Insurance Licensing and Final Exam Flashcards

A set of 352 practice flashcards based on lecture notes for insurance licensing, covering life and health insurance, annuities, Social Security, and Washington state-specific regulations.

What is an example of an applicant intentionally lying to an insurance company on an application to obtain a cheaper premium?

fraud

Which activity would most life insurance policies typically exclude coverage for?

An individual who has a hobby racing cars once a month

Which of the following is NOT typically a source of underwriting information for life or health insurance?

Disclosure authorization response

What happens if a life insurance applicant receives a conditional receipt and then dies the next day?

The claim will be paid if the application is approved

Which signature is NOT required on an individual insurance application?

The insurer

Which individual is NOT required to provide a signature for an insurance application?

The beneficiary

Normally, how many months can a life insurance policy be backdated from the date of application?

$6$ months

In the state of Ohio, how many months can a life insurance policy be backdated from the date of application?

$3$ months

For what purpose would an attending physician's statement (APS) be requested by an insurer?

To assist in the underwriting decision, with the consent of the applicant

What document describes the critical segments of a life insurance policy?

Policy summary

How may an applicant's medical history be handled when applying for life or health insurance?

It may be analyzed and reported

What is the term for a person who is not acceptable by an insurer at standard rates due to health history, occupation, or hobbies?

Substandard risk

Under which law must all insurers and producers comply when obtaining personal information from a third party concerning an applicant?

Fair Credit Reporting Act

What guarantees that the statements supplied by an insurance applicant are true?

Warranty

Which of the following is NOT considered a key factor in underwriting life insurance?

Marital status

In what way can an insurer screen applicants for HIV?

Requiring a blood test for HIV

Which of the following is NOT a possible field underwriting role for an insurance producer?

Providing commission information to the applicant

Under a group life plan, what does the conversion privilege allow an employee to do upon termination of employment?

Convert to an individual plan

What document is issued by the insurer to the policyowner for delivery to each person insured under a group life policy?

certificate

What does the risk selection process in group life underwriting help protect insurance companies from?

Adverse selection

An employee under a group insurance policy has the right to name a beneficiary and what other specific right?

The right to convert to an individual policy in the event of employment termination

What is the term for a type of group that has a constitution and bylaws and is organized for purposes other than obtaining insurance?

association or labor group

What is the term for when an insured individual changes group coverage to an individual policy with the same insurer due to employment termination?

Conversion

Which factor would an insurer consider when determining whether to accept a group life plan?

Average age

How does a non-contributory health insurance plan benefit the insurer's underwriting process?

It helps the insurer avoid adverse selection

Which of the following is NOT a characteristic of a Group Life Insurance Plan?

Individual underwriting

Where can the coverage, conditions, and limitations of a group contract's master policy be found?

Certificate of coverage and benefits

What phase is an annuity in while it is experiencing tax-deferred growth until retirement?

Accumulation period

Which annuity payout option allows the policyowner to select a pre-determined number of benefit payments?

Period certain

How are interest earnings in a deferred annuity accumulated?

On a tax-deferred basis

Which rider on a variable annuity ensures the annuitant will not outlive their benefits by allowing minimum withdrawals without annuitizing?

Guaranteed lifetime withdrawal benefit (GLWB)

What is the nonforfeiture value of an annuity prior to annuitization?

All premiums paid, plus interest, minus any withdrawals and surrender charges

How soon are periodic income payments scheduled to begin for an annuity to be considered deferred?

A minimum of $12$ months after date of purchase

Which benefit option ensures an income benefit is paid for life without Actually annuitizing the contract, usually for a fee?

Guaranteed lifetime withdrawal benefit

Fixed annuities provide each of the following EXCEPT which?

Hedge against inflation

What is a type of annuity that is linked to a market-related index?

Equity-indexed annuity

Which type of annuity requires premium payments that vary from year to year?

Flexible premium deferred annuity

What is the name for an annuity that provides a guaranteed accumulation or payout?

annuity certain

During the accumulation period, who has the authority to surrender an annuity?

Policyowner

When does an immediate annuity typically begin making payments?

After the first premium has been paid

What determines the annuity payments for an annuitant?

The annuitant's life expectancy

If an annuitant dies before the annuity start date, what does the beneficiary receive?

Premiums paid plus interest earned

How does an individual qualify as fully-insured under Social Security disability coverage?

The individual has been credited with the appropriate number of quarters of coverage

What are the two types of insured statuses that qualify individuals for Social Security benefits?

Fully insured and currently insured

Social Security achieves all the following EXCEPT which?

Replacing a sound personal insurance plan

What is the name of the period where no Social Security benefits are available to a surviving spouse, starting when the youngest child turns $16$?

blackout period

To qualify for Social Security Total Disability, how long must an individual's inability to engage in gainful activity last or be expected to last?

$12$ months

Which of the following would disqualify a company's retirement plan from favorable tax treatment?

