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WEBCE INSURANCE/ GROUP EB /INSURANCE/ INTRODUCTION TO INSURANCE Exam Bundle Solutions Pack
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Introduction to Insurance Exam Latest Updated (Employee Benefits)
Insurance - ANSWER-A contract or device for transferring risk from a person, business or organization to an insurance company that agrees, in exchange for ... [Show More] a premium, to pay for losses through an accumulation of premiums. Insured - ANSWER-A person or organization covered by insurance. Insurer - ANSWER-A person or company that underwrites an insurance risk. Employee Benefits - ANSWER-All benefits and services other than wages for time worked that are provided to employees in whole or in part by their employers. Indemnify - ANSWER-To restore the insured to the same condition as before the occurrence of loss with no intent of loss or gain. Risk - ANSWER-The uncertainty or likelihood that a loss occurs. Pure Risk - ANSWER-Risks affecting an individual that result in a loss or reduction of personal assets. Circumstances that can only result in no change or a loss and no chance of financial gain. Speculative Risk - ANSWER-The opportunity for either a gain or loss. Hazard - ANSWER-A circumstance or a setting that increase the likelihood that a loss may occur. A hazard might be a slippery floor that may result in a individual falling. Peril - ANSWER-A cause of loss. Insurance will typically cover causes of loss and perils that are named in that insurance policy. Ex: Health insurance will insure against the loss of income and/or medical expenses caused by an insured's sickness or accidental injury. Loss - ANSWER-A loss is the decrease, reduction, or disappearance of value of the individual or property insured in a policy caused by a named peril. Ex: An individual is unable to perform their job function or attend work due to a serious injury; therefore, there will be a loss of income. Exposure - ANSWER-An individual's inclination to risk in their daily life. Insurance companies use exposure to measure the risks of taking on certain policies and to help calculate rates. Ex: The age of an insured, their medical history, and occupation may determine level of exposure. Risk Management - ANSWER-A process that includes four elements to minimize a negative impact that could cause injury, death or loss of financial assets. Avoid Risk - ANSWER-Avoidance of risk is removing the exposure to a loss all together. For example, if someone wants to avoid ever getting into an automobile accident, they may choose to never drive a car or be an occupant in a car. Reduce Risk - ANSWER-Reduce the likelihood or severity of a loss. It may be difficult to reduce certain types of risk all together, but we can find a way to reduce it. For example, we may choose not to smoke cigarettes as a method to reduce the chance of lung cancer. Retain Risk - ANSWER-There is an assumption of risk and the individual will accept the risk; therefore, there could be potential loss. Risk retention is often referred to as self-insurance. The individual might select to have a larger deductible or co-payments on their health program. Transfer Risk - ANSWER-Transfer risk to another party who will bear the loss. We transfer our risk when we purchase insurance. While it does not remove the risk of illness or death, it will provide financial payment in the event of a loss associated with the type of insurance policy that we purchase. Law of Large Numbers - ANSWER-Predict the risk of loss or claims of participants so that premium can be accurately calculated. Private Insurance Policies - ANSWER-Funded by policyholder paying the premium. Government Funded Programs - ANSWER-Funded with taxpayer dollars - examples include Medicaid, Medicare, Social Security. Mutual Insurer - ANSWER-An insurance company that is owned by the policyowners and issue participating policies. Policyowners are entitled to dividends; these are a return of excess premiums and are not taxable. Dividends are not guaranteed. They are generated when the combined earnings and premiums create a surplus that exceed actual costs of providing coverage. Stock Insurance Company - ANSWER-An insurance company owned by stockholders who supply capital necessary for operations. The stockholders will share in any profits or losses. There are typically a board of directors who are elected by the stockholders. Fraternal Benefit Society - ANSWER-An organization formed to offer insurance for members of a religious, fraternal or affiliated lodge organization. They only sell insurance to their members and are considered charitable institutions. They are not subject to the same regulations that apply to insurance providers that offer coverage to the public at large. Admitted Carrier - ANSWER-An Admitted carrier is one that has been approved and received a license or Certificate of Authority from the Department of Insurance in a specific state. They must meet the financial requirements and confirm to the state regulations. Since most Employee Benefits are through Admitted carriers, local/state regulations create unique markets by geographic region. Non-Admitted Carrier - ANSWER-A Non-Admitted carrier is one that is not licensed with the state and does not have to follow the same criteria for underwriting, coverage and rate setting. Insurance Agent - ANSWER-Insurance Agents represent the insurer. They are the direct connection between insurance carriers and policyholders. Insurance Broker - ANSWER-Insurance Brokers and Independent Agencies both represent multiple carriers. Exclusive/Captive Agency - ANSWER-The insurance company contracts the agency (an independent business) to represent and sell insurance exclusively for that insurance company. Direct Writer Agency - ANSWER-In a Direct Writer Agency, the agents are insurance company employees. They are only selling the products approved by the insurance company. Direct Response Agency - ANSWER-No agents are present in the Direct Response Agency. These insurance companies sell through direct mail, over the phone, over the internet or web-based purchases. These agencies typically must be licensed. [Show Less]
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Group EB /Insurance Basics Exam Solved 100% Correct
