Life and Health Insurance Exam Prep

A producer needs to complete ___ of continuing education every __ years.
25;2
24;3
24;2
25;2

24;2

A producer MUST leave a buyer's guide with an applicant for which type of policy?
Credit Life insurance
Annuity
Group Life insurance
Universal Life insurance

Universal Life insurance

All of these are powers of the Commissioner EXCEPT
Incarcerate a producer
Hold hearings
Enforce insurance laws
Issue subpoenas

Incarcerate a producer

B is an insurance producer who occasionally engages in financial planning. If B sells an insurance policy during the course of a financial planning seminar, B must disclose to the client
the examination score received on B's licensing exam
how old B was when producer license was obtained
that a commission will be earned in addition to any fee charged for financial planning
which states B is also licensed in

that a commission will be earned in addition to any fee charged for financial planning

How long is a temporary license valid?
180 days
45 days
120 days
90 days

180 days

How often must the Commissioner examine each domestic company?
Every four years
Every 2 years
Every three years
Every five years

Every five years

In Tennessee, the definition of "individual" may include which of the following?
The individual's children
The individual's business associates
The individual's financial accounts
The individual's legal representative

The individual's legal representative

In Tennessee, the MAXIMUM fine that the Commissioner can impose on a producer is _ per violation.
$500
$1,000
$2,000
$1,500

$1,000

Insurance contracts may be sold, solicited, or negotiated by an insurance producer ONLY upon
filing an application for licensure
becoming an appointed producer of an insurer
passing the licensure examination
issuance of license

becoming an appointed producer of an insurer

J applies for an insurance policy. What BEST describes the particular terms of this policy?
Provisional Page
Buyer's Guide
Policy Summary
AM Best Statement

Policy Summary

The Commissioner notifies the association of an insolvent insurer no later than __ days after receiving notice of the insurer's insolvency.
30
3
5
10

3

The Commissioner would like to hold a hearing against a producer. Before the hearing is held, a notice
must be sent to the insurer's home office
must be sent by registered or certified mail to the producer's address on file
is not required
must be delivered in person

must be sent by registered or certified mail to the producer's address on file

The Insurance Commissioner is REQUIRED to do which of the following before holding a hearing that could lead to the suspension of a producer's license.
Give written AND oral notice to the producer
Give written AND oral notice to the producer's insurance company
Give written notice to the producer
Give oral notice to the producer's insurance company

Give written notice to the producer

The Tennessee Guaranty Association is subject to review and regulation by the Commissioner. A financial statement must be submitted no later than ____ of each year.
February 13th
March 30th
April 30th
January 3rd

March 30th

What authority does the Commissioner have over Tennessee producers?
The Commissioner may establish guidelines for continuing education as a part of the producer license renewal procedure
The Commissioner may require adjacent states to adopt reciprocal agreements for nonresident producer licenses
The Commissioner may levy fees on policy applications to defray operating costs
The Commissioner may mandate the financial restructuring of insolvent insurers

The Commissioner may establish guidelines for continuing education as a part of the producer license renewal procedure

When engaged in an insurance transaction in Tennessee, the producer represents the
Commissioner
insured
insurer
beneficiary

insurer

Which of the following is the purpose of the Tennessee Guaranty Association?
Avoid excessive delay in payment
Avoid a loss to policyholders and claimant due to the insolvency of an insurer
Charged to distribute the costs of protection to all insurers
All of the above

All of the above

Which of these is a valid Tennessee regulation for referral fees?
The Commissioner may establish by rule a maximum amount for each referral
If the referral sale involves replacement, the Notice Regarding Replacement form is not required
Referral fees may only be paid in the event a policy is purchased
Referral fees can be unlimited in amount

The Commissioner may establish by rule a maximum amount for each referral

Which of these is NOT a fair marketing practice when an existing insurance policy is being replaced?
Offer the same coverage for a lower price
Offer better coverage for the same price
Reduce the cost by lowering the commission
Reduce the cost by raising the deductible as long as the insured is notified

Reduce the cost by lowering the commission

Who determines the education credits needed for a producer's continuing education?
National Association of Insurance and Financial Advisors (NAIFA)
Commissioner of Commerce and Insurance
The Governor
The insurer who appointed the producer

