Life, Accident and Health Pearson Final Exams - exam 5

Which of the following health insurance policy provisions allows an insurer to deny a claim that does not occur during the policy period?

AReinstatement provision

BInsuring clause

COwnership provision

DConsideration clause

B insuring clause

The insuring clause specifies the time frame of the policy period which is generally one year. Therefore, accidents or illnesses occurring prior to the policy's inception date are not covered. (1416)

Which of the following statements is true with regard to limited health policies?

ALimited policies protect against gaps in coverage that exist in other plans

BLimited policies provide benefits for cancer only

CLimited policies must state clearly what coverage they provide

DLimited policies cover scheduled surgical expenses if not covered by major medical plans

c limited policies must state clearly what coverage they provide

Limited policies pay benefits for an individual illness or an accident. These policies must state prominently that they are limited in nature. Cancer only or dread disease plans are two common types of limited health insurance policies. (1175)

AD&D coverage provides all of the following benefits, EXCEPT:

ADeath as a result of an accident

BCapital sum benefits

CBenefits for loss of sight due to an illness

DLoss of use of limbs caused by an accident

c benefits for loss of sight due to an illness

Accidental death and dismemberment coverage, whether provided as a rider or an individual policy, does not provide benefits for an insured as a result of an illness. (1318)

To be eligible for coverage under Part C of Medicare, an individual does not have to prove that he or she is insurable if enrollment occurs during what period of time following the attainment of age 65?

AOne month

BThree months

CSix months

DTwelve months

c six months

No evidence of insurability is required if enrollment occurs during a six-month period following the individual's 65th birthday. After this six month period the individual must prove that he or she is insurable. (4132)

In most States, domestic insurers must be examined or audited:

AAt least once every year

BAt least once every three years

CAt least once every five years

DAt least once every ten years

c at least once every five years

Most states require that licensed insurers be audited at least every fifth year to ensure solvency. A few State Departments of Insurance require it every year (e.g., New Jersey). Please consult your State law chapter in your textbook. (2127)

The main purpose of the underwriting department is?

ATo support the field underwriting

BTo compute the necessary profit

CTo issue contracts

DTo review applications

d to review applications

The function and purpose of underwriting is to review applications for insurance coverage to determine if the proposed insured is insurable. (1461)

If a life insurance policy becomes a modified endowment contact, it may revert back to an ordinary life policy within:

AOne year

BThree years

CSeven years

DIt is not allowed to revert back to an ordinary life contract

D it is not allowed to revert back to an ordinary life contract

Once a whole life policy is determined to be a Modified Endowment Contract (MEC) it may not revert back. This means that the tax benefits included in a whole life policy will be suspended when there are any distributions of cash from the contract. Interest credited to the cash value is general tax deferred. Once labeled as a MEC, a policy loan may be subject to taxation when it otherwise would not be. The policy become a MEC when the owner violates the 7 pay test. (4184)

If an individual makes a payment to fund an annuity contract today and the benefit commences thirty days later, which of the following contracts has been purchased?

AFixed annuity

BImmediate annuity

CDeferred annuity

DLife annuity

b immediate annuity

An immediate annuity has no accumulation period. Once it is purchased, a monthly payment begins approximately thirty days after purchase since that is the usual time it takes to process the application. An immediate annuity is best suited for someone who needs "immediate" income. A person who is totally disable is an example of someone who needs income right away. (4129)

Which statement listed is false when discussing policy illustrations?

AThey protect against unfair sales solicitations

BThe regulations apply to both individual and group policies

CThe use of footnotes is prohibited

DOnly guaranteed elements of the contract must be listed

d only guaranteed elements of the contract must be listed

Policy illustrations must list both guaranteed and non-guaranteed elements of the contract. They are designed to provide full disclosure to the client, thus protecting them against unfair and exaggerated hypothetical illustrations. (1457)

Which of the following is not considered to be one of the Required Uniform Accident and Health policy provisions?

