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25 Cards in this Set
- Front
- Back
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The entire contract in health insurance includes all of the following EXCEPT: * A) buyer's guide.* B) endorsements to the policy. * C) riders attached to the policy. * D) the policy itself. |
a The entire contract in health insurance includes the policy itself, endorsements to the policy, and riders attached to the policy. It protects the policyowner by stating that nothing outside of the contract can be considered part of the contract. It also assures the policyowner that no changes will be made to the contract after it has been issued, even if the insurer makes policy changes that affect all policy sales in the future. |
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All of the following statements about flexible spending accounts are correct EXCEPT: * A) they provide reimbursement for medical expenses incurred.* B) they may reimburse participants for all medical related expenses. * C) they allow participants to pay for health care expenses with pre-tax dollars. * D) they may be provided as a stand-alone plan or as part of a traditional cafeteria plan. |
B. A flexible spending account is a benefit provided by an employer that allows an employee to deposit a certain amount of his or her paycheck into an account before paying income taxes. During the year, the employee is then directly reimbursed from this account for eligible health care and dependent care expenses. Only qualified medical expenses are reimbursable, not all medical expenses. Eligible expenses include certain medical expenses, health care plan deductibles, and co-payments. |
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Jessica saw an advertisement in the local newspaper for a new type of health insurance policy offered by Protective Insurers, Inc. She noticed that Protective Insurers was also selling these policies through vending machines. Protective Insurers would be considered what type of insurer? * A) Surplus lines insurer.* B) Direct writer. * C) Unauthorized insurer. * D) Mass response writer. |
b. Protective Insurers, Inc. sells insurance through the direct selling method, where policies are sold directly to consumers through vending machines, advertisements, or salaried sales representatives. Insurers that operate using this method are known as direct writers or direct response insurers. |
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Which of the following statements regarding professions in the insurance business is CORRECT? * A) A life insurance analyst adjusts insurance claims.* B) A public adjuster represents the insured. * C) A public adjuster is compensated according to the volume of work he or she does in a year. * D) A life insurance analyst is employed by the Department of Insurance. |
b A public adjuster, for compensation, acts on behalf or assists an insured in settling an insurance claim. An analyst receives compensation for giving advice on insurance matters. |
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The term of insurance protection provided by a credit insurance policy cannot extend for more than how long? * A) 15 days beyond the scheduled maturity date of the loan.* B) Two years after the loan is paid off. * C) Two years. * D) One year after the loan is made. |
a Coverage begins when the borrower becomes obligated to the creditor (the effective date of the policy). The term of the insurance shall not extend more than 15 days beyond the scheduled maturity date (pay-off date of the indebtedness). The maximum term is five years. |
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Diane would like to purchase a life insurance policy in which the face amount remains level and the cash value grows each year until she dies (or reaches age 100). Which type of policy should she purchase? * A) Limited pay life policy.* B) Whole life policy. * C) Endowment policy. * D) Term policy. |
b The cash values of a whole life policy grow steadily, and if Diane lives and premiums are paid to age 100, she will be entitled to the face amount. |
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A guaranteed insurability rider may be attached to which of the following policies? * A) Disability income.* B) Group health. * C) Accidental death and dismemberment. * D) Medical expense. |
a The guaranteed insurability rider may be attached to a disability income policy. This rider is sometimes also referred to as the future increase option or guaranteed purchase option. |
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Except for direct response insurers, companies must deliver a Buyer's Guide to all prospective buyers: * A) before the signing of the application.* B) at the time of policy delivery. * C) before the agent commences a sales presentation. * D) before accepting an initial premium or premium deposit. |
d Insurance companies must present the Buyer's Guide before accepting the applicant's initial premium or premium deposit. Direct response insurers must deliver the Buyer's Guide with or before the delivery of the policy. |
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All of the following statements regarding indemnity dental plan exclusions and limitations are correct EXCEPT: * A) most indemnity dental plans limit the amount of services that are covered within a year.* B) coordination of benefit provisions are not permitted with dental insurance and a person may collect full plan benefits from every plan under which he is covered. * C) elective dental procedures such as teeth whitening are generally not covered under indemnity dental plans. * D) the maximum amount of coverage a plan will provide for any given form of dental care is most commonly based on the fees that are deemed usual, customary, and reasonable for the community in which the service is provided. |
