
Under a Guaranteed Renewable disability policy, the insurance

company may? - Correct Answer - Change premium rates if all
other policies in that class within that state are changed.
Income payments made from an annuity are? - Correct Answer -

Only partly subject to federal taxation. - When the annuitant
annuitizes the payments they receive are made up of two things;
1) their investment (cost basis) which is returned tax free and 2)
the accumulated interest which is taxable. The annuitants cost
basis is spread over their life span and is not taxable. Anything
received over and above their cost basis is interest and is taxable
as ordinary income.
The type of annuity in which the values grow according to the

performance of the separate account, and in which benefits may
fluctuate according to market performance, is called? - Correct
Answer - A variable annuity.
Which type of insurance policy would provide the greatest amount
of protection for a temporary period which an insured will have
limited financial resources? - Correct Answer - Term!
On Adjustable Whole Life, by adjusting the premium it will also

adjust what? - Correct Answer - The face amount.
An agent licensed for Life insurance in 2009 mostly sells Long

Term Care. She needs how many hours of Continuing Education
in 2009? - Correct Answer - 24 hours each two years of
continuing education, of which must be 8 hours of Long Term
Care specific hours of credits.
What is a Self-Employed Plan? (HR-10 or Keogh Plans)? -

Correct Answer - This type of retirement plan is also known as
an HR-10 plan.
In Medicare, Physicians and Surgeons services are covered by? -

Correct Answer - Medicare Part B for an additional premium.
An insured has a Whole Life policy with a $100,000 face amount

and a $40,000 cash value. The insured's policy lapses, which
non-forfeiture option should they select to provide lifetime
coverage? - Correct Answer - Reduced Paid-Up
Another form of business life insurance is "Executive Bonuses". -
Correct Answer - Some employers use life insurance products to
fund-deferred compensation plans which enables highly paid
corporate employees to defer current income, such as an
executive bonus, and have it paid at a later date when the
employee may be in a lower tax bracket.
If an insurance company refuses to renew an individual health

policy, the policy would be considered? - Correct Answer -
Optionally renewable.
Which statement about the optional Change of Occupation

Provision in a Disability Income policy is true? - Correct Answer -
It sets forth the rights and obligations of the insurance company
and the insured in the event the insured engages in a more
hazardous or less-hazardous occupation.
What is true about the requirements regarding HIV exams? -

Correct Answer - Prior informed written consent is required from
the applicant.
Annuity values are determined by multiplying the number of

accumulation units by the value of units in the separate account in
a? - Correct Answer - Variable annuity.
Medicare Part A-Hospital Insurance will provide coverage for
which of the following? - Correct Answer - Skilled nursing care.
What is decreasing term? - Correct Answer - A policy in which

the premium stays the same each year but the amount of
coverage decreases, usually on a straight-line basis.
When an insured holds more than one occupation, and

occupation is used to classify the risk, the insurer will generally
classify the insured according to the occupation? - Correct
Answer - That is most hazardous.
When a property insurance applicant makes a statement on an

application that becomes part of the contract and includes a
promies by the insured, the statement is considered to be a? -
Correct Answer - Warranty
What is insurable interest? - Correct Answer - To be insurable, a

risk must involve the possibility of loss only, and not gain, and the
applicant must have a legitimate interest in the preservation of the
life or property insured.
The waiting period on a Disability Income policy is defined as? -

Correct Answer - The time period from onset of injury until
benefits begin.
An insurable risk requires a "Loss Must Be Ascertainable".
Explain. - Correct Answer - The insurer must be able to place a
monetary value on the loss.
Life Paid-Up at age 65 is an example of? - Correct Answer -

Limited-Pay life policy.
Who or what can be the beneficiary of a life insurance policy? -

Correct Answer - Mostly any entity can be named as a
beneficiary of a life insurance policy.
California Life agents must renew their license? - Correct

Answer - Prior to the expiration of your license.
Statements provided by an applicant for insurance are considered

to be? - Correct Answer - Representations
Concurrent review is defined as - Correct Answer - the

assignment of a caseworker to an ongoing claim.
As opposed to life insurance, an annuity is designed to protect an

individual from the financial risk of? - Correct Answer - Outliving
one's resources.
Group health insurance for terminated employees is convertible to
individual coverage without a physical exam for? - Correct
Answer - 31 days.
A cancelable health insurance policy can be cancelled by? -

Correct Answer - The insured or the insurer.
The law of large numbers states that? - Correct Answer - The

predictions become more accurate as the number of units being
considered increases.
Cash Surrender is available on an annuity in which period? -