AGrace period

BFree-look provision

CTime of payment of claims

DClaim forms

b free-look provision

The free-look provision must be included in all life and health insurance policies issued in most states. Most free-look periods are ten days except for Medigap and Long Term Care plans which require a thirty-day free-look. This provision is not one of the required uniform or optional uniform policy provisions, although it is statutorily required in most locales. (1398)

Tim has a whole life policy with an assortment of riders attached. He is blinded in an accident and receives proceeds from one of the riders. Which of the following riders paid a benefit for his loss of sight?

AReturn of premium rider

BExclusion rider

CImpairment rider

DAccidental dismemberment rider

d accidental dismemberment rider

The AD&D rider pays benefits for accidental death, dismemberment, or loss of sight, hearing or speech.

Each of the following statements is true with regard to the modifications made to an existing life insurance policy, EXCEPT:

AThe change or modification must be attached to the policy

BThe change must include the signature of a company officer

CThe change must be countersigned by the agent

DThe change must be in writing

c the change must be countersigned by the agent

This provision states that any changes made to the contract must be in writing and endorsed or attached to the policy. It also states that only an officer of the insurer or authorized home office personnel possess the authority to make any changes or modifications, or waive a policy provision. A producer or agent need not countersign any such modification. (4188)

A surplus lines insurance carrier is also referred to as a:

ANon-admitted insurer

BAdmitted insurer

CAuthorized insurer

DNon-concurrent insurer

A - non-admitted insurer

a non-admitted carrier may also be called an unauthorized insurer. (1967)

An employer is mandated to offer COBRA benefits as long as he or she employs:

ATwo or more but not more than 50 employees

B10 or more employees

C30 or more employees

D20 or more employees

D 20 or more employees

COBRA provides for the continuation of health insurance coverage. Employers with twenty or more employees must offer COBRA. Once employment is terminated, an individual generally has sixty days to select coverage through COBRA. (1212)

Which of the following is not a necessary underwriting tool to determine eligibility for insurance provided a premium was submitted with the application?

AA Statement of Good Health

BAn agents report

CThe MIB

DConsumer Report

A a statement of good health

The statement of good health is provided by the insured at contract deliver only if the original policy submission did not include the initial premium requirement. (1434)

Which of the following is not a responsibility of a field underwriter?

AIssue a policy

BComplete applications

CCollect premium

DProvide a premium receipt to an applicant

A issue a policy

The issuance of an insurance policy is the responsibility of the home office underwriters, not a producer (i.e., field underwriter). (1951)

Long-term care insurance coverage may be secured through each of the following, EXCEPT:

AAn individual long-term care policy

BA group long-term care plan

CA rider added to a disability income plan

DA rider added to a life insurance policy

c a rider added to a disability income plan

Long-term care coverage is available to a person by: (1) buying an individual plan from a licensed insurance carrier; (2) receiving coverage through a group plan; or (3) attaching a rider to a life insurance policy. The latter method generally requires the payment of an additional premium as well. (1111)

Accident and Health policies include several uniform provisions, one of which is called the "claim form" provision. An insurer is required to send a proof of loss form to an insured within what period of time after notice of loss has been provided by the insured?

A90 days

B10 days

C20 days

D15 days

d 15 days

One of the twelve required uniform policy provisions is the claim form provision. Also known as the "proof of loss form" provision, it requires that an insurer send a claim form to the insured within 15 days after it has been notified of the covered illness or accident. (1394)

A Point of Service plan (POS) is a hybrid arrangement that combines the aspects of a traditional HMO and a PPO. Such plans allow treatment inside or outside the "network". If the POS requires that a member insured provide notification of treatment outside the network, which of the following generally must be notified ?

AThe medical provider

BThe gatekeeper

CThe network manager

DThe provider contractor

b the gatekeeper

Under some POS plans, a covered member may go outside the network but must inform the gatekeeper or primary care physician that such treatment is being sought. (1254)

According to the notice of claim mandatory provision, the policyowner must furnish the insurer with a notice of claim within how many days after a loss occurs?

A10

B20

C30

D45

b 20

According to this mandatory provision, the policyowner must furnish the insurer with a notice of claim within 20 days after a loss occurs (or as soon as reasonably possible). The policyowner may notify the insurer or the producing agent of the loss (i.e., accident or illness) in written form, in person or by phone. (2184)

Which of the following is true with regard to the replacement of an individual long-term care insurance plan ?

