Texas State Exam Simulator - Life and Health Insurance (200 Questions Practice Exam)

An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called

An installment Refund annuity

A Straight Life annuity

A Cash Refund annuity

A Joint Life annuity

An installment Refund annuity

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

3 months

5 months

6 months

12 months

5 months

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?

Straight life accumulates faster than Limited-pay Life

20-Pay Life accumulates cash value faster than Straight 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

Who makes the legally enforceable promises in a unilateral insurance policy?

Beneficiary

Insurance company

Insured

Applicant

Insurance company

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and

the initial premium

agreeing to a physical examination

delivery of policy

disclosure of any medical conditions

the initial premium

Which parts of a life insurance policy are guaranteed to be true?

Rating

Representation

Statement

Warranty

Warranty

A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for

hospital charges

physician fees

experimental and investigative services

nursing services

experimental and investigative services

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

Long-term care

Indemnity

Medicare Supplement

Medicaid

Medicare Supplement

S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?

No benefits are payable under the Master contract

Full benefits are payable under the Master contract

Full benefits are payable under the converted policy

Benefits less required premium are payable under the converted policy

Full benefits are payable under the Master contract

All of the following are limited benefit plans EXCEPT

cancer policies

life insurance policies

dental policies

critical illness policies

life insurance policies

A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow?

Extended Term rider

Cost of Living Adjustment rider

Guaranteed Insurability Option rider

Waiver of Premium rider

Guaranteed Insurability Option rider

An agent whose license has been revoked is required to

wait at least five years before applying for a new license

submit all previously written policies to the Commissioner of Insurance's office for servicing of the accounts

cancel all policies currently in effect and advise the insureds to place them elsewhere

continue to service the existing accounts but not solicit new business

wait at least five years before applying for a new license

The benefits under a Disability Buy-Out policy are

normally paid in installments

taxable to the beneficiary

payable to the company or another shareholder

normally paid after a short elimination period

payable to the company or another shareholder

he Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for

insolvency

health information

financial information

overinsurance

health information

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted from the death benefit

Deducted when the policy is discontinued

Deducted from policy's cash value

Deducted when assigned to another policyowner

Deducted when the policy is discontinued

What MUST an insurance company use in its advertising?

Its trade name

Its true corporate name

Its service mark

Its corporate logo

Its true corporate name

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

self-inflicted injury

critical illness

on-the-job accident

off-the-job accident

off-the-job accident

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT

policy is delivered

free-look period has expired

insurance company issues policy

initial premium is collected

free-look period has expired

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)

Federal Fair Credit Act Violation

Title 18 Fraud violation

Anti-Money Laundering violation

Unfair Trade Practice violation

Anti-Money Laundering violation

Which of these do NOT constitute policy delivery?

Policy mailed to applicant

Policy mailed to agent

Policy delivered to the applicant by the agent

Policy issued with a rating

Policy issued with a rating

What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?

1

2

3

4

2

An agent who tells a client that dividends are guaranteed may be guilty of

fraud

rebating

misrepresentation

slander

misrepresentation

Which statement regarding a Key Employee Life policy is NOT true?

The application must be signed by the key employee

Its purpose is to prevent the financial loss that may ensue if a key employee dies

The beneficiary is named by the key employee

The company purchases, owns, pays the premiums and is the beneficiary

The beneficiary is named by the key employee

A policyowner's rights are limited under which beneficiary designation?

Revocable

Tertiary

Contingent

Irrevocable

Irrevocable

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?

Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company

Cross off his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company

Deposit the check in to his personal account, use the funds to purchase a cashiers check, and send the new cashiers check back to the insurance company

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company

Variable Whole Life Insurance can be described as

both an insurance and securities product

an insurance product only

a securities product only

the insurance company assumes the investment risk

both an insurance and securities product

A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?

Medicaid

Long-term care

Medicare

Her group health plan

Her group health plan

Medicare

is a disability program

is a hospital and medical expense insurance program

offers assistance in making health insurance premiums

Part D provides payment for surgeon expenses

is a hospital and medical expense insurance program

T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?

