Final Exam California Life, Accident, and Health Insurance 152 Questions with Answers
What is considered to be any situation that has the potential for
... [Show More] loss? - CORRECT ANSWER Loss exposure
An insurance policy issued in California may be called a "comprehensive long-term care" insurance policy if it provides benefits for - CORRECT ANSWER Institutional (nursing facilities) and home care
(To be called a comprehensive LTC policy, a policy must provide at least some benefits for facility care and home care.)
Employer contributions to qualified plans are
A) tax-deductible by the employer
B) taxable to the employee
C) only available for key employees
D) only found in 403(b) plans - CORRECT ANSWER Tax deductible by the employer
According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwillfully commits an unfair method of competition? - CORRECT ANSWER $5,000
A unilateral contract is one in which - CORRECT ANSWER only one party (the insurer) makes any kind of legally enforceable promise
Disabled workers are covered under Workers' Compensation medical expense benefits for how long? - CORRECT ANSWER no limit
An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? - CORRECT ANSWER Exclusion ratio
The elimination period in a disability income policy serves the same purpose as a(n) ___ in medical expense policy. - CORRECT ANSWER deductible
Which of the following is NOT considered to be an unfair claims settlement practice? - CORRECT ANSWER Advising a claimant to hire an attorney
What type of license is required for an individual who charges a fee to review an insured's existing life insurance policy? - CORRECT ANSWER Life and disability analyst
What is considered to be the definition of disability, according to Social Security? - CORRECT ANSWER Unable to engage in any substantial gainful activity
Which statement is true regarding policy dividends?
A) Dividends are always guaranteed
B) Nonparticipating policies issue dividends
C) Dividends are always taxable
D) A dividend option is selected by the insured at the time of policy purchase - CORRECT ANSWER A dividend option is selected by the insured at the time of policy purchase
Which of the following is NOT considered to be insurer expenses?
A) Maintenance costs
B) Policy premiums
C) Employees' salaries
D) Utilities - CORRECT ANSWER Policy premiums
How is a Medicare claim submitted? - CORRECT ANSWER Expenses are submitted to Medicare by the health provider
Which of the following risk classifications charges the lowest premium?
a) Preferred
b) Standard
c) Level
d) Substandard - CORRECT ANSWER preferred
Which of the following is NOT included under long-term care insurance?
a) Adult day care
b) Custodial care
c) Hospital acute care
d) Respite care - CORRECT ANSWER Hospital acute care
When calculating life insurance premium rates, which component is affected by an insured's age and gender? - CORRECT ANSWER mortality
Which of the following is NOT a benefit of insurance?
A) Losses due to fraud are eliminated
B) Reduces the uncertainty of loss exposures
C) Makes a loss whole again
D) Source of investment funds - CORRECT ANSWER Losses due to fraud are eliminated
Minimum participation standards exist for group health insurance plans in order to - CORRECT ANSWER prevent adverse selection
Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this? - CORRECT ANSWER Waiver of premium provision
Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a - CORRECT ANSWER Joint Life Policy
When handling premiums for an insured, an agent is acting in which capacity? - CORRECT ANSWER Fiduciary
Individuals become eligible for Medicare Part A benefits at what age? - CORRECT ANSWER 65
Which of these is NOT a relevant factor in the health insurance principle of morbidity?
A) Age
B) Intelligence
C) Occupation
D) Health - CORRECT ANSWER Intelligence
Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct?
a) Jim is not required to disclose the conviction on his insurance license application.
b) Jim must still disclose the conviction on his insurance license application.
c) Only convictions that have been expunged within the last 3 years need to be reported on an insurance license application
d) Only expunged felonies are required to be reported on an insurance license application - CORRECT ANSWER Jim must still disclose the conviction on his insurance license application
What distinguishes a deferred annuity from an immediate annuity? - CORRECT ANSWER The time at which benefit payments start
If an insured dies because of an accident, which type of life insurance rider will provide additional coverage? - CORRECT ANSWER Accidental death rider
Lynn owns a life policy that guarantees the right to renew the policy each year, regardless of health, but at an increased premium. What kind of policy is this? - CORRECT ANSWER Renewable term
When an accidental death benefit is added to a whole life policy, how does this affect the policy's cash value? - CORRECT ANSWER The policy's cash value is not affected.
When must insurance agents and brokers make their insurance records available to the Commissioner? - CORRECT ANSWER At all times
Which term describes the increase in the probability of a loss due to an insured's dishonest tendencies? - CORRECT ANSWER moral hazard
Who does a life settlement broker represent? - CORRECT ANSWER Individual wanting to sell their life policy to a 3rd party
"Life insurance creates an immediate estate." This phrase means that: - CORRECT ANSWER When the insured dies, a death benefit is paid.