Correct Answer - During the accumulation period.
What is the pooling concept use in insurance? - Correct Answer

- By looking at groups of individuals, rather than the individuals
themselves, to make predictions is called the pooling concept and
is an accurate way of predicting potential losses.
In Partial Disability benefits payment would be based on? -

Correct Answer - Payment would be based on loss of time,
income or function.
A customer who wants his medical bills paid if he breaks his leg
should buy? - Correct Answer - Medical Expense policy
Medicare Part A Hospital coverage is supported by? - Correct
Answer - Withholding and self-employment taxes.
The extra premium that is charged for the Accidental Death

Benefit rider? - Correct Answer - Does not apply to the policy's
cash value.
An annuitant that chooses Life Income option means? - Correct

Answer - All payments cease when the annuitant dies and there
is no beneficiary. The insurance company keeps any monies
remaining in the account. This is a risky option.
Which annuity pay out option will pay the highest monthly
payment for life of the annuitant? - Correct Answer - Life Income
A client concerned about paying future medical bills would buy

which type of health insurance? - Correct Answer - Medical
expense. Medical Expense covers your hospital and doctors bills
if you become sick or injured.
Which type of life insurance does not permit changes in death

benefits? - Correct Answer - Modified whole life.
Medicare Part A-Hospital Insurance provides coverage for
institutional psychiatric care for 190 days per? - Correct Answer -
Lifetime.
The amount of annuity benefits included in the value of the estate

of a deceased "life income" annuitant is? - Correct Answer -
Zero
A Whole Life policy furnishes a form of permanent protection

because it never has to be? - Correct Answer - Renewed or
converted
Under HIPAA, the maximum probationary period for pregnancy on

Group Health insurance is? - Correct Answer - 0 months.
What is concealment? - Correct Answer - Concealment is the

failure to discole any material fact.
The premium paid for group life insurance is tax deductible for the
employer? (True or False?) - Correct Answer - True
What is a Flexible Premium Deferred Annuity (FPDAs)? - Correct

Answer - This simply means that the annuitant has purchased a
Deferred Annuity and has the option to pay in whatever amount
he chooses, or nothing at all!
An insurance contract requires that the insured have the legal
capacity to make a contract and is known as having? - Correct
Answer - Competent parties
What is a retained risk? - Correct Answer - A risk is retained

when a person decides to assume financial responsibility for
certain events. The deductible amount on a health insurance
policy may be seen as a way the insured retains some portion of
the risk.
When benefits are paid to a policy holder covered under a

Hospital Expense policy, the policy is considered to be? - Correct
Answer - Reimbursement. - In true insurance, unlike HMO's, the
benefits are paid directly to the insured.
Are premiums of any policy type deductible by an individual for

income tax purposes? - Correct Answer - Premiums paid for
individual life insurance policies are not tax deductible.
Pre-existing conditions are referred to in which required disability

policy provisions? - Correct Answer - Time Limit on Certain
Defenses. It is another name for incontestability clause. If you
failed to mention a pre-existing condition on your application, a
claim occurring in the first two years may be contested.
In order to avoid withholding tax applied to a qualified plan
rollover an individual should do which of the following? - Correct
Answer - Make a trustee to trustee roll over. - Mandatory income
tax withholding of 20% applies to most taxable distributions paid
directly to you in a lump sum from employer retirement plans
regardless of whether you plan to roll over the taxable amount
within 60 days. The only way this 20% withholding can be avoided
is by executing a trustee to trustee direct rollover.
Supreme court decisions and case law have contributed to the

regulation of the insurance business which has set a? - Correct
Answer - Legal Precedent
The provision in a life insurance policy that provides protection

against unintentional policy lapse is known as? - Correct Answer
- The Automatic Premium Loan Provision.
Seth Brown is covered by a non-contributory group disability

income policy and becomes eligible for $2000 a month in benefits.
Which of the following is true? - Correct Answer - 100% of the
premium is tax deductible by the employer, and 100% of the
benefits are taxable to Seth. (Non-contributory means, employer
pays 100% of the premium.)
Once classified as a Modified Endowment Contract (MEC), the

contract will remain that way? - Correct Answer - Forever
What organization is responsible for enforcing the Employees
Retirement Income Security Act of 1974 (ERISA) pension plan
requirements? - Correct Answer - The Department of Labor.
What is "Term" insurance? - Correct Answer - Term is