Conditions - ANSWER-The policy provisions that qualify or limit the insurance company's promise to pay or perform. Declarations (Dec) Page - ANSWER-Summ... [Show More] ary of key details of the policy. Definitions - ANSWER-Words used in the policy along with definitions; they may be in italics or bold print in the policy. Insuring Agreement - ANSWER-The contract that defines what is covered by the policy and what the insurer promises to do and not do in exchange for the paid premium. Exclusions/Limitations - ANSWER-Lists what is limited or excluded from the policy coverage. Employer Paid - ANSWER-The employer is making a contribution to the premium/rate so the employee does not pay the entire amount. Contributory Plans - ANSWER-Each employee will pay a portion of the costs for his or her own coverage. The employer pays the remainder of the cost. Voluntary Benefits - ANSWER-Products provided by the employer that the employee purchases and will pay 100% of the premium. Dependent - ANSWER-Someone who relies on another person for support, such as a child. Beneficiary - ANSWER-An individual who receives the proceeds from the policy when the insured dies. Insurer or Carrier - ANSWER-An entity that contracts to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, also known as the "insurance company" or "insurance provider." Provider - ANSWER-An entity that provides health care services. Network or In-Network - ANSWER-A group of providers that participants are able to receive services through at a discounted rate. Non-Network or Out-of-Network - ANSWER-A provider that's not in the discounted group of providers. Services generally cost more through out-of-network providers. Eligibility or Probationary Period - ANSWER-The period of time in which an employee can enroll in a group health care plan without evidence of insurability. Enrollment Period - ANSWER-The amount of time an employee has to enroll in a health care plan. Effective Date - ANSWER-The date the insurance policy coverage starts, also called the inception date. Expiration Date - ANSWER-The termination date of the policy. Calendar Year (CY) vs Plan Year (PY) - ANSWER-If the participant has a Calendar Year deductible, then any eligible claims incurred between January 1st and December 31st, will count toward the deductible. However, if the member has a Plan Year deductible and their Plan goes from April to April, any eligible claims incurred between April 1st and March 31st of the following year will count toward the deductible. Benefit Period - ANSWER-The period or length of time in which the insurance benefits will be paid, such as disability, illness or a hospital visit. Waiting Period - ANSWER-The period or length of time after enrollment onto the plan which must pass prior to receiving a specific benefit. They used to be common in many dental plans. Deductible - ANSWER-The portion of the expense that is to be paid by the insured before any claim benefits can be paid by the insurance company. Deductible Waived (DW) - ANSWER-Refers to certain benefits (like preventive care and office visits for some plans) where the deductible that you would normally need to pay before the insurance kicks in, is waived. Sometimes the insurance will have you pay a small amount like a copay and then they'll step in and take care of the rest, even if you haven't met your deductible. Coinsurance - ANSWER-An agreement between an insured and insurer in which both parties are expected to pay a certain portion of the potential expense. For example, the carrier may pay 80% after the deductible is met and the insured pays 20%. Copay - ANSWER-The insured has to pay a specified amount for services "up front," and the insurance provider pays the remainder of the cost. [Show Less]
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WebCE Quizzes/Health Insurance Exam 2023
Reimbursement health insurance policies, in contrast to valued health insurance policies, pay benefits based on the federal government's rates for reimb... [Show More] ursement the cost of the medical care received the limits of coverage a flat daily amount - ANSWER-the cost of the medical care received The purpose of health insurance is to: keep the insured healthy prevent medical risks get health care and medical treatment protect against the financial cost of accidental injury and illness - ANSWER-protect against the financial cost of accidental injury and illness How does health insurance differ from life insurance? Health insurance protects against the unexpected. Health insurance protects against risks that may arise more than once in a lifetime. Health insurance protects against financial loss. Only one type of health insurance is available. - ANSWER-Health insurance protects against risks that may arise more than once in a lifetime. The primary purpose of federal tax-favored health insurance plans is to: serve as a provider of last resort encourage people and employers to save for health care expenses satisfy public demand for nationalized health insurance generate income for federal spending projects - ANSWER-encourage people and employers to save for health care expenses An application for health insurance requires the signature of: only the producer only the proposed insured the proposed insured and the producer only the underwriter. - ANSWER-the proposed insured and the producer What happens if a person submits an insurance application without the first premium? The applicant has made a counteroffer. The insurer must make an offer to the applicant. The applicant made an offer to the insurer. The insurer must make a counteroffer. - ANSWER-The insurer must make an offer to the applicant. What is the effect of a binding receipt given to an applicant? It obligates the insurer to renew the policy at the insured's request. It guarantees coverage during the underwriting period even if the insured turns out to be uninsurable. It gives conditional coverage during the underwriting period. It gives permanent insurance protection. - ANSWER-It guarantees coverage during the underwriting period even if the insured turns out to be uninsurable. Which activity is NOT an error or omission that makes an agent or producer legally liable to both the insured and the insurer? failing to perform due diligence placing insurance with an approved surplus lines insurer placing insurance with insurers who are not authorized to conduct business in the state professional negligence - ANSWER-placing insurance with an approved surplus lines insurer The time of payment of claims provision of a health insurance policy defines "immediately" to mean: within 21 days as soon as reasonably possible within a period that is defined by individual states upon proof of loss - ANSWER-within a period that is defined by individual states Which provision