Life Insurance Practice Questions

Life Insurance Practice Questions and Answers

Which life insurance rider allows the applicant to have excess coverage?

Term Rider

Insurance benefits NOT covered due to an Act of War are?

Excluded by the Insurer

What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?

Notice of appointment must be submitted to the Commissioner

John is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event John was killed, while flying as a student pilot?

Exclusion

A father who dies within 3 years after purchasing a Life Insurance Policy on his infant daughter can have the policy premiums waived under which provision?

Payor Provision

With any insurance policy, what is the purpose of the Grace Period?

Gives the Policy Owner, additional time to Pay Past Due Premiums

An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n):

life agent

Henry had an annual Life Insurance Premium Payment due Jan. 1. He died Jan 10 without making the premium payment. What action will the Insurer take?

Pay the Face Amount, minus the Past due premium

What does the ownership clause in a life insurance policy state?

Who the policy owner is and what rights the policy owner is entitled to

An insured is past due, on his Life Insurance Premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this grace period?

Full Face Amount, minus any past due premiums

Which of the following statements is CORRECT about accumulated interest earned on dividends from an insurance policy?

It is taxed as ordinary income

An insured pays a premium on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace-Period provision?

31 days

Joan’s insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify her of this denial. How many days from the reinstatement application date does the insurance company have to notify her of the denial before the policy will be automatically placed back in force?

45 days

Which of the following statements describes the “Purpose of the insuring clause” in an insurance policy?

States the scope, and limits of the coverage

If an insurance company issues a Disability income policy that it can not cancel or for which it cannot increase premiums, the type of renewability that best describes this policy is called?

Non Cancellable

The Agreement in an insurance contract that states a specific sum of money will be paid to a designated person upon an insured’s death is called a(n)?

Insuring Agreement

How long must life agents keep their transaction records?

5 years

The Consideration Clause in an Insurance Contract contains what pertinent information?

Amount of premium payments and when they are due

After the annual deductible is met, a Medicare Part B patient will pay _ of the remaining covered expenses.

20%

Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?

Entire contract

Which statement is TRUE regarding Workers' Compensation coverage

Employer pays the entire premium for Workers' Compensation coverage

Which of the following policy provisions states that the producer does not have the authority to change the policy or waive any of its provisions?

Entire contract

Which statement about Health Maintenance Organizations is NOT true?

When a member uses out-of-network providers, a higher monthly fee is charged

A life Insurance Policy that provides a policy owner with cash value along with a level face amount is called?

Whole Life

Medicare Part A covers what type of care?

Skilled nursing facility care

What kind of Premium does a Whole-Life policy have?

Level

Individuals age 65 or older are exclusively eligible for which optional program?

Medicare Part B

Which statement about a whole life policy is correct?

Cash value may be borrowed against

John was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called?

Conversion

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

A terminated employee that has exercised the conversion privilege is able to convert

term insurance into permanent insurance

Life Insurance that covers an insured’s Whole Life with Level Premiums Paid over a Limited Time is called?

Limited Pay Life

Which of the following describes a contributory group insurance plan?

Part of the premium is paid by the employee

Henry 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 Henry purchase?

30 Pay Life

If an individual has an Accidental Death & Dismemberment Policy, and dies an autopsy can be performed in all these situations EXCEPT?

When consent for the autopsy is not obtained

John 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?

$20,000 Death Benefit

Life insurance surplus must be distributed to policyowners at what frequency?

Annually

Which type of policy is considered to be overfunded, as stated by IRS guidelines?

Modified Endowment Contract

Henry has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n)

unnecessary replacement

Term Insurance has which of the following characteristics?

Expires at the end of the Policy Period

An agent's attempt to stop the replacement of an existing life insurance policy is known as

conservation

John needs life insurance that provides coverage for only a limited amount of time, while also paying the lowest possible premium. What kind of policy is needed?

Level Term

According to the PPACA, the medical enrollment tier that has 80% actuarial value is called

gold

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?

Conversion Privilege

When an insured changes to a more hazardous occupation, Which disability policy provision allows an insurer to adjust policy benefit and rates?

Change of Occupation provision

What type of Life Insurance are Credit Policies issued as?

Term

Which of the following is NOT a valid reason to replace an existing long term care policy?

