Northwestern Mutual Certification Exam

The "Notice to buyer" on the first page of each long term care policy explains that some long term care costs may not be covered. The buyer is advised to review all policy limitations.

A producer is an individual appointed by an insurance company that represents the company and presents policies on its behalf.

The primary purpose of examining a producer's insurance records would be to determine compliance with state insurance laws and regulations.

A producer's license may be suspended for misappropriation of premiums.

When long-term care insurance is replaced, the insurer issuing the new policy cannot impose a new pre-existing conditions exclusion.

A consumer being investigated must be advised of any denial based on an unfavorable report.

The licensee is responsible for reporting a change of name or address to the Director.

If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered misrepresentation.

Coercion is the use of force or intimidation.

An insurance company headquartered in another country is considered to be an alien insurer in the United States.

Producers must provide applicants and prospects with the approved Buyer’s Guide and Policy Summary no later than when the policy is delivered.

Medicare Supplement policies have a 30 day free-look period after policy delivery.

A false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk is considered a material misrepresentation.

The Director can issue a cease and desist order to anyone violating the South Dakota insurance code.

Basic coverage for the treatment of alcoholism includes 30 days of hospital inpatient coverage in any 365-day benefit period.

Individuals applying for a producer's license must be at least 18 years of age.

Under these circumstances, the insurer must provide a policy summary upon delivery of the policy.

It is an illegal practice to commit or coordinate any act of boycott, coercion, or intimidation in order to restrain or monopolize the business of insurance.

In South Dakota, a long-term care policy may offer coverage in which benefits are based on an individual's ability to perform the activities of daily living.

Individual health insurance policies must cover mentally or physically handicapped dependent children until they become self-supporting.

A producer's license must be renewed every two years.

A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that the policyowner may need to resume premium payments, depending on actual results.

When using illustrations in the sale of a life insurance policy, producers and companies are required to use an illustration that shows both guaranteed and non-guaranteed elements.

Backdating a life insurance application is permitted as long as it involves a period of no more than 6 months before the date the application was originally made.

A temporary license is valid for up to 180 days.

False advertising of an insurance policy is considered misrepresentation.

Proceeds of the viatical settlement contract could be subject to the claims of creditors.

Twisting means persuading an insured, to the insured's detriment, to switch policies.

Insurance producers are required to complete 10 hours of continuing education every 2 years. Multiple lines, such as Life and health, would require 20 hours.

The insurer is responsible for reporting a producer's termination of appointment.

The company names the beneficiary, not the employee in a Key Employee Life policy.

In a Key Employee life insurance policy, the third-party owner can be all of these EXCEPT the insured.

Medicare Part C (Medicare Advantage) is offered by private insurers and available to those who are enrolled in Medicare Part A and Part B.

Addictive behavior rehabilitation is normally excluded or limited under a Long Term Care policy.

A Long Term Care policy will typically pay for home health care.

Income tax and a penalty tax are generally assessed when a participant receives retirement savings from an IRA before reaching age 59 1/2.

A family maximum deductible provision waives the deductible for all family members after some of them have satisfied individual deductibles within the same year.

A major medical policy provides benefits for reasonable and necessary medical expenses, subject to policy limits.

The USA PATRIOT Act includes provisions intended to prevent the financial services industry, including the insurance sector, from being used for money laundering and terrorist financing by criminals and terrorists.

The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.

An example of a Limited-Pay Life policy is a Life Paid-Up at Age 70.

Certain types of expenses may have limits placed on the dollar amount of certain services or on the type of service provided.

When a life insurance policy exceeds certain IRS table values, the result would create a Modified Endowment Contract (MEC).

No income tax deductions can be taken for contributions made to a Roth, but the earnings on those contributions are entirely tax-free when they are withdrawn.

If there is questions left unanswered on a life application, the producer should schedule another appointment with the applicant to complete the unanswered questions.

In calculating the amount of personal life insurance needed, all of the following information would be directly relevant EXCEPT local unemployment rates.

While an insured is hospitalized, the hospitalization expense coverage includes benefits for the cost of all of these services EXCEPT "surgical fees".

On delivery of a policy, a signed statement of good health is typically requested if the application was submitted without the initial premium.

If ABC company takes a key employee policy out on C, ABC is the policyowner, C is the insured, and ABC is the beneficiary.

The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured's estate.

A Family Income Policy is a combination of Whole Life and Decreasing Term insurance.

A plan is considered to be top heavy if more than 60% of plan assets are attributable to “key employees” as of the last day of the prior plan year.