Commissioner of Commerce and Insurance

A Long Term Care policy sold in Tennessee MUST be
Guaranteed renewable
Optionally renewable
Conditionally renewable
Noncancellable

guaranteed renewable

An individual health insurance policy is REQUIRED to contain a(n)
Subrogation provision
Other insurance provision
Payment of Claims provision
Waiver of premium provision

Payment of Claims provision

For a change to a health policy to be valid, what is required?
Changes must be notarized by the Commissioner and attached to the policy
The producer must take an affidavit from the policyholder
The producer must approve of the changes
Changes in the policy must be approved by an executive officer of the insurer

Changes in the policy must be approved by an executive officer of the insurer

What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Reduce the company's tax liability
To provide an income for the surviving dependents
To pay for final expenses
Fund a buy-sell agreement

Fund a buy-sell agreement

If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses?
Medicaid
Medicare Supplement
Indemnity
Long-term care

Medicare Supplement

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):
Title 18 Fraud violation
Anti-Money Laundering violation
Unfair Trade Practice violation
Federal Fair Credit Act Violation

Anti-Money Laundering violation

Which provision allows a portion of any used medical benefits to be restored following a particular amount of benefit has been used, or after the policy has been in effect for a particular period of time?
Restoration of used benefit
Restoration of unused benefit
Reimbursement benefit
Medical offset benefit

Restoration of used benefit

All are true statements regarding the underwriting process, EXCEPT:
The cost of any examination is paid for by the insurer
Signed consent from the applicant must be provided in order to test for AIDS and HIV virus
AIDS and HIV virus exams can be conducted in a discriminatory fashion
The original application is the primary source of information used in the underwriting process

AIDS and HIV virus exams can be conducted in a discriminatory fashion

All of these are considered to be a benefit under Social Security, EXCEPT for:
unemployment
disability
retirement
survivorship

unemployment

Comprehensive Major Medical policies usually combine:
Basic/Hospital/Surgical with Disability Income coverage
Basic Hospital/Surgical with Accidental coverage
Major Medical with Basic Hospital/Surgical coverage
Major Medical with Disability Income coverage

Major Medical with Basic Hospital/Surgical coverage

Which of these statements describe a Modified Endowment Contract (MEC)?
Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
The 7-pay test is used to determine the minimum death benefit of the policy
The 7-pay test is used to determine the maximum death benefit of the policy
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Takes into account the present value of future income earned by the breadwinner
Establishes the needs of the individual and his dependents
Establishes the investment risk level acceptable to the individual
Places a dollar value on the life of the individual

Establishes the needs of the individual and his dependents

Additional coverage can be added to a Whole Life policy by adding a(n):
decreasing term rider
accelerated benefit rider
payor rider
automatic premium loan rider

decreasing term rider

N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
Universal Life
Term to Age 70
Adjustable Life
30 Pay Life

30 Pay Life

Which of these provisions require proof of insurability after a policy has lapsed?
Conversion
Insuring
Reinstatement
Consideration

Reinstatement

Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable universal life
Adjustable life
Variable life
Universal life

Variable universal life

What is the initial source of underwriting for an insurance policy?
Medical exam
MIB report
Credit report
Application containing statements from the insured

Application containing statements from the insured

A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Universal Life policy
Joint Life policy
Endowment
Variable Universal Life policy

Variable Universal Life policy

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):
1035 exchange
Inter vivos gift
Non-forfeiture option
Living Benefit

Living Benefit

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
Deny the claim
Collect premium from M's estate
Subtract past due premium from cash value

Pay face amount minus the past due premium

A life insurance application may be rejected on the basis of all of these factors EXCEPT
Medical history
Hobbies
Weight
Gender

Gender

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Survivor Policy
Family Survivor Policy
Family Income Policy
Family Maintenance Policy

Family Maintenance Policy

For which of the following expenses does a Basic Hospital policy pay?
Prescription medication
Physician's fees
Surgical fees
Hospital room and board

Hospital room and board

Variable Whole Life Insurance can be described as:
the insurance company assumes the investment risk
both an insurance and securities product
an insurance product only
a securities product only

the insurance company assumes the investment risk

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P cannot assign ownership of the policy while premiums are being waived
P will have to pay income taxes on the amount of premiums waived
P will still receive declared dividends
P cannot borrow against the policy's cash value while disabled

