Life & Health Ultimate Study Guide

All of the following statements about individual life insurance tax treatment are correct EXCEPT

Premiums paid are tax deductible

Which statement about employer sponsored tax-qualified retirement plans is INCORRECT?

Employer contributions are not tax-deductible to the business.

Term insurance differs from permanent insurance in that term

builds no cash value and pays a death benefit only.

Which of the following is considered an income need when determining the amount a person needs for personal life insurance?

Family dependency

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

stop-loss limit.

In group insurance, the evidence of an agreement between the insurer and the employer or association is the

contract

Dread disease, travel accident, vision care, and hospital income (indemnity) policies are all examples of

limited policies

When the entire death benefit is paid in a lump sum to a beneficiary, it is

not taxable as income.

Before Cranston was disabled, he was a full-time engineer earning about $70,000 annually. Now, 2 years later, he is able to work part-time, earning about $25,000 annually. It is likely that Cranston would be classified as

partially disabled.

When a group plan is contributory, what percentage of employees must want and be willing to pay for coverage?

75%

Nathan and Sarah want to fund their IRA. Which of the following vehicles for funding is NOT allowed?

Life insurance

Medicare coverage Part B covers

medical care provided by physicians and other medical services.

Which is the proper term for a company owned by its policyowners?

A mutual insurance company

Which of the following phrases correctly describes Medicaid?

Provides medical benefits for certain low-income people, for the disabled, and for families with dependent children.

The usual payment arrangement under a preferred provider organization contract is

a fee for service.

When medical expense policies do NOT state specific dollar benefit amounts but instead base payments on the charges for like services in the same geographic area, benefits are designated as which of the following?

Usual, customary, and reasonable charges

An insured’s disability income policy defines total disability as the insured’s inability to perform the duties of any occupation for which he is reasonably qualified by education, training, or experience. This definintion is known as the

any occupation definition and is more restrictive than other definitions.

Ed has a $50,000 policy with cash values of $10,000. Including the interest owed, there is a $2,000 policy loan outstanding. Ed finds he can no longer make premium payments on this policy. If Ed chooses the cash surrender value option, he will receive

$8,000

All of the following are characteristics of an annuity EXCEPT

Protects against dying too soon

All of the following are elements of a contract EXCEPT

assignment

An insurance contracts is an aleatory contract. This means

equal value is not given by both parties to the contract.

The death benefit of a variable life policy

may go up or down but will never fall below the guaranteed minimum amount specified in the policy.

Health maintenance organizations are required to provide for all of the following EXCEPT

prescription drugs

The type of health care provider that is a managed care entity and provides both health care services and health care financing is a

health maintenance organization.

Which of the following situations most likely calls for the purchase of term insurance?

George has no income and 2 years of medical school to complete. He and his wife have 1 child.

An annuity is a contract that

provides a lifetime income through periodic payments to the annuitant.

Warren and Wilma have a joint life policy. Warren dies, and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a

survivorship, or second-to-die, policy

In health maintenance organizations, the use of a primary care physician, or PCP, is common as part of

the gatekeeper concept.

The term annuity period refers to which of the following?

The time during which payments are made to the annuitant.

A policyowner allows a policy to lapse, and the insurance company converts the policy to the extended term option. Which of the following from the original policy will automatically carry over into the new policy?

Face value

Which of the following is covered by Medicare Part A?

Inpatient hospital coverage for a semi-private room

Qualified health plans (QHP) that a part of the Affordable care act are sold

only on the health insurance exchange.

A rollover refers to which of the following?

A transfer of funds from one IRA to another

Which of the following Medicare advantage plans have a network of providers, but no gatekeeper and enrollees pay more if they go outside of the network?

Medicare preferred provider organization (PPO) plans

When the annuity period begins in a variable annuity contract, the accumulation units are converted to

annuity units.

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company

will automatically institute the extended term option

Jack has a variable annuity in a separate account that has a portfolio valued at $5 million. There are 500,000 outstanding accumulation units for the account. What’s the value of 1 unit?

$10

A variable life policy

has a death benefit that varies to reflect the investment results of the underlying separate account but will not drop below a guaranteed minimum

A limited pay life policy

requires premium payments for a specified number of years or until a specified age is reached

When would an immediate premium annuity begin payments to an annuitant?

as soon as a month after purchase

The cash value accumulation in a life insurance policy

can be used for loans or later as retirement income

Part 1 of the insurance application includes all of the following EXCEPT:

The applicant’s current medical treatments

For a contract to be binding, both parties must have the legal capacity to make a contract. This principle is known as

competent parties

Which of the following methods of handling risk means that the individual will pay for the loss if it occurs?

Retention

In a whole life insurance policy

the cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy.

Which of the following is NOT considered an activity of daily living (ADL)?

Working

Which of the following classification of risks would typically have the lowest premium payment?

preferred risks

A life annuity with period certain settlement option pays the annuitant

for a specified minimum number of years, or the rest of his life, whichever is longer.

All of the following are living benefits of life insurance EXCEPT:

last expenses

One of the greatest advantages of convertible and renewable term policies is that

the insured is not required to show proof of insurability in order to renew or convert.

