practice Exam 2

An insured may assign up to ____ of policy ownership under an individual life insurance policy.

100%

An example of rebating would be

Returning a portion not a premium as inducement to purchase insurance

Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?

Pay an amount the premiums would have purchased at the insured's actual age,

A temporary agent's license issued by the Commissioner of Insurance is valid for up to ___ days.

90

Under a Long Term Care policy, which benefit would be typically excluded or limited?

Alcohol rehabilitation

A domestic insurance company in Texas is considered a company that?

Is incorporated and formed in Texas

ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering‘

unfair methods of competition

All of these statements about the Commissioner of Insurance are true EXCEPT

The Commissioner must be elected

Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?

Activate insurance companies financial reserves

What is an organization that solicits insurance only to its members?

Fraternal benefit society

Why would the Insurance Commissioner examine the records of an insurance company?

To determine the solvency of the company

Which statement regarding third-party ownership of a life insurance policy is true?

It is used extensively in estate-planning as well as business circumstances

Which statement regarding third-party ownership of a life insurance policy is true?

It is used extensively in estate-planning as well as business circumstances

A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family's out-of-pocket medical expenses for 2013?

$1000

One becomes eligible for Social Security disability benefits after having been disabled for:

5 months

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal life

B's policy provides coverage on an in-hospital basis only and contains a limited daily room and board benefit. Which of these policies does B have?

Basic hospital

Comprehensive Major Medical policies usually combine:

Major medical with basic hospital / surgical coverage

Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?

USA Patriot act

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt

A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as

A representation

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:

Mandatory income tax with hold on the transfer amount

K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.

Universal

The combination of Whole Life and _______ Term insurance is referred to as a Family Income Policy

Decreasing

An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n):

Extra premium

Which of these options can an individual use their medical flexible spending account to pay for?

Prescription drugs

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the:

Policy proceeds

A sole proprietor may use this plan ONLY if the employees of this business are included.

Keogh pension plan

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:

Policy Loan provision

Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:

$10,000

Under a Graded Premium policy, the premiums

are lower during the policy's early years

A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take?

Send a notice to the MIB that the applicant was declined

Which of the following types of care is typically not covered in a Long-Term Care policy?

Acupuncture

Which of the following will a Long Term Care plan typically provide benefits for?

Home health care

Which of these is an element of a Variable Life policy?

A fixed, level premium

The guarantee of insurability option provides a long-term care policyowner the ability to:

Pay the same premium for life

A "reimbursement policy" pays what amount of covered Long-Term Care expenses?

Actual covered expenses up to the daily maximum

A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.

Variable

T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is

conditional, depending on the insurer's underwriting guidelines

C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?

$720

The __________ is authorized to assign a Life Insurance policy as collateral for a loan.

policyowner

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

The account can be rolled into the surviving spouse's IRA

The reason for backdating a policy is

To obtain a premium rate based on an earlier age

The advantage of reinstating an original life policy is

the premiums are based on a younger age

Typically a life insurance death benefit is paid by a lump-sum payment. A(n) ___________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.

Settlement

In Major Medical Expense policies, what is the objective of a Stop Loss provision?

Limits an insured's out-of-pocket medical expenses

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

Modified Whole Life

The Automatic Premium Loan provision is designed to:

Avoid a Policy lapse

Which of the following statements describes what an Accident and Health policyowner may NOT do?

Adjust the premium payment

What advantage does the renewability feature give to a term policy?

The insured may extend the coverage period

The benefits under a Disability Buy-Out policy are:

payable to the company or another shareholder

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable

An accident policy will most likely pay a benefit for a(n):

Off-the-job accident

At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?

Upon completion of the application

A contract owner terminates an annuity before the income payment period begins. The owner will then receive

The current contract surrender value

S is the policyowner of a Major Medical policy. The premiums are paid monthly and due on the 1st of each month. S fails to make September's payment and is hospitalized October 15th. When S files the claim for this hospitalization, the insurer will likely

Deny the claim

All students attending a large university could be covered by:

A blanket policy

Dividends payable to a policyowner are

Declared by the insurance company

A(n) ___________ of benefits of a Health Policy transfers payments to someone other than the policyowner.

Assignment

What type of reinsurance contract involves two companies automatically sharing their risk exposure?

Treaty

Under a Guaranteed Renewable health insurance policy, the insurer

May cancer the policy for non payment only

T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?

The insurer will rescind the policy, deny the claim, and recover all payments made

Variable annuities may invest premiums in each of the following, EXCEPT:

Insurers corporate business account

Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?

Portion of the premiums paid for by the employer may be a tax deduction

The type of annuity that can be purchased with one monetary deposit is called a(n):

Single premium annuity

Which of the following are Equity Indexed annuities typically invested in?

S&P 500

What is the basic function of an annuity?

The systematic liquidation of accumulated funds

Which of the following statements is correct regarding an employer/employee group health plan?

The employer receives a master policy and the employees receive certificates

Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?

Commercial insurer

An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the?

Commissioner

If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital

Medical supplement

The individual most likely to buy a Medicare Supplement policy would be a(n):

68-year old male covered by Medicare