An insurer having a large number of similar exposure units is considered important because - CORRECT ANSWER The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
Which of the following is NOT a feature of equity-indexed annuities?
a) Offers long term inflation protection
b) Offers a minimum guaranteed rate
c) Offers a maximum interest rate that increases annually
d) Offers protection during a decline in the stock market - CORRECT ANSWER Offers a maximum interest rate that increases annually
What is a common reason people purchase an annuity? - CORRECT ANSWER To protect against the risk of outliving their financial resources
(An annuity is a long-term investment that is issued by an insurance company and is designed to help protect you from the risk of outliving your income.)
A Spendthrift Clause in a life insurance policy
A) permits the beneficiary to borrow from a policy's cash value
B) evenly distributes benefits among all named living beneficiaries
C) assigns a policy's face amount to the insured's estate if the beneficiary dies before the insured
D) restricts the ability of the beneficiary to assign benefits - CORRECT ANSWER D) restricts the ability of the beneficiary to assign benefits
(It also protects life insurance proceeds from creditors.)
Which type of health insurance policy cannot be canceled by the insurer nor increase the premiums? - CORRECT ANSWER Non-cancellable Policy
Buy-sell plans are typically funded by which two types of insurance? - CORRECT ANSWER Life insurance
&
Disability insurance
(A buy and sell agreement is a legally binding contract that stipulates how a partner's share of a business may be reassigned if that partner dies or otherwise leaves the business. Most often, the buy and sell agreement stipulates that the available share be sold to the remaining partners or to the partnership.)
How long must life agents keep their transaction records? - CORRECT ANSWER 5 years
Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilege?
a) Convert within 31 days
b) Convert up to the previous amount of group coverage
c) Provide proof of insurability
d) Premium must be paid - CORRECT ANSWER Provide proof of insurability
What time period allows an insured's life insurance policy to remain in force even if the premium was not paid on the due date? - CORRECT ANSWER grace period
A contract that involves one party which indemnifies another when a loss arises from an unknown event is called a(n) - CORRECT ANSWER insurance policy
All of the following are considered characteristics of group life insurance, EXCEPT
a. certificates of insurance
b. conversion privilege
c. individual policies
d. master policy - CORRECT ANSWER Individual policies
Restoring an insured to the same condition as before a loss is an example of the principle of - CORRECT ANSWER indemnity
According to the PPACA, an adult can be covered by a parent's health care plan until what age? - CORRECT ANSWER age 26
Which of the following does NOT have to be included on life insurance policy illustrations?
a) Age of the insured
b) Name of the agent
c) Statement that all values and benefits are guaranteed
d) Name of the insurer - CORRECT ANSWER Statement that all values and benefits are guaranteed
(Not all benefits and values are guaranteed in life insurance policies. Some have non-guaranteed values which must be described in the illustration.)
Manuel is considered to be a disabled person as defined by the Americans with Disabilities Act (ADA). As such, he is unable to perform which of the following life activities?
a) Communicating
b) Breathing
c) Driving
d) Hearing - CORRECT ANSWER driving
Which of the following is a situation where there is a possibility of either a loss or a gain?
A) Hazard
B) Pure risk
C) Speculative risk
D) Peril - CORRECT ANSWER Speculative risk
The California Insurance Code defines "policy" as a(n) - CORRECT ANSWER written contract
How many "activities of daily living" must an insured be UNABLE to perform in order to meet the chronically ill requirement of a Long-Term Care policy? - CORRECT ANSWER Minimum of two activities of daily living
A contract requires an ___________________ & ___________________ of the contract terms. - CORRECT ANSWER an offer and acceptance of the contract terms
Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of? - CORRECT ANSWER theft
An insurance policy written after 1988 that fails to pass the seven-pay test is known as a - CORRECT ANSWER Modified Endowment Contract (MEC)
After a policy has lapsed, which provision allows the insured to continue coverage? - CORRECT ANSWER Reinstatement provision
Tim 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? - CORRECT ANSWER conversion
Which of the following does specified disease insurance NOT cover? - CORRECT ANSWER costs covered by medical expense insurance
Who would be most likely to submit a Medicare Part A claim? - CORRECT ANSWER hospital
An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n): - CORRECT ANSWER life agent
According to the PPACA, the medical enrollment tier that has 80% actuarial value is called - CORRECT ANSWER gold
According to the California Insurance Code, which of the following is NOT an example of an insurable event?
a) An insured suffers a financial loss in the state lottery
b) A guest is injured by a fall from the insured's driveway
c) An insured is sued for unintentional slander of another person
d) An insured is admitted to the hospital for delivery of a newborn - CORRECT ANSWER An insured suffers a financial loss in the state lottery
(An insurable event can be defined as "any event which may cause a loss to a person with insurable interest." A lottery or its outcome cannot be insured against.)