ALong-term care insurance policies may not be replaced

BAny pre-existing condition limitation in the new long-term care plan is waived

CAny non-forfeiture benefit in the policy will be terminated

DReplacement of any accident and health insurance policy is only permitted if it occurs within the first three years of issuance

b any pre-existing condition limitation in the new long-term care plan is waived

Whenever a long-term insurance policy is replaced, any pre-existing condition limitation in the new policy being purchased is automatically waived (1116)

According to the time of payment of claims provision, insurers must provide payment of disability income benefits not less frequently than:

ADaily

BWeekly

CMonthly

DQuarterly

c monthly

Disability income claims are designed to be paid to an insured by an insurer on a monthly basis, according to this provision (4152)

In some states, the Commissioner of Insurance is appointed by the Governor. Which of the following are powers or duties of the Commissioner?

AActivates the reserves of an insurer

BProsecutes producers who break insurance laws

CSets life insurance premium rates

DIssues licenses to producers

d issues licenses to producers

A Commissioner or Superintendent of Insurance has the power to issue insurance licenses and certificates of authority. (1025)

Except in cases of fraud, what life insurance policy provisions limits an insurer to contest application information for the initial two years of the contract?

AIncontestable clause

BTime limit on certain defense provision

CGrace period provision

DOwner's rights clause

AIncontestable clause

The incontestable provision allows the insurer to "contest" statements made by an applicant for life insurance for the initial two years after the contract is issued. If the insurer determines that the applicant engaged in any material misrepresentation, it may void the policy. (1726)

Which of the following accurately describes an equity indexed annuity?

AIt is a form of variable annuity

BIt is a form of non-variable annuity

CIt is a registered investment product

DIt is a permanent insurance product

BIt is a form of non-variable annuity

An equity indexed annuity is a type of fixed or non-variable annuity. The owner receives a guaranteed minimum interest rate and account assets are tied to an index such as the Standard & Poor's (S&P) index. (1630)

Ray has a life insurance policy with a waiver of premium benefit. If he becomes disabled for a lengthy period of time, the insurer will begin to waive the premium in which of the following months?

AThe ninth month following the onset of the disability

BThe sixth month following the onset of the disability

CThe seventh month following the onset of the disability

DThe twelfth month following the onset of the disability

CThe seventh month following the onset of the disability

If a waiver of premium rider is added to a life insurance policy and the insured becomes disabled for six consecutive months, the insurer will waive premiums while the disability continues starting in the seventh month of disability. (1712)

What often occurs with the deductible for preventative dental care?

AIt is waived by the dentist

BIt is waived by the insurer

CIt is a required payment

DDeductibles do not exist in dental care plans

BIt is waived by the insurer

Preventative care lessens more costly dental procedures in the future. As an incentive to seek preventative care, an insurer will often waive the deductible requirement for preventative care only. (1182)

All of the following statements are true regarding the reinstatement provision in a health insurance policy, EXCEPT:

AReinstatement may occur without application

BIllness is covered after a waiting period following reinstatement

CAutomatic reinstatement may occur if an insurer does not respond within 45 days of receipt of the reinstatement application

DAccidents are covered immediately upon reinstatement

AReinstatement may occur without application

One of the requirements that must be satisfied in order to reinstate a lapsed policy is that a reinstatement application must be completed and submitted to the insurer. (1382)

Which of the following riders prevents a policy from lapsing if the insured becomes disabled for more than six months?