Allow her to take a tax deduction on unearned premiums

Increase her policy's coverage amount

Decrease her policy's coverage amount

Nothing

Increase her policy's coverage amount

All of the following statements about health coverage for newborns are correct EXCEPT

coverage begins and benefits are payable from the moment of birth

coverage includes necessary care and treatment of congenital defects

coverage during the first year is limited to congenital defects

continued coverage after the first 31 days is dependent on notification

coverage during the first year is limited to congenital defects

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

Policy Exclusion

Incontestable

Entire Contract Provision

Assignment

Entire Contract Provision

An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a

$125,000 individual whole life policy

$25,000 modified whole life policy

$25,000 individual term life policy

$25,000 individual whole life policy

$25,000 individual whole life policy

M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is

Adjustable Life

Indeterminate Premium Life

Grader Premium Life

Modified Premium Life

Modified Premium Life

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

type of life insurance

S's attained age

dividend amount used toward purchase

beneficiary's age

beneficiary's age

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company

Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company

Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company

Which of the following statements is CORRECT about the period in which a Term Policy can be converted?

It is the same in all contracts

It is set by state regulation

It can be changed by the insured

It varies according to the contracts

It varies according to the contracts

If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely

deny the claim for policy proceeds on the basis of fraud

collect the correct premiums and pay the claim

pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age

pay the policy proceeds less a penalty not to exceed 12% of those proceeds

pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the sales appointment was made

The date the application was submitted to the insurance company

The date of application

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

An assignment of benefits of a Health Policy

transfers payments to someone other than the policyowner

is prohibited by state law

is allowed only on policies dates after 1992

transfers rights from the company to the policyholder

transfers payments to someone other than the policyowner

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

MEWA

Blanket insurance

Dread disease insurance

Disability insurance

Dread disease insurance

K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?

Indemnity

Major Medical

Travel

Disability Income

Disability Income

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

Tertiary

Irrevocable

Revocable

Contingent

Revocable

The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured

dies of natural causes

becomes critically ill

becomes chronically ill

is blinded in an accident

is blinded in an accident

Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of the current year's deducitble?

Deferral provision

Carryover provision

Stop Loss provision

Corridor provision

Carryover provision

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Fixed Certain

Joint and Full Survivor

Life Annuity with Period Certain

Installment Refund

Life Annuity with Period Certain

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?

Collect initial premium

Collect initial premium along with a signed health statement

Explain to the applicant the policy is no longer in effect due to change in health condition

Collect initial premium and leave a binding receipt

Collect initial premium along with a signed health statement

Which of the following costs would a Basic Hospital/Surgical policy likely cover?

Surgically removing a facial birthmark

Care given at a nursing home

Treating a wound from a soldier injured at war

Lost income caused by a hospital stay

Surgically removing a facial birthmark

Which of these statements concerning an Individual Straight Life annuity is accurate?

Life expectancy of the annuitant is not a factor

The payments are received tax-free

Only available to employees of nonprofit charitable, educational, and religious organizations

Payments are made to an annuitant for life

Payments are made to an annuitant for life

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Payor clause

Automatic Premium Loan provision

Reinstatement provision

Waiver of Premium

Reinstatement provision

P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA laws, which of the following statements is TRUE?

She DOES need to provide evidence of insurability

She does NOT need to provide evidence of insurability

She will have up to 6 months to convert to an individual policy

She will be paying exactly the same premium for the individual plan as she did the group plan

She does NOT need to provide evidence of insurability

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?

Cash surrender

Life settlement contract

Buy-sell arrangement

1031 Exchange

Life settlement contract

Who can purchase a plan through the Marketplace?

Anyone

Any legal resident except those incarcerated

Only those who do not have access to employer-sponsored coverage

Only those who might be eligible for tax credits

Any legal resident except those incarcerated

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Medicare

Social Security

Medicaid

FICA

Social Security

Which of these require an offer, acceptance, and consideration?