According to the California code governing claim settlement practices, which of the following is NOT considered to be an act of unfair discrimination?
a) denial of a claim based on race
b) denial of a claim based on religion
c) denial of a claim based on ethnicity
d) denial of a claim based on reckless behavior - CORRECT ANSWER Denial of a claim based on reckless behavior
Which of these statements is NOT true concerning recurrent disabilities?
a) The insurer continues coverage after a new elimination period
b) The recurrence of a disability must occur within a specified time period after the prior disability
c) A recurrent disability is considered to be a continuation of the prior disability
d) The recurrent disability must be caused from the original disability - CORRECT ANSWER a) The insurer continues coverage after a new elimination period.
(The recurrent disability insurance provision is designed to make sure that a person does not have to go through more than one elimination period within a certain period of time.)
What type of changes can be made to a "guaranteed renewable" health insurance policy? - CORRECT ANSWER The premium rates of the policyowner
(Guaranteed renewable policies normally have increasing premiums after renewal.)
Which of the following is NOT typically covered under vision care insurance?
a) eyeglasses
b) examinations
c) contacts
d) eye surgery - CORRECT ANSWER eye surgery
Kimberly is an employee on leave under the Family and Medical Leave Act (FMLA). What will happen to her group health coverage? - CORRECT ANSWER She continues to be enrolled during the leave
Which of the following is NOT a factor in determining the morbidity of a group of individuals?
a) Health
b) Occupation
c) Age
d) Race - CORRECT ANSWER race
How are Roth IRA's treated for tax purposes?
a) Fully tax deductible
b) Not tax deductible
c) Partially tax deductible
d) Conditionally tax deductible - CORRECT ANSWER Not tax deductible
(Non-deductible contributions and tax-free distributions)
Which of the following describes a contributory group insurance plan?
a) All of the premium is paid by the employer.
b) Part of the premium is paid by the employee.
c) Employees are eligible for policy dividends.
d) Federal government contributes a portion of the employee's premium. - CORRECT ANSWER Part of the premium is paid by the employee.
Which of the following is NOT considered a definition of risk?
a) The potential for loss
b) The cause of a loss
c) Exposure to danger
d) Uncertainty - CORRECT ANSWER The cause of a loss
What is the purpose of the Pre-Existing Condition Insurance Plan (PCIP)? - CORRECT ANSWER PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions
Which of the following is NOT required in the content of a policy?
a) Parties involved in the contract
b) Period to which the coverage exists
c) Probability of loss
d) Risk insured against - CORRECT ANSWER Probability of loss
When a life insurance policy is surrendered, how does the cost recovery rule apply? - CORRECT ANSWER The policy's cost basis is exempt from taxation
When a claimant has coverage under more than one health plan, which group medical plan provision applies?
A) Legal actions
B) Notice of claim
C) Time of payment of claims
D) Coordination of benefits - CORRECT ANSWER coordination of benefits
The California Insurance Code allows an individual how many days to cancel a life policy for a full-refund? - CORRECT ANSWER Between 10 and 30 days
Which of the following terms is NOT associated with a Major Medical policy?
a. Stop-loss
b. Comprehensive
c. Deductible
d. Capitation - CORRECT ANSWER Capitation
(Capitation is the method in which HMO providers are paid.)
Who is eligible for retirement benefits under Social Security? - CORRECT ANSWER Fully insured workers
(Social Security retirement benefits are only available to covered workers who are fully insured upon retirement.)
A report which is based on creditworthiness and personal characteristics that influences an insurance applicant's eligibility for life and health insurance is called a(n) - CORRECT ANSWER Consumer report
Rating an individual's need for long-term care benefits can be measured by - CORRECT ANSWER activities of daily living
Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n) - CORRECT ANSWER deductible
Which of the following pieces of information is NOT gathered during the personal financial planning process?
a) An individual's assets
b) An individual's expenses
c) An individual's income
d) An individual's civic organization memberships - CORRECT ANSWER An individual's civic organization memberships
An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called? - CORRECT ANSWER Reinsurance
Who are the parties to the master contract in a group life insurance policy? - CORRECT ANSWER Insurer and employer
Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss"? - CORRECT ANSWER Indemnity contract
Which of the following is NOT a provision in a disability income policy?
