Mon, Aug 12, 2013 at 10:02 AM


By: Feemarie

#3. All of the following statements describe a MEWA EXCEPT

a) MEWA employers retain full responsibility for any unpaid claims.
b) MEWAs can be self-insured.
c) MEWAs are groups of at least 3 employers.
d) MEWAs can be sponsored by insurance companies.

MEWAs are groups of at least 2 employers who pool their risks to self-insure. MEWAs can be sponsored by an insurance company, an independent administrator, or another group established to provide group benefits for participants.


#5. Which of the following is the best reason to purchase life insurance rather than annuities?

a) To create regular income payments
b) To liquidate a sum of money over a lifetime
c) To create an estate
d) To liquidate a sum of money over a period of years

With insurance, the death benefit creates an immediate estate should the insured die.


#6. What is the benefit of experience rating?

a) Experience rating helps employers with high claims experience get group coverage.
b) Experience rating helps employees with low claims experience become exempt from group premiums.
c) Experience rating helps employers with high claims experience because they get high premiums.
d) Experience rating helps employers with low claims experience because they get lower premiums.

Group health insurance is usually subject to experience rating, where the premiums are determined by the experience of this particular group as a whole. Individual policies are subject to community rating where the premium is based upon the overall claims experience of the insurance company. Experience rating helps employers with low claims experience because they get lower premiums.


#9. An insured receives an annual life insurance dividend check. What term best describes this arrangement?

a) Cash option
b) Reduction of Premium
c) Annual Dividend Provision
d) Accumulation at Interest

The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.


#11. An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What is the name of this provision?

a) Premium Differential
b) Net Premium
c) Premium First
d) Unpaid Premium

If a premium is past due and the insurer owes claim payment, the amount of the premium will be deducted from the amount of the claim. For example, if a claim is worth $500 and the premium costs $200, the insured would receive the net total of $300 from his insurer.


#12. Which of the following would an Accident-Only policy NOT cover?

a) Death from a motorcycle accident
b) Amputation of a leg that was burned during a house fire
c) Surgery to repair a wrist damaged by tendonitis.
d) Hospitalization costs from a boating accident

Accident-Only policies cover medical costs caused by accidents, not sickness. Because the wrist was damaged by a sickness, not an accident, the policy would not cover any medical claims relating to the surgery or the condition itself.


#14. An individual has just borrowed $10,000 from his bank on a 5-year note. What type of life insurance policy would be best suited to this situation?

a) Variable life
b) Universal life
c) Whole life
d) Decreasing term

A decreasing term policy's face amount decreases as the amount of debt is reduced.


#15. Under which of the following circumstances can financial institutions share insurance coverage information with third parties, for the purpose of soliciting the purchase of insurance?

a) Under no circumstances; nonpublic personal financial information cannot be shared with third parties
b) If a consumer decides to opt out
c) If a consumer does not sign and return the notice of disclosure within 30 days
d) Whenever it is requested by the Commissioner

Financial institutions are prohibited from sharing insurance coverage information with a third party for the purpose of selling or soliciting the purchase of insurance. However, if notice is given, and the customer does not sign and return such a form within 30 days, such information may be shared.


#16. Which of the following types of insurance policies would perform the function of cash accumulation?

a) Increasing term
b) Whole life
c) Term life
d) Credit life

Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies.


#17. An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after age 70½. The account owner does not have to pay taxes on the growth of his account. What type of retirement account is it?

a) Roth IRA
b) 403(b) plan
c) Simplified Employee Pension Plan
d) Traditional IRA

Roth IRAs have several distinguishing features. Unlike traditional IRAs, the account owner can continue beyond age 70½, and distributions do not have to begin at age 70½. The contributions are not tax-deductible.


#18. In a direct rollover, how is the money transferred from one plan to the new one?

a) From trustee to the participant
b) From the participant to the new plan
c) From the original plan to the original custodian
d) From trustee to trustee

In a direct rollover, the distribution is made directly from the trustee of the first plan to the trustee or administrator/custodian of the new IRA plan.


#19. How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people?

a) 1
b) 2
c) 3
d) 6

Since each person would have a policy on each of the other people, among the 3 owners, the total number of policies would be six.


#20. A couple owns a life insurance policy with a Children’s Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

a) Proof of insurability is not required.
b) Medical exam
c) Her parents' federal income tax receipts
d) Medical exam and parents' medical history

If a Children’s Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.