Warranty

Estoppel

Contract

Representation

Contract

How does a typical Variable Life Policy investment account grow?

Tied to price of gold

Through mutual funds, stocks, bonds

Based on returns from insurer's general account

Tied to Treasury Bills

Through mutual funds, stocks, bonds

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

agent

applicant's spouse

National Association of Insurance Commissioners (NAIC)

applicant's physician

applicant's physician

After the initial enrollment period, an HMO must hold an open enrollment period of how many days at LEAST once in every 12-month period?

15

31

45

90

31

Which of the following is NOT included in the policy face?

Free Look provision

Name of the insured

Name of the insurer

Exclusions

Exclusions

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Guaranteed Insurability rider

Aviation exclusion

Impairment rider

Accidental Death Benefit rider

Aviation exclusion

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?

Nonforfeiture

Entire Contract

Insuring Clause

Owner's Rights

Owner's Rights

A Renewable Term Policy is renewable at the option of the

Owner

Company

Insured

Assignee

insured

Which of these is considered a true statement regarding Medicaid?

Funded by both state and federal governments

Intended to be used by individuals age 65 and older

Provides disability income benefits

Automatically covers those receiving Social Security disability benefits

Funded by both state and federal governments

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment

Policyowner has no say where the investment will go but can choose the premium mode

The investment vehicle for this type of policy is held in the insurer's general portfolio

The death benefit can vary but the policyowner has no say in the premium amount paid

Policyowner controls where the investment will go and selects the amount of the premium payment

In life insurance, the needs approach is used mostly to establish

which type of life insurance a client should apply for

how much life insurance a client should apply for

which company a client should use when applying for life insurance

what the maximum amount the client can spend on life insurance

how much life insurance a client should apply for

A life insurance illustration is NOT required to include the

name of the insurer

underwriting or rating classification upon which the illustration is based

initial death benefit

company's mortality table

company's mortality table

Which of these characteristics is consistent with a Straight Life policy?

Owner can adjust both premium and death benefit

Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract

Owner has the option of converting to term insurance

Premiums are payable for as long as there is insurance coverage in force

Premiums are payable for as long as there is insurance coverage in force

Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT?

The Commissioner of Insurance must review insurance companies' Suicide clauses every five years for discrimination

A Suicide clause must apply equally to Life and Accidental Death and Dismemberment (AD&D) policies

An insurance company must actuarially justify any suicide limitation

Suicide may not be a defense against payment after the second year

Suicide may not be a defense against payment after the second year

Which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

Person designated by the primary beneficiary's executor to receive policy proceeds

Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies

Person designated by the insurance comapany to receive policy proceeds in the event that the primary beneficiary dies

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

A Business Disability Buyout plan policy is designed

as an incurred expense plan

with a very short Elimination period

to pay benefits to the Corporation or other shareholders

to pay benefits to the insured's spouse

to pay benefits to the Corporation or other shareholders

Term insurance has which of the following characteristics?

Expires at the end of the policy period

Builds cash value

Has nonforfeiture options

Endows at the end of the policy period

Expires at the end of the policy period

An agent MUST do which of the following during a sales presentation for a participating life insurance policy?

Include a statement that dividends are NOT guaranteed

Include a statement that dividends ARE guaranteed

Explain the applicable Nonforfeiture values

Explain the surrender cost indexes for 5 and 10 years

Include a statement that dividends are NOT guaranteed

In regards to representations or warranties, which of these statements is TRUE?

Warranties are statements considered to be true to the best of the applicant's belief

If material to the risk, false representations will void a policy

Representations are statements guaranteed to be true in every respect

If material to the risk, false representations will NOT void a policy

If material to the risk, false representations will void a policy

The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days?

180

90

60

30

90

A stock insurance company is owned by it's

directors

stockholders

agents

insureds

stockholders

J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?