P will still receive declared dividends

What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Level premiums build cash value quicker in the early years
The early years are charged less than what is needed
Level premiums can only be paid annually

The early years are charged more than what is needed

A Term Life rider offers the insured
long-term care coverage
additional life coverage
cash value
disability protection

additional life coverage

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT:
Signed amendment
The required premium
Signed statement of Good Health
Signed HIPAA disclosure

Signed HIPAA disclosure

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Inspection report
Warranty review
Insurable interest
Risk classification

Risk classification

T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is
guaranteed, no matter what is found during the underwriting process
effective upon completion of the Free-Look period
effective upon delivery of the policy
conditional, depending on the insurer's underwriting guidelines

conditional, depending on the insurer's underwriting guidelines.

A policyowner is able to choose the frequency of premium payments through what policy feature?
Payor benefit
Assignment provision
Premium Mode
Consideration

Premium Mode

All of these are characteristics of an Adjustable Life policy, EXCEPT:
adjustable premiums
combination of term and whole life insurance
adjustable premium payment period
face amount can be adjusted using policy dividends

face amount can be adjusted using policy dividends

A life insurance arrangement which circumvents insurable interest statutes is called:
key person insurance
an indemnity contract
a contract of adhesion
Investor-Originated Life Insurance

Investor-Originated Life Insurance

Which of the following BEST describes a short-term medical expense policy?
Conditionally renewable
Guaranteed renewable
Noncancellable
Nonrenewable

Nonrenewable

Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies?
Blanket custodial
Critical Illness
Medicare Supplements
Long-Term Care

Long-Term Care

According to the Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid?
31 days
60 days
10 days
7 days

31 days

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
80% of the funds are invested in a separate account
If Tom's employment is terminated, 80% of the funds would be forfeited
20% of the funds are subject to taxes

If Tom's employment is terminated, 20% of the funds would be forfeited

Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage.
1
24
6
12

6

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
Straight life accumulates faster than Limited-pay Life
Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating
20-Pay Life and Straight Life accumulate cash value at the same rate

20-Pay Life accumulates cash value faster than Straight Life

An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
Concealment clause
extended Contestable period
delayed effective date
exclusion for the medical condition

exclusion for the medical condition

What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
Straight whole life
Paid-up at 65
30-pay life

20-pay life

In order to establish a Health Reimbursement Arrangement (HRA), it MUST:
be offered in conjunction with other employer provided health benefits
limit the amount of money the employee can contribute toward the account
be established by the employer
limit the benefits to prescription drugs only

be established by the employer

Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
Guarantee Insurability rider
Automatic Premium Loan rider
Waiver of Premium rider

Term rider

What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Premiums may increase at any time
Policy may be amended by insurer at any time
Premiums may increase at time of renewal
Policy may be renewed at the discretion of the insured

Premiums may increase at time of renewal

When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Extended term option
1035 Exchange
Conversion provision
Incontestable period

Conversion provision

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Proceeds are received tax-free if there is a named beneficiary
Premiums are normally not tax deductible
Cash dividends are normally not taxed
Entire cash surrender value is taxable

Entire cash surrender value is taxable

What action will an insurer take if an interest payment on a policy loan is not made on time?
cancel the policy if not paid within the grace period
automatically add the amount of interest due to the loan balance
disallow any further loans
subtract from any dividends owed

automatically add the amount of interest due to the loan balance

What kind of premium does a Whole Life policy have?
deferred
decreasing
adjustable
level

level

Which of the following is an example of a nonforfeiture option?
Inflation option
Reduced Paid-Up option
Guaranteed insurability option
Conversion option

Reduced Paid-Up option

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Universal Life
Modified Whole Life
Variable Life
Adjustable Life

Variable Life

A level premium indicates:
the premium stays level until the policy's renewal date
the premium can only be changed with the consent of the insurer
the premium is fixed for a period stated in the contract, then becomes variable
the premium is fixed for the entire duration of the contract

the premium is fixed for the entire duration of the contract

J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age, as stated on the application five years ago, was found to be understated by ten years. Which of the following actions will the insurance company take?
The insurer will pay the original face amount minus any premium deficiencies owed
The insurer will pay the original benefit stated in the policy
The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age
The insurer will deny the claim and refund premiums paid