#22. Which of the following best describes fixed-period settlement option?

a) The death benefit must be paid out in a lump sum within a certain time period.
b) Income is guaranteed for the life of the beneficiary.
c) Both the principal and interest will be liquidated over a selected period of time.
d) Only the principal amount will be paid out within a specified period of time.

Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.


#23. In reference to fixed annuities, what comprises most of a life insurance company’s general account?

a) S&P 500 index
b) Conservative investments like bonds
c) Aggressive stocks and bonds
d) Company stock

Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which makes conservative enough investments (like bonds) to ensure a guaranteed rate to the annuity owners.


#29. In life insurance policies, cash value increases

a) Are only taxed when the owner reaches age 65.
b) Grow tax deferred.
c) Are sales-taxable.
d) Are taxed annually.

Generally life insurance cash values are only income taxed if the policy is surrendered (totally or partially) and the cash value exceeds the premiums paid.


#31. All of the following are examples of risk retention EXCEPT

a) Self-insurance
b) Premiums
c) Deductibles
d) Copayments

Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.


#32. In which Medicare supplemental policies are the core benefits found?

a) Plans A-D only
b) All plans
c) Plans A and B only
d) Plan A only

The benefits in Plan A are considered to be core benefits and must be included in the other types. Therefore, all types contain the core benefits offered by Plan A.


#33. If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

a) Joint and survivor annuity.
b) Deferred annuity.
c) Pure annuity.
d) Joint life annuity.

Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.


#35. During partial withdrawal from a universal life policy, which portion will be taxed?

a) Principal
b) Loan
c) Interest
d) Cash value

During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.


#36. Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as the

a) Tertiary beneficiary.
b) Irrevocable beneficiary.
c) Revocable beneficiary.
d) Secondary beneficiary.

If her husband is named as the revocable beneficiary, Bonnie would be the policyowner and could make changes to the contract. Her husband would receive the death benefit.


#38. An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario?

a) Revision of consideration
b) Re-entry
c) Preferred premium reduction
d) Contract review

Some policies contain a re-entry option where the insured, upon the end of a term policy with guaranteed renewable option, may answer medical questions to prove insurability and qualify for a discounted premium rate.


#39. All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

a) The policyholder has the right to withdraw the accumulations at any time.
b) The interest credited under this option is not taxable since it remains inside the insurance policy.
c) The annual dividend is retained by the company.
d) The interest is credited at a rate specified by the policy.

The interest credited under this option is TAXABLE, whether or not the policyowner receives it.


#40. Even though "sickness" is a peril covered by a health insurance policy, coverage may be limited or excluded because of all of the following EXCEPT

a) Occupational exclusions.
b) Probationary periods.
c) Exemption periods.
d) Pre-existing conditions.

Health insurance policy conditions require that certain eligibility requirements be met in order for coverage to apply. At the start of a policy, there may be a probationary period and conditions for which an insured received treatment or should have received treatment may be excluded as pre-existing. Injury or disease resulting from an occupation and covered under a workers compensation policy will be excluded from coverage under health insurance.


#41. According to the 2001 CSO Table, at what age will the terminal reserves be reached?

a) 99
b) 101
c) 120
d) 100

The 2001 CSO Mortality Table extends to age of 120.


#42. Which is the correct comparison between survivorship life and a traditional joint life policy?

a) A traditional joint life policy has a lower premium than a Survivorship Life policy.
b) Joint life policies can cover more than two individuals, while Survivorship Life is limited to two.
c) The premiums for both are determined by a combined general health rating.
d) Joint life pays a death benefit on the first death, while Survivorship Life pays on the last death.

The main difference between joint and survivorship life policies concerns the payment of the death benefit. Whereas traditional joint life policies pay after the first death, survivorship life policies pay after the second death. Both types of policies' premiums are determined by a joint age. Because the benefits of a survivorship life policy are not paid until after the last death, the joint age is considered to be extended, thus lowering the premium.


#44. An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. The insured is hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay?

a) $1,000
b) $2,500
c) $900
d) $500

The insured will pay the $500 deductible, plus 20% of the remainder: $2,500 (total bill) - $500 (deductible) = $2,000; 20% of $2,000 = $400; $500 (deductible) + 20% (coinsurance) = $900 (total amount due by the insured).


#49. When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply?

a) Cost reduction
b) Claims reduction
c) Claims discrimination
d) Cas

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