of a health insurance policy requires the insurer to give the insured the forms necessary to file a claim? notice of claim change of beneficiary reinstatement claim forms - ANSWER-claim forms Which provision requires the insured to notify the insurer within a certain number of days after a covered loss? reinstatement legal actions change of beneficiary notice of claim - ANSWER-notice of claim An insured files a notice of claim but the insurer fails to provide the necessary forms to file the claim. What should the insured do to file the claim? take legal action against the insurer submit a written statement describing the loss submit another notice of claim notify the state's insurance department - ANSWER-submit a written statement describing the loss Which organization recommends that health insurance policies follow certain standard provisions to protect consumers? National Association of Insurance Commissioners (NAIC) U.S. Department of Commerce National Association of Insurance and Financial Advisors (NAIFA) American Council of Life Insurance (ACLI) - ANSWER-National Association of Insurance Commissioners (NAIC) A notice of claim tells the insurer that the insured: expects payment upon proof of loss will make a claim and needs the necessary claim forms is terminating coverage and wants a return of unused premium has a claim that must be paid - ANSWER-will make a claim and needs the necessary claim forms Which provision lets the insured control the payment of a death benefit in a health insurance policy? reinstatement provision notice of claim provision change of beneficiary provision legal actions provision - ANSWER-change of beneficiary provision How many days does the insurer have to provide claim forms to the insured after receiving a notice of claim? 15 30 60 10 - ANSWER-15 After buying a health insurance policy, the insured takes a job that increases the risk of injury. What will the insurer do to accommodate the increased risk? maintain the same coverage and premium require additional proof of continued insurability reduce benefits reduce the premium rate - ANSWER-reduce benefits Under the other insurance with other insurer provision, what happens to any premiums the insured paid in excess of those needed for coverage? The insurer credits them to future coverage. The insurer keeps them. The insurer returns them. Both insurers share them in proportion to their risk. - ANSWER-The insurer returns them. How many optional provisions did the NAIC develop for use in a health insurance policy? 5 6 11 12 - ANSWER-11 How does the other insurance with other insurers provision cover losses on other than an expense-incurred basis? The insurer refunds premiums that are less than the amount associated with its proportion of prorated benefits. The insurer returns premiums that exceed the amount associated with its proportion of prorated benefits. The insurer returns premiums equal to the amount associated with its proportion of prorated benefits. The insurer keeps premiums that exceed the amount associated with its proportion of prorated benefits. - ANSWER-The insurer returns premiums that exceed the amount associated with its proportion of prorated benefits. Which provision in a health insurance policy imposes a waiting period on every claim before benefits begin? probationary period elimination period consideration clause waiver of premium provision - ANSWER-elimination period As a contract, a health insurance policy requires all of the following elements EXCEPT: an offer a deadline acceptance consideration - ANSWER-a deadline An insured is injured and files a claim under his disability income insurance policy. When does the elimination period begin? on the date the insured gets medical treatment for the injury on the policy's effective date on the date of injury on the date the claim is filed - ANSWER-on the date of injury A noncancellable health insurance policy guarantees that: the insurer will not cancel coverage or increase the premium the insurer will not reduce coverage or increase the premium the insured will not cancel the policy the insured will renew the policy - ANSWER-the insurer will not cancel coverage or increase the premium Which definition of total disability lets the insured qualify for benefits most easily? presumptive disability partial occupation any occupation own occupation - ANSWER-own occupation Which disability would most likely qualify for a full benefit under the presumption of disability provision? heart surgery loss of eyesight brain concussion back surgery - ANSWER-loss of eyesight Which statement is true about the "any occupation" and "own occupation" definitions of total disability? The any occupation definition is normally available only in policies sold to professional or white-collar employees. Policies with an own occupation definition are more expensive. Disability policies sold to those in blue-collar occupations typically use the own occupation definition. Insureds prefer the any occupation definition. - ANSWER-Policies with an own occupation definition are more expensive. [Show Less]
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WebCE Practice Exam Latest Updated
Which medical plan covers doctor visits while the insured is in the hospital and physical therapy treatments following release from the hospital? limite... [Show More] d medical policy basic hospital expense policy comprehensive major medical insurance supplementary major medical insurance - ANSWER-comprehensive major medical insurance A comprehensive major medical plan covers hospital expenses and doctor and surgeon fees. A basic hospital expense policy covers the cost of hospitalization, but not physician's fees. Upon the lapse or surrender of a permanent life insurance policy, the cash value is available to the policyowner in the form of: distribution options nonforfeiture options surrender options settlement options - ANSWER-nonforfeiture options Nonforfeiture options give policyowners several ways to receive a policy's cash value upon lapse or surrender of the policy. Medicare Part A provides reasonable and medically necessary hospital care for how long? 21 days 60 days 30 days Inpatient hospital care is not covered. - ANSWER-60 days For a Medicare Part A beneficiary, a benefit period begins on the day of admittance to the hospital. That benefit period ends 60 days after release from the hospital. When received in a lump sum, how are life insurance death benefits commonly taxed to the beneficiary? Death benefits from a life insurance policy are generally