considered to be temporary, in that it usually purchased for a
particular temporary need, such as to cover a bank loan or a
mortgage. Although term is the most inexpensive type to buy at
issue, over the long run, its net cost may be higher than Whole
Life since there is no cash value to offset the cost.
A client who contributes to a 403B TSA on a payroll deduction

basis may? - Correct Answer - Also make non-deductible
contributions to a ROTH IRA up to a specified limits. - Any one
with earned income may contribute to an IRA regardless of
wheather or not they are covered by another qualified plan.
However, contributions to a ROTH IRA are NEVER tax
deductible.
An insurance company can change a provision that is required to

be in the policy by the Uniform Provision Law in which situation? -
Correct Answer - Only if it benefits the policyholder.
The IRS levies a 10% IRS early withdraw penalty but will waive
the fee for many reasons such as disability, medical expenses,
education, first time home buyer. But it will not waive the fee for? -
Correct Answer - Bankruptcy
How many days must an insured wait after submission of Proof of
Loss before taking legal action against an insurance company? -
What is a profit sharing plan? - Correct Answer - A profit sharing

plan is an arrangement by an employer in which employees share
in profits of the business. To be a qualified plan, a predetermined
formula must be used to determine contributions to the plan
benefits to be distributed once a participant attains a specified
age, becomes ill or disabled, severs employment, retires, or dies.
In Health Maintenance Organizations, the use of a primary care

physician or PCP is common as part of? - Correct Answer - The
gatekeeper system.
Group health insurance for terminated employees is convertible to

individual coverage without a physical exam for? - Correct
Answer - 31 days.
What is a Qualified Plan? - Correct Answer - A retirement plan

that meets the criteria of the Employees Retirement Income
Security Act (ERISA) of 1974.
A beneficiary designation of "To all my children" is considered to

be by? - Correct Answer - By Class
Group Disability Income insurance is designed to cover
employees only while? - Correct Answer - they are off the job, so
the coverage is considered to be 'non-occupational' in nature.
Employees who are injured on the job are covered by Workers
Compensation insurance, which is a type of Casualty insurance.
What is Fraud defined as? - Correct Answer - Fraud is defined

as the "intent to deceive" and is very hard to prove.
A revocable beneficiary has? - Correct Answer - Has no vested

interest in the policy.
Upon death of an annuitant, proceeds payable to a beneficiary

are? - Correct Answer - Taxed as ordinary income above the
annuitant's invested capital.
The Time of Payment Claims Provision requires that an insurance

company pay Disability Income benefits no less frequently than? -
Correct Answer - Monthly
If the interest on a policy loan is not repaid? - Correct Answer - It

will be added to the amount of the loan outstanding.
Alice has Group Health Insurance with Alpha company where she
works. Her husband Ben has Health Insurance with Bravo
Company where he works. Both policies provide dependents
coverage. If Ben gets sick? - Correct Answer - Bravo is primary,
Alpha is secondary.
A health insurance claim occurs on May 30, but the policy lapses
on June 1. If the claim is turned in on June 8th, the company will?
- Correct Answer - Pay the claim.
Which statement best describes the tax responsibilities under a

Business Overhead policy? - Correct Answer - Premiums are
deductible, benefits are taxed.
Under contract law, the actions by a party may intentionally and

voluntariuly give up a known right. When this occurs, it is known
as: - Correct Answer - A Waiver.
Third party administrators do everything but? - Correct Answer -

Provide coverage. They are basically doing everything an
insurance company would, without the insurance. Marketing,
Underwriting, Claims processing, etc.
Occupational coverage provides coverage? - Correct Answer -

This is self employed insurance for on the job and off the job
coverage.
When an Agent pleads 'nolo contendere' to a violation of the
insurance code it means? - Correct Answer - He is leaving the
determination of guilt up to the opinion of the Commissioner.
Which Annuity will start paying the annuitant a monthly payment

right away for the rest of their life? - Correct Answer - Immediate
To qualify as disabled under the provisions of Social Security,

your disability must be expected to last at least? - Correct
Answer - 12 months.
Death of an annuity owner may create a tax burden for the

beneficiary. How can the spouse of an annuity owner, as
beneficiary, avoid this burden? - Correct Answer - They may
continue the contract and defer taxes.
When an employer and an employee share the cost of the

employee's Life insurance, it is known as? - Correct Answer - A
split dollar plan.
If a person is transacting insurance without a license they are

guilty of which of the following? - Correct Answer - A
misdemeanor.
To be eligible for benefits under the Waiver of Premium Provision,
the insured must? - Correct Answer - Be under a physician's
care.
Under the Uniform Provisions Law, which of the following

provisions is optional for an A&H policy? - Correct Answer -
Change of occupation.
Are accelerated benefits treated as a policy loan? - Correct