New policy has higher premiums with fewer benefits

T has a Term Policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

Renewable

The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is

no cost

A 15-Year mortgage is best protected by what kind of life policy?

15- Year Decreasing Term

Henry buys a $10,000 Whole Life Policy in 2003 and pays an annual premium of $100. He dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did Henry include on the Policy?

Return of Premium Rider

A Variable Insurance Policy

Does not guarantee a Return on its investment accounts

Key person insurance is intended to

cover business losses due to the death of a key employee

A Life Policy with a Death Benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as?

Variable Life

How long is a person expected to be disabled in order to receive Social Security disability benefits?

12 months

All of these insurance products require an Agent to have proper FINRA securities registration in order to sell them Except for?

Modified Whole Life

Which statement is NOT true regarding Social Security benefits?

Benefits are designed to replace the entire amount of the worker's earnings

Which of the following statements about a Variable Whole Life Policy is correct?

It provides a minimum guaranteed Death Benefit

Which type of worker has Social Security benefits available to them?

Fully insured

What type of Life Insurance incorporates Flexible premiums and an Adjustable Death Benefit?

Universal Life

Rating an individual's need for long-term care benefits can be measured by

activities of daily living

Which is true concerning a Variable Universal Life Policy?

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

All of these statements concerning Medicare are true EXCEPT

Long-term care is covered by Medicare Part C

What kind of special need would a policy owner require with an Adjustable Life Insurance Policy?

Flexible Premiums

ESOPs are typically invested in

employer stock

All of these are characteristics of an Adjustable Life Policy Except?

Face Amount can be adjusted using Policy Dividends

How are Roth IRAs treated for tax purposes?

Non-deductible contributions and tax-free distributions

Henry would like to purchase $100,000 of Permanent Protection on his wife and $50,000 of Term Coverage on himself under the same policy. What kind of policy should he purchase?

Whole Life Policy with another insured rider

A situation in which there is ONLY a chance of loss or no loss is a

pure risk

When is the face amount paid under a Joint Life and Survivor policy?

Upon Death of the last insured

An insurer having a large number of similar exposure units is considered important because

the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums

What policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Family Income Policy

Which of the following would NOT be accomplished with the purchase of an insurance policy?

Risk is eliminated

A medical care provider which typically delivers health services at its own local medical facility is known as a?

Health Maintenance Organization

A hazard can be best described as

a condition that may increase the likelihood of a loss occurring

The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n)?

Closed panel

Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n)

deductible

Which of these statements is FALSE, regarding a Preferred Provider Organization (PPO)?

PPO’s are NOT a type of managed care systems.

An insured is protected from the expense of a catastrophic illness by which of the following health insurance provisions?

Stop-loss

Which of the following is NOT a limited benefit plan?

Life insurance policies

All of these are examples of cost sharing in a health insurance policy EXCEPT

Coordination

Which statement BEST describes dental care indemnity coverage?

Services are reimbursed after insurer receives the invoice

Which of the following terms is NOT associated with a Major Medical policy?

Capitation

Which of these coverage types is best described as a short term medical policy?

Interim coverage

When an insurance company requests an attending physician's report , the request must be accompanied by a

copy of the signed authorization

B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death if B is killed from an accident on a commercial flight, what will the policy pay B’s beneficiary?

$300,000

How does a conditional receipt differ from a binding receipt?

Conditional receipts always require an initial premium payment

MEDICARE is intended for all of the following groups EXCEPT?

Those enrolled as a Full-time student

The objective of underwriting is to

avoid selecting a disproportionate number of bad risks

Medicare Part A and Part B, do NOT pay for?

Dental work

Which is a life insurance policy that does NOT require a physical exam?

Non-medical

What is the maximum Social Security Disability benefit amount an insured can receive?

100% of the insured’s Primary Insurance Amount PIA

What is the proper order of initial life insurance premiums, lowest to highest?

Modified premium, ordinary life, single premium

The individual most likely to buy a Medicare Supplement Policy would be a(n)?

68-year old male covered by Medicare

An insurance policy written after 1988 that fails to pass the seven-pay test is

a modified endowment contract

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?

2

A life insurance policy's limit of liability would be

the policy's face amount

LTC Policies usually pay for eligible benefits using the following method?

Expense incurred

Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT

Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance

Which mode of Payment is NOT used by Health Insurance Policies?

Single premium