taxable to the beneficiary. Fifty percent of death benefits from a life insurance are taxable to the beneficiary. Death benefits from a life insurance policy are generally not taxable to the beneficiary. Death benefits from a life insurance policy are received tax deferred. - ANSWER-Death benefits from a life insurance policy are generally not taxable to the beneficiary. When received in a lump sum, the death benefits from a life insurance policy are generally not taxable to the beneficiary. For tax purposes, the term "self-employed person" includes all of the following, EXCEPT: a sole proprietor a C corporation's officers a partner an S corporation owner who owns more than 2 percent of the outstanding shares - ANSWER-a C corporation's officers A pregnant woman marries and is covered by her spouse's employer's group health plan. Will the plan cover the child? Yes, after the woman applies for coverage on behalf of the child. Yes, from the moment of birth. No, because the pregnancy was a pre-existing condition. No, because dependents must be covered under a separate policy. - ANSWER-Yes, from the moment of birth. HMOs must provide their subscribers (enrollees) with evidence of coverage, which must include all the following EXCEPT the HMO's contact information a list of all approved medical care providers in the HMO's network a description of the coverage provided by the plan an explanation of the capitation arrangement the HMO has with providers in its network - ANSWER-a list of all approved medical care providers in the HMO's network On June 1, Sandra submitted proof of her uncle's death and her right as beneficiary to receive the proceeds of his life insurance policy. A life insurance policy settlement must take place by: July 1 June 15 August 1 December 31 - ANSWER-August 1 A policy settlement must take place no later than two months after the date of receipt of proof of the insured's death and the right of the claimant to the policy proceeds. Which of the following types of health insurance covers the cost of medical care and medical services? disability income insurance medical expense insurance accidental death and dismemberment (AD&D) insurance Medicare supplement insurance - ANSWER-medical expense insurance Medicare supplement policies offer private insurance coverage that supports and enhances the care and services Medicare covers. Congress amended the Medicaid spend-down rules to eliminate: spousal abuse spousal participation spousal impoverishment spousal abandonment - ANSWER-spousal impoverishment At one time, requiring Medicaid applicants to reduce their assets often resulted in the impoverishment of the spouse. Today, spouses are protected from this unintended consequence. Which of the following best describes how group life insurance premiums are treated for tax purposes? The employer can deduct its premiums as a business expense, but employees cannot deduct their premium contributions. The employer can deduct its premiums as a business expense, and employees can deduct their premium contributions on their tax returns. Employees can deduct their premium contributions on their tax returns, but the employer cannot deduct its premiums. Neither employees nor their employers can deduct group life premiums on their tax returns. - ANSWER-The employer can deduct its premiums as a business expense, but employees cannot deduct their premium contributions. While employer contributions are deductible as a business expense, employee contributions are not tax deductible, though they can help reduce the tax impact of employer contributions. What kind of policy only covers cancer, stroke, heart attack, and Parkinson's disease? medical surgical expense policy catastrophic medical policy limited disability policy specified disease policy - ANSWER-specified disease policy Specified disease policies only cover hospital or dental expenses, or they can cover a specific disease or condition. If a person receives funds directly from a qualified pension plan and intends to roll them over to an IRA, within how many days must the rollover be completed? 30 days 60 days 120 days 180 days - ANSWER-60 days Which of the following is NOT a method used for providing accelerated benefits? additional premium or cost of insurance charge method percentage of death benefit method actuarial discount method lien method - ANSWER-percentage of death benefit method Where no additional premium or cost of insurance charge is payable in advance by the policy holder, and the acceleration-of-life-insurance benefit is not reduced by a present value actuarial discount, the insurer may consider the acceleration-of-life-insurance benefit, any administrative expense charges, any due and unpaid premiums and any accrued interest as a lien against the death benefit of the life insurance contract. When a deferred annuity is annuitized, which one of the following most correctly describes the tax treatment of the contract's "gain" (i.e., accrued interest) portion of each payment? It is tax exempt. It is taxable as ordinary income. It is taxable as capital gains. A 10 percent tax is applied. - ANSWER-It is taxable as ordinary income. As the policyowner, Mark can pledge or transfer ownership of his life insurance policy through which of the following means? assignment surrender disbursement withdrawal - ANSWER-assignment All of the following are standard permanent exclusions found in life insurance policies EXCEPT: war aviation hazardous occupations and hobbies suicide - ANSWER-suicide A risk that is excluded from coverage means that it is not covered and that the policy's benefit will not be paid if death results from that risk. A suicide clause only restricts coverage until after a certain amount of time has passed, typically two years, and then death by suicide is covered. Melina paid $7,000 for medical care this year. If her adjusted gross income is $50,000 this year, how much of these expenses can she deduct from her income taxes, if any? $5,000 $0 $2,300 $2,000 - ANSWER-$2,000 A person can deduct unreimbursed medical expenses that exceed 10 percent of adjusted gross income (AGI). In this case, Melina can deduct $2,000 ($7,000 - $5,000), the amount by which her expenses exceed 10 percent of her AGI. Which of the following statements about cash value withdrawals from a universal life insurance (UL) policy is correct? Total withdrawals cannot reduce the cash value to anything less than 50 percent of its full value. Withdrawals must be repaid. Withdrawals incur interest charges. Withdrawals reduce the death