b As with most forms of health insurance, indemnity dental plans control premiums by limiting coverage from all plans to the cost of care received. Coordination of benefit provisions are standard with indemnity plans. |
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All of the following provisions of an individual health and accident policy are required EXCEPT: * A) an entire contract provision.* B) an insurance with other insurers provision. * C) a grace period provision. * D) a physical examination and autopsy provision. |
b There are two provisions that address insurance with other insurers that may be included in an individual health and accident policy, but these provisions are optional. The other three provisions listed in the answer choices are mandatory. |
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Which of the following policies endows at age 100? * A) Any endowment policy.* B) Level term and whole life. * C) Whole life and limited pay life. * D) Endowment and decreasing term. |
c Term policies do not endow (meaning the point when the cash value equals the face amount). Endowment policies can endow at different ages. Whole life and limited pay life endow at age 100. |
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When a life insurance policy is to be replaced, what must the producer present to an applicant at the time of taking the application? * A) Insurer's Statement of Policy.* B) Notice Concerning Solicitation. * C) Policy Outline. * D) Notice Regarding Replacement of Life Insurance. |
d If replacement is involved, the producer must provide the applicant with a Notice Regarding Replacement of Life Insurance, which the applicant signs and keeps. The producer must also give the applicant a comparative information form, which compares the essential features of the proposed new insurance and the existing insurance. The producer must give the applicant copies of any sales proposal used and provide the replacing insurer with copies of the Notice Regarding Replacement, the comparative information form, and any sales proposals used. |
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All of the following are purposes of juvenile insurance EXCEPT to: * A) begin a life insurance program for a child at a low premium rate.* B) provide funds for a child's final expenses. * C) cover the medical expenses of a child. * D) fund a college education. |
c Juvenile insurance may provide funds for a child's final expenses, for a college education or to begin a life insurance program for a child, at relatively low premium rates. Juvenile insurance also can assure a child has some life insurance if he or she becomes uninsurable later. |
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With regard to substandard health insurance risks, which of the following statements is CORRECT? * A) Because of stringent underwriting requirements, most health insurance applicants are classified as substandard risks.* B) An applicant can be deemed a substandard risk based on physical condition only; no other criteria may be considered. * C) To provide coverage to substandard risks, insurers are allowed to charge an extra premium; however, they cannot alter benefit periods or waiting periods. * D) When the applicant represents a substandard risk, the policy may be modified to exclude a specific kind of illness or condition. |
d In order to take into account the above average exposure involved with a substandard risk, in order to be able to issue a policy insurers may charge a higher premium or make an adjustment in regards to the benefits involved. This could include issuing the policy with a waiver which excludes a specific kind of illness or condition. An individual can be deemed a substandard risk based on physical condition, occupation or moral hazards. Only a small percentage of health insurance applicants are classified as substandard risks. |
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Which of the following statements about a health maintenance organization (HMO) is CORRECT? * A) It provides health insurance coverage specifically to people who cannot obtain coverage from insurance companies.* B) It provides or arranges for health care services for the benefit of its subscribers. * C) It does not need to be approved by the state before offering services to its subscribers. * D) It generally hires medical professionals as employees to provide health care services to the general public. |
b HMOs finance health care services for their members primarily on a prepaid basis. They also organize and deliver the services. Subscribers pay a fixed periodic fee and receive a broad range of health services. The fee is payable whether or not the services are used. HMOs rarely charge deductibles but may charge a nominal co-payment. |
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Jill's long-term care insurance policy provides a daily benefit amount of $130 per day. If her nursing home facility charges $120 per day, the insurance company will pay: * A) $120.00* B) $130.00 * C) $125.00 * D) nothing; the charges will not be covered. |
b If Jill's LTC policy provides a daily benefit amount of $130 per day, the insurer will pay $130, even though the actual cost is less than this amount. Jill may decide what to do with the remaining funds. |
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Harold, age 52, owns a variable universal life insurance policy (non-MEC) with a current death benefit of $122,000 and a cash value of $18,000. His basis in the policy is $12,000. Harold is interested in either borrowing or withdrawing $15,000 from this policy. What would be the tax consequences if he were to withdraw $12,000 and borrow $3,000 through a policy loan? * A) There will be no income taxation on any portion of the amount withdrawn or borrowed.* B) The $12,000 withdrawn and the $3,000 borrowed would be income tax free unless he did not repay the loan in which case the $3,000 is subject to income taxation. * C) The full $15,000 is subject to income taxation. * D) The $3,000 borrowed would be income tax free, and of the amount withdrawn, $9,000 would be income tax-free but $3,000 would be subject to income taxation. There will be no income taxation on the $12,000 withdrawal but the $3,000 loan is subject to income tax. |