A contract that transfers the risk of financial loss from an individual or business to an insurer is known as

Insurance

An expense load is also known as

the insurers operating costs.

Which of the following life insurance policies was designed for individuals who want flexible premiums and flexible coverage over the course of their lifetime?

Universal life

The Medical Information Bureau is

a non-profit insurance trade association.

All of the following factors are used to determine annuity payment amounts EXCEPT:

annuitant’s place of residence

The suicide clause states that if an insured commits suicide:

During the first two years after the policy is in effect, the insurance company will only pay the premium paid by the insured, not the face amount of the policy.

A straight life annuity pays a periodic income

during the annuitant’s lifetime with no refund upon his death.

Income payments made from an annuity are

only partly subject to federal taxation.

Which of the following statements about a modified endowment contract (MEC) is INCORRECT?

MEC’s are not life insurance but do offer tax-free death benefits

The cash value of a variable life policy

is determined by the investment experience of the separate ccount.

Paul dies before his annuity has paid out an amount at least equal to the purchase price of the annuity, so Paul’s beneficiary continues to receive annuity payments until that amount has been reached. This type of annuity is a

life with refund annuity.

Under a group credit disability policy, what is the maximum amount of any accidental death benefit included?

The amount of outstanding indebtedness at any given time

All of the following are common exclusions in a disability income policy EXCEPT:

a reoccurring disability

Producers selling variable life insurance

must have a valid life license and must be registered with FINRA.

The type of annuity in which the values grow according to the performance of the investment medium, and in which benefits may fluctuate according to market performance, is called a

variable annuity

The punishment for fraud or making false statements may include

fines, imprisonment, or both

Which of the following statements about whole life insurance is INCORRECT?

The initial premium is lower than term insurance.

Second surgical opinions, preauthorization, limits on length of stay, and outpatient benefits are all elements of

reducing hospital care costs

Leah Smith has universal life policy. She wants an increasing death equal to the face value of the policy plus the cash account. Which of the following death benefit options should Leah choose?

Option B

Susan has been classified as a standard risk by her insurance company. This means that Susan

Has average health and a normal life expectancy

The elimination period in a disability policy may be thought of as

A time deductible

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if all back premiums due

plus interest have been repaid and fewer than 3 years have elapsed.

A injury that causes a person to only be able to perform some, but not all, of the essential duties of his or her occupation is

a partial disability.

A whole life policy

is guaranteed to remain in force as long as premiums are paid.

A child may be a dependent beyond the ages of 26

only if the child is permanently mentally or physically disabled before that age.

Which of the following statements regarding COBRA is CORRECT?

COBRA protects dependents of employees by mandating for them the same extension and conversion privileges available to employees covered by group plans.

An insurance policy is a unilateral contract because

only the insurance company is bound to live up to its side of the agreement.

The relative frequency of deaths in a specific population is known as

Mortality

Third-party ownership refers to a situation in which

the policyowner is someone other than the insured.

The type of health insurance policy most likely used to cover all students attending a large university is known as

a blanket policy.

Employer-paid premiums for employee group health insurance are generally

tax deductible to the employer and nontaxable to the employees.

Which of the following statements regarding fixed annuities is NOT correct?

the benefit payments are not guaranteed

Which of the following is NOT necessary for the formation of a valid contract?

Written documents

Carol’s husband dies, leaving her with a 5-year-old daughter to support. Which of the 3 income periods is Carol in currently?

Family dependency period

Compared with individual disability income policies, group disability income policies are generally

less costly and have less benefit options.

Alma, age 35, earns $50,000 a year and expects to retire when she is 65. What is Alma’s human life value?

$1.5 million

A health insurance policy includes an endorsement indicating that the insurer will allow the policy to continue in force without further premiums if the insured is totally and permanently disabled. Which endorsement is attached to this policy?

Waiver of premium

Which statement about accelerated death benefits is CORRECT?

Benefits could be paid up to a certain percentage of the death benefit.

Which of the following would NOT be permitted as a Section 1035 policy exchange?

An annuity contract exchanged for a life contract

With life insurance, insurable interest must exist

At the time of application

The federal Affordable Care Act (ACA) eliminated pre-existing condition exclusions for which of the following policies?

medical expense policies

Mr. and Mrs. Burden receive a monthly annuity payment. Mr. Burden dies, but Mrs. Burden continues to receive a monthly annuity payment. The Burdens have a

joint life and survivor annuity settlement option.

The coordination of benefits provision is designed to

give insureds as much coverage as possible while eliminating overinsurance

All of the following individuals are required to sign documents to complete the insurance application EXCEPT:

The beneficiary

The intentional failure to disclose known facts is known as

Concealment

Under Social Security disaability benefits, a qualified disabled worker receives a benefit

equal to 100% of the worker’s primary insurance amount (PIA).

The Lucrative Lozenge Company provides a $5,000 monthly bonus plan to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of a

nonqualified plan

When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company

will pay only the amount of insurance that Jonas’ premiums would have purchased at his correct age

Nick has a major medical policy with an 80/20 coinsurance arrangement. Assuming he has already met his deductible, if Nick has $1000.00 medical bill, how much will the insurer have to pay?

$800.00

The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a

life with refund annuity.