benefit dollar-for-dollar. - ANSWER-Withdrawals reduce the death benefit dollar-for-dollar. Which kind of health insurance policy gives the insurer the right, at the time of policy renewal, to change the premium rate on a class basis? noncancellable guaranteed renewable nonforfeitable adjustable premium policy - ANSWER-guaranteed renewable What is the purpose of a disability reducing term insurance policy? to cover any outstanding loans a business might have if the business owner becomes disabled to reimburse a business for overhead expenses it incurs if the business owner becomes disabled to provide funds to a business when a key employee becomes disabled to provide funds to buy the interest of a business owner if he or she becomes disabled - ANSWER-to cover any outstanding loans a business might have if the business owner becomes disabled A business overhead expense policy reimburses a business for certain overhead costs if the owner becomes disabled. Which one of the following most illustrates the biggest drawback to the human life value approach to determining insurance needs? It fails to consider a family's unique financial needs. It does not consider a family's typical expenses. It does not consider how much will be needed to replace lost income if the breadwinner dies before retirement. It does not consider how much a person is likely to earn in his or her career. - ANSWER-It fails to consider a family's unique financial needs. The purpose of utilization review in a managed care plan is to: monitor doctor behavior negotiate rates paid to doctors restrict a member's use of medical services develop managed care standards for providers - ANSWER-develop managed care standards for providers Managed care plans use utilization review to assess the need and appropriateness of health-care services for members. It controls over-utilization and reduces costs. Standards for coverage and treatment are developed. Ella is an agent for State Industry Insurance Company in Texas. After meeting with several family members, she learns that they would like to buy some life and health insurance contracts from her company. Which of the following statements is correct? Ella can sell insurance to her family members provided at least 25 percent of the total volume of her premiums comes from non-family members. Another agent from her company must be involved in the sale in order to prevent it from being considered controlled business. Ella will not be engaged in controlled business if she gets at least 50 percent of her total business from non-family members. Ella cannot sell any policies to her own family because it is considered controlled business. - ANSWER-Ella can sell insurance to her family members provided at least 25 percent of the total volume of her premiums comes from non-family members. Jerry's life insurance policy instructs him to pay the premium to the insurer's home office. However, he has sent his payments to his agent for many years, and the agent has forwarded them to the insurer. What legal principal will prevent the insurer from now requiring that Jerry send the premiums to the home office? estoppel waiver misrepresentation fraud - ANSWER-estoppel All the following statements about ordinary whole life insurance are correct EXCEPT: Its death benefits are level. The premium level is higher than the actual mortality costs during the early years of the policy. The insured pays level premiums until he or she dies or reaches age 120, whichever comes first. The cash value decreases as the insured gets older. - ANSWER-The cash value decreases as the insured gets older. The most basic type of whole life insurance is ordinary whole life (also called straight whole life). With ordinary whole life, benefits and premiums remain level and payable through the insured's entire life (think: whole life). All of the following are acceptable reasons for a producer to deliver a new life insurance policy in person to a client, EXCEPT: it is an opportunity to sell the client some additional life insurance. It is the producer's responsibility to fully explain the policy. It is an opportunity to reaffirm the customer's reasons for purchasing the policy. It is an opportunity to strengthen the client relationship. - ANSWER-it is an opportunity to sell the client some additional life insurance. Janet has been continuously licensed as an agent in Texas for the past 25 years. Her friend, Steven, is a nonresident licensee in Texas and every year completes his state's continuing education requirements. When they ask you for advice on meeting the Texas continuing education requirements, you inform them that Neither Steven nor Janet needs to comply with Texas's continuing education requirements. Both Steven and Janet must comply with Texas's continuing education requirements. Only Steven must complete Texas's continuing education requirements. Only Janet must complete Texas's continuing education requirements. - ANSWER-Neither Steven nor Janet needs to comply with Texas's continuing education requirements. Because Janet has continuously held a Texas insurance license for at least 20 years, she is exempt from the state's continuing education requirements. The Texas Department of Insurance has found that ABT Insurance has consistently failed to promptly respond to policyholder communications regarding claims. This means that it typically fails to respond within: 15 days 30 days 60 days 90 days - ANSWER-15 days Who is the contingent beneficiary, second level, in the following beneficiary designation: "Sally Grant, wife of the insured, if she survives the insured; otherwise in equal shares to surviving children of the insured, if any; otherwise to Frank Grant, brother of the insured." Sally Grant the surviving children Frank Grant the insured's estate - ANSWER-Frank Grant The surviving children are contingent beneficiaries, first level. Which of the following statements regarding the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association is correct? A producer may tell applicants their purchase of a life insurance policy will be protected even if the insurer becomes insolvent. Neither a producer nor an insurer may use the existence of the guaranty association to sell insurance covered by the association. A producer may not use the existence of the guaranty association to sell insurance, but insurers are permitted to do so in their advertising. An insurer may not use the existence of the guaranty association to market insurance, but producers are permitted to do so when meeting with an