"Owner's Rights" states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy.

In cases where a policyowner wishes to reinstate a lapsed policy, the reinstatement provision allows the policyowner to do so with some limitations.

One of the actions a producer should take when submitting an application is to advise the insurer of any other relevant information not contained in the application.

Some life insurance policies (known as participating policies) pay dividends to their policyholders. Dividends are generally not taxed as income to the policyowner. However interest is taxable as income for federal income tax purposes.

One of the purposes of a qualified profit-sharing plan is to distribute a portion of company earnings to employees.

A contingent beneficiary is named by the insured to receive the policy proceeds if the primary beneficiary dies before the insured.

In long-term care insurance, the guarantee of insurability option provides the insured with the ability to purchase additional insurance at a later date without evidence of insurability.

Term life policies can only mature (pay out the face amount) if death occurs during the term of the policy.

Equity Indexed Life Insurance is permanent life insurance that allows policyholders to tie accumulation values to a stock market index.

A substandard risk is below the insurer's average risk guidelines. An individual can be rated substandard for a number of reasons and can even be rejected outright.

Acupuncture is a service typically not covered in a Long-Term Care policy.

A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.

The feature of a life insurance policy stating that the policy will not cover certain risks is called an exclusion.

A "reimbursement policy" pays the actual covered expenses up to the daily maximum.

The elements of an insurance contract do not include negotiating.

An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred? $5,000 + 20% of the remaining bill = $7,000

Most Long Term Care policies require a 30-day free look period.

Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts. They need to be registered with the NASD before selling.

The application statements and representations are part of the consideration for issuing a policy.

M applies for a health insurance policy and pays the initial premium. When the agent completes the application, a conditional receipt is left with the applicant. The insurance company’s underwriting department request’s M’s medical records and determined that M has had asthma for many years. The policy premiums can not be changed.

If the primary beneficiary dies before the insured, the contingent beneficiary will receive the proceeds when the insured dies.

Medicare Part B is a voluntary program designed to provide supplementary medical insurance to cover physician services, medical services, and supplies not covered under Part A.

Long-Term Care policies are designed to provide nursing home benefits on an extended basis of at least twelve consecutive months.

Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter.

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". 80% "vested" means that 20% of the funds could be forfeited if Tom's employment is terminated.

The policyowner has the right to change the beneficiary designation. However, consent may needed by the current beneficiary if designated as irrevocable.

Policy deliver refers to the delivery of the insurance contract to the applicant.

If a pre-existing condition waiting period applies, the policy must not exclude coverage for any pre-existing conditions that occurred more than 6 months prior to the effective date of coverage. These conditions cannot be excluded beyond 6 months after the policy is issued.

The Insuring clause states the amount of benefits to be paid in an Accident and Health policy.

An underwriter determines that an applicant's risk should be recategorized due to a health issue. The policy may be issued with an exclusion for the medical problem.

Most long-term care policies pay on a reimbursement (or expense-incurred) basis, up to the policy limits.

The option to convert gives the insured the right to convert or exchange the term policy for a whole life (or permanent) plan without evidence of insurability.

The Entire Contract provision states that the application and policy contain all provisions and constitute the entire contract.

Because certain future conditions or acts must occur before any claims can be paid, insurance contracts are known as conditional.

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. 20-Pay Life accumulates cash value faster than Straight Life.

M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim? $2,200 - $200 deductible x 80% = $1,600.

The purpose of a Suicide provision is to protect the insurer against the purchase of a policy in contemplation of suicide.

Choosing the "Extended-term option" allows the policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy.

An Accidental Death & Dismemberment (AD&D) policy can provide financial benefits if an insured is killed, loses a limb, suffers blindness, or is paralyzed in a covered accident.

The Fair Credit Reporting Act of 1970, or FCRA, established procedures for the collection and disclosure of information obtained on consumers through investigation and credit reports.

Business Overhead Expense insurance covers eligible expenses for utilities, rent, and staff.

Accidental Death and Dismemberment policy will most likely pay benefits for loss of eyesight due to an accidental injury.

The cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.

A Health Maintenance Organization (HMO) is a prepaid group health plan, where members pay in advance for the services of participating physicians and hospitals that have agreements.

A Proof of Loss statement must be provided to an insurance company to show that a loss actually occurred.

A disability buy-sell plan allows the remaining partners to buy out the interest of the disabled business partner.

Medicare Part A covers hospital benefits. Part B covers physician's services.

Unilateral, aleatory, and adhesion are all special features of insurance contracts. Bilateral is not.