The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age

Which Accident and Health policy provision addresses preexisting conditions?
Proof of Loss
Time Limit on Certain Defenses
Legal Actions
Payment of Claims

Time Limit on Certain Defenses

Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks?
Key Employer Disability
Business Overhead Expense
Worker's Compensation
Disability Income

Business Overhead Expense

Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurer has the right to change the premium rate for the overall risk class?
Guaranteed Renewable
Noncancellable
Conditionally Renewable
Optionally Renewable

Guaranteed Renewable

Which of the following is considered to be the time period after a Health Policy is issued, during which no benefits are provided for illness?
Probationary Period
Trial Period
Subrogation Period
Incontestable Period

Probationary Period

X owns a Disability Income policy. X recently suffered a disability which was due to the same cause as a previous disability. These disabilities both occurred over a four-month span. Which of the following provisions allows X's second disability to be covered without a new elimination period?
Residual Disability
Partial Disability
Recurrent Disability
Delayed Disability

Recurrent Disability

Which of the following statements about a Guaranteed Renewable Health Insurance policy is CORRECT?
Premiums normally increase at time of renewal
Premiums normally decrease at time of renewal
Policy can be cancelled at any time by the company
Policy can renewed at any time by the company

Premiums normally increase at time of renewal

An insurance company receives E's application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet?
Insuring clause
Consideration clause
MIB clause
Entire Contract clause

Consideration clause

X is insured with a Disability Income policy that provides coverage until age 65. This policy allows the insurer to change the premium rate for the overall risk class assigned. Which of these renewability features does this policy contain?
Optionally Cancellable
Noncancellable
Guaranteed Renewable
Guaranteed Assignable

Guaranteed Renewable

In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments:
During the time an insured is confined in a hospital
Whenever an insured is unable to work
Following an accidental injury, but not during sickness
After an insured has become totally disabled as defined in the policy

After an insured has become totally disabled as defined in the policy

Which of the following BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
More restrictive
Double indemnity
Benefits are taxable
Less restrictive

Less restrictive

A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
Claim will be denied and coverage will remain in force
Claim will be denied and coverage will be cancelled
Claim will be denied, the coverage cancelled, and all premiums paid will be refunded

Claim will be paid and coverage will remain in force

Health insurance benefits NOT covered due to an act of war are:
charged a higher premium
assigned to a reinsurer
given a longer probationary period
excluded by the insurer in the contract provisions

excluded by the insurer in the contract provisions

T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Inflation protection
Income for a fixed period stated in the contract
Income that cannot be outlived by the owner
Tax-free income

Income that cannot be outlived by the owner

In a Disability Income policy, which of these clauses acts as a deductible?
Waiver Period
Elimination Period
Deductible Period
Probationary Period

Elimination Period

R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?
Presumptive Disability
Residual Disability
Recurrent Disability
Occupational Disability

Residual Disability

Insurers may request a hearing within ____ if their policy is rejected
30 Days
90 Days
20 Days
60 Days

20 days

What is the primary factor that determines the benefits paid under a disability income policy?
Age
Wages
Education level
Type of occupation

Wages

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n):
Straight Life annuity
Immediate annuity
Flexible Premium Deferred annuity
Variable annuity

Immediate annuity

Which of the following are Equity Indexed annuities typically invested in?
S&P 500
Municipal Bonds
Money Market accounts
Corporate Bonds

S&P 500

Group life insurance policies are generally written as:
increasing term
group whole life
a term rider
annually renewable term

annually renewable term

What is considered to be a characteristic of an immediate annuity?
Periodical contributions begin immediately
Normally tied to a specific equity or stock index
Benefit payments start within 5 years of initial purchase
Benefit payments start within one payment period of purchase

Benefit payments start within one payment period of purchase

Which type of plan normally includes hospice benefits?
Group life plans
Short-term disability plans
Managed care plans
Workers' Compensation

Managed care plans

A group major medical policyholder that provides benefits on a self- funding basis may limit its total liability for claims by purchasing
A deductible
Coinsurance
Supplementary coverage
A stop-loss contract

A stop-loss contract