applicant for insurance. - ANSWER-Neither a producer nor an insurer may use the existence of the guaranty association to sell insurance covered by the association. As a collateral assignee, Ned has first claim on the policy for the amount of the assignment. In these cases, what happens to the death benefit if the policyowner dies? The insurer pays the assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary. The insurer pays the assignee the entire death benefit. The assignee and beneficiary split the death benefit. The policyowner decides at the time of the assignment how to divide up the death benefit. - ANSWER-The insurer pays the assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary. Which of the following is NOT a standard category of life insurance? individual insurance industrial insurance qualified insurance participating insurance - ANSWER-qualified insurance With respect to life insurance settlement options, the term 'without life contingency' means: The death benefit payout is based on a specified period or amount, not on the life of the beneficiary. The beneficiary is a non-human entity. The benefit is paid out for as long as the beneficiary lives, however long that may be. The beneficiary is not permitted to choose the settlement option under any circumstances. - ANSWER-The death benefit payout is based on a specified period or amount, not on the life of the beneficiary. All the following statements about the paid-up dividend option with participating life insurance are correct, EXCEPT: The paid-up insurance option lets the policyowner use the dividends to pay up the life insurance policy early. A policyowner who chooses this option could pay up a whole life policy several years early, depending on the policy. After the policy is paid up, the policyowner does not owe any more premiums. The policy benefits will continue in force only until the policyholder reaches age 65. - ANSWER-The policy benefits will continue in force only until the policyholder reaches age 65. To be eligible for participation in an employer's Simplified Employee Pension (SEP) plan, an employee must meet all the following requirements EXCEPT: The employee must have worked for the employer during at least three of the previous five years. The employee must have received a minimum specified amount in annual compensation. The employee must be 21 or older. The employee must own at least 5 percent or more of the business or be recognized as a key employee. - ANSWER-The employee must own at least 5 percent or more of the business or be recognized as a key employee. With respect to annuity taxation, what purpose does the exclusion ratio serve? to determine the portion of each annuity payment that is taxable to determine the portion of each annuity payment that is excluded from tax to determine the portion of each annuity payment that is subject to a penalty tax to determine the portion of each annuity payment that is exempt from a penalty tax - ANSWER-to determine the portion of each annuity payment that is excluded from tax A cancellable health insurance policy gives the insurer the right to do which of the following? cancel the policy or increase the premium only on the policy's anniversary date cancel the policy only on the policy's anniversary date but increase the premium at any time cancel the policy or increase the premium at any time by giving written notice require the insured to furnish evidence of insurability to renew the policy - ANSWER-cancel the policy or increase the premium at any time by giving written notice May one person qualify as a group and be eligible for group health insurance coverage? Yes, in some states a business group of one can qualify as a small group. Yes, if the coverage includes dependents. Yes, if the business is not a sole proprietorship. No, one person never constitutes a business group. - ANSWER-Yes, in some states a business group of one can qualify as a small group. For estate tax purposes, what is the value of any life insurance policy a person owns at his or her death? It is generally includible in the valuation of his or her estate. It is fully deductible from the insured's estate. It is subject to estate taxes at the beneficiary's death. It is includible in the beneficiary's estate. - ANSWER-It is generally includible in the valuation of his or her estate. Alpha Corporation pays the premiums for its group medical, dental, disability, and long-term care insurance plans. Which statement is correct about the income tax consequences? The premiums for all of the policies are taxable income to the employees. The premiums are deductible income to the employees. Alpha can take an income tax deduction for all of the premiums it pays for all of the policies. Alpha can take an income tax deduction only for the premiums it pays for its medical plans. - ANSWER-Alpha can take an income tax deduction for all of the premiums it pays for all of the policies. Premier Health Company is an HMO that is operating in several states. It wants to offer coverage in Texas but is not sure what is required under Texas law, and has asked you for advice. You inform Premier that it must meet all of the following requirements before it can operate in Texas EXCEPT: Obtain a fidelity bond of at least $100,000 on its officers and employees. Obtain a certificate of authority from the Texas Department of Insurance. Maintain a minimum net worth of $1.5 million. Receive at least $1 million annually in premiums. - ANSWER-Receive at least $1 million annually in premiums. All the following statements about increasing term insurance policies are correct EXCEPT: The premium is higher than that for a level term policy starting out with the same face amount. The premium increases over the term of the policy. The death benefit increases over the term of the policy. The increasing term coverage is typically provided by a rider on a base policy. - ANSWER-The premium increases over the term of the policy. ERISA protects enrollees in an employer-sponsored health care plan in each of these ways EXCEPT: ensuring access to information about the plan guaranteeing immediate processing of claims permitting temporary continuation of terminated group coverage. review of a coverage dispute - ANSWER-guaranteeing immediate processing of claims Beth is a senior vice president at Acme Insurers. While reviewing some health insurance claims, she discovers that one of the company's agents has been filing illegal claims for financial gain. After discovering the fraudulent insurance act, Beth must notify the Texas Attorney General within 60 days to begin criminal proceedings against the agent. report the information in writing to the Texas Department of Insurance within 30 days notify the Texas Insurance Fraud Unit in writing within the next six months notify the insurance agent and revoke his or her license - ANSWER-report the information in writing to the Texas Department of Insurance within 30 days Jason is a new agent and will be meeting with a potential client to discuss life insurance policies. He is not sure what type of questions he can ask the applicant about his sexual orientation or exposure to HIV, and has come to you for advice. You advise Jason correctly that he can never ask questions about whether the applicant has been diagnosed with AIDS. he can ask questions to determine the applicant's sexual orientation. the insurer can require the applicant to take an HIV-related test. [Show Less]