a) Change of occupation provision
b) Recurrent disability provision
c) Deductible and coinsurance provision
d) Elimination period provision - CORRECT ANSWER Deductible and coinsurance provision
What does the term coinsurance refer to?
a) The stated initial dollar amount that the individual insured is required to pay before insurance benefits are paid
b) The amount the Federal government pays after the deductible is met
c) A situation where two insurance policies cover the same claim
d) After the deductible is satisfied, the percentage paid by the insured for the remaining covered expenses - CORRECT ANSWER d) After the deductible is satisfied, the percentage paid by the insured for the remaining covered expenses
In regards to a group health insurance plan, which statement is CORRECT?
A) A contributory group health plan must cover at least 50% of all eligible members
B) A non-contributory group health plan must cover all eligible members
C) A minimum of 75% of eligible members is required for a non-contributory group health plan
D) A contributory group health plan only requires participation of key employees - CORRECT ANSWER A non-contributory group health plan must cover all eligible members.
(100%)
The objective of underwriting is to - CORRECT ANSWER avoid selecting a disproportionate number of bad risks
The reason for social insurance is to
A) provide more products for agents to sell
B) create dependents of government
C) grow the U.S. economy
D) protect certain vulnerable segments of the population - CORRECT ANSWER protect certain vulnerable segments of the population
Premiums are best described as
A) money paid by the insurer for settling a claim
B) money paid by the insured to acquire a policy's benefits
C) the amount an insured pays per unit of coverage
D) commissions payable to the writing agent - CORRECT ANSWER the amount an insured pays per unit of coverage
The insurer has the option of terminating a health insurance policy on a date stated in the contract. What type of policy is this?
a) Optionally renewable
b) Renewable
c) Conditionally renewable
d) Cancellable - CORRECT ANSWER Optionally renewable
Which of the following would be considered an activity of daily living under a long term care policy?
a) Bathing
b) Running
c) Working
d) Breathing - CORRECT ANSWER Bathing
Which type of worker has Social Security benefits available to them? - CORRECT ANSWER fully insured
Which of the following are two examples of activities of daily living (ADL's) used in qualifying for long-term care benefits? - CORRECT ANSWER Eating and dressing
(The six ADLs: bathing, dressing, transferring, eating, toileting, and continence)
Which type of risk is gambling? - CORRECT ANSWER Speculative risk
The elimination period in a disability income policy serves the same purpose as - CORRECT ANSWER deductible
Life insurance surplus must be distributed to policyowners at what frequency? - CORRECT ANSWER Annually
When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called - CORRECT ANSWER Underwriting
What is considered the most common type of specified disease insurance policy? - CORRECT ANSWER cancer
Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose? - CORRECT ANSWER Interest option
What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code? - CORRECT ANSWER Presentation of policy features that includes non-guaranteed elements
When calculating life insurance premium rates, which component would an agent's commission fall under? - CORRECT ANSWER Insurer's expenses
Any changes in background information that occur after a producer application has been submitted or a license has been issued MUST be reported to the Insurance Commissioner within - CORRECT ANSWER 30 days
Which of the following is a characteristic of the disability elimination period?
a) Benefits are optionally payable
b) Benefits are conditionally payable
c) Benefits are unconditionally payable
d) Benefits are not payable - CORRECT ANSWER Benefits are not payable
All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT
a) Loss cannot be catastrophic
b) Probability of loss is unknown
c) Highly predictable losses
d) Loss must be measurable - CORRECT ANSWER Probability of loss is unknown
What is the price of insurance for each exposure unit? - CORRECT ANSWER rate
Which statement about Health Maintenance Organizations is NOT true?