a The "withdrawal to basis" method is a tax-effective way to access a universal life insurance policy's cash value. Non-MEC withdrawals are tax-free up to basis. Treating the gain as a policy loan avoids taxation on that portion of the distribution. |
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Generally, the consideration clause does all of the following EXCEPT: * A) lists the effective date of the contract.* B) lists the insured's beneficiaries. * C) states the amount of premium payments. * D) defines the initial term of the policy. |
b The consideration clause frequently lists the effective date of the contract, defines the initial term of the policy and states the amount of premium payments. In addition, it may specify the insured's right to renew the policy. |
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Which of the following statements pertaining to a whole life policy is NOT correct? * A) It is designed to mature or endow at the insured's age 100.* B) The policy offers insurance protection to age 100. * C) It provides both insurance protection and "living" values. * D) The face amount may be paid as a lump sum at the policyowner's selected retirement age. |
d The face amount of a whole life policy may be paid as a lump sum at the policyowner's death, not at retirement age. |
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An accident and health policy whose premiums are paid on a quarterly basis must contain a grace period of at least: * A) 45 days.* B) 31 days. * C) 15 days. * D) 60 days. |
b Accident and health insurance policies must provide a grace period of seven days for premiums paid weekly, ten days for premiums paid monthly, and 31 days for all other premiums, such as those paid quarterly. |
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All of the following statements pertaining to the Fair Credit Reporting Act are correct EXCEPT: * A) a life insurance company obtains a consumer report on Burl, an applicant, without advising him of its intended action. The company has violated the Fair Credit Reporting Act.* B) the Fair Credit Reporting Act does not apply to insurance companies who use their own staffs to investigate an applicant for insurance. * C) the Fair Credit Reporting Act is a state law that helps to assure accurate reporting of information about consumers. * D) Peg has an application for life insurance rejected because of an unfavorable consumer report. She has a right to know what information the reporting agency has and can insist that any errors in the data be corrected. |
c The Fair Credit Reporting Act is a federal law, not a state law. As corrected, the statement is also true. |
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Agnes purchases a round-trip travel accident policy at the airport before leaving on a business trip. Her policy would be which type of insurance? * A) Credit accident and health.* B) Industrial health. * C) Business overhead expense. * D) Limited risk. |
d Limited risk policies provide coverage for specific kinds of accidents or illnesses. A traveler who purchases an accident policy at an airport would be covered in the event of an accident during that specific trip. The risk covered is limited to the trip. |
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Which of the following producers is allowed to charge a fee for his or her services? * A) Insurance agent.* B) Insurance planner. * C) Insurance intermediary. * D) Insurance consultant. |
d Insurance producers who act as brokers or consultants may charge fees. |
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Which of the following situations would create a possible errors and omissions liability to the producer? * A) The producer informs the insurer that he has serious doubts about the applicant's insurability.* B) During the sale of a replacement health policy, the producer tells an applicant that the new policy will cover expenses ordinarily paid by Medicare. * C) The producer fails to inform the client that her policy is being canceled at the end of the year. * D) The producer fails to return phone calls from the client. |
b The producer selling the replacement policy has engaged in misrepresentation, which is illegal. Health policies exclude coverage for benefits that are covered by Medicare. The producer has exposed himself to errors and omissions liability, in addition to possible license suspension or revocation. |
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All of the following acts are prohibited EXCEPT: * A) providing a sales illustration that is based on a hypothetical dividend scale greater than the insurer's current scale.* B) advertising the policy by using such words as "all", "full", or "unlimited" to describe a benefit beyond the terms of the policy. * C) replacing one policy with another. * D) implying that by purchasing a policy the owner will be entitled to special advantages that would not be available to other consumers. |
c It is illegal to use misleading advertising as well as to misrepresent the benefits of an insurance policy. It is also illegal to make false illustrations or estimates about a policy's provisions, the dividends to be received, or the benefits or advantages of a policy. Replacing one policy with another is not a prohibited act, provided the agent and insurer adhere to the replacement regulations. |