The gross premium is higher on a monthly payment mode as compared to being paid annually

The gross premium is lower on a monthly payment mode as compared to being paid annually

The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis

The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis

The gross premium is higher on a monthly payment mode as compared to being paid annually

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

Family Maintenance Policy

Family Income Policy

Survivor Policy

Family Survivor Policy

Family Maintenance Policy

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Revocable assignment

Beneficiary change

Irrevocable assignment

Collateral assignment

Collateral assignment

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?

HMO

PPO

EPO

PLHSO

PPO

Basic Hospital and Surgical policy benefits are

lower than the actual expenses incurred

higher than the actual expenses incurred

normally subject to deductibles

normally subject to coinsurance

lower than the actual expenses incurred

An employer that offers a qualified retirement plan to its employees is eligible to

avoid ERISA regulations

make tax-deductible contributions to the plan

make tax deductible contributions to key employees only

make partial tax-deductible contributions to the plan

make tax-deductible contributions to the plan

What action can a policyowner take if an application for a bank loan requires collateral?

Utilize accelerated benefits provision

Borrow against policy cash value and use as a down payment

Assign policy ownership to the bank

Name bank as beneficiary

Assign policy ownership to the bank

Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due?

Grace Period

Consideration

Waiver of Premium

Reinstatement

Grace Period

The Consideration clause in a life insurance contract contains what pertinent information?

Summary of benefits

Offer and acceptance

Entire Contract

Amount of premium payments and when they are due

Amount of premium payments and when they are due

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

The total premiums paid minus any policy loans

Nothing

$50,000

$100,000

$50,000

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$1,000,000

$500,000

$250,000

$0

$0

The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the

Entire Contract provision

Consideration clause

Benefit clause

Insuring clause

Insuring clause

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

Term Life

Whole Life

Credit Life

Universal Life

Whole Life

What is the purpose of the Time of Payment of Claims provision?

Requires the insured to wait 60 days after submitting Proof of Loss before filing a lawsuit

Prevents delayed claim payments made by the insurer

Requires a probation period for each claim filed by the insured

Protects the insurer from frivolous lawsuits

Prevents delayed claim payments made by the insurer

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

Critical illness

Terminal illness

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

Inability of the insured to maintain insurance premiums due to unemployment

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Owner's Rights clause

Incontestable Period

Insuring Agreement

Conversion privilege

Conversion privilege

The Insurance Commissioner may examine the records of an insurance company in order to

determine the solvency of the company

determine the trust deposits of the company

approve the claims records of the company for tax purposes

assess the company's value on behalf of a prospective client

determine the solvency of the company

What does Medicare Parts A and B cover?

Part A covers hospitalization; Part B covers long-term care

Part A covers doctor's services; Part B covers hospitalization

Part A covers hospitalization; Part B covers doctor's services

Part A covers prescription drugs; Part B covers disability

Part A covers hospitalization; Part B covers doctor's services

What is issued to each employee of an employer health plan?

Provision

Receipt

Policy

Certificate

Certificate

A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?

Endowment at Age 75

Universal Life

Graded Benefit Whole Life

Modified Whole Life

Universal Life

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

1035 Exchange

An investment

Modified Endowment Contract (MEC)

Endowment

Modified Endowment Contract (MEC)

Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?

The maximum premium an insurer can charge for their health insurance based on geography

The maximum amount an employer can contribute to a contributory health plan

The maximum deductible an insured can be charged

The maximum amount considered eligible for reimbursement by an insurance company under a health plan

The maximum amount considered eligible for reimbursement by an insurance company under a health plan

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

Return of premiums paid

Cash value plus interest

$20,000 death benefit

Face amount plus interest

$20,000 death benefit

Which of the following are NOT managed care organizations?

Point-of-Service plan (POS)

Preferred Provider Organization (PPO)

Medical Information Bureau (MIB)

Health Maintenance Organization (HMO)

Medical Information Bureau (MIB)

K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered

optionally renewable

conditionally renewable

guaranteed renewable

noncancellable

guaranteed renewable

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

Endowment Policy

Modified Whole Life

Decreasing Term

Universal Life

Universal Life