a) Members minimize out-of-pocket expenses by using HMO network providers
b) Subscribers pay a fixed periodic fee to the HMO
c) HMOs are known for stressing preventive care
d) When a member uses out-of-network providers, a higher monthly fee is charged - CORRECT ANSWER When a member uses out-of-network providers, a higher monthly fee is charged
Which of the following is an insurer established by a parent company for the purpose of insuring the parent company's loss exposures? - CORRECT ANSWER Captive insurer
Why is a life insurance policy's delivery date important? - CORRECT ANSWER The free-look period begins on the policy delivery date
What is an "'insurance broker" according to California Insurance Code? - CORRECT ANSWER A person compensated for transacting insurance on behalf of another person with an insurer
Which of the following healthcare providers provides both the healthcare services and healthcare coverage? - CORRECT ANSWER Health Maintenance Organization (HMO)
Health insurance policies typically contain a provision stating that insureds and their insurer will share covered losses in an agreed proportion. Which provision does this refer to? - CORRECT ANSWER coinsurance
In California, the elderly can receive information about health related issues from - CORRECT ANSWER Health Insurance Counseling and Advocacy Program (HiCAP)
Which statement is CORRECT when describing a contract of adhesion? - CORRECT ANSWER Contract may be accepted or rejected by the insured
John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this? - CORRECT ANSWER participating
Which of the following statements do NOT apply to child coverage in a family policy? - CORRECT ANSWER Only children born prior to policy's issue date may be included
Medicare Part A covers what type of care? - CORRECT ANSWER Skilled nursing facility care
When intentional concealment is involved, what course of action is the injured party entitled to? - CORRECT ANSWER Rescission of the contract
A health insurance policy paid on a quarterly basis has a grace period of - CORRECT ANSWER 31 days
In order to be considered "currently insured" under Social Security, an individual must be credited with: - CORRECT ANSWER 6 quarters of coverage during the last 13-quarter period
The Medical Information Bureau consists of - CORRECT ANSWER life and health insurance companies
The Human Life Value concept is based on - CORRECT ANSWER income
Which of these statements correctly describes risk? - CORRECT ANSWER Pure risk is the only insurable risk
What effect did the Pregnancy Discrimination Act have on the health industry? - CORRECT ANSWER Pregnancy must be treated as any other medical condition
According to the California Insurance Code, who is responsible for submitting a life agent's appointment? - CORRECT ANSWER insurer
Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors? - CORRECT ANSWER charge a fee
The free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30 days
An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n) - CORRECT ANSWER unfair method of competition
Under a health insurance policy, the provision that states the kind of benefits provided and the circumstances under which they will be paid is called the? - CORRECT ANSWER Insuring clause
Individuals age 65 or older are exclusively eligible for which optional program? - CORRECT ANSWER Medicare Part B
Retirement plans cannot favor highly compensated employs. The government regulation that prevents this from happening is called - CORRECT ANSWER Nondiscrimination
What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - CORRECT ANSWER Incontestability clause
In a modified endowment contract, the penalty tax imposed on premature withdrawals is - CORRECT ANSWER 10%
Most U.S. life insurance companies belong to the - CORRECT ANSWER Medical Information Bureau
Medicare Part B covers - CORRECT ANSWER Physician expenses
What are collateral assignments normally associated with? - CORRECT ANSWER bank loans
The risk selection process is primarily given to which insurance company department? - CORRECT ANSWER Underwriting
An insurer can be protected from adverse selection with which policy provision? - CORRECT ANSWER Suicide clause
A life insurance policy can be surrendered for its cash value under which policy provision? - CORRECT ANSWER nonforfeiture options
Which of the following statements correctly describes a contract of indemnity? - CORRECT ANSWER One party is restored to the same financial position the party was in before the loss occurred
At what age is a surviving spouse without dependents eligible for Social Security survivor benefits? - CORRECT ANSWER 60
Which of the following is NOT a true description of non-medical life insurance? - CORRECT ANSWER Applicants are not required to answer medical questions on the application
John and Mary have a handicapped child that is financially dependent upon them. The death of one of the parents would not be financially disastrous, however the death of both likely would be. Which policy would be best suited for them? - CORRECT ANSWER Second-to-die policy
A life insurance policy that pays the face amount if the insured survives to a specified period of time is called - CORRECT ANSWER endowment insurance
Who acts as the gatekeeper in a Health Maintenance Organization (HMO)? - CORRECT ANSWER primary care physician
What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? - CORRECT ANSWER Disclosure and reporting
Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)? - CORRECT ANSWER Traveling overseas with a spouse
What kind of annuity pays income to two annuitants until their deaths? - CORRECT ANSWER Joint and survivor annuity
What does the grace period allow a life insurance policyowner to do? - CORRECT ANSWER Make a premium payment after the due date without any loss of coverage
An employee for XYZ Corp is injured on the job. Where does coverage for the employee's injuries come from? - CORRECT ANSWER workers compensation
Which of the following types of policies pay a stated amount for each day an individual is hospitalized?
a) Hospital confinement indemnity
b) Hospital endowment
c) Short-term major medical
d) Surgical expense - CORRECT ANSWER Hospital confinement indemnity
Which type of long-term care benefit would be most appropriate for a stroke victim who requires speech therapy administered at her home?
a) Respite care
b) Continuing care
c) Home health care
d) Custodial care - CORRECT ANSWER c) Home health care [Show Less]