Commercial insurance companies function on the reimbursement approach. Policyowners obtain medical treatment from whatever source they feel is most appropriate and submit their charges to their insurer for reimbursement.

Most Blue Cross/Blue Shield organizations are considered to be nonprofit.

If the employer has more than 20 employees, the group health plan generally pays first.

A Guaranteed Insurability rider allows the insured to periodically increase the amount of benefits payable under the policy.

Employers cannot report additional taxable income to employees covered under a group life policy paid for by the employer.

An individual Disability Income insurance applicant may not be required to submit spouse’s occupation.

A Disability Income policy would reimburse an insured for loss of earnings due to sickness.

The conversion privilege allows an individual to leave the group term plan and continue his or her insurance without providing evidence of insurability.

A health insurance contract is valid only if the insured provides consideration in the form of the full minimum premium and the statements made in the application.

When benefits are paid to a policyowner covered under a Hospital Expense policy, the policy is known as reimbursement.

A group-owned insurer whose primary activity consists of assuming and spreading the liability risks of its members is called a risk retention group.

The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called reserves.

Guaranteed Renewable individual disability income policies provides the right to continue a policy (normally through age 65) if the client pays the premium on time. Where the insurance company cannot change the benefits or features of the policy, they may change the premium of the policy.

In an Accident & Health policy, the insuring clause states the amount of benefits to be paid.

A Business Disability Buyout plan policy is designed to pay benefits to the Corporation or other shareholders.

If an annuity is terminated prior to beginning of the income payment period, the contract owner receives the contract surrender value at that time.

An irrevocable designation may not be changed without the written consent of the beneficiary.

A second period of disability from the same or related cause of a prior disability is called a recurrent disability.

A Variable annuity pays benefits based on units rather than specific dollar amounts.

A policy that uses the "accidental bodily injury" definition of an accident is less restrictive than the one that uses the "accidental means" definition.

Blanket health insurance is issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are constantly changing.

In a health policy, the Payment of Claims provision states that the insured and insurance company will share the cost of covered losses.

After a policy has been in force for 2 (sometimes 3) years, it enters the incontestable period, in which the insurer may not deny a claim based on information not disclosed at the time of application.

A Fixed Deferred annuity pays out a fixed amount for life starting at a future date.

Group insurance differs from individual insurance in that it provides coverage at a lower cost.

The best way to describe a disability elimination period is a "time deductible".

A Business Overhead Expense policy's purpose is to cover certain overhead expenses that continue when the businessowner is disabled.

J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. The maximum sum payable would be the capital sum, or $25,000.

The Elimination Period serves as the deductible in a Disability Income policy.

A 45 year-old woman won $100,000 in a scratch-off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Because the annuity will pay a fixed amount beginning at a future date, it is considered a Deferred Fixed annuity.

An immediate annuity has a single premium.

An insurer may legally take all of these actions to provide disability income coverage to a substandard applicant EXCEPT "Lengthen the contestability period".

Certificates are not issued in blanket policies.

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. This situation involves a Life Annuity with Period Certain.

The Straight Life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.

A closed panel is when an HMO is represented by a group of physicians who are salaried employees and work out of the HMO's facility.

The payments on Q's annuity are no less than $250 quarterly. This is an example of a Flexible Installment Deferred annuity.

Disability policies do NOT normally pay for disabilities arising from an act of war.

A variable annuity's cash value will depend on the results of its investment funds.

In determining how much Disability Income insurance a prospective insured should purchase, the most important factor to be considered is the insured's monthly income.

Disability income insurance on a key employee would likely insure a company executive.

If a physician wants to ensure he can increase the benefit for his disability policy as his practice and income grow, he would want to include a Guaranteed Insurability Option rider.

This annuity was purchased with one payment and begins immediately. It also covers K and her spouse for the rest of their lives. This annuity is classified as Single Premium Immediate Joint with Survivor Annuity.

AD&D is not included in an annuity contract.

A Disability Income policy will pay monthly benefits to a teacher who is unable to work as a result of a car accident.

S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits? Full benefits are payable under the Master contract. An individual is covered under the group policy during the conversion period.

Under the Affordable Care Act, dependent children are covered up until age 26.

A health policy must provide Essential Benefits without annual and lifetime limits when purchased individually or with group coverage through the Federal Marketplace.

A dependent's health coverage is provided under the Affordable Care Act (ACA) until the child reaches the age of 26.

The basic function of an annuity is the systematic liquidation of accumulated funds.