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Webce Insurance test questions and Answers Graded A+
Agent Thompson received a letter from the Department of Insurance asking her to provide proof of completing the continuing education requirements. Within h... [Show More] ow many days must Agent Thompson respond to the Department's inquiry? 20 30 10 45 - ANSWER-10 days Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy? She must move to Pennsylvania. She must surrender her Ohio license. She must be sponsored by a producer licensed in Pennsylvania. She must show her Ohio license is in good standing. - ANSWER-She must show her Ohio license is in good standing The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance to fund future cash needs using life insurance as a speculative investment on another person's life overusing life insurance designating an ineligible person as the policy beneficiary - ANSWER-using life insurance as a speculative interest on another person's life Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? group life insurance industrial life insurance ordinary term insurance ordinary whole life insurance - ANSWER-industrial life insurance Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? the policy's cash value her ability to borrow an interest-free loan from the cash value policy dividends payment of premiums on Sylvia's behalf in the event of emergencies - ANSWER-the policy's cash value Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request? The insurer divides the annual premium by 12 and then adds a modest charge. The insurer simply divides the annual premium by 12. The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year. The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12. - ANSWER-The insurer divides the annual premium by 12 and then adds a modest charge All of the following statements about key person life insurance are correct, EXCEPT: The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Key person, or key employee, life insurance is an example of third-party ownership. Life insurance used as key person life is normally owned by the business rather than the insured. - ANSWER-XXX Upon the insured employee's death, the employee's surviving family receives the policy benefit XXX The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called: field underwriting fiduciary process agency development due diligence - ANSWER-field underwriting How is increasing term life insurance normally sold? as an endorsement as a permanent insurance policy as a stand-alone term life insurance policy as a rider attached to a permanent life insurance policy - ANSWER-as a rider attached to a permanent insurance policy Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT: The policy provides $300,000 of coverage until Andrea reaches age 55. The policy will generate a cash value that is payable at age 55. It is possible that Andrea could convert the term policy to a life insurance policy that provides coverage for Andrea's entire life even if she becomes uninsurable. The premium for the policy stays the same until the policy expires. - ANSWER-XXX The policy will generate a cash value that is payable at age 55 XXX The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability convert the term policy to a permanent life insurance policy renew the policy with a higher face amount without having to provide evidence of insurability renew the policy at lower current rates rather than guaranteed renewal rates - ANSWER-renew the policy at lower current rates rather than guaranteed renewal rates Term life insurance is well suited for all the following needs EXCEPT: mortgage protection a source of emergency cash for any financial need inexpensive protection until the policyowner can afford permanent life insurance protection while the family children are living at home or attending college - ANSWER-XXX a source of emergency cash for any financial need XXX Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance? straight whole life current assumption whole life limited pay whole life graded premium whole life - ANSWER-current assumption whole life Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? 10-pay whole life single premium whole life graded premium whole life modified premium whole life - ANSWER-graded premium whole life Which one of the following statements about variable life insurance is correct? Variable life policyowners can invest all of their premiums in the insurer's general account. Subaccounts are managed within the insurer's general account. Variable life policyowners can choose flexible premium payment schedules. With a variable life insurance policy, the policyowner assumes most of the investment risk. - ANSWER-With a variable life insurance policy, the policyowner assumes most of the investment risk. Which of the following statements best explains the basic level premium concept of ordinary whole life insurance? The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age. Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance. The death benefit is decreased to offset the rising cost of insurance with age. The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level. - ANSWER-the steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age All the following statements about ordinary (straight) whole life insurance are correct EXCEPT: The insured pays premiums for his or her entire life. Premiums remain level. The death benefit increases during the early policy years and then levels off. It has a steadily increasing cash value. - ANSWER-XXX the death benefit increases during the early policy years and then levels off XXX Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct? Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time. Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time. Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's. - ANSWER-barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time Unlike traditional fixed interest UL policies, many variable universal life policies offer a third death benefit option, which provides a guaranteed minimum death benefit equal to: he policy's net amount at risk plus its cash value the policy's net amount at risk plus its cash value minus the sum of premiums paid the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid the policy's net amount at risk plus its cash value plus the sum of premiums paid - ANSWER-the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy? from the cash value after the premium has been deposited to it from the premium payment before it is credited to the policy's cash value once, when the first premium is paid at the start of each policy year - ANSWER-from the premium payment before it is credited to the policy's cash value Jack bought a life insurance policy that will provide a lump-sum death benefit plus a ten-year stream of income should he die before a specified date. Five years after purchasing the policy, before the specified date, Jack died and the policy began paying a monthly benefit to his family for ten years. What type of policy did Jack buy? ten-year family maintenance policy ten-year family income policy survivorship life insurance policy ten-year family protection policy - ANSWER-ten-year family maintenance policy All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT: Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death. Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. Joint life insurance is especially popular in the estate planning market. Survivorship life insurance pays the death benefit upon the death of the second insured. - ANSWER-XXX joint life insurance is especially popular in the estate planning market XXX How does a family income policy differ from a family maintenance policy? A family income policy combines whole life insurance with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term. - ANSWER-A family income policy combines whole life with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance Endowment contracts are NOT considered life insurance (for tax purposes) because: They never mature. They endow before age 120. They do not pay a death benefit if the insured dies before the contract matures. They do not build cash values. - ANSWER-they endow before age 120 Which statement is correct if a group offers noncontributory group life insurance? The employer must pay most of the premiums. The employees must pay part of the premiums. The plan must cover at least 75 percent of eligible group members. The plan must cover 100 percent of eligible group members. - ANSWER-the plan must cover 100% of eligible group members All the following statements about standard policy exclusions are correct EXCEPT: Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. The war exclusion usually excludes paying the death benefit only if the death directly resulted from war. The war and commission of a felony exclusions are required by law. If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk. - ANSWER-XXX the war and commission of a felony exclusions are required by law XXX Which of the following most accurately describes who can be a life insurance policy beneficiary? The beneficiary must have an insurable interest in the insured. The beneficiary can be anyone as long as it is a natural person. The beneficiary must be a blood relative of the insured. It can be virtually any person or entity the policyowner chooses. - ANSWER-it can be virtually any person or entity the policyowner chooses Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid? Sue Reggie's estate Mary Carl - ANSWER-Carl Which of the following most correctly describes the option(s) available with a universal life insurance policy the owner no longer wishes to maintain? surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions surrender the policy for its cash value, convert it to extended term insurance, or convert it to paid-up whole life insurance surrender the policy for its cash value or convert it to extended term insurance surrender the policy for its cash value or convert it to paid-up whole life insurance - ANSWER-surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions If a permanent life insurance policy lapses and the owner does NOT select a nonforfeiture option, the insurer will automatically: suspend coverage until the policyowner either reinstates or surrenders the policy apply the extended term insurance option surrender the policy and pay out the cash value apply the reduced paid-up option - ANSWER-apply the extended term insurance option All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT: If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends. The paid-up policy will not build any more cash value. A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis. A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid. - ANSWER-XXX the paid-up policy will not build any more cash value XXX The automatic premium loan (APL) provision does which of the following? prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities provides liquidity if the insured wants to increase a policy's face amount improves the policyowner's credit rating - ANSWER-prevents a life insurance policy from lapsing if the policyowner fails to pay a premium With a variable life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy - ANSWER-75-90% of the cash value, less any outstanding debt against the policy With a traditional whole life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy - ANSWER-100% of the cash value, less any outstanding debt against the policy If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium? It increases. It fluctuates up and down thereafter. It stays level. It goes down. - ANSWER-it goes down Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option? one-year term life insurance extended-term insurance one-year permanent insurance renewable term insurance - ANSWER-one-year term life insurance Which of the following correctly describes the two basic categories of life insurance settlement options? period certain and refund straight life and survivorship fixed period and fixed amount [Show Less]
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