The plan is temporary

Withdrawals from a qualified plan for which purpose would still trigger a $10\%$ tax penalty?

Stock purchase

Which plans were specifically designed to provide pension benefits for self-employed individuals?

Keogh plans

In a Traditional IRA, when is interest earned on the account taxed?

Upon distribution

Regarding Traditional IRAs, which of the following is a CORRECT statement?

Earnings are taxable when withdrawn

How many days does an individual have to complete a rollover to another IRA to avoid being taxed as current income?

$60$ days

Under ERISA regulations, which of the following employers MUST follow the rules?

A local electrical supply company with $12$ employees

What is the minimum age a Roth IRA owner must be, and the account must have been held for at least $5$ years, to make tax-free withdrawals?

$$59\,1/2$$

How are contributions to a Roth IRA handled for tax purposes?

Not tax deductible

When a beneficiary inherits a traditional IRA, what type of tax is paid on money withdrawn?

Income tax

Which factor is NOT considered when determining an applicant's life insurance needs?

applicant's automobile

Which method is used to assess the financial loss a family would incur if the breadwinner were to die today?

Human life value

Which of the following is NOT an example of a Business Continuation Plan?

Deferred Compensation

Which of the following is considered an inappropriate use of life insurance for business purposes?

Protecting the business by covering entry level employees with life insurance

Which approach predicts a person's earning potential and determines the amount devoted to dependents?

Human life value approach

What is it called when an individual purchases life insurance to enable their heirs to pay estate taxes?

Estate conservation

Tax-wise, how are premiums paid by an employer for an employee's group life insurance treated?

Tax-deductible to the employer

What is a valid reason for a small business to insure the lives of its major shareholders with life insurance?

To fund a buy-sell agreement

Who is considered the policyholder for a group health benefit plan?

Employer

Which type of medical policy utilizes a master contract and certificate of coverage?

Group

Under which plan can contributions to an HSA be made pre-tax?

Section $125$ Cafeteria Plan

Under COBRA, which individual is NOT eligible for continued health coverage?

A covered employee terminated for gross misconduct

If an employer pays $50\%$ of a disability plan premium and the monthly benefit is $1,000$, what is the taxable income?

$$\$500$$

Which of the following is typically NOT eligible for coverage in a group health policy?

Temporary employee

According to HIPAA, when does an individual who leaves an employer and begins working for a new company become eligible for group health coverage?

Upon hire

What are the two perils involved in health insurance?

accident and sickness

How are disability income benefits treated for tax purposes if the group policy is paid for by the employer?

Taxable income

According to HIPAA, what is considered individually identifiable health information?

A person's health claim information

What would evidence ownership in a participating health insurance contract?

Policy ownership

Which peril is typically covered by health insurance?

Injury due to accident

If an individual continues to work after age $65$ and keeps their employer group health plan, how is Medicare utilized?

Medicare is the secondary payer

On what basis may group health plans deny participation to a potential member?

The member's part-time employment status

What percentage of health costs paid from earnings are sole proprietors permitted to deduct for tax purposes?

$100\%$ of costs

What is the purpose of Credit Accident and Health plans?

To help pay off existing loans during periods of disability

Under HIPAA, when can a group health policy renewal be denied?

When contribution or participation rules have been violated

What is issued to a person covered by an individual health plan?

A policy

What is the term for changing Group Health Insurance to an individual policy with the same insurer upon termination of employment?

Conversion

What percentage of most doctor's services and outpatient treatments does Medicare Part B pay?

$$80\%$$

Besides medical insurance, Medicare Part B is known for covering which of the following?

Durable medical equipment like wheelchairs

Medicaid was established to allow states to receive matching funds to expand what?

Public assistance programs

Who is the intended recipient of government-funded Medicaid?

Poverty stricken people

Which of the following is NOT a qualifying event for Medicare?

Falling below the federal poverty level

Under Workers' Compensation, who is typically covered if an innocent bystander employee is injured because of another employee's misconduct?

The innocent bystander employee

What is an association of small employers joined together to provide health benefits for their employees called?

MEWA (Multiple Employer Welfare Association)

Which type of care is covered under Medicare Part A?

Inpatient hospital stay

Eligibility for Medicare benefits does NOT take which factor into consideration?

Income

Which specific charge is covered by Medicare Part B?

Doctor's charges

What are the two types of health plans for federal civilian employees in the Federal Employees Benefit Program?

Fee-for-service and health maintenance organizations (prepaid)

How is Medicare Part B partially funded?

User premiums

What is a payment model where health care services are unbundled and paid for separately?

Fee-for-service

What legal entity is created so smaller employers can pool contributions to purchase group health benefits and gain economies of scale?

Multiple Employer Welfare Arrangement (MEWA)

How does a PPO compare to an HMO regarding provider choice?

A PPO provides a greater choice of providers (includes out-of-network)

What is the likely result if a PPO subscriber receives care from an out-of-network provider?

The care is covered, but at a lower percentage