Answer - No they are not treated as a policy loan.
If a life insurance policy is purchased and fails to meet the seven-

pay test, it is considered by the IRS as a(n)? - Correct Answer -
Modified Endowment Contract (MEC)?
On individual Disability income benefits are? - Correct Answer -

Not taxable, coverage is based upon the insured's net income.
Premiums paid by the individual are not tax deductible.
You might consider buying Disability Income insurance to cover

occupational injury because? - Correct Answer - Your Workers'
Compensation benefits may be inadequate.
A client pays $4,000 in premiums on his $50,000 Whole Life

policy that has a cash value of $5,000. If he takes cash surrender,
his tax implication will be? - Correct Answer - $1,000 ordinary
income.
What is the agreement between the insurer and the insured

called? - Correct Answer - It is called a contract of insurance, or
a policy.
On a disability income policy with the typical definition of total

disability, you are still considered to be disabled if, after 2 years? -
Correct Answer - You cannot perform any job you are suited to
do by experience, education or training.
When an insured sells or assigns their life insurance policy to

another party in order to get money to pay for terminal expenses,
it is known as (an):? - Correct Answer - Viatical settlement!
An accounting measure used to determine an annuity owner's

interest in the separate account of a variable annuity before
payments begin is called a/an? - Correct Answer - Accumulation
unit. - Variable annuity values are calculated based on the value
of units. During the accumulation period these units are referred
to as accumulations units.
What is a life insurance policy dividend classified as? - Correct

Answer - The policy's share of the company's excess funds or
divisible surplus.
An element NOT part of a legal contract is? - Correct Answer -
Waiver and Estoppel
In every LTC policy that provides home care benefits, eligibility for
home care benefits require that the insured be unable to perform
at least ____ Activities of Daily Living (ADLs) or have an
impairment of cognitive ability. - Correct Answer - Two.
A binder may be? - Correct Answer - Oral or written
24 Hour Coverage provides "seamless" occupational and non-

occupational coverage? - Correct Answer - True - It means it
covers 24 hours a day.
An annuity with a 10 year period certain will pay? - Correct

Answer - Minimum 10 years / maximum lifetime.
An employee covered by a group life policy elects to cover 3

dependents as well. How many certificates of insurance must the
group insurer issue? - Correct Answer - One certificate.
On Medical expense insurance, when only one deductible applies

to all family members injured in the same accident, it is called a
________ deductible? - Correct Answer - Common accident
Nursing home care for those who are not sick, but cannot take
care of themselves is provided by? - Correct Answer - Medicaid.
When a corporation establishes a contributory group term

contract, what percentage test must be met for participation? -
Correct Answer - 75%
What is a "Collateral Assignment"? - Correct Answer - A

collateral assignment occurs when the insured pledges his policy
proceeds to the bank for a loan. This is seldom done anymore,
since interest rates on life insurance loans are generally lower
than those on bank loans.
In general when does coverage become effective in health

insurance? - Correct Answer - When the insurance company
accepts the risk.
Protection against unintentional lapse of a Life policy is afforded

by? - Correct Answer - An automatic-premium loan
If an insurance company fails to notify an applicant that a

reinstatement application was not approved, insurance will be
placed back in force within how many days? - Correct Answer -
45 days.
What are the two ways a risk is transferred? - Correct Answer -
The first way is if a person is injured and sues the negligent party.
That party is having the burdon of the risk involved put on them.
The second way is through use of insurance where the risk or
loss is transferred to the insurance company.
What are some other personal uses of life insurance beyond

protection for survivors? - Correct Answer - Life insurance
includes, creation of an estate, cash accumulation, liquidity,
estate conservation and viatical settlements.
What does Disability Income insurance cover? - Correct Answer

- It protects against loss of your net earned income in case you
become sick or injured and cannot work.
A client covered by Group Health insurance needs kidney

dialysis. Which coverage is primary? - Correct Answer - The
group plan.
Medicaid is funded by - Correct Answer - State and federal

moneys.
What does a "free look" provision in a life insurance policy allow?

