CEBS - GBA 1 & 2 Practice Exam 2023-2024 with
complete solution
Which of the following statements correctly describes the negotiated placement method
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of marketing a group benefits plan? - answer -Once potential insurers are identified,
each company submits a brief report that highlights its general strategy, philosophy and
proposed group benefits plan
Which of the following statements correctly describes eligibility requirements under most
group insurance plans? - answer -Unmarried children under a specified age and
dependent on the plan member for support are eligible for coverage
True North Insurance has established a waiver-of-premium reserve of $100,000 and will
have to pay out an optional life insurance benefit of $200,000. With an interest rate of
6% compounded annually, how many years will it take for the reserve of $100,000 to
accumulate to $200,000? - answer -12 years (Use the relationship between future
value and present value to solve for the number of time periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value table. With an
interest rate of 6%, it will take 12 years to accumulate to a sum of $200,000 (or
2.01220).)
Which of the following statements correctly describes a group insurance policy? -
answer -It is issued on a group of individuals for protection against financial hazards,
such as death, accident and sickness
Last year, a small town reported that 20 people under the age of 50 died. If the
population of people under the age of 50 in the town is 10,000, what is the probability of
a resident under the age of 50 dying? - answer -0.2% (Probability of a resident under
the age of 50 dying is 20/10,000 = 0.002 = 0.2%.)
Which of the following statements correctly describes the predictability of an event and
the cost of insurance under a group benefits plan? - answer -An out-of-country
emergency is an unforeseen event with a potentially high cost (Disability is an
unforeseen event with a potentially high cost. Option C: Basic dental services are a
predictable event with a low cost. Option D: Paramedical services are an unforeseen
event with a low cost.)
Which of the following statements best describes individual large amount pooling? -
answer -It protects the plan sponsor from claims payments with respect to any one
insured individual in excess of the pooling limit or pool ceiling.
Nevaeh works full¬time as a business manager on her family's dairy farm. She has an
allergy to grain that is triggered by direct contact. If she becomes sick and is unable to
work, she loses her only source of income and her lifestyle will change significantly.
Which of the following risk management approaches would BEST address Nevaeh's
need to protect her income? - answer -Transfer the risk of becoming sick (Assuming
Nevaeh wants to stay in farming, avoidance is not an option. Nevaeh can do everything
she can to take measures to reduce her exposure, but if becoming sick jeopardizes her
only source of income, Option C, purchasing insurance, is the best option.)
Under the coordination-¬of-¬benefits (COB) provision, which of the following plans is
the first payer in respect of a claim for a covered dependent child under a singlecustody arrangement? - answer -Plan of the parent with custody of the child
In terms of designing a group benefits plan, which of the following statements correctly
describes a benefit/needs-oriented philosophy? - answer -An example of a needsoriented benefit is health care
Which of the following statements correctly describes static tables and tables with
projection? - answer -In "mortality tables with projection," it is assumed that the
mortality rate at a particular age will improve in the future by a certain percentage per
year (Static tables include mortality rates that are not adjusted for expected future
mortality improvements. Option B: Instead of replacing tables, actuaries typically make
adjustments for unexpected improvements in mortality. Option C: Setbacks method
uses the same mortality rate but assumes that it applies to a lower age.)
Which of the following statements correctly describes participation ratios in a benefits
plan? - answer -A noncontributory life insurance plan with liberal eligibility requirements
should have a reasonably high participation ratio (The level of benefits under a
mandatory, noncontributory life insurance plan does not affect participation ratios.
Option C: An optional life insurance plan should have a lower participation ratio if
eligibility requirements are tight. Option D: The level of plan member contributions under
a voluntary, contributory plan has an impact on participation ratios.)
Vivienne's health care plan pays a maximum of $5,000 if she is hospitalized. She was
recently hospitalized and her actual expenses were $4,000. Vivienne's insurer will pay
the actual amount of expenses and not the $5,000 maximum stipulated in the plan. This
is an example of: - answer -A contract of indemnity (A valued contract specifies in
advance the amount payable when a loss occurs regardless of the actual loss amount.
Option B: Face value is the amount of insurance payable under the policy. Option D:
Liability risk is the risk of economic loss resulting from an individual being held
accountable for harming others or their property.)
Which of the following statements correctly describes processing health care claims
under a group benefits plan? - answer -The plan member must submit a completed
claim form and written proof of the expense within a specified time period to recover
eligible expenses
Which of the following statements correctly describes marketing a group benefits plan? -
answer -If a plan sponsor decides to cancel a plan, it typically must notify the insurer
within 30 to 60 days before the effective date of cancellation
How is the funding arrangement for a nonunionized single-employer plan determined? -
answer -By the amount the employer is willing and/or able to contribute from revenue
Which of the following statements correctly describes an income replacement benefit
provided under a group benefits plan? - answer -Sick leave plans typically provide full
pay for absences from work due to sickness or injury for a short period (A long-term
disability (LTD) plan is the most common method of providing extended income
replacement benefits to plan members who are disabled and unable to work due to
prolonged illness or injury. Option C: Salary continuance plans typically provide benefits
for the full period of short-term disability up to the end of the elimination period under an
LTD plan. Option D: An LTD plan typically replaces 55¬-75% of a disabled plan
member's gross earnings, subject to a maximum monthly amount.)
Which of the following statements correctly describes the financial accounting of a selfinsured group benefits plan using a billed-in-advance administrative services only (ASO)
arrangement with an insurer? - answer -Year-end plan surpluses may be carried
forward as a positive cash balance to the next contract period for payment of claims
Eagle Assurance is expecting to pay total death benefits of $150,000 at the end of four
years. Assuming the interest rate is 6% per year compounded semiannually, what
reserve level must be held today to meet this future obligation? - answer -$118,412:
Use the present value formula or present value table to determine the reserv [Show Less]