ACost of living

BGuaranteed insurability

CWaiver of premium

DPayor benefit

CWaiver of premium

The waiver of premium may be added to a life insurance policy for an additional premium. It provides a benefit in the event the insured becomes totally disabled. If disability results for more than six consecutive months, the insurer will waive future premiums, starting in the seventh month of disability, until the insured is no longer disabled. In addition, the premium paid during the initial six months of disability is returned retroactively. (1715)

The Taxpayer Act of 1997 resulted in the creation of a Roth IRA. Each of the following are characteristics of a Roth IRA, EXCEPT:

AContributions may continue beyond age 72

BContributions are tax-deductible

CDistributions may be deferred past age 72

DQualified distributions at the time of retirement are not taxed as income

B contributions are tax-deductible

A Roth IRA may be good for those who are looking for estate planning benefits for their beneficiaries since distributions to beneficiaries will pass income tax free. Contributions to a Roth IRA are not tax-deductible. Qualified distributions at the time of retirement are not taxed as income. (4407)

An insurer engaging in an unreasonable restraint of trade has committed which of the following unfair practices?

ACoercion or boycott

BTwisting

CDefamation

Misrepresentation

a coercion or boycott

An insurer or producer engaging in an illegal restraint of trade has engaged in the unfair practice of coercion or boycott. (1056)

Each of the following is excluded under an individual long-term care insurance policy, EXCEPT:

AIntentionally self-inflicted injury

BTreatment for alcohol abuse

CCare for benefits provided by Workers' Compensation

DInstitutional care received within the U.S.

d insitutional care receivedc within the U.S.

Accident & Health policies generally include a renewability provision. Which of the following statements best describes a cancelable accident and health insurance policy?

AThe insurer may only cancel the policy if the insured files too many claims during the policy period

BThe policy may be cancelled by the insurer on its renewal date

CThe policy premium may be increased by the insurer at any time

DThe policy may be cancelled by the insurer at any time

d the policy may be cancelled by the insurer at any time

A cancelable policy may be cancelled by the issuing insurer for any reason. This type of policy is the least expensive since the policy may cancel at its discretion. (1424)

Examination expenses incurred when the Commissioner decides to audit an insurer will be the responsibility of which of the following?

AThe Commissioner's office

BInsurance Department

CLicensed producers

DThe insurer being examined

d the insurer being examined

Which of the following policy options allows a policyowner to effectuate a single premium purchase?

ACash refund insurance

BReduced paid-up insurance

COne year term

DReduced premium payments

b reduced paid-up insurance

This option allows the policyowner to surrender the policy and use the cash value to buy a smaller or reduced amount of permanent paid-up life insurance. This means that the insured is buying the same type of insurance as the policy being surrendered. Therefore, this non-forfeiture option provides for the longest period of protection since it involves whole life insurance. The cash value is being used to make a single premium purchase. No further premiums are due. (4045)

Group plan sponsors may include all of the following, EXCEPT:

AEmployer groups

BLabor Unions

CCustomer groups

DSelf-employed individuals

d self employed individuals

Self-employed individuals are not eligible for group insurance. Employer groups, unions and customer groups such as creditors at a bank are all eligible for group insurance. (1488)

Which of the following would make sure that coverage continues in the event of a premium lapse for more than the grace period?

AEntire contract clause

BInsuring clause

CAutomatic premiums loan provision

DConsideration clause

c automatic premiums loan provision

The automatic premium loan provision is not part of the standard whole life contract. It may be added by the applicant, or later the policyowner. If the policyowner neglects to pay the premium by the end of the grace period, this provision is activated and automatically takes a loan from the cash value to pay the premium. This provision is not available in a term life policy since it has no cash value. (1780)

Mutual insurers issue participating policies which in turn may pay dividends. Which of the following is a dividend option provided to the policyowner of a "par" policy?

ACash surrender

BReduce the premium

CReduced paid-up insurance

DInterest only

b reduce the premium

The common dividend options available to owners of participating policies include reduce the premium, cash, accumulate at interest, paid-up additions and one year term. (1696)

Term life insurance may be converted at any time without proof of insurability. All of the following statements pertaining to the conversion privilege of group term life insurance are correct, EXCEPT:

AAn insured employee generally has 31 days following termination of employment in which to convert the group insurance

BAn insured employee must convert to the same type of term life coverage as was provided under the group plan

CInsureds who convert their coverage to individual plans generally pay a premium rate according to their attained age

DAn insured employee may exercise the conversion privilege regardless of his or her insurability

b an insured employee must convert to the same type of term life coverage as was provided under the group plan

