If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following?
a)Adjust the benefit in accordance with the in
a)Adjust the benefit in accordance with the increased risk
A certified insurance consultant can
a)Work as a consultant for the Commissioner.
b)Examine insurance contracts and make recommendations for a fee.
c)Decide whether a claim is valid.
d)Solicit insurance contracts.
b)Examine insurance contracts and make recommendations for a fee
What documentation grants express authority to an agent?
a)Agent's insurance license
b)Fiduciary contract
c)State provisions
d)Agent's contract with the principal
d)Agent's contract with the principal
What is the maximum number of employees that a small employer can have?
a)10
b)25
c)50
d)100
c)50
What is an important feature of a dental expense insurance plan that is NOT typically found in a medical expense insurance plan?
a)A broad coverage area
b)A low monthly premium
c)Low cost deductibles
d)Diagnostic and preventive care
d)Diagnostic and preventive care
In insurance, an offer is usually made when
a)The insurer approves the application and receives the initial premium.
b)The agent hands the policy to the policyholder.
c)An agent explains a policy to a potential applicant.
d)An applicant submits an applica
d)An applicant submits an application to the insurer.
The rider that may be added to a Disability Income policy that allows for an increase in the benefit amount under certain conditions is called
a)Double Indemnity.
b)Residual Benefits.
c)Cost of Living (COLA).
d)Waiver of Premium.
c)Cost of Living (COLA).
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
a)Executive bonus.
b)Key person policy.
c)Fraternal association.
d)Aleatory contract.
a)Executive bonus
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
a)Any type of insurance policy may be used.
b)The employer pays a bonus to a selected employee to fund the policy.
c)It is considered a nonqualif
d)The policy is owned by the company.
Every small employer carrier must actively offer to small employers at least how many health benefit plans?
a)One plan
b)2 plans
c)3 plans
d)There is no minimum.
b)2 plans
Variable Whole Life insurance is based on what type of premium?a)Flexible
b)Graded
c)Level fixed
d)Increasing
c)Level fixed
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to
a)Name another annuitant.
b)Live at least to his life expectancy.
c)Die before his life expectancy.
d)N
b)Live at least to his life expectancy.
What happens if a deferred annuity is surrendered before the annuitization period?
a)The insurer can only apply the surrender value toward another annuity.
b)Deferred annuities cannot be surrendered prior to the annuitization period.
c)The owner will rece
c)The owner will receive the surrender value of the annuity.
A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic
c)Usual, customary and reasonable.
What is the maximum amount of controlled business allowed, in relation to the total premiums written to the general public?
a)3 times
b)5 times
c)9 times
d)2 times
c)9 times
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
a)Universal Life - Option B
b)Equity Indexed Universal Life
c)Variable Universal Life
d)Universal Life - Option A
d)Universal Life - Option A
Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no
Which of the following is NOT a characteristic or a service of an HMO plan?
a)Providing care on an outpatient basis
b)Contracting with insurance companies
c)Providing free annual checkups
d)Encouraging early treatment
b)Contracting with insurance companies
All of the following would be different between qualified and nonqualified retirement plans EXCEPT
a)IRS approval requirements
b)Taxation on accumulation
c)Taxation of withdrawals
d)Taxation of contributions
b)Taxation on accumulation
Employer health plans must provide primary coverage for individuals with end-stage renal disease before Medicare becomes primary for how many months?
a)12 months
b)24 months
c)30 months
d)36 months
c)30 months
Which of the following statements concerning buy-sell agreements is true?
a)Benefits received are considered income taxable.
b)Buy-sell agreements pay in the event of a medical emergency.
c)Buy-sell agreements are normally funded with a life insurance pol
c)Buy-sell agreements are normally funded with a life insurance policy.
An insured does not have to pay coinsurance or deductibles on a full-series mouth x-ray, but does have to pay a deductible to get his cavities filled. Which dental plan does he have?
a)Limited
b)Procedure-based
c)Scheduled
d)Nonscheduled
d)Nonscheduled
Diagnostic and preventative services are generally not subject to coinsurance or deductibles in nonscheduled plans, but basic and major services are.