- Correct Answer - The insured to return their policy, within a
specified number of days, and receive a full refund.
What are the tax implications when an annuitant elects to take a
cash surrender of a deferred annuity during the accumulation
period at age 56? - Correct Answer - Only the interest is taxable
as ordinary income, but the interest is also subject to an IRS 10%
early withdrawal penalty.
At what age is a person eligible for Medicare? - Correct Answer -

They must be at least age 65.
An insured has Major Medical policy that calls for a flat $2,000
deductible and 80/20 co-insurance. If the insured incurs medical
expenses of $6,000, he/she would receive benefits of? - Correct
Answer - $3,200
Under Social Security, you are considered to be totally disabled if

you cannot perform any job and your disability is expected to last
at least ____ months, or to result in death. - Correct Answer - 12
months.
What is reinsurance? - Correct Answer - Reinsurance is a form

of insurance between insurers. It occurs when an insurer (the re-
insurer) agrees to accept all or a portion of a risk covered by
another insurer.
What is "Endowment" insurance? - Correct Answer - The

endowment policies are similar to Whole Life, except they mature
(endow) at a predetermined age that is selected by the client
upon purchase. For example, an Endowment at 65 (E65)
purchased with a face amount of $100,00 at original age 30, will
pay $100,000 upon the death of the insured prior to age 65.
However, if the client lives to age 65, the policy will endow and
pay the client $100,000, which can be used for retirement
purposes. Endowments are often used for children's educational
purposes.

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California Life and Health Insurance Final Exam

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California Life and Health Insurance

Final Exam| Questions and Answers

Medical expense premiums paid by sole proprietors or partners

What is the Eligibility of a Qualified Plan? - Correct Answer -

If an insurance contract has "variable" features, which set of laws

What insurance product has a flexible premium, fixed rate of

What is "Whole Life" insurance? - Correct Answer - It is

Disability Income policies often do not begin paying benefits

A contract where only one party, the insurer, makes an

A survivorship life insurance policy will pay benefits when the? -

Speculative risk has a chance of? - Correct Answer - gain or

Nursing home coverage under Medicaid is based on? - Correct

An insurance company that issues participating policies? -

Most assignments of a life-insurance policy are made in order to

On an HMO, initial care and consultation is performed by... -

Federal securities laws are enforced by? - Correct Answer - The

Policy delivery refers to the delivery of the? - Correct Answer -

The 'carry-over-deductible' applies to claims occurring within? -

In general Group Life Insurance is? - Correct Answer - The most

Ryder buys an annuity naming Gerry and Cheryl as co-

What are Nonprofit Service Organization (Insurers)? - Correct

What changes on a Term Life insurance policy when an insured

What is Part B-Hospital Insurance for Medicare? - Correct

An insurance company organized in Great Britain doing business

What is Modified Premium and Graded Premium Whole Life? -

What does an annuity provide to a retired person? - Correct

Persons covered by Medicare are called? - Correct Answer -

What are Stock Insurers? - Correct Answer - The individual

An insurance prospect wants to purchase a policy that will

When only one deductible applies to all family members it is

With regard to the ethical behavior of a Life agent, which of the

What is Limited Payment and Single Premium (Whole Life)? -

What is an Endowment Policy? - Correct Answer - An

Medicare Part B-Medical Insurance pays a percentage of? -

What are fraternal insurers? - Correct Answer - Fraternal benefit

To restore you financially after a claim is known as the? - Correct

A 46 year old is paralyzed in an accident on vacation. Disability

What is the principle of indemnity? - Correct Answer - The

A settlement option that provides for payment to be made in

What is an accidental Injury? - Correct Answer - It is an injury

In the medical insurance field, the term "Coinsurance" means that

A Keogh Plan is a qualified plan for? - Correct Answer - Keogh

Upon death of the annuitant during the accumulation period of a

Most group life insurance is what type of coverage? - Correct

A permanent life insurance that offers cash value at the lowest

When medical expense policies do not state specific dollar benefit

Under HIPAA, health coverage is "portable" from one group to

What does Basic Medical Expense insurance policy cover? -

The words "disability (or health) insurance" could mean any of

What happens at age 65 if one has been receiving Social Security

Remember this about noncontributory group health insurance! -

Mr. Smith is insured on a contributory Group Disability Income

When switching from one Group Medical Expense policy to

A Deferred Annuity is like? - Correct Answer - It is like stashing

The annuitants cost basis on a non qualified deferred annuity is? -

What is divisible surplus? - Correct Answer - It is another name

A sworn statement of truth is a? - Correct Answer - Warranty.

When a person takes early retirement under Social Security at

Something important to remember about annuities is that you are

Retirement benefits under Social Security are based primarily

How do insurance company's make money? - Correct Answer -

The federal law that allows a terminated employee to continue

The purpose of a 75% participation requirement on a contributory

The section of a health policy that states the causes of eligible