Generally, when group term life insurance is converted to an individual plan, the new insurance is permanent insurance. (1798)

A short term disability policy usually has a benefit payout period of:

AMore than 2 years

BLess than 2 years

CMore than 1 year

DLess than 1 year

b less than 2 years

Although there is no definitive answer, most insurers consider short term DI policies to have a benefit payout period of no more than 2 years. (1350)

Once a reinstatement application is completed by an insured, the insurer must inform him or her whether or not reinstatement has been approved within:

A60 days

B10 days

C30 days

D45 days

d 45 days

An insurer has forty-five days to inform an insured whether or not reinstatement has been approved once the reinstatement application and any owed premium is paid. (1385)

A premium receipt is provided to an applicant by the producer when an initial premium is collected at the time of application. Which of the following statements is true regarding a "Conditional Receipt"?

AThis receipt indicates that coverage is provided immediately when payment is received

BThis receipt provides coverage on a date earlier than the issue date of the policy

CThis receipt is also known as a binding receipt

DThis receipt states that coverage will become effective once a physical examination is completed

b this receipt provides coverage on a date earlier than the issue date of the policy

A conditional receipt indicates the amount of premium collected by the producer and may provide coverage effective on the date of the receipt as long as certain conditions are satisfied. The date on this receipt is always earlier than the issue date of the policy. (1953)

Brad buys a permanent life insurance policy that has a fixed premium for five years. In year six, the premium increases to a higher amount and stays level for life. What type of life insurance policy did Brad purchase?

AStraight life

BGroup life

CModified life

DIndexed life

c modified life

Therefore, for example, modified whole life is characterized by two fixed premiums — a lower initial premium for five (5) years that increases in the sixth year to an amount higher than the traditional whole life premium would have been and remains level for life. (4017)

A salary continuation plan is also referred to as a:

AQualified plan

BNon-qualified deferred compensation plan

CAn entity plan

DA cross-purchase plan

b non qualified deferred compensation plan

A salary continuation plan is an example of a non-qualified deferred compensation plan. (2131)

Which of the following policy provisions protects an insured against a small claim that may be present prior to coverage being provided under a new health insurance policy?

APre-existing conditions provision

BCoordination of benefits provision

CDuplicate coverage provision

DCommon accident provision

a pre existing conditions provision

The pre-existing condition provision in an accident and health policy states that a new policy will not provide coverage for an insured for an illness or other condition for which he or she is already being treated, if this condition was in existence for six months before the new policy goes into effect. (1427)

In the event a Long Term Care policy is replaced, a Notice Regarding Replacement form must be provided to and signed by the applicant at what time?

AAnytime during the underwriting process

BAt time of policy application

CThe Notice Regarding Replacement only applies to disability income policies

DWithin 30 days following policy delivery

b at time of policy application

Anytime a policy is to be replaced by a new policy, a Notice Regarding Replacement form must be provided to the applicant before or during the initial application process. (1128)

The annuity phase is also referred to as which of the following?

AThe maturity period

BThe pay-in period

CThe non-forfeiture period

DThe pay-out period

D the pay out period

The annuity phase begins when contributions cease and upon receipt of the initial periodic payment. During this "pay-out" phase, the annuitant receives a combination of principal and interest each month. (1643)

If an insurance company issues a health insurance policy based upon an incomplete application, it has unknowingly engaged in a:

AWarranty

BWaiver

CEstoppel

DCondition precedent

B waiver

A waiver is the voluntary abandonment or relinquishment of a known right provided in a policy. This legal principle protects a consumer when an insurer or principal makes a mistake. A common example of a waiver is when an insurer fails to enforce a policy provision. (1894)

Mutual insurers issue participating life insurance policies. One dividend option available to a whole life policyowner is called "paid-up additions." What does it provide to the policyowner if selected?

AIncreased interest payments

BIncreased cash values

CA taxable event

DLimited protection for one year

b increased cash values

If a policyowner selects a paid-up additions dividend option, a new paid-up permanent policy is purchased with the dividend. Therefore, an additional amount of cash value is also acquired. (1694)