All of the following are business uses of life insurance EXCEPT
a)Funding against financial loss caused by the death of a key employee.
b)Funding business continuation agreements.
c)Funding against company's general financial loss.
d)Compensating executiv
c)Funding against company's general financial loss.
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?
a)Contingent
b)Aleatory
c)Unilateral
d)Conditional
d)Conditional
A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
Which types of insurance companies marketing long-term care insurance coverage must establish procedures to assure that any comparison of policies by its agents will be fair and accurate?
a)Any company that uses any form of media to market policies that y
d)Every company is required to establish marketing procedures.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
a)Required a premium increase each renewal.
b)Built cash values.
c)Required proof
a)Required a premium increase each renewal.
How many continuing education hours related to regulations or ethics are producers required to complete per reporting period?
a)2 hours
b)3 hours
c)6 hours
d)10 hours
b)3 hours
The insured's health policy only pays for medical costs related to accidents. Which of the following types of policies does the insured have?
a)Restrictive
b)Accidental Death
c)Comprehensive
d)Accident-only
d)Accident-only
The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT
a)Individual tax deduction for premiums paid.
b)Right to appeal.
c)No lifetime dollar limits.
d)Coverage for preventive benefits.
a)Individual tax deduction for premiums paid.
All of the following statements are true of a Combination Dental Plan EXCEPT
a)It covers diagnostic and preventive care on the usual, customary, and reasonable basis.
b)It uses a fee schedule for other dental services.
c)It is also known as the Superimpos
c)It is also known as the Superimposed Plan.
A combination plan is basically a combination of the scheduled and nonscheduled plan. The combination plan covers diagnostic and preventive services on the usual, customary and reasonable basis but uses a fee s
Why should the producer personally deliver the policy when the first premium has already been paid?
a)To find out how the family has been doing since the initial presentation
b)To make sure the policy is not stolen or lost
c)To help the insured understand
c)To help the insured understand all aspects of the contract
It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.
Kevin and Nancy are married; Kevin is the primary breadwinner and has a health insurance policy that covers both him and his wife. Nancy has an illness that requires significant medical attention. Kevin and Nancy decide to legally separate, which means th
a)COBRA
Dependents of employees are eligible to receive group health insurance under the employee's plan. If the employee and the dependent become legally separated or divorced, or if the employee dies, the dependent will be eligible for COBRA benefits fo
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
a)Capital gains tax on distributions and no penalty.
b)Capital gains tax on distributions plus 10% penalty.
c)I
d)Income tax on distributions plus 10% penalty.
If the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 70�, the distributions would be subject to income taxation at the
Regarding the return of premium option for LTC policies, what happens to the premium if the policy lapses?
a)The insurer will not return any premiums in the case the policy is allowed to lapse.
b)The premium will only be returned if the insured dies.
c)Th
d)The insurer will return a percentage of the premiums paid.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the followi
a)Guaranteed insurability option
The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
When appointing a producer, an insurer must file a notice of appointment to the Department of Insurance within
a)15 days.
b)20 days.
c)30 days.
d)31 days.
a)15 days.
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?
a)AM Best
b)NAIC
c)Consumer's guide
d)SEC
a)AM Best
AM Best & Company assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer.
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
a)The contract can be issued without an annuitant.
b)The annuitant must be a natural person.
c)A corporati
b)The annuitant must be a natural person.
Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
a)Universal life
b)Flexible life
c)Variable life
d)Adjustable life
a)Universal life
The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficie
Long-term care policies MUST cover
a)A pre-existing condition.
b)Alzheimer's disease.
c)Treatment payable by Medicare.
d)Alcoholism.
b)Alzheimer's disease.
Which of the following will vary the length of the grace period in health insurance policies?
a)The length of time the insured has been insured
b)The term of the policy
c)The mode of the premium payment
d)The length of any elimination period
c)The mode of the premium payment
Which of the following describes the tax advantage of a qualified retirement plan?
a)Employer contributions are not taxed when paid out to the employee.
b)The earnings in the plan accumulate tax deferred.
c)Distributions prior to age 59� are tax deductibl
b)The earnings in the plan accumulate tax deferred.
Contributions are tax deferred, and earnings on the money in the plan accrue on a tax-deferred basis.
Which of the following is NOT the consideration in a policy?
a)The application given to a prospective insured
b)Something of value exchanged between parties
c)The premium amount paid at the time of application
d)The promise to pay covered losses
a)The application given to a prospective insured
Consideration is something of value that is transferred between the two parties to form a legal contract.
Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability?
a)Inco
b)Residual disability
A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss.
Which of the following is true regarding limited health insurance policies?
a)They cover every need of a health insurance policy holder.
b)They only cover specific accidents or diseases.
c)They cover all sickness or accidents that are not specifically exc
b)They only cover specific accidents or diseases.
HIPAA applies to groups of
a)More than 2, fewer than 50.
b)2 or more.
c)At least 10.
d)At least 100.
b)2 or more.
Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?
a)Vatical settlement
b)Estate conservation
c)Life insurance proceeds
d)State Education Waiver
c)Life insurance proceeds
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first.
a)The insured's contingent beneficiary
Under the Uniform Simultaneous Death Law, the law will assume that the beneficiary dies first in a common disaster. This provides that the proceeds will be paid to the contingent beneficiary or to the insured's estat
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
a)No penalties, since the owner is older than 59 �
b)10% for early withdrawal
d)50% tax on the amount not distributed as required
When immediate annuities are used to pay IRA benefits, distributions must begin no later than age 70� in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required
Which of the following is NOT true regarding a nonqualified retirement plan?
a)Contributions are not currently tax deductible.
b)It can discriminate in benefits and selecting participants.
c)Earnings grow tax deferred.
d)It needs IRS approval.
d)It needs IRS approval.
Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by IRS.
Which of the following is the closest term to an authorized insurer?
a)Legal
b)Admitted
c)Certified
d)Licensed
b)Admitted
*Both start with A
Annuities can be used to fund which of the following?a)Estate creation
b)Retirement plans
c)Variable life insurance
d)Group life insurance
b)Retirement plans
Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce
a)Under any circumstances.
b)Unless they have served an appropriate prison sent
d)Without receiving written consent from an insurance regulatory authority.
Which nonforfeiture option provides coverage for the longest period of time?
a)Accumulated at interest
b)Reduced paid-up
c)Extended term
d)Paid-up option
b)Reduced paid-up
The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
Which of the following types of agent authority is also called "perceived authority"?
a)Fiduciary
b)Apparent
c)Express
d)Implied
b)Apparent
Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
a)Guaranteed insurability rider.
b)Paid-up additions option.
c)Cost of living provision.
d)Nonforf
a)Guaranteed insurability rider.
The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon atta
Under a typical health insurance policy, claims that result from injuries while the insured was intoxicated or under the influence of drugs are generally
a)Covered with a 90 days' waiting period.
b)Excluded.
c)Covered.
d)Covered, but an extra premium is c
b)Excluded.
With respect to the Consideration Clause, which of the following would be considered consideration on the part of the applicant for insurance?
a)Notice of policy cancellation
b)Payment of premium
c)Promise to renew the policy at the end of the policy peri
b)Payment of premium
An insurance company receives an application with some information missing and issues the policy anyway. What is this called?
a)Aleatory
b)Waiver
c)Estoppel
d)Subrogation
b)Waiver
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be
d)Any form of life insurance
Premiums paid by self-employed sole proprietors or partners for medical expense insurance are
a)Not tax deductible.
b)Partially tax deductible.
c)Totally tax deductible.
d)Taxable.
Sole proprietors and partners may deduct 100% of the cost of a medical exp
c)Totally tax deductible.
Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees.
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
a)Consideration.
b)Legal purpose.
c)Offer and acceptance.
d)Conditions.
d)Conditions.
Which of the following does NOT have to be disclosed in a long-term care (LTC) policy?
a)The aggregate amount of premiums due
b)The meaning of the terms "reasonable" and "customary"
c)Any limitations or conditions of eligibility for LTC benefits
d)Any rid
a)The aggregate amount of premiums due
All LTC policies must disclose and explain the renewability provisions. With regard to life insurance policies that provide an accelerated benefit for long-term care, the policy must include a statement to the effect
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT
a)Stocks, securities, or bonds.
b)An offer to share in commissions generated by the sale.
c)Dividends from a mutual insurer.
d)An offer of employment
c)Dividends from a mutual insurer.
Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
a)Premiums are not tax deductible as a business expense.
b)Premiums are tax deductible by the key employee.
c)Premiums are tax deductible as a bus
a)Premiums are not tax deductible as a business expense.
Because benefits paid to the business are usually received tax free.
Which of the following is true regarding health insurance?
a)Disability coverage is excluded.
b)It provides death benefit coverage.
c)It only covers expenses related to health care.
d)It could provide payments for loss of income.
d)It could provide payments for loss of income.
Under what condition are group disability income benefits received by an employee NOT taxable as income?
a)When the employer makes all the premium payments.
b)When the employee is 59 �.
c)When the amount of the benefit is equal or less than the amount of
d)When the benefits received are equal or less than the employee's percentage of the contribution.
Because employee already paid
In order to minimize adverse selection, employer group dental plans may require employees who enroll after they were initially eligible to participate to do all of the following EXCEPT
a)Submit evidence of insurability.
b)Satisfy a longer probationary per
d)Increase benefits for a period of one year.
Because it helps cover cost
In a life settlement contract, whom does the life settlement broker represent?
a)The insurer
b)The beneficiary
c)The life settlement intermediary
d)The owner
d)The owner
Because brokers represent their clients- like lawyers
Which of the following is NOT true of life settlements?
a)They could be used for a key person coverage.
b)They could be sold for an amount greater than the current cash value.
c)They involve insurance policies with large face amounts.
d)The seller must be
d)The seller must be terminally ill.
What happens when a policy is surrendered for its cash value?
a)The policy can be reinstated by paying back all policy loans and premiums.
b)The policy can be converted to term coverage.
c)Coverage ends and the policy cannot be reinstated.
d)Coverage ends
c)Coverage ends and the policy cannot be reinstated.
Because when you surrender, you're done
Which of the following statements regarding Business Overhead Expense policies is NOT true?
a)Premiums paid for BOE are tax-deductible.
b)Any benefits received are taxable to the business.
c)Leased equipment expenses are covered by the plan.
d)Benefits ar
d)Benefits are usually limited to six months.
Because there is not a limit
What is the purpose of establishing the target premium for a universal life policy?
a)To pay up the policy faster
b)To cover all policy expenses
c)To keep the policy in force
d)To accumulate cash value faster
c)To keep the policy in force
Because you need to hit targets in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amou
b)$500
Because secondary insurer pays for deductibles and out of pocket costs
Which of the following factors would be an underwriting consideration for a small employer carrier?
a)Medical history of the employees
b)Percentage of participation
c)Claims experience
d)Health status
b)Percentage of participation
Needs minimum of 75%
Which of the following riders would NOT cause the Death Benefit to increase?
a)Cost of Living Rider
b)Accidental Death Rider
c)Payor Benefit Rider
d)Guaranteed Insurability Rider
c)Payor Benefit Rider
This rider waives premium, has nothing to do with benefit
Which of the following is NOT a goal of risk retention?
a)To fund losses that cannot be insured
b)To minimize the insured's level of liability in the event of loss
c)To reduce expenses and improve cash flow
d)To increase control of claim reserving and cla
b)To minimize the insured's level of liability in the event of loss